Soriano vs NLRC
FELICIANO, J.:
Petitioner started working with respondent commodities trading
Corporation in November 1977 as Investment Counselor and
eventually became Vice-President, Marketing. On 18
September 1984, petitioner was charged with allowing or
failing to supervise and monitor certain activities of investment
counselors in her department, which included the signing of a
contract opening an account for a client by an investment
counselor without authority from the client, transfers of funds
from one account to another without the knowledge and
authority of the clients involved, unauthorized transactions in
foreign currency with clients of the respondent Corporation,
unauthorized approval of leave for members of her department,
and resulting in loss of confidence in petitioner. Petitioner was
preventively suspended and required to explain her acts or
failure to act. Two (2) days later, petitioner submitted her
detailed answer or explanation. On 27 September, 1984, the
Executive Vice-President and General Manager of respondent
Corporation found petitioner's written explanation
unsatisfactory and notified petitioner that the Corporation had
lost confidence on her ability to discharge the functions of her
office and accordingly terminated her services.
Petitioner filed a complaint for illegal suspension and dismissal
against respondent Corporation and Mr. Guil Rivera, Senior
Vice-President, and Mr. Richard Tan, Executive Vice-President
and General Manager. She asked for reinstatement with
backwages, as well as moral and exemplary damages, medical
expenses, attorney's fees and other litigation expenses.
On 8 July 1985, Labor Arbiter A.L Sevilla rendered a Decision
requiring the respondent Corporation to pay petitioner: (1)
separation pay in the amount of P10,500.00; (2) six (6) months
backwages in the amount of P120,000.00; (3) moral damages
in the amount of P500,000.00; (4) exemplary damages in the
amount of P100,000.00; and (5) attorney's fees equivalent to
10% of the award.
On appeal by the private respondents, public respondent NLRC,
in a Decision dated 10 March 1986, modified the Labor
Arbiter's award by deleting the award of moral and exemplary
damages and requiring respondent Corporation to pay: (1)
separation pay amounting to P21,000.00; (2) three (3) months
backwages without qualification and deduction amounting to
P9,000.00; and (3) 10% of the award as attorney's fees.
Both the Labor Arbiter and respondent NLRC found that
because of the strained relations between petitioner and
respondent Corporation, reinstatement of petitioner was not
feasible. Respondent Corporation had alleged that petitioner
had immediately found employment with Onapal Philippines
Commodities, which had not been denied or refuted by
petitioner. Because respondent Corporation had failed to
specify the definite date of her employment, respondent NLRC
granted petitioner three (3) months backwages without
qualification and deduction.
In the present Petition for Certiorari, petitioner seeks the
annulment of the Decision of respondent NLRC dated 10 March
1986 and the revival or reinstatement of the Decision of Iabor
Arbiter Sevilla dated 8 July 1985.
Petitioner claims that respondent Corporation acted in bad faith
in suspending and terminating her services. Petitioner asserts
that:
1. respondent Corporation had violated her right to due
process by suspending her immediately without the benefit of
hearing. She argues that the notice of preventive suspension
served her on 18 September 1986 was "living proof" that the
corporation had already concluded she was guilty of the charges
levelled against her even before she could submit her written
explanation.
2. the "true reason" for her "illegal dismissal" was the
"personal grudge which Rivera harbored against her.
3. respondent Corporation's bad faith was also
demonstrated in discrimination against her in relation to other
employees of the Corporation who had been in the past
similarly charged with alleged infractions of the corporation's
rules. More specifically, petitioner asserts discrimination
against herself consisting of the failure of the respondent
Corporation to dismiss the two (2) immediate supervisors of the
investment counselor who had carried out the unauthorized
manipulations of clients' accounts in petitioner's department.
4. petitioner also charges respondent Corporation with
having misrepresented the extent of her participation in or the
scope of her duties in respect of unauthorized acts and
transactions of her subordinates in the marketing department of
respondent company.
The Court considers that petitioner has failed to show a grave
abuse of discretion, or an act performed without or in excess of
jurisdiction, on the part of the respondent NLRC.
In respect of Item 1, preventive suspension does not in itself
prove that the company had prejudged that petitioner was guilty
of the charges she was asked to answer and explain. Preventive
suspension may be necessary for the protection of the company,
its operations and assets, pending investigation of the alleged
malfeasance or misfeasance on the part of officers or employees
of the company and pending a decision on the part of the
company (See Sec. 3 of Rule XIV, Book V, of the Omnibus
Rules Implementing the Labor Code). Considering the very
senior and sensitive character of petitioner's position as head of
a Department, a fine position as distinguished from a staff or
planning position, and considering the unauthorized
transactions then just discovered by the respondent
Corporation, we do not believe that the preventive suspension
was an arbitrary and capricious act amounting to bad faith on
the part of the respondent Corporation.
In respect of Item 2, the alleged personal motive behind
petitioner's dismissal-personal envy or feelings of personal
insecurity on the part of Guil Rivera, Senior Vice-President,
respondent NLRC found that petitioner had not sufficiently
established her assertion. Petitioner's assertion on this point
appears no more than a conjecture or supposition and does not
afford an adequate basis for overturning respondent NLRC's
finding on this point. Further, if petitioner had clearly proven
such personal ill-will on the part of Mr. Rivera, a serious
question would arise as to whether the respondent Corporation
(as distinguished from Mr. Rivera) could be held liable at all for
Mr. Rivera's acts in the absence of clear authorization for, or
approval or adoption of, such act by the respondent Corporation
with knowledge of the personal malice on the part of Mr.
Rivera.
In respect of Item 3, respondent NLRC's decision was silent.
The Court believes, however, that respondent Corporation must
be accorded reasonable latitude in determining who among
erring officers or employees should be punished by the
company and to what extent. In the instant case, respondent
Corporation presumably found it was not necessary to terminate
the services also of the two (2) section heads in petitioner's
department, who clearly are much lower in the corporate
hierarchy than petitioner.
With respect to the last and most important of the above listed
items, the scope of petitioner's responsibility for the operations
of her department and the extent of her supervisory authority
over her subordinates in the marketing department, respondent
NLRC set forth the following discussion and evaluation:
Appellants stressed the point that complainant, as vice
president, marketing, is actually a department head of one of the
company's sales department (sic). As such, her basic function is
the supervision and monitoring the daily activities of her
department and the employees she supervises (sic). By the
nature of the company's business, complainant as a department
head should see to it that the clients' trust and confidence in the
company is upheld through above-board transactions, untainted
relations, satisfactory servicing and unquestioned integrity of
its officers and staff, aside from the promotion of cordial
employee relations among her personnel through unbiased and
uniform implementation of company policies affecting
employee benefits and welfare.
According to the appellants, the finding of the Labor Arbiter
that 'complainant is not expected to keep an eye or be aware of
all day-to-day transactions of her workers particularly
Investment Consultants in her department' does not conform to
the facts prevailing in this case.
In the Panemanglor case, which is the crucial point at issue,
Panemanglor opened an account with the respondent
corporation on June 28, 1984 by depositing the amount of
P50,000.00 through Sofia Nazareno, investment counselor.
Instead of the client signing the Customers Agreement, it was
Nazareno who signed the agreement and the signature card in
the name of the client, which is highly irregular. Had she
exercised prudence in the supervision of her investment
consultants, the irregularity could hate been earlier detected. As
a result, the sum of P25,000.00 from Panemanglor's account
was transferred by Nazareno to the account of Ramon Lopez,
without the knowledge of Panemanglor on July 9, 1984. On
July 13, 1984 the said client withdrew the sum of P25,000.00
through a Payment Instruction Form that was approved by the
complainant. On August 6, 1964, the amount of P4,052.59 was
transferred by Nazareno to the account of Panemanglor from
the account of Ramon Lopez. This transaction was with the
approval of the complainant. On September 3, 1984,
Panemanglor demanded the payment of the balance of
P25,000.00 from the respondent company to close his account
and the letter of Panemanglor was referred to complainant by
respondent Guil Rivera for necessary action. In her
memorandum to senior vice president Guil Rivera complainant
confirmed the irregularity in the handling of the account of
Panemanglor, but she failed to take appropriate action against
the erring employee which was within her power to discipline
employees under her supervision ater on February 4, 1985, a
complaint was filed before the Securities and Exchange
Commission by Panemanglor for the recovery of the
P25,000.00 plus damages against the respondent corporation,
contrary to her claim that the client will not file a recovery suit
against the corporation since the obligation was purely personal
to Nazareno.
Respondents contend that complainant could have immediately
discovered the unauthorized signature of Sofia Nazareno that
led to the illegal transfers of fund, had she followed the
company procedure and practice for her to be personally
acquainted with new clients and her admission that she was not
aware of the complained acts has brought to light that she was
remiss in her supervisory and monitoring function. On top of
this, she failed to institute disciplinary action
xxx xxx xxx
As head of one of the company's sales department (sic) and a
managerial employee at that, complainant is expected to
monitor the daily activities of the investment counselors and the
transactions of clients in her department. As a matter of practice
and procedure, complainant, as vice-president marketing, is
always informed of new clients for her to be personally
acquainted with the client. We agree with the appellants that
had the complainant adhered to this procedure, she could have
immediately noticed the unauthorized signature by Sofia
Nazareno that enabled her to transfer funds from one account to
another. Likewise, since the complainant approved the payment
instruction for P25,000.00 on July 13, 1984, the transfer of
P4,052.59 on August 6, 1984 from the account of Ramon Lopez
to Panemanglor's account, and the withdrawal of the transferred
amount on August 7, 1984, she could have easily suspected that
something was irregular with the transaction Yet, it took several
months before she knew of the anomaly and it took her superior,
respondent Guil Rivera, to bring the matter to her attention.
Under the circumstances, it cannot be truthfully said that
complainant has not been without any fault whatsoever. For this
reason, the basis for the award of the moral and exemplary
damages has not been suffiiciently or satisfactorily against the
erring employee. gently or satisfactorily established by the
complainant. And besides the dismissal of the complainant by
the respondent was done in good faith. ... (Emphasis supplied)
Petitioner's argument that, because she was head of the entire
marketing (sales) department, she could not be expected to
monitor the detailed or day-to-day acts and behaviour of the
staff members of her department, does not address what appears
to be the thrust of the respondent NLRC's decision, And that is,
that as head of the department, it was her responsibility to adopt
ways and means of keeping herself sufficiently informed of the
activities of her staff members so as to prevent or at least
discover at an early stage, e.g., unauthorized or illegal
transactions and manipulation of clients' accounts. On the one
hand, the above position taken by the respondent NLRC cannot
be regarded as so obviously unreasonable and despotic as to
constitute a grave abuse of discretion, given the character of the
business of a commodities trading company and the fact that
very substantial sums of money are handled daily by petitioner's
department. Upon the other hand, petitioner's logic would lead
to the conclusion that the more senior the management position,
the slighter the responsibility for malfeasance or nonfeasance
that can be laid upon the position holder; the chief executive
officer of a corporation would effectively have, under this logic,
little or no responsibility at all.
Turning to the specific award made by respondent NLRC, the
salary base properly used in computing the separation pay and
the backwages due to petitioner should include not just the basic
salary but also the regular allowances that petitioner had been
receiving (See Santos v. National Labor Relations Commission
G.R. No. 76721, 21 September 1987). In petitioner's case, the
base figure properly includes her: (a) basic salary of P3,000.00
a month; and (b) living allowance of P2,400 a month
(petitioner's Affidavit, dated 12 April 1985, Exhibit "G", Rollo,
p. 105). 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.
Neither should "travels equivalent" [an unusual and
unexplained term; P10,000.00 a month] and "commission in
trading personal clients" P3,000.00 a month] be included in
such base figure. Considering that the charge of bad faith on the
part of private respondents was not proven, the respondent
NLRC having, on the contrary, made a finding that petitioner's
dismissal was made in good faith there appears no real basis for
the award of attorney's fees (Art. 2208 5 Civil Code). This
award should not exceed a nominal amount which we set at
P1,500.00.
Thus, the appropriate computation would be:
A. Separationpay-P5,400.00/month 7 = P37,800.00
(in view of petitioner's seven (7) years of service)
B. Backwages-P5,400.00/month x 3 mos. = P16,200.00
Sub-Total P54,000.00
plus nominal attorney's fees 1,500.00
TOTAL P55,500.00
ACCORDINGLY, the Court Resolved to DISMISS the Petition
for certiorari for lack of merit. The Decision of the respondent
NLRC dated 10 March 1986 is modified so as to award
petitioner the following items: a) separation pay in the amount
of P37,800.00; b) backwages for three (3) months in the amount
of P16,200.00; and c) attorney's fees of P1,500.00, making a
total of P55,500.00.
SO ORDERED.
Songco vs NLRC
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 employer-employee relationship exists. Bearing in
mind the preceeding dicussions, if we adopt the opposite view
that commissions, do not form part of wage or salary, then, in
effect, We will be saying that this kind of salesmen do not
receive any salary and therefore, not entitled to separation pay
in the event of discharge from employment. Will this not be
absurd? This narrow interpretation is not in accord with the
liberal spirit of our labor laws and considering the purpose of
separation pay which is, to alleviate the difficulties which
confront a dismissed employee thrown the the streets to face the
harsh necessities of life.
Additionally, in Soriano v. NLRC, et al., supra, in resolving the
issue of the salary base that should be used in computing the
separation pay, We held that:
The commissions also claimed by petitioner ('override
commission' plus 'net deposit incentive') are not properly
includible in such base figure since such commissions must be
earned by actual market transactions attributable to petitioner.
Applying this by analogy, since the commissions in the present
case were earned by actual market transactions attributable to
petitioners, these should be included in their separation pay. In
the computation thereof, what should be taken into account is
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.
Javier vs Fly ace
MENDOZA, J.:
This is a petition under Rule 45 of the Rules of Civil Procedure
assailing the March 18, 2010 Decision[1] of the Court of
Appeals (CA) and its June 7, 2010 Resolution,[2] in CA-G.R.
SP No. 109975, which reversed the May 28, 2009 Decision[3]
of the National Labor Relations Commission (NLRC) in the
case entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,[4]
holding that petitioner Bitoy Javier (Javier) was illegally
dismissed from employment and ordering Fly Ace Corporation
(Fly Ace) to pay backwages and separation pay in lieu of
reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC for
underpayment of salaries and other labor standard benefits. He
alleged that he was an employee of Fly Ace since September
2007, performing various tasks at the respondents warehouse
such as cleaning and arranging the canned items before their
delivery to certain locations, except in instances when he would
be ordered to accompany the companys delivery vehicles, as
pahinante; that he reported for work from Monday to Saturday
from 7:00 oclock in the morning to 5:00 oclock in the afternoon;
that during his employment, he was not issued an identification
card and payslips by the company; that on May 6, 2008, he
reported for work but he was no longer allowed to enter the
company premises by the security guard upon the instruction of
Ruben Ong (Mr. Ong), his superior;[5] that after several
minutes of begging to the guard to allow him to enter, he saw
Ong whom he approached and asked why he was being barred
from entering the premises; that Ong replied by saying,
Tanungin mo anak mo; [6] that he then went home and
discussed the matter with his family; that he discovered that
Ong had been courting his daughter Annalyn after the two met
at a fiesta celebration in Malabon City; that Annalyn tried to
talk to Ong and convince him to spare her father from trouble
but he refused to accede; that thereafter, Javier was terminated
from his employment without notice; and that he was neither
given the opportunity to refute the cause/s of his dismissal from
work.
To support his allegations, Javier presented an affidavit of one
Bengie Valenzuela who alleged that Javier was a stevedore or
pahinante of Fly Ace from September 2007 to January 2008.
The said affidavit was subscribed before the Labor Arbiter
(LA).[7]
For its part, Fly Ace averred that it was engaged in the business
of importation and sales of groceries. Sometime in December
2007, Javier was contracted by its employee, Mr. Ong, as extra
helper on a pakyaw basis at an agreed rate of 300.00 per trip,
which was later increased to 325.00 in January 2008. Mr. Ong
contracted Javier roughly 5 to 6 times only in a month whenever
the vehicle of its contracted hauler, Milmar Hauling Services,
was not available. On April 30, 2008, Fly Ace no longer needed
the services of Javier. Denying that he was their employee, Fly
Ace insisted that there was no illegal dismissal.[8] Fly Ace
submitted a copy of its agreement with Milmar Hauling
Services and copies of acknowledgment receipts evidencing
payment to Javier for his contracted services bearing the words,
daily manpower (pakyaw/piece rate pay) and the latters
signatures/initials.
Ruling of the Labor Arbiter
On November 28, 2008, the LA dismissed the complaint for
lack of merit on the ground that Javier failed to present proof
that he was a regular employee of Fly Ace. He wrote:
Complainant has no employee ID showing his employment
with the Respondent nor any document showing that he
received the benefits accorded to regular employees of the
Respondents. His contention that Respondent failed to give him
said ID and payslips implies that indeed he was not a regular
employee of Fly Ace considering that complainant was a helper
and that Respondent company has contracted a regular trucking
for the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in
the importation and sales of groceries. Since there is a regular
hauler to deliver its products, we give credence to Respondents
claim that complainant was contracted on pakiao basis.
As to the claim for underpayment of salaries, the payroll
presented by the Respondents showing salaries of workers on
pakiao basis has evidentiary weight because although the
signature of the complainant appearing thereon are not uniform,
they appeared to be his true signature.
xxxx
Hence, as complainant received the rightful salary as shown by
the above described payrolls, Respondents are not liable for
salary differentials. [9]
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It ruled that the
LA skirted the argument of Javier and immediately concluded
that he was not a regular employee simply because he failed to
present proof. It was of the view that a pakyaw-basis
arrangement did not preclude the existence of employer-
employee relationship. Payment by result x x x is a method of
compensation and does not define the essence of the relation. It
is a mere method of computing compensation, not a basis for
determining the existence or absence of an employer-employee
relationship.[10] The NLRC further averred that it did not
follow that a worker was a job contractor and not an employee,
just because the work he was doing was not directly related to
the employers trade or business or the work may be considered
as extra helper as in this case; and that the relationship of an
employer and an employee was determined by law and the same
would prevail whatever the parties may call it. In this case, the
NLRC held that substantial evidence was sufficient basis for
judgment on the existence of the employer-employee
relationship. Javier was a regular employee of Fly Ace because
there was reasonable connection between the particular activity
performed by the employee (as a pahinante) in relation to the
usual business or trade of the employer (importation, sales and
delivery of groceries). He may not be considered as an
independent contractor because he could not exercise any
judgment in the delivery of company products. He was only
engaged as a helper.
Finding Javier to be a regular employee, the NLRC ruled that
he was entitled to a security of tenure. For failing to present
proof of a valid cause for his termination, Fly Ace was found to
be liable for illegal dismissal of Javier who was likewise
entitled to backwages and separation pay in lieu of
reinstatement. The NLRC thus ordered:
WHEREFORE, premises considered, complainants appeal is
partially GRANTED. The assailed Decision of the labor arbiter
is VACATED and a new one is hereby entered holding
respondent FLY ACE CORPORATION guilty of illegal
dismissal and non-payment of 13th month pay. Consequently,
it is hereby ordered to pay complainant DANILO Bitoy
JAVIER the following:
1. Backwages -45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -59,854.16
All other claims are dismissed for lack of merit.
SO ORDERED.[11]
Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC findings that
Javier was indeed a former employee of Fly Ace and reinstated
the dismissal of Javiers complaint as ordered by the LA. The
CA exercised its authority to make its own factual
determination anent the issue of the existence of an employer-
employee relationship between the parties. According to the
CA:
xxx
In an illegal dismissal case the onus probandi rests on the
employer to prove that its dismissal was for a valid cause.
However, before a case for illegal dismissal can prosper, an
employer-employee relationship must first be established. x x x
it is incumbent upon private respondent to prove the employee-
employer relationship by substantial evidence.
xxx
It is incumbent upon private respondent to prove, by substantial
evidence, that he is an employee of petitioners, but he failed to
discharge his burden. The non-issuance of a company-issued
identification card to private respondent supports petitioners
contention that private respondent was not its employee.[12]
The CA likewise added that Javiers failure to present salary
vouchers, payslips, or other pieces of evidence to bolster his
contention, pointed to the inescapable conclusion that he was
not an employee of Fly Ace. Further, it found that Javiers work
was not necessary and desirable to the business or trade of the
company, as it was only when there were scheduled deliveries,
which a regular hauling service could not deliver, that Fly Ace
would contract the services of Javier as an extra helper. Lastly,
the CA declared that the facts alleged by Javier did not pass the
control test.
He contracted work outside the company premises; he was not
required to observe definite hours of work; he was not required
to report daily; and he was free to accept other work elsewhere
as there was no exclusivity of his contracted service to the
company, the same being co-terminous with the trip only.[13]
Since no substantial evidence was presented to establish an
employer-employee relationship, the case for illegal dismissal
could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS
ERRED IN HOLDING THAT THE PETITIONER WAS NOT
A REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS
ERRED IN HOLDING THAT THE PETITIONER IS NOT
ENTITLED TO HIS MONETARY CLAIMS.[14]
The petitioner contends that other than its bare allegations and
self-serving affidavits of the other employees, Fly Ace has
nothing to substantiate its claim that Javier was engaged on a
pakyaw basis. Assuming that Javier was indeed hired on a
pakyaw basis, it does not preclude his regular employment with
the company. Even the acknowledgment receipts bearing his
signature and the confirming receipt of his salaries will not
show the true nature of his employment as they do not reflect
the necessary details of the commissioned task. Besides, Javiers
tasks as pahinante are related, necessary and desirable to the
line of business by Fly Ace which is engaged in the importation
and sale of grocery items. On days when there were no
scheduled deliveries, he worked in petitioners warehouse,
arranging and cleaning the stored cans for delivery to
clients.[15] More importantly, Javier was subject to the control
and supervision of the company, as he was made to report to the
office from Monday to Saturday, from 7:00 oclock in the
morning until 5:00 oclock in the afternoon. The list of
deliverable goods, together with the corresponding clients and
their respective purchases and addresses, would necessarily
have been prepared by Fly Ace. Clearly, he was subjected to
compliance with company rules and regulations as regards
working hours, delivery schedule and output, and his other
duties in the warehouse.[16]
The petitioner chiefly relied on Chavez v. NLRC,[17] where the
Court ruled that payment to a worker on a per trip basis is not
significant because this is merely a method of computing
compensation and not a basis for determining the existence of
employer-employee relationship. Javier likewise invokes the
rule that, in controversies between a laborer and his master, x x
x doubts reasonably arising from the evidence should be
resolved in the formers favour. The policy is reflected is no less
than the Constitution, Labor Code and Civil Code.[18]
Claiming to be an employee of Fly Ace, petitioner asserts that
he was illegally dismissed by the latters failure to observe
substantive and procedural due process. Since his dismissal was
not based on any of the causes recognized by law, and was
implemented without notice, Javier is entitled to separation pay
and backwages.
In its Comment,[19] Fly Ace insists that there was no
substantial evidence to prove employer-employee relationship.
Having a service contract with Milmar Hauling Services for the
purpose of transporting and delivering company products to
customers, Fly Ace contracted Javier as an extra helper or
pahinante on a mere per trip basis. Javier, who was actually a
loiterer in the area, only accompanied and assisted the company
driver when Milmar could not deliver or when the exigency of
extra deliveries arises for roughly five to six times a month.
Before making a delivery, Fly Ace would turn over to the driver
and Javier the delivery vehicle with its loaded company
products. With the vehicle and products in their custody, the
driver and Javier would leave the company premises using their
own means, method, best judgment and discretion on how to
deliver, time to deliver, where and [when] to start, and manner
of delivering the products.[20]
Fly Ace dismisses Javiers claims of employment as baseless
assertions. Aside from his bare allegations, he presented
nothing to substantiate his status as an employee. It is a basic
rule of evidence that each party must prove his affirmative
allegation. If he claims a right granted by law, he must prove
his claim by competent evidence, relying on the strength of his
own evidence and not upon the weakness of his opponent.[21]
Invoking the case of Lopez v. Bodega City,[22] Fly Ace insists
that in an illegal dismissal case, the burden of proof is upon the
complainant who claims to be an employee. It is essential that
an employer-employee relationship be proved by substantial
evidence. Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the
employer to prove that its dismissal of an employee was for a
valid cause. However, before a case for illegal dismissal can
prosper, an employer-employee relationship must first be
established.
Fly Ace points out that Javier merely offers factual assertions
that he was an employee of Fly Ace, which are unfortunately
not supported by proof, documentary or otherwise.[23] Javier
simply assumed that he was an employee of Fly Ace, absent any
competent or relevant evidence to support it. He performed his
contracted work outside the premises of the respondent; he was
not even required to report to work at regular hours; he was not
made to register his time in and time out every time he was
contracted to work; he was not subjected to any disciplinary
sanction imposed to other employees for company violations;
he was not issued a company I.D.; he was not accorded the same
benefits given to other employees; he was not registered with
the Social Security System (SSS) as petitioners employee; and,
he was free to leave, accept and engage in other means of
livelihood as there is no exclusivity of his contracted services
with the petitioner, his services being co-terminus with the trip
only. All these lead to the conclusion that petitioner is not an
employee of the respondents.[24]
Moreover, Fly Ace claims that it had no right to control the
result, means, manner and methods by which Javier would
perform his work or by which the same is to be
accomplished.[25] In other words, Javier and the company
driver were given a free hand as to how they would perform
their contracted services and neither were they subjected to
definite hours or condition of work.
Fly Ace likewise claims that Javiers function as a pahinante was
not directly related or necessary to its principal business of
importation and sales of groceries. Even without Javier, the
business could operate its usual course as it did not involve the
business of inland transportation. Lastly, the acknowledgment
receipts bearing Javiers signature and words pakiao rate,
referring to his earned salaries on a per trip basis, have
evidentiary weight that the LA correctly considered in arriving
at the conclusion that Javier was not an employee of the
company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javiers alleged illegal
dismissal is anchored on the existence of an employer-
employee relationship between him and Fly Ace. This is
essentially a question of fact. Generally, the Court does not
review errors that raise factual questions. However, when there
is conflict among the factual findings of the antecedent deciding
bodies like the LA, the NLRC and the CA, it is proper, in the
exercise of Our equity jurisdiction, to review and re-evaluate
the factual issues and to look into the records of the case and re-
examine the questioned findings.[26] In dealing with factual
issues in labor cases, substantial evidence that amount of
relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion is sufficient.[27]
As the records bear out, the LA and the CA found Javiers claim
of employment with Fly Ace as wanting and deficient. The
Court is constrained to agree. Although Section 10, Rule VII of
the New Rules of Procedure of the NLRC[28] allows a
relaxation of the rules of procedure and evidence in labor cases,
this rule of liberality does not mean a complete dispensation of
proof. Labor officials are enjoined to use reasonable means to
ascertain the facts speedily and objectively with little regard to
technicalities or formalities but nowhere in the rules are they
provided a license to completely discount evidence, or the lack
of it. The quantum of proof required, however, must still be
satisfied. Hence, when confronted with conflicting versions on
factual matters, it is for them in the exercise of discretion to
determine which party deserves credence on the basis of
evidence received, subject only to the requirement that their
decision must be supported by substantial evidence.[29]
Accordingly, the petitioner needs to show by substantial
evidence that he was indeed an employee of the company
against which he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart and
proffer allegations as different as chalk and cheese. It is,
therefore, incumbent upon the Court to determine whether the
party on whom the burden to prove lies was able to hurdle the
same. No particular form of evidence is required to prove the
existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may
be admitted. Hence, while no particular form of evidence is
required, a finding that such relationship exists must still rest on
some substantial evidence. Moreover, the substantiality of the
evidence depends on its quantitative as well as its qualitative
aspects.[30] Although substantial evidence is not a function of
quantity but rather of quality, the x x x circumstances of the
instant case demand that something more should have been
proffered. Had there been other proofs of employment, such as
x x x inclusion in petitioners payroll, or a clear exercise of
control, the Court would have affirmed the finding of employer-
employee relationship.[31]
In sum, the rule of thumb remains: the onus probandi falls on
petitioner to establish or substantiate such claim by the requisite
quantum of evidence.[32] Whoever claims entitlement to the
benefits provided by law should establish his or her right thereto
x x x.[33] Sadly, Javier failed to adduce substantial evidence as
basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed
to establish his employment with Fly Ace. By way of evidence
on this point, all that Javier presented were his self-serving
statements purportedly showing his activities as an employee of
Fly Ace. Clearly, Javier failed to pass the substantiality
requirement to support his claim. Hence, the Court sees no
reason to depart from the findings of the CA.
While Javier remains firm in his position that as an employed
stevedore of Fly Ace, he was made to work in the company
premises during weekdays arranging and cleaning grocery
items for delivery to clients, no other proof was submitted to
fortify his claim. The lone affidavit executed by one Bengie
Valenzuela was unsuccessful in strengthening Javiers cause. In
said document, all Valenzuela attested to was that he would
frequently see Javier at the workplace where the latter was also
hired as stevedore.[34] Certainly, in gauging the evidence
presented by Javier, the Court cannot ignore the inescapable
conclusion that his mere presence at the workplace falls short
in proving employment therein. The supporting affidavit could
have, to an extent, bolstered Javiers claim of being tasked to
clean grocery items when there were no scheduled delivery
trips, but no information was offered in this subject simply
because the witness had no personal knowledge of Javiers
employment status in the company. Verily, the Court cannot
accept Javiers statements, hook, line and sinker.
The Court is of the considerable view that on Javier lies the
burden to pass the well-settled tests to determine the existence
of an employer-employee relationship, viz: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees
conduct. Of these elements, the most important criterion is
whether the employer controls or has reserved the right to
control the employee not only as to the result of the work but
also as to the means and methods by which the result is to be
accomplished.[35]
In this case, Javier was not able to persuade the Court that the
above elements exist in his case. He could not submit competent
proof that Fly Ace engaged his services as a regular employee;
that Fly Ace paid his wages as an employee, or that Fly Ace
could dictate what his conduct should be while at work. In other
words, Javiers allegations did not establish that his relationship
with Fly Ace had the attributes of an employer-employee
relationship on the basis of the above-mentioned four-fold test.
Worse, Javier was not able to refute Fly Aces assertion that it
had an agreement with a hauling company to undertake the
delivery of its goods. It was also baffling to realize that Javier
did not dispute Fly Aces denial of his services exclusivity to the
company. In short, all that Javier laid down were bare
allegations without corroborative proof.
Fly Ace does not dispute having contracted Javier and paid him
on a per trip rate as a stevedore, albeit on a pakyaw basis. The
Court cannot fail to note that Fly Ace presented documentary
proof that Javier was indeed paid on a pakyaw basis per the
acknowledgment receipts admitted as competent evidence by
the LA. Unfortunately for Javier, his mere denial of the
signatures affixed therein cannot automatically sway us to
ignore the documents because forgery cannot be presumed and
must be proved by clear, positive and convincing evidence and
the burden of proof lies on the party alleging forgery.[36]
Considering the above findings, the Court does not see the
necessity to resolve the second issue presented.
One final note. The Courts decision does not contradict the
settled rule that payment by the piece is just a method of
compensation and does not define the essence of the
relation.[37] Payment on a piece-rate basis does not negate
regular employment. The term wage is broadly defined in
Article 97 of the Labor Code as remuneration or earnings,
capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece or commission basis. Payment
by the piece is just a method of compensation and does not
define the essence of the relations. Nor does the fact that the
petitioner is not covered by the SSS affect the employer-
employee relationship. However, in determining whether the
relationship is that of employer and employee or one of an
independent contractor, each case must be determined on its
own facts and all the features of the relationship are to be
considered.[38] Unfortunately for Javier, the attendant facts and
circumstances of the instant case do not provide the Court with
sufficient reason to uphold his claimed status as employee of
Fly Ace.
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be
supposed that every labor dispute will be automatically decided
in favor of labor. Management also has its rights which are
entitled to respect and enforcement in the interest of simple fair
play. Out of its concern for the less privileged in life, the 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 the Court 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.[39]
WHEREFORE, the petition is DENIED. The March 18, 2010
Decision of the Court of Appeals and its June 7, 2010
Resolution, in CA-G.R. SP No. 109975, are hereby
AFFIRMED.
SO ORDERED.
SLL International vs NLRC
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 re-employed. Lopez was also hired for the said
specific project. For this, private respondents received the wage
of P145.00. Again, after the completion of their project in
March 1999, private respondents went home to Cebu City.
On May 21, 1999, private respondents for the 4th time worked
with Lagons project in Camarin, Caloocan City with Furukawa
Corporation as the general contractor. Their contract would
expire on February 28, 2000, the period of completion of the
project. From May 21, 1997-December 1999, private
respondents received the wage of P145.00. At this time, the
minimum prescribed rate for Manila was P198.00. In January
to February 28, the three received the wage of P165.00. The
existing rate at that time was P213.00.
For reasons of delay on the delivery of imported materials from
Furukawa Corporation, the Camarin project was not completed
on the scheduled date of completion. Face[d] with economic
problem[s], Lagon was constrained to cut down the overtime
work of its worker[s][,] including private respondents. Thus,
when requested by private respondents on February 28, 2000 to
work overtime, Lagon refused and told private respondents that
if they insist, they would have to go home at their own expense
and that they would not be given anymore time nor allowed to
stay in the quarters. This prompted private respondents to leave
their work and went home to Cebu. On March 3, 2000, private
respondents filed a complaint for illegal dismissal, non-
payment of wages, holiday pay, 13th month pay for 1997 and
1998 and service incentive leave pay as well as damages and
attorneys fees.
In their answers, petitioners admit employment of private
respondents but claimed that the latter were only project
employees[,] for their services were merely engaged for a
specific project or undertaking and the same were covered by
contracts duly signed by private respondents. Petitioners further
alleged that the food allowance of P63.00 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.17
Specifically with respect to labor cases, the burden of proving
payment of monetary claims rests on the employer, the rationale
being that the pertinent personnel files, payrolls, records,
remittances and other similar documents which will show
that overtime, differentials, service incentive leave and other
claims of workers have been paid are not in the possession
of the worker but in the custody and absolute 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 2. Paterno Llarena
the wage and when furnished by the employer are deductible
therefrom, since if they are not so furnished, the laborer would Front Desk Clerk
spend and pay for them just the same.
3. Gregorio Nicerio
In short, the benefit or privilege given to the employee which
constitutes an extra remuneration above and over his basic or Supervisory Waiter
ordinary earning or wage is supplement; and when said benefit
or privilege is part of the laborers' basic wages, it is a facility. 4. Amado Macandog
The distinction lies not so much in the kind of benefit or item
(food, lodging, bonus or sick leave) given, but in the purpose Roomboy
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 5. Luis Guades
efficiency and health of its workers while they were working at
their respective projects.1avvphi1 Utility/Maintenance Worker

