PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY, Petitioner, v.
NATIONAL tasked, among others, with the payment of their wages [See Article VII Sec. 3 of
LABOR RELATIONS COMMISSION, and ODIN SECURITY AGENCY, as
representative of its Security Guards, Respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATIONS; PRINCIPAL AND CONTRACTOR; JOINTLY
AND SEVERALLY LIABLE FOR PAYMENT OF UNPAID WAGES; TERM ‘EMPLOYER’
CONSTRUED. — Notwithstanding that the petitioner is a government agency,
its liabilities, which are joint and solidary with that of the contractor, are
provided in Articles 106, 107 and 109 of the Labor Code. This places the
petitioner’s liabilities under the scope of the NLRC. Moreover, Book Three, Title
II on Wages specifically provides that the term "employer" includes any person
acting directly or indirectly in the interest of an employer in relation to an
employee and shall include the Government and all its branches, subdivisions
and instrumentalities, all government-owned or controlled corporation and
institutions as well as non-profit private institutions, or organizations (Art. 97
[b], Labor Code; Eagle Security Agency, Inc. v. NLRC, 173 SCRA 479 [1989];
Rabago v. NLRC, 200 SCRA 158 [1991]). Settled is the rule that in job
contracting, the petitioner as principal is jointly and severally liable with the
contractor for the payment of unpaid wages. The statutory basis for the joint
and several liability is set forth in Articles 107, and 109 in relation to Article 106
of the Labor Code.
2. ID.; ID.; ID.; WAGE ORDERS, MANDATORY AND CANNOT BE WAIVED. — In
the case at bar, the action instituted by the private respondent was for the
payment of unpaid wage differentials under Wage Order No. 6. The liabilities of
the parties were very well explained in the case of Eagle Security v. NLRC, supra
where the court held: . . . "The solidary liability of PTSI and EAGLE, however,
does not preclude the right of reimbursement from his co-debtor by the one
who paid [See Article 1217, Civil Code]. It is with respect to this right of
reimbursement that petitioners can find support in the aforecited contractual
stipulation and Wage Order provision. "That Wage Orders are explicit that
payment of the increases are `to be borne’ by the principal or client.’To be
borne’, however, does not mean that the principal, PTSI in this case, would
directly pay the security guards the wage and allowance increases because
there is no privity of contract between them. The security guards’ contractual
relationship is with their immediate employer, EAGLE. As an employer, EAGLE is
the Contract for Security Services, supra and Bautista v. Inciong, G.R. No.
52824, March 16, 1988, 158 SCRA 556]. . . . The Wage Orders are statutory and
mandatory and can not be waived. The petitioner can not escape liability since
the law provides the joint and solidary liability of the principal and the
contractor for the protection of the laborers.
3. ID.; ID.; ID.; DUE PROCESS OBSERVED IN CASE AT BAR. — The contention that
it was deprived due process because no hearing was conducted does not
deserve merit. A decision on the merits is proper where the issues raised by the
parties did not involve intricate questions of law. (See Blue Bar Coconut Phils.
Inc. v. Minister of Labor, 174 SCRA 25 [1989]) There can be no question that the
security guards are entitled to wage adjustments. The computation of the
amount due to each individual guard can be made during the execution of the
decision where hearings can be held. (See Section 3, Rule VIII of the New Rules
of Procedure of the NLRC).
4. ID.; INDIRECT EMPLOYER; ESTOPPED FROM ASSAILING CONTRACT. —
Petitioner assail the contract for security services for being void ab initio on the
ground that it did not comply with the bidding requirements set by law.
Undeniably, services were rendered already and the petitioner benefitted from
said contract for two (2) years now. The petitioner is therefore estopped from
assailing the contract.
5. ID.; PHIL. ASSOCIATION OF DETECTIVE AND PROTECTIVE AGENCY
OPERATORS (PADPAO); PURPOSE FOR ITS CREATION. — In the complaint filed,
the private respondent alleged that it requested the Regional Director, NCR
Region of the Department of Labor and Employment for their intercession in
connection with the illegal bidding and award made by the petitioner in favor
of Triad Security Agency which was below the minimum wage law. Undeniably,
the private respondent is equally guilty when it entered into the contract with
the petitioner without considering Wage Order No. 6. The private respondent
tries to explain that the Philippine Association of Detective and Protective
Agency Operators (PADPAO) which fixes the contract rate of the security
agencies was unable to fix the new contract rate until May 12, 1986. We,
however, agree with the posture that the setting of wages under PADPAO is of
no moment. The PADPAO memorandum was not necessary to make Wage
1
Order No. 6 effective. The PADPAO memo was merely an internal agreement
among the operators to set the ceiling of the contract rates. It was aimed to
curb the practice of security agencies which were in cutthroat competition to
request for wage adjustments after proposals were accepted in good faith to
the prejudice of the parties.
DECISION
The petitioner questions the resolution of the National Labor Relations
Commission (NLRC) dated January 17, 1983 setting aside the order of dismissal
issued by the Labor Arbiter and the resolution dated June 25, 1990 denying
petitioner’s motion for reconsideration.

6. ID.; SECURITY AGENCY; CANNOT ESCAPE LIABILITY FOR PAYMENT OF UNPAID The facts are as follows:
WAGES; PAYMENT OF WAGES TO EMPLOYEES GUARANTEED UNDER THE
CONSTITUTION. — it bears emphasis that it was the private respondent which The petitioner is a government-owned or controlled corporation created by
first deprived the security personnel of their rightful wage under Wage Order P.D. No. 977.
No. 6. The private respondent is the employer of the security guards and as the
employer, it is charged with knowledge of labor laws and the adequacy of the On November 11, 1985, it entered into a contract with the Odin Security
compensation that it demands for contractual services is its principal concern Agency for security services of its Iloilo Fishing Port Complex in Iloilo City. The
and not any other’s (Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, 136 pertinent provision of the contract provides:chanrobles.com : virtual law library
SCRA 669 [1985]). Given this peculiar circumstance, the private respondent
should also be faulted for the unpaid wage differentials of the security guards. OBLIGATION OF THE FISHING PORT COMPLEX:chanrob1es virtual 1aw library
By filing the complaint in its own behalf and in behalf of the security guards,
the private respondent wishes to exculpate itself from liability on the strength 1. For and in consideration of the services to be rendered by the AGENCY to the
of the ruling in the Eagle case that the ultimate liability rests with the principal. FISHING PORT COMPLEX, the latter shall pay to the former per month for eight
Nonetheless, the inescapable fact is that the employees must be guaranteed (8) hours work daily as follows:chanrob1es virtual 1aw library
payment of the wages due them for the performance of any work, task, job or
project. They must be given ample protection as mandated by the Constitution OUTSIDE METRO MANILA
(See Article II, Section 18 and Article XIII, Section 3). Thus, to assure compliance Security Guard P1,990.00
with the provisions of the Labor Code including the statutory minimum wage, Security Supervisor 2,090.00
the joint and several liability of the contractor and the principal is mandated. Det. Commander 2,190.00.

