Labor Law 1 cases #7
1.) Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 111515 July 14, 1995
JACKSON BUILDING CONDOMINIUM CORPORATION and/or
RAZUL REQUESTO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FERDINAND
GUMOGDA, respondents.
RESOLUTION
QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court
to set aside the Decision of National Labor Relations Commission (NLRC),
which affirmed the Decision of the Labor Arbiter dated October 30, 1992.
The latter decision ordered petitioners to reinstate private respondent and to
pay him back wages, differential pay, thirteenth-month pay and service-
incentive leave pay for 1991.
On November 22, 1989, private respondent was employed as a janitor by
petitioner with a monthly salary of P2,340.00 or a daily wage of P90.00.
On November 15, 1992, private respondent filed a 45-day leave of absence
from November 15, 1991 to December 29, 1991 to undergo an
appendectomy, which would necessitate complete bed rest for about thirty
days from the date of operation as shown by his medical certificate (Annex
"C-l", Rollo, p. 28). This was granted by petitioner.
On January 3, 1992, private respondent informed petitioner Razul Requesto,
president of petitioner corporation, that he was physically fit to assume his
work. However, petitioners refused to accept him back contending that he
had abandoned his work.
On March 24, 1992, private respondent filed with the Labor Arbiter a
complaint against petitioners for illegal dismissal, underpayment of wages
and non-payment of thirteenth-month pay and service-incentive leave pay
(Annex "C", Rollo, pp. 20-26).
On July 12, 1992, petitioners submitted their position paper wherein they
alleged that private respondent was not dismissed but was merely advised to
rest for health reasons until he could procure a medical certificate attesting
that he was fit to work. They further alleged that private respondent failed to
return to his workplace or to submit the required medical certificate.
On October 30, 1992, the Labor Arbiter rendered a decision in favor of
private respondent.
Petitioners then appealed to NLRC, alleging that the Labor Arbiter
committed grave abuse of discretion. .However, NLRC affirmed in toto the
decision of the Labor Arbiter. A subsequent motion for reconsideration was
denied.
II
The issues for consideration of this Court are whether private respondent
abandoned his work and whether petitioners are liable for the payment of
private respondent's back wages, differential pay, thirteenth-month pay and
service-incentive leave pay for 1991.
III
Petitioners contend that private respondent was still weak when he reported
back for work and they had to ask him to secure a medical clearance. They
claim that he failed to submit one or to report for work; hence they
considered him as having abandoned his work.
Petitioners raise questions of fact which have already been passed upon by
the Labor Arbiter and NLRC. This Court does not disturb the findings of fact
of administrative agencies when supported by substantial evidence (Wyeth-
Suaco Laboratories, Inc. v. National Labor Relations Commission, 219
SCRA 356 [1993]).
For abandonment to be a valid ground for dismissal, two requisites must be
compresent: the intention by an employee to abandon coupled with an overt
act from which it may be inferred that the employee had no more intention to
resume his work (People's Security, Inc. v. National Labor Relations
Commission, 226 SCRA 146 [1993]).
In the instant case, the said requisites are not present.
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As found by the Labor Arbiter, private respondent's physician advised him to

rest for 30 days before reporting back for work in order to recuperate. Private
respondent heeded this advise and even exceeded the number of days
recommended by his doctor for his recuperation. In fact, he reported back for
work 50 days after his operation. This would clearly show that private
respondent was ready to assume his responsibilities considering that he had
fully recovered from the operation. Furthermore, the filing of a complaint for
illegal dismissal by private respondent is inconsistent with the allegation of
petitioners that he had abandoned his job. Surely, an employee's posture will
be illogical if he abandons his work and then immediately files an action for
his reinstatement (Remerco Garments Manufacturing v. Minister of Labor
and Employment, 135 SCRA 167 [1985]).

Petitioners also urged that private respondent is not entitled to any

remuneration during the period that he did not report for work under the
principle of "a fair day's work for a fair day's pay."

The law on the matter refutes this legal challenge of petitioners.

Section 31 of R.A. No. 6715 which amended Article 279 of the Labor Code
of the Philippines provides that "an employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and
other privileges without loss of seniority rights and other privileges and to his
full back wages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement."

The award of back wages by NLRC to private respondent was predicated on

the ground that he was illegally dismissed and not on his failure to report for
work (Llosa-Tan v. Silahis International Hotel, 181 SCRA 738 [1990]).

Private respondent is likewise entitled to the thirteenth-month pay.

Presidential Decree No. 851, as amended by Memorandum Order No. 28,
provides that employees are entitled to the thirteenth-month pay benefit
regardless of their designation and irrespective of the method by which their
wages are paid.

WHEREFORE, the Court Resolved to DISMISS the petition.

SO ORDERED.