For said reason, the cases of Agabon and Glaxo are inapplicable 6. Santos Broola
in this case. At any rate, these were cases of dismissal with just
and authorized causes. The present case involves the matter of Roomboy
the failure of the petitioners to comply with the payment of the
prescribed minimum wage. 7. Teodoro Laurenaria

The Court sustains the deletion of the award of differentials Waiter

with respect to respondent Roldan Lopez. As correctly pointed
out by the CA, he did not work for the project in Antipolo. 8. Eduardo Alamares

WHEREFORE, the petition is DENIED. The temporary Roomboy/Waiter

restraining order issued by the Court on November 29, 2006 is
deemed, as it is hereby ordered, DISSOLVED. 9. Lourdes Camigla

SO ORDERED. Cashier

Mayon Hotel vs Adana 10. Chona Bumalay

PUNO, J.:
Cashier
This is a petition for certiorari to reverse and set aside the
Decision issued by the Court of Appeals (CA)1 in CA-G.R. SP 11. Jose Atractivo
No. 68642, entitled "Rolando Adana, Wenefredo Loveres, et.
al. vs. National Labor Relations Commission (NLRC), Mayon Technician
Hotel & Restaurant/Pacita O. Po, et al.," and the Resolution2
denying petitioners' motion for reconsideration. The assailed 12. Amado Alamares
CA decision reversed the NLRC Decision which had dismissed
all of respondents' complaints,3 and reinstated the Joint Dishwasher and Kitchen Helper
Decision of the Labor Arbiter4 which ruled that respondents
were illegally dismissed and entitled to their money claims. 13. Roger Burce

The facts, culled from the records, are as follows:5 Cook

Petitioner Mayon Hotel & Restaurant is a single proprietor 14. Rolando Adana
business registered in the name of petitioner Pacita O. Po,6
whose mother, petitioner Josefa Po Lam, manages the Waiter
establishment.7 The hotel and restaurant employed about
sixteen (16) employees. 15. Miguel Torrefranca

Records show that on various dates starting in 1981, petitioner Cook

hotel and restaurant hired the following people, all respondents
in this case, with the following jobs:8 16. Edgardo Torrefranca