7. ID.; SOLIDARY LIABILITY OF PRINCIPAL AND CONTRACTOR; WITHOUT The Security Group of the AGENCY will be headed by a detachment
PREJUDICE TO THE RIGHT OF REIMBURSEMENT TO EITHER PRINCIPAL OR commander whose main function shall consist of the administration and
DIRECT EMPLOYER AS WARRANTED. — We hold the petitioner and the private supervision control of the AGENCY’s personnel in the FISHING PORT COMPLEX.
respondent jointly and severally liable to the security guards for the unpaid There shall be one supervisor per shift who shall supervise the guards on duty
wage differentials under Wage Order No. 6. As held in the Eagle case, the during a particular shift.
security guards’ immediate recourse is with their direct employer, private
respondent Odin Security Agency. The solidary liability is, however, without The above schedule of compensation includes among others, the
prejudice to a claim for reimbursement by the private respondent against the following:chanrob1es virtual 1aw library
petitioner for only one-half of the amount due considering that the private
respondent is also at fault for entering into the contract without taking into (a) Minimum wage (Wage Order No. 5)
consideration the minimum wage rates under Wage Order No. 6. (b) Rest Day Pay
2
(c) Night Differential Pay
(d) Incentive Leave Pay
(e) 13th Month Pay
(f) Emergency Cost of Living Allowance (up to Wage Order No. 5)
(g) 4% Contractor’s Tax
(h) Operational Expenses
(i) Overhead (Rollo, pp. 197-198)
The contract for security services also provided for a one year renewable
period unless terminated by either of the parties. It reads:
9. This agreement shall take effect upon approval for a period of one (1) year
unless sooner terminated upon notice of one party to the other provided, that
should there be no notice of renewal within thirty (30) days before the expiry
date, the same shall be deemed renewed, and provided further, that the party
desiring to terminate the contract before the expiry date shall give thirty (30)
days written advance notice to the other party. (Rollo, p. 198)
On October 24, 1987, and during the effectivity of the said Security Agreement,
the private respondent requested the petitioner to adjust the contract rate in
view of the implementation of Wage Order No. 6 which took effect on
November 1, 1984.
The private respondent’s request for adjustment was anchored on the
provision of Wage Order No. 6 which states:
SECTION 9. In the case of contracts for construction projects and for security,
janitorial and similar services, the increases in the minimum wage and
allowance rates of the workers shall be borne by the principal or client of the
construction/service contractor and the contracts shall be deemed amended
accordingly, subject to the provisions of Section 3(c) of this Order. (Rollo, p. 49)
Section 7, par. c of the Security Services Contract which calls for an automatic
escalation of the rate per guard in case of wage increase also reads:
The terms and conditions herein set forth shall be modified by the applicable
provisions of subsequent laws or decrees, especially as they pertain to
increases in the minimum wage and occupational benefits to workers. (Rollo, p.
46)
Requests for adjustment of the contract price were reiterated on January 14,
1988 and February 19, 1988 but were ignored by the petitioner.
Thus on June 7, 1988, the private respondent filed with the Office of the Sub-
Regional Arbitrator in Region VI, Iloilo City a complaint for unpaid amount of re-
adjustment rate under Wage Order No. 6 together with wage salary
differentials arising from the integration of the cost of living allowance under
Wage Order No. 1, 2, 3 and 5 pursuant to Executive Order No. 178 plus the
amount of P25,000.00 as attorney’s fees and cost of litigation.
On July 29, 1988, the petitioner filed a Motion to Dismiss on the following
grounds:
(1) The Commission has no jurisdiction to hear and try the case;
(2) Assuming it has jurisdiction, the security guards of Odin Security Agency
have no legal personality to sue or be sued; and
(3) Assuming the individual guards have legal personality the action involves
interpretation of contract over which it has no authority. (Rollo, p. 75)
On August 19, 1988, the Labor Arbiter issued an Order dismissing the complaint
stating that the petitioner’s being a government-owned or controlled
corporation would place it under the scope and jurisdiction of the Civil Service
Commission and not within the ambit of the NLRC.
This Order of dismissal was raised on Appeal to the NLRC and on January 17,
1989 the NLRC issued the questioned resolution setting aside the order and
entered a decision granting reliefs to the private Respondent.
A motion for reconsideration was subsequently filed raising among others that
the resolution is:
(1) In violation of the right of the respondent to due process under the
3
Constitution;
(2) Granting arguendo that the due process clause was observed, the resolution
granting relief is without any legal basis; and
(3) Granting arguendo that there is legal basis for the award, the stipulation
under the contract allowing an increase of wage rate is void ab initio. (Rollo, p.
86)
On June 25, 1990, the motion for reconsideration was denied.
The petitioner now comes to this Court reiterating substantially the same
grounds it raised in its motion for reconsideration, to wit:
(1) The National Labor Relations Commission failed to observe due process.
(2) Granting the award of the National Labor Relations Commission is valid,
reliefs granted are not legal.
(3) Assuming the award complies with the requirements of due process, the
National Labor Relations Commission erred when it failed to declare the
contract for security services void. (Rollo, pp. 201-202)
The petitioner is a government-owned or controlled corporation with a special
charter. This places it under the scope of the civil service (Art. XI [B] [1] and [2],
1987 Constitution); Boy Scouts of the Philippines v. NLRC, 196 SCRA 176 [1991];
PNOC-Energy Development Corp. v. NLRC, 201 SCRA 487 [1991]). However, the
guards are not employees of the petitioner. The contract of services explicitly
states that the security guards are not considered employees of the petitioner
(Rollo, p. 45). There being no employer-employee relationship between the
petitioner and the security guards, the jurisdiction of the Civil Service
Commission may not be invoked in this case.
The contract entered into by the petitioner which is merely job contracting
makes the petitioner an indirect employer. The issue, therefore, is whether or
not an indirect employer is bound by the rulings of the NLRC.
Notwithstanding that the petitioner is a government agency, its liabilities,
which are joint and solidary with that of the contractor, are provided in Articles
106, 107 and 109 of the Labor Code. This places the petitioner’s liabilities under
the scope of the NLRC. Moreover, Book Three, Title II on Wages specifically
provides that the term "employer" includes any person acting directly or
indirectly in the interest of an employer in relation to an employee and shall
include the Government and all its branches, subdivisions and
instrumentalities, all government-owned or controlled corporation and
institutions as well as non-profit private institutions, or organizations (Art. 97
[b], Labor Code; Eagle Security Agency, Inc. v. NLRC, 173 SCRA 479 [1989];
Rabago v. NLRC, 200 SCRA 158 [1991]). The NLRC, therefore, did not commit
grave abuse of discretion in assuming jurisdiction to set aside the Order of
dismissal by the Labor Arbiter.
The underlying issue in this case is who should carry the burden of the wage
increases.
Settled is the rule that in job contracting, the petitioner as principal is jointly
and severally liable with the contractor for the payment of unpaid wages. The
statutory basis for the joint and several liability is set forth in Articles 107, and
109 in relation to Article 106 of the Labor Code. (Del Rosario and Sons Logging
Enterprises, Inc. v. NLRC, 136 SCRA 669 [1985]; Baguio v. NLRC, 202 SCRA 465
[1991]; Ecal v. NLRC, 195 SCRA 224 [1991]). In the case at bar, the action
instituted by the private respondent was for the payment of unpaid wage
differentials under Wage Order No. 6. The liabilities of the parties were very
well explained in the case of Eagle Security v. NLRC, supra where the court
held:chanrob1es virtual 1aw library
"The solidary liability of PTSI and EAGLE, however, does not preclude the right
of reimbursement from his co-debtor by the one who paid [See Article 1217,
Civil Code]. It is with respect to this right of reimbursement that petitioners can
find support in the aforecited contractual stipulation and Wage Order
provision.
"The Wage Orders are explicit that payment of the increases are `to be borne’
by the principal or client.’To be borne’, however, does not mean that the
principal, PTSI in this case, would directly pay the security guards the wage and
allowance increases because there is no privity of contract between them. The
security guards’ contractual relationship is with their immediate employer,
EAGLE. As an employer, EAGLE is tasked, among others, with the payment of
4
their wages [See Article VII Sec. 3 of the Contract for Security Services, supra
and Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 556].
"Premises considered, the security guards’ immediate recourse for the
payment of the increases is with their direct employer, EAGLE. However, in
order for the security agency to comply with the new wage and allowance rates
it has to pay the security guards, the Wage Order made specific provision to
amend existing contracts for security services by allowing the adjustment of
the consideration paid by the principal to the security agency concerned. What
the Wage Orders require, therefore, is the amendment of the contract as to the
consideration to cover the service contractor’s payment of the increases
mandated. In the end, therefore, ultimate liability for the payment of the
increases rests with the principal."
The Wage Orders are statutory and mandatory and can not be waived. The
petitioner can not escape liability since the law provides the joint and solidary
liability of the principal and the contractor for the protection of the laborers.
The contention that it was deprived due process because no hearing was
conducted does not deserve merit. A decision on the merits is proper where
the issues raised by the parties did not involve intricate questions of law. (See
Blue Bar Coconut Phils. Inc. v. Minister of Labor, 174 SCRA 25 [1989]) There can
be no question that the security guards are entitled to wage adjustments. The
computation of the amount due to each individual guard can be made during
the execution of the decision where hearings can be held. (See Section 3, Rule
VIII of the New Rules of Procedure of the NLRC) Neither can the petitioner
assail the contract for security services for being void ab initio on the ground
that it did not comply with the bidding requirements set by law. Undeniably,
services were rendered already and the petitioner benefitted from said
contract for two (2) years now. The petitioner is therefore estopped from
assailing the contract.
Quite noteworthy is the fact that the private respondent entered into the
contract when Wage Order No. 6 had already been in force. The contract was
entered into in November 11, 1985 one year after the effectivity of Wage Order
No. 6 which was on November 1, 1984. The rates of the security guards as
stipulated in the contract did not consider the increases in the minimum wage
mandated by Wage Order No. 6. Two years after, the private respondent is
