WAGES:

G.R. No. 85073 August 24, 1993

DAVAO FRUITS CORPORATION, petitioner,
vs.
ASSOCIATED LABOR UNIONS (ALU) for in behalf of all the rank-and-file workers/employees of DAVAO FRUITS CORPORATION and NATIONAL
LABOR RELATIONS COMMISSION, respondents.
Dominguez & Paderna Law Offices for petitioners.
The Solicitor General for public respondents.

QUIASON, J.:
This is a petition for certiorari to set aside the resolution of the National Labor Relations Commission (NLRC), dismissing for lack of merit petitioner's appeal from the
decision of the Labor Arbiter in NLRC Case No. 1791-MC-X1-82.
On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the rank-and-file workers and employees of petitioner, filed a complaint
(NLRC Case No. 1791-MC-XI-82) before the Ministry of Labor and Employment, Regional Arbitration Branch XI, Davao City, against petitioner, for "Payment of the
Thirteenth-Month Pay Differentials." Respondent ALU sought to recover from petitioner the thirteenth month pay differential for 1982 of its rank-and-file employees,
equivalent to their sick, vacation and maternity leaves, premium for work done on rest days and special holidays, and pay for regular holidays which petitioner, allegedly
in disregard of company practice since 1975, excluded from the computation of the thirteenth month pay for 1982.
In its answer, petitioner claimed that it erroneously included items subject of the complaint in the computation of the thirteenth month pay for the years prior to 1982,
upon a doubtful and difficult question of law. According to petitioner, this mistake was discovered only in 1981 after the promulgation of the Supreme Court decision in
the case of San Miguel Corporation v. Inciong (103 SCRA 139).
A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of respondent ALU. The dispositive portion of the decision reads as follows:
WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered ordering respondent to pay the 1982 13th month pay differential to all its
rank-and-file workers/employees herein represented by complainant Union (Rollo, p. 32).
Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said decision accordingly dismissed the appeal for lack of merit.
Petitioner elevated the matter to this Court in a petition for review under Rule 45 of the Revised Rules of Court. This error notwithstanding and in the interest of justice,
this Court resolved to treat the instant petition as a special civil action for certiorari under Rule 65 of the Revised Rules of Court (P.D. No. 1391, Sec. 5; Rules
Implementing P.D. No. 1391, Rule II, Sec. 7; Cando v. National Labor Relations Commission, 189 SCRA 666 [1990]: Pearl S. Buck Foundation, Inc. v. National Labor
Relations Commission, 182 SCRA 446 [1990]).
The crux of the present controversy is whether in the computation of the thirteenth month pay given by employers to their employees under P.D.
No. 851, payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays may be excluded in
the computation and payment thereof, regardless of long-standing company practice.
Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay their employees a thirteenth month pay. How this pay shall be
computed is set forth in Section 2 of the "Rules and Regulations Implementing Presidential Decree No. 851," thus:
SECTION 2. . . .
(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 renumerations or earnings paid by an employer to an employee for services rendered but may not include cost of living allowances
granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary benefits which are not
considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.

The Department of Labor and Employment issued on January 16, 1976 the "Supplementary Rules and Regulations Implementing P.D. No. 851" which in paragraph 4
thereof further defines the term "basic salary," thus:
4. Overtime pay, earnings and other renumerations which are not part of the basic salary shall not be included in the computation of the 13th month pay.
Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to employee, but excludes cost-of-living allowances, profit-sharing payments,
and all allowances and monetary benefits which have not been considered as part of the basic salary of the employee as of December 16, 1975. The exclusion of cost-ofliving allowances and profit sharing payments shows the intention to strip "basic salary" of payments which are otherwise considered as "fringe" benefits. This intention
is emphasized in the catch all phrase "all allowances and monetary benefits which are not considered or integrated as part of the basic salary." Basic salary, therefore
does not merely exclude the benefits expressly mentioned but all payments which may be in the form of "fringe" benefits or allowances (San Miguel Corporation v.
Inciong, supra, at 143-144). In fact, the Supplementary Rules and Regulations Implementing P.D. No. 851 are very emphatic in declaring that overtime pay, earnings
and other renumerations shall be excluded in computing the thirteenth month pay.
In other words, whatever compensation an employee receives for an eight-hour work daily or the daily wage rate in the basic salary. Any compensation or remuneration
other than the daily wage rate is excluded. It follows therefore, that payments for sick, vacation and maternity leaves, premium for work done on rest days special
holidays, as well as pay for regular holidays, are likewise excluded in computing the basic salary for the purpose of determining the thirteen month pay.
Petitioner claims that the mistake in the interpretation of "basic salary" was caused by the opinions, orders and rulings rendered by then Acting Labor Secretary Amado
C. Inciong, expressly including the subject items in computing the thirteenth month pay. The inclusion of these items is clearly not sanctioned under P.D. No. 851, the
governing law and its implementing rules, which speak only of "basis salary" as the basis for determining the thirteenth month pay.
Moreover, whatever doubt arose in the interpretation of P.D. No. 851 was erased by the Supplementary Rules and Regulations which clarified the definition of "basic
salary."
As pointed out in San Miguel Corporation v. Inciong, (supra):
While doubt may have been created by the prior Rules and Regulations and 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 definition of basic salary earnings and other remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules
indicates that what has hitherto been the subject of broad inclusion is now a subject of broad exclusion. The Supplementary Rules and Regulations cure the seeming
tendency of the former rules to include all remunerations and earnings within the definition of basic salary.
The all-embracing phrase "earnings and other remunerations which are deemed not part of the basic salary includes within its meaning payments for sick, vacation, or
maternity leaves, premium for work performed on rest days and special holidays, pay 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 so excluded, it is hard to find any "earnings and other remunerations"
expressly excluded in computation of the 13th month-pay. Then the exclusionary provision would prove to be idle and with purpose.
The "Supplementary Rules and Regulations Implementing P.D. No. 851," which put to rest all doubts in the computation of the thirteenth month pay, was issued by the
Secretary of Labor as early as January 16, 1976, barely one month after the effectivity of P.D. No. 851 and its Implementing Rules. And yet, petitioner computed and
paid the thirteenth month pay, without excluding the subject items therein until 1981. Petitioner continued its practice in December 1981, after promulgation of the
afore-quoted San Miguel decision on February 24, 1981, when petitioner purportedly "discovered" its mistake.
From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its employees' thirteenth month pay, the payments for sick,
vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays. The considerable length of time the questioned
items had been included by petitioner indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake.
A company practice favorable to the employees had indeed been established and the payments made pursuant thereto, ripened into benefits enjoyed by them. And any
benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Section 10 of the Rules
and Regulations Implementing P.D. No. 851, and Article 100 of the labor of the Philippines, which prohibit the diminution or elimination by the employer of the
employees' existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).
Petitioner cannot invoke the principle of solutio indebiti which as a civil law concept that is not applicable in Labor Law. Besides, in solutio indebiti, the obligee is
required to return to the obligor whatever he received from the latter (Civil Code of the Philippines, Arts. 2154 and 2155). Petitioner in the instant case, does not demand
the return of what it paid respondent ALU from 1975 until 1981; it merely wants to "rectify" the error it made over these years by excluding unilaterally from the
thirteenth month pay in 1982 the items subject of litigation. Solutio indebiti, therefore, is not applicable to the instant case.
WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is hereby DISMISSED, and the questioned decision of respondent NLRC is
AFFIRMED accordingly.
COMMISSIONS

G.R. No. 121927 April 22, 1998

ANTONIO W. IRAN (doing business under the name and style of Tones Iran Enterprises), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), GODOFREDO O. PETRALBA, MORENO CADALSO, PEPITO TECSON,
APOLINARIO GOTHONG GEMINA, JESUS BANDILAO, EDWIN MARTIN, CELSO LABIAGA, DIOSDADO GONZALGO, FERNANDO M.
COLINA, respondents.

ROMERO, J.:
Whether or not commissions are included in determining compliance with the minimum wage requirement is the principal issue presented in this petition.
Petitioner Antonio Iran is engaged in softdrinks merchandising and distribution in Mandaue City, Cebu, employing truck drivers who double as salesmen, truck helpers,
and non-field personnel in pursuit thereof. Petitioner hired private respondents Godofredo Petralba, Moreno Cadalso, Celso Labiaga and Fernando Colina as
drivers/salesmen while private respondents Pepito Tecson, Apolinario Gimena, Jesus Bandilao, Edwin Martin and Diosdado Gonzalgo were hired as truck helpers.
Drivers/salesmen drove petitioner's delivery trucks and promoted, sold and delivered softdrinks to various outlets in Mandaue City. The truck helpers assisted in the
delivery of softdrinks to the different outlets covered by the driver/salesmen.
As part of their compensation, the driver/salesmen and truck helpers of petitioner received commissions per case of softdrinks sold at the following rates:
SALESMEN:
Ten Centavos (P0.10) per case of Regular softdrinks.
Twelve Centavos (P0.12) per case of Family Size softdrinks.
TRUCK HELPERS:
Eight Centavos (P0.08) per case of Regular softdrinks.
Ten Centavos (P0.10) per case of Family Size softdrinks.
Sometime in June 1991, petitioner, while conducting an audit of his operations, discovered cash shortages and irregularities allegedly committed by private respondents.
Pending the investigation of irregularities and settlement of the cash shortages, petitioner required private respondents to report for work everyday. They were not
allowed, however, to go on their respective routes. A few days thereafter, despite aforesaid order, private respondents stopped reporting for work, prompting petitioner to
conclude that the former had abandoned their employment. Consequently, petitioner terminated their services. He also filed on November 7, 1991, a complaint for estafa
against private respondents.
On the other hand, private respondents, on December 5, 1991, filed complaints against petitioner for illegal dismissal, illegal deduction, underpayment of wages,
premium pay for holiday and rest day, holiday pay, service incentive leave pay, 13th month pay, allowances, separation pay, recovery of cash bond, damages and
attorney's fees. Said complaints were consolidated and docketed as Rab VII-12-1791-91, RAB VII-12-1825-91 and RAB VII-12-1826-91, and assigned to Labor Arbiter
Ernesto F. Carreon.
The labor arbiter found that petitioner had validly terminated private respondents, there being just cause for the latter's dismissal. Nevertheless, he also ruled that
petitioner had not complied with minimum wage requirements in compensating private respondents, and had failed to pay private respondents their 13th month pay. The
labor arbiter, thus, rendered a decision on February 18, 1993, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Antonio W. Iran to pay the complainants the following:
1. Celso Labiaga P10,033.10
2. Godofredo Petralba 1,250.00
3. Fernando Colina 11,753.10
4. Moreno Cadalso 11,753.10
5. Diosdado Gonzalgo 7,159.04
6. Apolinario Gimena 8,312.24
7. Jesus Bandilao 14,729.50
8. Pepito Tecson. 9,126.55

Attorney's Fees (10%) 74,116.63

of the gross award 7,411.66

GRAND TOTAL AWARD P81,528.29

========
The other claims are dismissed for lack of merit.
SO ORDERED. 1
Both parties seasonably appealed to the NLRC, with petitioner contesting the labor arbiter's refusal to include the commissions he paid to private respondents in
determining compliance with the minimum wage requirement. He also presented, for the first time on appeal, vouchers denominated as 13th month pay signed by
private respondents, as proof that petitioner had already paid the latter their 13th month pay. Private respondents, on the other hand, contested the findings of the labor
arbiter holding that they had not been illegally dismissed, as well as mathematical errors in computing Jesus Bandilao's wage differentials. The NLRC, in its decision of
December 21, 1994, affirmed the validity of private respondent's dismissal, but found that said dismissal did not comply with the procedural requirements for dismissing
employees. Furthermore, it corrected the labor arbiter's award of wage differentials to Jesus Bandilao. The dispositive portion of said decision reads:
WHEREFORE, premises considered, the decision is hereby MODIFIED in that complainant Jesus Bandilao's computation for wage differential is corrected from
P154.00 to P4,550.00. In addition to all the monetary claim (sic) originally awarded by the Labor Arbiter a quo, P1,000.00 is hereby granted to each complainants (sic)
as indemnity fee for failure of respondents to observe procedural due process.
SO ORDERED. 2
Petitioner's motion for reconsideration of said decision was denied on July 31, 1995, prompting him to elevate this case to this Court, raising the following issues:
1. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AND CONTRARY TO LAW AND JURISPRUDENCE IN AFFIRMING
THE DECISION OF THE LABOR ARBITER A QUOEXCLUDING THE COMMISSIONS RECEIVED BY THE PRIVATE RESPONDENTS IN COMPUTING
THEIR WAGES;
2. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION IN FINDING PETITIONER GUILTY OF PROCEDURAL LAPSES IN
TERMINATING PRIVATE RESPONDENTS AND IN AWARDING EACH OF THE LATTER P1,000.00 AS INDEMNITY FEE;
3. THE HONORABLE COMMISSION GRAVELY ERRED IN NOT CREDITING THE ADVANCE AMOUNT RECEIVED BY THE PRIVATE RESPONDENTS AS
PART OF THEIR 13TH MONTH PAY.
The petition is impressed with merit.
The NLRC, in denying petitioner's claim that commissions be included in determining compliance with the minimum wage ratiocinated thus:
Respondent (petitioner herein) insist assiduously that the commission should be included in the computation of actual wages per agreement. We will not fall prey to this
fallacious argument. An employee should receive the minimum wage as mandated by law and that the attainment of the minimum wage should not be dependent on the
commission earned by an employee. A commission is an incentive for an employee to work harder for a better production that will benefit both the employer and the
employee. To include the commission in the computation of wage in order to comply with labor standard laws is to negate the practice that a commission is granted after
an employee has already earned the minimum wage or even beyond it. 3
This holding is unsupported by law and jurisprudence. Article 97(f) of the Labor Code defines wage as follows:
Art. 97(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed
or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee.
xxx xxx xxx (Emphasis supplied)
This definition explicitly includes commissions as part of wages. While commissions are, indeed, incentives or forms of encouragement to inspire employees to put a
little more industry on the jobs particularly assigned to them, still these commissions are direct remunerations for services rendered. In fact, commissions have been
defined as the recompense, compensation or reward of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a
percentage on the amount of his transactions or on the profit to the principal. The nature of the work of a salesman and the reason for such type of remuneration for
services rendered demonstrate clearly that commissions are part of a salesman's wage or salary. 4
Thus, the commissions earned by private respondents in selling softdrinks constitute part of the compensation or remuneration paid to drivers/salesmen and truck helpers
for serving as such, and hence, must be considered part of the wages paid them.

The NLRC asserts that the inclusion of commissions in the computation of wages would negate the practice of granting commissions only after an employee has earned
the minimum wage or over. While such a practice does exist, the universality and prevalence of such a practice is questionable at best. In truth, this Court has taken
judicial notice of the fact that some salesmen do not receive any basic salary but depend entirely on commissions and allowances or commissions alone, although an
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 employee's remuneration cannot fall, not that commissions are excluded from wages in determining compliance with the
minimum wage law. This conclusion is bolstered by Philippine Agricultural Commercial and Industrial Workers Union vs. NLRC, 7 where this Court acknowledged that
drivers and conductors who are compensated purely on a commission basis are automatically entitled to the basic minimum pay mandated by law should said
commissions be less than their basic minimum for eight hours work. It can, thus, be inferred that were said commissions equal to or even exceed the minimum wage, the
employer need not pay, in addition, the basic minimum pay prescribed by law. It follows then that commissions are included in determining compliance with minimum
wage requirements.
With regard to the second issue, it is settled that in terminating employees, the employer must furnish the worker with two written notices before the latter can be legally
terminated: (a) a notice which apprises the employee of the particular acts or omissions for which his dismissal is sought, and (b) the subsequent notice which informs
the employee of the employer's decision to dismiss him. 8 (Emphasis ours) Petitioner asseverates that no procedural lapses were committed by him in terminating private
respondents. In his own words:
. . . when irregularities were discovered, that is, when the misappropriation of several thousands of pesos was found out, the petitioner instructed private respondents to
report back for work and settle their accountabilities but the latter never reported for work. This instruction by the petitioner to report back for work and settle their
accountabilities served as notices to private respondents for the latter to explain or account for the missing funds held in trust by them before they disappeared. 9
Petitioner considers this return-to-work order as equivalent to the first notice apprising the employee of the particular acts or omissions for which his dismissal is sought.
But by petitioner's own admission, private respondents were never told in said notice that their dismissal was being sought, only that they should settle their
accountabilities. In petitioner's incriminating words:
It should be emphasized here that at the time the misappropriation was discovered and subsequently thereafter, the petitioner's first concern was not effecting the
dismissal of private respondents but the recovery of the misappropriated funds thus the latter were advised to report back to work. 10
As above-stated, the first notice should inform the employee that his dismissal is being sought. Its absence in the present case makes the termination of private
respondents defective, for which petitioner must be sanctioned for his non-compliance with the requirements of or for failure to observe due process. 11 The twin
requirements of notice and hearing constitute the essential elements of due process, and neither of these elements can be disregarded without running afoul of the
constitutional guarantee. Not being mere technicalities but the very essence of due process, to which every employee is entitled so as to ensure that the employer's
prerogative to dismiss is not exercised arbitrarily, 12 these requisites must be complied with strictly.
Petitioner makes much capital of private respondents' failure to report to work, construing the same as abandonment which thus authorized the latter's dismissal. As
correctly pointed out by the NLRC, to which the Solicitor General agreed, Section 2 of Book V, Rule XIV of the Omnibus Rules Implementing the Labor Code requires
that in cases of abandonment of work, notice should be sent to the worker's last known address. If indeed private respondents had abandoned their jobs, it was incumbent
upon petitioner to comply with this requirement. This, petitioner failed to do, entitling respondents to nominal damages in the amount of P5,000.00 each, in accordance
with recent jurisprudence, 13 to vindicate or recognize their right to procedural due process which was violated by petitioner.
Lastly, petitioner argues that the NLRC gravely erred when it disregarded the vouchers presented by the former as proof of his payment of 13th month pay to private
respondents. While admitting that said vouchers covered only a ten-day period, petitioner argues that the same should be credited as amounts received by private
respondents as part of their 13th month pay, Section 3(e) of the Rules and Regulations Implementing P.D. No. 851 providing that the employer shall pay the difference
when he pays less than 1/12th of the employee's basic salary. 14
While it is true that the vouchers evidencing payments of 13th month pay were submitted only on appeal, it would have been more in keeping with the directive of
Article 221 15 of the Labor Code for the NLRC to have taken the same into account. 16Time and again, we have allowed evidence to be submitted on appeal, emphasizing
that, in labor cases, technical rules of evidence are not binding. 17 Labor officials should use every and all reasonable means to ascertain the facts in each case speedily
and objectively, without regard to technicalities of law or procedure. 18
It must also be borne in mind that the intent of P.D. No. 851 is the granting of additional income in the form of 13th month pay to employees not as yet receiving the
same and not that a double burden should be imposed on the employer who is already paying his employees a 13th month pay or its equivalent. 19 An employer who
pays less than 1/12th of the employees basic salary as their 13th month pay is only required to pay the difference. 20
The foregoing notwithstanding, the vouchers presented by petitioner covers only a particular year. It does not cover amounts for other years claimed by private
respondents. It cannot be presumed that the same amounts were given on said years. Hence, petitioner is entitled to credit only the amounts paid for the particular year
covered by said vouchers.