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2.) Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-60403 August 3, 1983
ALLIANCE OF GOVERNMENT WORKERS (AGW); PNB-FEMA
BANK EMPLOYEES ASSOCIATION (AGW); KAISAHAN AT
KAPATIRAN NG MGA MANGAGAWA AT KAWANI NG MWSS
(AGW); BALARA EMPLOYEES ASSOCIATION (AGW); GSIS
WORKERS ASSOCIATION (AGW); SSS EMPLOYEES
ASSOCIATION (AGW); PVTA EMPLOYEES ASSOCIATION
(AGW); NATIONAL ALLIANCE OF TEACHERS AND OFFICE
WORKERS (AGW); , petitioners,
vs.
THE HONORABLE MINISTER OF LABOR and EMPLOYMENT,
PHILIPPINE NATIONAL BANK (PNB); METROPOLITAN
WATERWORKS and SEWERAGE SYSTEM (MWSS);
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS); SOCIAL
SECURITY SYSTEM (SSS); PHILIPPINE VIRGINIA TOBACCO
ADMINISTRATION (PVTA) PHILIPPINE NORMAL COLLEGE
(PNC); POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
(PUP), respondents.
The Solicitor General for MOLE, PNB, SSS, PNC and PUP.
Oliver Gesmundo for petitioners.
Jesus C. Gentiles for petitioner SSSEA-AGW.
GUTIERREZ, JR., J.:
Are the branches, agencies, subdivisions, and instrumentalities of the
Government, including government owned or controlled corporations
included among the 4 "employers"" under Presidential Decree No. 851 which
are required to pay an their employees receiving a basic salary of not more
than P1,000.00 a month, a thirteenth (13th) month pay not later than
December 24 of every year?
Petitioner Alliance of Government Workers (AGW) is a registered labor
federation while the other petitioners are its affiliate unions with members
from among the employees of the following offices, schools, or government
owned or controlled corporations:
1. Philippine National Bank (PNB) Escolta Street, Manila
2. Metropolitan Waterworks and Sewerage System (MWSS) Katipunan
Road, Balara, Quezon City
3. Government Service Insurance System (GSIS) Arroceros Street, Manila
4. Social Security System (SSS) East Avenue, Quezon City
5. Philippine Virginia Tobacco Administration (PVTA) Consolacion
Building, Cubao, Quezon City
6. Philippine Normal College (PNC) Ayala Boulevard, Manila
7. Polytechnic University of the Philippines (PUP) Hippodromo Street, Sta.
Mesa, Manila
On February 28, 1983, the Philippine Government Employees Association
(PGEA) filed a motion to come in as an additional petitioner.
Presidential Decree No. 851 provides in its entirety:
WHEREAS, it is necessary to further protect the level of real f wages from
the ravage of world-wide inflation;
WHEREAS, there has been no increase case in the legal minimum wage
rates since 1970;
WHEREAS, the Christmas season is an opportune time for society to show
its concern for the plight of the working masses so they may properly
celebrate Christmas and New Year.
NOW, THEREFORE, I, FERDINAND E. MARCOS, by virtue of the
powers vested in me by the Constitution do hereby decree as follows:
SECTION 1. All employers are hereby required to pay all their employees
receiving a basic salary of not more than Pl,000 a month, regardless of the
nature of their employment, a 13th-month pay not later than December 24 of
every year.
SECTION 2. Employers already paying their employees a 13th-month pay or
its equivalent are not covered by this Decree.
SECTION 3. This Decree shall take effect immediately. Done in the City of
Manila, this 16th day of December 1975.
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According to the petitioners, P.D. No. 851 requires all employers to pay the
13th-month pay to their employees with one sole exception found in Section
2 which states that "(E)mployers already paying their employees a 13th
month pay or its equivalent are not covered by this Decree. " The petitioners
contend that Section 3 of the Rules and Regulations Implementing
Presidential Decree No. 851 included other types of employers not exempted
by the decree. They state that nowhere in the decree is the secretary, now
Minister of Labor and Employment, authorized to exempt other types of
employers from the requirement.
Section 3 of the Rules and Regulations Implementing Presidential Decree
No. 851 provides:
Section 3. Employers covered The Decree shall apply to all employers
except to:
a) Distressed employers, such as (1) those which are currently incurring
substantial losses or 112) in the case of non-profit institutions and
organizations, where their income, whether from donations, contributions,
grants and other earnings from any source, has consistently declined by more
than forty (40%) per cent of their normal income for the last two (2) )years,
subject to the provision of Section 7 of this issuance.
b) The Government and any of its political subdivisions, including
government-owned and controlled corporations, except)t those corporation,
operating essentially as private, ,subsidiaries of the government;
c) Employers already paying their employees 13th-month pay or more in a
calendar year or its equivalent at the of this issuance;
d) Employers of household helpers and persons in the personal service of
another in relation to such workers: and
e) Employers of those who are paid on purely commission, boundary, or task
basis and those who are paid a fixed for performing a specific work,
irrespective of the time consumed in the performance thereof, except where
the workers are paid an piece- rate basis in which case the employer shall be
covered by this issuance :insofar ab such workers are concerned ...
The petitioners assail this rule as ultra vires and void. Citing Philippine
Apparel Workers'Union v. NIRC et al., (106 SCRA 444); Teoxon v. Members
of the Board of' Administators (33 SCRA 585); Santos u. Hon. Estenzo et al.,
(109 Phil. 419); Hilado u. Collector of Internal Revenue (100 Phil. 288),
and Olsen & Co. Inc. v. Aldanese and Trinidad (43 Phil. 259), the petitioners
argue that regulations adopted under legislative authority must be in harmony
with the provisions of the law and for the sole purpose of carrying into effect
its general provisions. They state that a legislative act cannot be amended by
a rule and an administrative officer cannot change the law. Section 3 is
challenged as a substantial modification by rule of a Presidential Decree and
an unlawful exercise of legislative power.
Our initial reaction was to deny due course to the petition in a minute
resolution, however, considering the important issues propounded and the
fact, that constitutional principles are involved, we have now decided to give
due course to the petition, to consider the various comments as answers and
to resolve the questions raised through a full length decision in the exercise
of this Court's symbolic function as an aspect of the power of judicial review.
At the outset, the petitioners are faced with a procedural barrier. The petition
is one for declaratory relief, an action not embraced within the original
jurisdiction of the Supreme Court. (Remotigue v. Osmena,, Jr., 21 SCRA
837; Rural Bank of Olongapo v. Commission of Land Registration, 102
SCRA 794; De la Llana v. Alba, 112 SCRA 294). There is no statutory or
jurisprudential basis for the petitioners' statement that the Supreme Court has
original and exclusive jurisdiction over declaratory relief suits where only
questions of law are involved. Jurisdiction is conferred by law. The
petitioners have not pointed to any provision of the Constitution or statute
which sustains their sweeping assertion. On this ground alone, the petition
could have been dismissed outright.
Following similar action taken in Nacionalista Party v. Angelo Bautista (85
Phil. 101) and Aquino v. Commission on Elections (62 SCRA 275) we have,
however, decided to treat the petition as one for mandamus. The petition has
far reaching implications and raises questions that should be resolved. Have
the respondents unlawfully excluded the petitioners from the use and
enjoyment of rights to which they are entitled under the law?
An analysis of the "whereases" of P.D. No. 851 shows that the President had
in mind only workers in private employment when he issued the decree.
There was no intention to cover persons working in the government service.
The decree states:
xxx xxx xxx
WHEREAS, there has been no increase in the legal minimum wage rates
since 1970;
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xxx xxx xxx
As pointed out by the Solicitor General in his comment for the Minister of
Labor and Employment, the Social Security System the Philippine Normal
College, and Polytechnic University, the contention that govermment owned
and controlled corporations and state colleges and universities are covered by
the term "all employers" is belied by the nature of the 13- month pay and the
intent behind the decree.
The Solicitor General states:
"Presidential Decree No. 851 is a labor standard law which requires covered
employers to pay their employees receiving not more than P1,000.00 a month
an additional thirteenth-month pay. Its purpose is to increase the real wage of
the worker (Marcopper Mining Corp. v. Ople, 105 SCRA 75; and National
Federation of Sugar Workers v. Ovejera, G.R. No. 59743, May 31, 1982) as
explained in the'whereas'clause which read:
WHEREAS, it is necessary to further protect the level of real wages from the
ravage of world-wide inflation;
WHEREAS, there has been no increase in the legal minimum wage rates
since 1970; 11
WHEREAS, the Christmas season is an opportune time for society to show
its concern for the plight of the working masses so they may celebrate the
Christmas and New Year.
xxx xxx xxx
What the P.D. No. 851 intended to cover, as explained in the prefatory
statement of the Decree, are only those in the private sector whose real wages
require protection from world-wide inflation. This is emphasized by the
"whereas" clause which states that 'there has been no increase in the legal
minimum wage rates since 1970'. This could only refer to the private sector,
and not to those in the government service because at the time of the
enactment of Presidential Decree No. 851 in 1975, only the employees in the
private sector had not been given any increase in their minimum wage. The
employees in the government service had already been granted in 1974 a ten
percent across-the-board increase on their salaries as stated in P.D. No. 525,
Section 4.
Moreover, where employees in the government service were to benefit from
labor standard laws, their coverage is explicitly stated in the statute or
presidential enactment. This is evident in (a) Presidential Decree No. 390,
Sec. 1 which granted emergency cost of living allowance to employees in the
national government; (b) Republic Act No. 6111, Sec. 10 on medicare
benefits; (c) Presidential Decree No -442, Title II, Article 97 on the
applicable minimum wage rates; (d) Presidential Decree No. 442, Title 11,
Article 167 (g) on workmen's compensation; (e) Presidential Decree No.
1123 which provides for increases in emergency allowance to employees in
the private sector and in salary to government employees in Section 2
thereof; and (f) Executive Order No. 752 granting government employees a
year-end bonus equivalent to one week's pay. Thus, had the intention been to
include government employees under the coverage of Presidential Decree
No. 851, said Decree should have expressly so provided and there should
have been accompanying yearly appropriation measures to implement the
same. That no such express provision was provided and no accompanying
appropriation measure to was passed clearly show the intent to exclude
government employees from the coverage of P. D. No. 85 1.
We agree.
It is an old rule of statutory construction that restrictive statutes and acts
which impose burdens on the public treasury or which diminish rights and
interests, no matter how broad their terms do not embrace the Sovereign,
unless the Sovereign is specifically mentioned. (See Dollar Savings Bank v.
United States, 19 Wall (U.S.) 227; United States v. United Mine Workers of
America, 330 U.S. 265). The Republic of the Philippines, as sovereign,
cannot be covered by a general term like "employer" unless the language
used in the law is clear and specific to that effect.
The issue raised in this petition, however, is more basic and fundamental
than a mere ascertainment of intent or a construction of statutory provisions.
It is concerned with a revisiting of the traditional classification of
government employment into governmental functions and proprietary
functions and of the many ramifications that this dichotomous treatment
presents in the handling of concerted activities, collective bargaining, and
strikes by government employees to wrest concessions in compensation,
fringe benefits, hiring and firing, and other terms and conditions of
employment.
The workers in the respondent institutions have not directly petitioned the
heads of their respective offices nor their representatives in the Batasang
Pambansa. They have acted through a labor federation and its affiliated
unions. In other words, the workers and employees of these state firms,
college, and university are taking collective action through a labor federation
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which uses the bargaining power of organized labor to secure increased
compensation for its members.
Under the present state of the law and pursuant to the express language of the
Constitution, this resort to concerted activity with the ever present threat of a
strike can no longer be allowed.
The general rule in the past and up to the present is that "the terms and
conditions of employment in the Government, including any political
subdivision or instrumentality thereof are governed by law" (Section 11, the
Industrial Peace Act, R.A. No. 875, as amended and Article 277, the Labor
Code, P.D. No. 442, as amended). Since the terms and conditions of
government employment are fixed by law, government workers cannot use
the same weapons employed by workers in the private sector to secure
concessions from their employers. The principle behind labor unionism in
private industry is that industrial peace cannot be secured through
compulsion by law. Relations between private employers and their
employees rest on an essentially voluntary basis. Subject to the minimum
requirements of wage laws and other labor and welfare legislation, the terms
and conditions of employment in the unionized private sector are settled
through the process of collective bargaining. In government employment,
however, it is the legislature and, where properly given delegated power, the
administrative heads of government which fix the terms and conditions of
employment. And this is effected through statutes or administrative circulars,
rules, and regulations, not through collective bargaining agreements.
At the same time, the old Industrial Peace Act excepted employees and
workers in proprietary functions of government from the above compulsion
of law. Thus, in the past, government employees performing proprietary
functions could belong to labor organizations imposing the obligation to join
in strikes or engage in other concerted action. (Section 11, R.A. 875, as
amended). They could and they did engage in concerted activities and
various strikes against government owned and controlled corporations and
other government institutions discharging proprietary functions. Among the
institutions as falling under the exception in Section 11 of the Industrial
Peace Act were respondents Government Service Insurance System
(GSISEA v. Alvendia, 108 Phil. 505) and Social Security System (SSSEA v.
Soriano, 7 SCRA 1016). And this Court has supported labor completely in
the various strikes and concerted activities in firms and agencies discharging
proprietary functions because the Constitution and the laws allowed these
activities.
The exception, however belongs to the past.
The petitioners state in their counter comment filed July 23, 1982 that the
1973 Constitution is categorical about the grant of the rights to self-
organization and collective bargaining to all workers and that no amount of
stretched interpretation of lesser laws like the Labor Code and the Civil
Service Act can overturn the clear message of the Constitution with respect
to these rights to self-organization and collective bargaining.
These statements of the petitioners are error insofar as government workers
are now concerned.
Under the present Constitution, govemment-owned or controlled
corporations are specifically mentioned as embraced by the civil service.
(Section 1, Article XII-B, Constitution). The inclusion of the clause
"including every government owned or controlled corporation" in the 1973
amendments to the Constitution was a deliberate amendment for an express
purpose. There may be those who disagree with the intent of the framers of
the amendment but because it is fundamental law, we are all bound by it. The
amendment was intended to correct the situation where more favored
employees of the government could enjoy the benefits of two worlds. They
were protected by the laws governing government employment. They could
also engage in collective bargaining and join in strikes to secure higher
wages and fringe benefits which equally hardworking employees engaged in
government functions could only envy but not enjoy.
Presidential Decree No. 807, the Civil Service Decree of the Philippines has
implemented the 1973 Constitutional amendment. It is categorical about the
inclusion of personnel of government-owned or controlled corporations in
the civil service and their being subject to civil service requirements:
SECTION 56. Government- owned or Controlled Corporations Personnel.
All permanent personnel of government- owned or controlled corporations
whose positions are now embraced in the civil service shall continue in the
service until they have been given a chance to qualify in an appropriate
examination, but in the meantime, those who do not possess the appropriate
civil service eligibility shall not be promoted until they qualify in an
appropriate civil service examination. Services of temporary personnel ma be
y terminated any time.
Personnel of government-owned or controlled corporations are now part of
the civil service. It would not be fair to allow them to engage in concerted
activities to wring higher salaries or fringe benefits from Government even as
other civil service personnel such as the hundreds of thousands of public
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school teachers, soldiers, policemen, health personnel, and other government
workers are denied the right to engage in similar activities.
To say that the words "all employers" in P.D. No. 851 includes the
Government and all its agencies, instrumentalities, and government-owned or
controlled corporations would also result in nightmarish budgetary problems.
For instance, the Supreme Court is trying its best to alleviate the financial
difficulties of courts, judges, and court personnel in the entire country but it
can do so only within the limits of budgetary appropriations. Public school
teachers have been resorting to what was formerly unthinkable, to mass
leaves and demonstrations, to get not a 13th-month pay but promised
increases in basic salaries and small allowances for school uniforms. The
budget of the Ministry of Education, Culture and Sports has to be
supplemented every now and then for this purpose. The point is, salaries and
fringe benefits of those embraced by the civil service are fixed by law. Any
increases must come from law, from appropriations or savings under the law,
and not from concerted activity.
The Government Corporate Counsel, Justice Manuel Lazaro, in his
consolidated comment * for respondents GSIS, MWSS, and PVTA gives the
background of the amendment which includes every government-owned or
controlled corporation in the embrace of the civil service:
Records of the 1971 Constitutional Convention show that in the deliberations
held relative to what is now Section 1(1) Article XII-B, supra the issue of the
inclusion of government-owned or controlled corporations figured
prominently.
The late delegate Roberto S. Oca, a recognized labor leader, vehemently
objected to the inclusion of government-owned or controlled corporations in
the Civil Service. He argued that such inclusion would put asunder the right
of workers in government corporations, recognized in jurisprudence under
the 1935 Constitution, to form and join labor unions for purposes of
collective bargaining with their employers in the same manner as in the
private section (see: records of 1971 Constitutional Convention).
In contrast, other labor experts and delegates to the 1971 Constitutional
Convention enlightened the members of the Committee on Labor on the
divergent situation of government workers under the 1935 Constitution, and
called for its rectification. Thus, in a Position Paper dated November-22,
1971, submitted to the Committee on Labor, 1971 Constitutional
Convention, then Acting Commissioner of Civil Service Epi Rev
Pangramuyen declared:
It is the stand, therefore, of this Commission that by reason of the nature of
the public employer and the peculiar character of the public service, it must
necessarily regard the right to strike given to unions in private industry as not
applying to public employees and civil service employees. It has been stated
that the Government, in contrast to the private employer, protects the
interests of all people in the public service, and that accordingly, such
conflicting interests as are present in private labor relations could not exist in
the relations between government and those whom they employ.
Moreover, determination of employment conditions as well as supervision of
the management of the public service is in the hands of legislative bodies. It
is further emphasized that government agencies in the performance of their
duties have a right to demand undivided allegiance from their workers and
must always maintain a pronounced esprit de corps or firm discipline among
their staff members. It would be highly incompatible with these requirements
of the public service, if personnel took orders from union leaders or put
solidarity with members of the working class above solidarity with the
Government. This would be inimical to the public interest.
Moreover, it is asserted that public employees by joining labor unions may
be compelled to support objectives which are political in nature and thus
jeopardize the fundamental principle that the governmental machinery must
be impartial and non-political in the sense of party politics.' (see: Records of
1971 Constitutional Convention).
Similarly, Delegate Leandro P. Garcia, expressing support for the inclusion
of government-owned or controlled corporations in the Civil Service, argued:
It is meretricious to contend that because Govermnent owned or controlled
corporations yield profits, their employees are entitled to better wages and
fringe benefits than employees of Government other than Government-
owned and controlled cor orations which are not making profits. There is no
gainsaying the fact that the capital they use is the people's (see Records of the
1971 Constitutional Convention).
Summarizing the deliberations of the 1971 Constitutional Convention on the
inclusion of Government owned or controlled corporations, Dean Joaquin G.
Bernas, SJ., of the Ateneo de Manila University Professional School of Law,
stated that government-owned corporations came under attack as milking
cows of a privileged few enjoying salaries far higher than their counterparts
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in the various branches of government, while the capital of these
corporations belongs to the Government and government money is pumped
into them whenever on the brink of disaster, and they should therefore come
under the strick surveillance of the Civil Service System. (Bernas, The 1973
Philippine Constitution, Notes and Cases, 1974 ed., p. 524).
The Government Corporate Counsel cites the precedent setting decision in
Agricultural- Credit and Cooperative Financing Administration (ACCFA v.
Confederation of Unions in Government Corporations and Offtces CUGCO
et al., 30 SCRA 649) as giving the rationale for coverage of government-
owned or controlled corporations by the civil service. We stated ACCFA v.
CUGCO that:
... The ACA is a government office or agency engaged in governmental, not
proprietary functions. These functions may not be strictly what President
Wilson described as "constituent" (as distinguished from 'ministrant'),
[Bacani vs. National Coconut Corporation, G.R. No. L-9657, Nov. 29,1956,
53 O.G. p. 2800] such as those relating to the maintenance of peace and the
prevention of crime, those regulating property and property rights, those
relating to the administration of justice and the determination of political
duties of citizens, and those relating to national defense and foreign relations.
Under this traditional classification, such constituent functions are exercised
by the State as attributes of sovereignty, and not merely to promote the
welfare, progress and prosperity of the people these latter functions being
ministrant, the exercise of which is optional on the part of the government.
The growing complexities of modern society, however, have rendered this
traditional classification of the functions of government quite unrealistic, not
to say obsolete. The areas which used to be left to private enterprise and
initiative and which the government was called upon to enter optionally, and
only "because it was better equipped to administer for the public welfare than
is any private individual or group of individuals," (Malcolm, The
Government of the Philippines, pp. 19-20; Bacani vs. National Coconut
Corporation, supra) continue to lose their well- defined boundaries and to be
absorbed within activities that the government must undertake in its
sovereign capacity if it is to meet the increasing social challenges of the
times. Here as almost everywhere else the tendency is undoubtedly towards a
greater socialization of economic forces, Here of course this development
was envisioned, indeed adopted as a national policy, by the Constitution
itself in its declaration of principle concerning the promotion of social
justice.
Chief Justice Fernando, then an Associate Justice of this Court, observed in a
concurring opinion that the traditional classification into constituent and
ministrant functions reflects the primacy at that time of the now discredited
and repudiated laissez faire concept carried over into government. He stated:
The influence exerted by American constitutional doctrines unavoidable
when the Philippines was still under American rule notwithstanding, an
influence that has not altogether vanished even after independence,
the laissez faire principle never found fun acceptance in this jurisdiction,
even during the period of its full flowering in the United States. Moreover, to
erase any doubts, the Constitutional Convention saw to it that our
fundamental law embodies a policy of the responsibility thrust on
government to cope with social and economic problems and an earnest and
sincere commitment to the promotion of the general welfare through state
action. It would thus follow that the force of any legal objection to regulatory
measures adversely affecting property rights or to statutes organizing public
corporations that may engage in competition with private enterprise has been
blunted. Unless there be a clear showing of any invasion of rights guaranteed
by the Constitution, their validity is a foregone conclusion. No fear need be
entertained that thereby spheres hitherto deemed outside government domain
have been encroached upon. With our explicit disavowal of the 'constituent-
ministrant' test, the ghost of the laissez-faire concept no longer stalks the
juridical stage."
Our dismissal of this petiti/n should not, by any means, be interpreted to
imply that workers in government-owned and controlled corporations or in
state colleges and universities may not enjoy freedom of association. The
workers whom the petitioners purport to represent have the right, which may
not be abridged, to form associations or societies for purposes not contrary to
law. (Constitution, Article IV, Section 7). This is a right which share with all
public officers and employees and, in fact, by everybody living in this
country. But they may not join associations which impose the obligation to
engage in concerted activities in order to get salaries, fringe benefits, and
other emoluments higher than or different frm that provided by law and
regulation.
The very Labor Code, P.D. No. 442 as amended,, which governs the
registration and provides for the rights of legitimate labor organizations
states:
ART. 277. Government employees. The terms and conditions of
employment of all government employees, including employees of
government-owned and controlled corporations, shall be governed by the
8
Labor Law 1 cases #7