now asking for an adjustment in the contract price pursuant to the wage order
provision.
Such action of the private respondent is rather disturbing and must not remain
unchecked. In the complaint filed, the private respondent alleged that it
requested the Regional Director, NCR Region of the Department of Labor and
Employment for their intercession in connection with the illegal bidding and
award made by the petitioner in favor of Triad Security Agency which was
below the minimum wage law. Undeniably, the private respondent is equally
guilty when it entered into the contract with the petitioner without considering
Wage Order No. 6.
The private respondent tries to explain that the Philippine Association of
Detective and Protective Agency Operators (PADPAO) which fixes the contract
rate of the security agencies was unable to fix the new contract rate until May
12, 1986.
We, however, agree with the posture that the setting of wages under PADPAO
is of no moment. The PADPAO memorandum was not necessary to make Wage
Order No. 6 effective. The PADPAO memo was merely an internal agreement
among the operators to set the ceiling of the contract rates. It was aimed to
curb the practice of security agencies which were in cutthroat competition to
request for wage adjustments after proposals were accepted in good faith to
the prejudice of the parties.chanrobles.com.ph : virtual law library
While it is true that security personnel should not be deprived of what is
lawfully due them, it bears emphasis that it was the private respondent which
first deprived the security personnel of their rightful wage under Wage Order
No. 6. The private respondent is the employer of the security guards and as the
employer, it is charged with knowledge of labor laws and the adequacy of the
compensation that it demands for contractual services is its principal concern
and not any other’s (Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, 136
Given this peculiar circumstance, the private respondent should also be faulted
for the unpaid wage differentials of the security guards. By filing the complaint
in its own behalf and in behalf of the security guards, the private respondent
wishes to exculpate itself from liability on the strength of the ruling in the Eagle
case that the ultimate liability rests with the principal. Nonetheless, the
5
inescapable fact is that the employees must be guaranteed payment of the
wages due them for the performance of any work, task, job or project. They
must be given ample protection as mandated by the Constitution (See Article II,
Section 18 and Article XIII, Section 3). Thus, to assure compliance with the
provisions of the Labor Code including the statutory minimum wage, the joint
and several liability of the contractor and the principal is mandated.
We, therefore, hold the petitioner and the private respondent jointly and
severally liable to the security guards for the unpaid wage differentials under
Wage Order No. 6. As held in the Eagle case, the security guards’ immediate
recourse is with their direct employer, private respondent Odin Security
Agency. The solidary liability is, however, without prejudice to a claim for
reimbursement by the private respondent against the petitioner for only one-
half of the amount due considering that the private respondent is also at fault
for entering into the contract without taking into consideration the minimum
wage rates under Wage Order No. 6.chanrobles lawlibrary : rednad
WHEREFORE, the questioned resolutions of the National Labor Relations
Commission are hereby AFFIRMED with the modification that both the
petitioner and the private respondent are ORDERED to pay jointly and severally
the unpaid wage differentials under Wage Order No. 6 without prejudice to the
right of reimbursement for one-half of the amount which either the petitioner
or the private respondent may have to pay to the security guards. Costs against
the petitioner.
SO ORDERED.
ANTONIO W. IRAN (doing business under the name and style of Tones Iran
Enterprises), petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION (Fourth Division), GODOFREDO O. PETRALBA, MORENO
CADALSO, PEPITO TECSON, APOLINARIO GOTHONG GEMINA, JESUS
BANDILAO, EDWIN MARTIN, CELSO LABIAGA, DIOSDADO GONZALGO,
FERNANDO M. COLINA, respondents.
DECISION
ROMERO, J.:
Whether or not commissions are included in determining compliance with
the minimum wage requirement is the principal issue presented in this
petition.
Petitioner Antonio Iran is engaged in softdrinks merchandising and
distribution in Mandaue City, Cebu, employing truck drivers who double as
salesmen, truck helpers, and non-field personnel in pursuit thereof.Petitioner
hired private respondents Godofredo Petralba, Moreno Cadalso, Celso Labiaga
and Fernando Colina as drivers/salesmen while private respondents Pepito
Tecson, Apolinario Gimena, Jesus Bandilao, Edwin Martin and Diosdado
Gonzalgo were hired as truck helpers. Drivers/salesmen drove petitioners
delivery trucks and promoted, sold and delivered softdrinks to various outlets
in Mandaue City. The truck helpers assisted in the delivery of softdrinks to the
different outlets covered by the driver/salesmen.
As part of their compensation, the driver/salesmen and truck helpers of
petitioner received commissions per case of softdrinks sold at the following
rates:
SALESMEN:
Ten Centavos (P0.10) per case of Regular softdrinks.
Twelve Centavos (P0.12) per case of Family Size softdrinks.
TRUCK HELPERS:
Eight Centavos (P0.08) per case of Regular softdrinks.
6
Ten Centavos (P0.10) per case of Family Size softdrinks.
Sometime in June 1991, petitioner, while conducting an audit of his
operations, discovered cash shortages and irregularities allegedly committed by
private respondents. Pending the investigation of irregularities and settlement
of the cash shortages, petitioner required private respondents to report for
work everyday. They were not allowed, however, to go on their respective
routes. A few days thereafter, despite aforesaid order, private respondents
stopped reporting for work, prompting petitioner to conclude that the former
had abandoned their employment. Consequently, petitioner terminated their
services. He also filed on November 7, 1991, a complaint for estafa against
private respondents.
On the other hand, private respondents, on December 5, 1991, filed
complaints against petitioner for illegal dismissal, illegal deduction,
underpayment of wages, premium pay for holiday and rest day, holiday pay,
service incentive leave pay, 13th month pay, allowances, separation pay,
recovery of cash bond, damages and attorneys fees. Said complaints were
consolidated and docketed as Rab VII-12-1791-91, RAB VII-12-1825-91 and RAB
VII-12-1826-91, and assigned to Labor Arbiter Ernesto F. Carreon.
The labor arbiter found that petitioner had validly terminated private
respondents, there being just cause for the latters dismissal. Nevertheless, he
also ruled that petitioner had not complied with minimum wage requirements
in compensating private respondents, and had failed to pay private
respondents their 13th month pay. The labor arbiter, thus, rendered a decision
on February 18, 1993, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the
respondent Antonio W. Iran to pay the complainants the following:
1. Celso Labiaga P10,033.10
2. Godofredo Petralba 1,250.00
3. Fernando Colina 11,753.10
4. Moreno Cadalso 11,753.10
5. Diosdado Gonzalgo 7,159.04
6. Apolinario Gimena 8,312.24
7. Jesus Bandilao 14,729.50
8. Pepito Tecson 9,126.55
---------------
74,116.63
Attorneys Fees (10%)
of the gross award 7,411.66
-------------
GRAND TOTAL AWARD P81,528.29
========
The other claims are dismissed for lack of merit.
SO ORDERED.[1]
Both parties seasonably appealed to the NLRC, with petitioner contesting
the labor arbiters refusal to include the commissions he paid to private
respondents in determining compliance with the minimum wage
requirement. He also presented, for the first time on appeal, vouchers
denominated as 13th month pay signed by private respondents, as proof that
petitioner had already paid the latter their 13th month pay. Private
respondents, on the other hand, contested the findings of the labor arbiter
holding that they had not been illegally dismissed, as well as mathematical
errors in computing Jesus Bandilaos wage differentials. The NLRC, in its decision
of December 21, 1994, affirmed the validity of private respondents dismissal,
but found that said dismissal did not comply with the procedural requirements
for dismissing employees. Furthermore, it corrected the labor arbiters award of
wage differentials to Jesus Bandilao. The dispositive portion of said decision
reads:
WHEREFORE, premises considered, the decision is hereby MODIFIED in that
complainant Jesus Bandilaos computation for wage differential is corrected
from P154.00 to P4,550.00. In addition to all the monetary claim (sic) originally
awarded by the Labor Arbiter a quo, P1,000.00 is hereby granted to each
7
complainants (sic)as indemnity fee for failure of respondents to observe
procedural due process.
SO ORDERED.[2]
Petitioners motion for reconsideration of said decision was denied on July
31, 1995, prompting him to elevate this case to this Court, raising the following
issues:
1. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE OF
DISCRETION AND CONTRARY TO LAW AND JURISPRUDENCE IN
AFFIRMING THE DECISION OF THE LABOR ARBITER A QUOEXCLUDING
THE COMMISSIONS RECEIVED BY THE PRIVATE RESPONDENTS IN
COMPUTING THEIR WAGES;
2. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE OF
DISCRETION IN FINDING PETITIONER GUILTY OF PROCEDURAL LAPSES
IN TERMINATING PRIVATE RESPONDENTS AND IN AWARDING EACH OF
THE LATTER P1,000.00 AS INDEMNITY FEE;
3. THE HONORABLE COMMISSION GRAVELY ERRED IN NOT CREDITING THE
ADVANCE AMOUNT RECEIVED BY THE PRIVATE RESPONDENTS AS PART
OF THEIR 13TH MONTH PAY.
The petition is impressed with merit.
The NLRC, in denying petitioners claim that commissions be included in
determining compliance with the minimum wage ratiocinated thus:
Respondent (petitioner herein) insist assiduously that the commission should
be included in the computation of actual wages per agreement. We will not fall
prey to this fallacious argument. An employee should receive the minimum
wage as mandated by law and that the attainment of the minimum wage
should not be dependent on the commission earned by an employee. A
commission is an incentive for an employee to work harder for a better
production that will benefit both the employer and the employee. To include
the commission in the computation of wage in order to comply with labor
standard laws is to negate the practice that a commission is granted after an
employee has already earned the minimum wage or even beyond it.[3]
This holding is unsupported by law and jurisprudence. Article 97(f) of the
Labor Code defines wage as follows:
Art. 97(f) Wage paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money, whether
fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done
or to be done, or for services rendered or to be rendered and includes the fair
and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the
employee.
x x x x x x x x x. (Emphasis supplied)
This definition explicitly includes commissions as part of wages. While
commissions are, indeed, incentives or forms of encouragement to inspire
employees to put a little more industry on the jobs particularly assigned to
them, still these commissions are direct remunerations for services rendered.
In fact, commissions have been defined as the recompense, compensation or
reward of an agent, salesman, executor, trustee, receiver, factor, broker or
bailee, when the same is calculated as a percentage on the amount of his