WHEREFORE, in view of the foregoing, the decision of the NLRC dated July 31, 1995, insofar as it excludes the commissions received by private respondents in the
determination of petitioner's compliance with the minimum wage law, as well as its exclusion of the particular amounts received by private respondents as part of their
13th month pay is REVERSED and SET ASIDE. This case is REMANDED to the Labor Arbiter for a recomputation of the alleged deficiencies. For non-observance of
procedural due process in effecting the dismissal of private respondents, said decision is MODIFIED by increasing the award of nominal damages to private respondents
from P1,000.00 to P5,000.00 each. No costs.
SO ORDERED.
Facilities
G.R. No. L-5276

March 3, 1953

ATOK-BIG WEDGE MINING CO., INC., petitioner,

vs.
ATOK-BIG WEDGE MUTUAL BENEFIT ASSOCIATION, respondent.
Vicente Hilado, Pedro Lopez and Artemio A. Almendral for petitioner.
Sanidad, Ayson and Casia for respondent.
LABRADOR, J.:
This is an appeal by certiorari against a decision of the Court of Industrial Relations. On September 4, 1950, demand was submitted to petitioner by respondent union
through its officers for various concession, among which were (a) an increase of P0.50 in wages, (b) commutation of sick and vacation leave if not enjoyed during the
year, (c) various privileges, such as free medical care, medicine, and hospitalization, (d) right to a closed shop, check off, etc., (e) no dismissal without prior just cause
and with a prior investigation, etc. Some of the demands, were granted by the petitioner, and the other were rejected, and so hearings were held and evidence submitted
on the latter. After the hearing the respondent court rendered a decision, the most important provisions of which were those fixing the minimum wage for the laborers at
P3.20, declaring that additional compensation representing efficiency bonus should not be included as part of the wage, and making the award effective from September
4, 1950. It is against these portion of the decision that this appeal is taken.
On the issue of the wage, it is contended by petitioner that as the respondent court found that the laborer and his family at least need the amount of P2.58 for food, this
should be the basis for the determination of his wage, not what he actually spends; that it is not justifiable to fix a wage higher than that provided by Republic Act No.
602; and that respondent union made the demand in accordance with a pernicious practice of claiming more after an original demand is granted. The respondent court
found that P2.58 is the minimum amount actually needed by the laborer and his family. That does not mean that it is his actual expense. A person's needs increase as his
means increase. This is true not only as to food but as to everything else education, clothing, entertainment, etc. The law guarantees the laborer a fair and just wage.
The minimum must be fair and just. The "minimum wage" can by no means imply only the actual minimum. Some margin or leeway must be provided, over and above
the minimum, to take care of contingencies such as increase of prices of commodities and desirable improvement in his mode of living. Certainly, the amount of P0.22 a
day (difference between P2.80 fixed and P2.58 actual) is not excessive for this purpose. That the P3 minimum wage fixed in the law is still far below what is considered
a fair and just minimum is shown by the fact that this amount is only for the year after the law takes effect, as thereafter the law fixes it at P4. Neither may it be correctly
contended that the demand for increase is due to an alleged pernicious practice. Frequent demands for increase are indicative of a healthy spirit of wakefulness to the
demands of a progressing and an increasingly more expensive world. We, therefore, find no reason or ground for disturbing the finding contained in the decision fixing
the amount of P3.20 as the minimum wage.
It is next contended that the efficiency bonus paid the laborer should have been included in his (minimum) wage, in the same manner as the value of living quarters.
Whether or not bonus forms part of wages depends upon the circumstances or condition for its payment. If it is an additional compensation which the employer
promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But
if it is paid only if profits are realized or a certain amount of productivity achieved, it cannot be considered part of the wages. In the case at bar, it is not payable to all but
to laborers only. It is also paid on the basis of actual production or actual work accomplished. If the desired goal of production is not obtained or the amount of actual
work accomplished, the bonus does not accrue. It is evidence that under the circumstances it is paid only when the labor becomes more efficient or more productive. It is
only an inducement for efficiency, a prize therefor, not a part of the wage.
The last question raised in the appeal is the grant of the increase from September 4, 1950, the date of the presentation of the original demand, instead of from April 5,
1951, the date of the amended demand. The decision states:
Both parties agreed that any award should be retroactive to the date of the presentation of the demand, which is September 4, 1950. (Annex A, p. 5.)
The terms of the stipulation are clearly against petitioner's contention. There being no question as to its (agreement) existence, the same must be given force and effect.
The petition is hereby dismissed, with costs.
SUPPLEMENTS
G.R. No. L-12444

February 28, 1963

STATES MARINE CORPORATION and ROYAL LINE, INC., petitioners,

vs.
CEBU SEAMEN'S ASSOCIATION, INC., respondent.
Pedro B. Uy Calderon for petitioners.
Gaudioso C. Villagonzalo for respondent.
PAREDES, J.:
Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the business of marine coastwise transportation, employing therein several steamships of
Philippine registry. They had a collective bargaining contract with the respondent Cebu Seamen's Association, Inc. On September 12, 1952, the respondent union filed
with the Court of Industrial Relations (CIR), a petition (Case No. 740-V) against the States Marine Corporation, later amended on May 4, 1953, by including as party
respondent, the petitioner Royal Line, Inc. The Union alleged that the officers and men working on board the petitioners' vessels have not been paid their sick leave,
vacation leave and overtime pay; that the petitioners threatened or coerced them to accept a reduction of salaries, observed by other shipowners; that after the Minimum
Wage Law had taken effect, the petitioners required their employees on board their vessels, to pay the sum of P.40 for every meal, while the masters and officers were
not required to pay their meals and that because Captain Carlos Asensi had refused to yield to the general reduction of salaries, the petitioners dismissed said captain
who now claims for reinstatement and the payment of back wages from December 25, 1952, at the rate of P540.00, monthly.
The petitioners' shipping companies, answering, averred that very much below 30 of the men and officers in their employ were members of the respondent union; that
the work on board a vessel is one of comparative ease; that petitioners have suffered financial losses in the operation of their vessels and that there is no law which
provides for the payment of sick leave or vacation leave to employees or workers of private firms; that as regards the claim for overtime pay, the petitioners have always
observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law), notwithstanding the fact that it does not apply to those who provide means of transportation;
that the shipowners and operators in Cebu were paying the salaries of their officers and men, depending upon the margin of profits they could realize and other factors or
circumstances of the business; that in enacting Rep. Act No. 602 (Minimum Wage Law), the Congress had in mind that the amount of P.40 per meal, furnished the
employees should be deducted from the daily wages; that Captain Asensi was not dismissed for alleged union activities, but with the expiration of the terms of the
contract between said officer and the petitioners, his services were terminated.
A decision was rendered on February 21, 1957 in favor of the respondent union. The motion for reconsideration thereof, having been denied, the companies filed the
present writ of certiorari, to resolve legal question involved. Always bearing in mind the deep-rooted principle that the factual findings of the Court of Industrial
Relations should not be disturbed, if supported by substantial evidence, the different issues are taken up, in the order they are raised in the brief for the petitioners.
1. First assignment of error. The respondent court erred in holding that it had jurisdiction over case No. 740-V, notwithstanding the fact that those who had dispute
with the petitioners, were less than thirty (30) in number.
The CIR made a finding that at the time of the filing of the petition in case No. 740-V, respondent Union had more than thirty members actually working with the
companies, and the court declared itself with jurisdiction to take cognizance of the case. Against this order, the herein petitioners did not file a motion for reconsideration
or a petition for certiorari. The finding of fact made by the CIR became final and conclusive, which We are not now authorized to alter or modify. It is axiomatic that
once the CIR had acquired jurisdiction over a case, it continues to have that jurisdiction, until the case is terminated (Manila Hotel Emp. Association v. Manila Hotel
Company, et al., 40 O.G. No. 6, p. 3027). It was abundantly shown that there were 56 members who signed Exhibits A, A-I to A-8, and that 103 members of the Union
are listed in Exhibits B, B-1 to B-35, F, F-1 and K-2 to K-3. So that at the time of the filing of the petition, the respondent union had a total membership of 159, working
with the herein petitioners, who were presumed interested in or would be benefited by the outcome of the case (NAMARCO v. CIR, L-17804, Jan. 1963). Annex D,
(Order of the CIR, dated March 8, 1954), likewise belies the contention of herein petitioner in this regard. The fact that only 7 claimed for overtime pay and only 7
witnesses testified, does not warrant the conclusion that the employees who had some dispute with the present petitioners were less than 30. The ruling of the CIR, with
respect to the question of jurisdiction is, therefore, correct.
2. Second assignment of error. The CIR erred in holding, that inasmuch as in the shipping articles, the herein petitioners have bound themselves to supply the crew
with provisions and with such "daily subsistence as shall be mutually agreed upon" between the master and the crew, no deductions for meals could be made by the
aforesaid petitioners from their wages or salaries.
3. Third assignment of error. The CIR erred in holding that inasmuch as with regard to meals furnished to crew members of a vessel, section 3(f) of Act No. 602 is
the general rule, which section 19 thereof is the exception, the cost of said meals may not be legally deducted from the wages or salaries of the aforesaid crew members
by the herein petitioners.
4. Fourth assignment of error. The CIR erred in declaring that the deduction for costs of meals from the wages or salaries after August 4, 1951, is illegal and same
should be reimbursed to the employee concerned, in spite of said section 3, par. (f) of Act No. 602.
It was shown by substantial evidence, that since the beginning of the operation of the petitioner's business, all the crew of their vessels have been signing "shipping
articles" in which are stated opposite their names, the salaries or wages they would receive. All seamen, whether members of the crew or deck officers or engineers, have
been furnished free meals by the ship owners or operators. All the shipping articles signed by the master and the crew members, contained, among others, a stipulation,
that "in consideration of which services to be duly performed, the said master hereby agrees to pay to the said crew, as wages, the sums against their names respectively
expressed in the contract; and to supply them with provisions as provided herein ..." (Sec. 8, par. [b], shipping articles), and during the duration of the contract "the
master of the vessel will provide each member of the crewsuch daily subsistence as shall be mutually agreed daily upon between said master and crew; or, in lieu of such

subsistence the crew may reserve the right to demand at the time of execution of these articles that adequate daily rations be furnished each member of the crew." (Sec.
8, par. [e], shipping articles). It is, therefore, apparent that, aside from the payment of the respective salaries or wages, set opposite the names of the crew members, the
petitioners bound themselves to supply the crew with ship's provisions, daily subsistence or daily rations, which include food.
This was the situation before August 4, 1951, when the Minimum Wage Law became effective. After this date, however, the companies began deducting the cost of
meals from the wages or salaries of crew members; but no such deductions were made from the salaries of the deck officers and engineers in all the boats of the
petitioners. Under the existing laws, therefore, the query converges on the legality of such deductions. While the petitioners herein contend that the deductions are legal
and should not be reimbursed to the respondent union, the latter, however, claims that same are illegal and reimbursement should be made.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties
adducing other evidence to prove their case not covered by this stipulation of facts. 1wph1.t
We hold that such deductions are not authorized. In the coastwise business of transportation of passengers and freight, the men who compose the complement of a vessel
are provided with free meals by the shipowners, operators or agents, because they hold on to their work and duties, regardless of "the stress and strain concomitant of a
bad weather, unmindful of the dangers that lurk ahead in the midst of the high seas."
Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows
(f) Until and unless investigations by the Secretary of Labor on his initiative or on petition of any interested party result in a different determination of the fair and
reasonable value, the furnishing of meals shall be valued at not more than thirty centavos per meal for agricultural employees and not more than fortycentavos for any
other employees covered by this Act, and the furnishing of housing shall be valued at not more than twenty centavos daily for agricultural workers and not more than
forty centavos daily for other employees covered by this Act.
Petitioners maintain, in view of the above provisions, that in fixing the minimum wage of employees, Congress took into account the meals furnished by employers and
that in fixing the rate of forty centavos per meal, the lawmakers had in mind that the latter amount should be deducted from the daily wage, otherwise, no rate for meals
should have been provided.
However, section 19, same law, states
SEC. 19. Relations to other labor laws and practices. Nothing in this Act shall deprive an employee of the right to seek fair wages, shorter working hours and better
working conditions nor justify an employer in violating any other labor law applicable to his employees, in reducing the wage now paid to any of his employees in excess
of the minimum wage established under this Act, or in reducing supplements furnished on the date of enactment.
At first blush, it would appear that there exists a contradiction between the provisions of section 3(f) and section 19 of Rep. Act No. 602; but from a careful examination
of the same, it is evident that Section 3(f) constitutes the general rule, while section 19 is the exception. In other words, if there are no supplements given, within the
meaning and contemplation of section 19, but merely facilities, section 3(f) governs. There is no conflict; the two provisions could, as they should be harmonized. And
even if there is such a conflict, the respondent CIR should resolve the same in favor of the safety and decent living laborers (Art. 1702, new Civil Code)..
It is argued that the food or meals given to the deck officers, marine engineers and unlicensed crew members in question, were mere "facilities" which should be
deducted from wages, and not "supplements" which, according to said section 19, should not be deducted from such wages, because it is provided therein: "Nothing in
this Act shall deprive an employee of the right to such fair wage ... or in reducing supplements furnished on the date of enactment." In the case of Atok-Big Wedge Assn.
v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms are defined as follows
"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or received by the laborers over and above their ordinary earnings or
wages. "Facilities", on the other hand, are items of expense necessary for the laborer's and his family's existence and subsistence so that by express provision of law
(Sec. 2[g]), they form part of the wage and when furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer would spend and pay
for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic or ordinary earning or wage, is supplement; and
when said benefit or privilege is part of the laborers' basic wages, it is a facility. The criterion is not so much with the kind of the benefit or item (food, lodging, bonus or
sick leave) given, but its purpose. Considering, therefore, as definitely found by the respondent court that the meals were freely given to crew members prior to August
4, 1951, while they were on the high seas "not as part of their wages but as a necessary matter in the maintenance of the health and efficiency of the crew personnel
during the voyage", the deductions therein made for the meals given after August 4, 1951, should be returned to them, and the operator of the coastwise vessels affected
should continue giving the same benefit..
In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L-9742, Oct. 27, 1955, the company used to pay to its drivers and conductors, who
were assigned outside of the City limits, aside from their regular salary, a certain percentage of their daily wage, as allowance for food. Upon the effectivity of the
Minimum Wage Law, however, that privilege was stopped by the company. The order CIR to the company to continue granting this privilege, was upheld by this Court.
The shipping companies argue that the furnishing of meals to the crew before the effectivity of Rep. Act No. 602, is of no moment, because such circumstance was
already taken into consideration by Congress, when it stated that "wage" includes the fair and reasonable value of boards customarily furnished by the employer to the

employees. If We are to follow the theory of the herein petitioners, then a crew member, who used to receive a monthly wage of P100.00, before August 4, 1951, with no
deduction for meals, after said date, would receive only P86.00 monthly (after deducting the cost of his meals at P.40 per meal), which would be very much less than the
P122.00 monthly minimum wage, fixed in accordance with the Minimum Wage Law. Instead of benefiting him, the law will adversely affect said crew member. Such
interpretation does not conform with the avowed intention of Congress in enacting the said law.
One should not overlook a fact fully established, that only unlicensed crew members were made to pay for their meals or food, while the deck officers and marine
engineers receiving higher pay and provided with better victuals, were not. This pictures in no uncertain terms, a great and unjust discrimination obtaining in the present
case (Pambujan Sur United Mine Workers v. CIR, et al., L-7177, May 31, 1955).
Fifth, Sixth and Seventh assignments of error. The CIR erred in holding that Severino Pepito, a boatsman, had rendered overtime work, notwithstanding the provisions
of section 1, of C.A. No. 444; in basing its finding ofthe alleged overtime, on the uncorroborated testimony of said Severino Pepito; and in ordering the herein
petitioners to pay him. Severino Pepito was found by the CIR to have worked overtime and had not been paid for such services. Severino Pepito categorically stated that
he worked during the late hours of the evening and during the early hours of the day when the boat docks and unloads. Aside from the above, he did other jobs such as
removing rusts and cleaning the vessel, which overtime work totalled to 6 hours a day, and of which he has not been paid as yet. This statement was not rebutted by the
petitioners. Nobody working with him on the same boat "M/V Adriana" contrawise. The testimonies of boatswains of other vessels(M/V Iruna and M/V Princesa), are
incompetent and unreliable. And considering the established fact that the work of Severino Pepito was continuous, and during the time he was not working, he could not
leave and could not completely rest, because of the place and nature of his work, the provisions of sec. 1, of Comm. Act No. 444, which states "When the work is not
continuous, the time during which the laborer is not working and can leave his working place and can rest completely shall not be counted", find no application in his
case.
8. Eighth assignment of error. The CIR erred in ordering petitioners to reinstate Capt. Carlos Asensi to his former position, considering the fact that said officer had
been employed since January 9, 1953, as captain of a vessel belonging to another shipping firm in the City of Cebu.
The CIR held
Finding that the claims of Captain Carlos Asensi for back salaries from the time of his alleged lay-off on March 20, 1952, is not supported by the evidence on record, the
same is hereby dismissed. Considering, however, that Captain Asensi had been laid-off for a long time and that his failure to report for work is not sufficient cause for
his absolute dismissal, respondents are hereby ordered to reinstate him to his former job without back salary but under the same terms and conditions of employment
existing prior to his lay-off, without loss of seniority and other benefits already acquired by him prior to March 20, 1952. This Court is empowered to reduce the
punishment meted out to an erring employee (Standard Vacuum Oil Co., Inc. v. Katipunan Labor Union, G.R. No. L-9666, Jan. 30, 1957). This step taken is in
consonance with section 12 of Comm. Act 103, as amended." (p. 16, Decision, Annex 'G').
The ruling is in conformity with the evidence, law and equity.
Ninth and Tenth assignments of error. The CIR erred in denying a duly verified motion for new trial, and in overruling petitioner's motion for reconsideration.
The motion for new trial, supported by an affidavit, states that the movants have a good and valid defense and the same is based on three orders of the WAS (Wage
Administration Service), dated November 6, 1956. It is alleged that they would inevitably affect the defense of the petitioners. The motion for new trial is without merit.
Having the said wage Orders in their possession, while the case was pending decision, it was not explained why the proper move was not taken to introduce them before
the decision was promulgated. The said wage orders, dealing as they do, with the evaluation of meals and facilities, are irrelevant to the present issue, it having been
found and held that the meals or food in question are not facilities but supplements. The original petition in the CIR having been filed on Sept. 12, 1952, the WAS could
have intervened in the manner provided by law to express its views on the matter. At any rate, the admission of the three wage orders have not altered the decision
reached in this case.
IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.
GRATUITIES AND ALLOWANCES
G.R. No. 81176 April 19, 1989
PLASTIC TOWN CENTER CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND NAGKAKAISANG LAKAS NG MANGGAGAWA (NLM)-KATIPUNAN, respondents.
Generosa R. Jacinto for petitioner.
The Solicitor General for public respondent.