Civil Service Law, rules and regulations. Their salaries shall be standardized funds and for such technical positions as may be approved by the President in
by the National Assembly as provided for in the new constitution. However, critical government agencies.
there shall be no reduction of existing wages, benefits, and other terms and
conditions of employment being enjoyed by them at the time of the adoption The Solicitor-General correctly points out that to interpret P.D. No. 851 as
of this code. including government employees would upset the compensation levels of
government employees in violation of those fixed according to P.D. No. 985.
Section 6, Article XII-B of the Constitution gives added reasons why the
government employees represented by the petitioners cannot expect Here as in other countries, government salaries and wages have always been
treatment in matters of salaries different from that extended to all others lower than salaries, wages, and bonuses in the private sector. However, civil
government personnel. The provision states: servants have no cause for despair. Service in the government may at times
be a sacrifice but it is also a welcome privilege. Apart from the emotional
SEC. 6. The National Assembly shall provide for the standardization of and psychic satisfactions, there are various material advantages. The security
compensation of government officials and employees, including those in of tenure guaranteed to those in the civil service by the Constitution and
government-owned or controlled corporations, taking into account the nature statutes, the knowledge that one is working for the most stable of employers
of the responsibilities pertaining to, and the qualifications required for the and not for private persons, the merit system in appointments and
positions concerned. promotions, the scheme of vacation, sick, and maternity leave privileges, and
the prestige and dignity associated with public office are only a few of the
It is the legislature or, in proper cases, the administrative heads of joys of government employment.
government and not the collective bargaining process nor the concessions
wrung by labor unions from management that determine how much the Section 3 of the Rules and Regulations Implementing Presidential Decree
workers in government-owned or controlled corporations may receive in No. 851 is, therefore, a correct interpretation of the decree. It has been
terms of salaries, 13th month pay, and other conditions or terms of implemented and enforced from December 22, 1975 to the present, The
employment. There are government institutions which can afford to pay two petitioners have shown no valid reason why it should be nullified because of
weeks, three weeks, or even 13th-month salaries to their personnel from their their petition filed six and a half years after the issuance and implementation
budgetary appropriations. However, these payments must be pursuant to law of the rule.
or regulation. Presidential Decree No. 985 as amended provides:
WHEREFORE, the petition is hereby DISMISSED for lack of merit.
xxx xxx xxx
SO ORDERED.
SEC. 2. Declaration of Policy. It is hereby declared to be the policy, of the
national government to provide equal pay for substantially, equal work and
to base differences in pay upon substantive differences in duties and
responsibilities, and qualification requirements of the positions. In
determining rates of pay, due regard shall be given to, among others,
prevailing rates in private industry for comparable work. For this purpose,
there is hereby established a system of compensation standardization and
position classification in the national government for all departments,
bureaus, agencies, and officers including government-owned or controlled
corporations and financial institutions: Provided, That notwithstanding a
standardized salary system established for all employees, additional financial
incentives may be established by government corporations and financial
institutions for their employees to be supported fully from their corporate

9
Labor Law 1 cases #7
3.) Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 107225 June 2, 1995
ARCHILLES MANUFACTURING CORPORATION, ALBERTO YU
and ADRIAN YU, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, GERONIMO
MANUEL, ARNULFO DIAZ, JAIME CARUNUNGAN and
BENJAMIN RINDON, respondents.
BELLOSILLO, J.:
There are three issues to be resolved in this special civil action
for certiorari under Rule 65 of the Revised Rules of Court, namely: (a)
whether a writ of execution is still necessary to enforce the Labor Arbiter's
order of immediate reinstatement pending appeal; (b) whether dismissal for
cause results in the forfeiture of the employee's right to a 13th month pay;
and, (c) whether the award of attorney's fees is proper in the instant case.
Archilles Manufacturing Corporation (ARCHILLES for brevity), Alberto Yu
and Adrian Yu are the petitioners, the latter two (2) being the Chairman and
the Vice-President of ARCHILLES, respectively. Private respondents
Geronimo Manuel, Arnulfo Diaz, Jaime Carunungan and Benjamin Rindon
were employed by ARCHILLES as laborers in its steel factory located in
Barangay Pandayan, Meycauayan, Bulacan, each receiving a daily wage of
P96.00. 1
ARCHILLES was maintaining a bunkhouse in the work area which served as
resting place for its workers including private respondents. In 1988 a mauling
incident nearly took place involving a relative of an employee. As a result
ARCHILLES prohibited its workers from bringing any member of their
family to the bunkhouse. But despite this prohibition, private respondents
continued to bring their respective families to the bunkhouse, causing
annoyance and discomfort to the other workers. 2 This was brought to the
attention of ARCHILLES.
On 11 May 1990 the management ordered private respondent to remove their
families from the bunkhouse and to explain their violation of the company
rule. Private respondents remove their families from the premises but failed
to report to the management as required; instead, they absented themselves
from 14 to 18 May 1990. Consequently, on 18 May 1990, ARCHILLES
terminated their employment for abandonment and for violation of the
company rule regarding the use of the bunkhouse. 3
Private respondents filed a complaint for illegal dismissal. On 10 July 1991
the Labor Arbiter found the dismissal of private respondents illegal and
ordered their reinstatement as well as the payment to them the backwages,
proportionate 13th month pay for the year 1990 and attorney's
fees. 4 ARCHILLES appealed.
On 10 September 1991 private respondent filed with public respondent
National Labor Relations Commission a motion for the issuance of a writ of
execution for their immediate reinstatement, pending appeal, either
physically or in the company payroll. On 19 September 1991 ARCHILLES
opposed the motion.
Since no action was taken by NLRC on the motion of 10 September 1991,
private respondents filed a similar motion on 15 July 1992. Both motions
however have remained unresolved.
On 11 August 1992 NLRC vacated and set aside the decision of the Labor
Arbiter and ruled that the dismissal of private respondents was valid since
they wilfully disobeyed a lawful order of their employer requiring them to
explain their infraction of a company rule. In the dispute part of its decision,
however, NLRC ordered ARCHILLES to pay private respondents their
"withheld" salaries from 19 September 1991 when it filed its opposition to
the motion for issuance of a writ of execution until the promulgation of the
NLRC Decision (11 August 1992) on the ground that the order of
reinstatement of the Labor Arbiter was immediately executory, even pending
appeal. And since ARCHILLES in its opposition alleged that actual
reinstatement was no longer possible as it would affect the peace and order
situation in the steel factory, clearly, ARCHILLES had opted for payroll
reinstatement of private respondents. NLRC also ordered ARCHILLES to
pay their proportionate 13th month pay for 1990 and P12,351.30 representing
10% of the total judgment award of P123,513.00 as attorney's fees. 5
Their motion for partial reconsideration having been denied by public
respondent in its resolution of 8 September 1992, petitioners filed the instant
petition praying that the questioned NLRC decision of 11 August 1992 as
well as its resolution of 8 September 1992 be partially annulled in connection
with the award of "withheld" salaries, proportionate 13th month pay and
attorney's fees.
10
Labor Law 1 cases #7
As regards the first issue, i.e., whether a writ of execution is still necessary to
enforce the Labor Arbiter's order of immediate reinstatement even when
pending appeal, we agree with petitioners that it is necessary. The third
paragraph of Art. 223 of the Labor Code provides
In any event, the decision of the Labor Arbiter reinstating a dismissed or
separated employee, insofar as the reinstatement aspect is concerned, shall be
immediately executory, even pending appeal. The employee shall either be
admitted back to work under the same terms and conditions prevailing prior
to his dismissal or separation or, at the option of the employer, merely
reinstated in the payroll. The posting of the bond by the employer shall not
stay the execution for reinstatement provided herein.
We have fully explained the legal basis for this conclusion in Maranaw Hotel
Resort Corporation (Century Park Sheraton Manila) v. NLRC and Gina G.
Castro 6 thus
It must be stressed, however, that although the reinstatement aspect of the
decision is immediately executory, it does not follow that it is self-executory.
There must be a writ of execution which may be issued motu proprio or on
motion of an interested party. Article 224 of the Labor Code provides:
Art. 224. Execution of decisions, orders or awards. (a) The Secretary of
Labor and Employment or any Regional Director, the Commission or any
Labor Arbiter, or med-Arbiter or voluntary arbitrator may, motu proprio or
on motion of any interested party, issue a writ of execution on a judgment
within five (5) years from the date it becomes final and executory . . . .
The second paragraph of Section 1, Rule XVIII of the New Rules of
Procedure of the NLRC also provides:
The Labor Arbiter, POEA Administrator, or the Regional Director, or his
duly authorized hearing officer of origin shall, motu proprio or upon motion
of any interested party, issue a writ of execution on a judgment only within
five (5) years from the date it becomes final and executory . . . . No motion
for execution shall be entertained nor a writ be issued unless the Labor
Arbiter is in possession of the records of the case which shall include an
entry of judgment.
In the absence . . . of an order for the issuance of a writ of execution on the
reinstatement aspect of the decision of the Labor Arbiter, the petitioner was
under no legal obligation to admit back to work the private respondent under
the terms and conditions prevailing prior to her dismissal or, at the
petitioner's option, to merely reinstate her in the payroll. An option is a right
of election to exercise a privilege, and the option in Article 223 of the Labor
code is exclusively granted to the employer. The event that gives rise for its
exercise is not the reinstatement decree of the Labor Arbiter, but the writ for
its execution commanding the employer to reinstate the employee, while the
final act which compels the employer to exercise the option is the service
upon it of the writ of execution when, instead of admitting the employee
back to his work, the employee chooses to reinstate the employee in the
payroll only. If the employer does not exercise this option, it must forthwith
admit the employee back to work, otherwise it may be punished for
contempt.
In the case at bench, there was no occasion for petitioners to exercise their
option under Art. 223 of the Labor Code in connection with the reinstatement
aspect of the decision of the Labor Arbiter. The motions of private
respondents for the issuance of a writ of execution were not acted upon by
NLRC. It was not shown that respondent exerted efforts to have their
motions resolved. They are deemed to have abandoned their motions for
execution pending appeal. They cannot now ask that the writ of execution be
issued since their dismissal was found to be for cause.
On the second issue, which refers to the propriety of the award of a 13th
month pay, paragraph 6 of the Revised Guidelines on the Implementation of
the 13th Month Pay Law (P. D. 851) provides that "(a)n employee who has
resigned or whose services were terminated at any time before the payment
of the 13th month pay is entitled to this monetary benefit in proportion to the
length of time he worked during the year, reckoned from the time he started
working during the calendar year up to the time of his resignation or
termination from the
service . . . The payment of the 13th month pay may be demanded by the
employee upon the cessation of employer-employee relationship. This is
consistent with the principle of equity that as the employer can require the
employee to clear himself of all liabilities and property accountability, so can
the employee demand the payment of all benefits due him upon the
termination of the relationship."
Furthermore, Sec. 4 of the original Implementing Rules of P.D. 851
mandates employers to pay their employees a 13th month pay not later than
the 24th of December every year provided that they have worked for at least
one (1) month during a calendar year. In effect, this statutory benefit is
automatically vested in the employee who has at least worked for one month
during the calendar year. As correctly stated by the Solicitor General, such
11
Labor Law 1 cases #7

benefit may not be lost or forfeited even in the event of the employee's
subsequent dismissal for cause without violating his property rights.

With respect to the third issue, the disputed attorney's fees can only be
assessed in cases of unlawful withholding of wages. 7 It cannot be said that
petitioners were guilty of unlawfully withholding private respondents'
salaries since, as earlier discussed, the occasion never arose for them to
exercise that option under Art. 223 of the Labor Code. Clearly, the award of
attorney's fees is baseless.

WHEREFORE, the instant petition is partly granted. The challenged

Decision of the National Labor Relations Commission dated 11 August 1992
is MODIFIED by deleting that portion ordering petitioners to pay private
respondents their salaries from 19 September 1991 to 20 September 1992 as
well as that portion awarding 10% of the total judgment award as attorney's
fees for lack of legal and factual basis. In other respects, the Decision is
AFFIRMED.

SO ORDERED.