1. Wenefredo Loveres Cook

Accountant and Officer-in-charge Due to the expiration and non-renewal of the lease contract for
the rented space occupied by the said hotel and restaurant at
Rizal Street, the hotel operations of the business were
suspended on March 31, 1997.9 The operation of the restaurant
was continued in its new location at Elizondo Street, Legazpi
City, while waiting for the construction of a new Mayon Hotel
& Restaurant at Pearanda Street, Legazpi City.10 Only nine
(9) of the sixteen (16) employees continued working in the
Mayon Restaurant at its new site.11
On various dates of April and May 1997, the 16 employees filed
complaints for underpayment of wages and other money claims
against petitioners, as follows:12
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose
Atractivo for illegal dismissal, underpayment of wages,
nonpayment of holiday and rest day pay; service incentive leave
pay (SILP) and claims for separation pay plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with
claims for underpayment of wages; nonpayment of cost of
living allowance (COLA) and overtime pay; premium pay for
holiday and rest day; SILP; nightshift differential pay and
separation pay plus damages;
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for
underpayment of wages; nonpayment of holiday and rest day
pay and SILP;
Rolando Adana, Roger Burce and Amado Alamares for
underpayment of wages; nonpayment of COLA, overtime,
holiday, rest day, SILP and nightshift differential pay;
Eduardo Alamares for underpayment of wages, nonpayment of
holiday, rest day and SILP and night shift differential pay;
Santos Broola for illegal dismissal, underpayment of wages,
overtime pay, rest day pay, holiday pay, SILP, and damages;13
and
Teodoro Laurenaria for underpayment of wages; nonpayment
of COLA and overtime pay; premium pay for holiday and rest
day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera,
Jr. rendered a Joint Decision in favor of the employees. The
Labor Arbiter awarded substantially all of respondents' money
claims, and held that respondents Loveres, Macandog and
Llarena were entitled to separation pay, while respondents
Guades, Nicerio and Alamares were entitled to their retirement
pay. The Labor Arbiter also held that based on the evidence
presented, Josefa Po Lam is the owner/proprietor of Mayon
Hotel & Restaurant and the proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was
reversed, and all the complaints were dismissed.
Respondents filed a motion for reconsideration with the NLRC
and when this was denied, they filed a petition for certiorari
with the CA which rendered the now assailed decision.
After their motion for reconsideration was denied, petitioners
now come to this Court, seeking the reversal of the CA decision
on the following grounds:
I. The Honorable Court of Appeals erred in reversing the
decision of the National Labor Relations Commission (Second
Division) by holding that the findings of fact of the NLRC were
not supported by substantial evidence despite ample and
sufficient evidence showing that the NLRC decision is indeed
supported by substantial evidence;
II. The Honorable Court of Appeals erred in upholding the joint
decision of the labor arbiter which ruled that private
respondents were illegally dismissed from their employment,
despite the fact that the reason why private respondents were
out of work was not due to the fault of petitioners but to causes
beyond the control of petitioners.
III. The Honorable Court of Appeals erred in upholding the
award of monetary benefits by the labor arbiter in his joint
decision in favor of the private respondentS, including the
award of damages to six (6) of the private respondents, despite
the fact that the private respondents have not proven by
substantial evidence their entitlement thereto and especially the
fact that they were not illegally dismissed by the petitioners.
IV. The Honorable Court of Appeals erred in holding that Pacita
Ong Po is the owner of the business establishment, petitioner
Mayon Hotel and Restaurant, thus disregarding the certificate
of registration of the business establishment ISSUED by the
local government, which is a public document, and the
unqualified admissions of complainants-private respondents.14
In essence, the petition calls for a review of the following
issues:
1. Was it correct for petitioner Josefa Po Lam to be held liable
as the owner of petitioner Mayon Hotel & Restaurant, and the
proper respondent in this case?
2. Were respondents Loveres, Guades, Macandog, Atractivo,
Llarena and Nicerio illegally dismissed?
3. Are respondents entitled to their money claims due to
underpayment of wages, and nonpayment of holiday pay, rest
day premium, SILP, COLA, overtime pay, and night shift
differential pay?
It is petitioners' contention that the above issues have already
been threshed out sufficiently and definitively by the NLRC.
They therefore assail the CA's reversal of the NLRC decision,
claiming that based on the ruling in Castillo v. NLRC,15 it is
non sequitur that the CA should re-examine the factual findings
of both the NLRC and the Labor Arbiter, especially as in this
case the NLRC's findings are allegedly supported by substantial
evidence.
We do not agree.
There is no denying that it is within the NLRC's competence, as
an appellate agency reviewing decisions of Labor Arbiters, to
disagree with and set aside the latter's findings.16 But it stands
to reason that the NLRC should state an acceptable cause
therefore, otherwise it would be a whimsical, capricious,
oppressive, illogical, unreasonable exercise of quasi-judicial
prerogative, subject to invalidation by the extraordinary writ of
certiorari.17 And when the factual findings of the Labor Arbiter
and the NLRC are diametrically opposed and this disparity of
findings is called into question, there is, necessarily, a re-
examination of the factual findings to ascertain which opinion
should be sustained.18 As ruled in Asuncion v. NLRC,19
Although, it is a legal tenet that factual findings of
administrative bodies are entitled to great weight and respect,
we are constrained to take a second look at the facts before us
because of the diversity in the opinions of the Labor Arbiter and
the NLRC. A disharmony between the factual findings of the
Labor Arbiter and those of the NLRC opens the door to a review
thereof by this Court.20
The CA, therefore, did not err in reviewing the records to
determine which opinion was supported by substantial
evidence.
Moreover, it is explicit in Castillo v. NLRC21 that factual
findings of administrative bodies like the NLRC are affirmed
only if they are supported by substantial evidence that is
manifest in the decision and on the records. As stated in
Castillo:
[A]buse of discretion does not necessarily follow from a
reversal by the NLRC of a decision of a Labor Arbiter. Mere
variance in evidentiary assessment between the NLRC and the
Labor Arbiter does not automatically call for a full review of
the facts by this Court. The NLRC's decision, so long as it is not
bereft of substantial support from the records, deserves respect
from this Court. As a rule, the original and exclusive
jurisdiction to review a decision or resolution of respondent
NLRC in a petition for certiorari under Rule 65 of the Rules of
Court does not include a correction of its evaluation of the
evidence but is confined to issues of jurisdiction or grave abuse
of discretion. Thus, the NLRC's factual findings, if supported
by substantial evidence, are entitled to great respect and even
finality, unless petitioner is able to show that it simply and
arbitrarily disregarded the evidence before it or had
misappreciated the evidence to such an extent as to compel a
contrary conclusion if such evidence had been properly
appreciated. (citations omitted)22
After careful review, we find that the reversal of the NLRC's
decision was in order precisely because it was not supported by
substantial evidence.
1. Ownership by Josefa Po Lam
The Labor Arbiter ruled that as regards the claims of the
employees, petitioner Josefa Po Lam is, in fact, the owner of
Mayon Hotel & Restaurant. Although the NLRC reversed this
decision, the CA, on review, agreed with the Labor Arbiter that
notwithstanding the certificate of registration in the name of
Pacita Po, it is Josefa Po Lam who is the owner/proprietor of
Mayon Hotel & Restaurant, and the proper respondent in the
complaints filed by the employees. The CA decision states in
part:
[Despite] the existence of the Certificate of Registration in the
name of Pacita Po, we cannot fault the labor arbiter in ruling
that Josefa Po Lam is the owner of the subject hotel and
restaurant. There were conflicting documents submitted by
Josefa herself. She was ordered to submit additional documents
to clearly establish ownership of the hotel and restaurant,
considering the testimonies given by the [respondents] and the
non-appearance and failure to submit her own position paper by
Pacita Po. But Josefa did not comply with the directive of the
Labor Arbiter. The ruling of the Supreme Court in Metropolitan
Bank and Trust Company v. Court of Appeals applies to Josefa
Po Lam which is stated in this wise:
When the evidence tends to prove a material fact which imposes
a liability on a party, and he has it in his power to produce
evidence which from its very nature must overthrow the case
made against him if it is not founded on fact, and he refuses to
produce such evidence, the presumption arises that the
evidence[,] if produced, would operate to his prejudice, and
support the case of his adversary.
Furthermore, in ruling that Josefa Po Lam is the real owner of
the hotel and restaurant, the labor arbiter relied also on the
testimonies of the witnesses, during the hearing of the instant
case. When the conclusions of the labor arbiter are sufficiently
corroborated by evidence on record, the same should be
respected by appellate tribunals, since he is in a better position
to assess and evaluate the credibility of the contending
parties.23 (citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the
CA to have ruled that petitioner Josefa Po Lam is the owner of
Mayon Hotel & Restaurant. They allege that the documents
they submitted to the Labor Arbiter sufficiently and clearly
establish the fact of ownership by petitioner Pacita Po, and not
her mother, petitioner Josefa Po Lam. They contend that
petitioner Josefa Po Lam's participation was limited to merely
(a) being the overseer; (b) receiving the month-to-month and/or
year-to-year financial reports prepared and submitted by
respondent Loveres; and (c) visitation of the premises.24 They
also put emphasis on the admission of the respondents in their
position paper submitted to the Labor Arbiter, identifying
petitioner Josefa Po Lam as the manager, and Pacita Po as the
owner.25 This, they claim, is a judicial admission and is binding
on respondents. They protest the reliance the Labor Arbiter and
the CA placed on their failure to submit additional documents
to clearly establish ownership of the hotel and restaurant,
claiming that there was no need for petitioner Josefa Po Lam to
submit additional documents considering that the Certificate of
Registration is the best and primary evidence of ownership.
We disagree with petitioners. We have scrutinized the records
and find the claim that petitioner Josefa Po Lam is merely the
overseer is not borne out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the
proceedings with the Labor Arbiter. Despite receipt of the
Labor Arbiter's notice and summons, other notices and Orders,
petitioner Pacita Po failed to appear in any of the proceedings
with the Labor Arbiter in these cases, nor file her position
paper.26 It was only on appeal with the NLRC that Pacita Po
signed the pleadings.27 The apathy shown by petitioner Pacita
Po is contrary to human experience as one would think that the
owner of an establishment would naturally be concerned when
all her employees file complaints against her.
Second. The records of the case belie petitioner Josefa Po Lam's
claim that she is merely an overseer. The findings of the Labor
Arbiter on this question were based on credible, competent and
substantial evidence. We again quote the Joint Decision on this
matter:
Mayon Hotel and Restaurant is a [business name] of an
enterprise. While [petitioner] Josefa Po Lam claims that it is her
daughter, Pacita Po, who owns the hotel and restaurant when
the latter purchased the same from one Palanos in 1981, Josefa
failed to submit the document of sale from said Palanos to
Pacita as allegedly the sale was only verbal although the license
to operate said hotel and restaurant is in the name of Pacita
which, despite our Order to Josefa to present the same, she
failed to comply (p. 38, tsn. August 13, 1998). While several
documentary evidences were submitted by Josefa wherein
Pacita was named therein as owner of the hotel and restaurant
(pp. 64, 65, 67 to 69; vol. I, rollo)[,] there were documentary
evidences also that were submitted by Josefa showing her
ownership of said enterprise (pp. 468 to 469; vol. II, rollo).
While Josefa explained her participation and interest in the
business as merely to help and assist her daughter as the hotel
and restaurant was near the former's store, the testimonies of
[respondents] and Josefa as well as her demeanor during the
trial in these cases proves (sic) that Josefa Po Lam owns Mayon
Hotel and Restaurant. [Respondents] testified that it was Josefa
who exercises all the acts and manifestation of ownership of the
hotel and restaurant like transferring employees from the
Greatwall Palace Restaurant which she and her husband Roy Po
Lam previously owned; it is Josefa to whom the employees
submits (sic) reports, draws money for payment of payables and
for marketing, attending (sic) to Labor Inspectors during ocular
inspections. Except for documents whereby Pacita Po appears
as the owner of Mayon Hotel and Restaurant, nothing in the
record shows any circumstance or manifestation that Pacita Po
is the owner of Mayon Hotel and Restaurant. The least that can
be said is that it is absurd for a person to purchase a hotel and
restaurant in the very heart of the City of Legazpi verbally.
Assuming this to be true, when [petitioners], particularly Josefa,
was directed to submit evidence as to the ownership of Pacita
of the hotel and restaurant, considering the testimonies of
[respondents], the former should [have] submitted the lease
contract between the owner of the building where Mayon Hotel
and Restaurant was located at Rizal St., Legazpi City and Pacita
Po to clearly establish ownership by the latter of said enterprise.
Josefa failed. We are not surprised why some employers
employ schemes to mislead Us in order to evade liabilities. We
therefore consider and hold Josefa Po Lam as the
owner/proprietor of Mayon Hotel and Restaurant and the proper
respondent in these cases.28
Petitioners' reliance on the rules of evidence, i.e., the certificate
of registration being the best proof of ownership, is misplaced.
Notwithstanding the certificate of registration, doubts were cast
as to the true nature of petitioner Josefa Po Lam's involvement
in the enterprise, and the Labor Arbiter had the authority to
resolve this issue. It was therefore within his jurisdiction to
require the additional documents to ascertain who was the real
owner of petitioner Mayon Hotel & Restaurant.
Article 221 of the Labor Code is clear: technical rules are not
binding, and the application of technical rules of procedure may
be relaxed in labor cases to serve the demand of substantial
justice.29 The rule of evidence prevailing in court of law or
equity shall not be controlling in labor cases and it is the spirit
and intention of the Labor Code that the Labor Arbiter shall use
every and all reasonable means to ascertain the facts in each
case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due
process.30 Labor laws mandate the speedy administration of
justice, with least attention to technicalities but without
sacrificing the fundamental requisites of due process.31
Similarly, the fact that the respondents' complaints contained no
allegation that petitioner Josefa Po Lam is the owner is of no
moment. To apply the concept of judicial admissions to
respondents who are but lowly employees - would be to
exact compliance with technicalities of law that is contrary to
the demands of substantial justice. Moreover, the issue of
ownership was an issue that arose only during the course of the
proceedings with the Labor Arbiter, as an incident of
determining respondents' claims, and was well within his
jurisdiction.32
Petitioners were also not denied due process, as they were given
sufficient opportunity to be heard on the issue of ownership.33
The essence of due process in administrative proceedings is
simply an opportunity to explain one's side or an opportunity to
seek reconsideration of the action or ruling complained of.34
And there is nothing in the records which would suggest that
petitioners had absolute lack of opportunity to be heard.35
Obviously, the choice not to present evidence was made by
petitioners themselves.36
But more significantly, we sustain the Labor Arbiter and the CA
because even when the case was on appeal with the NLRC,
nothing was submitted to negate the Labor Arbiter's finding that
Pacita Po is not the real owner of the subject hotel and
restaurant. Indeed, no such evidence was submitted in the
proceedings with the CA nor with this Court. Considering that
petitioners vehemently deny ownership by petitioner Josefa Po
Lam, it is most telling that they continue to withhold evidence
which would shed more light on this issue. We therefore agree
with the CA that the failure to submit could only mean that if
produced, it would have been adverse to petitioners' case.37
Thus, we find that there is substantial evidence to rule that
petitioner Josefa Po Lam is the owner of petitioner Mayon
Hotel & Restaurant.
2. Illegal Dismissal: claim for separation pay
Of the sixteen employees, only the following filed a case for
illegal dismissal: respondents Loveres, Llarena, Nicerio,
Macandog, Guades, Atractivo and Broola.38
The Labor Arbiter found that there was illegal dismissal, and
granted separation pay to respondents Loveres, Macandog and
Llarena. As respondents Guades, Nicerio and Alamares were
already 79, 66 and 65 years old respectively at the time of the
dismissal, the Labor Arbiter granted retirement benefits
pursuant to Article 287 of the Labor Code as amended.39 The
Labor Arbiter ruled that respondent Atractivo was not entitled
to separation pay because he had been transferred to work in the
restaurant operations in Elizondo Street, but awarded him
damages. Respondents Loveres, Llarena, Nicerio, Macandog
and Guades were also awarded damages.40
The NLRC reversed the Labor Arbiter, finding that "no clear
act of termination is attendant in the case at bar" and that
respondents "did not submit any evidence to that effect, but the
finding and conclusion of the Labor Arbiter [are] merely based
on his own surmises and conjectures."41 In turn, the NLRC was
reversed by the CA.
It is petitioners contention that the CA should have sustained
the NLRC finding that none of the above-named respondents
were illegally dismissed, or entitled to separation or retirement
pay. According to petitioners, even the Labor Arbiter and the
CA admit that when the illegal dismissal case was filed by
respondents on April 1997, they had as yet no cause of action.
Petitioners therefore conclude that the filing by respondents of
the illegal dismissal case was premature and should have been
dismissed outright by the Labor Arbiter.42 Petitioners also
claim that since the validity of respondents' dismissal is a
factual question, it is not for the reviewing court to weigh the
conflicting evidence.43
We do not agree. Whether respondents are still working for
petitioners is a factual question. And the records are
unequivocal that since April 1997, when petitioner Mayon
Hotel & Restaurant suspended its hotel operations and
transferred its restaurant operations in Elizondo Street,
respondents Loveres, Macandog, Llarena, Guades and Nicerio
have not been permitted to work for petitioners. Respondent
Alamares, on the other hand, was also laid-off when the
Elizondo Street operations closed, as were all the other
respondents. Since then, respondents have not been permitted
to work nor recalled, even after the construction of the new
premises at Pearanda Street and the reopening of the hotel
operations with the restaurant in this new site. As stated by the
Joint Decision of the Labor Arbiter on July 2000, or more than
three (3) years after the complaint was filed:44
[F]rom the records, more than six months had lapsed without
[petitioner] having resumed operation of the hotel. After more
than one year from the temporary closure of Mayon Hotel and
the temporary transfer to another site of Mayon Restaurant, the
building which [petitioner] Josefa allege[d] w[h]ere the hotel
and restaurant will be transferred has been finally constructed
and the same is operated as a hotel with bar and restaurant
nevertheless, none of [respondents] herein who were employed
at Mayon Hotel and Restaurant which was also closed on April
30, 1998 was/were recalled by [petitioner] to continue their
services...
Parenthetically, the Labor Arbiter did not grant separation pay
to the other respondents as they had not filed an amended
complaint to question the cessation of their employment after
the closure of Mayon Hotel & Restaurant on March 31, 1997.45
The above factual finding of the Labor Arbiter was never
refuted by petitioners in their appeal with the NLRC. It
confounds us, therefore, how the NLRC could have so
cavalierly treated this uncontroverted factual finding by ruling
that respondents have not introduced any evidence to show that
they were illegally dismissed, and that the Labor Arbiter's
finding was based on conjecture.46 It was a serious error that
the NLRC did not inquire as to the legality of the cessation of
employment. Article 286 of the Labor Code is clear there is
termination of employment when an otherwise bona fide
suspension of work exceeds six (6) months.47 The cessation of
employment for more than six months was patent and the
employer has the burden of proving that the termination was for
a just or authorized cause.48
Moreover, we are not impressed by any of petitioners' attempts
to exculpate themselves from the charges. First, in the
proceedings with the Labor Arbiter, they claimed that it could
not be illegal dismissal because the lay-off was merely
temporary (and due to the expiration of the lease contract over
the old premises of the hotel). They specifically invoked Article
286 of the Labor Code to argue that the claim for separation pay
was premature and without legal and factual basis.49 Then,
because the Labor Arbiter had ruled that there was already
illegal dismissal when the lay-off had exceeded the six-month
period provided for in Article 286, petitioners raise this novel
argument, to wit:
It is the firm but respectful submission of petitioners that
reliance on Article 286 of the Labor Code is misplaced,
considering that the reason why private respondents were out of
work was not due to the fault of petitioners. The failure of
petitioners to reinstate the private respondents to their former
positions should not likewise be attributable to said petitioners
as the private respondents did not submit any evidence to prove
their alleged illegal dismissal. The petitioners cannot discern
why they should be made liable to the private respondents for
their failure to be reinstated considering that the fact that they
were out of work was not due to the fault of petitioners but due
to circumstances beyond the control of petitioners, which are
the termination and non-renewal of the lease contract over the
subject premises. Private respondents, however, argue in their
Comment that petitioners themselves sought the application of
Article 286 of the Labor Code in their case in their Position
Paper filed before the Labor Arbiter. In refutation, petitioners
humbly submit that even if they invoke Article 286 of the Labor
Code, still the fact remains, and this bears stress and emphasis,
that the temporary suspension of the operations of the
establishment arising from the non-renewal of the lease contract
did not result in the termination of employment of private
respondents and, therefore, the petitioners cannot be faulted if
said private respondents were out of work, and consequently,
they are not entitled to their money claims against the
petitioners.50
It is confounding how petitioners have fashioned their
arguments. After having admitted, in effect, that respondents
have been laid-off since April 1997, they would have this Court
excuse their refusal to reinstate respondents or grant them
separation pay because these same respondents purportedly
have not proven the illegality of their dismissal.
Petitioners' arguments reflect their lack of candor and the
blatant attempt to use technicalities to muddle the issues and
defeat the lawful claims of their employees. First, petitioners
admit that since April 1997, when hotel operations were
suspended due to the termination of the lease of the old
premises, respondents Loveres, Macandog, Llarena, Nicerio
and Guades have not been permitted to work. Second, even after
six months of what should have been just a temporary lay-off,
the same respondents were still not recalled to work. As a matter
of fact, the Labor Arbiter even found that as of the time when
he rendered his Joint Decision on July 2000 or more than
three (3) years after the supposed "temporary lay-off," the
employment of all of the respondents with petitioners had
ceased, notwithstanding that the new premises had been
completed and the same operated as a hotel with bar and
restaurant. This is clearly dismissal or the permanent
severance or complete separation of the worker from the service
on the initiative of the employer regardless of the reasons
therefor.51
On this point, we note that the Labor Arbiter and the CA are in
accord that at the time of the filing of the complaint,
respondents had no cause of action to file the case for illegal
dismissal. According to the CA and the Labor Arbiter, the lay-
off of the respondents was merely temporary, pending
construction of the new building at Pearanda Street.52
While the closure of the hotel operations in April of 1997 may
have been temporary, we hold that the evidence on record belie
any claim of petitioners that the lay-off of respondents on that
same date was merely temporary. On the contrary, we find
substantial evidence that petitioners intended the termination to
be permanent. First, respondents Loveres, Macandog, Llarena,
Guades, Nicerio and Alamares filed the complaint for illegal
dismissal immediately after the closure of the hotel operations
in Rizal Street, notwithstanding the alleged temporary nature of
the closure of the hotel operations, and petitioners' allegations
that the employees assigned to the hotel operations knew about
this beforehand. Second, in their position paper submitted to the
Labor Arbiter, petitioners invoked Article 286 of the Labor
Code to assert that the employer-employee relationship was
merely suspended, and therefore the claim for separation pay
was premature and without legal or factual basis.53 But they
made no mention of any intent to recall these respondents to
work upon completion of the new premises. Third, the various
pleadings on record show that petitioners held respondents,
particularly Loveres, as responsible for mismanagement of the
establishment and for abuse of trust and confidence. Petitioner
Josefa Po Lam's affidavit on July 21, 1998, for example,
squarely blamed respondents, specifically Loveres, Bumalay
and Camigla, for abusing her leniency and causing petitioner
Mayon Hotel & Restaurant to sustain "continuous losses until it
is closed." She then asserts that respondents "are not entitled to
separation pay for they were not terminated and if ever the
business ceased to operate it was because of losses."54 Again,
petitioners make the same allegation in their memorandum on
appeal with the NLRC, where they alleged that three (3) years
prior to the expiration of the lease in 1997, the operation of the
Hotel had been sustaining consistent losses, and these were
solely attributed to respondents, but most especially due to
Loveres's mismanagement and abuse of petitioners' trust and
confidence.55 Even the petition filed in this court made
reference to the separation of the respondents due to "severe
financial losses and reverses," again imputing it to respondents'
mismanagement.56 The vehemence of petitioners' accusation
of mismanagement against respondents, especially against
Loveres, is inconsistent with the desire to recall them to work.
Fourth, petitioners' memorandum on appeal also averred that
the case was filed "not because of the business being operated
by them or that they were supposedly not receiving benefits
from the Labor Code which is true, but because of the fact that
the source of their livelihood, whether legal or immoral, was
stopped on March 31, 1997, when the owner of the building
terminated the Lease Contract."57 Fifth, petitioners had
inconsistencies in their pleadings (with the NLRC, CA and with
this Court) in referring to the closure,58 i.e., in the petition filed
with this court, they assert that there is no illegal dismissal
because there was "only a temporary cessation or suspension of
operations of the hotel and restaurant due to circumstances
beyond the control of petitioners, and that is, the non-renewal
of the lease contract..."59 And yet, in the same petition, they
also assert that: (a) the separation of respondents was due to
severe financial losses and reverses leading to the closure of the
business; and (b) petitioner Pacita Po had to close shop and was
bankrupt and has no liquidity to put up her own building to
house Mayon Hotel & Restaurant.60 Sixth, and finally, the
uncontroverted finding of the Labor Arbiter that petitioners
terminated all the other respondents, by not employing them
when the Hotel and Restaurant transferred to its new site on
Pearanda Street.61 Indeed, in this same memorandum,
petitioners referred to all respondents as "former employees of
Mayon Hotel & Restaurant."62
These factors may be inconclusive individually, but when taken
together, they lead us to conclude that petitioners really
intended to dismiss all respondents and merely used the
termination of the lease (on Rizal Street premises) as a means
by which they could terminate their employees.
Moreover, even assuming arguendo that the cessation of
employment on April 1997 was merely temporary, it became
dismissal by operation of law when petitioners failed to
reinstate respondents after the lapse of six (6) months, pursuant
to Article 286 of the Labor Code.
We are not impressed by petitioners' claim that severe business
losses justified their failure to reinstate respondents. The
evidence to prove this fact is inconclusive. But more important,
serious business losses do not excuse the employer from
complying with the clearance or report required under Article
283 of the Labor Code and its implementing rules before
terminating the employment of its workers.63 In the absence of
justifying circumstances, the failure of petitioners to observe
the procedural requirements set out under Article 284, taints
their actuations with bad faith, especially since they claimed
that they have been experiencing losses in the three years before
1997. To say the least, if it were true that the lay-off was
temporary but then serious business losses prevented the
reinstatement of respondents, then petitioners should have
complied with the requirements of written notice. The
requirement of law mandating the giving of notices was
intended not only to enable the employees to look for another
employment and therefore ease the impact of the loss of their
jobs and the corresponding income, but more importantly, to
give the Department of Labor and Employment (DOLE) the
opportunity to ascertain the verity of the alleged authorized
cause of termination.64
And even assuming that the closure was due to a reason beyond
the control of the employer, it still has to accord its employees
some relief in the form of severance pay.65
While we recognize the right of the employer to terminate the
services of an employee for a just or authorized cause, the
dismissal of employees must be made within the parameters of
law and pursuant to the tenets of fair play.66 And in termination
disputes, the burden of proof is always on the employer to prove
that the dismissal was for a just or authorized cause.67 Where
there is no showing of a clear, valid and legal cause for
termination of employment, the law considers the case a matter
of illegal dismissal.68
Under these circumstances, the award of damages was proper.
As a rule, moral damages are recoverable where the dismissal
of the employee was attended by bad faith or fraud or
constituted an act oppressive to labor, or was done in a manner
contrary to morals, good customs or public policy.69 We
believe that the dismissal of the respondents was attended with
bad faith and meant to evade the lawful obligations imposed
upon an employer.
To rule otherwise would lead to the anomaly of respondents
being terminated from employment in 1997 as a matter of fact,
but without legal redress. This runs counter to notions of fair
play, substantial justice and the constitutional mandate that
labor rights should be respected. If doubts exist between the
evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter the
employer must affirmatively show rationally adequate evidence
that the dismissal was for a justifiable cause.70 It is a time-
honored rule that in controversies between a laborer and his
master, doubts reasonably arising from the evidence, or in the
interpretation of agreements and writing should be resolved in
the former's favor.71 The policy is to extend the doctrine to a
greater number of employees who can avail of the benefits
under the law, which is in consonance with the avowed policy
of the State to give maximum aid and protection of labor.72
We therefore reinstate the Labor Arbiter's decision with the
following modifications:
(a) Separation pay for the illegal dismissal of respondents
Loveres, Macandog and Llarena; (Santos Broola cannot be
granted separation pay as he made no such claim);
(b) Retirement pay for respondents Guades, Nicerio, and
Alamares, who at the time of dismissal were entitled to their
retirement benefits pursuant to Article 287 of the Labor Code
as amended;73 and
(c) Damages for respondents Loveres, Macandog, Llarena,
Guades, Nicerio, Atractivo, and Broola.
3. Money claims
The CA held that contrary to the NLRC's ruling, petitioners had
not discharged the burden of proving that the monetary claims
of the respondents have been paid.74 The CA thus reinstated
the Labor Arbiter's grant of respondents' monetary claims,
including damages.
Petitioners assail this ruling by repeating their long and
convoluted argument that as there was no illegal dismissal, then
respondents are not entitled to their monetary claims or
separation pay and damages. Petitioners' arguments are not only
tiring, repetitive and unconvincing, but confusing and confused
entitlement to labor standard benefits is a separate and
distinct concept from payment of separation pay arising from
illegal dismissal, and are governed by different provisions of
the Labor Code.
We agree with the CA and the Labor Arbiter. Respondents have
set out with particularity in their complaint, position paper,
affidavits and other documents the labor standard benefits they
are entitled to, and which they alleged that petitioners have
failed to pay them. It was therefore petitioners' burden to prove
that they have paid these money claims. One who pleads
payment has the burden of proving it, and even where the
employees must allege nonpayment, the general rule is that the
burden rests on the defendant to prove nonpayment, rather than
on the plaintiff to prove non payment.75 This petitioners failed
to do.
We also agree with the Labor Arbiter and the CA that the
documents petitioners submitted, i.e., affidavits executed by
some of respondents during an ocular inspection conducted by
an inspector of the DOLE; notices of inspection result and
Facility Evaluation Orders issued by DOLE, are not sufficient
to prove payment.76 Despite repeated orders from the Labor
Arbiter,77 petitioners failed to submit the pertinent employee
files, payrolls, records, remittances and other similar documents
which would show that respondents rendered work entitling
them to payment for overtime work, night shift differential,
premium pay for work on holidays and rest day, and payment
of these as well as the COLA and the SILP documents which
are not in respondents' possession but in the custody and
absolute control of petitioners.78 By choosing not to fully and
completely disclose information and present the necessary
documents to prove payment of labor standard benefits due to
respondents, petitioners failed to discharge the burden of
proof.79 Indeed, petitioners' failure to submit the necessary
documents which as employers are in their possession, inspite
of orders to do so, gives rise to the presumption that their
presentation is prejudicial to its cause.80 As aptly quoted by the
CA:
[W]hen the evidence tends to prove a material fact which
imposes a liability on a party, and he has it in his power to
produce evidence which from its very nature must overthrow
the case made against him if it is not founded on fact, and he
refuses to produce such evidence, the presumption arises that
the evidence, if produced, would operate to his prejudice, and
support the case of his adversary.81
Petitioners next claim that the cost of the food and snacks
provided to respondents as facilities should have been included
in reckoning the payment of respondents' wages. They state that
although on the surface respondents appeared to receive
minimal wages, petitioners had granted respondents other
benefits which are considered part and parcel of their wages and
are allowed under existing laws.82 They claim that these
benefits make up for whatever inadequacies there may be in
compensation.83 Specifically, they invoked Sections 5 and 6,
Rule VII-A, which allow the deduction of facilities provided by
the employer through an appropriate Facility Evaluation Order
issued by the Regional Director of the DOLE.84 Petitioners
also aver that they give five (5) percent of the gross income each
month as incentives. As proof of compliance of payment of
minimum wages, petitioners submitted the Notice of Inspection
Results issued in 1995 and 1997 by the DOLE Regional
Office.85
The cost of meals and snacks purportedly provided to
respondents cannot be deducted as part of respondents'
minimum wage. As stated in the Labor Arbiter's decision:86
While [petitioners] submitted Facility Evaluation Orders (pp.
468, 469; vol. II, rollo) issued by the DOLE Regional Office
whereby the cost of meals given by [petitioners] to
[respondents] were specified for purposes of considering the
same as part of their wages, We cannot consider the cost of
meals in the Orders as applicable to [respondents].
[Respondents] were not interviewed by the DOLE as to the
quality and quantity of food appearing in the applications of
[petitioners] for facility evaluation prior to its approval to
determine whether or not [respondents] were indeed given such
kind and quantity of food. Also, there was no evidence that the
quality and quantity of food in the Orders were voluntarily
accepted by [respondents]. On the contrary; while some [of the
respondents] admitted that they were given meals and
merienda, the quality of food serve[d] to them were not what
were provided for in the Orders and that it was only when they
filed these cases that they came to know about said Facility
Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,]
June 19, 1998). [Petitioner] Josefa herself, who applied for
evaluation of the facility (food) given to [respondents], testified
that she did not inform [respondents] concerning said Facility
Evaluation Orders (p. 34, tsn[,] August 13, 1998).
Even granting that meals and snacks were provided and indeed
constituted facilities, such facilities could not be deducted
without compliance with certain legal requirements. As stated
in Mabeza v. NLRC,87 the employer simply cannot deduct the
value from the employee's wages without satisfying the
following: (a) proof that such facilities are customarily
furnished by the trade; (b) the provision of deductible facilities
is voluntarily accepted in writing by the employee; and (c) the
facilities are charged at fair and reasonable value. The records
are clear that petitioners failed to comply with these
requirements. There was no proof of respondents' written
authorization. Indeed, the Labor Arbiter found that while the
respondents admitted that they were given meals and merienda,
the quality of food served to them was not what was provided
for in the Facility Evaluation Orders and it was only when they
filed the cases that they came to know of this supposed Facility
Evaluation Orders.88 Petitioner Josefa Po Lam herself admitted
that she did not inform the respondents of the facilities she had
applied for.89
Considering the failure to comply with the above-mentioned
legal requirements, the Labor Arbiter therefore erred when he
ruled that the cost of the meals actually provided to respondents
should be deducted as part of their salaries, on the ground that
respondents have availed themselves of the food given by
petitioners.90 The law is clear that mere availment is not
sufficient to allow deductions from employees' wages.
More important, we note the uncontroverted testimony of
respondents on record that they were required to eat in the hotel
and restaurant so that they will not go home and there is no
interruption in the services of Mayon Hotel & Restaurant. As
ruled in Mabeza, food or snacks or other convenience provided
by the employers are deemed as supplements if they are granted
for the convenience of the employer. The criterion in making a
distinction between a supplement and a facility does not so
much lie in the kind (food, lodging) but the purpose.91
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 petitioners' business.92 The
deduction of the cost of meals from respondents' wages,
therefore, should be removed.
We also do not agree with petitioners that the five (5) percent
of the gross income of the establishment can be considered as
part of the respondents' wages. We quote with approval the
Labor Arbiter on this matter, to wit:
While complainants, who were employed in the hotel,
receive[d] various amounts as profit share, the same cannot be
considered as part of their wages in determining their claims for
violation of labor standard benefits. Although called profit
share[,] such is in the nature of share from service charges
charged by the hotel. This is more explained by [respondents]
when they testified that what they received are not fixed
amounts and the same are paid not on a monthly basis (pp. 55,
93, 94, 103, 104; vol. II, rollo). Also, [petitioners] failed to
submit evidence that the amounts received by [respondents] as
profit share are to be considered part of their wages and had
been agreed by them prior to their employment. Further, how
can the amounts receive[d] by [respondents] be considered as
profit share when the same [are] based on the gross receipt of
the hotel[?] No profit can as yet be determined out of the gross
receipt of an enterprise. Profits are realized after expenses are
deducted from the gross income.
On the issue of the proper minimum wage applicable to
respondents, we sustain the Labor Arbiter. We note that
petitioners themselves have admitted that the establishment
employs "more or less sixteen (16) employees,"93 therefore
they are estopped from claiming that the applicable minimum
wage should be for service establishments employing 15
employees or less.
As for petitioners repeated invocation of serious business
losses, suffice to say that this is not a defense to payment of
labor standard benefits. The employer cannot exempt himself
from liability to pay minimum wages because of poor financial
condition of the company. The payment of minimum wages is
not dependent on the employer's ability to pay.94
Thus, we reinstate the award of monetary claims granted by the
Labor Arbiter.
4. Conclusion
There is no denying that the actuations of petitioners in this case
have been reprehensible. They have terminated the respondents'
employment in an underhanded manner, and have used and
abused the quasi-judicial and judicial processes to resist
payment of their employees' rightful claims, thereby protracting
this case and causing the unnecessary clogging of dockets of the
Court. They have also forced respondents to unnecessary
hardship and financial expense. Indeed, the circumstances of
this case would have called for exemplary damages, as the
dismissal was effected in a wanton, oppressive or malevolent
manner,95 and public policy requires that these acts must be
suppressed and discouraged.96
Nevertheless, we cannot agree with the Labor Arbiter in
granting exemplary damages of P10,000.00 each to all
respondents. While it is true that other forms of damages under
the Civil Code may be awarded to illegally dismissed
employees,97 any award of moral damages by the Labor
Arbiter cannot be based on the Labor Code but should be
grounded on the Civil Code.98 And the law is clear that
exemplary damages can only be awarded if plaintiff shows
proof that he is entitled to moral, temperate or compensatory
damages.99
As only respondents Loveres, Guades, Macandog, Llarena,
Nicerio, Atractivo and Broola specifically claimed damages
from petitioners, then only they are entitled to exemplary
damages.sjgs1
Finally, we rule that attorney's fees in the amount to P10,000.00
should be granted to each respondent. It is settled that in actions
for recovery of wages or where an employee was forced to
litigate and incur expenses to protect his rights and interest, he
is entitled to an award of attorney's fees.100 This case
undoubtedly falls within this rule.
IN VIEW WHEREOF, the petition is hereby DENIED. The
Decision of January 17, 2003 of the Court of Appeals in CA-
G.R. SP No. 68642 upholding the Joint Decision of July 14,
2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97
and 04-00080-97 is AFFIRMED, with the following
MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every
year of service to respondents Loveres, Macandog and Llarena;
(2) Granting retirement pay for respondents Guades, Nicerio,
and Alamares;
(3) Removing the deductions for food facility from the amounts
due to all respondents;
(4) Awarding moral damages of P20,000.00 each for
respondents Loveres, Macandog, Llarena, Guades, Nicerio,
Atractivo, and Broola;
(5) Deleting the award of exemplary damages of P10,000.00
from all respondents except Loveres, Macandog, Llarena,
Guades, Nicerio, Atractivo, and Broola; and
(6) Granting attorney's fees of P10,000.00 each to all
respondents.
The case is REMANDED to the Labor Arbiter for the
RECOMPUTATION of the total monetary benefits awarded
and due to the employees concerned in accordance with the
decision. The Labor Arbiter is ORDERED to submit his
compliance thereon within thirty (30) days from notice of this
decision, with copies furnished to the parties.
SO ORDERED.
Mabeza vs NLRC
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. 7 Pointing 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 quasi-judicial 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 full wage
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.
SO ORDERED.
Our Haus Realty vs Parian
BRION, J.:
We resolve in this petition for review on certiorari1 the
challenge to the May 7, 2012 decision2 and the November 27,
2012 resolution3 (assailed CA rulings) of the Court of Appeals
(CA) in CA-G.R. SP No. 123273. These assailed CA rulings
affirmed the July 20, 2011 decision4 and the December 2, 2011
resolution5 (NLRC rulings) of the National Labor Relations
Commission (NLRC) in NLRC LAC No. 02-000489-11
(NLRC NCR Case No. 06-08544-10). The NLRC rulings in
turn reversed and set aside the December 10, 2010 decision6 of
the labor arbiter (LA).
Factual Antecedents
Respondents Alexander Parian, Jay Erinco, Alexander Canlas,
Jerry Sabulao and Bernardo Tenederowere all laborers working
for petitioner Our Haus Realty Development Corporation (Our
Haus), a company engaged in the construction business.The
respondents respective employment records and daily wage
rates from 2007 to 2010 are summarized in the table7 below:
Name Date Hired Years of Service Year and Place of
Assignment Daily Rate
Alexander M. Parian October 1999 10 years 2007-
2010- Quezon City P353.50
Jay C. Erinco January 2000 10 years 2008- Quezon
City 2009- Antipolo 2010- Quezon City P342.00
Alexander R. Canlas 2005 5 years 2007-2010-
Quezon City P312.00
Jerry Q. Sabulao August 1999 10 years 2008- Quezon
City 2009- Antipolo 2010- Quezon City P342.00
Bernardo N. Tenedero 1994 16 years 2007-2010-
Quezon City P383.50
Sometime in May 2010, Our Haus experienced financial
distress. To alleviate its condition, Our Haus suspended some
of its construction projects and asked the affected workers,
including the respondents, to take vacation leaves.8
Eventually, the respondents were asked to report back to work
but instead of doing so, they filed with the LA a complaint for
underpayment of their daily wages. They claimed that except
for respondent Bernardo N. Tenedero, their wages were below
the minimum rates prescribed in the following wage orders
from 2007 to 2010:
1. Wage Order No. NCR-13, which provides for a daily
minimum wage rate of P362.00for the non-agriculture sector
(effective from August 28, 2007 until June 13, 2008); and
2. Wage Order No. NCR-14, which provides for a daily
minimum wage rate of P382.00for the non-agriculture sector
(effective from June 14, 2008 until June 30, 2010).
The respondents also alleged thatOur Haus failed to pay them
their holiday, service incentive leave (SIL), 13th month and
overtime pays.9
The Labor Arbitration Rulings
Before the LA, Our Haus primarily argued that the respondents
wages complied with the laws minimum requirement. Aside
from paying the monetary amount of the respondents wages,
Our Haus also subsidized their meals (3 times a day), and gave
them free lodging near the construction project they were
assigned to.10 In determining the total amount of the
respondents daily wages, the value of these benefits should be
considered, in line with Article 97(f)11 of the Labor Code.
Our Haus also rejected the respondents other monetary claims
for lack of proof that they were entitled to it.12
On the other hand, the respondents argued that the value of their
meals should not be considered in determining their wages
total amount since the requirements set under Section 413 of
DOLE14 Memorandum Circular No. 215 were not complied
with.
The respondents pointed out that Our Haus never presented any
proof that they agreed in writing to the inclusion of their meals
value in their wages.16 Also, Our Haus failed to prove that the
value of the facilities it furnished was fair and reasonable.17
Finally, instead of deducting the maximum amount of 70% of
the value of the meals, Our Haus actually withheld its full value
(which was Php290.00 per week for each employee).18
The LA ruled in favor of Our Haus. He held that if the
reasonable values of the board and lodging would be taken into
account, the respondents daily wages would meet the
minimum wage rate.19 As to the other benefits, the LA found
that the respondents were not able to substantiate their claims
for it.20
The respondents appealed the LAs decision to the NLRC,
which in turn, reversed it. Citing the case of Mayon Hotel &
Restaurant v. Adana,21 the NLRC noted that the respondents
did not authorize Our Haus in writing to charge the values of
their board and lodging to their wages. Thus, the samecannot be
credited.
The NLRC also ruled that the respondents are entitled to their
respective proportionate 13th month payments for the year
2010 and SIL payments for at least three years,immediately
preceding May 31, 2010, the date when the respondents leftOur
Haus. However, the NLRC sustained the LAs ruling that the
respondents were not entitled to overtime pay since the exact
dates and times when they rendered overtime work had not been
proven.22
Our Haus moved for the reconsideration23 of the NLRCs
decision and submitted new evidence (the five kasunduans) to
show that the respondents authorized Our Haus in writing to
charge the values of their meals and lodging to their wages.
The NLRC denied Our Haus motion, thus it filed a Rule 65
petition24 with the CA. In its petition, Our Haus propounded a
new theory. It made a distinction between deduction and
charging. A written authorization is only necessary if the
facilitys value will be deducted and will not be needed if it will
merely be charged or included in the computation of wages.25
Our Haus claimed that it did not actually deduct the values of
the meals and housing benefits. It only considered these in
computing the total amount of wages paid to the respondents
for purposes of compliance with the minimum wage law.
Hence, the written authorization requirement should not apply.
Our Haus also asserted that the respondents claim for SIL pay
should be denied as this was not included in their pro
formacomplaint. Lastly, it questioned the
respondentsentitlement to attorneys fees because they were
not represented by a private lawyer but by the Public Attorneys
Office (PAO).
The CAs Ruling
The CA dismissed Our Haus certiorari petition and affirmed
the NLRC rulings in toto. It found no real distinction between
deduction and charging,26 and ruled that the legal requirements
before any deduction or charging can be made, apply to both.
Our Haus, however, failed to prove that it complied with any of
the requirements laid down in Mabeza v. National Labor
Relations Commission.27 Accordingly, it cannot consider the
values of its meal and housing facilities in the computation of
the respondents total wages.
Also, the CA ruled that since the respondents were able to allege
non-payment of SIL in their position paper, and Our Haus, in
fact, opposed it in its various pleadings,28 then the NLRC
properly considered it as part of the respondents causes of
action. Lastly, the CA affirmed the respondents entitlement to
attorneys fees.29
Our Haus filed a motion for reconsideration but the CA denied
its motion, prompting it to file the present petition for review
on certiorari under Rule 45.
The Petition
Our Haus submits that the CA erred in ruling that the legal
requirements apply without distinction whether the facilitys
value will be deducted or merely included in the computation
of the wages. At any rate, it complied with the requirements for
deductibility of the value of the facilities. First, the five
kasunduans executed by the respondents constitute the written
authorization for the inclusion of the board and lodgings values
to their wages. Second, Our Haus only withheld the amount of
P290.00 which represents the foods raw value; the weekly
cooking cost (cooks wage, LPG, water) at P239.40 per person
is a separate expense that Our Haus did not withhold from the
respondents wages.30 This disproves the respondentsclaim
that it deducted the full amount of the meals value.
Lastly, the CA erred in ruling that the claim for SIL pay may
still be granted though not raised in the complaint; and that the
respondents are entitled to an award of attorneys fees.31
The Case for the Respondents
The respondents prayed for the denial of the petition.32 They
maintained that the CA did not err inruling that the values of the
board and lodging cannot be deducted from their wages for
failure to comply with the requirements set by law.33 And
though the claim for SIL pay was not included in their pro forma
complaint, they raised their claims in their position paper and
Our Haus had the opportunity to contradict it in its pleadings.34
Finally, under the PAO law, the availment of the PAOs legal
services does not exempt its clients from an award of attorneys
fees.35
The Courts Ruling
We resolve to DENYthe petition.
The nature of a Rule 45 petition only questions of law
Basic is the rule that only questions of lawmay be raised in a
Rule 45 petition.36 However, in this case, weare confronted
with mixed questions of fact and law that are subsumed under
the issue of whether Our Haus complied with the legal
requirements on the deductibility of the value of facilities.
Strictly, factual issues cannot be considered under Rule 45
except in the course of resolving if the CA correctly determined
whether or not the NLRC committed grave abuse of discretion
in considering and appreciating the factual issues before it.37
In ruling for legal correctness, we have to view the CA decision
in the same context that the petition for certiorariit ruled upon
was presented to it; we have to examine the CA decision from
the prism of whether it correctly determined the presence or
absence of grave abuse of discretion in the NLRC decision
before it, not on the basis of whether the NLRC decision, on the
merits of the case, was correct. In other words, we have to be
keenly aware that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it.
This is the approach that should bebasic in a Rule 45 review of
a CA ruling in a labor case. In question form, the question to
ask in the present case is: did the CA correctly determine that
the NLRC did not commit grave abuse of discretion in ruling
on the case?38 We rule that the CA correctly did.
No substantial distinction between deducting and charging a
facilitys value from the employees wage; the legal
requirements for creditability apply to both
To justify its non-compliance with the requirements for the
deductibility of a facility, Our Haus asks us to believe that there
is a substantial distinction between the deduction and the
charging of a facilitys value to the wages. Our Haus explains
that in deduction, the amount of the wage (which may already
be below the minimum) would still be lessened by the facilitys
value, thus needing the employees consent. On the other hand,
in charging, there is no reduction of the employees wage since
the facilitys value will just be theoretically added to the wage
for purposes of complying with the minimum wage
requirement.39
Our Haus argument is a vain attempt to circumvent the
minimum wage law by trying to create a distinction where none
exists.
In reality, deduction and charging both operate to lessen the
actual take-home pay of an employee; they are two sides of the
same coin. In both, the employee receives a lessened amount
because supposedly, the facilitys value, which is part of his
wage, had already been paid to him in kind. As there is no
substantial distinction between the two, the requirements set by
law must apply to both.
As the CA correctly ruled, these requirements, as summarized
in Mabeza, are the following:
a. proof must be shown thatsuch facilities are customarily
furnished by the trade;
b. the provision of deductiblefacilities must be voluntarily
accepted in writingby the employee; and
c. The facilities must be charged at fair and reasonable value.40
We examine Our Haus compliance with each of these
requirements in seriatim.
a. The facility must be customarily furnished by the trade
In a string of cases, we have concluded that one of the badges
to show that a facility is customarily furnished by the trade is
the existence of a company policy or guideline showing that
provisions for a facility were designated as part of the
employees salaries.41 To comply with this, Our Haus
presented in its motion for reconsideration with the NLRC the
joint sinumpaang salaysayof four of its alleged employees.
These employees averred that they were recipients of free
lodging, electricity and water, as well as subsidized meals from
Our Haus.42
We agree with the NLRCs finding that the sinumpaang
salaysay statements submitted by Our Haus are self-
serving.1wphi1 For one, Our Haus only produced the
documents when the NLRC had already earlier determined that
Our Haus failed to prove that it was traditionally giving the
respondents their board and lodging. This document did not
state whether these benefits had been consistently enjoyed by
the rest of Our Haus employees. Moreover, the records reveal
that the board and lodging were given on a per project basis.
Our Haus did not show if these benefits were also provided inits
other construction projects, thus negating its claimed customary
nature. Even assuming the sinumpaang salaysay to be true, this
document would still work against Our Haus case. If Our Haus
really had the practice of freely giving lodging, electricity and
water provisions to its employees, then Our Haus should not
deduct its values from the respondents wages. Otherwise, this
will run contrary to the affiants claim that these benefits were
traditionally given free of charge.
Apart from company policy, the employer may also prove
compliance with the first requirement by showing the existence
of an industry-wide practice of furnishingthe benefits in
question among enterprises engaged in the same line of
business. If it were customary among construction companies
to provide board and lodging to their workers and treat their
values as part of their wages, we would have more reason to
conclude that these benefits were really facilities.
However, Our Haus could not really be expected to prove
compliance with the first requirement since the living
accommodation of workers in the construction industry is not
simply a matter of business practice. Peculiar to the
construction business are the occupational safety and health
(OSH) services which the law itself mandates employers to
provide to their workers. This isto ensure the humane working
conditions of construction employees despite their constant
exposure to hazardous working environments. Under Section
16 of DOLE Department Order (DO) No. 13, series of 1998,43
employers engaged in the construction business are required to
providethe following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as may be
applicable, for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor men
and women workers. [emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out the
guidelines for the implementation ofDOLE DO No. 13,
mandates that the cost of the implementation of the
requirements for the construction safety and health of workers,
shall be integrated to the overall project cost.44 The rationale
behind this isto ensure that the living accommodation of the
workers is not substandard and is strictly compliant with the
DOLEs OSH criteria.
As part of the project cost that construction companies already
charge to their clients, the value of the housing of their workers
cannot be charged again to their employees salaries. Our Haus
cannot pass the burden of the OSH costs of its construction
projects to its employees by deducting it as facilities. This is
Our Haus obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it
must still pass the purpose testset by jurisprudence. Under this
test, if a benefit or privilege granted to the employee is clearly
for the employers convenience, it will not be considered as a
facility but a supplement.45 Here, careful consideration is given
to the nature of the employers business in relation to the work
performed by the employee. This test is used to address
inequitable situations wherein employers consider a benefit
deductible from the wages even if the factual circumstances
show that it clearly redounds to the employers greater
advantage.
While the rules serve as the initial test in characterizing a
benefit as a facility, the purpose test additionally recognizes that
the employer and the employee do not stand at the same
bargaining positions on benefits that must or must not formpart
of an employees wage. In the ultimate analysis, the purpose
test seeks to prevent a circumvention of the minimum wage law.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be
deducted from the employees wages but not the value of
supplements. Facilities include articles or services for the
benefit of the employee or his family but exclude tools of the
trade or articles or services primarily for the benefit of the
employer or necessary to the conduct of the employers
business.47
The law also prescribes that the computation of wages shall
exclude whatever benefits, supplementsor allowances given to
employees. Supplements are paid to employees on top of their
basic pay and are free of charge.48 Since it does not form part
of the wage, a supplements value may not be includedin the
determination of whether an employer complied with the
prescribed minimum wage rates.
In the present case, the board and lodging provided by Our Haus
cannot be categorized asfacilities but as supplements. In SLL
International Cables Specialist v. National Labor Relations
Commission,49 this Court was confronted with the issue on the
proper characterization of the free board and lodging provided
by the employer. We explained:

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., 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 overand 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
thatby 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.In the case at bench, the items provided
were given freely by SLLfor the purpose of maintaining the
efficiency and health of its workers while they were working
attheir respective projects.50
Ultimately, the real difference lies not on the kind of the benefit
but on the purpose why it was given by the employer. If it is
primarily for the employees gain, then the benefit is a facility;
if its provision is mainly for the employers advantage, then it
is a supplement. Again, this is to ensure that employees are
protected in circumstances where the employer designates a
benefit as deductible from the wages even though it clearly
works to the employers greater convenience or advantage.
Under the purpose test, substantial consideration must be given
to the nature of the employers business inrelation to the
character or type of work performed by the employees
involved.
Our Haus is engaged in the construction business, a
laborintensive enterprise. The success of its projects is largely
a function of the physical strength, vitality and efficiency of its
laborers. Its business will be jeopardized if its workers are
weak, sickly, and lack the required energy to perform strenuous
physical activities. Thus, by ensuring that the workers are
adequately and well fed, the employer is actually investing on
its business.
Unlike in office enterprises where the work is focused on desk
jobs, the construction industry relies heavily and directly on the
physical capacity and endurance of its workers. This is not to
say that desk jobs do not require muscle strength; wesimply
emphasize that in the construction business, bulk of the work
performed are strenuous physical activities.
Moreover, in the construction business, contractors are usually
faced with the problem ofmeeting target deadlines. More often
than not, work is performed continuously, day and night, in
order to finish the project on the designated turn-over date.
Thus, it will be more convenient to the employer if itsworkers
are housed near the construction site to ensure their ready
availability during urgent or emergency circumstances. Also,
productivity issues like tardiness and unexpected absences
would be minimized. This observation strongly bears in the
present case since three of the respondents are not residents of
the National Capital Region. The board and lodging provision
might have been a substantial consideration in their acceptance
of employment in a place distant from their provincial
residences.
Based on these considerations, we conclude that even under the
purpose test, the subsidized meals and free lodging provided by
Our Haus are actually supplements. Although they also work to
benefit the respondents, an analysis of the nature of these
benefits in relation to Our Haus business shows that they were
given primarily for Our Haus greater convenience and
advantage. If weighed on a scale, the balance tilts more towards
Our Haus side. Accordingly, their values cannot be considered
in computing the total amount of the respondents wages. Under
the circumstances, the dailywages paid to the respondents are
clearly below the prescribed minimum wage rates in the years
2007-2010.
b. The provision of deductible facilities must be voluntarily
accepted in writing by the employee
In Mayon Hotel, we reiterated that a facility may only be
deducted from the wage if the employer was authorized in
writingby the concerned employee.51 As it diminishes the take-
home pay of an employee, the deduction must be with his
express consent.
Again, in the motion for reconsideration with the NLRC, Our
Haus belatedly submitted five kasunduans, supposedly
executed by the respondents, containing their conformity to the
inclusion of the values of the meals and housing to their total
wages. Oddly, Our Haus only offered these documents when
the NLRC had already ruled that respondents did not
accomplish any written authorization, to allow deduction from
their wages. These five kasunduans were also undated, making
us wonder if they had reallybeen executed when respondents
first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus
four employees, it was not mentioned that they also executed a
kasunduanfor their board and lodging benefits. Because of these
surrounding circumstances and the suspicious timing when the
five kasunduanswere submitted as evidence, we agree withthe
CA that the NLRC committed no grave abuse of discretion in
disregarding these documents for being self serving.
c. The facility must be charged at a fair and reasonable value
Our Haus admitted that it deducted the amount of P290.00 per
week from each of the respondents for their meals. But it now
submits that it did not actually withhold the entire amount as it
did not figure in the computation the money it expended for the
salary of the cook, the water, and the LPG used for cooking,
which amounts to P249.40 per week per person. From these, it
appears that the total meal expense per week for each person is
P529.40,making Our Haus P290.00 deduction within the 70%
ceiling prescribed by the rules.
However, Our Haus valuation cannotbe plucked out of thin air.
The valuation of a facility must besupported by relevant
documents such as receipts and company records for it to be
considered as fair and reasonable. In Mabeza, we noted:
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 pointedout 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".52 [emphasis ours]
In the present case, Our Haus never explained how it came up
with the valuesit assigned for the benefits it provided; it merely
listed its supposed expenses without any supporting document.
Since Our Haus is using these additional expenses (cooks
salary, water and LPG) to support its claim that it did not
withhold the full amount of the meals value, Our Haus is
burdened to present evidence to corroborate its claim. The
records however, are bereft of any evidence to support Our
Haus meal expense computation. Eventhe value it assigned for
the respondents living accommodations was not supported by
any documentary evidence. Without any corroborative
evidence, it cannot be said that Our Haus complied withthis
third requisite.
A claim not raised in the pro forma complaint may still beraised
in the position paper.
Our Haus questions the respondents entitlement to SIL pay by
pointing out that this claim was not included in the pro forma
complaint filed with the NLRC. However, we agree with the
CA that such omission does not bar the labor tribunals from
touching upon this cause of action since this was raised and
discussed inthe respondents position paper. In Samar-Med
Distribution v. National Labor Relations Commission,53 we
held:
Firstly, petitioners contention that the validity of Gutangs
dismissal should not be determined because it had not been
included in his complaint before the NLRC is bereft of merit.
The complaint of Gutang was a mere checklist of possible
causes of action that he might have against Roleda. Such
manner of preparing the complaint was obviously designed to
facilitate the filing of complaints by employees and laborers
who are thereby enabled to expediently set forth their
grievances in a general manner. But the non-inclusion in the
complaint of the issue on the dismissal did not necessarily mean
that the validity of the dismissal could not be an issue.The rules
of the NLRC require the submission of verified position papers
by the parties should they fail to agree upon an amicable
settlement, and bar the inclusion of any cause of action not
mentioned in the complaint or position paper from the time of
their submission by the parties. In view of this, Gutangs cause
of action should be ascertained not from a reading of his
complaint alone but also from a consideration and evaluation of
both his complaint and position paper.54
The respondents entitlement to the other monetary benefits
Generally a party who alleges payment as a defense has the
burden of proving it.Particularly in labor cases, the burden of
proving payment of monetary claims rests on the employeron
the reasoning 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.55
Unfortunately, records will disclose the absence of any credible
document which will show that respondents had been paid their
13th month pay, holiday and SIL pays. Our Haus merely
presented a handwritten certification from its administrative
officer that its employees automatically become entitled to five
days of service incentive leave as soon as they pass probation.
This certification was not even subscribed under oath. Our Haus
could have at least submitted its payroll or copies of the pay
slips of respondents to show payment of these benefits.
However, it failed to do so.
Respondents are entitled to attorneys fees.
Finally, we affirm that respondents are entitled to attorneys
fees. Our Haus asserts that respondents availment of free legal
services from the PAO disqualifies them from such award. We
find this untenable.
It is settled that in actions for recovery of wages or where an
employee was forced to litigate and, thus, incur expenses to
protect his rights and interest, the award of attorney's fees is
legally and morally justifiable.56 Moreover, under the PAO
Law or Republic Act No. 9406, the costs of the suit, attorney's
fees and contingent fees imposed upon the adversary of the
PAO clients after a successful litigation shall be deposited in
the National Treasury as trust fund and shall be disbursed for
special allowances of authorized officials and lawyers of the
PAO.57
Thus, the respondents are still entitled to attorney's fees. The
attorney's fees awarded to them shall be paid to the PAO. It
serves as a token recompense to the PAO for its provision of
free legal services to litigants who have no means of hiring a
private lawyer.
WHEREFORE, in light of these considerations, we conclude
that the Court of Appeals correctly found that the National
Labor Relations Commission did not abuse its discretion in its
decision of July 20, 2011 and Resolution of December 2,
2011.1wphi1 Consequently we DENY the petition and
AFFIRM the Court of Appeals' decision dated May 7, 2012 and
resolution dated November 27, 2012 in CA-G.R. SP No.
123273. No costs.
SO ORDERED.
Manila Mandarin vs NLRC
NARVASA, C.J.:
The petitioner in this special civil action of certiorari seeks
nullification of the September 11, 1992 Decision of the Second
Division of the National Labor Relations Commission reversing
the judgment of the Labor Arbiter in NLRC NCR Case No. 10-
4336-86 and dismissing the case for lack of merit, as well as of
the Commissions November 24, 1992 Resolution denying
reconsideration of said decision.
On October 30, 1986, the Manila Mandarin Employees Union
(hereafter UNION), as exclusive bargaining agent of the rank-
and-file employees of the Manila Mandarin Hotel, Inc.
(hereafter MANDARIN), filed with the NLRC Arbitration
Branch a complaint in its members behalf to compel
MANDARIN to pay the salary differentials of the individual
employees concerned because of wage distortions in their
salary structure allegedly created by the upward revisions of the
minimum wage pursuant to various Presidential Decrees and
Wage Orders, and the failure of MANDARIN to implement the
corresponding increases in the basic salary rate of newly-hired
employees.
The relevant Presidential Decrees and Wage Orders were
specified by the UNION as follows:
a. PD 1389, amending PD 928, mandating an increase in the
statutory minimum wage by P3.00 spread out over a period of
three years, as follows: P1.00 starting July 1, 1978; P1.00
starting May 1, 1979; and P1.00 starting May 1, 1980.
b. PD 1614, providing that workers covered by PD 1389,
whether agricultural or non-agricultural, should receive an
increase of P2.00 in their statutory minimum wage effective
April 1, 1979, the same representing an acceleration of the
remaining increases under PD 1389; and that all non-
agricultural workers in Metro Manila shall receive a minimum
wage of P12.00;
c. PD 1713, issued on august 18, 1980 providing an increase in
the minimum daily wage rates and for additional allowance;
increasing the minimum daily wage rates by P1.00 and
providing that all private employers shall pay their employees
with wages or salaries not exceeding P1,500.00 a month, an
additional mandatory living allowance of P60.00 a month for
non-agricultural workers, P45.00 for plantation workers and
P30.00 a month for agricultural non-plantation workers;
d. PD 1751, issued on December 14, 1980, increasing the
statutory daily minimum wages by integrating the P4.00
mandatory allowance under PD 525 and PD 1123 into the basic
pay of all covered workers;
e. Wage Order No. 1, issued on March 26, 1981, increasing the
mandatory emergency living allowance of all workers with
salaries or wages of P1,500.00 a month by P2.00 a day for non-
agricultural workers, P1.50 a day for agricultural plantation
workers, P1.00 a day for agricultural non-plantation workers,
effective March 22, 1981;
f. Wage Order No. 2 issued on July 6, 1983 increasing the
mandatory basic minimum wage and living allowance for non-
agricultural and agricultural workers in the following manner:
1) For non-agricultural employees, receiving not more than
P1,800.00 monthly, P1.00 a day as minimum wage and P1.50 a
day as cost of living allowance;
2) For plantation agricultural employees, P1.00 a day as
minimum wage and P0.50 a day as cost of living allowance
subject to the same salary ceiling provided in the immediately
preceding section; and
3) For non-plantation agricultural employees, P1.00 a day as
minimum wage; and
also, providing that effective October 1, 1983, the living
allowances rates as adjusted in the preceding section shall be
further increased subject to the same salary ceiling, for non-
agricultural employees, by P1.00.
g. Wage Order No. 3 issued November 7, 1983 increasing the
statutory minimum wage rates for workers in the private sector
by P1.00 per day effective November 1, 1983, and also
increasing the statutory wage rates by P1.00 per day, effective
December 1, 1983;
h. Wage Order No. 4 issued on May 1, 1984 increasing the
statutory daily minimum wages, after integrating the mandatory
living allowance under PDs 1614, 1634, 1678 and 1713 into the
basic pay of all covered employees, effective May 1, 1984; --
after the integration, the minimum daily wage rate was
increased by P11.00 for non-agricultural workers.
i. Wage Order No. 5 issued on June 11, 1984 increasing the
statutory daily minimum wage rates and living allowances of
workers in the private sector by P3.00 effective June 16, 1984 -
- the minimum daily wage rates became P35.00 for Metro
Manila and P34.00 for outside Metro Manila; and
j. Wage Order No. 6, effective November 1, 1984, increasing
the statutory minimum wage rate by P2.00 per day.
On January 15, 1987, the UNION filed its Position Paper
amplifying the allegations of its complaint and setting forth the
legal bases of its demands against MANDARIN; and on March
25, 1987, it filed an Amended Complaint presenting an
additional claim for payment of salary differentials to the union
members affected, allegedly resulting from underpayment of
wages.
The Labor Arbiter eventually ruled in favor of the UNION,
holding that there were in fact wage distortions entitling its
members to salary adjustments totalling P26,173,601.25 -- for
541 employees -- as well as underpayments amounting to
P1,978,296.18 -- 182 employees. The dispositive portion of his
decision reads:[1]
WHEREFORE, judgment is hereby rendered ordering the
respondent Hotel to pay the individual complainants who are
members of the respondent Union whose names appear on the
respective computations embodied in this Decision, the
aggregate amount of P26,173,601.25 representing their salary
adjustments by way of correcting the wage distortions in their
respective salary structure, for the period from October 30,
1983 up to October 31, 1990, and continuously thereafter to pay
the corresponding amounts due them as such salary adjustments
until the same are properly and finally restored in their basic
monthly rates; to pay the aggregate amount of P1,978,296.18
representing their salary differentials resulting from
underpayment of wages in violation of the minimum wage
laws, Presidential Decrees and Wage Orders for the period from
March 25, 1984 up to October 31, 1990, and continuously
thereafter to pay the corresponding amounts due them as such
salary differentials until the same are properly and finally
restored into their basic monthly rates.
Likewise, the respondent Hotel is ordered to pay an amount
equivalent to ten percent (10%) of the total awards granted to
individual complainants, by way of and as attorneys fees.
On appeal, the Second Division of respondent Commission
(composed of Commissioner Domingo H. Zapanta, ponente,
and Presiding Commissioner Edna Bonto-Perez) rendered the
dispositions already referred to and now assailed -- setting aside
the Labor Arbiters judgment and dismissing the UNIONs
complainant, and later denying the UNIONs motion for
reconsideration.[2]
The principal issues raised in this Court are: (1) Whether or not
the NLRC had jurisdiction to take cognizance of
MANDARINS appeal from the Labor Arbiters decision; and
(2) if so, whether or not it gravely abused its discretion in setting
aside the Labor Arbiters judgment and dismissing the UNIONS
complaint.
The issue of jurisdiction is grounded on the posited tardiness of
private respondents appeal from the Labor Arbiters judgment to
the NLRC, and fatal defect in their supersedeas bond.
The UNION contends[3] that the records indubitably show that
MANDARIN received on January 22, 1991 its copy of the
Labor Arbiters Decision (of January 15, 1991), but filed its
appeal and paid the appeal fee only on February 4, 1991, three
(3) days beyond the reglementary ten-day period for doing so.
It also condemns as anomalous the certification of Deputy
Executive Clerk Gaudencio P. Demaisip, Jr., NLRC, to the
effect that MANDARINs lawyer had approached Hon.
Domingo H. Zapanta, a member of the Second Division,
NLRC, for assistance to have the appeal including the appeal
fee in said case duly received and acknowledged on February
1, 1991, at 4:40 P.M; and claims that the anomally was
aggravated when it was Commissioner Zapanta who wrote the
Decision for the Second Division[4]-- reversing the Labor
Arbiters judgment, as aforesaid -- despite the UNIONS motion
for his disqualification and/or inhibition. The UNION finally
argues that MANDARINS appeal was not only tardy but also
fatally flawed in that its supersedeas bond had been issued by a
surety company -- Plaridel Surety & Insurance Company --
which had pending obligations and liabilities at the time, the
Insurance Commissioner having in fact issued a Cease-and-
Desist Order against said company for issuing bonds of no little
magnitude without authority; and that moreover, the
replacement bond of the Commonwealth Insurance Company -
- subsequently filed by order of the NLRC -- was just as
defective because the latter company had an authorized
maximum net retention level in the amount of only
P686,582.80, way below the monetary award subject of
MANDARINS appeal to the Commission.
The Court rules that respondent Commission acted correctly in
accepting and acting on MANDARINs appeal. The
circumstances attendant upon the filing of the appeal and
supersedeas bond are clearly set forth in the Certification of
Deputy Executive Clerk Demaisip, Jr.[5] above mentioned,
viz.:
This is to certify that when Atty. Godofredo Labay filed the
appeal in NLRC NCR Case No. 10-4335-86 entitled Manila
Mandarin Employees Union vs. Manila Mandarin on Friday,
February 1, 1991, the Cashier and the Docket Section, NCR,
were not around, that no one would receive the pleadings and
the appeal fee. He therefore approached Commissioner
Domingo H. Zapanta for assistance and to have the appeal
including the appeal bond in said case duly received on
February 1, 1991 at 4:50 p.m.
with respect to the appeal fee, since no one was authorized to
act as substitute for the Cashier of the NCR for purposes of
receiving the appeal fee and issuing a temporary receipt and/or
official receipt therefor, Commissioner Zapanta requested Atty.
Gaudencio P. Demaisip, Jr. to receive said pleadings and
allowed Atty. Labay to pay the appeal fee on Monday, February
4, 1991.
This certification is issued upon request of Atty. Labay for
whatever purpose it may serve him.
(SGD.) GAUDENCIO P. DEMAISIP, JR.
Deputy Executive Clerk
Second Division
MANDARIN cannot be faulted for paying the appeal fee only
on February 4, 1991. The fact is that on February 1, 1991, its
lawyer was in the NLRC premises, ready to pay said fee, but
was unable to do so because the NLRC Cashier or any other
employee authorized to receive payment in his stead, was no
longer around. This is why Commissioner Zapanta allowed
payment of the appeal fee to be made on the next business day,
as in fact the appeal fee was paid on, February 4, 1991. This
Court has ruled that the failure to pay the appeal docketing fee
within the reglementary period confers a directory, not
mandatory, power to dismiss an appeal, to be exercised with
circumspection in light of all the relevant facts.[6] In view of
these considerations, and the meritoriousness of MANDARINs
appeal -- as later pronounced by respondent NLRC -- the
interest of justice was quite evidently served when
MANDARINs appeal was given due course despite delayed
payment of the docketing fee.
The contention concerning MANDARINs ostensibly defective
appeal bond, issued by Plaridel Surety and Insurance Company,
deserves short shrift, too. The issuance of the bond antedated
this Courts resolution of January 15, 1992 -- to which the
attention of respondent NLRC had been invited by the UNION
-- declaring said surety company to be of doubtful solvency.
More important, the issue was mooted when MANDARIN
posted a new surety bond, through Commonwealth Insurance
Company, in compliance with the Order of the respondent
Commission dated December 10, 1991. The UNIONs
contention that this new bond was equally defective because the
bonding company had an authorized maximum net retention
level lower than the sum of P30,967,087.17 involved in this
dispute, is inconsequential, the new bonding company being
duly accredited by this Court and licensed by the Insurance
Commission.
At any rate, this Court has invariably ruled that Article 223 of
the Labor Code, requiring a bond in appeals involving monetary
awards, must be liberally construed, in line with the desired
objective of resolving controversies on their merits.[7] The
circumstance under which the bond was filed in this case
adequately justify such liberal application of the provision.
As to the alleged partiality of Commissioner Domingo Zapanta,
the Court finds that his intervention on February 1, 1991 in the
matter of payment of the appeal docketing fee did not, in the
circumstances already related, constitute impropriety or pre-
judgment of the case and a ground for his disqualification as a
member of the Second Division to which the case was thereafter
raffled. Significantly, in its motion to inhibit, the UNION
mentioned that the case was assigned particularly to the late
Commissioner Rustico Diokno ** (but) that upon the latters
demise, the case was reassigned to Commissioner Domingo
Zapanta as the new ponente.[8] As Commissioner Zapanta had
always been a member of the Second Division, the UNIONs
motion for his inhibition, filed more than a year after the
occurrence of the incident on which it was based, becomes
suspect as a mere afterthought. In any case, Commissioner
Zapanta did inhibit himself from taking part in the resolution of
the UNIONS motion for reconsideration of the assailed
decision of September 11, 1992, thus dispelling what doubts
might linger about his impartiality.
Coming now to the issue of wage distortion, prior to the
effectivity on June 9, 1989 of Republic Act No. 6727 which,
among others, amended Article 124 (Standards/Criteria for
Minimum Wage Fixing) of the Labor Code, the concept to wage
distortion was relatively obscure. So it was observed by this
Court in National Federation of Labor vs. NLRC,[9] a case
involving the same subject Wage Orders:
We note that neither the Wage Orders noted above, nor the
Implementing Rules promulgated by the Department of Labor
and Employment, set forth a clear and specific notion of wage
distortion. What the Wage Orders and the Implementing Rules
did was simply to recognize that implementation of the Wage
Orders could result in a distortion of the wage structure of an
employer, and to direct the employer and the union to negotiate
with each other to correct the distortion. Thus, Section 6 of
Wage Order No. 3, dated 7 November 1983, provided as
follows:
Section 6. Where the application of the minimum wage rate
prescribed herein results in distortions of the wage structure of
an establishment, the employer and the union shall negotiate to
correct the distortions. Any dispute arising from wage
distortions shall be resolved through the grievance procedure
under their collective bargaining agreement of through
conciliation.
In case where there is no collective bargaining agreement or
recognized labor organization, the employer shall endeavor to
correct such distortions in consultation with their workers. Any
dispute arising from wage distortions shall be resolved through
conciliation by the appropriate Regional Office of the Ministry
of Labor and Employment or through arbitration by the NLRC
Arbitration Branch having jurisdiction over the work-place.
(Underscoring supplied)
It is therefore opportune to re-state the general principles
enunciated in that case, summarized in Metro Transit
Organization, Inc. vs. NLRC, et al.[10] as follows:
(a) The concept of wage distortion assumes an existing
grouping or classification of employees which establishes
distinctions among such employees on some relevant or
legitimate basis. This classification is reflected in a differing
wage rate for each of the existing classes of employees.
(b) Wage distortions have often been the result of government-
decreed increases in minimum wages. There are, however,
other causes of wage distortions, like the merger of two (2)
companies (with differing classification of employees and
different wage rates) where the surviving company absorbs all
the employees of the dissolved corporation. (In the present
Metro case, as already noted, the wage distortion arose because
the effectivity dates of wage increases given to each of the two
(2) classes of employees (rank-in-file and supervisory) had not
been synchronized in their respective CBAs.)
(c) Should a wage distortion exist, there is no legal requirement
that, in the rectification of that distortion by re-adjustment of
the wage rates of the differing classes of employees, the gap
which had previously or historically existed be restored in
precisely the same amount. In other words, correction of a wage
distortion may be done by re-establishing a substantial or
significant gap (as distinguished from the historical gap)
between the wage rates of the differing classes of employees.
(d) The re-establishment of a significant difference in wage
rates may be the result of resort to grievance procedures or
collective bargaining negotiations.
It was only on June 9, 1989, upon the enactment of R.A. No.
6727 (Wage Rationalization Act, amending, among others,
Article 124 of the Labor Code),[11] that the term wage
distortion came to be explicitly defined as:
** a situation where an increase in prescribed wage rates results
in the elimination or severe contraction of intentional
quantitative differences in wage or salary rates between and
among employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure
based on skills, length of service, or other logical bases of
differentiation.
The same provision lays down the procedure to be followed
where wage distortion arises from the implementation of a wage
increase prescribed by law or ordered by a Regional Wage
Board, viz.:
Where the application of any prescribed wage increase by virtue
of a law or Wage order issued by any Regional Board results in
distortions of the wage structure within an establishment, the
employer and the union shall negotiate to correct the
distortions. Any dispute arising from the wage distortions shall
be resolved through the grievance procedure under their
collective bargaining agreement and, if it remains unresolved,
through voluntary arbitration. Unless otherwise agreed by the
parties in writing, such dispute shall be decided by the voluntary
arbitrator or panel of voluntary arbitrators within ten (10)
calendar days from the time said dispute was referred to
voluntary arbitration.
In cases where there are no collective agreements or recognized
labor unions, the employers and workers shall endeavor to
correct such distortions. Any dispute arising therefrom shall be
settled through the National Conciliation and Mediation Board
and, if it remains unresolved after ten (10) calendar days of
conciliation, shall be referred to the appropriate branch of the
National Labor Relations Commission (NLRC). It shall be
mandatory for the NLRC to conduct continuous hearings and
decide the dispute within twenty (20) calendar days from the
time said dispute is submitted for compulsory arbitration.
The pendency of a dispute arising from a wage distortion shall
not in any way delay the applicability of any increase in
prescribed wage rates pusurant to the provisions of law or Wage
Order.
The issue of whether or not a wage distortion exists as a
consequence of the grant of a wage increase to certain
employees, is a question of fact;[12] and as a rule, factual
findings in labor cases, where grounded on substantial
evidence, are not reviewed.[13] However, a disharmony such
as exists here, between the factual findings of the Labor Arbiter
and those of the NLRC, opens the door to a review thereof by
this Court.[14]
The Labor Arbiter ruled that a wage distortion existed, and that
the only and logical way to correct ** (it) in the salary structure
of the employees of respondent Hotel is to apply the
corresponding increase made by way of revising upward the
minimum wage or integration of the ECOLA into the basic
wage as embodied in the various Presidential Decrees and
Wage Orders, across-the-board, so that employees whose
salaries are above the minimum set by law who have already
been long in the service will not be discriminated against.[15]
On the other hand, respondent Commission declared in its
decision[16] that there was no wage distortion arising from the
implementation of said Presidential Decrees and Wage Orders
such as warranted across-the-board increases to all employees:
On the issue of wage distortion, we have examined the various
presidential decrees and wage orders referred to by the
complainant and in the Labor Arbiters decision and we found
nothing therein that would justify the award of across-the-board
increases to all employees. The apparent intention of the law is
only to upgrade the salaries or wages of the employees
receiving lower than the minimum daily wage set therein. For
example, Section 1 of Wage Order No. 6 provides that effective
November 1, 1984, the statutory minimum daily wage rates
workers in the private sector shall be increased by P2.00. Also,
Section 1 of Presidential Decree 1389 provides that Presidential
Decree 928 is hereby amended by increasing all existing
statutory minimum wages in the country by Three Pesos
(P3.00) spread equally over a period of three years, as follows:
1)One Peso (P1.00) starting July 1, 1978; 2)One Peso(P1.00)
starting May 1, 1979; and One Peso (P1.00) starting May 1,
1980. Thus, it is clear that the presidential decrees and wage
orders merely provide for a floor wage to be observed by the
employers in the private sector.
It indeed appears that the clear mandate of those issuances was
merely to increase the prevailing minimum wages of particular
employee groups. There were no across-the-board increases to
all employees; increases were required only as regards those
specified therein.[17] It was therefore incorrect for the UNION
to claim that all its members became automatically entitled to
across-the-board increases upon the effectivity of the Decrees
and Wage Orders in question. And even if there were wage
distortions, which is not the case here, the appropriate remedy
thereunder prescribed is for the employer and the union to
negotiate to correct them; or, if the dispute be not thereby
resolved, to thresh out the controversy through the grievance
procedure in the collective bargaining agreement, or through
conciliation or arbitration.
A review of the records convinces this Court that respondent
NLRC committed no grave abuse of discretion in holding that
no wage distortion was demonstrated by the UNION. It was, to
be sure, incumbent on the UNION to prove by substantial
evidence its assertion of the existence of a wage distortion. This
it failed to do. It presented no such evidence to establish, as
required by the law, what, if any, were the designed quantitative
differences in wage or salary rates between employee groups,
and if there were any severe contractions or elimination of these
quantitative differences.
The UNIONs effort to prove wage distortion consisted only of
the presentation of an unverified list of thirteen (13) employees
denominated a Sample Comparison of Salary Rates Affected by
Wage Distortion,[18] viz.:
SAMPLE COMPARISON OF SALARY RATES OF
COMPLAINANTS
AFFECTED BY WAGE DISTORTION
F & B DEPT.
Name Position Date Hired Basic Rate
(12/30/85)
1. Pablo Trinidad -- Waiter -- 9/1/78 P1,300
2. Eduardo Vito -- Waiter -- 10/16/80 P1,375
3. Camilo Sanchez -- Busboy -- 8/1/83 P 954
4. Renato Solomon -- Busboy -- 7/19/84 P1,096
5. Buenconsejo Monico -- Busboy -- 4/15/85 P 968
HOUSEKEEPING DEPT.
1. Ruben A. Rillo -- Linen Uniform Att. -- 6/19/76 P 984
2. Hubert Malolot -- Linen Uniform Att. -- 1/16/80 P1,238
3. Aurella Kilat -- Linen Uniform Att. -- 5/2/79 P1,272
4. Rogelio Molaco -- Cloakroom Attn. -- 9/1/80 P 946
5. David Pineda -- Cloakroom Attn. -- 9/14/81 P1,194
6. Nemesio Matro -- Houseman Attn. -- 6/10/76 P1,142
7. Domgo Sabando -- Houseman Attn. -- 3/8/82 P1,194
8. Renato Guina -- Houseman Attn. -- 8/24/81 P1,194
SUBMITTED:
(SGD.) ATTY. R. E. ESPINOSA
9/17/87.
The UNIONs Internal Vice-President, Arnulfo Castro, deposed
that the employees named in this list were the more or less (13)
persons found to have suffered wage distortion,[19] and the
UNION pointed out that while these thirteen employees
occupied similar positions, they were receiving different rates
of salary.
Respondent Commission however found that as explained by
respondents, such disparity was due simply to the fact that the
employees mentioned had been hired on different dates and
were thus receiving different salaries; or that an employee was
hired initially at a position level carrying a hiring rate than the
others; or that an employee failed to meet the cut-off date in the
grant of yearly CBA increase; or that the union did not get the
correct data on salaries. The Commission accepted as more
accurate the data presented by MANDARIN respecting the
same employees, to wit:[20]
ANNEX2
F & B Dept.
NAME Position Date Hired Basic Rate
per Hotel Records as of 12/30/85
1. Pablo Trinidad Waiter 09/01/78 P1,302.00*
2. Eduardo Vito Waiter 10/16/80 1,375.00*
3. Camilo Sanchez Busboy 08/01/83 1,194.00
4. Renato Solomon Busboy 07/19/84 1,096.00
5. Buenconsejo Monico Busboy 14/15/85 968.00
Housekeeping Dept.
1. Ruben A. Rillo Linen Uniform Att. 06/19/76 1,417.00
2. Hubert Malolot Linen Uniform Att. 01/16/80 1.238.00
3. Aurella Kilat Linen Uniform Att. 05/02/79 1,272.00
4. Rogelio Molaco Cloakroom Attn. 09/01/80 1,272.00
5. David Pineda Cloakroom Attn. 09/14/81 1,213.00
6. Nemesio Matro Houseman Attn. 06/10/77 1,342.00
7. Domingo Sabando Houseman Attn. 03/08/82 1,194.00
8. Renato Guina Houseman Attn. 08/24/81 1,194.00
* Vito was hired at a higher position with a higher hiring rate
than that given to Trinidad, i.e. Vito was hired at P366/mo.
While Trinidad at P301/mo. Prior to hiring, Vito already
worked as a waiter at the Metropolitan Club.
The Court agrees that the claimed wage distortion was actually
a result of the UNIONS failure to appreciate various
circumstances relating to the employment of the thirteen
employees. For instance, while some of these employees
mentioned by UNION Vice-President Arnulfo Castro occupied
the same or similar positions, they were hired by the Hotel on
different dates and at different salaries. As explained in part by
MANDARIN:
With respect to the case of Pablo Trinidad and Eduardo Vito,
while they were both occupying the position of waiter in 1987,
with monthly salaries of P2,044.00 and P2,217.00, respectively,
a comparative study of the records of these employees shows
one of them was initially hired at a higher position level which
naturally carried a higher hiring rate. Trinidad was originally
hired in 1978 as a mere Houseman at the Banquet Department
with a basic starting rate of P301.00 a month. On the other hand,
Vito was originally hired in 1980 already a Busboy at the Food
and Beverage Department with a starting salary of P366.00 a
month. Before he was hired at the Mandarin Hotel, Vito had
already been working as Waiter at the Metropolitan Club.