GUTIERREZ, JR., J.:

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.
xxx xxx xxx
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:
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]).
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:
xxx xxx xxx
... 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:
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.
[G.R. No. 123810. January 20, 1999]

ONSOLIDATED RURAL BANK (Cagayan Valley), INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and ANTONIA L. SANCHEZ,respondents.
DECI SION
BELLOSILLO, J.:
This is a special civil action for certiorari filed by Consolidated Rural Bank (Cagayan Valley), Inc. (CONSOLBANK for short),[1] assailing the Resolution of the
National Labor Relations Commission (NLRC) dated 9 November 1995 in NLRC NCR CN. II-01-00002-94, Antonia L. Sanchez v. Consolidated Rural Bank, which
affirmed the decision of Labor Arbiter Ricardo N. Olairez that Antonia L. Sanchez was illegally dismissed as well as its Resolution of 30 January 1996 denying
petitioners motion for reconsideration.
Private respondent Antonia L. Sanchez was Branch Manager of petitioners Ilagan Branch, Ilagan, Isabela, when she was terminated effective 7 August 1993 for
lack of diligence, gross negligence, insubordination, and violation of existing bank policies resulting to loss. [2] Her termination arose from the
following incident: Sometime in May 1992 a certain Rosalinda Rodriguez presented six (6) US Treasury Warrants (USTW) for deposit with CONSOLBANKs Ilagan
Branch with a total value of $13,966.74 or P335,201.76. As Branch Manager private respondent referred the checks to her superiors at CONSOLBANKs Head Office in
Santiago City who accepted and deposited the checks for clearing at PCIBank, CONSOLBANKs depositary bank. On 21 July 1992 CONSOLBANK Head Office was
informed by PCIBank that the checks were cleared prompting the Head Office to withdraw the amount of the checks which it used as cash assistance from
CONSOLBANK Ilagan. On 31 July 1992 the Head Office credited Ilagan Branch with P1,805.97 as interest income for the cash assistance. In the meantime Rosalinda
Rodriguez withdrew on different dates the total amount of P314,00.00 from her account at CONSOLBANK Ilagan. However, six (6) months after the USTWs were
cleared CONSOLBANK was informed by PCIBank that the checks had been dishonored for having been altered and was consequently requested t deposit the amount it
had previously withdrawn to cover the cost of the altered USTWs inclusive of interest charges amounting to P391,687.87.
The Board of Directors of CONSOLBANK, in order to determine responsibility for the loss, created a fact-finding committee to delve on facts as it (sic)
happened.[3] In its Report dated 27 March 1993 the Committee recommended the imposition of the penalty of 30 days suspension each for Head Office General
Manager Ramon T. Cocson, Treasury Department Manager Ginajane Espina, and herein private respondent. Private respondent was found liable for having accepted the
USTWs when she should have known that CONSOLBANK was not authorized to accept dollar checks. Her participation however was found mitigated by the fact that
she consulted Head Office first before acting and that she relied heavily on Head Office actions on said TWs.

The Fact-Finding Committee the required private respondent to comment on the charge of willful disobedience of company rules, regulations and instructions, to
wit: (a) acceptance of six (6) USTWs for deposit knowing fully well that CONSOLBANK was not authorized to accept dollar checks; (b) allowing withdrawal by
depositor even before clearance of said checks; and,(c) denying that she was instructed by her superior, the then President/General Manager Ramon T. Cocson to retain
the USTWs.[4]
In her comment, private respondent denied that she was ever informed of CONSOLBANKs alleged policy of not accepting dollar checks/treasury
warrants. Neither did her superiors at the Head Office advise her against accepting the particular USTWs in question as in fact they even accepted the checks, deposited
them with CONSOLBANKs depositary bank for clearing, and used the amount as cash assistance from Ilagan Branch for which it was credited with interest
income. Private respondent denied that she authorized any withdrawal on the checks before they were cleared.
In June 1993 an Executive Committee composed of the Vice-Chairman of the Board of Directors of CONSOLBANK as Chairman, and four other Members of the
Board of Directors conducted further investigation on the matter. After six (6) hearings held on June 10, 11, 14, 28, July 3 and 6, 1993, the Board of Directors issued on
7 August 1993 Board Resolution No. 93-256, to wit:
WHEREAS, the findings of fact of the Fact-finding committee and the result of hearings and examination of documentary evidences made by the Executive Committee
have shown that Mrs. Antonia L. Sanchez, Branch Manager of Ilagan Branch, has committed lack of diligence, gross negligence, insubordination and violation of
existing bank policies resulting to loss;
WHEREFORE, premises considered, be it: RESOLVED, as it is hereby RESOLVED, that Mrs. Antonia L Sanchez be dismissed for cause effective August 07, 1993 x x
xx
On 10 January 1994 private respondnet sued CONSOLBANK for illegal dismissal with prayer for reinstatement, backwages and other benefits as well
as P500,000.00 in damages.
In his decision dated 22 July 1994 the Labor Arbiter ruled in favor of private respondent thusWHEREFORE x x x we find complainant illegally and unjustly dismissed and she should be reinstated to her former or substantially equivalent position without loss
of seniority rights with full backwages and other benefits which she could have enjoyed had she not been illegally dismissed, computed as of July 30, 1994 as follows:
P69,700.00 Basic Pay including 13th month pay (August 1992 to July 31, 1994)
P4, 380.00 COLA for one year (365 days x 12 mos)
P18,000.00 Gasoline allowance (P1,500 x 12 mos)
P14,400.00 Car allowance (P1,200 x 12 mos)
P12,000.00 Additional representation allowance (P1,000.00 x 12 mos) and
P2,500.00 Clothing allowance for one year
_________
P120,980.00 Total
Respondent is likewise ordered to pay complainant P500,000.00 as moral damages plus ten percent attorneys fees of the total monetary award.
In case reinstatement is no longer feasible, complainant is given the option to be paid separation pay in the total amount of P148,830.00 (P6,765.00 x 22) for her twenty
years of service in addition to her backwages or a total amount of P269,810.00, in lieu of reinstatement x x x x
The Labor Arbiter found that private respondent could not be considered guilty of lack of diligence, gross negligence or of having violated bank policies because
she merely referred the USTWs to her superiors at the Head Office who were the ones who accepted the checks and deposited them. The alleged warning not to accept
the checks given by the Head Offices General Manager Ramon T. Cocson to private respondent was not given credence because his subsequent actions revealed his
knowledge of the acceptance and deposit of the USTWs by the Treasury Department of the Head Office itself. In addition to finding private respondents dismissal as
tainted with bad faith because she was deliberately made a sacrificial lamb or scapegoat of the Head Offices General manager and Treasurer who were meted relatively
light penalties, the Labor Arbiter ruled that private respondent was denied due process as she was neither informed of petitioners intention to dismiss her nor given the
opportunity to defend herself.

CONSOLBANK appealed to the NLRC which affirmed the conclusions of the Labor Arbiter that no valid cause existed for private respondents dismissal and
that she was denied due process.[5] A subsequent motion for reconsideration by CONSOLBANK was similarly denied in the second questioned resolution dated 30
January 1996;[6] hence, this petition.
Petitioner assails the questioned resolutions of the NLRC on both procedural and substantive grounds. On procedural grounds, petitioner contends that public
respondent committed grave abuse of discretion in affirming the Labor Arbiters decision which was rendered with indecent haste without giving petitioner further
opportunity to present its evidence. Petitioner takes particular exception to the fact that the Labor Arbiter rendered his decision only two (2) days after the hearing of 19
July 1994 wherein only private respondent was present. He brands that hearing as a give-away to private respondent and therefore asks that this case be remanded to
the Labor Arbiter for further reception of evidence.
Petitioners avowal of denial of procedural due process must fail, and so with its prayer for a remand. The fact that counsel for petitioner was not present during
the clarificatory hearing on 19 July 1994, hence, unable to rebut the testimony given by private respondent could hardly be attributed to anybody elses fault but its
own. Records show that notice was given to the parties with warning that failure to attend would be construed as a waiver of the opportunity to be heard. [7] However,
while counsel for private respondent filed his Manifestation begging off from the hearing on ground of a prior engagement, counsel for petitioner on the other hand
simply chose not to appear on the assumption that the hearing would be postponed on account of opposing counsels absence thus negligently and completely
overlooking the assurance in the very same Manifestation that private respondent would nevertheless appear on her own. Hence, the fact that the Labor Arbiter
proceeded with the hearing as scheduled could not be branded as an arbitrary act depriving petitioner of its right to present evidence. Petitioner lost this additional
opportunity entirely through its own fault and negligence.
Similarly, the decision of the Labor Arbiter not to schedule the case for another hearing could not be considered as a grave abuse of discretion. First of all, it is
well-settled that the holding of a hearing is discretionary with the Labor Arbiter and is something which the parties cannot demand as a matter of right. [8] It is entirely
within the bounds of the Labor Arbiters authority to decide a case based on mere position papers and supporting documents without a formal trial or hearing as is
sanctioned by the The New Rules of Procedure of the National Labor Relations Commission.[9] Thus we have consistently held that the requirements of due process are
satisfied when the parties are given the opportunity to submit position papers [10] wherein they are supposed to attach all the documents that would prove their claim in
case it be decided that no hearing should be conducted or was necessary. [11] Secondly, we note that petitioner and private respondent themselves agreed during the
hearing of 3 March 1994 to forego with a formal trial and opted instead to file only their respective replies to each others position paper. [12] Given these circumstances,
petitioner certainly cannot now be heard to have been deprived of due process.
On the merits, petitioner assails public respondents conclusion that private respondent was denied due process and that there was no valid cause for her
dismissal. The NLRC and the Labor Arbiter concluded that private respondent was deprived due process because she was not informed of petitioners intention to
dismiss her. As regards this point, we agree with petitioner that the minimum requirements of due process have been substantially complied with when private
respondent, with the assistance of counsel, was duly investigated by petitioners Executive Committee and given opportunities to answer the charges levelled against her.
[13]
However, we are unable to agree with petitioners proposition that valid cause exists for private respondents dismissal.
Private respondent was dismissed for lack of diligence, gross negligence, insubordination, and violation of existing bank policies resulting to loss. [14] However,
we find no grave abuse of discretion on the part of public respondents in concluding that these charges were not substantially proved. As they have correctly observed,
private respondent could not fairly be considered lacking in diligence or grossly negligent in her actuations with respect to the six (6) USTWs. Petitioner itself does not
deny that private respondent merely referred the checks to the Head Office. [15] That she may have been previously warned by the Manager of Metrobank not to accept
such checks as alleged by petitioner does not erase the fact that it was still the Head Office which ultimately decided on accepting and depositing the USTWs for
clearing.
On the charge of violating bank policies, while private respondent was accused of having violated CONSOLBANKs alleged policy of not accepting
dollar checks for deposit, it was nonetheless established during the investigation that CONSOLBANK had in fact no such written policy and accepting dollar checks
was actually a tolerated practice among its branches.[16]
The charge of insubordination to the alleged instruction of General Manager Ramon T. Cocson to private respondent not to accept the checks was correctly
disregarded considering Cocsons actuations inescapably demonstrating his knowledge of the acceptance of the USTWs, the most notable of which was his signing of
the Inter-Office Memo No. 7030 crediting Ilagan Branch with P1,805.97 as interest income for the value of the USTWs which the head Office used as cash assistance
from CONSOLBANK Ilagan.[17]
The other charges against private respondent, i. e., allowing Rosalinda Rodriguez to withdraw from her dollar account before the USTWs were cleared and
granting a commercial loan to Rodriguez secured by the uncleared USTWs, were not substantiated as in fact they were not even included in the findings of fact
of petitioners Fact-Finding Committee, hence, they may not now be invoked to justify private respondents dismissal.
However, in addition to back wages, the NLRC sustained the Labor Arbiters awards of reinstatement or payment of separation pay in lieu thereof, P500,000.00
moral damages and attorneys fees equivalent to 10% of the total monetary award.
Petitioner objects to the inclusion of gasoline, car and representation allowances in the computation of back wages on the ground that these are but operating
expenses to the company. However, while these may beoperating expenses to petitioner they are, on the other hand, still allowances/benefits to private respondent and
hence included in the computation of her back wages under Art. 279 of the Labor Code, to wit:

x x x x An employee who is unjustly dismissed from work shall be entitled to reinstatement x x x and to his full back wages, inclusive of allowances, and to his other
benefits or their monetary equivalent from the time his compensation was withheld from him up to the time of his actual reinstatement (underscoring ours).
On the matter of payment of separation pay in lieu of reinstatement, we adopt public respondents factual finding that private respondent was employed by
petitioner for twenty-two (22) years or from October 1971 until her termination on 7 August 1983 for failure of petitioner to prove its affirmative allegation that it was
incorporated only in June 1983.
With respect to the award of moral damages we ascribe no grave abuse of discretion on the part of the NLRC and the Labor Arbiter who found private respondent
entitled thereto for having been made the sacrificial lamb or scapegoat of the Head Offices General Manager and Treasurer who got away with light penalties. In
addition, the arbitrary manner by which petitioner dismissed private respondent, i.e., notifying her on 25 August 1993 of her dismissal which took effect some eighteen
(18) days earlier or on 7 August 1993 as well as petitioners persistent failure despite repeated requests from private respondents counsel and assurances by
CONSOLBANKs President himself to furnish private respondent with the Executive Committee decision made the basis of her dismissal, constitutes further
justification for the award of moral damages. It is well-settled that moral damages are recoverable where the dismissal was attended by bad faith or constituted an act
contrary to labor, or was done in a manner contrary to morals, good customs or public policy.[18]
Lastly, petitioner objects to the award of attorneys fees on the ground that it was not claimed by private respondent in her complaint for illegal
dismissal. However, it is settled that in actions for recovery of wages or where an employee was forced to litigate and thus incur expenses to protect her rights and
interests, even if not so claimed, an award of attorneys fees equivalent to ten percent (10%) of the total award is legally and morally justifiable. [19]
WHEREFORE, finding no grave abuse of discretion on the part of public respondent National Labor Relations Commission, the instant petition is DISMISSED
and the questioned Resolutions of 9 November 1995 and 30 January 1996 are AFFIRMED with the clarification that the award of damages should be reckoned not from
August 1992 but from 7 August 1993, the date of private respondents actual termination from the service as found by the Labor Arbiter [20] and the NLRC[21] and
supported by the evidence.
SO ORDERED.
G.R. No. 122827 March 29, 1999
LIDUVINO M. MILLARES, J. CAPISTRANO CORDITA, SHIRLEY P. UY, DIONISIO J. REQUINA, GABRIEL A. DEJERO, NELSON T. GOMONIT,
IMELDA IMPEYNADO SULPICIO B. SUMILE, MA. CONSUELO AVIEL, SILVINO S.GUEVARRA, FIDEL DUMANHOG, NELFA T.POLOTAN,
LEMUEL C. RISMA, JUANITO M. GONZALES, ROGELIO B. CABATUAN, EPIFANCIO E. GANANCIAL, DOMINADOR D. ATOK, CONRADO U.
SERRANO, ISIDRO J. BARNAJA, ROMEO VIRTUDAZO, AVELINO NABLE, EDGAR TAMPOS, ERNESTO ORIAS, DALMACIO LEGARAY, ROMEO
R. BULA ROBERTO G.GARCIA, RUDOLFO SUZON, JERRY S. DANO, AUGUST G. ESCUDERO, OSCAR B. CATBAGAN, TEOFILO C. SISON,
NARCISO BULASA, ALBERTO CORTEZ, LILIA C. CABRERA, NESTOR A. ACASO, BIENVENIDO MOZO, ISIDORO A. ALMENDAREZ, VICENTE
M. PILONGO, ROBERTO N. LUMPOT, PATRICIO BANDOLA, MANUEL S. ESPINA, ISIDRO K. BALCITA, JR., EMMANUEL O. ABRAHAM,
OLEGARIO A. EPIS, NESTOR D. PEREGRINO, RAMON A.USANAGA, PRESTO BARTOLOME, BRADY EMPEYNADO, PORFERIO N. CONDADO,
AQUILLO V. CORDOVA, LEONARDO ESTOSI, PACIFICO B. DACORINA, PABLITO B. LLUBIT, ANTONIO DOZA, LEONITO LABADIA, EDGARDO
BELLIZA, FEDENCIO P. GEBERTAS, VIRGILIO D. GULBE, MANUEL A. LERIO, JR., ROGELIO B. OCAMIA, RODOLFO A. CASTILLO, EDMUNDO
L. PLAZA, ROBERTO D. YAGONIA, JR., PETRONIO ESTELA, JR., CRISOLOGO A. LOGRONIO, ERNESTO T. MORIO, ROGELIO M. DAVID,
BENJAMIN U. ARLIGUE, APOLONIO MUNDO, JR., NENE M. ESPINOSA, NILO B. BALAORO, GERONIMO S. CONVI, VICENTE R. TARAGOZA,
YOLANDO A. SALAZAR, MANUEL A. NERI, ELIO C. TICAR, ROBERTO A. MACALAM, MIGUEL MACARIOLA, WALTERIO DAPADAP, SILVERIO
CUAMAG EUPARQUIO PLANOS, GILBERTO M. MIRA, REYNALDO BACSARSA, DIOSDADO B. ABING, ARISTARCO V. SALON, TOMAS N.
CATACTE, RODOLFO MEMORIA, PAPENIANO CURIAS, JOSE S. CANDIA, DESIDERIO C. NAVARRO, EMMANUEL O. ABRAHAM, JOSELITO D.
ARLAN, FRANCISCO S. SANCHEZ, MANSUETO B. LINGGO, ISIDRO BARNAJA, ROMEO S. CABRERA, LEODEGARIO CAINTIC, NESTOR G.
BLANDO, FLORENCIO B. DELIZO, MILAN M. ETES, GONZALO C. PADILLO, LEONARDO CAGAKIT, JOSEFINO E. DULGUIME, PEPITO G.
ARREZA, AMADOR G. CAGALAWAN, GAUDENCIO C. SARMIENTO, FLORENTINO J. BRACAMONTE, DOMINADOR H. TY, LEOPOLDO T.
SUPIL, JOSE A. DOHINOG, ANIANO T. REYES, CARLITO G. UY, PLACIDO D. PADILLO, TERESITA C. ADRIANO, CANDIDO S. ADRIANO, and
AVELINO G. VENERACION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, (FIFTH DIVISION) and PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES
(PICOP) respondents.