12
Labor Law 1 cases #7
4.) Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 92174 December 10, 1993
BOIE-TAKEDA CHEMICALS, INC., petitioner,
vs.
HON. DIONISIO DE LA SERNA, Acting Secretary of the Department of
Labor and Employment, respondent.
G.R. No. L-102552 December 10, 1993
PHILIPPINE FUJI XEROX CORP., petitioner,
vs.
CRESENCIANO B. TRAJANO, Undersecretary of the Department of Labor
and Employment, and PHILIPPINE FUJI XEROX EMPLOYEES UNION,
respondents.
Herrera, Laurel, De los Reyes, Roxas & Teehankee for Boie-Takeda
Chemicals, Inc. and Phil Xerox Corp.
The Solicitor General for public respondents.
NARVASA, C.J.:
What items or items of employee remuneration should go into the
computation of thirteenth month pay is the basic issue presented in these
consolidated petitions. Otherwise stated, the question is whether or not the
respondent labor officials in computing said benefit, committed "grave abuse
of discretion amounting to lack of jurisdiction," by giving effect to Section 5
of the Revised Guidelines on the implementation of the Thirteenth Month
Pay (Presidential Decree No. 851) promulgated by then Secretary of Labor
and Employment, Hon. Franklin Drilon, and overruling petitioner's
contention that said provision constituted a usurpation of legislative power
because not justified by or within the authority of the law sought to be
implemented besides being violative of the equal protection of the law clause
of the Constitution.
Resolution of the issue entails, first, a review of the pertinent provisions of
the laws and implementing regulations.
Sections 1 and 2 of Presidential Decree No. 851, the Thirteenth Month Pay
Law, read as follows:
Sec 1. All employees are hereby required to pay all their employees receiving
basic salary of not more than P1,000.00 a month, regardless of the nature of
the employment, a 13th month pay not later than December 24 of every year.
Sec. 2. Employers already paying their employees a 13th month pay or its
equivalent are not covered by this Decree.
The Rules and Regulations Implementing P.D. 851 promulgated by then
Labor Minister Blas Ople on December 22, 1975 contained the following
relevant provisions relative to the concept of "thirteenth month pay" and the
employers exempted from giving it, to wit:
Sec. 2. Definition of certain terms. . . .
a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary
of an employee within a calendar year;
b) "Basic Salary" shall include all remunerations or earnings paid by an
employer to an employee for services rendered but may not include cost of
living allowances granted pursuant to Presidential Decree No. 525 or Letter
of Instructions No. 174, profit sharing payments, and all allowances and
monetary benefits which are not considered or integrated as part of the
regular or basic salary of the employee at the time of the promulgation of the
Decree on December 16, 1975.
Sec. 3. Employers covered. . . . (The law applies) to all employers except
to:
xxx xxx xxx
c) Employers already paying their employers a 13-month pay or more in
calendar year or is equivalent at the time of this issuance;
xxx xxx xxx
e) Employers of those who are paid on purely commission, boundary, or task
basis, and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof, except where
the workers are paid on piece-rate basis in which case the employer shall be
covered by this issuance insofar as such workers are concerned.
xxx xxx xxx
13
Labor Law 1 cases #7
The term "its equivalent" as used in paragraph (c) shall include Christmas
bonus, mid-year bonus, profit-sharing payments and other cash bonuses
amounting to not less than 1/12th of the basic salary but shall not include
cash and stock dividends, cost of living allowances and all other allowances
regularly enjoyed by the employee, as well as non-monetary benefits. Where
an employer pays less than 1/12th of the employee's basic salary, the
employer shall pay the difference.
Supplementary Rules and Regulations implementing P.D. 851 were
subsequently issued by Minister Ople which inter alia set out items of
compensation not included in the computation of the 13th month pay, viz.:
Sec. 4. Overtime pay, earnings and other remunerations which are not part of
the basic salary shall not be included in the computation of the 13th month
pay.
On August 13, 1986, President Corazon C. Aquino promulgated
Memorandum Order No. 28, which contained a single provision modifying
Presidential Decree No. 851 by removing the salary ceiling of P1,000.00 a
month set by the latter, as follows:
Section 1 of Presidential Decree No. 851 is hereby modified to the extent that
all employers are hereby required to pay all their rank-and-file employees a
13th month pay not later than December 24, of every year.
Slightly more than a year later, on November 16, 1987, Revised Guidelines
on the Implementation of the 13th Month Pay Law were promulgated by then
Labor Secretary Franklin Drilon which, among other things, defined with
particularity what remunerative items were and were not embraced in the
concept of 13th month pay, and specifically dealt with employees who are
paid a fixed or guaranteed wage plus commission. The relevant provisions
read:
4. Amount and payment of 13th Month Pay.
xxx xxx xxx
The basic salary of an employee for the purpose of computing the 13th
month pay shall include all remunerations or earnings paid by the employer
for services rendered but does not include allowances and monetary benefits
which are not considered or integrated as part of the regular or basic salary,
such as the cash equivalent of unused vacation and sick leave credits,
overtime, premium, night differential and holiday pay, and cost-of-living
allowances. However, these salary-related benefits should be included as part
of the basic salary in the computation of the 13th month pay if by individual
or collective agreement, company practice or policy, the same are treated as
part of the basic salary of the employees.
xxx xxx xxx
5. 13th Month Pay for Certain Types of Employees.
(a) Employees Paid by Results. Employees who are paid on piece work
basis are by law entitled to the 13th month pay.
Employees who are paid a fixed or guaranteed wage plus commission are
also entitled to the mandated 13th month pay based on their total earnings
during the calendar year, i.e., on both their fixed or guaranteed wage and
commission.
This was the state of the law when the controversies at bar arose out of the
following antecedents:
(RE G.R. No. 92174) A routine inspection was conducted on May 2, 1989 in
the premises of petitioner Boie-Takeda Chemicals, Inc. by Labor
and Development Officer Reynaldo B. Ramos under Inspection Authority
No. 4-209-89. Finding that Boie-Takeda had not been including the
commissions earned by its medical representatives in the computation of
their 13th month pay, Ramos served a Notice of Inspection Results 1 on Boie-
Takeda through its president, Mr. Benito Araneta, requiring Boie-Takeda
within ten (10) calendar days from notice to effect restitution or correction of
"the underpayment of 13th month pay for the year(s) 1986, 1987 and 1988 of
Med Rep (Revised Guidelines on the Implementation of 13th month pay # 5)
in the total amount of P558,810.89."
Boie-Takeda wrote the Labor Department contesting the Notice of Inspection
Results, and expressing the view "that the commission paid to our medical
representatives are not to be included in the computation of the 13th month
pay . . . (since the) law and its implementing rules speak of REGULAR or
BASIC salary and therefore exclude all other remunerations which are not
part of the REGULAR salary." It pointed out that, "if no sales is (sic) made
under the effort of a particular representative, there is no commission during
the period when no sale was transacted, so that commissions are not and
cannot be legally defined as regular in nature. 2
14
Labor Law 1 cases #7
Regional Director Luna C. Piezas directed Boie-Takeda to appear before his
Office on June 9 and 16, 1989. On the appointed dates, however, and despite
due notice, no one appeared for Boie-Takeda, and the matter had perforce to
be resolved on the basis of the evidence at hand. On July 24, 1989, Director
Piezas issued an Order 3 directing Boie-Takeda:
. . . to pay . . . (its) medical representatives and its managers the total amount
of FIVE HUNDRED SIXTY FIVE THOUSAND SEVEN HUNDRED
FORTY SIX AND FORTY SEVEN CENTAVOS (P565,746.47)
representing underpayment of thirteenth (13th) month pay for the years 1986,
1987, 1988, inclusive, pursuant to the . . . revised guidelines within ten (10)
days from receipt of this Order.
A motion for reconsideration 4 was seasonably filed by Boie-Takeda under
date of August 3, 1989. Treated as an appeal, it was resolved on
January 17, 1990 by then Acting Labor Secretary Dionisio de la Serna, who
affirmed the July 24, 1989 Order with modification that the sales
commissions earned by Boie-Takeda's medical representatives before August
13, 1989, the effectivity date of Memorandum Order No. 28 and its
Implementing Guidelines, shall be excluded in the computation of their 13th
month pay. 5
Hence the petition docketed as G.R. No. 92174.
(RE G.R. No. 102552) A similar Routine Inspection was conducted in the
premises of Philippine Fuji Xerox Corp. on September 7, 1989 pursuant to
Routine Inspection Authority No. NCR-LSED-RI-494-89. In his Notice of
Inspection Results, 6 addressed to the Manager, Mr. Nicolas O. Katigbak,
Senior Labor and Employment Officer Nicanor M. Torres noted the
following violation committed by Philippine Fuji Xerox Corp., to wit:
Underpayment of 13th month pay of 62 employees, more or less pursuant
to Revised Guidelines on the Implementation of the 13th month pay law for
the period covering 1986, 1987 and 1988.
Philippine Fuji Xerox was requested to effect rectification and/or restitution
of the noted violation within five (5) working days from notice.
No action having been taken thereon by Philippine Fuji Xerox,
Mr. Eduardo G. Gonzales, President of the Philxerox Employee Union, wrote
then Labor Secretary Franklin Drilon requesting a follow-up of the
inspection findings. Messrs. Nicolas and Gonzales were summoned to appear
before Labor Employment and Development Officer Mario F. Santos, NCR
Office, Department of Labor for a conciliation conference. When no
amicable settlement was reached, the parties were required to file their
position papers.
Subsequently, Regional Director Luna C. Piezas issued an Order dated
August 23, 1990, 7 disposing as follows:
WHEREFORE, premises considered, Respondent PHILIPPINE FUJI
XEROX is hereby ordered to restitute to its salesmen the portion of the 13th
month pay which arose out of the non-implementation of the said revised
guidelines, ten (10) days from receipt hereof, otherwise,
MR. NICANOR TORRES, the SR. LABOR EMPLOYMENT OFFICER is
hereby Ordered to proceed to the premises of the Respondent for the purpose
of computing the said deficiency (sic) should respondent fail to heed his
Order.
Philippine Fuji Xerox appealed the aforequoted Order to the Office of the
Secretary of Labor. In an Order dated October 120, 1991, Undersecretary
Cresenciano B. Trajano denied the appeal for lack of merit. Hence, the
petition in G.R. No. 102552, which was ordered consolidated with G.R. No.
92174 as involving the same issue.
In their almost identically-worded petitioner, petitioners, through common
counsel, attribute grave abuse of discretion to respondent labor officials
Hon. Dionisio dela Serna and Undersecretary Cresenciano B. Trajano in
issuing the questioned Orders of January 17, 1990 and October 10, 1991,
respectively. They maintain that under P.D. 851, the 13th month pay is based
solely on basic salary. As defined by the law itself and clarified by the
implementing and Supplementary Rules as well as by the Supreme Court in a
long line of decisions, remunerations which do not form part of the basic or
regular salary of an employee, such as commissions, should not be
considered in the computation of the 13th month pay. This being the case, the
Revised Guidelines on the Implementation of the 13th Month Pay Law
issued by then Secretary Drilon providing for the inclusion of commissions
in the 13th month pay, were issued in excess of the statutory authority
conferred by P.D. 851. According to petitioners, this conclusion becomes
even more evident when considered in light of the opinion rendered by Labor
Secretary Drilon himself in "In Re: Labor Dispute at the Philippine Long
Distance Telephone Company" which affirmed the contemporaneous
interpretation by then Secretary Ople that commissions are excluded from the
basic salary. Petitioners further contend that assuming that Secretary Drilon
did not exceed the statutory authority conferred by P.D. 851, still the Revised
15
Labor Law 1 cases #7
Guidelines are null and void as they violate the equal protection of the law
clause.
Respondents through the Office of the Solicitor General question the
propriety of petitioners' attack on the constitutionality of the Revised
Guidelines in a petition for certiorari which, they contend, should be
confined purely to the correction of errors and/or defects of jurisdiction,
including matters of grave abuse of discretion amounting to lack or excess of
jurisdiction and not extend to a collateral attack on the validity and/or
constitutionality of a law or statute. They aver that the petitions do not
advance any cogent reason or state any valid ground to sustain the allegation
of grave abuse of discretion, and that at any rate, P.D. No. 851, otherwise
known as the 13th Month Pay Law has already been amended by
Memorandum Order No. 28 issued by President Corazon C. Aquino on
August 13, 1986 so that commissions are now imputed into the computation
of the 13th Month Pay. They add that the Revised Guidelines issued by then
Labor Secretary Drilon merely clarified a gray area occasioned by the silence
of the law as to the nature of commissions; and worked no violation of the
equal protection clause of the Constitution, said Guidelines being based on
reasonable classification. Respondents point to the case of Songco
vs. National Labor Relations Commission, 183 SCRA 610, wherein the Court
declared that Article 97(f) of the Labor Code is explicit that commission is
included in the definition of the term "wage".
We rule for the petitioners.
Contrary to respondents' contention, Memorandum Order No. 28 did not
repeal, supersede or abrogate P.D. 851. As may be gleaned from the
language of the Memorandum Order No. 28, it merely "modified" Section 1
of the decree by removing the P1,000.00 salary ceiling. The concept of 13th
Month Pay as envisioned, defined and implemented under P.D. 851 remained
unaltered, and while entitlement to said benefit was no longer limited to
employees receiving a monthly basic salary of not more than P1,000.00, said
benefit was, and still is, to be computed on the basic salary of the employee-
recipient as provided under P.D. 851. Thus, the interpretation given to the
term "basic salary" as defined in P.D. 851 applies equally to "basic salary"
under Memorandum Order No. 28.
In the case of San Miguel Corp. vs. Inciong, 103 SCRA 139, this Court
delineated the coverage of the term "basic salary" as used in P.D. 851. We
said at some length:
Under Presidential Decree 851 and its implementing rules, the basic salary of
an employee is used as the basis in the determination of his 13th month pay.
Any compensations or remunerations which are deemed not part of the basic
pay is excluded as basis in the computation of the mandatory bonus.
Under the Rules and Regulations implementing Presidential Decree 851, the
following compensations are deemed not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and
Letter of Instructions No. 174;
b) Profit-sharing payments;
c) All allowances and monetary benefits which are not considered or
integrated as part of the regular basic salary of the employee at the time of
the promulgation of the Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing
Presidential Decree 851 Presidential Decree 851 issued by then Labor
Secretary Blas Ople, overtime pay, earnings and other remunerations are
excluded as part of the basic salary and in the computation of the 13th month
pay.
The exclusion of the cost-of-living allowances under Presidential Decree 525
and Letter of Instructions No. 174, and profit-sharing payments indicate the
intention to strip basic salary of other payments which are properly
considered as "fringe" benefits. Likewise, the catch-all exclusionary phrase
"all allowances and monetary benefits which are not considered or integrated
as part of the basic salary" shows also the intention to strip basic salary of
any and all additions which may be in the form of allowances or "fringe"
benefits.
Moreover, the Supplementary Rules and Regulations Implementing
Presidential Decree 851 is even more emphatic in declaring that earnings and
other remunerations which are not part of the basic salary shall not be
included in the computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations
Implementing Presidential Decree 851 which defines basic salary to include
all remunerations or earnings paid by an employer to an employee, this cloud
is dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically exclude from the definitions of basic salary
earnings and other remunerations paid by an employer to an employee. A
16
Labor Law 1 cases #7
cursory perusal of the two sets of Rules indicates that what has hitherto been
the subject of a broad inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the seeming tendency of the
former rules to include all remunerations and earnings within the definition
of basic salary.
The all embracing phrase "earnings and other remunerations" which are
deemed not part of the basic salary includes within its meaning payments for
sick, vacation, or maternity leaves, premium for works performed on rest
days and special holidays, pays for regular holidays and night differentials.
As such they are deemed not part of the basic salary and shall not be
considered in the computation of the 13th-month pay. If they were not
excluded, it is hard to find any "earnings and other remunerations" expressly
excluded in the computation of the 13th month pay. Then the exclusionary
provision would prove to be idle and with no purpose.
This conclusion finds strong support under the Labor Code of the
Philippines. To cite a few provisions:
Art. 87. Overtime Work. Work may be performed beyond eight (8) hours a
day provided that the employee is paid for the overtime work, additional
compensation equivalent to his regular wage plus at least twenty-five (25%)
percent thereof.
It is clear that overtime pay is an additional compensation other than and
added to the regular wage or basic salary, for reason of which such is
categorically excluded from the definition of basic salary under the
Supplementary Rules and Regulations Implementing Presidential Decree
851.
In Article 93 of the same Code, paragraph
c) work performed on any special holiday shall be paid an additional
compensation of at least thirty percent (30%) of the regular wage of the
employee.
It is likewise clear the premiums for special holiday which is at least 30% of
the regular wage is an additional pay other than and added to the regular
wage or basic salary. For similar reason, it shall not be considered in the
computation of the 13th month pay.
Quite obvious from the foregoing is that the term "basic salary" is to be
understood in its common, generally-accepted meaning, i.e., as a rate of pay
for a standard work period exclusive of such additional payments as bonuses
and overtime. 8 This is how the term was also understood in the case of Pless
v. Franks, 308 S.W. 2nd. 402, 403, 202 Tenn. 630, which held that in statutes
providing that pension should not less than 50 percent of "basic salary" at the
time of retirement, the quoted words meant the salary that an employee (e.g.,
a policeman) was receiving at the time he retired without taking into
consideration any extra compensation to which he might be entitled for extra
work. 9
In remunerative schemes consisting of a fixed or guaranteed wage plus
commission, the fixed or guaranteed wage is patently the "basic salary" for
this is what the employee receives for a standard work period. Commissions
are given for extra efforts exerted in consummating sales or other related
transactions. They are, as such, additional pay, which this Court has made
clear do not form part of the "basic salary."
Respondents would do well to distinguish this case from Songco vs. National
Labor Relations Commission, supra, upon which they rely so heavily. What
was involved therein was the term "salary" without the restrictive adjective
"basic". Thus, in said case, we construed the term in its generic sense to refer
to all types of "direct remunerations for services rendered," including
commissions. In the same case, we also took judicial notice of the fact "that
some salesmen do not receive any basic salary but depend on commissions
and allowances or commissions alone, although an employer-employee
relationship exists," which statement is quite significant in that it speaks of a
"basic salary" apart and distinct from "commissions" and "allowances".
Instead of supporting respondents' stand, it would appear that Songco itself
recognizes that commissions are not part of "basic salary."
In including commissions in the computation of the 13th month pay, the
second paragraph of Section 5(a) of the Revised Guidelines on the
Implementation of the 13th Month Pay Law unduly expanded the concept of
"basic salary" as defined in P.D. 851. It is a fundamental rule that
implementing rules cannot add to or detract from the provisions of the law it
is designed to implement. Administrative regulations adopted under
legislative authority by a particular department must be in harmony with the
provisions of the law they are intended to carry into effect. They cannot
widen its scope. An administrative agency cannot amend an act of
Congress. 10
Having reached this conclusion, we deem it unnecessary to discuss the other
issues raised in these petitions.
17
Labor Law 1 cases #7

WHEREFORE, the consolidated petitions are hereby GRANTED. The

second paragraph of Section 5 (a) of the Revised Guidelines on the
Implementation of the 13th Month Pay Law issued on November 126, 1987
by then Labor Secretary Franklin M. Drilon is declared null and void as
being violative of the law said Guidelines were issued to implement, hence
issued with grave abuse of discretion correctible by the writ of prohibition
and certiorari. The assailed Orders of January 17, 1990 and October 10,
1991 based thereon are SET ASIDE.