Rrecords also show that it was only after some time that
Trinidad was promoted to Busboy but still with the smaller
Banquet Department. The headway in rate was carried by Vito
although at some point in their careers, these two employees
achieved the same position as Waiter. Not long after, Vito was
promoted to Captain Waiter while Trinidad remained Waiter.
There is therefore no reason to compare the remuneration of
these two employees as the circumstances attendant to their
employment are different.[21]
Respondent Commission correctly concluded that these did not
represent cases of wage distortion contemplated by the law
(Article 124, Labor Code, as amended), i.e., a situation where
an increase in prescribed wage rates results in the elimination
or severe contraction of intentional quantitative differences in
wage or salary rates between and among employees groups in
an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of
service, or other logical basis of differentation.
Moreover, even assuming arguendo that there was really a wage
distortion, it was wrong for the Labor Arbiter, after first
acknowledging that some of the money claims had prescribed
under Article 291 of the Labor Code,[22] to nevertheless order
the computation of salary differentials retroactive to the
effective dates of PDs 1389,1614,1713, 1751 and Wage Orders
Nos. 2,3,4,5,and 6: in 1978, 1979, 1980, 1980, July 1983,
November 1983, May 1984, June 1981 and November 1984,
respectively. Clearly, five of these Decrees and Wage Orders
took effect after the lapse of the three-year prescriptive period
for litigating claims for wage distortion differentials, the
original complaint for wage distortion having been filed on
October 30, 1986 and the amended complaint for underpayment
of wages, on March 25, 1987. Consequently, the applicable cut-
off dates, for purposes of prescription, were October 30, 1983
and March 25, 1984, respectively.
Finally, the records show that the matter of wage distortion,
actual or imputed under the various issuances up to Wage Order
No. 6, had been settled by the parties as early as July 30, 1985.
On that day they executed a Compromise Agreement with the
assistance of the then Regional Director of the National Capital
Region, Severo M. Pucan in which they affirmed that with the
implementation by MANDARIN of Wage Order Nos. 4 and 6
as well as P.D. 1634, the latter was deemed for all legal and
purposes to have fully satisfied all its legal and contractual
obligations to its employees under all presidential issuances on
wages,[23]
The Compromise Agreement pertinently states:
1. That the respondent shall implement Wage Order No. 6
effective July 1, 1985, without prejudice to the outcome of the
application for exemption as distressed employer filed by said
respodent with the National Wage Council as regards benefits
that might be due between November 1, 1985 and June 30,
inclusive;
2. The the respondent shall also implement effective August 1,
1985 the integration of the P90.00 a month cost of living
allowance under P.D. 1634 into the basic wages of its
employees as called for under Wage Order No. 4 in accordance
with the Guidelines contained in the Explanatory Bulletin
issued by the Bureau of Working Conditions on August 8, 1985;
3. That as soon as the respondent shall have complied with the
above terms of this Compromise Agreement, said respondent
shall be deemed for all legal intents and puposes to have fully
satisfied all the legal and contractual obligations to its
employees under all presidential issuances on wages, including
Wage Orders No. 4 and 6, and Article XI of the collective
bargaining agreement,
The Labor Code recognizes the conclusiveness of compromises
as a means to settle and end labor disputes. Article 227 provides
that (a)ny compromise settlement, including those involving
labor standard laws, voluntary agreed upon by the parties with
the assistance of the Bureau or the regional office of the
Department of Labor, shall be final and binding upon the
parties. The National Labor Relations Commission or any court
shall not assume jurisdiction over issues involved therein
except in case of non-compliance thereof or if there is prima
facie evidence that the settlement was obtained through fraud,
misrepresentation or coercion. In Olaybar vs. NLRC,[24] this
Court had occasion, in a labor dispute, to apply the rule that
compromises and settlements have the effect and
conclusiveness of res judicata upon the parties.
Thus, and again assuming arguendo the existence of a wage
distortion, this was corrected under the fully implemented
Compromise Agreement;[25] and such correction having been
explicitly acknowledge by the UNION, it is now estopped from
claiming that a distortion still subsists. In the same manner,
when the UNION entered into a new collective agreement with
MANDARIN, providing for wage increases in 1987, it is
deemed to have thereby settled any remaining question of wage
distortion, since the subject of wages and wage distortions were
plainly and unavoidably an economic issue and the proper
subject of collective bargaining.[26]
Neither did respondent Commission gravely abuse its discretion
in ruling against the UNION on the issue of underpayment of
wages.
The UNIONs theory was that since the employees of
MANDARIN are paid on a monthly basis under the Group III
category, the applicable increase in daily wage must be
multiplied by 365 and then divided by 12 to determine the
equivalent monthly rate. MANDARINs position, on the other
hand, was that it had consistently been using the multiplier 313,
and not 365, for the purpose of deriving salary related benefits
of its employees who are paid by the month, excluding from
365, the 52 unpaid rest days in a year. This appears to have been
the consistent practice of MANDARIN, following the formula
for daily paid employees under Group II category as prepared
by the Bureau of Labor Standards:[27]
AR x 313 days = EMR
____________
12
Where: 313 days = 303 actual working days a year
plus the paid 10 unworked regular
holidays.
Actual working days . 303
10 legal holidays 10
_____
Total No. of Days 313.
MANDARIN presented evidence of its practice regarding the
use of the factor 313 in computing the monthly equivalent of
the minimum daily wages and other related benefits of its
employees; i.e., Annexes 3 and 4 of its Supplemental Appeal
dated November 12, 1991. This was corroborated by the
UNIONs Internal Vice President, Arnulfo Castro, who admitted
during cross-examination that in his research and study, he
found that the divisor used in arriving at the daily rate of the
hotel employees was 313 days, which meant that the days-off
or rest days are not paid.[28] The admission confirms that the
hotel employees pertain to Group II category under the Bureau
of Labor Standards Guidelines for computing the equivalent
monthly minimum wage rates.[29] Thus, instead of multiplying
the applicable minimum daily wage by 365 and dividing the
result by 12 to derive the applicable minimum monthly salary,
the factor used is 313, composed of 303 actual working days
and the 10 unworked but paid regular holidays in a year.
In his explanatory Bulletin on the payment of Holiday Pay --
Ref. No. 85-08 dated 6 November 1985 -- then Secretary
Augusto Sanchez of the Department of Labor and Employment,
expatiating on the implications of the Chartered Bank case,[30]
stated:
6. Monthly Paid Employees
Oftentime confusion arises from the different interpretations as
to who is a monthly-paid employee. A monthly-paid employee
is one whose monthly salary includes payments for everyday of
the month although he does not regularly work on his rest days
or Sundays and on regular and special holidays. Group III in the
above illustration covers monthly paid employees. Employees
falling under Group I, II and IV are in reality daily paid
employees but whose daily rate is translated into its monthly
equivalent. The fact, therefore, that an employee is regularly
paid a fixed monthly rate does not necessarily mean that he is a
monthly-paid employee as defined above. (Italics supplied)
As applied to the UNION, the monthly equivalent of the
minimum wage under the various Presidential Decrees and
Wage Orders based on the above formula should be as follows:
PD/WO NO. Effectivity Minimum Daily Equivalent
Wage Rate Monthly Rate
PD 1389 01 July 1978 P 11.00 P 286.96
PD 1614 1 March 1979 13.00 339.00
PD 1813 18 Aug. 1980 14.00 365.17
WO # 2 06 July 1983 19.00 495.58
WO # 3 01 Nov. 1983 20.00 521.67
WO # 4 01 May 1984 32.00 834.67
WO # 5 01 Nov. 1984 35.00 912.92
WO # 6 01 Nov. 1984 37.00 965.08
On the other hand, the monthly pay of the Hotel employees and
their hiring rate may be illustrated as follows:
PD/WO NO. Effectivity Equivalent Lowest Salary
Monthly Rate in the Hotel
PD 1389 01 July 1978 P 286.92 P 350.00
PD 1614 01 March 1979 339.08 411.00
PD 1813 18 Aug. 1980 365.17 562.00
WO # 2 06 July 1983 495.58 960.00
WO # 3 01 Nov. 1983 521.67 960.00
WO # 4 01 May 1984 834.67 960.00
WO # 5 16 May 1984 912.92 960.00
WO # 6 01 Nov. 1984 965.08 1,015.00.
A comparative analysis of the wages of the Hotels employees
from 1978 to 1984 vis a vis the minimum wages fixed by law
for the same period reveals that at no time during the said period
was there any underpayment of wages by the respondent Hotel.
On the contrary, the prevailing monthly salaries of the subject
hotel employees appear to be and above the minimum amounts
required under the applicable Presidential Decrees and Wage
Orders.
WHEREFORE, the assailed Decision of respondent
Commission promulgated on September 11, 1992 -- reversing
the judgment of the Labor Arbiter and dismissing the UNIONS
complaint - - being based on substantial evidence and in accord
with applicable laws and jurisprudence, as well as said
Commissions Resolution dated November 24, 1992 -- denying
reconsideration -- are hereby AFFIRMED in toto.
SO ORDERED.
National Federation of Labor vs NLRC
FELICIANO, J.:
Between 1 November 1983 and 1 November 1984, Wage
Orders Nos. 3, 4, 5 and 6 were promulgated by the then
President Ferdinand E. Marcos. Wage Order No. 3 became
effective as of 1 November 1983; Wage Order No. 4, as of 1
May 1984; Wage Order No. 5, as of 16 June 1984; and Wage
Order No. 6 went into effect on 1 November 1984. All these
Wage Orders increased the statutory minimum wages of
workers with differing increases being specified for agricultural
plantation and non-agricultural workers.
Before the effectivity of Wage Order No. 3, the wage rates of
regular employees and of casual (or non-regular) employees of
private respondent Franklin Baker Company of the Philippines
(Davao Plant) ("Company") were such that there was a positive
differential between the two (2) in the amount of P4.56. The
effect of the implementation of the successive Wage Orders
upon the daily wage rates of these two (2) groups of employees
was summarized by petitioner in the following table:
Effectivity Wage of Wage of Gap
Date Regulars Casuals
Before W.O. No. 3 P22.56 P18.00 P4.56
After W.O. No. 3 1 Nov. 1983 22.56 20.00
2.56
After W.O. No. 4 1 May 1984 32.64 31.00
1.64
After W.O. No. 5 16 June 1984 34.00 34.00
0.00 1
Upon the effectivity of Wage Order No. 5, grievance meetings
were held by petitioner National Federation of Labor ("NFL")
and private respondent Company sometime in June 1984,
addressing the impact which implementation of the various
Wage Orders had on the wage structure of the Company.
On 21 June 1984, all the casual or non-regular employees of
private respondent Company (at least in its Davao Plant) were
"regularized," or converted into regular employees, pursuant to
the request of petitioner NFL.
On 1 July 1984, the effectivity date of the 1984 Collective
Bargaining Agreement between NFL and the Company, all
regular employees of the Company received an increase of
P1.84 in their daily wage; the regular daily wage of the regular
employees thus became P35.84 as against P34.00 per day for
non-regular employees.
As a result of the implementation of Wage Order No. 6, casual
employees received an increase of their daily wage from P34.00
to P36.00. At the same time, the Company unilaterally granted
an across-the-board increase of P2.00 in the daily rate of all
regular employees, thus increasing their daily wage from
P35.84 to P37.84. Further, on 1 July 1985, the anniversary date
of the increases under the CBA, all regular employees who were
members of the collective bargaining unit got a raise of P1.76
in their basic daily wage, which pushed that daily wage from
P37.84 to P39.60, as against the non-regular's basic wage of
P36.00 per day. Finally, by November 1987, the lowest paid
regular employee had a basic daily rate of P64.64, or P10.64
more than the statutory minimum wage paid to a non-regular
employee.
The development of the wage scales of the Company's
employees after the effectivity date of Wage Order No. 5 is
presented in the following table:
Effectivity Wage of Wage of Gap
Date Regulars Casuals
After W.O. No. 5 16 June 1984 34.00 34.00
0.00
CBA Increase 1 July 1984 35.84 34.00 1.84
After W.O. No. 6 1 Nov. 1984 37.84 36.00
1.84
CBA Anniversary 1 July 1985 39.60 36.00
3.60
Increase
Meantime, while the above wage developments were unfolding,
the Company experienced a work output slow down. The
Company directed some 205 workers to explain the reduction
in their work output. The workers failed to comply and they
were accordingly issued notices of dismissal by the Company.
As a response to its decreasing productivity levels, the
Company suspended operations on 16 August 1984. Operations
were resumed on 14 September 1984; the Company, however,
refused to take back the 205 dismissed employees. Petitioner
Union then went on strike alleging a lock-out on the part of the
Company and demanding rectification of the wage distortion.
The case was certified by the Secretary of Labor to the National
Labor Relations Commission ("NLRC") for compulsory
conciliation.
On 19 June 1985, the Union and the Company reached an
agreement with respect to the lock-out issue. The agreement,
which was approved by the NLRC En Banc, granted the 205
employees "financial assistance" equivalent to thirty (30) days'
separation pay. This left unresolved only the wage distortion
issue.
On 11 November 1987, the NLRC En Banc rendered a decision
which in effect found the existence of wage distortion and
required the Company to pay a P1.00 wage increase effective 1
May 1984:
In the computation submitted by the Union, there is a need to
restore the P2.56 gap between non-regulars or "casuals" and
"regular workers." This difference in the basic wage of these
workers was existing at the time of the conclusion of the
collective bargaining agreement and before the implementation
of Wage Orders No. 4 & 5. The imprecise claim of respondent
that there is P3.60 gap between non-regular and regulars may
not be sustained because as aforestated, this amount represents
negotiated wage increase which should not be considered
covered and in compliance with the wage orders. Considering,
however, the present economic conditions and the outlay
involved in correcting the distortion in the wages of
respondent's workers, this Commission, in the exercise of its
arbitral powers, feels that an increase of P1.00 on the present
basic wage of regular workers would significantly rectify or
minimize the distortion in the wage structure of respondent
company caused by the implementation of the various wage
orders. Respondent is, therefore, required to implement the
P1.00 wage increase effective May 1, 1984 when Wage Order
4 took effect. 2 (Emphasis supplied)
On motion for partial reconsideration filed by the Company, the
above quoted portion of the NLRC En Banc's decision was
reconsidered and set aside by the NLRC Fifth Division. 3 The
Fifth Division of the NLRC in effect found that while a wage
distortion did exist commencing 16 June 1984, the distortion
persisted only for a total of fifteen (15) days and accordingly
required private respondent company to pay "a wage increase
of P2.00 per day to all regular workers effective June 16, 1984
up to June 30, 1984 or a total of fifteen (15) days." 4 The rest
of the decision of 11 November 1987 was left untouched.
In its decision dated 16 December 1991, the NLRC (Fifth
Division) said:
. . . At the time Wage Order No. 4 was implemented on May 1,
1984, casual employees were increased to P34.00 per day,
placing them on equal salary footing with the regular employees
who were likewise receiving P34.00 per day. But effective July
1, 1984 when the 1984 CBA took effect, the regular employees
of the company admittedly received the basic wage of P35.84
or an increase of P1.84 as against the daily wage of P34.00 of
the casual employees.
Thus, the apparent wage distortion did not last long but only for
15 days, that is from June 16, 1984 when Wage Order No. 5
took effect and lasted only up to June 30, 1984. From July 1,
1984, the regular employees received an increase of P1.84
making their daily wage P35.84 as against the wage of casual
employees of P34.00 per day. And as rightly pointed out
respondent-movant, the difference in the wage scale between
the two (2) groups of employees was maintained even after the
implementation of Wage Order No. 6 which took effect on
November 1, 1984. 5 (Emphasis supplied)
The bottom line issue presented to the Court is thus whether or
not, under the facts as summarized above, the NLRC (Fifth
Division) committed a grave abuse of discretion amounting to
lack or excess of jurisdiction, when it concluded that the wage
distortion had ceased to exist, after 1 July 1984.
The principal contention of petitioner NFL is that a wage
distortion in the wage structure of private respondent Company
continued to exist although a gap of P1.84 between the daily
wage rate of regular employees and that of casual employees
had been re-established upon the effectivity of the CBA
increase on 1 July 1984. The original claim of NFL was that the
initial prior to effectivity of Wage Order No. 3 differential
of P4.56 in the wage rate of regular employees and that of
casual employees, should be re-created this time between the
wage rates of the newly "regularized" employees (i.e., the
casual employees regularized by the Company on 21 June
1984) and the "old" regular employees (employees who,
allegedly, had been regular employees for at least three [3]
years before the "regularization" of the casuals). 6 NFL stresses
that seniority is a valid basis of distinction between differing
groups of employees, under the Labor Code.
We note that neither the Wage Orders noted above, nor the
Implementing Rules promulgated by the Department of Labor
and Employment, set forth a clear and specific notion of "wage
distortion." What the Wage Orders and the Implementing Rules
did was simply to recognize that implementation of the Wage
Orders could result in a "distortion of the wage structure" of an
employer, and to direct the employer and the union to negotiate
with each other to correct the distortion. Thus, Section 6 of
Wage Order No. 3, dated 7 November 1983, provided as
follows:
Sec. 6. Where the application of the minimum wage rate
prescribed herein results in distortions of the wage structure of
an establishment, the employer and the union shall negotiate to
correct the distortions. Any dispute arising from wage
distortions shall be resolved through the grievance procedure
under their collective bargaining agreement or through
conciliation.
In case where there is no collective bargaining agreement or
recognized labor organization, the employer shall endeavor to
correct such distortions in consultation with their workers. Any
dispute shall be resolved through conciliation by the
appropriate Regional Office of the Ministry of Labor and
Employment or through arbitration by the NLRC Arbitration
Branch having jurisdiction over the work-place. 7 (Emphasis
supplied)
In its Resolution dated 11 November 1987, the NLRC En Banc
provided some elaboration of the notion of wage distortion, in
the following terms:
Wage distortion presupposes a classification of positions and
ranking of these positions at various levels. One visualizes a
hierarchy of positions with corresponding ranks basically in
terms of wages and other emoluments. Where a significant
change occurs at the lowest level of positions in terms of basic
wage without a corresponding change in the other level in the
hierarchy of positions, negating as a result thereof the
distinction between one level of position from the next higher
level, and resulting in a disparity [should be "parity"] between
the lowest level [and] the next higher level or rank, between
new entrants and old hires, there exists a wage distortion.
The various issuances on wages anticipated this occurrence so
that it had been commonly provided for in these issuances that
negotiations may be initiated for the purposes of correcting the
resulting distortion. 8 (Emphases and brackets supplied)
A statutory definition of "wage distortion" is now found in
Article 124 of the Labor Code as amended by Republic Act. No.
6727 (dated 9 June 1989) which reads as follows:
Article 124. Standards/Criteria for Minimum Wage
Fixing . . .
xxx xxx xxx
As used herein, a wage distortion shall mean a situation where
an increase in prescribed wage rates results in the elimination
or severe contraction of intentional quantitative differences in
wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation. 9 (Emphasis
supplied)
From the above quoted material, it will be seen that the concept
of wage distortion assumes an existing grouping or
classification of employees which establishes distinctions
among such employees on some relevant or legitimate basis.
This classification is reflected in a differing wage rate for each
of the existing classes of employees. The wage distortion
anticipated in Wage Orders Nos. 3, 4, 5 and 6 was a "distortion"
(or "compression") which ensued from the impact of those
Wage Orders upon the different wage rates of the several
classes of employees. Thus distortion ensued where the result
of implementation of one or another of the several Wage Orders
was the total elimination or the severe reduction of the
differential or gap existing between the wage rates of the
differing classes of employees. 10
It is important to note that the remedy contemplated in the Wage
Orders, and now in Article 124 of the Labor Code, for a wage
distortion consisted of negotiations between employer and
employees for the rectification of the distortion by re-adjusting
the wage rates of the differing classes of employees. As a
practical matter, this ordinarily meant a wage increase for one
or more of the affected classes of employees so that some gap
or differential would be
re-established. There was no legal requirement that the
historical gap which existed before the implementation of the
Wage Orders be restored in precisely the same form or amount.
Applying the above concept to the case at bar, we note that there
did exist a two-fold classification of employees within the
private respondent Company: regular employees on the one
hand and casual (or non-regular) employees on the other. As
can be seen from the figures referred to earlier, the differential
between these two (2) classes of employees existing before
Wage Order No. 3 was reduced to zero upon the effectivity of
Wage Order No. 5 on 16 June 1984. Obviously, distortion
consisting of complete elimination of the wage rate differential
had occurred. It is equally clear, however, that fifteen (15)
days later, on 1 July 1984, upon effectivity of the wage increase
stipulated in the collective bargaining agreement between the
parties, a gap or differential of P1.84 was re-created. This
restored differential persisted after the effectivity of Wage
Order No. 6 on 1 November 1984. By operation of the same
CBA, by 1 July 1985, the wage differential had grown to P3.60.
We believe and so hold that the re-establishment of a significant
gap or differential between regular employees and casual
employees by operation of the CBA was more than substantial
compliance with the requirements of the several Wage Orders
(and of Article 124 of the Labor Code). That this re-
establishment of a significant differential was the result of
collective bargaining negotiations, rather than of a special
grievance procedure, is not a legal basis for ignoring it. The
NLRC En Banc was in serious error when it disregarded the
differential of P3.60 which had been restored by 1 July 1985
upon the ground that such differential "represent[ed] negotiated
wage increase[s] which should not be considered covered and
in compliance with the Wage Orders." 11 The Wage Orders
referred to above had provided for the crediting of increases in
wages or allowances granted or paid by employers within a
specified time against the statutorily prescribed increases in
minimum wages. 12 A similar provision recognizing crediting
of increases in daily basic wage rates granted by employers
pursuant to collective bargaining agreements, is set out in
Section 4(d) of R.A. No. 6727, a statute which sought to
"rationalize wage policy determination by establishing the
mechanism and proper standards therefor ." In Apex Mining
Company, Inc. v. National Labor Relations Commission, 13 the
Supreme Court said:
It is important to note that the creditability provisions in Wage
Orders Nos. 5 and 6 (as well as the parallel provisions in Wage
Orders Nos. 2, 3 and 4) are grounded in an important public
policy. That public policy may be seen to be the encouragement
of employers to grant wage and allowance increases to their
employees higher than the minimum rates of increases
prescribed by statute or administrative regulation.
To obliterate the creditability provisions in the Wage Orders
through interpretation or otherwise, and to compel employers
simply to add legislated increases in salaries or allowances
without regard to what is 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 counter-productive so far as securing the interests 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 allowances and pay their workers more than what
the law or regulations require. 14 (Emphases in the original)
We believe that the same public policy requires recognition and
validation, as it were, of wage increases given by employers
either unilaterally or as a result of collective bargaining
negotiations, in the effort to correct wage distortions.
We consider, still further, that the "regularization" of the casual
or non-regular employees on 21 June 1984 which was
unilaterally effected by the Company (albeit upon the request
of petitioner NFL), in conjunction with the coming into effect
of the increases in daily wage stipulated in the CBA, had the
effect of rendering the whole problem of wage distortion
academic. The act of "regularization" eliminated the
classification scheme in respect of which the wage distortion
had existed.
Petitioner NFL's principal contention that the wage distortion
persisted with respect to the "old" regular employees and the
"newly regularized" employees, is realistically a claim or
demand that the classification of "regular" employees be broken
down into a sub-classification of "new regulars" and "old
regulars." A basic problem with this contention is that, per the
record of this case and during the period of time here relevant,
there was in fact no pre-existing sub-classification of regular
employees into "new regulars" and "old regulars" (i.e., on the
basis of seniority or longevity) in the Company. It follows that,
as pointed out by the Solicitor-General, 15 no wage distortion
within the meaning of Wage Orders Nos. 3 through 6 (and of
Article 124 of the Labor Code) continued beyond the
"regularization" of the casual employees on
21 June 1984. It may be though here again the record is silent
that the Company had some other sub-grouping of regular
employees on the basis, for instance, of the kind of functions
discharged by employees (e.g., rank and file; supervisory;
middle management; senior management; highly technical,
etc.).
The basic point which needs to be stressed is that whether or
not a new or additional scheme of classification of employees
for compensation purposes should be established by the
Company (and the legitimacy or viability of the bases of
distinction there embodied) is properly a matter for
management judgment and discretion, and ultimately, perhaps,
a subject matter for bargaining negotiations between employer
and employees. It is assuredly something that falls outside the
concept of "wage distortion." The Wage Orders and Article 124
as amended do not require the establishment of new
classifications or sub-classifications by the employer. The
NLRC is not authorized unilaterally to impose, directly or
indirectly, under the guise of rectifying a "wage distortion,"
upon an employer a new scheme of classification of employees
where none has been established either by management
decision or by collective bargaining.
We conclude that petitioner NFL has not shown any grave
abuse of discretion amounting to lack of excess of jurisdiction
on the part of the NLRC in rendering its decision (through its
Fifth Division) dated 16 December 1991.
WHEREFORE, the Petition for Certiorari is hereby
DISMISSED for lack of merit. No pronouncement as to costs.
SO ORDERED.
Bankard EEs Union vs NLRC
CARPIO MORALES, J.:
The present Petition for Review on Certiorari under Rule 45 of
the Rules of Court raises the issue of whether the unilateral
adoption by an employer of an upgraded salary scale that
increased the hiring rates of new employees without increasing
the salary rates of old employees resulted in wage distortion
within the contemplation of Article 124 of the Labor Code.
Bankard, Inc. (Bankard) classifies its employees by levels, to
wit: Level I, Level II, Level III, Level IV, and Level V. On May
28, 1993, its Board of Directors approved a "New Salary Scale",
made retroactive to April 1, 1993, for the purpose of making its
hiring rate competitive in the industrys labor market. The
"New Salary Scale" increased the hiring rates of new
employees, to wit: Levels I and V by one thousand pesos
(P1,000.00), and Levels II, III and IV by nine hundred pesos
(P900.00). Accordingly, the salaries of employees who fell
below the new minimum rates were also adjusted to reach such
rates under their levels.
Bankards move drew the Bankard Employees Union-WATU
(petitioner), the duly certified exclusive bargaining agent of the
regular rank and file employees of Bankard, to press for the
increase in the salary of its old, regular employees.
Bankard took the position, however, that there was no
obligation on the part of the management to grant to all its
employees the same increase in an across-the-board manner.
As the continued request of petitioner for increase in the wages
and salaries of Bankards regular employees remained
unheeded, it filed a Notice of Strike on August 26, 1993 on the
ground of discrimination and other acts of Unfair Labor
Practice (ULP).
A director of the National Conciliation and Mediation Board
treated the Notice of Strike as a "Preventive Mediation Case"
based on a finding that the issues therein were "not strikeable".
Petitioner filed another Notice of Strike on October 8, 1993 on
the grounds of refusal to bargain, discrimination, and other acts
of ULP - union busting. The strike was averted, however, when
the dispute was certified by the Secretary of Labor and
Employment for compulsory arbitration.
The Second Division of the NLRC, by Order of May 31, 1995,
finding no wage distortion, dismissed the case for lack of merit.
Petitioners motion for reconsideration of the dismissal of the
case was, by Resolution of July 28, 1995, denied.
Petitioner thereupon filed a petition for certiorari before this
Court, docketed as G.R. 121970. In accordance with its ruling
in St. Martin Funeral Homes v. NLRC,1 the petition was
referred to the Court of Appeals which, by October 28, 1999,
denied the same for lack of merit.
Hence, the present petition which faults the appellate court as
follows:
(1) It misapprehended the basic issues when it concluded that
under Bankards new wage structure, the old salary gaps
between the different classification or level of employees were
"still reflected" by the adjusted salary rates2; and
(2) It erred in concluding that "wage distortion does not appear
to exist", which conclusion is manifestly contrary to law and
jurisprudence.3
Upon the enactment of R.A. No. 6727 (WAGE
RATIONALIZATION ACT, amending, among others, Article
124 of the Labor Code) on June 9, 1989, the term "wage
distortion" was explicitly defined as:
... a situation where an increase in prescribed wage rates results
in the elimination or severe contraction of intentional
quantitative differences in wage or salary rates between and
among employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure
based on skills, length of service, or other logical bases of
differentiation.4
Prubankers Association v. Prudential Bank and Trust
Company5 laid down the four elements of wage distortion, to
wit: (1.) An existing hierarchy of positions with corresponding
salary rates; (2) A significant change in the salary rate of a lower
pay class without a concomitant increase in the salary rate of a
higher one; (3) The elimination of the distinction between the
two levels; and (4) The existence of the distortion in the same
region of the country.
Normally, a company has a wage structure or method of
determining the wages of its employees. In a problem dealing
with "wage distortion," the basic assumption is that there exists
a grouping or classification of employees that establishes
distinctions among them on some relevant or legitimate bases.6
Involved in the classification of employees are various factors
such as the degrees of responsibility, the skills and knowledge
required, the complexity of the job, or other logical basis of
differentiation. The differing wage rate for each of the existing
classes of employees reflects this classification.
Petitioner maintains that for purposes of wage distortion, the
classification is not one based on "levels" or "ranks" but on two
groups of employees, the newly hired and the old, in each and
every level, and not between and among the different levels or
ranks in the salary structure.
Public respondent National Labor Relations Commission
(NLRC) refutes petitioners position, however. It, through the
Office of the Solicitor General, essays in its Comment of April
12, 2000 as follows:
To determine the existence of wage distortion, the "historical"
classification of the employees prior to the wage increase must
be established. Likewise, it must be shown that as between the
different classification of employees, there exists a "historical"
gap or difference.
xxx
The classification preferred by petitioner is belied by the wage
structure of private respondent as shown in the new salary scale
it adopted on May 28, 1993, retroactive to April 1, 1993, which
provides, thus:
Hiring Minimum Maximum
Level From To From To From To
I 3,100 4,100 3,200 4,200 7,200 9,250
II 3,200 4,100 3,300 4,200 7,500 9,500
III 3,300 4,200 3,400 4,300 8,000 10,000
IV 3,500 4,400 3,600 4,500 8,500 10,500
V 3,700 4,700 3,800 4,800 9,000 11,000
Thus the employees of private respondent have been
"historically" classified into levels, i.e. I to V, and not on the
basis of their length of service. Put differently, the entry of new
employees to the company ipso facto place[s] them under any
of the levels mentioned in the new salary scale which private
respondent adopted retroactive [to] April 1, 1993. Petitioner
cannot make a contrary classification of private respondents
employees without encroaching upon recognized management
prerogative of formulating a wage structure, in this case, one
based on level.7 (Emphasis and underscoring supplied)
The issue of whether wage distortion exists being a question of
fact that is within the jurisdiction of quasi-judicial tribunals,8
and it being a basic rule that findings of facts of quasi-judicial
agencies, like the NLRC, are generally accorded not only
respect but at times even finality if they are supported by
substantial evidence, as are the findings in the case at bar, they
must be respected. For these agencies have acquired expertise,
their jurisdiction being confined to specific matters.9
It is thus clear that there is no hierarchy of positions between
the newly hired and regular employees of Bankard, hence, the
first element of wage distortion provided in Prubankers is
wanting.lawphi1.nt
While seniority may be a factor in determining the wages of
employees, it cannot be made the sole basis in cases where the
nature of their work differs.
Moreover, for purposes of determining the existence of wage
distortion, employees cannot create their own independent
classification and use it as a basis to demand an across-the-
board increase in salary.
Our mind said gap is not significant as to obliterate or result in
severe contraction of the intentional quantitative differences in
the salary rates between the employee group. As already stated,
the classification under the wage structure is based on the rank
of an employee, not on seniority. For this reason, ,wage
distortion does not appear to exist.12 (Emphasis and
underscoring supplied)
Apart from the findings of fact of the NLRC and the Court of
Appeals that some of the elements of wage distortion are absent,
petitioner cannot legally obligate Bankard to correct the alleged
"wage distortion" as the increase in the wages and salaries of
the newly-hired was not due to a prescribed law or wage order.