BELLOSILLO, J.:
Petitioners numbering one hundred sixteen (116) 1 occupied the position of Technical Staff, Unit Manager, Section Manager, Department Manager, Division Manager
and Vice President in the mill site of respondent Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur. In 1992 PICOP suffered a major
financial setback allegedly brought about by the joint impact of restrictive government regulations on logging and the economic crisis. To avert further losses, it
undertook a retrenchment program and terminated the services of petitioners. Accordingly, petitioners received separation pay computed at the rate of one (1) month
basic pay for every year of service. Believing however that the allowances they allegedly regularly received on a monthly basis during their employment should have
been included in the computation thereof they lodged a complaint for separation pay differentials.

The allowances in question pertained to the following

1. Staff/Manager's Allowance
Respondent PICOP provides free housing facilities to supervisory and managerial employees assigned in Bislig. The privilege includes free water and electric
consumption. Owing however to shortage of such facilities, it was constrained to grant Staff allowance instead to those who live in rented houses outside but near the
vicinity of the mill site. But the allowance ceases whenever a vacancy occurs in the company's housing facilities. The former grantee is then directed to fill the vacancy.
For Unit, Section and Department Managers, respondent PICOP gives an additional amount to meet the same kind of expenses called Manager's allowance.
2. Transportation Allowance
To relieve respondent PICOP's motor pool in Bislig from a barrage of requests for company vehicles and to stabilize company vehicle requirements it grants
transportation allowance to key officers and Managers assigned in the mill site who use their own vehicles in the performance of their duties. It is a conditional grant
such that when the conditions no longer obtain, the privilege is discontinued. The recipients of this kind of allowance are required to liquidate it by submitting a report
with a detailed enumeration of expenses incurred.
3. Bislig Allowance
The Bislig Allowance is given to Division Managers and corporate officers assigned in Bislig on account of the hostile environment prevailing therein. But once the
recipient is transferred elsewhere outside Bislig, the allowance ceases.
Applying Art. 97, par. (f), of the Labor Code which defines "wage," the Executive Labor Arbiter opined that the subject allowances, being customarily furnished by
respondent PICOP and regularly received by petitioners, formed part of the latter's wages. Resolving the controversy from another angle, on the strength of the ruling
inSantos v. NLRC 2 and Soriano v. NLRC 3 that in the computation of separation pay account should be taken not just of the basic salary but also of the regular
allowances that the employee had been receiving, he concluded that the allowances should be included in petitioners' base pay. Thus respondent PICOP was ordered on
28 April 1994 to pay petitioners Four Million Four Hundred Eighty-One Thousand Pesos P(4,481,000.00) representing separation pay differentials plus ten per cent
(10%) thereof as attorney's fees. 4
The National Labor Relations Commission (NLRC) did not the view of the Executive Labor Arbiter. On 7 October 1994 it set aside the assailed decision by decreeing
that the allowances did not form part of the salary base used in computing separation pay. 5 Its ruling was based on the finding that the cases relied upon by the
Executive Labor Arbiter were inapplicable since they involved illegal dismissal where separation pay was granted in lieu of reinstatement which was no longer feasible.
Instead, what it considered in point was Estate of the late Eugene J. Kneebone v. NLRC 6 where the Court held that representation and transportation allowances were
deemed not part of salary and should therefore be excluded in the computation of separation benefits. Relating the present case with Art. 97, par. (f), of the Labor Code,
the NLRC likewise found that petitioners' allowances were contingency-based and thus not included in their salaries. On 26 September 1995 reconsideration was
denied. 7
In this petition for certiorari, petitioners submit that their allowances are included in the definition of "facilities" in Art. 97, par. (f), of the Labor Code, being necessary
and indispensable for their existence and subsistence. Furthermore they claim that their availment of the monetary equivalent of those "facilities" on a monthly basis was
characterized by permanency, regularity and customariness. And to fortify their arguments they insist on the applicability of Santos, 8 Soriano, 9 The Insular Life
Assurance Company, 10 Planters Products, Inc. 11 and Songco 12 which are all against the NLRC holding that the salary base in computing separation pay includes not just
the basic salary but also the regular allowances.
There is no showing of grave abuse of discretion on the part of the NLRC. In case of retrenchment to prevent losses, Art. 283 of the Labor Code imposes on the
employer an obligation to grant to the affected employees separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. Since the law speaks of "pay," the question arises, "What exactly does the term connote?" We correlate Art. 283 with Art. 97 of the same Code on
definition of terms. "Pay" is not defined therein but "wage." In Songco the Court explained that both words (as well as salary) generally refer to one and the same
meaning, i.e., a reward or recompense for services performed. Specifically, "wage" is defined in letter (f) as 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.
We invite attention to the above-underlined clause. Stated differently, when an employer customarily furnishes his employee board, lodging or other facilities, the fair
and reasonable value thereof, as determined by the Secretary of Labor and Employment, is included in "wage." In order to ascertain whether the subject allowances form
part of petitioner's "wages," we divide the discussion on the following "customarily furnished;" "board, lodging or other facilities;" and, "fair reasonable value as
determined by the Secretary of Labor."
"Customary" is founded on long-established and constant practice 13 connoting regularity. 14 The receipt of an allowance on a monthly basis does not ipso
facto characterize it as regular and forming part of salary 15 because the nature of the grant is a factor worth considering. We agree with the observation of the Office of
the Solicitor General that the subject allowances were temporarily, not regularly, received by petitioners because

In the case of the housing allowance, once a vacancy occurs in the company-provided housing accommodations, the employee concerned transfers to the company
premises and his housing allowance is discontinued . . . .
On the other hand, the transportation allowance is in the form of advances for actual transportation expenses subject to liquidation . . . given only to employees who have
personal cars.
The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig, Surigao del Norte. Once the officer is transferred outside Bislig, the
allowance stops. 16
We add that in the availment of the transportation allowance, respondent PICOP set another requirement that the personal cars be used by the employees in the
performance of their duties. When the conditions for availment ceased to exist, the allowance reached the cutoff point. The finding of the NLRC along the same line
likewise merits concurrence, i.e., petitioners' continuous enjoyment of the disputed allowances was based on contingencies the occurrence of which wrote finis to such
enjoyment.
Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing the Labor Code
gives meaning to the term as including articles or services for the benefit of the employee or his family but excluding tools of the trade or articles or service primarily for
the benefit of the employer or necessary to the conduct of the employer's business. The Staff/Manager's allowance may fall under "lodging" but the transportation and
Bislig allowances are not embraced in "facilities" on the main consideration that they are granted as well as the Staff/Manager's allowance for respondent PICOP's
benefit and convenience, i.e., to insure that petitioners render quality performance. In determining whether a privilege is a facility, the criterion is not so much its kind
but its purpose. 17 That the assailed allowances were for the benefit and convenience of respondent company was supported by the circumstance that they were not
subjected to withholding tax. Revenue Audit Memo Order No. 1-87 pertinently provides
3.2. . . . transportation, representation or entertainment expenses shall not constitute taxable compensation if:
(a) It is for necessary travelling and representation or entertainment expenses paid or incurred by the employee in the pursuit of the trade or business of the employer,
and
(b) The employee is required to, and does, make an accounting/liquidation for such expense in accordance with the specific requirements of substantiation for such
category or expense.
Board and lodging allowances furnished to an employee not in excess of the latter's needs and given free of charge, constitute income to the latter except if such
allowances or benefits are furnished to the employee for the convenience of the employer and as necessary incident to proper performance of his duties in which case
such benefits or allowances do not constitute taxable income. 18
The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of the Rules Implementing the Labor Code may from time to time fix in appropriate issuances
the "fair and reasonable value of board, lodging and other facilities customarily furnished by an employer to his employees." Petitioners' allowances do not represent
such fair and reasonable value as determined by the proper authority simply because the Staff/Manager's allowance and transportation allowance were amounts given by
respondent company in lieu of actual provisions for housing and transportation needs whereas the Bislig allowance was given in consideration of being assigned to the
hostile environment then prevailing in Bislig.
The inevitable conclusion is that, as reached by the NLRC, subject allowances did not form part of petitioners' wages.
In Santos 19 the Court decreed that in the computation of separation pay awarded in lieu of reinstatement, account must be taken not only of the basic salary but also of
transportation and emergency living allowances. Later, the Court in Soriano, citing Santos, was general in its holding that the salary base properly used in computing
separation pay where reinstatement was no longer feasible should include not just the basic salary but also the regular allowances that the employee had been receiving.
Insular merely reiterated the aforementioned rulings. The rationale is not difficult to discern. It is the obligation of the employer to pay an illegally dismissed employee
the whole amount of his salaries plus all other benefits, bonuses and general increases to which he would have been normally entitled had he not been dismissed and had
not stopped working. 20 The same holds true in case of retrenched employees. And thus we applied Insular and Soriano in Planters in the computation of separation pay
of retrenched employees. Songco likewise involved retrenchment and was relied upon in Planters, Soriano and Santos in determining the proper amount of separation
pay. As culled from the foregoing jurisprudence, separation pay when awarded to an illegally dismissed employee in lieu of reinstatement or to a retrenched employee
should be computed based not only on the basic salary but also on the regular allowances that the employee had been receiving. But in view of the previous discussion
that the disputed allowances werenot regularly received by petitioners herein, there was no reason at all for petitioners to resort to the above cases.
Neither is Kneebone applicable, contrary to the finding of the NLRC, because of the difference in factual circumstances. In Kneebone, the Court was tasked to resolve
the issue whether there presentation and transportation allowances formed part of salary as to be considered in the computation of retirement benefits. The ruling was in
the negative on the main ground that the retirement plan of the company expressly excluded such allowances from salary.
WHEREFORE, the petition is DISMISSED. The resolution of public respondent National Labor Relations Commission dated 7 October 1994 holding that the
Staff/Manager's, transportation and Bislig allowances did not form part of the salary base used in computing the separation pay of petitioners, as well as its resolution
dated 26 September 1995 denying reconsideration, is AFFIRMED. No costs.

SO ORDERED.
BUNOS
G.R. No. 100701

March 28, 2001

PRODUCERS BANK OF THE PHILIPPINES, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PRODUCERS BANK EMPLOYEES ASSOCIATION, 1respondents.
GONZAGA-REYES, J.:
Before us is a special civil action for certiorari with prayer for preliminary injunction and/or restraining order seeking the nullification of (1) the decision of public
respondent in NLRC-NCR Case No. 02-00753-88, entitled "Producers Bank Employees Association v. Producers Bank of the Philippines," promulgated on 30 April
1991, reversing the Labor Arbiter's dismissal of private respondent's complaint and (2) public respondent's resolution dated 18 June 1991 denying petitioner's motion for
partial reconsideration.1wphi1.nt
The present petition originated from a complaint filed by private respondent on 11 February 1988 with the Arbitration Branch, National Capital Region, National Labor
Relations Commission (NLRC), charging petitioner with diminution of benefits, non-compliance with Wage Order No. 6 and non-payment of holiday pay. In addition,
private respondent prayed for damages.2
On 31 March 1989, Labor Arbiter Nieves V. de Castro found private respondent's claims to be unmeritorious and dismissed its complaint. 3 In a complete reversal,
however, the NLRC4 granted all of private respondent's claims, except for damages. 5 The dispositive portion of the NLRC's decision provides
WHEREFORE, premises considered, the appealed Decision is, as it is hereby, SET ASIDE and another one issued ordering respondent- appellee to pay complainantappellant:
1. The unpaid bonus (mid-year and Christmas bonus) and 13th month pay;
2. Wage differentials under Wage Order No. 6 for November 1, 1984 and the corresponding adjustment thereof; and
3. Holiday pay under Article 94 of the Labor Code, but not to exceed three (3) years.
The rest of the claims are dismissed for lack of merit.
SO ORDERED.
Petition filed a Motion for Partial Reconsideration, which was denied by the NLRC in a Resolution issued on 18 June 1991. Hence, recourse to this Court.
Petitioner contends that the NLRC gravely abused its discretion in ruling as it did for the succeeding reasons stated in its Petition 1. On the alleged diminution of benefits, the NLRC gravely abused its discretion when (1) it contravened the Supreme Court decision in Traders Royal Bank v. NLRC,
et al., G.R. No. 88168, promulgated on August 30, 1990, (2) its ruling is not justified by law and Art. 100 of the Labor Code, (3) its ruling is contrary to the CBA, and
(4) the so-called "company practice invoked by it has no legal and moral bases" (p. 2, Motion for Partial Reconsideration, Annex "H");
2. On the alleged non-compliance with Wage Order No. 6, the NLRC again gravely abused its discretion when it patently and palpably erred in holding that it is "more
inclined to adopt the stance of appellant (private respondent UNION) in this issue since it is more in keeping with the law and its implementing provisions and the
intendment of the parties as revealed in their CBA" without giving any reason or justification for such conclusions as the stance of appellant (private respondent
UNION) does not traverse the clear and correct finding and conclusion of the Labor Arbiter.
Furthermore, the petitioner, under conservatorship and distressed, is exempted under Wage Order No. 6.
Finally, the "wage differentials under Wage Order No. 6 for November 1, 1984 and the corresponding adjustment thereof" (par. 2, dispositive portion, NLRC Decision),
has prescribed (p. 12, Motion for Partial Reconsideration, Annex "H").
3. On the alleged non-payment of legal holiday pay, the NLRC again gravely abused its discretion when it patently and palpably erred in approving and adopting "the
position of appellant (private respondent UNION)" without giving any reason or justification therefor which position does not squarely traverse or refute the Labor
Arbiter's correct finding and ruling (p. 18, Motion for Partial Reconsideration, Annex "H").6
On 29 July 1991, the Court granted petitioner's prayer for a temporary restraining order enjoining respondents from executing the 30 April 1991 Decision and 18 June
1991 Resolution of the NLRC.7
Coming now to the merits of the petition, the Court shall discuss the issues ad seriatim.

Bonuses
As to the bonuses, private respondent declared in its position papers filed with the NLRC that
1. Producers Bank of the Philippines, a banking institution, has been providing several benefits to its employees since 1971 when it started its operation. Among the
benefits it had been regularly giving is a mid-year bonus equivalent to an employee's one-month basic pay and a Christmas bonus equivalent to an employee's one whole
month salary (basic pay plus allowance);
2. When P.D. 851, the law granting a 13th month pay, took effect, the basic pay previously being given as part of the Christmas bonus was applied as compliance to it
(P.D. 851), the allowances remained as Christmas bonus;
3. From 1981 up to 1983, the bank continued giving one month basic pay as mid-year bonus, one month basic pay as 13th month pay but the Christmas bonus was no
longer based on the allowance but on the basic pay of the employees which is higher;
4. In the early part of 1984, the bank was placed under conservatorship but it still provided the traditional mid-year bonus;
5. By virtue of an alleged Monetary Board Resolution No. 1566, bank only gave a one-half (1/2) month basic pay as compliance of the 13 th month pay and none for the
Christmas bonus. In a tabular form, here are the bank's violations:

YEAR

MID- YEAR BONUS

CHRISTMAS BONUS

13TH MO. PAY

previous years

one mo. basic

one mo. basic

one mo. Basic

1984

[one mo. basic]