SO ORDERED.

18
Labor Law 1 cases #7
5.) [G.R. No. 145561. June 15, 2005]
HONDA PHILS., INC., petitioner, vs. SAMAHAN NG MALAYANG
MANGGAGAWA SA HONDA, respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review under Rule 45 seeks the reversal of the Court of
Appeals decision[1] dated September 14, 2000[2] and its resolution[3] dated
October 18, 2000, in CA-G.R. SP No. 59052. The appellate court affirmed
the decision dated May 2, 2000 rendered by the Voluntary Arbitrator who
ruled that petitioner Honda Philippines, Inc.s (Honda) pro-rated payment of
the 13th and 14th month pay and financial assistance to its employees was
invalid.
As found by the Court of Appeals, the case stems from the Collective
Bargaining Agreement (CBA) forged between petitioner Honda and
respondent union Samahan ng Malayang Manggagawa sa Honda (respondent
union) which contained the following provisions:
Section 3. 13th Month Pay
The COMPANY shall maintain the present practice in the implementation
[of] the 13th month pay.
Section 6. 14th Month Pay
The COMPANY shall grant a 14th Month Pay, computed on the same basis
as computation of 13th Month Pay.
Section 7. The COMPANY agrees to continue the practice of granting, in its
discretion, financial assistance to covered employees in December of each
year, of not less than 100% of basic pay.
This CBA is effective until year 2000. In the latter part of 1998, the parties
started re-negotiations for the fourth and fifth years of their CBA. When the
talks between the parties bogged down, respondent union filed a Notice of
Strike on the ground of bargaining deadlock. Thereafter, Honda filed a
Notice of Lockout. On March 31, 1999, then Department of Labor and
Employment (DOLE) Secretary Laguesma assumed jurisdiction over the
labor dispute and ordered the parties to cease and desist from committing
acts that would aggravate the situation. Both parties complied accordingly.
On May 11, 1999, however, respondent union filed a second Notice of Strike
on the ground of unfair labor practice alleging that Honda illegally contracted
out work to the detriment of the workers. Respondent union went on strike
and picketed the premises of Honda on May 19, 1999. On June 16, 1999,
DOLE Acting Secretary Felicisimo Joson, Jr. assumed jurisdiction over the
case and certified the same to the National Labor Relations Commission
(NLRC) for compulsory arbitration. The striking employees were ordered to
return to work and the management accepted them back under the same
terms prior to the strike staged.
On November 22, 1999, the management of Honda issued a
memorandum[4] announcing its new computation of the 13th and 14th month
pay to be granted to all its employees whereby the thirty-one (31)-day long
strike shall be considered unworked days for purposes of computing said
benefits. As per the companys new formula, the amount equivalent to 1/12 of
the employees basic salary shall be deducted from these bonuses, with a
commitment however that in the event that the strike is declared legal, Honda
shall pay the amount deducted.
Respondent union opposed the pro-rated computation of the bonuses in a
letter dated November 25, 1999. Honda sought the opinion of the Bureau of
Working Conditions (BWC) on the issue. In a letter dated January 4,
2000,[5] the BWC agreed with the pro-rata payment of the 13th month pay as
proposed by Honda.
The matter was brought before the Grievance Machinery in accordance with
the parties existing CBA but when the issue remained unresolved, it was
submitted for voluntary arbitration. In his decision[6] dated May 2, 2000,
Voluntary Arbitrator Herminigildo C. Javen invalidated Hondas
computation, to wit:
WHEREFORE, in view of all foregoing premises being duly considered and
evaluated, it is hereby ruled that the Companys implementation of pro-rated
13th Month pay, 14th Month pay and Financial Assistance [is] invalid. The
Company is thus ordered to compute each provision in full month basic pay
and pay the amounts in question within ten (10) days after this Decision shall
have become final and executory.
The three (3) days Suspension of the twenty one (21) employees is hereby
affirmed.
SO ORDERED.[7]
19
Labor Law 1 cases #7
Hondas Motion for Partial Reconsideration was denied in a resolution dated
May 22, 2000. Thus, a petition was filed with the Court of Appeals, however,
the petition was dismissed for lack of merit.
Hence, the instant petition for review on the sole issue of whether the pro-
rated computation of the 13th month pay and the other bonuses in question is
valid and lawful.
The petition lacks merit.
A collective bargaining agreement refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of
work and all other terms and conditions of employment in a bargaining
unit.[8] As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient
provided these are not contrary to law, morals, good customs, public order or
public policy.[9] Thus, where the CBA is clear and unambiguous, it becomes
the law between the parties and compliance therewith is mandated by the
express policy of the law.[10]
In some instances, however, the provisions of a CBA may become
contentious, as in this case. Honda wanted to implement a pro-rated
computation of the benefits based on the no work, no pay rule. According to
the company, the phrase present practice as mentioned in the CBA refers to
the manner and requisites with respect to the payment of the bonuses, i.e.,
50% to be given in May and the other 50% in December of each year.
Respondent union, however, insists that the CBA provisions relating to the
implementation of the 13th month pay necessarily relate to the computation of
the same.
We agree with the findings of the arbitrator that the assailed CBA provisions
are far from being unequivocal. A cursory reading of the provisions will
show that they did not state categorically whether the computation of the
13th month pay, 14th month pay and the financial assistance would be based
on one full months basic salary of the employees, or pro-rated based on the
compensation actually received. The arbitrator thus properly resolved the
ambiguity in favor of labor as mandated by Article 1702 of the Civil
Code.[11] The Court of Appeals affirmed the arbitrators finding and added
that the computation of the 13th month pay should be based on the length of
service and not on the actual wage earned by the worker.
We uphold the rulings of the arbitrator and the Court of Appeals. 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 us when supported by substantial
evidence. It is not our function to assess and evaluate the evidence all over
again, particularly where the findings of both the arbiter and the Court of
Appeals coincide.[12]
Presidential Decree No. 851, otherwise known as the 13th Month Pay Law,
which required all employers to pay their employees a 13th month pay, was
issued to protect the level of real wages from the ravages of worldwide
inflation. It was enacted on December 16, 1975 after it was noted that there
had been no increase in the minimum wage since 1970 and the Christmas
season was an opportune time for society to show its concern for the plight of
the working masses so that they may properly celebrate Christmas and New
Year.[13]
Under the Revised Guidelines on the Implementation of the 13th month pay
issued on November 16, 1987, the salary ceiling of P1,000.00 under P.D. No.
851 was removed. It further provided that the minimum 13th month pay
required by law shall not be less than one-twelfth (1/12) of the total basic
salary earned by an employee within a calendar year. The guidelines
pertinently provides:
The basic salary of an employee for the purpose of computing the 13th month
pay shall include all remunerations or earnings paid by his employer for
services rendered but does not include allowances and monetary benefits
which are not considered or integrated as part of the regular or basic salary,
such as the cash equivalent of unused vacation and sick leave credits,
overtime premium, night differential and holiday pay, and cost-of-living
allowances.[14] (Emphasis supplied)
For employees receiving regular wage, we have interpreted basic salary to
mean, not the amount actually received by an employee, but 1/12 of their
standard monthly wage multiplied by their length of service within a given
calendar year. Thus, we exclude from the computation of basic salary
payments for sick, vacation and maternity leaves, night differentials, regular
holiday pay and premiums for work done on rest days and special
holidays.[15] In Hagonoy Rural Bank v. NLRC,[16] St. Michael Academy v.
NLRC,[17] Consolidated Food Corporation v. NLRC,[18] and similar cases, the
13th month pay due an employee was computed based on the employees basic
monthly wage multiplied by the number of months worked in a calendar year
prior to separation from employment.
20
Labor Law 1 cases #7
The revised guidelines also provided for a pro-ration of this benefit only in
cases of resignation or separation from work. As the rules state, under these
circumstances, an employee is entitled to a pay in proportion to the length of
time he worked during the year, reckoned from the time he started working
during the calendar year.[19] The Court of Appeals thus held that:
Considering the foregoing, the computation of the 13th month pay should be
based on the length of service and not on the actual wage earned by the
worker. In the present case, there being no gap in the service of the workers
during the calendar year in question, the computation of the 13th month pay
should not be pro-rated but should be given in full.[20] (Emphasis supplied)
More importantly, it has not been refuted that Honda has not implemented
any pro-rating of the 13th month pay before the instant case. Honda did not
adduce evidence to show that the 13th month, 14th month and financial
assistance benefits were previously subject to deductions or pro-rating or that
these were dependent upon the companys financial standing. As held by the
Voluntary Arbitrator:
The Company (Honda) explicitly accepted that it was the strike held that
prompt[ed] them to adopt a pro-rata computation, aside [from] being in [a]
state of rehabilitation due to 227M substantial losses in 1997, 114M in 1998
and 215M lost of sales in 1999 due to strike. This is an implicit acceptance
that prior to the strike, a full month basic pay computation was the present
practice intended to be maintained in the CBA.[21]
The memorandum dated November 22, 1999 which Honda issued shows that
it was the first time a pro-rating scheme was to be implemented in the
company. It was a convenient coincidence for the company that the work
stoppage held by the employees lasted for thirty-one (31) days or exactly one
month. This enabled them to devise a formula using 11/12 of the total annual
salary as base amount for computation instead of the entire amount for a 12-
month period.
That a full month payment of the 13th month pay is the established practice at
Honda is further bolstered by the affidavits executed by Feliteo Bautista and
Edgardo Cruzada. Both attested that when they were absent from work due to
motorcycle accidents, and after they have exhausted all their leave credits
and were no longer receiving their monthly salary from Honda, they still
received the full amount of their 13th month, 14th month and financial
assistance pay.[22]
The case of Davao Fruits Corporation v. Associated Labor Unions, et
al.[23] presented an example of a voluntary act of the employer that has
ripened into a company practice. In that case, the employer, from 1975 to
1981, freely and continuously included in the computation of the 13th month
pay those items that were expressly excluded by the law. We have held that
this act, which was favorable to the employees though not conforming to
law, has ripened into a practice and therefore can no longer be withdrawn,
reduced, diminished, discontinued or eliminated. Furthermore, in Sevilla
Trading Company v. Semana,[24] we stated: With regard to the length of time
the company practice should have been exercised to constitute voluntary
employer practice which cannot be unilaterally withdrawn by the employer,
we hold that jurisprudence has not laid down any rule requiring a specific
minimum number of years. In the above quoted case of Davao Fruits
Corporation vs. Associated Labor Unions, the company practice lasted for
six (6) years. In another case, Davao Integrated Port Stevedoring Services vs.
Abarquez, the employer, for three (3) years and nine (9) months, approved
the commutation to cash of the unenjoyed portion of the sick leave with pay
benefits of its intermittent workers. While in Tiangco vs. Leogardo, Jr. the
employer carried on the practice of giving a fixed monthly emergency
allowance from November 1976 to February 1980, or three (3) years and four
(4) months. In all these cases, this Court held that the grant of these
benefits has ripened into company practice or policy which cannot be
peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept
the practice of including non-basic benefits such as paid leaves for unused
sick leave and vacation leave in the computation of their 13th-month pay for
at least two (2) years. This, we rule likewise constitutes voluntary employer
practice which cannot be unilaterally withdrawn by the employer without
violating Art. 100 of the Labor Code.[25] (Emphasis supplied) Lastly, the
foregoing interpretation of law and jurisprudence is more in keeping with the
underlying principle for the grant of this benefit. It is primarily given to
alleviate the plight of workers and to help them cope with the exorbitant
increases in the cost of living. To allow the pro-ration of the 13th month pay
in this case is to undermine the wisdom behind the law and the mandate that
the workingmans welfare should be the primordial and paramount
consideration.[26] What is more, the factual milieu of this case is such that to
rule otherwise inevitably results to dissuasion, if not a deterrent, for workers
from the free exercise of their constitutional rights to self-organization and to
strike in accordance with law.[27]WHEREFORE, the instant petition is
DENIED. The decision and the resolution of the Court of Appeals dated
September 14, 2000 and October 18, 2000, respectively, in CA-G.R. SP No.
59052, affirming the decision rendered by the Voluntary Arbitrator on May
2, 2000, are hereby AFFIRMED in toto. SO ORDERED.
21
Labor Law 1 cases #7
6.) Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 72616-17 March 8, 1989
FRAMANLIS FARMS, INC., ELOISA SYCIP and LINCOLN
SYCIP, petitioners
vs.
HON. MINISTER OF LABOR, MANILA, PAFLU SEPTEMBER
CONVENTION, ZOILO ESTANISLAO, EMILIO ANITO, JAIME
ARNEJO, CASIMIRO ARRABIS, RENATO BACONADOR
,VICENTE BACONADOR, ROMEO BACONADOR, ROGELIO
BAYONITA ,RODOLFO BAYONITA, ROGELIO BONDOCIO,
NAPOLEON BONDOCIO, TEODORO BLANCAFLOR, PANFILO
BROOLA, ALFREDO DICHOSA, EDGARDO ENOPOSA, WILSON
ENOPOSA, SANCHO GALAGATE, GERARDO GALAGATE,
NELITO GALLEGO, FRANCISCO INDORES, EDUARDO LOZADA,
JESUS LABRADOR, PANFILO LAORENTE, ROGELIO MITRA,
FERNANDO MATTE, EDUARDO MARONE, ROSELLER MARONE,
IGLESERIO PANOGOT ,SILVERIO PANOGOT, ARTURO
PANOGOT ,ARMANDO SAGAYA ERNESTO TAGAMTAM,
ROMEO GARCIA, TEODORICO ATANGAN, LOURDES DE LA
CRUZ, CLARITA DELORIA ,DANILO MENDOZA, WILLIAM
GONZALES, RAFAEL PADRANES, JUAN PADRANES, JUAN
PANOGOT, MAGDALENA PANOGOT, JOSE SAGAYA, PABLO
TUNDAG, VIVENCIO NABAY, RAFAEL MARONE, RODOLFO
ENOPOSA, BALODOY ACADEMIA and GERARDO
GALLEGO, respondents.
Rodolfo B. Garbanzos, Jr. for petitioners.
The Solicitor General for public respondent.
GRIO-AQUINO, J.:
In April 1980, eighteen (18) employees of the petitioners filed against their
employer, and the other petitioners two labor standard cases which were
docketed in the Regional Office of the Ministry of Labor in Bacolod City as
FAD Cases Nos. 179180 and 0792-80 ("PAFLU SEPTEMBER
CONVENTION VS. FRAMANLIS FARMS"), alleging that in 1977 to 1979
they were not paid emergency cost of living allowance (ECOLA) minimum
wage, 13th month pay, holiday pay, and service incentive leave pay.
In their answer to the amended complaint, petitioners alleged that the private
respondents were not regular workers on their hacienda but were migratory
(sacadas) or pakyaw workers who worked on-and-off and were hired
seasonally, or only during the milling season, to do piece-work on the farms,
hence, they were not entitled to the benefits claimed by them. They also
alleged that under the decrees, the living allowance shall be paid on a
monthly, not percentage, basis depending on the total assets or authorized
capital stock of the employer, whichever is higher and applicable. They
admitted that their total assets and authorized capital stock exceeded P2
million. However, in 1977 they had applied for exemption under PDs 525
and 1123 but no ruling has been issued by the Ministry of Labor on their
application.
The claims for holiday pay, service incentive leave pay, social amelioration
bonus and underpayment of minimum wage were not controverted. With
respect to the complainants' other claims, the petitioners submitted only
random payrolls which showed that the women workers were underpaid as
they were receiving an average daily wage of P5.94 only, although the male
workers received P10 more or less, per day.
In an Order November 10, 1980, the Minister of Labor, through Assistant
Regional Director Dante Ardivilia adopting the recommendations of the
Chief of the Labor Regulation Section, Bacolod District Office, directed the
respondents (now petitioners) to pay the following:
1. Deficiency payment of P2.00 per day to female workers under PD
925 ** from May 1, 1976 to April 30, 1979;
2. Deficiency payment of P3.00 per day to female workers and Pl -00 per day
to male workers, under PD 1614 from April 1, 1979 to August 17, 1980;
3. Deficiency payment of P5.50 per day to female workers and P3.50 to male
workers under Ministry Order No. 5 effective at the start of grinding (sic) for
the crop year 1979-80;
4. Effective August 18, 1980, P6.50 per day to female workers and P4.50 to
male workers up to the date of restitution;
5. Deficiency payment of emergency living allowance at P60 per month
under PD 1678 and another P60 per month under Ministry Order No. 5;
6. Service incentive leave pay, holiday pay and social amelioration bonus for
3 years for 1977 to 1979;
22
Labor Law 1 cases #7
7. The claims for 13th month pay for 1977 and emergency living allowance
under PD 1123 and 525 are held in abeyance due to the application for
exemption which is unacted up to the present.
Compliance must be made within ten (10) days from receipt of the Order."
(p. 34, Rollo.)
Upon the petitioners' appeal of that Order, the Deputy Minister of Labor
Vicente Leogardo, Jr. modified it on January 18, 1983 by ordering the
employer to pay:
1. all non-pakyaw workers their claim for holiday and incentive leave pay for
the years 1977, 1978 and 1979;
2. all complainants their 13th month pay for the years 1978 and 1979;
3. all 'pakyaw' workers for the same period on days they worked for at least
eight (8) hours and earned below P8.06 daily, their pay differentials.
The claims for 13th month pay for 1977, as well as for ECOLA under PD
Nos. 525 and 1123 shall, pending outcome of respondent's application for
exemption therefrom, be held in abeyance." (Annex H, p. 55, Rollo.)
The Deputy Minister clarified that pakyaw workers were excluded from
holiday and service incentive leave pay (p. 54, Rollo).
Upon the denial of its motion for reconsideration, Framanlis Farms, Inc. filed
this petition for certiorari alleging that the Deputy Minister erred:
1. in awarding pay differentials, holiday and service incentive leave for
pakyaw workers who are not regular employees but are merely paid on
piece-rate, contrary to Art. 82 of the Labor Code;
2. in requiring the petitioners to pay 13th month pay despite the fact that they
(petitioners) had substantially complied with the requirement by extending
yearly bonuses and other benefits in kind and in cash to the complainants,
pursuant to Section 3(c) of PD 851 which exempts the employer from paying
13th month pay when its equivalent has already been given; and
3. in not precisely stating who among the private respondents are pakyaw and
non-pakyaw workers.
The petition is not impressed with merit.
In 1976, PD No. 928 fixed a minimum wage of P7.00 for agricultural
workers in any plantation or agricultural enterprise irrespective of whether or
not the worker was paid on a piece-rate basis. However, effective July 1,
1978, the minimum wage was increased to P8.00 (Sec. 1, PD 1389).
Subsequently, PD 1614 provided for a P2.00 increase in the daily wage of all
workers effective April 1, 1979. The petitioners admit that those were the
minimum rates prevailing then. Therefore, the respondent Minister did not
err in requiring the petitioners to pay wage differentials to their pakyaw
workers who worked for at least eight hours daily and earned less than P8.00
per day in 1978 to 1979.
With regard to the 13th month pay, petitioners admitted that they failed to
pay their workers 13th month pay in 1978 and 1979. However, they argued
that they substantially complied with the law by giving their workers a yearly
bonus and other non-monetary benefits amounting to not less than 1/12th of
their basic salary, in the form of:
1. a weekly subsidy of choice pork meat for only P9.00 per kilo and later
increased to P11 per kilo in March 1980, instead of the market price of P10
to P15 per kilo;
2. free choice pork meat in May and December of every year; and
3. free light or electricity.
4. all of which were allegedly "the equivalent" of the 13th month pay.
Unfortunately, under Section 3 of PD No. 851, such benefits in the form of
food or free electricity, assuming they were given, were not a proper
substitute for the 13th month pay required by law. PD 851 provides:
Section 3. Employees covered The Decree shall apply to all employees
except to:
x x x. x x x x x x
The term 'its equivalent' as used in paragraph (c) hereof shall include
Christmas bonus, mid-year bonus, profit-sharing payments and other cash
bonuses amounting to not less than 1/12 of the basic salary but shall not
include cash and stock dividends, cost of living allowances and all other
allowances regularly enjoyed by the employee, as well as non-monetary
benefits.
23
Labor Law 1 cases #7