transactions or on the profit to the principal. The nature of the work of a
salesman and the reason for such type of remuneration for services rendered
demonstrate clearly that commissions are part of a salesmans wage or salary.[4]
Thus, the commissions earned by private respondents in selling softdrinks
constitute part of the compensation or remuneration paid to drivers/salesmen
and truck helpers for serving as such, and hence, must be considered part of
the wages paid them.
The NLRC asserts that the inclusion of commissions in the computation of
wages would negate the practice of granting commissions only after an
employee has earned the minimum wage or over. While such a practice does
8
exist, the universality and prevalence of such a practice is questionable at
best. In truth, this Court has taken judicial notice of the fact that some
salesmen do not receive any basic salary but depend entirely on commissions
and allowances or commissions alone, although an employer-employee
relationship exists.[5] Undoubtedly, this salary structure is intended for the
benefit of the corporation establishing such, on the apparent assumption that
thereby its salesmen would be moved to greater enterprise and diligence and
close more sales in the expectation of increasing their sales commissions. This,
however, does not detract from the character of such commissions as part of
the salary or wage paid to each of its salesmen for rendering services to the
corporation.[6]
Likewise, there is no law mandating that commissions be paid only after
the minimum wage has been paid to the employee. Verily, the establishment of
a minimum wage only sets a floor below which an employees remuneration
cannot fall, not that commissions are excluded from wages in determining
compliance with the minimum wage law. This conclusion is bolstered
by Philippine Agricultural Commercial and Industrial Workers Union vs.
NLRC,[7] where this Court acknowledged that drivers and conductors who are
compensated purely on a commission basis are automatically entitled to the
basic minimum pay mandated by law should said commissions be less than
their basic minimum for eight hours work. It can, thus, be inferred that were
said commissions equal to or even exceed the minimum wage, the employer
need not pay, in addition, the basic minimum pay prescribed by law. It follows
then that commissions are included in determining compliance with minimum
wage requirements.
With regard to the second issue, it is settled that in terminating
employees, the employer must furnish the worker with two written notices
before the latter can be legally terminated: (a) a notice which apprises the
employee of the particular acts or omissions for which his dismissal is sought,
and (b) the subsequent notice which informs the employee of the employers
decision to dismiss him.[8] (Italics ours) Petitioner asseverates that no
procedural lapses were committed by him in terminating private respondents.
In his own words:
when irregularities were discovered, that is, when the misappropriation of
several thousands of pesos was found out, the petitioner instructed private
respondents to report back for work and settle their accountabilities but the
latter never reported for work. This instruction by the petitioner to report back
for work and settle their accountabilities served as notices to private
respondents for the latter to explain or account for the missing funds held in
trust by them before they disappeared.[9]
Petitioner considers this return-to-work order as equivalent to the first
notice apprising the employee of the particular acts or omissions for which his
dismissal is sought. But by petitioners own admission, private respondents
were never told in said notice that their dismissal was being sought, only that
they should settle their accountabilities. In petitioners incriminating words:
It should be emphasized here that at the time the misappropriation was
discovered and subsequently thereafter, the petitioners first concern was not
effecting the dismissal of private respondents but the recovery of the
misappropriated funds thus the latter were advised to report back to work.[10]
As above-stated, the first notice should inform the employee that his
dismissal is being sought. Its absence in the present case makes the
termination of private respondents defective, for which petitioner must be
sanctioned for his non-compliance with the requirements of or for failure to
observe due process.[11] The twin requirements of notice and hearing constitute
the essential elements of due process, and neither of these elements can be
disregarded without running afoul of the constitutional guarantee. Not being
mere technicalities but the very essence of due process, to which every
employee is entitled so as to ensure that the employers prerogative to dismiss
is not exercised arbitrarily,[12] these requisites must be complied with strictly.
Petitioner makes much capital of private respondents failure to report to
work, construing the same as abandonment which thus authorized the latters
dismissal. As correctly pointed out by the NLRC, to which the Solicitor General
agreed, Section 2 of Book V, Rule XIV of the Omnibus Rules Implementing the
Labor Code requires that in cases of abandonment of work, notice should be
sent to the workers last known address. If indeed private respondents had
abandoned their jobs, it was incumbent upon petitioner to comply with this
requirement. This, petitioner failed to do, entitling respondents to nominal
damages in the amount of P5,000.00 each, in accordance with recent
9
jurisprudence,[13] to vindicate or recognize their right to procedural due process case is REMANDED to the Labor Arbiter for a recomputation of the alleged
which was violated by petitioner. deficiencies. For non-observance of procedural due process in effecting the
dismissal of private respondents, said decision is MODIFIED by increasing the
Lastly, petitioner argues that the NLRC gravely erred when it disregarded
award of nominal damages to private respondents from P1,000.00 to P5,000.00
the vouchers presented by the former as proof of his payment of 13th month
each. No costs.
pay to private respondents. While admitting that said vouchers covered only a
ten-day period, petitioner argues that the same should be credited as amounts SO ORDERED.
received by private respondents as part of their 13th month pay, Section 3(e) of
the Rules and Regulations Implementing P.D. No. 851 providing that the
employer shall pay the difference when he pays less than 1/12th of the
employees basic salary.[14]
While it is true that the vouchers evidencing payments of 13th month pay
were submitted only on appeal, it would have been more in keeping with the
directive of Article 221[15] of the Labor Code for the NLRC to have taken the
same into account.[16] Time and again, we have allowed evidence to be
submitted on appeal, emphasizing that, in labor cases, technical rules of
evidence are not binding.[17] Labor officials should use every and all reasonable
means to ascertain the facts in each case speedily and objectively, without
regard to technicalities of law or procedure.[18]
It must also be borne in mind that the intent of P.D. No. 851 is the granting
of additional income in the form of 13th month pay to employees not as yet
receiving the same and not that a double burden should be imposed on the
employer who is already paying his employees a 13th month pay or its
equivalent.[19] An employer who pays less than 1/12th of the employees basic
salary as their 13th month pay is only required to pay the difference.[20]
The foregoing notwithstanding, the vouchers presented by petitioner
covers only a particular year. It does not cover amounts for other years claimed
by private respondents. It cannot be presumed that the same amounts were
given on said years. Hence, petitioner is entitled to credit only the amounts
paid for the particular year covered by said vouchers.
WHEREFORE, in view of the foregoing, the decision of the NLRC dated July
31, 1995, insofar as it excludes the commissions received by private
respondents in the determination of petitioners compliance with the minimum G.R. No. 204651 August 6, 2014 OUR HAUS REALTY DEVELOPMENT
wage law, as well as its exclusion of the particular amounts received by private CORPORATION, Petitioner, vs. ALEXANDER PARIAN, JAY C. ERINCO,
respondents as part of their 13th month pay is REVERSED and SET ASIDE. This ALEXANDER CANLAS, BERNARD TENEDERO and JERRY SABULAO,Respondents.
10
 BRION, J.: Sometime in May 2010, Our Haus experienced financial distress. To alleviate its
condition, Our Haus suspended some of its construction projects and asked the
We resolve in this petition for review on certiorari1 the challenge to the May 7, affected workers, including the respondents, to take vacation leaves.8
2012 decision2 and the November 27, 2012 resolution3 (assailed CA rulings) of
the Court of Appeals (CA) in CA-G.R. SP No. 123273. These assailed CA rulings Eventually, the respondents were asked to report back to work but instead of
affirmed the July 20, 2011 decision4 and the December 2, 2011 doing so, they filed with the LA a complaint for underpayment of their daily
resolution5 (NLRC rulings) of the National Labor Relations Commission (NLRC) in wages. They claimed that except for respondent Bernardo N. Tenedero, their
NLRC LAC No. 02-000489-11 (NLRC NCR Case No. 06-08544-10). The NLRC wages were below the minimum rates prescribed in the following wage orders
rulings in turn reversed and set aside the December 10, 2010 decision6 of the from 2007 to 2010:
labor arbiter (LA).
1. Wage Order No. NCR-13, which provides for a daily minimum wage
Factual Antecedents rate of P362.00for the non-agriculture sector (effective from August 28,
2007 until June 13, 2008); and
Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao and
Bernardo Tenederowere all laborers working for petitioner Our Haus Realty 2. Wage Order No. NCR-14, which provides for a daily minimum wage
Development Corporation (Our Haus), a company engaged in the construction rate of P382.00for the non-agriculture sector (effective from June 14,
business.The respondents’ respective employment records and daily wage 2008 until June 30, 2010).
rates from 2007 to 2010 are summarized in the table7 below:
The respondents also alleged thatOur Haus failed to pay them their holiday,
Date Years of Daily service incentive leave (SIL), 13th month and overtime pays.9
Name Year and Place of Assignment
Hired Service Rate
The Labor Arbitration Rulings
Alexander M. October
10 years 2007-2010- Quezon City P353.50
Parian 1999 Before the LA, Our Haus primarily argued that the respondents’ wages
January 2008- Quezon City 2009- complied with the law’s minimum requirement. Aside from paying the
Jay C. Erinco 10 years P342.00 monetary amount of the respondents’ wages, Our Haus also subsidized their
2000 Antipolo 2010- Quezon City
meals (3 times a day), and gave them free lodging near the construction project
Alexander R. they were assigned to.10 In determining the total amount of the respondents’
2005 5 years 2007-2010- Quezon City P312.00
Canlas daily wages, the value of these benefits should be considered, in line with
Article 97(f)11 of the Labor Code.
Jerry Q. August 2008- Quezon City 2009-
10 years P342.00
Sabulao 1999 Antipolo 2010- Quezon City
Our Haus also rejected the respondents’ other monetary claims for lack of
Bernardo N. proof that they were entitled to it.12
1994 16 years 2007-2010- Quezon City P383.50
Tenedero
On the other hand, the respondents argued that the value of their meals
should not be considered in determining their wages’ total amount since the