-none-

one-half mo. Basic

1985

one-half mo. basic

-none-

one-half mo. Basic

1986

one-half mo. basic

one-half mo. basic

one mo. Basic

1987

one-half mo. basic

one-half mo. basic

one mo. basic

Private respondent argues that the mid-year and Christmas bonuses, by reason of their having been given for thirteen consecutive years, have ripened into a vested right
and, as such, can no longer be unilaterally withdrawn by petitioner without violating Article 100 of Presidential Decree No. 4429 which prohibits the diminution or
elimination of benefits already being enjoyed by the employees. Although private respondent concedes that the grant of a bonus is discretionary on the part of the
employer, it argues that, by reason of its long and regular concession, it may become part of the employee's regular compensation. 10
On the other hand, petitioner asserts that it cannot be compelled to pay the alleged bonus differentials due to its depressed financial condition, as evidenced by the fact
that in 1984 it was placed under conservatorship by the Monetary Board. According to petitioner, it sustained losses in the millions of pesos from 1984 to 1988, an
assertion which was affirmed by the labor arbiter. Moreover, petitioner points out that the collective bargaining agreement of the parties does not provide for the
payment of any mid-year or Christmas bonus. On the contrary, section 4 of the collective bargaining agreement states that
Acts of Grace. Any other benefits or privileges which are not expressly provided in this Agreement, even if now accorded or hereafter accorded to the employees, shall
be deemed purely acts of grace dependent upon the sole judgment and discretion of the BANK to grant, modify or withdraw . 11
A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the
realization of profits. It is an act of generosity granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization

of bigger profits.12 The granting of a bonus is a management prerogative, something given in addition to what is ordinarily received by or strictly due the
recipient.13 Thus, a bonus is not a demandable and enforceable obligation,14 except when it is made part of the wage, salary or compensation of the employee. 15
However, an employer cannot be forced to distribute bonuses which it can no longer afford to pay. To hold otherwise would be to penalize the employer for his past
generosity. Thus, in Traders Royal Bank v. NLRC,16 we held that It is clear x x x that the petitioner may not be obliged to pay bonuses to its employees. The matter of giving them bonuses over and above their lawful salaries and
allowances is entirely dependent on the profits, if any, realized by the Bank from its operations during the past year.
From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986, the income of the Bank was only 20.2 million pesos, but the Bank still
gave out the usual two (2) months basic mid-year and two months gross year-end bonuses. The petitioner pointed out, however, that the Bank weakened considerably
after 1986 on account of political developments in the country. Suspected to be a Marcos-owned or controlled bank, it was placed under sequestration by the present
administration and is now managed by the Presidential Commission on Good Government (PCGG).
In light of these submissions of the petitioner, the contention of the Union that the granting of bonuses to the employees had ripened into a company practice that may
not be adjusted to the prevailing financial condition of the Bank has no legal and moral bases. Its fiscal condition having declined, the Bank may not be forced to
distribute bonuses which it can no longer afford to pay and, in effect, be penalized for its past generosity to its employees. Private respondent's contention, that the decrease in the mid-year and year-end bonuses constituted a diminution of the employees' salaries, is not correct, for bonuses
are not part of labor standards in the same class as salaries, cost of living allowances, holiday pay, and leave benefits, which are provided by the Labor Code.
This doctrine was reiterated in the more recent case of Manila Banking Corporation v. NLR17 wherein the Court made the following pronouncements
By definition, a "bonus" is a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right. It is something given in addition to
what is ordinarily received by or strictly due the recipient. The granting of a bonus is basically a management prerogative which cannot be forced upon the employer
who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or wages, especially so if it is
incapable of doing so.
xxx xxx xxx
Clearly then, a bonus is an amount given ex gratia to an employee by an employer on account of success in business or realization of profits. How then can an employer
be made liable to pay additional benefits in the nature of bonuses to its employees when it has been operating on considerable net losses for a given period of time?
Records bear out that petitioner Manilabank was already in dire financial straits in the mid-80's. As early as 1984, the Central Bank found that Manila bank had been
suffering financial losses. Presumably, the problems commenced even before their discovery in 1984. As earlier chronicled, the Central Bank placed petitioner bank
under comptrollership in 1984 because of liquidity problems and excessive interbank borrowings. In 1987, it was placed under receivership and ordered to close
operation. In 1988, it was ordered liquidated.
It is evident, therefore, that petitioner bank was operating on net losses from the years 1984, 1985 and 1986, thus, resulting to its eventual closure in 1987 and
liquidation in 1988. Clearly, there was no success in business or realization of profits to speak of that would warrant the conferment of additional benefits sought by
private respondents. No company should be compelled to act liberally and confer upon its employees additional benefits over and above those mandated by law when it
is plagued by economic difficulties and financial losses. No act of enlightened generosity and self-interest can be exacted from near empty , if not empty coffers.
It was established by the labor arbiter18 and the NLRC19 and admitted by both parties20 that petitioner was placed under conservatorship by the Monetary Board, pursuant
to its authority under Section 28-A of Republic Act No. 265,21 as amended by Presidential Decree No. 72,22 which provides
Sec.28-A. Appointment of conservator. - Whenever, on the basis of a report submitted by the appropriate supervising and examining department, the Monetary Board
finds that a bank is in a state of continuing inability or unwillingness to maintain a condition of solvency and liquidity deemed adequate to protect the interest of
depositors and creditors, the Monetary Board may appoint a conservator to take charge of the assets, liabilities, and the management of that banking institution, collect
all monies and debts due said bank and exercise all powers necessary to preserve the assets of the bank, reorganize the management thereof and restore its viability .He
shall have the power to overrule or revoke "the actions of the previous management and board of directors of the bank, any provision of law to the contrary
notwithstanding, and such other powers as the Monetary Board shall deem necessary.1wphi1.nt
xxx xxx xxx
Under Section 28-A, the Monetary Board may place a bank under the control of a conservator when it finds that the bank is continuously unable or unwilling to maintain
a condition of solvency or liquidity .In Central Bank of the Philippines v. Court of Appeals,23 the Court declared that the order placing petitioner herein under
conservatorship had long become final and its validity could no longer be litigated upon. Also, in the same case, the Court found that sometime in August, 1983, some
news items triggered a bank-run in petitioner which resulted in continuous over- drawings on petitioner's demand deposit account with the Central Bank; the overdrawings reached P143.955 million by 17 January 1984; and as of 13 February 1990, petitioner had over-drawings of up to P1.233 billion, which evidences petitioner's
continuing inability to maintain a condition of solvency and liquidity, thus justifying the conservatorship. Our findings in the Central Bank case coincide with
petitioner's claims that it continuously suffered losses from 1984 to 1988 as follows

NET LOSSES IN MILLIONS OF PESOS

January-February 1988

These losses do not include the interest expenses on the overdraft loan of the petitioner to the Central Bank, which interest as of July 31, 1987, amounted to P610.065
Million, and penalties on reserve deficiencies which amounted to P89.029 Million. The principal balance of the overdraft amounted to P971.632 Million as of March 16,
1988.24
Petitioner was not only experiencing a decline in its profits, but was reeling from tremendous losses triggered by a bank-run which began in 1983. In such a depressed
financial condition, petitioner cannot be legally compelled to continue paying the same amount of bonuses to its employees. Thus, the conservator was justified in
reducing the mid-year and Christmas bonuses of petitioner's employees. To hold otherwise would be to defeat the reason for the conservatorship which is to preserve the
assets and restore the viability of the financially precarious bank. Ultimately, it is to the employees' advantage that the conservatorship achieve its purposes for the
alternative would be petitioner's closure whereby employees would lose not only their benefits, but their jobs as well.
13th Month Pay
With regard to the 13th month pay, the NLRC adopted the position taken by private respondent and held that the conservator was not justified in diminishing or not
paying the 13th month pay and that petitioner should have instead applied for an exemption, in accordance with section 7 of Presidential Decree No. 851 (PD 851), as
amended by Presidential Decree No. 1364, but that it did not do so.25 The NLRC held that the actions of the conservator ran counter to the provisions of PD 851.
In its position paper,26 private respondent claimed that petitioner made the following payments to its members

MID-YEAR BONUS

MONTH PAY

1 month basic

month basic

month basic

month basic

month basic

1 month basic

CHRISTMAS BONUS

month basic

 month basic

1 month basic

month basic

However, in its Memorandum27 filed before this Court, private respondent revised its claims as follows

MID- YEAR BONUS

MONTH PAY

CHRISTMAS BONUS

1 month basic

month basic

month basic

month basic

month basic

1/2 month basic

1 month basic

1/2 month basic

month basic

1 month basic

1/2 month basic

month basic

1 month basic

Petitioner argues that it is not covered by PD 851 since the mid-year and Christmas bonuses it has been giving its employees from 1984 to 1988 exceeds the basic salary
for one month (except for 1985 where a total of one month basic salary was given). Hence, this amount should be applied towards the satisfaction of the 13 th month pay,
pursuant to Section 2 of PD 851.28
PD 851, which was issued by President Marcos on 16 December 1975, requires all employers to pay their employees receiving a basic salary of not more than P 1,000 a
month,29 regardless of the nature of the employment, a 13th month pay, not later than December 24 of every year.30 However, employers already paying their employees a
13th month pay or its equivalent are not covered by the law. Under the Revised Guidelines on the Implementation of the 13 th-Month Pay Law,31 the term "equivalent"
shall be construed to include Christmas bonus, mid-year bonus, cash bonuses and other payments amounting to not less than 1/12 of the basic salary. The intention of the
law was to grant some relief - not to all workers - but only to those not actually paid a 13 thmonth salary or what amounts to it, by whatever name called. It was not
envisioned that a double burden would be imposed on the employer already paying his employees a 13 th month pay or its equivalent whether out of pure generosity or on
the basis of a binding agreement. To impose upon an employer already giving his employees the equivalent of a 13 th month pay would be to penalize him for his
liberality and in all probability, the employer would react by withdrawing the bonuses or resist further voluntary grants for fear that if and when a law is passed giving
the same benefits, his prior concessions might not be given due credit.32
In the case at bar, even assuming the truth of private respondent's claims as contained in its position paper or Memorandum regarding the payments received by its
members in the form of 13th month pay, mid-year bonus and Christmas bonus, it is noted that, for each and every year involved, the total amount given by petitioner
would still exceed, or at least be equal to, one month basic salary and thus, may be considered as an "equivalent" of the 13 thmonth pay mandated by PD 851.
Thus, petitioner is justified in crediting the mid-year bonus and Christmas bonus as part of the 13th month pay.
Wage Order No. 6

Wage Order No.6, which came into effect on 1 November 1984, increased the statutory minimum wage of workers, with different increases being specified for
agricultural plantation and non-agricultural workers. The bone of contention, however, involves Section 4 thereof which reads
All wage increase in wage and/or allowance granted by employers between June 17, 1984 and the effectivity of this Order shall be credited as compliance with the
minimum wage and allowance adjustments prescribed herein, provided that where the increases are less than the applicable amount provided in this Order, the employer
shall pay the difference. Such increases shall not include anniversary wage increases provided in collective bargaining agreements unless the agreement expressly
provide otherwise.
On 16 November 1984, the parties entered into a collective bargaining agreement providing for the following salary adjustments
Article VIII. Section 1. Salary Adjustments. - Cognizant of the effects of, among others, price increases of oil and other commodities on the employees' wages and
earnings, and the certainty of continued governmental or statutory actions adjusting employees' minimum wages, earnings, allowances, bonuses and other fringe
benefits, the parties have formulated and agreed on the following highly substantial packaged increases in salary and allowance which take into account and cover (a)
any deflation in income of employees because of such price increases and inflation and (b) the expected governmental response thereto in the form of statutory
adjustments in wages, allowances and benefits, during the next three (3) years of this Agreement:
(i) Effective March 1, 1984 - P225.00 per month as salary increase plus P100.00 per month as increase in allowance to employees within the bargaining unit on March 1,
1984.
(ii) Effective March 1,1985 -P125.00 per month as salary increase plus P100.00 per month as increase in allowance to employees within the bargaining unit on March
1,1985.
(iii) Effective March 1,1986 -P125.00 per month as salary increase plus P100.00 per month as increase in allowance to employees within the bargaining unit on March 1,
1986.
In addition, the collective bargaining agreement of the parties also included a provision on the chargeability of such salary or allowance increases against governmentordered or legislated income adjustments
Section 2. Pursuant to the MOLE Decision dated October 2, 1984 and Order dated October 24, 1984, the first-year salary and allowance increases shall be chargeable
against adjustments under Wage Order No. 5, which took effect on June 16, 1984. The charge ability of the foregoing salary increases against government-ordered or
legislated income adjustments subsequent to Wage Order No. 5 shall be determined on the basis of the provisions of such government orders or legislation.
Petitioner argues that it complied with Wage Order No. 6 because the first year salary and allowance increase provided for under the collective bargaining agreement can
be credited against the wage and allowance increase mandated by such wage order. Under Wage Order No. 6, all increases in wages or allowances granted by the
employer between 17 June 1984 and 1 November 1984 shall be credited as compliance with the wage and allowance adjustments prescribed therein. Petitioner asserts
that although the collective bargaining agreement was signed by the parties on 16 November. 1984, the first year salary and allowance increase was made to take effect
retroactively, beginning from 1 March 1984 until 28 February 1985. Petitioner maintains that this period encompasses the period of creditability provided for under
Wage Order No. 6 and that, therefore, the balance remaining after applying the first year salary and allowance increase in the collective bargaining agreement to the
increase mandated by Wage Order No. 5, in the amount of P125.00, should be made chargeable against the increase prescribed by Wage Order No. 6, and if not
sufficient, petitioner is willing to pay the difference.33
On the other hand, private respondent contends that the first year salary and allowance increases under the collective bargaining agreement cannot be applied towards
the satisfaction of the increases prescribed by Wage Order No. 6 because the former were not granted within the period of creditability provided for in such wage order.
According to private respondent, the significant dates with regard to the granting of the first year increases are 9 November 1984 the date of issuance of the MOLE
Resolution, 16 November 1984 - the date when the collective bargaining agreement was signed by the parties and 1 March 1984 the retroactive date of effectivity of the
first year increases. Private respondent points out that none of these dates fall within the period of creditability under Wage Order No. 6 which is from 17 June 1984 to 1
November 1984. Thus, petitioner has not complied with Wage Order No. 6.34
The creditability provision in Wage Order No. 6 is based on important public policy, that is, the encouragement of employers to grant wage and allowance increases to
their employees higher than the minimum rates of increases prescribed by statute or administrative regulation. Thus, we held in Apex Mining Company, Inc. v.
NLRC35 that
[t]o obliterate the creditability provisions in the Wage Orders through interpretation or otherwise, and to compel employers simply to add on legislated increases in
salaries or allowances without regard to what is already being paid, would be to penalize employers who grant their workers more than the statutorily prescribed
minimum rates of increases. Clearly, this would be counter-productive so far as securing the interest of labor is concerned. The creditability provisions in the Wage
Orders prevent the penalizing of employers who are industry leaders and who do not wait for statutorily prescribed increases in salary or allowances and pay their
workers more than what the law or regulations require.
Section 1 of Article VIII of the collective bargaining agreement of the parties states that "...the parties have formulated and agreed on the following highly substantial
packaged increases in salary and allowance which take into account and cover (a) any deflation in income of employees because of such price increases and inflation
and (b) the expected governmental response thereto in the form of statutory adjustments in wages, allowances and benefits, during the next three (3) years of this
Agreement..." The unequivocal wording of this provision manifests the clear intent of the parties to apply the wage and allowance increases stipulated in the collective
bargaining agreement to any statutory wage and allowance, adjustments issued during the effectivity of such agreement from 1 March 1984 to 28 February 1987.
Furthermore, contrary to private respondent's contentions, there is nothing in the wording of Section 2 of Article VIII of the collective bargaining agreement that would
prevent petitioner from crediting the first year salary and allowance increases against the increases prescribed by Wage Order No. 6.

It would be inconsistent with the above stated rationale underlying the creditability provision of Wage Order No. 6 if, after applying the first year increase to Wage Order
No. 5, the balance was not made chargeable to the increases under Wage Order No. 6 for the fact remains that petitioner actually granted wage and allowance increases
sufficient to cover the increases mandated by Wage Order No. 5 and part of the increases mandated by Wage Order No. 6.
Holiday Pay
Article 94 of the Labor Code provides that every worker shall be paid his regular daily wage during regular holidays 36 and that the employer may require an employee to
work on any holiday but such employee shall be paid a compensation equivalent to twice his regular rate. In this case, the Labor Arbiter found that the divisor used by
petitioner in arriving at the employees' daily rate for the purpose of computing salary-related benefits is 314. 37This finding was not disputed by the NLRC.38 However,
the divisor was reduced to 303 by virtue of an inter-office memorandum issued on 13 August 1986, to wit
To increase the rate of overtime pay for rank and filers, we are pleased to inform that effective August 18, 1986, the acting Conservator approved the use of 303 days as
divisor in the computation of Overtime pay. The present Policy of 314 days as divisor used in the computation for cash conversion and determination of daily rate,
among others, still remain, Saturdays, therefore, are still considered paid rest days.
Corollarily, the Acting Conservator also approved the increase of meal allowance from P25.00 to P30.00 for a minimum of four (4) hours of work for Saturdays.
Proceeding from the unambiguous terms of the above quoted memorandum, the Labor Arbiter observed that the reduction of the divisor to 303 was for the sole purpose
of increasing the employees' overtime pay and was not meant to replace the use of 314 as the divisor in the computation of the daily rate for salary-related benefits. 39
Private respondent admits that, prior to 18 August 1986, petitioner used a divisor of 314 in arriving at the daily wage rate of monthly-salaried employees. Private
respondent also concedes that the divisor was changed to 303 for purposes of computing overtime pay only. In its Memorandum, private respondent states that
49. The facts germane to this issue are not debatable. The Memorandum Circular issued by the Acting Conservator is clear. Prior to August 18,1986, the petitioner bank
used a divisor of 314 days in arriving at the daily wage rate of the monthly-salaried employees. Effective August 18, 1986, this was changed. It adopted the following
formula:
Basic salary x 12 months = Daily Wage Rate
303 days
50. By utilizing this formula even up to the present, the conclusion is inescapable that the petitioner bank is not actually paying its employees the regular holiday pay
mandated by law. Consequently, it is bound to pay the salary differential of its employees effective November 1, 1974 up to the present.
xxx

xxx

xxx

54. Since it is a question of fact, the Inter-office Memorandum dated August 13,1986 (Annex "E") provides for a divisor of 303 days in computing overtime pay. The
clear import of this document is that from the 365 days in a year, we deduct 52 rest days which gives a total of 313 days. Now, if 313 days is the number of working days
of the employees then, there is a disputable presumption that the employees are paid their holiday pay. However, this is not so in the case at bar. The bank uses 303 days
as its divisor. Hence, it is not paying its employees their corresponding holiday pay.40
In Union of Filipro Employees v. Vivar, ]r.41 the Court held that "[t]he divisor assumes an important role in determining whether or not holiday pay is already included in
the monthly paid employee's salary and in the computation of his daily rate." This was also our ruling in Chartered Bank Employees Association v. Ople,42 as follows
It is argued that even without the presumption found in the rules and in the policy instruction, the company practice indicates that the monthly salaries of the employees
are so computed as to include the holiday pay provided by law. The petitioner contends otherwise.
One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing overtime compensation for its employees, employs a "divisor" of
251 days. The 251 working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays form the total number of calendar days in a
year. If the employees are already paid for all non-working days, the divisor should be 365 and not 251.
Apparently, the divisor of 314 is arrived at by subtracting all Sundays from the total number of calendar days in a year, since Saturdays are considered paid rest days, as
stated in the inter-office memorandum. Thus, the use of 314 as a divisor leads to the inevitable conclusion that the ten legal holidays are already included therein.
We agree with the labor arbiter that the reduction of the divisor to 303 was done for the sole purpose of increasing the employees' overtime pay, and was not meant to
exclude holiday pay from the monthly salary of petitioner's employees. In fact, it was expressly stated in the inter-office memorandum - also referred to by private
respondent in its pleadings - that the divisor of 314 will still be used in the computation for cash conversion and in the determination of the daily rate. Thus, based on the
records of this case and the parties' own admissions, the Court holds that petitioner has complied with the requirements of Article 94 of the Labor Code.1wphi1.nt
Damages
As to private respondent's claim for damages, the NLRC was correct in ruling that there is no basis to support the same.