Where an employer pays less than 1/12 of the employee's basic salary, the
employer shall pay the difference."

Neither may year-end rewards for loyalty and service be considered in lieu of
13th month pay. Section 10 of the Rules and Regulations Implementing
Presidential Decree No. 851 provides:

Section 10. Prohibition against reduction or elimination of benefits-Nothing

herein shall be construed to authorize any employer to eliminate, or diminish
in any way, supplements, or other employee benefits or favorable practice
being enjoyed by the employee at the time of promulgation of this issuance."

The failure of the Minister's decision to identify the pakyaw and non-pakyaw
workers does not render said decision invalid. The workers may be identified
or determined in the proceedings for execution of the judgment.

WHEREFORE, the petition for certiorari is dismissed with costs against the
petitioners.

SO ORDERED.

24
Labor Law 1 cases #7
7.) G.R. No. 75289. August 31, 1989.]
KAMAYA POINT HOTEL, Petitioner, v. NATIONAL LABOR
RELATIONS COMMISSION, FEDERATION OF FREE WORKERS
and MEMIA QUIAMBAO, Respondents.
SYLLABUS
1. LABOR LAW; LABOR CODE; PROVISION REGARDING
DIMINUTION OF BENEFITS NOT APPLICABLE. It is patently
obvious that Article 100 is clearly without applicability. The date of
effectivity of the Labor Code is May 1, 1974. In the case at bar, petitioner
extended its 14th month pay beginning 1979 until 1981. What is demanded is
payment of the 14th month pay for 1982. Indubitably from these facts alone,
Article 100 of the Labor Code cannot apply.
2. ID.; PAYMENT OF THE 14TH MONTH PAY NOT MANDATED BY
LAW. There is no law that mandates the payment of the 14th month pay.
This is emphasized in the grant of exemption under Presidential Decree 851
(13th Month Pay Law) which states: "Employers already paying their
employees a 13th month pay or its equivalent are not covered by this
Decree." Necessarily then, only the 13th month pay is mandated. Having
enjoyed the additional income in the form of the 13th month pay, private
respondents insistence on the 14th month pay for 1982 is already an
unwarranted expansion of the liberality of the law.
3. ID.; 14TH MONTH PAY; CONCEPT. A 14th month pay is a
misnomer because it is basically a bonus and, therefore, gratuitous in nature.
The granting of the 14th month pay is a management prerogative which
cannot be forced upon the employer. It is something given in addition to
what is ordinarily received by or strictly due the recipient. It is a gratuity to
which the recipient has no right to make a demand.
4. ID.; EMPLOYER-EMPLOYEE RELATIONSHIP; EMPLOYER NOT
OBLIGED TO ASSUME BURDEN OF PAYING BOTH THE 13TH AND
14TH MONTH PAY. An employer may not be obliged to assume a
"double burden" of paying the 13th month pay in addition to bonuses or other
benefits aside from the employees basic salaries or wages.
DECISION
FERNAN, C.J.:
This petition for review on certiorari filed by herein petitioner Kamaya Point
Hotel seeks to set aside the decision 1 of the National Labor Relations
Commission dated June 25, 1986 in NLRC Case No. RAB III-4-1191-83
which affirmed with modification the decision of the Labor Arbiter dated
May 31, 1984.
Respondent Memia Quiambao with thirty others who are members of private
respondent Federation of Free Workers (FFW) were employed by petitioner
as hotel crew. On the basis of the profitability of the companys business
operations, management granted a 14th month pay to its employees starting
in 1979. In January 1982, operations ceased to give way to the hotels
conversion into a training center for Libyan scholars. However, due to
technical and financing problems, the Libyans pre-terminated the program on
July 7, 1982, leaving petitioner without any business, aside from the fact that
it was not paid for the use of the hotel premises and in addition had to
undertake repairs of the premises damaged by the Libyan students. All in all
petitioner allegedly suffered losses amounting to P2-million.
Although petitioner reopened the hotel premises to the public, it was not able
to pick-up its lost patronage. In a couple of months it effected a retrenchment
program until finally on January 7, 1984, it totally closed its business. 2
On April 18, 1983, private respondent Federation of Free Workers (FFW); a
legitimate labor organization, filed with the Ministry of Labor and
Employment, Bataan Provincial Office, Bataan Export Processing Zone,
Mariveles, Bataan, a complaint against petitioner for illegal suspension,
violation of the CBA and non-payment of the 14th month pay. 3 Records
however show that the case was submitted for decision on the sole issue of
alleged non-payment of the 14th month pay for the year 1982. 4
After the hearing, Executive Labor Arbiter Francisco M. Jose, Jr. rendered a
decision dated May 31, 1984, the dispositive portion of which
reads:chanrobles law library
"WHEREFORE, IN VIEW OF ALL THE FOREGOING, judgment is hereby
rendered:jgc:chanrobles.com.ph
"1. Ordering the respondent Kamaya Point Hotel to pay the 14th month pay
25
Labor Law 1 cases #7
for 1982 of all its rank and file employees;
"2. Ordering the same respondent to pay the monetary equivalent of the
benefits mentioned in Section 6 of Article XII and Sections 1 and 2 of Article
XII of the then existing Collective Bargaining Agreement which will expire
on 1 July 1984." 5
On appeal, the National Labor Relations Commission (NLRC) in its decision
dated June 25, 1986 set aside the award of monetary benefits under the CBA
but affirmed the grant of the 14th month pay adopting the Labor Arbiters
reasoning, thus:chanrob1es virtual 1aw library
We agree with respondent that there is no law granting a 14th month pay. We
likewise agree with respondent that there is no provision in the Collective
Bargaining Agreement granting a 14th month pay. Despite all these,
however, we believe that individual complainants herein are still entitled to
the 14th month pay for 1982 because to our mind, the granting of this 14th
month pay has already ripened into a company practice which respondent
company cannot withdraw unilaterally. This 14th month pay is now an
existing benefit which cannot be withdrawn without violating Article 100 of
the Labor Code. To allow its withdrawal now would certainly amount to a
diminution of existing benefits which complainants are presently enjoying.
Premised on the above, the individual complainants are entitled to the 14th
month pay for 1982 and respondent should pay the same." (Emphasis
supplied) 6
Before this Court, petitioner now seeks to reverse the decision of the NLRC
arguing that the latter tribunal committed grave abuse of discretion when it
adopted the Labor Arbiters decision saying that the 14th month pay cannot
be withdrawn without violating Article 100 of the Labor Code which
states:jgc:chanrobles.com.ph
"Prohibition against elimination or diminution of benefits. Nothing in this
Book shall be construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of promulgation of this
Code."cralaw virtua1aw library
We find it difficult to comprehend why the NLRC and the Labor Arbiter,
despite their admission that the 14th month pay has no contractual or legal
basis, still chose to rule in favor of private respondents. It is patently obvious
that Article 100 is clearly without applicability. The date of effectivity of the
Labor Code is May 1, 1974. In the case at bar, petitioner extended its 14th
month pay beginning 1979 until 1981. What is demanded is payment of the
14th month pay for 1982. Indubitably from these facts alone, Article 100 of
the Labor Code cannot apply.chanrobles law library
Moreover, there is no law that mandates the payment of the 14th month pay.
This is emphasized in the grant of exemption under Presidential Decree 851
(13th Month Pay Law) which states: "Employers already paying their
employees a 13th month pay or its equivalent are not covered by this
Decree." Necessarily then, only the 13th month pay is mandated. Having
enjoyed the additional income in the form of the 13th month pay, private
respondents insistence on the 14th month pay for 1982 is already an
unwarranted expansion of the liberality of the law.
Also contractually, as gleaned from the collective bargaining agreement
between management and the union, there is no stipulation as to such extra
remuneration. Evidently, this omission is an acknowledgment that such
benefit is entirely contingent or dependent on the profitability of the
companys operations.
Verily, a 14th month pay is a misnomer because it is basically a bonus and,
therefore, gratuitous in nature. The granting of the 14th month pay is a
management prerogative which cannot be forced upon the employer. It is
something given in addition to what is ordinarily received by or strictly due
the recipient. It is a gratuity to which the recipient has no right to make a
demand. 7
This Court is not prepared to compel petitioner to grant the 14th month pay
solely because it has allegedly ripened into a "company practice" as the labor
arbiter has put it. Having lost its catering business derived from Libyan
students, Kamaya Hotel should not be penalized for its previous liberality.
An employer may not be obliged to assume a "double burden" of paying the
13th month pay in addition to bonuses or other benefits aside from the
employees basic salaries or wages. 8 Restated differently, we rule that an
employer may not be obliged to assume the onerous burden of granting
bonuses or other benefits aside from the employees basic salaries or wages
in addition to the required 13th month pay.cralawnad
WHEREFORE, the petition is hereby GRANTED. The portion of the
decision of the National Labor Relations Commission dated June 25, 1986
ordering the payment of 14th month pay to private respondents is set aside.
SO ORDERED.
26
Labor Law 1 cases #7
8.) [G.R. No. 155059. April 29, 2005]
AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES
UNION, petitioner, vs. AMERICAN WIRE AND CABLE CO., INC. and
THE COURT OF APPEALS, respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a special civil action for certiorari, assailing the Decision[1] of
the Special Eighth Division of the Court of Appeals dated 06 March 2002.
Said Decision upheld the Decision[2]and Order[3] of Voluntary Arbitrator
Angel A. Ancheta of the National Conciliation and Mediation Board
(NCMB) dated 25 September 2001 and 05 November 2001, respectively,
which declared the private respondent herein not guilty of violating Article
100 of the Labor Code, as amended. Assailed likewise, is the Resolution[4] of
the Court of Appeals dated 12 July 2002, which denied the motion for
reconsideration of the petitioner, for lack of merit.
THE FACTS
The facts of this case are quite simple and not in dispute.
American Wire and Cable Co., Inc., is a corporation engaged in the
manufacture of wires and cables. There are two unions in this company, the
American Wire and Cable Monthly-Rated Employees Union (Monthly-Rated
Union) and the American Wire and Cable Daily-Rated Employees Union
(Daily-Rated Union).
On 16 February 2001, an original action was filed before the NCMB of the
Department of Labor and Employment (DOLE) by the two unions for
voluntary arbitration. They alleged that the private respondent, without valid
cause, suddenly and unilaterally withdrew and denied certain benefits and
entitlements which they have long enjoyed. These are the following:
a. Service Award;
b. 35% premium pay of an employees basic pay for the work rendered during
Holy Monday, Holy Tuesday, Holy Wednesday, December 23, 26, 27, 28
and 29;
c. Christmas Party; and
d. Promotional Increase.
A promotional increase was asked by the petitioner for fifteen (15) of its
members who were given or assigned new job classifications. According to
petitioner, the new job classifications were in the nature of a promotion,
necessitating the grant of an increase in the salaries of the said 15 members.
On 21 June 2001, a Submission Agreement was filed by the parties before
the Office for Voluntary Arbitration. Assigned as Voluntary Arbitrator was
Angel A. Ancheta.
On 04 July 2001, the parties simultaneously filed their respective position
papers with the Office of the Voluntary Arbitrator, NCMB, and DOLE.
On 25 September 2001, a Decision[5] was rendered by Voluntary Arbitrator
Angel A. Ancheta in favor of the private respondent. The dispositive portion
of the said Decision is quoted hereunder:
WHEREFORE, with all the foregoing considerations, it is hereby declared
that the Company is not guilty of violating Article 100 of the Labor Code, as
amended, or specifically for withdrawing the service award, Christmas party
and 35% premium for work rendered during Holy Week and Christmas
season and for not granting any promotional increase to the alleged fifteen
(15) Daily-Rated Union Members in the absence of a promotion. The
Company however, is directed to grant the service award to deserving
employees in amounts and extent at its discretion, in consultation with the
Unions on grounds of equity and fairness.[6]
A motion for reconsideration was filed by both unions[7] where they alleged
that the Voluntary Arbitrator manifestly erred in finding that the company
did not violate Article 100 of the Labor Code, as amended, when it
unilaterally withdrew the subject benefits, and when no promotional increase
was granted to the affected employees.
On 05 November 2001, an Order[8] was issued by Voluntary Arbitrator Angel
A. Ancheta. Part of the Order is quoted hereunder:
Considering that the issues raised in the instant case were meticulously
evaluated and length[i]ly discussed and explained based on the pleadings and
documentary evidenc[e] adduced by the contending parties, we find no
cogent reason to change, modify, or disturb said decision.