11
requirements set under Section 413 of DOLE14 Memorandum Circular No.
215were not complied with.
The respondents pointed out that Our Haus never presented any proof that
they agreed in writing to the inclusion of their meals’ value in their
wages.16 Also, Our Haus failed to prove that the value of the facilities it
furnished was fair and reasonable.17 Finally, instead of deducting the maximum
amount of 70% of the value of the meals, Our Haus actually withheld its full
value (which was Php290.00 per week for each employee).18
The LA ruled in favor of Our Haus. He held that if the reasonable values of the
board and lodging would be taken into account, the respondents’ daily wages
would meet the minimum wage rate.19 As to the other benefits, the LA found
that the respondents were not able to substantiate their claims for it.20
The respondents appealed the LA’s decision to the NLRC, which in turn,
reversed it. Citing the case of Mayon Hotel & Restaurant v. Adana,21 the NLRC
noted that the respondents did not authorize Our Haus in writing to charge the
values of their board and lodging to their wages. Thus, the samecannot be
credited.
The NLRC also ruled that the respondents are entitled to their respective
proportionate 13th month payments for the year 2010 and SIL payments for at
least three years,immediately preceding May 31, 2010, the date when the
respondents leftOur Haus. However, the NLRC sustained the LA’s ruling that
the respondents were not entitled to overtime pay since the exact dates and
times when they rendered overtime work had not been proven.22
Our Haus moved for the reconsideration23 of the NLRC’s decision and
submitted new evidence (the five kasunduans) to show that the respondents
authorized Our Haus in writing to charge the values of their meals and lodging
to their wages.
The NLRC denied Our Haus’ motion, thus it filed a Rule 65 petition24 with the
CA. In its petition, Our Haus propounded a new theory. It made a distinction
between deduction and charging. A written authorization is only necessary if
the facility’s value will be deducted and will not be needed if it will merely be
charged or included in the computation of wages.25 Our Haus claimed that it
did not actually deduct the values of the meals and housing benefits. It only
considered these in computing the total amount of wages paid to the
respondents for purposes of compliance with the minimum wage law. Hence,
the written authorization requirement should not apply.
Our Haus also asserted that the respondents’ claim for SIL pay should be
denied as this was not included in their pro formacomplaint. Lastly, it
questioned the respondents’entitlement to attorney’s fees because they were
not represented by a private lawyer but by the Public Attorney’s Office (PAO).
The CA’s Ruling
The CA dismissed Our Haus’ certiorari petition and affirmed the NLRC rulings in
toto. It found no real distinction between deduction and charging,26 and ruled
that the legal requirements before any deduction or charging can be made,
apply to both. Our Haus, however, failed to prove that it complied with any of
the requirements laid down in Mabeza v. National Labor Relations
Commission.27 Accordingly, it cannot consider the values of its meal and
housing facilities in the computation of the respondents’ total wages.
Also, the CA ruled that since the respondents were able to allege non-payment
of SIL in their position paper, and Our Haus, in fact, opposed it in its various
pleadings,28 then the NLRC properly considered it as part of the respondents’
causes of action. Lastly, the CA affirmed the respondent’s entitlement to
attorney’s fees.29
Our Haus filed a motion for reconsideration but the CA denied its motion,
prompting it to file the present petition for review on certiorari under Rule 45.
The Petition
Our Haus submits that the CA erred in ruling that the legal requirements apply
without distinction ―whether the facility’s value will be deducted or merely
included in the computation of the wages. At any rate, it complied with the
12
requirements for deductibility of the value of the facilities. First, the five
kasunduans executed by the respondents constitute the written authorization
for the inclusion of the board and lodging’s values to their wages. Second, Our
Haus only withheld the amount of P290.00 which represents the food’s raw
value; the weekly cooking cost (cook’s wage, LPG, water) at P239.40 per person
is a separate expense that Our Haus did not withhold from the respondents’
wages.30 This disproves the respondents’claim that it deducted the full amount
of the meals’ value.
Lastly, the CA erred in ruling that the claim for SIL pay may still be granted
though not raised in the complaint; and that the respondents are entitled to an
award of attorney’s fees.31
The Case for the Respondents
The respondents prayed for the denial of the petition.32 They maintained that
the CA did not err inruling that the values of the board and lodging cannot be
deducted from their wages for failure to comply with the requirements set by
law.33 And though the claim for SIL pay was not included in their pro forma
complaint, they raised their claims in their position paper and Our Haus had the
opportunity to contradict it in its pleadings.34
Finally, under the PAO law, the availment of the PAO’s legal services does not
exempt its clients from an award of attorney’s fees.35
The Court’s Ruling
We resolve to DENYthe petition.
The nature of a Rule 45 petition ― only questions of law
Basic is the rule that only questions of lawmay be raised in a Rule 45
petition.36 However, in this case, weare confronted with mixed questions of
fact and law that are subsumed under the issue of whether Our Haus complied
with the legal requirements on the deductibility of the value of facilities.
Strictly, factual issues cannot be considered under Rule 45 except in the course
of resolving if the CA correctly determined whether or not the NLRC committed
grave abuse of discretion in considering and appreciating the factual issues
before it.37
In ruling for legal correctness, we have to view the CA decision in the same
context that the petition for certiorariit ruled upon was presented to it; we
have to examine the CA decision from the prism of whether it correctly
determined the presence or absence of grave abuse of discretion in the NLRC
decision before it, not on the basis of whether the NLRC decision, on the merits
of the case, was correct. In other words, we have to be keenly aware that the
CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it. This is the approach that should bebasic in a Rule 45
review of a CA ruling in a labor case. In question form, the question to ask in
the present case is: did the CA correctly determine that the NLRC did not
commit grave abuse of discretion in ruling on the case?38 We rule that the CA
correctly did.
No substantial distinction between deducting and charging a facility’s value
from the employee’s wage; the legal requirements for creditability apply to
both
To justify its non-compliance with the requirements for the deductibility of a
facility, Our Haus asks us to believe that there is a substantial distinction
between the deduction and the charging of a facility’s value to the wages. Our
Haus explains that in deduction, the amount of the wage (which may already
be below the minimum) would still be lessened by the facility’s value, thus
needing the employee’s consent. On the other hand, in charging, there is no
reduction of the employee’s wage since the facility’s value will just be
theoretically added to the wage for purposes of complying with the minimum
wage requirement.39
Our Haus’ argument is a vain attempt to circumvent the minimum wage law by
trying to create a distinction where none exists.
In reality, deduction and charging both operate to lessen the actual take-home
pay of an employee; they are two sides of the same coin. In both, the employee
receives a lessened amount because supposedly, the facility’s value, which is
part of his wage, had already been paid to him in kind. As there is no
13
substantial distinction between the two, the requirements set by law must
apply to both.
As the CA correctly ruled, these requirements, as summarized in Mabeza, are
the following:
a. proof must be shown thatsuch facilities are customarily furnished by
the trade;
b. the provision of deductiblefacilities must be voluntarily accepted in
writingby the employee; and
c. The facilities must be charged at fair and reasonable value.40
We examine Our Haus’ compliance with each of these requirements in
seriatim.
a. The facility must be customarily furnished by the trade
In a string of cases, we have concluded that one of the badges to show that a
facility is customarily furnished by the trade is the existence of a company
policy or guideline showing that provisions for a facility were designated as part
of the employees’ salaries.41 To comply with this, Our Haus presented in its
motion for reconsideration with the NLRC the joint sinumpaang salaysayof four
of its alleged employees. These employees averred that they were recipients of
free lodging, electricity and water, as well as subsidized meals from Our Haus.42
We agree with the NLRC’s finding that the sinumpaang salaysay statements
submitted by Our Haus are self-serving.1âwphi1 For one, Our Haus only
produced the documents when the NLRC had already earlier determined that
Our Haus failed to prove that it was traditionally giving the respondents their
board and lodging. This document did not state whether these benefits had
been consistently enjoyed by the rest of Our Haus’ employees. Moreover, the
records reveal that the board and lodging were given on a per project basis.
Our Haus did not show if these benefits were also provided inits other
construction projects, thus negating its claimed customary nature. Even
assuming the sinumpaang salaysay to be true, this document would still work
against Our Haus’ case. If Our Haus really had the practice of freely giving
lodging, electricity and water provisions to its employees, then Our Haus
should not deduct its values from the respondents’ wages. Otherwise, this will
run contrary to the affiants’ claim that these benefits were traditionally given
free of charge.
Apart from company policy, the employer may also prove compliance with the
first requirement by showing the existence of an industry-wide practice of
furnishingthe benefits in question among enterprises engaged in the same line
of business. If it were customary among construction companies to provide
board and lodging to their workers and treat their values as part of their wages,
we would have more reason to conclude that these benefits were really
facilities.
However, Our Haus could not really be expected to prove compliance with the
first requirement since the living accommodation of workers in the
construction industry is not simply a matter of business practice. Peculiar to the
construction business are the occupational safety and health (OSH) services
which the law itself mandates employers to provide to their workers. This isto
ensure the humane working conditions of construction employees despite their
constant exposure to hazardous working environments. Under Section 16 of
DOLE Department Order (DO) No. 13, series of 1998,43 employers engaged in
the construction business are required to providethe following welfare
amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as may be
applicable, for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor men and
women workers. [emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for
the implementation ofDOLE DO No. 13, mandates that the cost of the
14
implementation of the requirements for the construction safety and health of
workers, shall be integrated to the overall project cost.44 The rationale behind
this isto ensure that the living accommodation of the workers is not
substandard and is strictly compliant with the DOLE’s OSH criteria.
As part of the project cost that construction companies already charge to their
clients, the value of the housing of their workers cannot be charged again to
their employees’ salaries. Our Haus cannot pass the burden of the OSH costs of
its construction projects to its employees by deducting it as facilities. This is Our
Haus’ obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it must still pass
the purpose testset by jurisprudence. Under this test, if a benefit or privilege
granted to the employee is clearly for the employer’s convenience, it will not
be considered as a facility but a supplement.45 Here, careful consideration is
given to the nature of the employer’s business in relation to the work
performed by the employee. This test is used to address inequitable situations
wherein employers consider a benefit deductible from the wages even if the
factual circumstances show that it clearly redounds to the employers’ greater
advantage.
While the rules serve as the initial test in characterizing a benefit as a facility,
the purpose test additionally recognizes that the employer and the employee
do not stand at the same bargaining positions on benefits that must or must
not formpart of an employee’s wage. In the ultimate analysis, the purpose test
seeks to prevent a circumvention of the minimum wage law.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be deducted from the
employees’ wages but not the value of supplements. Facilities include articles
or services for the benefit of the employee or his family but exclude tools of
the trade or articles or services primarily for the benefit of the employer or
necessary to the conduct of the employer’s business.47
The law also prescribes that the computation of wages shall exclude whatever
benefits, supplementsor allowances given to employees. Supplements are paid
to employees on top of their basic pay and are free of charge.48 Since it does
not form part of the wage, a supplement’s value may not be includedin the
determination of whether an employer complied with the prescribed minimum
wage rates.
In the present case, the board and lodging provided by Our Haus cannot be
categorized asfacilities but as supplements. In SLL International Cables
Specialist v. National Labor Relations Commission,49 this Court was confronted
with the issue on the proper characterization of the free board and lodging
provided by the employer. We explained:
The Court, at this point, makes a distinction between "facilities" and
"supplements". It is of the view that the food and lodging, or the electricity and
water allegedly consumed by private respondents in this case were not
facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big
Wedge Co., the two terms were distinguished from one another in this wise:
"Supplements", therefore, constitute extra remuneration or special privileges
or benefits given to or received by the laborers overand above their ordinary
earnings or wages. "Facilities", on the other hand, are items of expense
necessary for the laborer's and his family's existence and subsistence so thatby
express provision of law (Sec. 2[g]), they form part of the wage and when
furnished by the employer are deductible therefrom, since if they are not so
furnished, the laborer would spend and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an
extra remuneration above and over his basic or ordinary earning or wage is
supplement; and when said benefit or privilege is part of the laborers' basic
wages, it is a facility. The distinction lies not so much in the kind of benefit or
item (food, lodging, bonus or sick leave) given, but in the purpose for which it is
given.In the case at bench, the items provided were given freely by SLLfor the
purpose of maintaining the efficiency and health of its workers while they were
working attheir respective projects.50
15
Ultimately, the real difference lies not on the kind of the benefit but on the
purpose why it was given by the employer. If it is primarily for the employee’s
gain, then the benefit is a facility; if its provision is mainly for the employer’s
advantage, then it is a supplement. Again, this is to ensure that employees are
protected in circumstances where the employer designates a benefit as
deductible from the wages even though it clearly works to the employer’s
greater convenience or advantage.
Under the purpose test, substantial consideration must be given to the nature
of the employer’s business inrelation to the character or type of work
performed by the employees involved.
Our Haus is engaged in the construction business, a laborintensive enterprise.
The success of its projects is largely a function of the physical strength, vitality
and efficiency of its laborers. Its business will be jeopardized if its workers are
weak, sickly, and lack the required energy to perform strenuous physical
activities. Thus, by ensuring that the workers are adequately and well fed, the
employer is actually investing on its business.
Unlike in office enterprises where the work is focused on desk jobs, the
construction industry relies heavily and directly on the physical capacity and
endurance of its workers. This is not to say that desk jobs do not require muscle
strength; wesimply emphasize that in the construction business, bulk of the
work performed are strenuous physical activities.
Moreover, in the construction business, contractors are usually faced with the
problem ofmeeting target deadlines. More often than not, work is performed
continuously, day and night, in order to finish the project on the designated
turn-over date. Thus, it will be more convenient to the employer if itsworkers
are housed near the construction site to ensure their ready availability during
urgent or emergency circumstances. Also, productivity issues like tardiness and
unexpected absences would be minimized. This observation strongly bears in
the present case since three of the respondents are not residents of the
National Capital Region. The board and lodging provision might have been a
substantial consideration in their acceptance of employment in a place distant
from their provincial residences.
Based on these considerations, we conclude that even under the purpose test,
the subsidized meals and free lodging provided by Our Haus are actually
supplements. Although they also work to benefit the respondents, an analysis
of the nature of these benefits in relation to Our Haus’ business shows that
they were given primarily for Our Haus’ greater convenience and advantage. If
weighed on a scale, the balance tilts more towards Our Haus’ side. Accordingly,
their values cannot be considered in computing the total amount of the
respondents’ wages. Under the circumstances, the dailywages paid to the
respondents are clearly below the prescribed minimum wage rates in the years
2007-2010.
b. The provision of deductible facilities must be voluntarily accepted in writing
by the employee
In Mayon Hotel, we reiterated that a facility may only be deducted from the
wage if the employer was authorized in writingby the concerned
employee.51 As it diminishes the take-home pay of an employee, the deduction
must be with his express consent.
Again, in the motion for reconsideration with the NLRC, Our Haus belatedly
submitted five kasunduans, supposedly executed by the respondents,
containing their conformity to the inclusion of the values of the meals and
housing to their total wages. Oddly, Our Haus only offered these documents
when the NLRC had already ruled that respondents did not accomplish any
written authorization, to allow deduction from their wages. These five
kasunduans were also undated, making us wonder if they had reallybeen
executed when respondents first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus’ four employees, it
was not mentioned that they also executed a kasunduanfor their board and
lodging benefits. Because of these surrounding circumstances and the
suspicious timing when the five kasunduanswere submitted as evidence, we
agree withthe CA that the NLRC committed no grave abuse of discretion in
disregarding these documents for being self serving.
c. The facility must be charged at a fair and reasonable value
16
Our Haus admitted that it deducted the amount of P290.00 per week from
each of the respondents for their meals. But it now submits that it did not
actually withhold the entire amount as it did not figure in the computation the
money it expended for the salary of the cook, the water, and the LPG used for
cooking, which amounts to P249.40 per week per person. From these, it
appears that the total meal expense per week for each person
is P529.40,making Our Haus’ P290.00 deduction within the 70% ceiling
prescribed by the rules.
However, Our Haus’ valuation cannotbe plucked out of thin air. The valuation
of a facility must besupported by relevant documents such as receipts and
company records for it to be considered as fair and reasonable. In Mabeza, we
noted:
Curiously, in the case at bench, the only valuations relied upon by the labor
arbiter in his decision were figures furnished by the private respondent's own
accountant, without corroborative evidence.On the pretext that records prior
to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he
could have, as has been pointedout in the Solicitor General's manifestation,
"secured certified copies thereof from the nearest regional office of the
Department of Labor, the SSS or the BIR".52 [emphasis ours]
In the present case, Our Haus never explained how it came up with the valuesit
assigned for the benefits it provided; it merely listed its supposed expenses
without any supporting document. Since Our Haus is using these additional
expenses (cook’s salary, water and LPG) to support its claim that it did not
withhold the full amount of the meals’ value, Our Haus is burdened to present
evidence to corroborate its claim. The records however, are bereft of any
evidence to support Our Haus’ meal expense computation. Eventhe value it
assigned for the respondents’ living accommodations was not supported by any
documentary evidence. Without any corroborative evidence, it cannot be said
that Our Haus complied withthis third requisite.
A claim not raised in the pro forma complaint may still beraised in the position
paper.
Our Haus questions the respondents’ entitlement to SIL pay by pointing out
that this claim was not included in the pro forma complaint filed with the NLRC.
However, we agree with the CA that such omission does not bar the labor
tribunals from touching upon this cause of action since this was raised and
discussed inthe respondents’ position paper. In Samar-Med Distribution v.
National Labor Relations Commission,53 we held:
Firstly, petitioner’s contention that the validity of Gutang’s dismissal should not
be determined because it had not been included in his complaint before the
NLRC is bereft of merit. The complaint of Gutang was a mere checklist of
possible causes of action that he might have against Roleda. Such manner of
preparing the complaint was obviously designed to facilitate the filing of
complaints by employees and laborers who are thereby enabled to expediently
set forth their grievances in a general manner. But the non-inclusion in the
complaint of the issue on the dismissal did not necessarily mean that the
validity of the dismissal could not be an issue.The rules of the NLRC require the
submission of verified position papers by the parties should they fail to agree
upon an amicable settlement, and bar the inclusion of any cause of action not
mentioned in the complaint or position paper from the time of their
submission by the parties. In view of this, Gutang’s cause of action should be
ascertained not from a reading of his complaint alone but also from a
consideration and evaluation of both his complaint and position paper.54
The respondents’ entitlement to the other monetary benefits
Generally a party who alleges payment as a defense has the burden of proving
it.Particularly in labor cases, the burden of proving payment of monetary claims
rests on the employeron the reasoning that the pertinent personnel files,
payrolls, records, remittances and other similar documents — which will show
that overtime, differentials, service incentive leave and other claims of workers
have been paid — are not in the possession of the worker but in the custody
and absolute control of the employer.55
Unfortunately, records will disclose the absence of any credible document
which will show that respondents had been paid their 13th month pay, holiday
and SIL pays. Our Haus merely presented a handwritten certification from its
administrative officer that its employees automatically become entitled to five
17
days of service incentive leave as soon as they pass probation. This certification
was not even subscribed under oath. Our Haus could have at least submitted
its payroll or copies of the pay slips of respondents to show payment of these
benefits. However, it failed to do so.