As National Federation of Labor v. NLRC, et al.10 teaches, the
formulation of a wage structure through the classification of
employees is a matter of management judgment and discretion.
[W]hether or not a new additional scheme of classification of
employees for compensation purposes should be established by
the Company (and the legitimacy or viability of the bases of
distinction there embodied) is properly a matter of management
judgment and discretion, and ultimately, perhaps, a subject
matter for bargaining negotiations between employer and
employees. It is assuredly something that falls outside the
concept of "wage distortion."11 (Emphasis and underscoring
supplied)
As did the Court of Appeals, this Court finds that the third
element provided in Prubankers is also wanting. For, as the
appellate court explained:
The wordings of Article 124 are clear. If it was the intention of
the legislators to cover all kinds of wage adjustments, then the
language of the law should have been broad, not restrictive as
it is currently phrased:
Article 124. Standards/Criteria for Minimum Wage Fixing.
xxx
Where the application of any prescribed wage increase by virtue
of a law or Wage Order issued by any Regional Board results
in distortions of the wage structure within an establishment, the
employer and the union shall negotiate to correct the
distortions. Any dispute arising from the wage distortions shall
be resolved through the grievance procedure under their
collective bargaining agreement and, if it remains unresolved,
through voluntary arbitration.

In trying to prove wage distortion, petitioner union presented a x x x (Italics and emphasis supplied)
list of five (5) employees allegedly affected by the said increase:
Article 124 is entitled "Standards/Criteria for Minimum Wage
Fixing." It is found in CHAPTER V on "WAGE STUDIES,
Pay of Old/ Pay of Newly Difference WAGE AGREEMENTS AND WAGE DETERMINATION"
Regular Employees Hired Employees which principally deals with the fixing of minimum wage.
A. Prior to April 1, 1993 Article 124 should thus be construed and correlated in relation
Level I P4,518.75 to minimum wage fixing, the intention of the law being that in
(Sammy Guce) P3,100 P1,418.75 the event of an increase in minimum wage, the distinctions
Level II P6,242.00 embodied in the wage structure based on skills, length of
(Nazario Abello) P3,200 P3,042.00 service, or other logical bases of differentiation will be
Level III P4,850.00 preserved.
(Arthur Chavez) P3,300 P1,550.00
Level IV P5,339.00 If the compulsory mandate under Article 124 to correct "wage
Melissa Cordero) P3,500 P1,839.00 distortion" is applied to voluntary and unilateral increases by
Level V P7,090.69 the employer in fixing hiring rates which is inherently a
(Ma. Lourdes Dee) P3,700 P3,390.69 business judgment prerogative, then the hands of the employer
B. Effective April 1, 1993 would be completely tied even in cases where an increase in
Level I P4,518.75 wages of a particular group is justified due to a re-evaluation of
Sammy Guce) P4,100 P418.75 the high productivity of a particular group, or as in the present
Level II P6,242.00 case, the need to increase the competitiveness of Bankards
(Nazario Abello) P4,100 P2,142.00 hiring rate. An employer would be discouraged from adjusting
Level III P4,850.00 the salary rates of a particular group of employees for fear that
(Arthur Chavez) P4,200 P650.00 it would result to a demand by all employees for a similar
Level IV P5,330.00 increase, especially if the financial conditions of the business
(Melissa Cordero) P4,400 P939.00 cannot address an across-the-board increase.
Level V P7,090.69
(Ma. Lourdes Dee) P4,700 P2,390.69 Petitioner cites Metro Transit Organization, Inc. v. NLRC13 to
Even assuming that there is a decrease in the wage gap between support its claim that the obligation to rectify wage distortion is
the pay of the old employees and the newly hired employees, to
not confined to wage distortion resulting from government
decreed law or wage order.
Reliance on Metro Transit is however misplaced, as the
obligation therein to rectify the wage distortion was not by
virtue of Article 124 of the Labor Code, but on account of a then
existing "company practice" that whenever rank-and-file
employees were paid a statutorily mandated salary increase,
supervisory employees were, as a matter of practice, also paid
the same amount plus an added premium. Thus this Court held
in said case:
We conclude that the supervisory employees, who then (i.e., on
April 17, 1989) had, unlike the rank-and-file employees, no
CBA governing the terms and conditions of their employment,
had the right to rely on the company practice of unilaterally
correcting the wage distortion effects of a salary increase given
to the rank-and-file employees, by giving the supervisory
employees a corresponding salary increase plus a premium. . .
.14 (Emphasis supplied)
Wage distortion is a factual and economic condition that may
be brought about by different causes. In Metro Transit, the
reduction or elimination of the normal differential between the
wage rates of rank-and-file and those of supervisory employees
was due to the granting to the former of wage increase which
was, however, denied to the latter group of employees.
The mere factual existence of wage distortion does not,
however, ipso facto result to an obligation to rectify it, absent a
law or other source of obligation which requires its
rectification.
Unlike in Metro Transit then where there existed a "company
practice," no such management practice is herein alleged to
obligate Bankard to provide an across-the-board increase to all
its regular employees.
Bankards right to increase its hiring rate, to establish minimum
salaries for specific jobs, and to adjust the rates of employees
affected thereby is embodied under Section 2, Article V (Salary
and Cost of Living Allowance) of the parties Collective
Bargaining Agreement (CBA), to wit:
Section 2. Any salary increase granted under this Article shall
be without prejudice to the right of the Company to establish
such minimum salaries as it may hereafter find appropriate for
specific jobs, and to adjust the rates of the employees thereby
affected to such minimum salaries thus established.15 (Italics
and underscoring supplied)
This CBA provision, which is based on legitimate business-
judgment prerogatives of the employer, is a valid and legally
enforceable source of rights between the parties.
In fine, absent any indication that the voluntary increase of
salary rates by an employer was done arbitrarily and illegally
for the purpose of circumventing the laws or was devoid of any
legitimate purpose other than to discriminate against the regular
employees, this Court will not step in to interfere with this
management prerogative. Employees are of course not
precluded from negotiating with its employer and lobby for
wage increases through appropriate channels, such as through a
CBA.
This Court, time and again, has shown concern and compassion
to the plight of workers in adherence to the Constitutional
provisions on social justice and has always upheld the right of
workers to press for better terms and conditions of employment.
It does not mean, however, that every dispute should be decided
in favor of labor, for employers correspondingly have rights
under the law which need to be respected.
WHEREFORE, the present petition is hereby DENIED.
SO ORDERED.
Prubankers vs Prudential
PANGANIBAN, J.:
Wage distortion presupposes an increase in the compensation
of the lower ranks in an office hierarchy wirhout a
corresponding raise for higher-tiered employees in the same
region of the country, resulting in the elimination or the severe
diminution of the distinction between the two groups. Such
distortion does not arise when a wage order gives employees in
one branch of a bank higher compensation than that given to
their counterparts in other regions occupying the same pay
scale, who are not covered by said wage order. In short, the
implementation of wage orders in one region but not in others
does not in itself necessarily result in wage distortion.
The Case
Before us is a Petition for Review on Certiorari, challenging the
November 6, 1997 Decision 1 of the Court of Appeals in CA-
GR SP No. 42525. The dispositive portion of the challenged
Decision reads:
WHEREFORE, the petition is GRANTED. The assailed
decision of the Voluntary Arbitration Committee dated June 18,
1996 is hereby REVERSED and SET ASIDE for having been
issued with grave abuse of discretion tantamount to lack of or
excess of jurisdiction, and a new judgment is rendered finding
that no wage distortion resulted from the petitioner's separate
and regional implementation of Wage Order No. VII-03 at its
Cebu, Mabolo and P. del Rosario.
The June 18, 1996 Decision of the Voluntary Arbitration
Commitee, 2 which the Court of Appeals reversed and set aside,
disposed as follows:
WHEREFORE, it is hereby ruled that the Bank's separate and
regional implementation of Wage Order No. VII-03 at its Cebu,
Mabolo and P. del Rosario branches created a wage distortion
in the Bank nationwide which should be resolved in accordance
with Art. 124 of the Labor Code. 3
The Facts
The facts of the case are summarized by the Court of Appeals
thus:
On November 18, 1993, the Regional Tripartite Wages and
Productivity Board of Region V issued Wage Order No. RB 05-
03 which provided for a Cost of Living Allowance (COLA) to
workers in the private sector who ha[d] rendered service for at
least three (3) months before its effectivity, and for the same
period [t]hereafter, in the following categories: SEVENTEEN
PESOS AND FIFTY CENTAVOS (P17.50) in the cities of
Naga and Legaspi; FIFTEEN PESOS AND FIFTY
CENTAVOS (P15.50) in the municipalities of Tabaco, Daraga,
Pili and the city of Iriga; and TEN PESOS (P10.00) for all other
areas in the Bicol Region.
Subsequently on November 23, 1993, the Regional Tripartite
Wages and Productivity Board of Region VII issued Wage
Order No. RB VII-03, which directed the integration of the
COLA mandated pursuant to Wage Order No. RO VII-02-A
into the basic pay of all workers. It also established an increase
in the minimum wage rates for all workers and and employees
in the private sector as follows: by Ten Pesos (P10.00) in the
cities of Cebu, Mandaue and Lapulapu; Five Pesos (P5.00) in
the municipalities of Compostela, Liloan, Consolacion,
Cordova, Talisay, Minglanilla, Naga and the cities of Davao,
Toledo, Dumaguete, Bais, Canlaon and Tagbilaran.
The petitioner then granted a COLA of P17.50 to its employees
at its Naga Branch, the only branch covered by Wage Order No.
RB 5-03, and integrated the P150.00 per month COLA into the
basic pay of its rank-and-file employees at its Cebu, Mabolo
and P. del Rosario branches, the branches covered by Wage
Order No. RB VII-03.
On June 7, 1994, respondent Prubankers Association wrote the
petitioner requesting that the Labor Management Committee be
immediately convened to discuss and resolve the alleged wage
distortion created in the salary structure upon the
implementation of the said wage orders. Respondent
Association then demanded in the Labor Management
Committee meetings that the petitioner extend the application
of the wage orders to its employees outside Regions V and VII,
claiming that the regional implementation of the said orders
created a wage distortion in the wage rates of petitioner's
employees nationwide. As the grievance could not be settled in
the said meetings, the parties agreed to submit the matter to
voluntary arbitration. The Arbitration Committee formed for
that purpose was composed of the following: public respondent
Froilan M. Bacungan as Chairman, with Attys. Domingo T.
Anonuevo and Emerico O. de Guzman as members. The issue
presented before the Committee was whether or not the bank's
separate and regional implementation of Wage Order No. 5-03
at its Naga Branch and Wage Order No. VII-03 at its Cebu,
Mabolo and P. del Rosario branches, created a wage distortion
in the bank nationwide.
The Arbitration Committee on June 18, 1996 rendered
questioned decision. 4
Ruling of the Court of Appeals
In ruling that there was no wage distortion, the Court of Appeals
held that the variance in the salary rates of employees in
different regions of the country was justified by RA 6727. It
noted that "the underlying considerations in issuing the wage
orders are diverse, based on the distinctive situations and needs
existing in each region. Hence, there is no basis to apply the
salary increases imposed by Wage Order No. VII-03 to
employees outside of Region VII." Furthermore, the Court of
Appeals ruled that "the distinctions between each employee
group in the region are maintained, as all employees were
granted an increase in minimum wage rate. 5
The Issues
In its Memorandum, petitioner raises the following issues: 6
I
Whether or not the Court of Appeals departed from the usual
course of judicial procedure when it disregarded the factual
findings of the Voluntary Arbitration Committee as to the
existence of wage distortion.
II
Whether or not the Court of Appeals committed grave error in
law when it ruled that wage distortion exists only within a
region and not nationwide.
III
Whether or not the Court of Appeals erred in implying that the
term "establishment" as used in Article 125 of the Labor Code
refers to the regional branches of the bank and not to the bank
as a whole.
The main issue is whether or not a wage distortion resulted from
respondent's implementation of the aforecited Wage Orders. As
a preliminary matter, we shall also take up the question of
forum-shopping.
The Court's Ruling
The petition is devoid of merit. 7
Preliminary Issue: Forum-Shopping
Respondent asks for the dismissal of the petition because
petitioner allegedly engaged in forum-shopping. It maintains
that petitioner failed to comply with Section 2 of Rule 42 of the
Rules of Court, which requires that parties must certify under
oath that they have not commenced any other action involving
the same issues in the Supreme Court, the Court of Appeals, or
different divisions thereof, or any other tribunal or agency; if
there is such other action or proceeding, they must state the
status of the same; and if they should thereafter learn that a
similar action or proceeding has been filed or is pending before
the said courts, they should promptly inform the aforesaid
courts or any other tribunal or agency within five days
therefrom. Specifically, petitioner accuses respondent of failing
to inform this Court of the pendency of NCMB-NCR-RVA-O4-
012-97 entitled "In Re: Voluntary Arbitration between
Prudential Bank and Prubankers Association" (hereafter
referred to as "voluntary arbitration case"), an action involving
issues allegedly similar to those raised in the present
controversy.