27
Labor Law 1 cases #7
WHEREFORE, let the instant MOTION[S] FOR RECONSIDERATION be,
as they are hereby, denied for lack of merit. Our decision dated 25 September
2001 is affirmed en toto.[9]
An appeal under Rule 43 of the 1997 Rules on Civil Procedure was made by
the Daily-Rated Union before the Court of Appeals[10] and docketed as CA-
G.R. SP No. 68182. The petitioner averred that Voluntary Arbitrator Angel
A. Ancheta erred in finding that the company did not violate Article 100 of
the Labor Code, as amended, when the subject benefits were unilaterally
withdrawn. Further, they assert, the Voluntary Arbitrator erred in adopting
the companys unaudited Revenues and Profitability Analysis for the years
1996-2000 in justifying the latters withdrawal of the questioned benefits.[11]
On 06 March 2002, a Decision in favor of herein respondent company was
promulgated by the Special Eighth Division of the Court of Appeals in CA-
G.R. SP No. 68182. The decretal portion of the decision reads:
WHEREFORE, premises considered, the present petition is hereby DENIED
DUE COURSE and accordingly DISMISSED, for lack of merit. The
Decision of Voluntary Arbitrator Angel A. Ancheta dated September 25,
2001 and his Order dated November 5, 2001 in VA Case No. AAA-10-6-4-
2001 are hereby AFFIRMED and UPHELD.[12]
A motion for reconsideration[13] was filed by the petitioner, contending that
the Court of Appeals misappreciated the facts of the case, and that it
committed serious error when it ruled that the unaudited financial statement
bears no importance in the instant case.
The Court of Appeals denied the motion in its Resolution dated 12 July
2002[14] because it did not present any new matter which had not been
considered in arriving at the decision. The dispositive portion of the
Resolution states:
WHEREFORE, the motion for reconsideration is hereby DENIED for lack
of merit.[15]
Dissatisfied with the court a quos ruling, petitioner instituted the instant
special civil action for certiorari,[16] citing grave abuse of discretion
amounting to lack of jurisdiction.
ASSIGNMENT OF ERRORS
The petitioner assigns as errors the following:
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THE
COMPANY DID NOT VIOLATE ARTICLE 100 OF THE LABOR CODE,
AS AMENDED, WHEN IT UNILATERALLY WITHDREW THE
BENEFITS OF THE MEMBERS OF PETITIONER UNION, TO WIT: 1)
35% PREMIUM PAY; 2) CHRISTMAS PARTY AND ITS INCIDENTAL
BENEFITS; AND 3) SERVICE AWARD, WHICH IN TRUTH AND IN
FACT SAID BENEFITS/ENTITLEMENTS HAVE BEEN GIVEN THEM
SINCE TIME IMMEMORIAL, AS A MATTER OF LONG
ESTABLISHED COMPANY PRACTICE, WITH THE FURTHER FACT
THAT THE SAME NOT BEING DEPENDENT ON PROFITS.
II
THE COURT OF APPEALS ERRED WHEN IT JUST ACCEPTED HOOK,
LINE AND SINKER, THE RESPONDENT COMPANYS SELF SERVING
AND UNAUDITED REVENUES AND PROFITABILITY ANALYSIS
FOR THE YEARS 1996-2000 WHICH THEY SUBMITTED TO FALSELY
JUSTIFY THEIR UNLAWFUL ACT OF UNILATERALLY AND
SUDDENLY WITHDRAWING OR DENYING FROM THE PETITIONER
THE SUBJECT BENEFITS/ENTITLEMENTS.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
YEARLY SERVICE AWARD IS NOT DEPENDENT ON PROFIT BUT
ON SERVICE AND THUS, CANNOT BE UNILATERALLY
WITHDRAWN BY RESPONDENT COMPANY.
ISSUE
Synthesized, the solitary issue that must be addressed by this Court is
whether or not private respondent is guilty of violating Article 100 of the
Labor Code, as amended, when the benefits/entitlements given to the
members of petitioner union were withdrawn.
THE COURTS RULING
Before we address the sole issue presented in the instant case, it is best to
first discuss a matter which was raised by the private respondent in its
Comment. The private respondent contends that this case should have been
dismissed outright because of petitioners error in the mode of appeal.
According to it, the petitioner should have elevated the instant case to this
28
Labor Law 1 cases #7
Court through a petition for review on certiorari under Rule 45, and not
through a special civil action for certiorari under Rule 65, of the 1997 Rules
on Civil Procedure.[17]
Assuming arguendo that the mode of appeal taken by the petitioner is
improper, there is no question that the Supreme Court has the discretion to
dismiss it if it is defective. However, sound policy dictates that it is far better
to dispose the case on the merits, rather than on technicality.[18]
The Supreme Court may brush aside the procedural barrier and take
cognizance of the petition as it raises an issue of paramount importance. The
Court shall resolve the solitary issue on the merits for future guidance of the
bench and bar.[19]
With that out of the way, we shall now resolve whether or not the respondent
company is guilty of violating Article 100 of the Labor Code, as amended.
Article 100 of the Labor Code provides:
ART. 100. PROHIBITION AGAINST ELIMINATION OR
DIMINUTION OF BENEFITS. Nothing in this Book shall be construed to
eliminate or in any way diminish supplements, or other employee benefits
being enjoyed at the time of promulgation of this Code.
The petitioner submits that the withdrawal of the private respondent of the
35% premium pay for selected days during the Holy Week and Christmas
season, the holding of the Christmas Party and its incidental benefits, and the
giving of service awards violated Article 100 of the Labor Code. The grant of
these benefits was a customary practice that can no longer be unilaterally
withdrawn by private respondent without the tacit consent of the petitioner.
The benefits in question were given by the respondent to the petitioner
consistently, deliberately, and unconditionally since time immemorial. The
benefits/entitlements were not given to petitioner due to an error in
interpretation, or a construction of a difficult question of law, but simply, the
grant has been a practice over a long period of time. As such, it cannot be
withdrawn from the petitioner at respondents whim and caprice, and without
the consent of the former. The benefits given by the respondent cannot be
considered as a bonus as they are not founded on profit. Even assuming that
it can be treated as a bonus, the grant of the same, by reason of its long and
regular concession, may be regarded as part of regular compensation.[20]
With respect to the fifteen (15) employees who are members of petitioner
union that were given new job classifications, it asserts that a promotional
increase in their salaries was in order. Salary adjustment is a must due to
their promotion.[21]
On respondent companys Revenues and Profitability Analysis for the years
1996-2000, the petitioner insists that since the former was unaudited, it
should not have justified the companys sudden withdrawal of the
benefits/entitlements. The normal and/or legal method for establishing profit
and loss of a company is through a financial statement audited by an
independent auditor.[22]
The petitioner cites our ruling in the case of Saballa v. NLRC,[23] where we
held that financial statements audited by independent auditors constitute the
normal method of proof of the profit and loss performance of the
company. Our ruling in the case of Bogo-Medellin Sugarcane Planters
Association, Inc., et al. v. NLRC, et al.[24] was likewise invoked. In this case,
we held:
The Court has previously ruled that financial statements audited by
independent external auditors constitute the normal method of proof of the
profit and loss performance of a company.
On the matter of the withdrawal of the service award, the petitioner argues
that it is the employees length of service which is taken as a factor in the
grant of this benefit, and not whether the company acquired profit or not.[25]
In answer to all these, the respondent corporation avers that the grant of all
subject benefits has not ripened into practice that the employees concerned
can claim a demandable right over them. The grant of these benefits was
conditional based upon the financial performance of the company and that
conditions/circumstances that existed before have indeed substantially
changed thereby justifying the discontinuance of said grants. The companys
financial performance was affected by the recent political turmoil and
instability that led the entire nation to a bleeding economy. Hence, it only
necessarily follows that the companys financial situation at present is already
very much different from where it was three or four years ago.[26]
On the subject of the unaudited financial statement presented by the private
respondent, the latter contends that the cases cited by the petitioner indeed
uniformly ruled that financial statements audited by independent external
auditors constitute the normal method of proof of the profit and loss
performance of a company. However, these cases do not require that the only
legal method to ascertain profit and loss is through an audited financial
29
Labor Law 1 cases #7
statement. The cases only provide that an audited financial statement is the
normal method.[27]
The respondent company likewise asseverates that the 15 members of
petitioner union were not actually promoted. There was only a realignment of
positions.[28]
From the foregoing contentions, it appears that for the Court to resolve the
issue presented, it is critical that a determination must be first made on
whether the benefits/entitlements are in the nature of a bonus or not, and
assuming they are so, whether they are demandable and enforceable
obligations.
In the case of Producers Bank of the Philippines v. NLRC[29] we have
characterized what a bonus is, viz:
A bonus is an amount granted and paid to an employee for his industry and
loyalty which contributed to the success of the employers business and made
possible the realization of profits. It is an act of generosity granted by an
enlightened employer to spur the employee to greater efforts for the success
of the business and realization of bigger profits. The granting of a bonus is a
management prerogative, something given in addition to what is ordinarily
received by or strictly due the recipient. Thus, a bonus is not a demandable
and enforceable obligation, except when it is made part of the wage, salary or
compensation of the employee.
Based on the foregoing pronouncement, it is obvious that the
benefits/entitlements subjects of the instant case are all bonuses which were
given by the private respondent out of its generosity and munificence. The
additional 35% premium pay for work done during selected days of the Holy
Week and Christmas season, the holding of Christmas parties with raffle, and
the cash incentives given together with the service awards are all in excess of
what the law requires each employer to give its employees. Since they are
above what is strictly due to the members of petitioner-union, the granting of
the same was a management prerogative, which, whenever management sees
necessary, may be withdrawn, unless they have been made a part of the wage
or salary or compensation of the employees.
The consequential question therefore that needs to be settled is if the subject
benefits/entitlements, which are bonuses, are demandable or not. Stated
another way, can these bonuses be considered part of the wage or salary or
compensation making them enforceable obligations?
The Court does not believe so.
For a bonus to be enforceable, it must have been promised by the employer
and expressly agreed upon by the parties,[30] or it must have had a fixed
amount[31] and had been a long and regular practice on the part of the
employer.[32]
The benefits/entitlements in question were never subjects of any express
agreement between the parties. They were never incorporated in the
Collective Bargaining Agreement (CBA). As observed by the Voluntary
Arbitrator, the records reveal that these benefits/entitlements have not been
subjects of any express agreement between the union and the company, and
have not yet been incorporated in the CBA. In fact, the petitioner has not
denied having made proposals with the private respondent for the service
award and the additional 35% premium pay to be made part of the CBA.[33]
The Christmas parties and its incidental benefits, and the giving of cash
incentive together with the service award cannot be said to have fixed
amounts. What is clear from the records is that over the years, there had been
a downtrend in the amount given as service award.[34] There was also a
downtrend with respect to the holding of the Christmas parties in the sense
that its location changed from paid venues to one which was free of
charge,[35] evidently to cut costs. Also, the grant of these two aforementioned
bonuses cannot be considered to have been the private respondents long and
regular practice. To be considered a regular practice, the giving of the bonus
should have been done over a long period of time, and must be shown to
have been consistent and deliberate.[36] The downtrend in the grant of these
two bonuses over the years demonstrates that there is nothing consistent
about it. Further, as held by the Court of Appeals:
Anent the Christmas party and raffle of prizes, We agree with the Voluntary
Arbitrator that the same was merely sponsored by the respondent corporation
out of generosity and that the same is dependent on the financial performance
of the company for a particular year[37]
The additional 35% premium pay for work rendered during selected days of
the Holy Week and Christmas season cannot be held to have ripened into a
company practice that the petitioner herein have a right to demand. Aside
from the general averment of the petitioner that this benefit had been granted
by the private respondent since time immemorial, there had been no evidence
adduced that it had been a regular practice. As propitiously observed by the
Court of Appeals:
30
Labor Law 1 cases #7