Respondents are entitled to attorney’s fees.

Finally, we affirm that respondents are entitled to attorney’s fees. Our Haus’
asserts that respondents’ availment of free legal services from the PAO
disqualifies them from such award. We find this untenable.

It is settled that in actions for recovery of wages or where an employee was

forced to litigate and, thus, incur expenses to protect his rights and interest,
the award of attorney's fees is legally and morally justifiable.56Moreover, under
the PAO Law or Republic Act No. 9406, the costs of the suit, attorney's fees and
contingent fees imposed upon the adversary of the PAO clients after a
successful litigation shall be deposited in the National Treasury as trust fund
and shall be disbursed for special allowances of authorized officials and lawyers
of the PAO.57

Thus, the respondents are still entitled to attorney's fees. The attorney's fees
awarded to them shall be paid to the PAO. It serves as a token recompense to G.R. No. L-50999 March 23, 1990. JOSE SONGCO, ROMEO CIPRES, and
the PAO for its provision of free legal services to litigants who have no means AMANCIO MANUEL, petitioners, vs NATIONAL LABOR RELATIONS
of hiring a private lawyer. COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO AGUAS, and F.E.
ZUELLIG (M), INC., respondents.
WHEREFORE, in light of these considerations, we conclude that the Court of
Appeals correctly found that the National Labor Relations Commission did not MEDIALDEA, J.:
abuse its discretion in its decision of July 20, 2011 and Resolution of December
2, 2011.1âwphi1 Consequently we DENY the petition and AFFIRM the Court of This is a petition for certiorari seeking to modify the decision of the National
Appeals' decision dated May 7, 2012 and resolution dated November 27, 2012 Labor Relations Commission in NLRC Case No. RB-IV-20840-78-T entitled, "Jose
in CA-G.R. SP No. 123273. No costs. Songco and Romeo Cipres, Complainants-Appellants, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee" and NLRC Case No. RN- IV-20855-78-T
SO ORDERED. entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee," which dismissed the appeal of petitioners herein and in
effect affirmed the decision of the Labor Arbiter ordering private respondent to