WHEREFORE, for the reasons above stated, the 30 April 1991 Decision of public respondent in NLRC-NCR Case No. 02-00753-88, entitled "Producers Bank
Employees Association v. Producers Bank of the Philippines," and its 18 June 1991 - Resolution issued in the same case are hereby SET ASIDE, with the exception of
public respondent's ruling on damages.
SO ORDERED.
G.R. No. L-27761 September 30, 1981
BISIG NG MANGGAGAWA NG PHILIPPINE REFINING CO., INC., plaintiff-appellants,
vs.
PHILIPPINE REFINING CO., INC., defendant-appellee.

ABAD SANTOS, J.:

This is an appeal from the decision of the Court of First Instance of Manila dated December 8, 1966, in Civil Case No. 65082, holding that Christmas bonus and other
fringe benefits are excluded in the computation of the overtime pay of the members of the appellant union under Section 6, Article VI of the 1965 collective bargaining
agreement which reads as follows:
Overtime pay at the rate of regular base pay plus 50% thereof shag be paid for all work performed in excess of eight hours on ordinary days within the work week (that
is to say, Monday to Friday).
On April 15,1966, the Bisig ng Manggagawa ng Philippine Refining Company, Inc., as the representative union of the rank and file employees of the Philippine Refining
Co., Inc., filed with the Court of First Instance of Manila a petition for declaratory relief praying, among others
That a declaratory judgment be rendered declaring and adjudicating the qqqtive rights and duties of petitioner and respon dent under the above quoted provision of their
Collective 13 - agreements and further declaring that the Christmas bonus of one month or thirty days pay and other de determinable benefits should be included for the
purpose of computation of the overtime pay spread throughout the twelve months period of each year from August, 1963 up to the present and subsequently hereafter;
and that respondent be therefore directed to pay such differential in the overtime pay of all the employees of the herein respondent ;
Petitioner union contended that the respondent company was under obligation to include the employees' Christmas bonus and other fringe benefits in the computation of
their overtime pay by virtue of the ruling of this Court in the case of NAWASA vs. NAWASA Consolidated Unions, et all G.R. No. L-18938, August 31, 1964, 11 SCRA
766.
On May 3, 1966, the Philippine Refining Co.. Inc. filed its answer to the petition alleging, among others, that never did the parties intend, in the 1965 collective
bargaining agreement and in prior agreements, to include the employees' Christmas bonus and other fringe benefits in the computation of the overtime pay and that the
company precisely agreed to a rate of 50%, which is much higher than the 25% required by the Eight-Hour Labor Law (Commonwealth Act No. 444, as amended), on
the condition that in computing the overtime pay only the "regular base pay" would be considered. Furthermore, respondent company contended that the ruling of this
Court in the NAWASA case relative to the computation of overtime compensation could not be applied to its employees since it was a private corporation and not a
government-owned or controlled corporation like the NAWASA.
After the requisite pre-trial was held, the Court of First Instance of Manila issued an order dated September 16, 1966, limiting the issues to the proper interpretation of
the above quoted provision of the 1965 collective bargaining agreement and to the applicability to the case of the NAWASA ruling and requiring the parties to submit
evidence as to the circumstances under which the questioned provision had been included in the agreement of 1965.
During the trial, the parties presented their respective witnesses from whose testimonies the following facts were established: that the collective bargaining agreements
entered into between the parties before 1965 all contained a provision similar to the aforequoted Sec. 6, Art. VI of the 1965 collective bargaining agreement; that in the
enforcement of said earlier agreements, the overtime compensation of the employees was computed on the basis solely of their basic monthly pay, i.e., excluding the
employees' Christmas bonus and other fringe benefits; that in the negotiations which led to the execution of the 1965 collective bargaining agreement, the matter of the
proper interpretation of the phrase "regular base pay" was discussed; that the petitioner union demanded that the NAWASA ruling should be applied by including the
employees' Christmas bonus and other fringe benefits in the computation of the overtime compensation; that the respondent company refused to give in to such demand
contending that (1) the company agreed to a 5% overtime rate, which was higher than the 25% rate required by law, precisely on the condition that the same should
be computed solely on the basis of the employees' basic monthly salary, excluding Christmas bonus and other fringe benefits; (2) the parties had the freedom to choose
the basis for computing the overtime pay provided that the same should not be less than the minimum prescribed by law; and (3) the NAWASA decision was
inapplicable to a private corporation like the Philippine Refining Co., Inc.; that while refusing to grant petitioner's demand, the respondent company nevertheless agreed
to submit to a court for resolution the issue of the applicability to their case of the NAWASA ruling, with the undertaking to abide by whatever decision the court would
render; and, that the parties agreed that, in the meantime, they would exclude the Christmas bonus and other fringe benefits in the computation of the overtime
compensation.
On December 8, 1966, the Court of First Instance of Manila rendered a decision the dispositive portion of which reads as follows:

IN VIEW OF THE FOREGOING, judgment is hereby rendered, declaring that the term "regular base pay" in Section 6, Ararticle VI of Exhibit A refers only to "regular
base pay" and does not include Christmas bonus and other fringe benefits. Without pronouncement as to costs.
SO ORDERED.
Said court held that while the NAWASA ruling concerning the meaning of the phrase "regular pay" of the Eight-Hour Labor Law could be applied to employees of
private corporations like the Philippine Refining Company, the same was, nevertheless, inapplicable to the case at bar which involved the interpretation of the phrase
"regular base pay which was different from "regular pay". It declared that "regular base pay" referred only to the basic or monthly pay exclusive of Christmas bonus and
other fringe benefits. Furthermore, the validity of the provision of the 1965 collective bargaining agreement concerning the computation of the employees' overtime pay
on the basis of their "regular base pay" was upheld by the court for the reason that the same was even higher than the overtime pay prescribed by law. The court
emphasized that contracts are binding on the parties insofar as they are not contrary to law, morals and public order.
A motion for reconsideration of the decision was filed by the petitioner union but the same was denied in an order dated February 17, 1967. Hence, the present appeal
which raises pure questions of law, namely: (1) whether or not the phrase "regular base pay" as used in the above-quoted provision of the 1965 CBA includes Christmas
bonus and other fringe benefits; and (2) whether or not the stipulation in the CBA on overtime pay violates the Nawasa doctrine if the answer to question No. I is in the
negative.
We answer both questions in the negative.
The phrase "regular base pay" is clear, unequivocal and requires no interpretation. It means regular basic pay and necessarily excludes money received in different
concepts such as Christmas bonus and other fringe benefits. In this connection it is necessary to remember that in the enforcement of previous collective bargaining
agreements containing the same provision of overtime pay at the rate of regular base pay plus 50@'c thereof", the overtime compensation was invariably based only on
the regular basic pay, exclusive of Christmas bonus and other tinge benefits. Appellant union knew all the while of such interpretation and precisely attempted to
negotiate for a provision in the subject collective bargaining agreement that would include the Christmas bonus and other fringe benefits in the computation of the
overtime pay. Significantly, the appellee company did not agree to change the phrase "regular base pay" as it could not consent to the inclusion of the fringe benefits in
the computation of the overtime pay. Hence, the appellant union could not question the intended definition of the phrase but could only claim that the same violated the
Nawasa doctrine and insist that the phrase should be redefined to conform to said doctrine.
We are thus tasked not so much with the interpretation of the phrase "regular base pay" in the CBA, which unquestionably excludes Christmas bonus and other fringe
benefits, but with the question of whether as understood, the contractual stipulation violates the ruling laid down in the Nawasa case.
The pertinent portions of the decision in the case of NAWASA vs. NAWASA Consolidated Unions (L-18938, August 31, 1964, 11 SCRA 766, 782-783) invoked by the
appellant union read as follows:
It has been held that for purposes of computing overtime compensation a regular wage includes all payments which the parties have agreed shall be received during the
work week, including piece work wages, differential payments for working at undesirable times, such as at night or on Sundays and holidays, and the cost of board and
lodging customarily furnished the employee Walling v. Yangermah-Reynolds Hardwork Co., 325 U.S. 419; Walling v. Harischfeger Corp., 325 U.S. 427. The 'regular
rate' of pay also ordinarily includes incentive bonus or profit-sharing payments made in addition to the normal basic pay (56 C.J.S., pp. 704-705), and it was also held
that the higher rate for night, Sunday and holiday work is just as much a regular rate as the lower rate for daytime work. The higher rate is merely an inducement to
accept employment at times which are not as desirable from a workman's standpoint (International L. Ass'n. v. National Terminals Corp. c.c. Wise, 50 F. Supp. 26,
affirmed CCA Casbunao v. National Terminals Corp. 139 F. 2d 853).
Respondent court, therefore, correctly included such differential pay in computing the weekly wages of those employees and laborers who worked seven days a week
and were continuously receiving 25% Sunday differential for a period of three months immediately p g the implementation of Republic Act 1880. "
The appellant union contends that by virtue of the forego. ing the Philippine Refining Co., Inc., is under obligation to include the, employees' Christmas bonus and other
fringe benefits in the computation of their overtime compensation which, as agreed, is "regular base pay plus 50% thereof".
The legal provisions pertinent to the subject of overtime compensation are found in Secs. 3 and 4 of Commonwealth Act No. 444, as amended, which read as follows:
SEC. 3. Work may be performed beyond eight hours a day in case of actual or impending emergencies ...; but in all such cases, the laborers and employees shall be
entitled to receive compensation for the overtime work performed at the same rate as their regular wages or salary, plus at least twenty-five per centum additional.
SEC. 4. No person, firm, or corporation, business establishment or place or center of labor shall compel an employee or laborer to work during Sunday and legal
holidays, unless he is paid an additional sum of at least twenty-five per centum of his regular renumeration (Emphasis supplied.)
Applying the aforequoted NAWASA ruling to the above provision of law, We arrive at the following conclusion: an employers covered by said law are under legal
compulsion to grant their employees overtime compensation in amounts not less than their basic pay and the fringe benefits regularly and continuously received by them
plus 25% thereof. This does not however mean that agreements concerning overtime compensation should always provide for a computation based on the employee's
"regular wage or salary i.e. regular base pay plus fringe benefits regularly and continuously received. For it is axiomatic that in multiplication, the product is directly
related to the multiplicand the multiplier, and that the multiplicand Is inversely related to the multiplier conviniently, the same product may be obtained despite reduction

of the multiplicand provided that the multiplier is correspondingly increased. Conformably with the foregoing mathematical axioms there is still compliance with the
above-stated ruling despite the fact that the overtime compensation is based only on the employee's "regular base pay" (the multiplicand) as long as the rate of 25% (the
multiplier) is increased by such amount as to produce a result (the product) which is not less than the result to be obtained in computing 25% of the employee's "regular
wage or salary" ("regular base pay" plus fringe benefits regularly and continuously received). In fine, the parties may agree for the payment of overtime compensation in
an amount to be determined by applying a formula other than the statutory formula of "regular wage or qqqs plus at least twenty-five per centum additional" provided
that the result in applying the contractual formula is not less than the result in applying said statutory formula.
In the case at bar, it is admitted that the contractual formula of "regular base pay plus 50% thereof" yields an overtime compensation which is higher than the result in
applying the statutory formula as elaborated in the Nawasa case. Consequently, its validity is upheld and the parties are enjoined to accord due respect to it.
WHEREFORE, the decision appealed from is hereby affirmed in all respects. Without pronouncement as to costs.
SO ORDERED.
G.R. No. 88168 August 30, 1990
TRADERS ROYAL BANK, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION & TRADERS ROYAL BANK EMPLOYEES UNION, respondents.
San Juan, Gonzalez, San Agustin & Sinense for petitioner.
E.N.A. Cruz, Enfero & Associates for private respondent.

GRIO-AQUINO, J.:
This petition for certiorari seeks to nullify or set aside the decision dated September 2, 1988 of the National Labor Relations Commission, which found the petitioner,
Traders Royal Bank (or TRB), guilty of diminution of benefits due the private respondents and ordered it to pay the said employees' claims for differentials in their
holiday, mid-year, and year-end bonuses.
On November 18, 1986, the Union, through its president, filed a letter-complaint against TRB with the Conciliation Division of the Bureau of Labor Relations claiming
that:
First, the management of TRB per memo dated October 10, 1986 paid the employees their HOLIDAY PAY, but has withheld from the Union the basis of their
computation.
Second, the computation in question, has allegedly decreased the daily salary rate of the employees. This diminution of existing benefits has decreased our overtime rate
and has affected the employees' take home pay.
Third, the diminution of benefits being enjoyed by the employees since time immemorial, e.g. mid-year bonus, from two (2) months gross pay to two (2) months basic
and year-end bonus from three (3) months gross to only two (2) months.
Fourth, the refusal by management to recall active union members from the branches which were being transferred without prior notice, solely at the instance of the
branch manager. (p. 26, Rollo.)
In its answer to the union's complaint, TRB pointed out that the NLRC, not the Bureau of Labor Relations, had jurisdiction over the money claims of the employees.
On March 24, 1987, the Secretary of Labor certified the complaint to the NLRC for resolution of the following issues raised by the complainants:
l) The Management of TRB per memo dated October 10, 1986 paid the employees their holiday pay but has withheld from the union the basis of their computation.
2) The computation in question has allegedly decreased the daily salary rate of the employees. This diminution of existing benefits has decreased our overtime rate and
has affected the employees' take home pay.
3) The diminution of benefits being enjoyed by the employees since the (sic) immemorial, e.g. mid-year bonus, from two (2) months gross pay to two (2) months basic
and year-end bonus from three (3) months gross to only two (2) months.

4) The refusal by management to recall active union members from the branches which were being transferred without prior notice, solely at the instance of the branch,
manager. (p. 28, Rollo.)
In the meantime, the parties who had been negotiating for a collective bargaining agreement, agreed on the terms of the CBA, to wit:
1. The whole of the bonuses given in previous years is not demandable, i.e., there is no diminution, as to be liable for a differential, if the bonus given is less than that in
previous years.
2. Since only two months bonus is guaranteed, only to that extent are bonuses deemed part of regular compensation.
3. As regards the third and fourth bonuses, they are entirely dependent on the income of the bank, and not demandable as part of compensation. (pp. 67-68, Rollo.)
Despite the terms of the CBA, however, the union insisted on pursuing the case, arguing that the CBA would apply prospectively only to claims arising after its
effectivity.
Petitioner, on the other hand, insisted that it had paid the employees holiday pay. The practice of giving them bonuses at year's end, would depend on how profitable the
operation of the bank had been. Generally, the bonus given was two (2) months basic mid-year and two (2) months gross end-year.
On September 2, 1988, the NLRC rendered a decision in favor of the employees, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the petitioner and ordering respondent bank to pay petitioner members-employees the following:
1. Holiday differential for the period covering l983-1986 as embodied in Resolution No. 4984-1986 of respondent's Board of Directors but to start from November 11,
1983 and using the Divisor 251 days in determining the daily rate of the employees;
2. Mid-year bonus differential representing the difference between two (2) months gross pay and two (2) months basic pay and end-year bonus differential of one (1)
month gross pay for 1986.
The claim for holiday differential for the period earlier than November 11, 1983 is hereby dismissed, the same having prescribed.
Likewise, the charge of unfair labor practice against the respondent company is hereby dismissed for lack of merit. (pp. 72-73, Rollo.)
A motion for reconsideration was filed by TRB but it was denied. Hence, this petition for certiorari.
There is merit in the petitioner's contention that the NLRC gravely abused its discretion in ordering it to pay mid-year/year-end bonus differential for 1986 to its
employees.
A bonus is "a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right" (Aragon vs. Cebu Portland Cement Co., 61 O.G.
4597). "It is something given in addition to what is ordinarily received by or strictly due the recipient." The granting of a bonus is basically a management prerogative
which cannot be forced upon the employer "who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic
salaries or wages" . . . (Kamaya Point Hotel vs. National Labor Relations Commission, Federation of Free Workers and Nemia Quiambao, G.R. No. 75289, August 31,
1989).
It is clear from the above-cited rulings that the petitioner may not be obliged to pay bonuses to its employees. The matter of giving them bonuses over and above their
lawful salaries and allowances is entirely dependent on the profits, if any, realized by the Bank from its operations during the past year.
From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986, the income of the Bank was only 20.2 million pesos, but the Bank still
gave out the usual two (2) months basic mid-year and two months gross year-end bonuses. The petitioner pointed out, however, that the Bank weakened considerably
after 1986 on account of political developments in the country. Suspected to be a Marcos-owned or controlled bank, it was placed under sequestration by the present
administration and is now managed by the Presidential Commission on Good Government (PCGG).
In the light of these submissions of the petitioner, the contention of the Union that the granting of bonuses to the employees had ripened into a company practice that
may not be adjusted to the prevailing financial condition of the Bank has no legal and moral bases. Its fiscal condition having declined, the Bank may not be forced to
distribute bonuses which it can no longer afford to pay and, in effect, be penalized for its past generosity to its employees.
Private respondent's contention, that the decrease in the midyear and year-end bonuses constituted a diminution of the employees' salaries, is not correct, for bonuses are
not part of labor standards in the same class as salaries, cost of living allowances, holiday pay, and leave benefits, which are provided by the Labor Code.

WHEREFORE, the petition for certiorari is granted. The decision of the National Labor Relations Commission is modified by deleting the award of bonus differentials
to the employees for 1986. In other respects, the decision is affirmed. Costs against the respondent union.
SO ORDERED.
EMOLUMENTS
G.R. No. 104860 July 11, 1996
CITYTRUST BANKING CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, and MARIA ANITA RUIZ, respondents.