. . . [N]otwithstanding that the subject 35% premium pay was deliberately

given and the same was in excess of that provided by the law, the same
however did not ripen into a company practice on account of the fact that it
was only granted for two (2) years and with the express reservation from
respondent corporations owner that it cannot continue to rant the same in
view of the companys current financial situation.[38]

To hold that an employer should be forced to distribute bonuses which it

granted out of kindness is to penalize him for his past generosity.[39]

Having thus ruled that the additional 35% premium pay for work rendered
during selected days of the Holy Week and Christmas season, the holding of
Christmas parties with its incidental benefits, and the grant of cash incentive
together with the service award are all bonuses which are neither demandable
nor enforceable obligations of the private respondent, it is not necessary
anymore to delve into the Revenues and Profitability Analysis for the years
1996-2000 submitted by the private respondent.

On the alleged promotion of 15 members of the petitioner union that should

warrant an increase in their salaries, the factual finding of the Voluntary
Arbitrator is revealing, viz:

Considering that the Union was unable to adduce proof that a promotion
indeed occur[ed] with respect to the 15 employees, the Daily Rated Unions
claim for promotional increase likewise fall[s] there being no promotion
established under the records at hand.[40]

WHEREFORE, in view of all the foregoing, the assailed Decision and

Resolution of the Court of Appeals dated 06 March 2002 and 12 July 2002,
respectively, which affirmed and upheld the decision of the Voluntary
Arbitrator, are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

31
Labor Law 1 cases #7
9.) [G.R. No. 149434. June 3, 2004]
PHILIPPINE APPLIANCE CORPORATION (PHILACOR), petitioner,
vs. THE COURT OF APPEALS, THE HONORABLE SECRETARY
OF LABOR BIENVENIDO E. LAGUESMA and UNITED PHILACOR
WORKERS UNION-NAFLU, respondents.
DECISION
YNARES-SANTIAGO, J.:
Before us is an appeal by certiorari under Rule 45 of the Rules of Court
which seeks to set aside the decision[1] of the Court of Appeals in CA-G.R.
SP No. 59011, denying due course to petitioner Philippine Appliance
Corporations partial appeal, as well as the Resolution[2] of the same court,
dated August 10, 2001, denying the motion for reconsideration.
Petitioner is a domestic corporation engaged in the business of
manufacturing refrigerators, freezers and washing machines. Respondent
United Philacor Workers Union-NAFLU is the duly elected collective
bargaining representative of the rank-and-file employees of
petitioner. During the collective bargaining negotiations between petitioner
and respondent union in 1997 (for the last two years of the collective
bargaining agreement covering the period of July 1, 1997 to August 31,
1999), petitioner offered the amount of four thousand pesos (P4,000.00) to
each employee as an early conclusion bonus. Petitioner claims that this bonus
was promised as a unilateral incentive for the speeding up of negotiations
between the parties and to encourage respondent union to exert their best
efforts to conclude a CBA. Upon conclusion of the CBA negotiations,
petitioner accordingly gave this early signing bonus.[3]
In view of the expiration of this CBA, respondent union sent notice to
petitioner of its desire to negotiate a new CBA. Petitioner and respondent
union began their negotiations. On October 22, 1999, after eleven meetings,
respondent union expressed dissatisfaction at the outcome of the negotiations
and declared a deadlock. A few days later, on October 26, 1999, respondent
union filed a Notice of Strike with the National Conciliation and Mediation
Board (NCMB), Region IV in Calamba, Laguna, due to the bargaining
deadlock.[4]
A conciliation and mediation conference was held on October 30, 1999 at the
NCMB in Imus, Cavite, before Conciliator Jose L. Velasco. The conciliation
meetings started with eighteen unresolved items between petitioner and
respondent union. At the meeting on November 20, 1999, respondent union
accepted petitioners proposals on fourteen items,[5] leaving the following
items unresolved: wages, rice subsidy, signing, and retroactive bonus.[6]
Petitioner and respondent union failed to arrive at an agreement concerning
these four remaining items. On January 18, 2000, respondent union went on
strike at the petitioners plant at Barangay Maunong, Calamba, Laguna and at
its washing plant at Paraaque, Metro Manila. The strike lasted for eleven
days and resulted in the stoppage of manufacturing operations as well as
losses for petitioner, which constrained it to file a petition before the
Department of Labor and Employment (DOLE). Labor Secretary Bienvenido
Laguesma assumed jurisdiction over the dispute and, on January 28, 2000,
ordered the striking workers to return to work within twenty-four hours from
notice and directed petitioner to accept back the said employees.[7]
On April 14, 2000, Secretary Laguesma issued the following Order:[8]
In view of the foregoing, we fix the wage increases at P30 per day for the
first year and P25 for the second year.
The rice subsidy and retroactive pay base are maintained at their existing
levels and rates.
Finally, this Office rules in favor of Companys proposal on signing
bonus. We believe that a P3,000 bonus is fair and reasonable under the
circumstances.
WHEREFORE, premises considered, Philippine Appliance Corporation and
United Philacor Workers Union-NAFLU are hereby directed to conclude a
Collective Bargaining Agreement for the period July 1, 1999 to June 30,
2001.The agreement is to incorporate the disposition set forth above and
includes other items already agreed upon in the course of negotiation and
conciliation.
SO ORDERED. (Emphasis supplied)
On April 27, 2000, petitioner filed a Partial Motion for
Reconsideration[9] stating that while it accepted the decision of Secretary
Laguesma, it took exception to the award of the signing bonus. Petitioner
argued that the award of the signing bonus was patently erroneous since it
was not part of the employees salaries or benefits or of the collective
bargaining agreement. It is not demandable or enforceable since it is in the
nature of an incentive. As no CBA was concluded through the mutual efforts
32
Labor Law 1 cases #7
of the parties, the purpose for the signing bonus was not served. On May 22,
2000, Secretary Laguesma issued an Order[10] denying petitioners motion. He
ruled that while the bargaining negotiations might have failed and the signing
of the agreement was delayed, this cannot be attributed solely to respondent
union.Moreover, the Secretary noted that the signing bonus was granted in
the previous CBA.
On June 2, 2000, petitioner filed a Petition for Certiorari with the Court of
Appeals docketed as CA-G.R. SP No. 59011 which was dismissed. The
Labor Secretarys award of the signing bonus was affirmed since petitioner
itself offered the same as an incentive to expedite the CBA negotiations. This
offer was not withdrawn and was still outstanding when the dispute reached
the DOLE. As such, petitioner can no longer adopt a contrary stand and
dispute its own offer.
Petitioner filed a Motion for Reconsideration but the same was
denied. Hence this petition for review raising a lone issue, to wit:
THE HONORABLE RESPONDENT COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT RENDERED
A DECISION NOT IN ACCORD WITH THE APPLICABLE DECISIONS
OF THE SUPREME COURT, SPECIFICALLY THE CALTEX
DOCTRINE OF 1997.
The petition is meritorious.
Petitioner invokes the doctrine laid down in the case of Caltex v.
Brillantes,[11] where it was held that the award of the signing bonus by the
Secretary of Labor was erroneous. The said case involved similar facts
concerning the CBA negotiations between Caltex (Philippines), Inc. and the
Caltex Refinery Employees Association (CREA). Upon referral of the
dispute to the DOLE, then Labor Secretary Brillantes ruled, inter alia:
Fifth, specifically on the issue of whether the signing bonus is covered under
the maintenance of existing benefits clause, we find that a clarification is
indeed imperative. Despite the expressed provision for a signing bonus in the
previous CBA, we uphold the principle that the award for a signing bonus
should partake the nature of an incentive and premium for peaceful
negotiations and amicable resolution of disputes which apparently are not
present in the instant case. Thus, we are constrained to rule that the award of
signing bonus is not covered by the maintenance of existing benefits clause.
On appeal to this Court, it was held:
Although proposed by [CREA], the signing bonus was not accepted by
[Caltex Philippines, Inc.]. Besides, a signing bonus is not a benefit which
may be demanded under the law. Rather, it is now claimed by petitioner
under the principle of maintenance of existing benefits of the old
CBA. However, as clearly explained by [Caltex], a signing bonus may not be
demanded as a matter of right. If it is not agreed upon by the parties or
unilaterally offered as an additional incentive by [Caltex], the condition for
awarding it must be duly satisfied. In the present case, the condition sine qua
non for its granta non-strike was not complied with.
In the case at bar, two things militate against the grant of the signing
bonus: first, the non-fulfillment of the condition for which it was offered, i.e.,
the speedy and amicable conclusion of the CBA negotiations; and second,
the failure of respondent union to prove that the grant of the said bonus is a
long established tradition or a regular practice on the part of
petitioner. Petitioner admits, and respondent union does not dispute, that it
offered an early conclusion bonus or an incentive for a swift finish to the
CBA negotiations. The offer was first made during the 1997 CBA
negotiations and then again at the start of the 1999 negotiations. The bonus
offered is consistent with the very concept of a signing bonus.
In the case of MERALCO v. The Honorable Secretary of Labor,[12] we stated
that the signing bonus is a grant motivated by the goodwill generated when a
CBA is successfully negotiated and signed between the employer and the
union. In that case, we sustained the argument of the Solicitor General, viz:
When negotiations for the last two years of the 1992-1997 CBA broke down
and the parties sought the assistance of the NCMB, but which failed to
reconcile their differences, and when petitioner MERALCO bluntly invoked
the jurisdiction of the Secretary of Labor in the resolution of the labor
dispute, whatever goodwill existed between petitioner MERALCO and
respondent union disappeared. . . .
Verily, a signing bonus is justified by and is the consideration paid for the
goodwill that existed in the negotiations that culminated in the signing of a
CBA.[13]
In the case at bar, the CBA negotiation between petitioner and respondent
union failed notwithstanding the intervention of the NCMB. Respondent
union went on strike for eleven days and blocked the ingress to and egress
from petitioners two work plants. The labor dispute had to be referred to the
Secretary of Labor and Employment because neither of the parties was
willing to compromise their respective positions regarding the four remaining
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items which stood unresolved. While we do not fault any one party for the
failure of the negotiations, it is apparent that there was no more goodwill
between the parties and that the CBA was clearly not signed through their
mutual efforts alone. Hence, the payment of the signing bonus is no longer
justified and to order such payment would be unfair and unreasonable for
petitioner.

Furthermore, we have consistently ruled that a bonus is not a demandable

and enforceable obligation.[14] True, it may nevertheless be granted on
equitable considerations as when the giving of such bonus has been the
companys long and regular practice.[15] To be considered a regular practice,
however, the giving of the bonus should have been done over a long period
of time, and must be shown to have been consistent and deliberate.[16] The
test or rationale of this rule on long practice requires an indubitable showing
that the employer agreed to continue giving the benefits knowing fully well
that said employees are not covered by the law requiring payment
thereof.[17] Respondent does not contest the fact that petitioner initially
offered a signing bonus only during the previous CBA negotiation. Previous
to that, there is no evidence on record that petitioner ever offered the same or
that the parties included a signing bonus among the items to be resolved in
the CBA negotiation. Hence, the giving of such bonus cannot be deemed as
an established practice considering that the same was given only once, that
is, during the 1997 CBA negotiation.

WHEREFORE, premises considered, the instant petition is

GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 59011
affirming the Order of the Secretary of Labor and Employment, directing
petitioner Philippine Appliance Corporation to pay each of its employees a
signing bonus in the amount of Three Thousand Pesos (P3,000.00), is hereby
REVERSED and SET ASIDE. No pronouncement as to costs.

SO ORDERED.

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