In its Reply, petitioner effectively admits that the voluntary
arbitration case was already pending when it filed the present
petition. However, it claims no violation of the rule against
forum-shopping, because there is no identity of causes of action
and issues between the two cases.
We sustain the respondent. The rule on forum-shopping was
first included in Section 17 of the Interim Rules and Guidelines
issued by this Court on January 11, 1983, which imposed a
sanction in this wise: "A violation of the rule shall constitute
contempt of court and shall be a cause for the summary
dismissal of both petitions, without prejudice to the taking of
appropriate action against the counsel or party concerned."
Thereafter, the Court restated the rule in Revised Circular No.
28-91 and Administrative Circular No. 04-94. Ultimately, the
rule was embodied in the 1997 amendments to the Rules of
Court.
As explained by this Court in First Philippine International
Bank v. Court of Appeals, 8 forum-shopping exists where the
elements of litis pendentia are present, and where a final
judgment in one case will amount to res judicata in the other.
Thus, there is forum-shopping when, between an action
pending before this Court and another one, there exist: "a)
identity of parties, or at least such parties as represent the same
interests in both actions, b) identity of rights asserted and relief
prayed for, the relief being founded on the same facts, and c)
the identity of the two preceding particulars is such that any
judgement rendered in the other action, will, regardless of
which party is successful amount to res judicata in the action
under consideration; said requisites also constitutive of the
requisites for auter action pendant or lis pendens." 9 Another
case elucidates the consequence of forum-shopping: "[W]here
a litigant sues the same party against whom another action or
actions for the alleged violation of the same right and the
enforcement of the same relief is/are still pending, the defense
of litis pendentia in one case is a bar to the others; and, a final
judgment in one would constitute res judicata and thus would
cause the dismissal of the rest." 10
The voluntary arbitration case involved the issue of whether the
adoption by the Bank of regionalized hiring rates was valid and
binding. On the other hand, the issue now on hand revolves
around the existence of a wage distortion arising from the
Bank's separate and regional implementation of the two Wage
Orders in the affected branches. A closer look would show that,
indeed, the requisites of forum-shopping are present.
First, there is identity of parties. Both cases are between the
Bank and the Association acting on behalf of all its members.
Second, although the respective issues and reliefs prayed for in
the two cases are stated differently, both actions boil down to
one single issue: the validity of the Bank's regionalization of its
wage structure based on RA 6727. Even if the voluntary
arbitration case calls for striking, down the Bank's regionalized
hiring scheme while the instant petition calls for the correction
of the alleged wage distortion caused by the regional
implementation of Wage Order No. VII-03, the ultimate relief
prayed for in both cases is the maintenance of the Bank's
national wage structure. Hence, the final disposition of one
would constitute res judicata in the other. Thus, forum-
shopping is deemed to exist and, on this basis, the summary
dismissal of both actions is indeed warranted.
Nonetheless, we deem it appropriate to pass upon the main issue
on its merit in view of its importance.
Main Issue: Wage Distortion
The statutory definition of wage distortion is found in Article
124 of the Labor Code, as amended by Republic Act No. 6727,
which reads:
Art. 124.Standards/Criteria for Minimum Wage Fixing . . .
As used herein, a wage distortion shall mean a situation where
an increase in prescribed wage results in the elimination of
severe contraction of intentional quantitative differences in
wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation.
Elaborating on this statutory definition, this Court ruled: "Wage
distortion presupposes a classification of positions and ranking
of these positions at various levels. One visualizes a hierarchy
of positions with corresponding ranks basically in terms of
wages and other emoluments. Where a significant change
occurs at the lowest level of positions in terms of basic wage
without a corresponding change in the other level in the
hierarchy of positions, negating as a result thereof the
distinction between one level of position from the next higher
level, and resulting in a parity between the lowest level and the
next higher level or rank, between new entrants and old hires,
there exists a wage distortion. . . . . The concept of a wage
distortion assumes an existing grouping or classification of
employees which establishes distinctions among such
employees on some relevant or legitimate basis. This
classification is reflected in a differing wage rate for each of the
existing classes of employees" 11
Wage distortion involves four elements:
1. An existing hierarchy of positions with corresponding
salary rates
2. A significant change in the salary rate of a lower pay
class without a concomitant increase in the salary rate of a
higher one
3. The elimination of the distinction between the two
levels
4. The existence of the distortion in the same region of
the country
In the present case, it is clear that no wage distortion resulted
when respondent implemented the subject Wage Orders in the
covered branches. In the said branches, there was an increase in
the salary rates of all pay classes. Furthermore, the hierarchy of
positions based on skills, lengh of service and other logical
bases of differentiation was preserved. In other words, the
quantitative difference in compensation between different pay
classes remained the same in all branches in the affected region.
Put differently, the distinction between Pay Class 1 and Pay
Class 2, for example, was not eliminated as a result of the
implementation of the two Wage Orders in the said region.
Hence, it cannot be said that there was a wage distortion.
Petitioner argues that a wage distortion exists, because the
implementation of the two Wage Orders has resulted in the
discrepancy in the compensation of employees of similar pay
classification in different regions. Hence, petitioner maintains
that, as a result of the two Wage Orders, the employees in the
affected regions have higher compensation than their
counterparts of the same level in other regions. Several tables
are presented by petitioner to illustrate that the employees in the
regions covered by the Wage Orders are receiving more than
their counterparts in the same pay scale in other regions.
The Court is not persuaded. A wage parity between employees
in different rungs, is not at issue here, but a wage disparity
between employees in the same rung but located in different
regions of the country.
Contrary to petitioner's postulation, a disparity in wages
between employees holding similar positions but in different
regions does not constitute wage distortion as contemplated by
law. As previously enunciated, it is the hierarchy of positions
and the disparity of their corresponding wages and other
emoluments that are sought to be preserved by the concept of
wage distortion. Put differently, a wage distortion arises when
a wage order engenders wage parity between employees in
different rungs of the organizational ladder of the same
establishment. It bears emphasis that wage distortion involves
a parity in the salary rates of different pay classes which, as a
result, eliminates the distinction between the different ranks in
the same region.
Different Regional Wages
Mandated by RA 6727
Petitioner's claim of wage distortion must also be denied for one
other reason. The difference in wages between employees in the
same pay scale in different regions is not the mischief sought to
be banished by the law. In fact, Republic Act No. 6727 (the
Wage Rationalization Act), recognizes "existing regional
disparities in the cost of living." Section 2 of said law provides:
Sec 2. It is hereby declared the policy of the State to
rationalize the fixing of minimum wages and to promote
productivity-improvement and gain-sharing measures to ensure
a decent standard of living for the workers and their families; to
guarantee the rights of labor to its just share in the fruits of
production; to enhance employment generation in the
countryside through industry dispersal; and to allow business
and industry reasonable returns on investment, expansion and
growth.
The State shall promote collective bargaining as the primary
mode of settling wages and other terms and conditions of
employment; and whenever necessary, the minimum wage rates
shall be adjusted in a fair and equitable manner, considering
existing regional disparities in the cost of living and other socio-
economic factors and the national economic and social
development plans.
RA 6727 also amended Article 124 of the Labor Code, thus:
Art. 124.Standards/Criteria for Minimum Wage Fixing. The
regional minimum wages to be established by the Regional
Board shall be as nearly adequate as is economically feasible to
maintain the minimum standards of living necessary for the
health, efficiency and general well-being of the employees
within the frame work of the national economic and social
development program. In the determination of such regional
minimum wages, the Regional Board shall, among other
relevant factors, consider the following:
The demand for living wages;
Wage adjustment vis-a-vis the consumer price index;
The cost of living and changes or increases therein;
The needs of workers and their families;
The need to induce industries to invest in the countryside;
Improvements in standards of living;
The prevailing wage levels;
Fair return of the capital invested and capacity to pay of
employers;
Effects on employment generation and family income; and
The equitable distribution of income and wealth along the
imperatives of social and economic development.
From the above-quoted rationale of the law, as well as the
criteria enumerated, a disparity in wages between employees
with similar positions in different regions is necessarily
expected. In insisting that the employees of the same pay class
in different regions should receive the same compensation,
petitioner has apparently misunderstood both the meaning of
wage distortion and the intent of the law to regionalize wage
rates.
It must be understood that varying in each region of the country
are controlling factors such as the cost of living; supply and
demand of basic goods, services and necessities; and the
purchasing power of the peso. Other considerations underscore
the necessity of the law. Wages in some areas may be increased
in order to prevent migration to the National Capital Region
and, hence, to decongest the metropolis. Therefore, what the
petitioner herein bewails is precisely what the law provides in
order to achieve its purpose.
Petitioner claims that it "does not insist that the Regional Wage
Boards created pursuant to RA 6727 do not have the authority
to issue wage orders based on the distinctive situations and
needs existing in each region. So also, . . . it does not insist that
the [B]ank should not implement regional wage orders. Neither
does it seek to penalize the Bank for following Wage Order VII-
03. . . . What it simply argues is that it is wrong for the Bank to
peremptorily abandon a national wage structure and replace the
same with a regionalized structure in violation of the principle
of equal pay for equal work. And, it is wrong to say that its act
of abandoning its national wage structure is mandated by law."
As already discussed above, we cannot sustain this argument.
Petitioner contradicts itself in not objecting, on the one hand, to
the right of the regional wage boards to impose a regionalized
wage scheme; while insisting, on the other hand, on a national
wage structure for the whole Bank. To reiterate, a uniform
national wage structure is antithetical to the purpose of RA
6727.
The objective of the law also explains the wage disparity in the
example cited by petitioner: Armae Librero, though only in Pay
Class 4 in Mabolo, was, as a result of the Wage Order, receiving
more than Bella Cristobal, who was already in Pay Class 5 in
Subic. 12 RA 6727 recognizes that there are different needs for
the different situations in different regions of the country. The
fact that a person is receiving more in one region does not
necessarily mean that he or she is better off than a person
receiving less in another region. We must consider, among
others, such factors as cost of living, fulfillment of national
economic goals, and standard of living. In any event, this Court,
in its decisions, merely enforces the law. It has no power to pass
upon its wisdom or propriety.
Equal Pay for Equal Work
Management Practice
Petitioner also insists that the Bank has adopted a uniform wage
policy, which has attained the status of an established
management practice; thus, it is estopped from implementing a
wage order for a specific region only. We are not persuaded.
Said nationwide uniform wage policy of the Bank had been
adopted prior to the enactment of RA 6727. After the passage
of said law, the Bank was mandated to regionalize its wage
structure. Although the Bank implemented Wage Order Nos.
NCR-01 and NCR-02 nationwide instead of regionally even
after the effectivity of RA 6727, the Bank at the time was still
uncertain about how to follow the new law. In any event, that
single instance cannot be constitutive of "management
practice."
WHEREFORE, the petition is DENIED and the assailed
Decision is AFFIRMED. Costs against petitioner.1wphi1.nt