MENDOZA, J.:p
This is a petition for certiorari with prayer for preliminary injunction to annul two resolutions of the National Labor Relations Commission in NLRC INJ. Case No.
1826. The first resolution, dated September 5, 1991, denied a petition to stop implementation of the alias writ of execution, while the second one, dated January 15,
1992, denied petitioner's motion for reconsideration.
The facts are as follows:
Private respondent Ma. Anita Ruiz was the internal auditor of petitioner Citytrust Banking Corporation. On November 1, 1974, she was designated manager of the
Quiapo branch of the bank, but she refused the appointment on the ground that it was a demotion. As a consequence, she was suspended and, upon clearance given by
the Department of Labor, she was terminated on November 8, 1974.
Private respondent filed a complaint for illegal dismissal. She was ordered reinstated as branch manager, the NLRC urging her to accept the position, otherwise her
refusal would be considered a ground for her loss of employment.
Private respondent appealed to the Minister of Labor (now Secretary of Labor and Employment) but again she lost. Both parties then appealed to the Office of the
President, which on January 3, 1977, ordered petitioner to reinstate private respondent to her former position as internal auditor and to pay her backwages from the time
her compensation was withheld up to the time of her reinstatement.
Petitioner moved for a reconsideration on the ground that the position of internal auditor had been abolished (although the position of resident inspector was created in
its stead), and therefore in lieu of reinstatement, it should only be made to pay private respondent's separation pay. The Office of the President modified its decision and
ordered petitioner to reinstate private respondent to a substantially equivalent position without loss of seniority rights and to grant her the benefits and privileges to
which she would be entitled had she not been dismissed.
On August 14, 1978 petitioner reinstated private respondent as manager of the Auditing Department. Private respondent accepted he appointment but questioned her
reinstatement to that position on the ground that it was not substantially equivalent to the position of resident inspector (the position created in place of internal auditor).
She also questioned the award of backwages as the report of the socio-economic analyst allegedly did not include backwages from April 1974 to June 1974 when she
was on leave with pay and vacation and sick leave in 11974 and other fringe benefits to which she was entitled before her termination.
On February 26, 1979, Labor Arbiter Apolinario N. Lumabao issued an order holding that the position of manager of the Auditing Department was not substantially
equivalent to that of resident inspector. The dispositive portion of his order read:
WHEREFORE, respondent is hereby ordered to reinstate complainant to the position of Resident Inspector and should this not be possible as it appears (that) the
position is already filled up(,) to relocate complainant to a substantially equivalent position with all the emoluments and privileges of a Resident Inspector. Respondent
is hereby further ordered to pay complainant P9,040.00 as transportation allowance from November 8, 1974 to August 13, 1978 and P1,150.00 mid-year bonus for 974
in addition to the benefits embodied in the report.
On October 14, 1980, the NLRC affirmed the Labor Arbiter's order with modification by ordering the following to be added to the award:
(a) Her vacation and sick leave privilege during the period of her separation in accordance with the disposition hereinbefore stated in the ody of his Resolution, and
(b) the normal increases which complainant would have received during the period of her separation.
Petitioner brought the matter to this Court, but its petition was dismissed. 1

In connection with the computation of the award in her favor, private respondent sought the production of the bank's payrolls for 1974-1981. Her motion was opposed by
petitioner which offered instead P74,344.00, the total amount of backwages as computed by the socio-economic analyst of the Department of Labor, plus P9,040.00 in
transportation allowance and P1,050.00 mid-year bonus for 1974.
Private respondent refused the offer, hence the NLRC directed the analyst to compute the award on the basis of the payrolls from 1974 to 1981. Petitioner appealed to
the NLRC en banc, but its petition was dismissed, on the ground that the order appealed from was interlocutory. Petitioner filed a petition forCertiorari and Prohibition
with this Court, assailing the dismissal of its appeal. Again its petition was dismissed for lack of merit. 2
On November 12, 1984, upon motion of private respondent, the NLRC issued a writ of execution of the award of P1,219,520.52. A notice of garnishment was also
issued on November 19, 1984 against petitioner. But on petitioner's motion, the NLRC enjoined execution in its order on November 22, 1984, pending the reconstitution
of records and recomputation of petitioner's liability.
On May 28, 1985, the socio-economic analyst of the DOLE submitted a computation of the monetary award due private respondent, consisting of (1) backwages from
November 8, 1974 to August 13, 1978 and (2) salary differentials (erroneously referred to as backwages) for the period August 14, 1978 to October 31, 1984 and
transportation allowance and mid-year bonus. The total amount found due private respondent was P1,304,054.52, computed as follows:
Backwages and other fringe benefits
from August 14, 1978 up to October
31, 1984, per computation embodied
in the Urgent Motion for Issuance
of Writ of Execution P1,219,520.52 3
Backwages and other fringe benefits
from November 8, 1974 up to August
13, 1978, per report dated August
28, 1979 74,344.00
Transportation allowance from Nov.
8, 1974 up to Aug. 13, 1978 and
Mid-year bonus for 1974 per Order
dated Feb. 26, 1978 and affirmed
by the NLRC in its Resolution
dated Oct. 14, 1980 10,190.00

T o t a l P1,304,054.52
Petitioner moved to set aside the above computation and asked for the execution of P41,400.00, the amount equivalent to private respondent's three years backwages. On
the other hand private respondent move to lift the restraining order. Her motion was granted, prompting petitioner to file a petition for Certiorari, Mandamus and
Prohibition, for the third time, in this Court. Petitioner asked that the Labor Arbiter be directed to award to private respondent backwages limited to three years without
deduction, in accordance with the ruling in Panay Railways v. NLRC. 4
The petition was at first dismissed by this Court for lack of merit. Petitioner's motion for reconsideration was also dismissed. On July 21, 1986 this Court modified its
decision and petitioner was order to pay private respondent "backwages limited to three (3) years without qualification or deduction at the salary rate of private
respondent at the time to dismissal." 5
On February 23, 1987, the Labor Arbiter ordered a recomputation of private respondent's award. As recomputed, the award is as follows:
A. Total Salary and other benefits of a Resident, Auditor from August 14, 1978 to December 31, 1986, as per Urgent Motion for Issuance of Writ to Execution dated
November 7, 1984:
Aug. 14, 1978 to Dec. 31, 1978 P 47,468.75
Jan. 1, 1979 to Dec. 31, 1979 126,000.00
Jan. 1, 1980 to Dec. 31, 1980 141,750.00
Jan. 1, 1981 to Dec. 31, 1981 157,500.00
Jan. 1, 1982 to Dec. 31, 1982 177,187.50
Jan. 1, 1983 to Dec. 31, 1983 196,875.00
Jan. 1, 1984 to Oct. 31, 1984 174,375.00
Nov. 1, 1984 to Dec. 31, 1984 61,875.00
Jan. 1, 1985 to Dec. 31, 1985 236,250.00
Jan. 1, 1986 to Dec. 31, 1986 236,250.00


T o t a l P1,555,531.25
[LESS]
B. Total salary and other benefits received by complainant from August 14, 1978 to December 31, 1986, as per Urgent Motion for Issuance of Writ of Execution dated
November 7, 1984, and as per xerox copies of Certificate of Income Tax Withheld on Compensation:
Aug. 14, 1978 to Dec. 31, 1978 P 7,041.50
Jan. 1, 1979 to Dec. 31, 1979 23,827.30
Jan. 1, 1980 to Dec. 31, 1980 21,216.74
Jan. 1, 1981 to Dec. 31, 1981 15,242.78
Jan. 1, 1982 to Dec. 31, 1982 23,036.66
Jan. 1, 1983 to Dec. 31, 1983 22,830.16
Jan. 1, 1984 to Dec. 31, 1984 35,757.97
Jan. 1, 1985 to Dec. 31, 1985 33,345.00
Jan. 1, 1986 to Dec. 31, 1986 33,345.00

T o t a l P215,843.20
C. TOTAL COMPUTED DIFFERENTIALS P1,339,888.05
The Labor Arbiter issued an alias writ of execution on August 20, 1987, after finding that the amount corresponded to the amount found due private respondent in the
October 14, 1980 decision of the NLRC and the resolution of this Court of July 21, 1986, consisting which were not paid to her from the time that she was reinstated on
August 14, 1978 as manager of the Auditing Department. 6
Petitioner moved to quash the alias writ of execution. As its motion was denied, it filed a petition for Injunction in the NLRC en banc to stop the implementation of the
alias writ of execution and prayed for a recomputation of the monetary award pursuant to this Court's resolution of July 21, 1986. Its petition was, however, denied, as
was its motion for reconsideration, in the resolutions dated September 5, 1991 and January 15, 1992 of the NLRC. Hence, this petition.
The preliminary question is whether petitioner should have appealed from the order dated August 20, 1987 of the Labor Arbiter to the NLRC, instead of filing a motion
for injunction. The Solicitor General argues that because petitioner never interposed such an appeal, the order in question became final. The NLRC denied petitioner's
petition on the ground that petitioner did not appeal the order granting the motion for the issuance of an alias writ of execution.
The order in question is an order of execution of a final and executory judgment. As such, it is not appealable, otherwise there would be no end to a case. 7 As petitioner's
claim was that the writ of execution varied the terms of the judgment, the petitioner correctly questioned the writ by filing a the petition for injunction with the NLRC
pursuant to Rule XIV, 1 of the 1986 NLRC Rules of Procedure and Art. 218 (e) of the Labor Code.
It is true that aside from seeking to enjoin implementation of the alias writ of execution, petitioner also sought before the Labor Arbiter the recomputation of the award
to private respondent. However, petitioner did so only with a view to enforcing compliance with this Court's resolution in G.R. No. 72589 that the backwages should be
limited only to three years without qualification. There is therefore no merit in the claim of the Solicitor General that because private respondent did not appeal from the
order, it cannot any more question that order.
Now as to the merits of this petition. Petitioner alleges that the NLRC gravely abused its discretion in dismissing the petition for injunction because the writ of execution
did not conform to the resolution of this Court on July 21, 1986, which limited the award of backwages to three years without qualification and deduction.
There is no merit in petitioner's contention that private respondent is entitled to only three years of backwages and no more. Private respondent is, in addition, entitled to
reinstatement without loss of seniority rights. Art. 280 8 of the Labor Code provides:
Art. 280. Security of Tenure. In cases of a regular employment, an employer shall not terminate the services of an employee except for a just cause or when
authorized by this title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to his
backwages computed from the time his compensation was withheld from him up to the time of his reinstatement. (emphasis supplied)
Backwages are for earnings which a worker has lost due to his illegal dismissal. 9 Private respondent was illegally dismissed from November 8, 1974 to August 13, 1978.
In its May 28, 1985 Report, the socio-economic analyst computed private respondent's backwages for this period but he erroneously considered as backwages private
respondent's salary differential from August 14, 1978 to October 31, 1984. On August 14, 1978, private respondent had already been reinstated, albeit to a lower paying
position as manager of the Auditing Department. Hence the award of backwages should be up to August 13, 1978 only. What she was entitled to receive after that date
was the difference between the salary of internal auditor (resident inspector) and that of manager of the Auditing Department to which she was actually appointed. This
position, as already noted, was found to be not a substantially equivalent position to that of internal auditor or resident inspector.

The resolution of July 21, 1986 of this Court in G.R. No. 72589, which limited the award of backwages, referred to the backwages for the period November 8, 1974 to
August 13, 1978 as component of the relief granted by law to those who are illegally dismissed. The Court at that time limited the award of backwages to three years
without qualification and deduction to avoid delays incident to the determination of the earnings of the laid-off employees during the pendency of the case and of
deducting them from the backwages later awarded. 10
The second component of the relief granted under then Art. 280 of the Labor Code as reinstatement either to their former position or if, this was not possible, to a
substantially equivalent position. Reinstatement contemplates a restoration to a position from which one has been removed or separated so that the employee concerned
may resume the functions of the position he already held. 11 Private respondent was the internal auditor of petitioner at the time of her dismissal. Since this position had
been replaced by the position of resident inspector, private respondent should have been appointed resident inspector. The position of manager of the Auditing
Department to which she was appointed was not a substantially equivalent position, as found by the Labor Arbiter in his order of February 26, 1979 and later by the
NLRC.
The order to reinstate an employee to a former position or to a substantially equivalent position is a positive mandate of the law with which strict compliance is required.
This is an affirmation that those deprived of a recognized and protected interest should be made whole so that the employer will not profit from his misdeeds. 12
In view of the fact that private respondent retired from the bank on March 1, 1991, 13 reinstatement is now academic. She should therefore be paid the difference in pay
of a resident inspector and a manager of the Auditing Department from August 14, 1978 up to March 1, 1991. This is the portion of the award to private respondent that
was the subject of recomputation made pursuant to the order of February 23, 1987 of the Labor Arbiter. It is in addition to the award for backwages granted to private
respondent in the order of October 14, 1980 of the NLRC, as modified by the resolution of July 21, 1986 in G.R. No. 72589, limiting the award of backwages to three
years. This award was not included in the alias writ of execution which is the subject of the present petition.
For the foregoing reasons, we find the petition for certiorari without merit. This petition is the fourth petition filed with this Court. It has no doubt, prolonged the
granting of complete relief to private respondent. Litigation must come to an end. In labor cases, the cause of an illegally dismissed employee must always be a concern
of everyone if we are to give effect to the constitutional policy of protecting labor and the duty of this Court to see to it that justice is served not only fairly but also
swiftly.
WHEREFORE, the instant petition is DISMISSED. Let this case be remanded for the computation of the amount due private respondent, consisting of backwages for
three years, conformably to the resolution of July 21, 1986 in G.R. No. 72589, and the salary differentials from August 14, 1978 to March 1, 1991.
SO ORDERED.
OFFSETTING OF WAGES
G.R. No. 80039 April 18, 1989
ERNESTO M. APODACA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, JOSE M. MIRASOL and INTRANS PHILS., INC., respondents.
Diego O. Untalan for petitioner.
The Solicitor General for public respondent.
Barcelona, Perlas, Joven & Academia Law Offices for private respondents.

GANCAYCO, J.:
Does the National Labor Relations Commission (NLRC) have jurisdiction to resolve a claim for non-payment of stock subscriptions to a corporation? Assuming that it
has, can an obligation arising therefrom be offset against a money claim of an employee against the employer? These are the issues brought to this court through this
petition for review of a decision of the NLRC dated September 18, 1987.
The only remedy provided for by law from such a decision is a special civil action for certiorari under Rule 65 of the Rules of Court based on jurisdictional grounds or
on alleged grave abuse of discretion amounting to lack or excess of jurisdiction, not by way of an appeal by certiorari. Nevertheless, in the interest of justice, this
petition is treated as a special civil action for certiorari.
Petitioner was employed in respondent corporation. On August 28, 1985, respondent Jose M. Mirasol persuaded petitioner to subscribe to 1,500 shares of respondent
corporation at P100.00 per share or a total of P150,000.00. He made an initial payment of P37,500.00. On September 1, 1975, petitioner was appointed President and
General Manager of the respondent corporation. However, on January 2, 1986, he resigned.

On December 19, 1986, petitioner instituted with the NLRC a complaint against private respondents for the payment of his unpaid wages, his cost of living allowance,
the balance of his gasoline and representation expenses and his bonus compensation for 1986. Petitioner and private respondents submitted their position papers to the
labor arbiter. Private respondents admitted that there is due to petitioner the amount of P17,060.07 but this was applied to the unpaid balance of his subscription in the
amount of P95,439.93. Petitioner questioned the set-off alleging that there was no call or notice for the payment of the unpaid subscription and that, accordingly, the
alleged obligation is not enforceable.
In a decision dated April 28, 1987, the labor arbiter sustained the claim of petitioner for P17,060.07 on the ground that the employer has no right to withhold payment of
wages already earned under Article 103 of the Labor Code. Upon the appeal of the private respondents to public respondent NLRC, the decision of the labor arbiter was
reversed in a decision dated September 18, 1987. The NLRC held that a stockholder who fails to pay his unpaid subscription on call becomes a debtor of the corporation
and that the set-off of said obligation against the wages and others due to petitioner is not contrary to law, morals and public policy.
Hence, the instant petition.
The petition is impressed with merit.
Firstly, the NLRC has no jurisdiction to determine such intra-corporate dispute between the stockholder and the corporation as in the matter of unpaid subscriptions.
This controversy is within the exclusive jurisdiction of the Securities and Exchange Commission. 1
Secondly, assuming arguendo that the NLRC may exercise jurisdiction over the said subject matter under the circumstances of this case, the unpaid subscriptions are not
due and payable until a call is made by the corporation for payment. 2 Private respondents have not presented a resolution of the board of directors of respondent
corporation calling for the payment of the unpaid subscriptions. It does not even appear that a notice of such call has been sent to petitioner by the respondent
corporation.
What the records show is that the respondent corporation deducted the amount due to petitioner from the amount receivable from him for the unpaid subscriptions. 3 No
doubt such set-off was without lawful basis, if not premature. As there was no notice or call for the payment of unpaid subscriptions, the same is not yet due and
payable.
Lastly, assuming further that there was a call for payment of the unpaid subscription, the NLRC cannot validly set it off against the wages and other benefits due
petitioner. Article 113 of the Labor Code allows such a deduction from the wages of the employees by the employer, only in three instances, to wit:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by him as premium on
the insurance;
(b) For union dues, in cases where the right of the worker or his union to checkoff has been recognized by the employer or authorized in writing by the individual worker
concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor. 4
WHEREFORE, the petition is GRANTED and the questioned decision of the NLRC dated September 18, 1987 is hereby set aside and another judgment is hereby
rendered ordering private respondents to pay petitioner the amount of P17,060.07 plus legal interest computed from the time of the filing of the complaint on December
19, 1986, with costs against private respondents.
SO ORDERED.
G.R. No. 143304

July 8, 2004

SPECIAL STEEL PRODUCTS, INC., petitioner,

vs.
LUTGARDO VILLAREAL AND FREDERICK SO, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