18
pay petitioners separation pay equivalent to their one month salary (exclusive
of commissions, allowances, etc.) for every year of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed
with the Department of Labor (Regional Office No. 4) an application seeking
clearance to terminate the services of petitioners Jose Songco, Romeo Cipres,
and Amancio Manuel (hereinafter referred to as petitioners) allegedly on the
ground of retrenchment due to financial losses. This application was
seasonably opposed by petitioners alleging that the company is not suffering
from any losses. They alleged further that they are being dismissed because of
their membership in the union. At the last hearing of the case, however,
petitioners manifested that they are no longer contesting their dismissal. The
parties then agreed that the sole issue to be resolved is the basis of the
separation pay due to petitioners. Petitioners, who were in the sales force of
Zuellig received monthly salaries of at least P40,000. In addition, they received
commissions for every sale they made.
The collective Bargaining Agreement entered into between Zuellig and F.E.
Zuellig Employees Association, of which petitioners are members, contains the
following provision (p. 71, Rollo):
ARTICLE XIV — Retirement Gratuity
Section l(a)-Any employee, who is separated from employment due to old
age, sickness, death or permanent lay-off not due to the fault of said
employee shall receive from the company a retirement gratuity in an
amount equivalent to one (1) month's salary per year of service. One
month of salary as used in this paragraph shall be deemed equivalent to
the salary at date of retirement; years of service shall be deemed
equivalent to total service credits, a fraction of at least six months being
considered one year, including probationary employment. (Emphasis
supplied)
On the other hand, Article 284 of the Labor Code then prevailing provides:
Art. 284. Reduction of personnel. — The termination of employment of any
employee due to the installation of labor saving-devices, redundancy,
retrenchment to prevent losses, and other similar causes, shall entitle the
employee affected thereby to separation pay. In case of termination due to
the installation of labor-saving devices or redundancy, the separation pay
shall be equivalent to one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and other similar causes, the separation
pay shall be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year. (Emphasis
supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the
Labor Code provide:
Sec. 9(b). Where the termination of employment is due to retrechment
initiated by the employer to prevent losses or other similar causes, or
where the employee suffers from a disease and his continued employment
is prohibited by law or is prejudicial to his health or to the health of his co-
employees, the employee shall be entitled to termination pay equivalent at
least to his one month salary, or to one-half month pay for every year of
service, whichever is higher, a fraction of at least six (6) months being
considered as one whole year.
Sec. 10. Basis of termination pay. — The computation of the
termination pay of an employee as provided herein shall be
based on his latest salary rate, unless the same was reduced by
the employer to defeat the intention of the Code, in which case
the basis of computation shall be the rate before its deduction.
(Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion
of which reads (p. 78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent should be as it is
hereby, ordered to pay the complainants separation pay
19
 equivalent to their one month salary (exclusive of commissions,
allowances, etc.) for every year of service that they have
worked with the company.
SO ORDERED.
The appeal by petitioners to the National Labor Relations Commission was
dismissed for lack of merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary
Abandonment and Withdrawal of Petition dated April 7, 1980 filed by
petitioner Romeo Cipres, based on the ground that he wants "to abide by the
decision appealed from" since he had "received, to his full and complete
satisfaction, his separation pay," resolved to dismiss the petition as to him.
The issue is whether or not earned sales commissions and allowances should
be included in the monthly salary of petitioners for the purpose of computation
of their separation pay.
The petition is impressed with merit.
Petitioners' position was that in arriving at the correct and legal amount of
separation pay due them, whether under the Labor Code or the CBA, their
basic salary, earned sales commissions and allowances should be added
together. They cited Article 97(f) of the Labor Code which includes commission
as part on one's salary, to wit;
(f) 'Wage' paid to any employee shall mean the remuneration
or earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or
to be done, or for services rendered or to be rendered, and
includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. 'Fair
reasonable value' shall not include any profit to the employer
or to any person affiliated with the employer.
Zuellig argues that if it were really the intention of the Labor Code as well as its
implementing rules to include commission in the computation of separation
pay, it could have explicitly said so in clear and unequivocal terms.
Furthermore, in the definition of the term "wage", "commission" is used only
as one of the features or designations attached to the word remuneration or
earnings.
Insofar as the issue of whether or not allowances should be included in the
monthly salary of petitioners for the purpose of computation of their
separation pay is concerned, this has been settled in the case of Santos v. NLRC,
et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where We ruled that
"in the computation of backwages and separation pay, account must be taken
not only of the basic salary of petitioner but also of her transportation and
emergency living allowances." This ruling was reiterated in Soriano v. NLRC, et
al., G.R. No. 75510, October 27, 1987, 155 SCRA 124 and recently, in Planters
Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989.
We shall concern ourselves now with the issue of whether or not earned sales
commission should be included in the monthly salary of petitioner for the
purpose of computation of their separation pay.
Article 97(f) by itself is explicit that commission is included in the definition of
the term "wage". It has been repeatedly declared by the courts that where the
law speaks in clear and categorical language, there is no room for
interpretation or construction; there is only room for application (Cebu
Portland Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August 22,
1968, 24 SCRA 708; Gonzaga v. Court of Appeals, G.R.No. L-2 7455, June
28,1973, 51 SCRA 381). A plain and unambiguous statute speaks for itself, and
any attempt to make it clearer is vain labor and tends only to obscurity. How
ever, it may be argued that if We correlate Article 97(f) with Article XIV of the
Collective Bargaining Agreement, Article 284 of the Labor Code and Sections
20
9(b) and 10 of the Implementing Rules, there appears to be an ambiguity. In
this regard, the Labor Arbiter rationalized his decision in this manner (pp. 74-
76, Rollo):
The definition of 'wage' provided in Article 96 (sic) of the Code
can be correctly be (sic) stated as a general definition. It is
'wage ' in its generic sense. A careful perusal of the same does
not show any indication that commission is part of salary. We
can say that commission by itself may be considered a wage.
This is not something novel for it cannot be gainsaid that
certain types of employees like agents, field personnel and
salesmen do not earn any regular daily, weekly or monthly
salaries, but rely mainly on commission earned.
Upon the other hand, the provisions of Section 10, Rule 1, Book
VI of the implementing rules in conjunction with Articles 273
and 274 (sic) of the Code specifically states that the basis of the
termination pay due to one who is sought to be legally
separated from the service is 'his latest salary rates.
x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly pay or
monthly salary'.
The above terms found in those Articles and the particular
Rules were intentionally used to express the intent of the
framers of the law that for purposes of separation pay they
mean to be specifically referring to salary only.
.... Each particular benefit provided in the Code and other
Decrees on Labor has its own pecularities and nuances and
should be interpreted in that light. Thus, for a specific
provision, a specific meaning is attached to simplify matters
that may arise there from. The general guidelines in (sic) the
formation of specific rules for particular purpose. Thus, that
what should be controlling in matters concerning termination
pay should be the specific provisions of both Book VI of the
Code and the Rules. At any rate, settled is the rule that in
matters of conflict between the general provision of law and
that of a particular- or specific provision, the latter should
prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the
implementing rules, it could be deduced that wage is used in its
generic sense and obviously refers to the basic wage rate to be
ascertained on a time, task, piece or commission basis or other
method of calculating the same. It does not, however, mean
that commission, allowances or analogous income necessarily
forms part of the employee's salary because to do so would
lead to anomalies (sic), if not absurd, construction of the word
"salary." For what will prevent the employee from insisting that
emergency living allowance, 13th month pay, overtime, and
premium pay, and other fringe benefits should be added to the
computation of their separation pay. This situation, to our
mind, is not the real intent of the Code and its rules.
We rule otherwise. The ambiguity between Article 97(f), which defines the
term 'wage' and Article XIV of the Collective Bargaining Agreement, Article 284
of the Labor Code and Sections 9(b) and 10 of the Implementing Rules, which
mention the terms "pay" and "salary", is more apparent than real. Broadly, the
word "salary" means a recompense or consideration made to a person for his
pains or industry in another man's business. Whether it be derived from
"salarium," or more fancifully from "sal," the pay of the Roman soldier, it
carries with it the fundamental idea of compensation for services rendered.
Indeed, there is eminent authority for holding that the words "wages" and
"salary" are in essence synonymous (Words and Phrases, Vol. 38 Permanent
Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481;
38 Am. Jur. 496). "Salary," the etymology of which is the Latin word "salarium,"
is often used interchangeably with "wage", the etymology of which is the
Middle English word "wagen". Both words generally refer to one and the same
21
meaning, that is, a reward or recompense for services performed. Likewise,
"pay" is the synonym of "wages" and "salary" (Black's Law Dictionary, 5th Ed.).
Inasmuch as the words "wages", "pay" and "salary" have the same meaning,
and commission is included in the definition of "wage", the logical conclusion,
therefore, is, in the computation of the separation pay of petitioners, their
salary base should include also their earned sales commissions.
The aforequoted provisions are not the only consideration for deciding the
petition in favor of the petitioners.
We agree with the Solicitor General that granting, in gratia argumenti, that the
commissions were in the form of incentives or encouragement, so that the
petitioners would be inspired to put a little more industry on the jobs
particularly assigned to them, still these commissions are direct remuneration
services rendered which contributed to the increase of income of Zuellig .
Commission is the recompense, compensation or reward of an agent,
salesman, executor, trustees, receiver, factor, broker or bailee, when the same
is calculated as a percentage on the amount of his transactions or on the profit
to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217
Md. 123, 141 A.2d 749, 750). The nature of the work of a salesman and the
reason for such type of remuneration for services rendered demonstrate
clearly that commission are part of petitioners' wage or salary. We take judicial
notice of the fact that some salesmen do not receive any basic salary but
depend on commissions and allowances or commissions alone, are part of
petitioners' wage or salary. We take judicial notice of the fact that some
salesman do not received any basic salary but depend on commissions and
allowances or commissions alone, although an employer-employee relationship
exists. Bearing in mind the preceeding dicussions, if we adopt the opposite
view that commissions, do not form part of wage or salary, then, in effect, We
will be saying that this kind of salesmen do not receive any salary and
therefore, not entitled to separation pay in the event of discharge from
employment. Will this not be absurd? This narrow interpretation is not in
accord with the liberal spirit of our labor laws and considering the purpose of
separation pay which is, to alleviate the difficulties which confront a dismissed
employee thrown the the streets to face the harsh necessities of life.
Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary
base that should be used in computing the separation pay, We held that:
The commissions also claimed by petitioner ('override
commission' plus 'net deposit incentive') are not properly
includible in such base figure since such commissions must be
earned by actual market transactions attributable to petitioner.
Applying this by analogy, since the commissions in the present case were
earned by actual market transactions attributable to petitioners, these should
be included in their separation pay. In the computation thereof, what should
be taken into account is the average commissions earned during their last year
of employment.
The final consideration is, in carrying out and interpreting the Labor Code's
provisions and its implementing regulations, the workingman's welfare should
be the primordial and paramount consideration. This kind of interpretation
gives meaning and substance to the liberal and compassionate spirit of the law
as provided for in Article 4 of the Labor Code which states that "all doubts in
the implementation and interpretation of the provisions of the Labor Code
including its implementing rules and regulations shall be resolved in favor of
labor" (Abella v. NLRC, G.R. No. 71812, July 30,1987,152 SCRA 140; Manila
Electric Company v. NLRC, et al., G.R. No. 78763, July 12,1989), and Article 1702
of the Civil Code which provides that "in case of doubt, all labor legislation and
all labor contracts shall be construed in favor of the safety and decent living for
the laborer.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the
respondent National Labor Relations Commission is MODIFIED by including
allowances and commissions in the separation pay of petitioners Jose Songco
and Amancio Manuel. The case is remanded to the Labor Arbiter for the proper
computation of said separation pay.
SO ORDERED.
22

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
s.
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
23
 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:
Employers already paying their employers a 13-month pay or more in
calendar year or is equivalent at the time of this issuance;
xxx xxx xxx
e) Employers of those who are paid on purely commission, boundary, or
task basis, and those who are paid a fixed amount for performing a specific
work, irrespective of the time consumed in the performance thereof,
except where the workers are paid on piece-rate basis in which case the
employer shall be covered by this issuance insofar as such workers are
concerned.
xxx xxx xxx
The term "its equivalent" as used in paragraph (c) shall include Christmas
bonus, mid-year bonus, profit-sharing payments and other cash bonuses
amounting to not less than 1/12th of the basic salary but shall not include
cash and stock dividends, cost of 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.
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.
24
 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
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 3directing 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.
25
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 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.
26
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 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.
27
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
28
"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.