Petitioner also avers that the implementation of the Wage Order SO ORDERED.
in only one region violates the equal-pay-for-equal-work
principle. This is not correct. At the risk of being repetitive, we
stress that RA 6727 mandates that wages in every region must
be set by the particular wage board of that region, based on the
prevailing situation therein. Necessarily, the wages in different
regions will not be uniform. Thus, under RA 6727, the
minimum wage in Region 1 may be different from that in
Region 13, because the socioeconomic conditions in the two
regions are different.

Meaning of "Establishment"

Petitioner further contends that the Court of Appeals erred in

interpreting the meaning of "establishment" in relation to wage
distortion. It quotes the RA 6727 Implementing Rules,
specifically Section 13 thereof which speaks of "workers
working in branches or agencies of establishments in or outside
the National Capital Region." Petitioner infers from this that the
regional offices of the Bank do not themselves constitute, but
are simply branches of, the establishment which is the whole
bank. In effect, petitioner argues that wage distortion covers the
pay scales even of employees in different regions, and not only
those of employees in the same region or branch. We disagree.

Sec. 13 provides that the "minimum wage rates of workers

working in branches or agencies of establishments in or outside
the National Capital Region shall be those applicable in the
place where they are sanctioned" The last part of the sentence
was omitted by petitioner in its argument. Given the entire
phrase, it is clear that the statutory provision does not support
petitioner's view that "establishment" includes all branches and
offices in different regions.

Further negating petitioner's theory is NWPC Guideline No. 1

(S. 1992) entitled "Revised Guidelines on Exemption From
Compliance With the Prescribed Wage/Cost of Living
Allowance Increases Granted by the Regional Tripartite Wages
and Productivity Board," which states that "establishment"
"refers to an economic unit which engages in one or
predominantly one kind of economic activity with a single fixed
location."