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.

G.R. No. 81176 April 19, 1989

29
PLASTIC TOWN CENTER CORPORATION, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION AND NAGKAKAISANG LAKAS NG MANGGAGAWA
(NLM)-KATIPUNAN, respondents.
An issue in this petition is the interpretation of certain provisions of the
Collective Bargaining Agreement (CBA) between Plastic Town Center
Corporation and the respondent union.
On September 7,1984, the respondent Nagkakaisang Lakas ng Manggagawa
(NLM)-Katipunan filed a complaint dated August 30, 1984 charging the
petitioner with:
a. Violation of Wage Order No. 5, by crediting the Pl.00 per day increase in the
CBA as part of the compliance with said Wage Order No. 5, and y instead of
thirty (30) days equivalent to one (1) month as gratuity pay to resigning
employees. (p. 3, Rollo)
b. Unfair labor practice thru violation of the CBA by giving only twenty-six (26)
days pay instead of thirty (30) days equivalent to one (1) month as gratuity pay
to resigning employees. (p. 3, Rollo)
On July 25,1985, Labor Arbiter Ruben Alberto ruled in favor of Plastic Town
Center Corporation. The pertinent portions of the decision read as follows:
... In this particular case, the P1.00 increase was ahead of the
implementation of the CBA provision or could be said was
advantageous to complainant members, chronologically stated.
For the above cogent reason we can not fault respondent for
its refusal to grant a second Pl.00 increase on July 1, 1984.
Complainant sustains the view that a month salary pertains to
salary for 30 days, citing the provision of the Civil Code on the
matter.
Upon the other hand, respondents understanding of the
controverted provision is pragmatic or practical. Since the
workers are paid on daily basis, it computed the salary received
by the worker in a month as a month salary. In this case the
salary of 26 days is a month salary.
We agree with the respondent's interpretation. As daily wage
earner, there would be no instance that the worker would
work for 30 days a month since work does not include Sunday
or rest days. In the mind of the daily worker in a month he
could not expect a month salary exceeding the equivalent of 26
days service. To award the daily wage earner pay for more than
26 days is pay for days he does not work. But as regards the
monthly- paid workers he expects his monthly salary to be
fixed which is a month salary. Hence, a distinction separates
him with the daily wages.
IN VIEW OF THE FOREGOING, the unfair labor practice charge
should be, as it is hereby dismissed for lack of legal and factual
basis. (pp- 56-57, Rollo)
On August 30, 1987, the respondent labor union appealed to the National
Labor Relations Commission.
On June 30, 1987, the NLRC rendered the questioned decision with the
following dispositive portion:
WHEREFORE, the appealed decision is hereby reversed and the
respondent is ordered to grant Pl.00 increase for July 1, 1984
and the equivalent of thirty days salary in gratuity pay, as
required by its CBA with the complainants. (p. 39, Rollo)
The motion for reconsideration of said decision was denied on December 7,
1987. Hence, this petition.
The applicable provisions of the CBA read as follows:
30
 Section 1 -The company agrees to grant permanent regular
rank and file workers covered by this Agreement who have
rendered at least one year of continuous service, across-the-
board wage increases as follows:
a. Effective 1 July, 1983-Pl.00 per worked day;
b Effective 1 July, 1984-Pl.00 per worked day;
c. Effective 1 July, 1985-Pl.00 per worked day;
Section 3- It is agreed and understood by the parties herein
that the aforementioned increase in pay shall be credited
against future allowances or wage orders hereinafter
implemented or enforced by virtue of Letters of Instructions,
Decrees and other labor legislation. (pp. 36-37, Rollo)
Wage Order No. 4 provided for the integration of the mandatory emergency
cost of living allowances (ECOLA) under Presidential Decrees 1614,1634,1678
and 1713 into the basic pay of all covered workers effective May 1, 1984. It
further provided that after the integration, the applicable statutory minimum
daily wage rate must be complied with, which in this case is P32.00.
The petitioner incurred a deficiency of P1.00 in the wage rate after integrating
the ECOLA with basic pay. So the petitioner advanced to May 1, 1984 or two
months earlier the implementation of the one-peso wage increase provided for
in the CBA starting July 1, 1984 for the benefit of the workers.
The petitioner argues that it did not credit the Pl.00 per day across the board
increase under the CBA as compliance with Wage Order No. 5 implemented on
June 16,1984 since it gave an additional P3.00 per day to the basic salary
pursuant to said order. It, however, credited the Pl.00 a day increase to the
requirement under Wage Order No. 4 to which the private respondents
allegedly did not object.
The other controverted provision of the CBA reads:
Section 2. It is the intention of both the COMPANY and the
UNION, that the grant of gratuity pay by the COMPANY herein
set forth is to reward employees and laborers, who have
rendered satisfactory and efficient service with the COMPANY.
THUS, in case of voluntary resignation, which is not covered by
Section 1 above, the COMPANY nevertheless agrees to grant a
gratuity pay to the resigning employee or laborer as follows:
1. Two to Five years of service : 1 month salary
2. Six (6) to Ten (10) yrs. of : Two and One-half (21/2)service
months salary
3 Eleven (ll) to Fifteen yrs. of service : 4 months salary
4 Sixteen (16) to twenty yrs. of : 5 months
5 Twenty one yrs. of service and above : Twelve (12) months
salary.
(p. 38, Rollo)
The petitioner alleges that one month salary for daily paid workers should be
computed on the basis of twenty-six (26) days and not thirty (30) days since
daily wage workers do not work every day of the month including Sundays and
holidays.
The petition is devoid of merit.
The subject for interpretation in this petition for review is not the Labor Code
or its implementing rules and regulations but the provisions of the collective
bargaining agreement entered into by management and the labor union. As a
contract, it constitutes the law between the parties (Fegurin v. National Labor
Relations Commission, 120 SCRA 910 [1983]) and in interpreting contracts, the
rules on contract must govern.
Contracts which are not ambiguous are to be interpreted according to their
literal meaning and should not be interpreted beyond their obvious
intendment (Herrera v. Petrophil Corp., 146 SCRA 385 [1986]).
31
In the case at bar, the petitioner alleges that on May 1, 1984, it granted a Pl.00
increase pursuant to Wage Order No. 4 which in consonance with Section 3 of
the CBA was to be credited to the July 1, 1984 increase under the CBA. It was,
therefore, a July increase. Section 3 of the CBA, however, clearly states that
CBA granted increases shall be credited against future allowances or wage
orders. Thus, the CBA increase to be effected on July 1, 1984 can not be
retroactively applied to mean compliance with Wage Order No. 4 which took
effect on May 1, 1984. The words of the contract are plain and readily
understandable so we find no need for any further construction or
interpretation petition (Dihiansan v. Court of Appeals, 153 SCRA 712 [1987]).
Furthermore, we agree with the NLRC as it held:
It is our finding that the respondent is bound by the CBA to
grant an increase on July 1, 1984.
In this case, between July 1, 1983 and July 1, 1984, there were
actually two increases mandated by Wage Order No. 4 on May
1, 1984 and by Wage Order No. 5 on June 16,1984. The fact
that the respondent had complied with Wage Order No. 4 and
Wage Order No. 5 does not relieve it of its obligation to grant
the P1.00 increase under the CBA. (pp. 37-38, Rollo)
With regards to the second issue, the petitioner maintains that under the
principle of "fair day's wage for fair day's labor", gratuity pay should be
computed on the basis of 26 days for one month salary considering that the
employees are daily paid.
We find no abuse of discretion on the part of the NLRC in granting gratuity pay
equivalent to one month or 30 days salary .
We quote with favor the NLRC decision which states:
... To say that awarding the daily wage earner salary for more
than 26 days is paying him for days he does not work misses
the point entirely. The issue here is not payment for days
worked but payment of gratuity pay equivalent to one month
or 30 days salary. (p. 29, Rollo)
Looking into the definition of gratuity, we find the following in
Moreno's Philippine Law Dictionary, to wit:
Something given freely, or without recompense; a gift;
something voluntarily given in return for a favor or services; a
bounty; a tip. -Pirovano v. De la Rama Steamship Co., 96 Phil.
357.
That paid to the beneficiary for past services rendered purely
out of the generosity of the giver or grantor.-Peralta v. Auditor
General, 100 Phil. 1054.
Salary or compensation. The very term 'gratuity' differs from
the words 'salary' or 'compensation' in leaving the amount
thereof, within the limits of reason, to the arvitrament of the
giver.-Herranz & Garriz v. Barbudo,12 Phil. 9.
From the foregoing, gratuity pay is therefore, not intended to pay a worker for
actual services rendered. It is a money benefit given to the workers whose
purpose is "to reward employees or laborers, who have rendered satisfactory
and efficient service to the company." (Sec. 2, CBA) While it may be enforced
once it forms part of a contractual undertaking, the grant of such benefit is not
mandatory so as to be considered a part of labor standard law unlike the salary,
cost of living allowances, holiday pay, leave benefits, etc., which are covered by
the Labor Code. Nowhere has it ever been stated that gratuity pay should be
based on the actual number of days worked over the period of years forming
its basis. We see no point in counting the number of days worked over a ten-
year period to determine the meaning of "two and one- half months' gratuity."
Moreover any doubts or ambiguity in the contract between management and
the union members should be resolved in the light of Article 1702 of the Civil
Code that:
32
 In case of doubt, all labor legislation and all labor contracts
shall be construed in favor of the safety and decent living for
the laborer.

This is also in consonance with the principle enunciated in the Labor Code that
all doubts should be resolved in favor of the worker.

The Civil Code provides that when months are not designated by name, a
month is understood to be thirty (30) days. The provision applies under the
circumstances of this case.

In view of the foregoing, the public respondent did not act with grave abuse of
discretion when it rendered the assailed decision which is in accordance with
law and jurisprudence.

WHEREFORE, the petition is hereby DISMISSED for lack of merit.

SO ORDERED.

33