May an employer withhold its employees wages and benefits as lien to protect its interest as a surety in the latters car loan and for expenses incurred in a training
abroad? This is the basic issue for our resolution in the instant case.
At bar is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision 1 dated October 29, 1999 and
Resolution2 dated May 8, 2000 of the Court of Appeals in CA-G.R. SP No. 50957, entitled "Special Steel Products, Inc. vs. National Labor Relations Commission,
Lutgardo Villareal and Frederick So."
The factual antecedents as borne by the records are:
Special Steel Products, Inc., petitioner, is a domestic corporation engaged in the principal business of importation, sale, and marketing of BOHLER steel products.
Lutgardo C. Villareal and Frederick G. So, respondents, worked for petitioner as assistant sales manager and salesman, respectively.
Sometime in May 1993, respondent Villareal obtained a car loan from the Bank of Commerce, with petitioner as surety, as shown by a "continuing suretyship
agreement" and "promissory note" wherein they jointly and severally agreed to pay the bank P786,611.60 in 72 monthly installments. On January 15, 1997, respondent
Villareal resigned and thereafter joined Hi-Grade Industrial and Technical Products, Inc. as executive vice-president.
Sometime in August 1994, petitioner "sponsored" respondent Frederick So to attend a training course in Kapfenberg, Austria conducted by BOHLER, petitioners
principal company. This training was a reward for respondent Sos outstanding sales performance. When respondent returned nine months thereafter, petitioner directed
him to sign a memorandum providing that BOHLER requires trainees from Kapfenberg to continue working with petitioner for a period of three (3) years after the
training. Otherwise, each trainee shall refund to BOHLER $6,000.00 (US dollars) by way of set-off or compensation. On January 16, 1997 or 2 years and 4 months after
attending the training, respondent resigned from petitioner.
Immediately, petitioner ordered respondents to render an accounting of its various Christmas giveaways 3 they received. These were intended for distribution to
petitioners customers.
In protest, respondents demanded from petitioner payment of their separation benefits, commissions, vacation and sick leave benefits, and proportionate 13 th month pay.
But petitioner refused and instead, withheld their 13thmonth pay and other benefits.
On April 16, 1997, respondents filed with the Labor Arbiter a complaint for payment of their monetary benefits against petitioner and its president, Augusto Pardo,
docketed as NLRC NCR Case No. 04-02820-97.
In due course, the Labor Arbiter rendered a Decision dated February 18, 1998, the dispositive portion of which reads:
"WHEREFORE, decision is hereby rendered ordering the respondents, Special Steel Products, Inc. and Mr. Augusto Pardo to pay, jointly and severally, complainants
Frederick G. So and Lutgardo C. Villareal the amounts of Seventy One Thousand Two Hundred Seventy Nine Pesos and Fifty Eight Centavos (P71,279.58) and One
Hundred Sixty Four Thousand Eight Hundred Seventy Three Pesos (P164,873.00), respectively, representing their commissions, retirement benefit (for Villareal),
proportionate 13th month, earned vacation and sick leave benefits, and attorneys fees.
xxx
SO ORDERED."
On appeal, the National Labor Relations Commission (NLRC), in a Decision dated June 29, 1998, affirmed with modification the Arbiters Decision in the sense that
Pardo, petitioners president, was exempted from any liability.
On September 11, 1998, petitioner filed a motion for reconsideration but was denied.
Hence, petitioner filed with the Court of Appeals a petition for certiorari.
On October 29, 1999, the Court of Appeals rendered a Decision dismissing the petition and affirming the assailed NLRC Decision, thus:
"At the outset, the Court notes that despite its Seventh Assignment of Error, petitioner does not question the NLRCs decision affirming the labor arbiters award to
private respondents of commissions, proportionate 13th month pay, earned vacation and sick leave benefits and retirement benefit (for Villareal). It merely asserts that it
was withholding private respondents claims by reason of their pending obligations.
Petitioner justifies its withholding of Villareals monetary benefits as a lien for the protection of its right as surety in the car loan. It asserts that it would release
Villareals monetary benefits if he would cause its substitution as surety by Hi-Grade. It further asserts that since Villareals debt to the Bank is now due and
demandable, it may, pursuant to Art. 2071 of the New Civil Code, demand a security that shall protect him from any proceeding by the creditor and from the danger of
insolvency of the debtor.
Petitioners posture is not sanctioned by law. It may only protect its right as surety by instituting an action x x x to demand a security (Kuenzle and Streiff vs. Tan
Sunco, 16 Phil 670). It may not take the law into its own hands. Indeed, it is unlawful for any person, directly or indirectly, to withhold any amount from the wages of a
worker or induce him to give up any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever without the workers consent (Art. 116,
Labor Code).

Moreover, petitioner has made no payment on the car loan. Consequently, Villareal is not indebted to petitioner. On the other hand, petitioner owes Villareal for the
decreed monetary benefits. The withholding of Villareals monetary benefits had effectively prevented him from settling his arrearages with the Bank.
With regard to Sos money claims. We find no cogent reason to disturb the findings of the NLRC. x x x.
Sos all-expense paid trip to Austria was a bonus for his outstanding sales performance. Before his sojourn to Austria, petitioner issued him a memorandum (or memo)
stating that Bohler is now imposing that trainees coming to Kapfenberg to stay with the local representative for at least three (3) years after training, otherwise, a lump
sum compensation of not less than US $6,000.00 will have to be refunded to them by the trainee. So did not affix his signature on the memo. However, nine (9) months
after coming back from his training, he was made to sign the memo. In his letter to Augusto Pardo dated July 18, 1997, So stated that his signature was needed only as a
formality and that he was left with no choice but to accommodate Augusto Pardos request. The labor arbiter gave credence to such explanation.
Assuming arguendo that the memo is binding on So, his more than two years post-training stay with petitioner is a substantial compliance with the condition. Besides,
So tendered his resignation effective February 16, 1997. Instead of asking So to defer his resignation until the expiration of the three-year period, petitioner advanced its
effectivity by one month - as of January 16, 1997. This means that petitioner no longer needed Sos services, particularly the skill and expertise acquired by him from the
training. More importantly, the party entitled to claim the US $6,000.00 liquidated damages is BOHLER and not petitioner. Consequently, petitioner has no right to insist
on payment of the liquidated damages, much less to withhold Sos monetary benefits in order to exact payment thereof.
With regard to the Christmas giveaways. We agree with the findings of the labor arbiter (affirmed by the NLRC) that there is no existing memorandum requiring the
accounting of such giveaways and that no actual accounting has ever been required before, as in the case of then Sales Manager Benito Sayo whose resignation took
effect on December 31, 1996 but was not required to account for the Christmas giveaways. To make So account now for said items would amount to discrimination. In
any event, the matter of accounting of the giveaways may be ventilated in the proper forum.
Finally, petitioner may not offset its claims against private respondents monetary benefits. With respect to its being the surety of Villareal, two requisites of
compensation are lacking, to wit: that each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other and that (the two
debts) be liquidated and demandable (Art. 1279 (1) and (4), New Civil Code). And in respect to its claim for liquidated damages against So, there can be no
compensation because his creditor is not petitioner but BOHLER (Art. 1278, New Civil Code).
Consequently, the NLRC committed no grave abuse of discretion.
WHEREFORE, the petition is DISMISSED while the assailed decision of the NLRC is AFFIRMED.
SO ORDERED."
On December 15, 1999, petitioner filed a motion for reconsideration but was denied by the Appellate Court in a Resolution dated May 8, 2000.
Hence, this petition for review on certiorari. Petitioner contends that as a guarantor, it could legally withhold respondent Villareals monetary benefits as a preliminary
remedy pursuant to Article 2071 of the Civil Code, as amended.4 As to respondent So, petitioner, citing Article 113 of the Labor Code, as amended,5 in relation to Article
1706 of the Civil Code, as amended,6 maintains that it could withhold his monetary benefits being authorized by the memorandum he signed.
Article 116 of the Labor Code, as amended, provides:
"ART. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly or indirectly, to withhold any amount from the wages
(and benefits) of a worker or induce him to give up any part of his wages by force, stealth, intimidation, threat or by any other means whatsoeverwithout the workers
consent."
The above provision is clear and needs no further elucidation. Indeed, petitioner has no legal authority to withhold respondents 13 th month pay and other benefits. What
an employee has worked for, his employer must pay.7Thus, an employer cannot simply refuse to pay the wages or benefits of its employee because he has either
defaulted in paying a loan guaranteed by his employer; or violated their memorandum of agreement; or failed to render an accounting of his employers property. 8
Nonetheless, petitioner, relying on Article 2071 (earlier cited), contends that the right to demand security and obtain release from the guaranty it executed in favor of
respondent Villareal may be exercised even without initiating a separate and distinct action.
There is no guaranty involved herein and, therefore, the provision of Article 2071 does not apply.
A guaranty is distinguished from a surety in that a guarantor is the insurer of the solvency of the debtor and thus binds himself to pay if the principal is unable to pay,
while a surety is the insurer of the debt, and he obligates himself to pay if the principal does not pay.9
Based on the above distinction, it appears that the contract executed by petitioner and respondent Villareal (in favor of the Bank of Commerce) is a contract of surety. In
fact, it is denominated as a "continuing suretyship agreement." Hence, petitioner could not just unilaterally withhold respondents wages or benefits as a preliminary
remedy under Article 2071. It must file an action against respondent Villareal. Thus, the Appellate Court aptly ruled that petitioner "may only protect its right as surety
by instituting an action to demand a security."
As to respondent So, petitioner maintains that there can be a set-off or legal compensation between them. Consequently, it can withhold his 13 th month pay and other
benefits.

For legal compensation to take place, the requirements set forth in Articles 1278 and 1279 of the Civil Code, quoted below, must be present.
"ARTICLE 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.
"ARTICLE 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor."
In the present case, set-off or legal compensation cannot take place between petitioner and respondent So because they are not mutually creditor and debtor of each
other.
A careful reading of the Memorandum10 dated August 22, 1994 reveals that the "lump sum compensation of not less than US $6,000.00 will have to be refunded" by
each trainee to BOHLER, not to petitioner.
In fine, we rule that petitioner has no legal right to withhold respondents 13th month pay and other benefits to recompense for whatever amount it paid as security for
respondent Villareals car loan; and for the expenses incurred by respondent So in his training abroad.
WHEREFORE, the petition is DENIED. The Decision dated October 29, 1999 and Resolution dated May 8, 2000 of the Court of Appeals in CA-G.R. SP No. 50957
are hereby AFFIRMED.
SO ORDERED.
EQUAL PAY FOR EQUAL WORK
G.R. No. 128845 June 1, 2000
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner,
vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the
Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of International School-Manila; and
INTERNATIONAL SCHOOL, INC., respondents.

KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School, mostly Filipinos, cry discrimination. We agree. That the localhires are paid more than their colleagues in other schools is, of course, beside the point. The point is that employees should be given equal pay for work of equal value.
That is a principle long honored in this jurisdiction. That is a principle that rests on fundamental notions of justice. That is the principle we uphold today.1wphi1.nt
Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a domestic educational institution established primarily for
dependents of foreign diplomatic personnel and other temporary residents.1 To enable the School to continue carrying out its educational program and improve its
standard of instruction, Section 2(c) of the same decree authorizes the School to
employ its own teaching and management personnel selected by it either locally or abroad, from Philippine or other nationalities, such personnel being exempt from
otherwise applicable laws and regulations attending their employment, except laws that have been or will be enacted for the protection of employees.
Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the same into two: (1) foreign-hires and (2) local-hires. The School
employs four tests to determine whether a faculty member should be classified as a foreign-hire or a local hire:
a. What is one's domicile?
b. Where is one's home economy?

c. To which country does one owe economic allegiance?

d. Was the individual hired abroad specifically to work in the School and was the School responsible for bringing that individual to the Philippines? 2
Should the answer to any of these queries point to the Philippines, the faculty member is classified as a local hire; otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local-hires. These include housing, transportation, shipping costs, taxes, and home leave travel allowance.
Foreign-hires are also paid a salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two "significant economic
disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School explains:
A foreign-hire would necessarily have to uproot himself from his home country, leave his family and friends, and take the risk of deviating from a promising career path
all for the purpose of pursuing his profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic realities: decent abode for
oneself and/or for one's family, effective means of transportation, allowance for the education of one's children, adequate insurance against illness and death, and of
course the primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his term: that he will eventually and inevitably return to his home
country where he will have to confront the uncertainty of obtaining suitable employment after along period in a foreign land.
The compensation scheme is simply the School's adaptive measure to remain competitive on an international level in terms of attracting competent professionals in the
field of international education.3
When negotiations for a new collective bargaining agreement were held on June 1995, petitioner International School Alliance of Educators, "a legitimate labor union
and the collective bargaining representative of all faculty members"4 of the School, contested the difference in salary rates between foreign and local-hires. This issue, as
well as the question of whether foreign-hires should be included in the appropriate bargaining unit, eventually caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and Mediation Board to bring the parties to a compromise prompted the
Department of Labor and Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano, issued
an Order resolving the parity and representation issues in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's motion
for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos and that the grant of higher salaries to foreign-hires
constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with nationalities other than Filipino, who have been hired locally
and classified as local hires.5 The Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits as the Filipino local-hires.
The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth to tell, there are foreigners who have been hired locally and who
are paid equally as Filipino local hires.6
The Acting secretary upheld the point-of-hire classification for the distinction in salary rates:
The Principle "equal pay for equal work" does not find applications in the present case. The international character of the School requires the hiring of foreign personnel
to deal with different nationalities and different cultures, among the student population.
We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired personnel which system is universally recognized. We agree that
certain amenities have to be provided to these people in order to entice them to render their services in the Philippines and in the process remain competitive in the
international market.
Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the local hires who enjoy security of tenure. To apply parity
therefore, in wages and other benefits would also require parity in other terms and conditions of employment which include the employment which include the
employment contract.
A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and professional compensation wherein the parties agree as follows:
All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof provided that the Superintendent of the School has the discretion
to recruit and hire expatriate teachers from abroad, under terms and conditions that are consistent with accepted international practice.
Appendix C of said CBA further provides:

The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary schedule. The 25% differential is reflective of the agreed value of system
displacement and contracted status of the OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS).
To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two types of employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established principle of constitutional law that the guarantee of equal
protection of the laws is not violated by legislation or private covenants based on reasonable classification. A classification is reasonable if it is based on substantial
distinctions and apply to all members of the same class. Verily, there is a substantial distinction between foreign hires and local hires, the former enjoying only a limited
tenure, having no amenities of their own in the Philippines and have to be given a good compensation package in order to attract them to join the teaching faculty of the
School.7
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the policy against these evils. The Constitution 8 in the
Article on Social Justice and Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect and enhance the right of all people to
human dignity, reduce social, economic, and political inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of his rights and
in the performance of his duties, [to] act with justice, give everyone his due, and observe honesty and good faith.
International law, which springs from general principles of law,9 likewise proscribes discrimination. General principles of law include principles of
equity, 10 i.e., the general principles of fairness and justice, based on the test of what is reasonable. 11 The Universal Declaration of Human Rights, 12 the International
Covenant on Economic, Social, and Cultural Rights, 13the International Convention on the Elimination of All Forms of Racial Discrimination, 14 the Convention against
Discrimination in Education, 15 the Convention (No. 111) Concerning Discrimination in Respect of Employment and Occupation 16 all embody the general principle
against discrimination, the very antithesis of fairness and justice. The Philippines, through its Constitution, has incorporated this principle as part of its national laws.
In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality and discrimination by the employer are all the more
reprehensible.
The Constitution 17 specifically provides that labor is entitled to "humane conditions of work." These conditions are not restricted to the physical workplace the
factory, the office or the field but include as well the manner by which employers treat their employees.
The Constitution 18 also directs the State to promote "equality of employment opportunities for all." Similarly, the Labor Code 19 provides that the State shall "ensure
equal work opportunities regardless of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State, in spite of its primordial
obligation to promote and ensure equal employment opportunities, closes its eyes to unequal and discriminatory terms and conditions of employment. 20
Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for example, prohibits and penalizes 21 the payment of lesser
compensation to a female employee as against a male employee for work of equal value. Article 248 declares it an unfair labor practice for an employer to discriminate
in regard to wages in order to encourage or discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof, provides:
The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and favourable conditions of work, which ensure, in particular:
a. Remuneration which provides all workers, as a minimum, with:
(i) Fair wages and equal remuneration for work of equal value without distinction of any kind, in particular women being guaranteed conditions of work not inferior to
those enjoyed by men, with equal pay for equal work;
xxx xxx xxx
The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay for equal work." Persons who work with
substantially equal qualifications, skill, effort and responsibility, under similar conditions, should be paid similar salaries. 22 This rule applies to the School, its
"international character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform work equal to that of foreign-hires. 23 The Court finds this argument a little
cavalier. If an employer accords employees the same position and rank, the presumption is that these employees perform equal work. This presumption is borne by logic
and human experience. If the employer pays one employee less than the rest, it is not for that employee to explain why he receives less or why the others receive more.
That would be adding insult to injury. The employer has discriminated against that employee; it is for the employer to explain why the employee is treated unfairly.
The employer in this case has failed to discharge this burden. There is no evidence here that foreign-hires perform 25% more efficiently or effectively than the localhires. Both groups have similar functions and responsibilities, which they perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the distinction in salary rates without violating the principle of equal
work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services performed." Similarly, the Philippine Legal Encyclopedia states that
"salary" is the "[c]onsideration paid at regular intervals for the rendering of services." In Songco v. National Labor Relations Commission, 24 we said that:
"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. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be used as an enticement to the prejudice of local-hires. The local-hires perform
the same services as foreign-hires and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor" and the foreign-hires' limited
tenure also cannot serve as valid bases for the distinction in salary rates. The dislocation factor and limited tenure affecting foreign-hires are adequately compensated by
certain benefits accorded them which are not enjoyed by local-hires, such as housing, transportation, shipping costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their welfare," 25 "to afford labor full protection." 26 The State, therefore, has the right
and duty to regulate the relations between labor and capital. 27 These relations are not merely contractual but are so impressed with public interest that labor contracts,
collective bargaining agreements included, must yield to the common good. 28 Should such contracts contain stipulations that are contrary to public policy, courts will
not hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to justify the distinction in the salary rates of foreign-hires and local hires to be an
invalid classification. There is no reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of the School of according higher
salaries to foreign-hires contravenes public policy and, certainly, does not deserve the sympathy of this Court.
We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the entire body of employees, consistent with equity to the employer,
indicate to be the best suited to serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the law." 29 The factors in determining
the appropriate collective bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the employees' interest, such as substantial
similarity of work and duties, or similarity of compensation and working conditions (Substantial Mutual Interests Rule); (3) prior collective bargaining history; and (4)
similarity of employment status. 30 The basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which will best
assure to all employees the exercise of their collective bargaining rights. 31
It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires for purposes of collective bargaining. The collective bargaining
history in the School also shows that these groups were always treated separately. Foreign-hires have limited tenure; local-hires enjoy security of tenure. Although
foreign-hires perform similar functions under the same working conditions as the local-hires, foreign-hires are accorded certain benefits not granted to local-hires. These
benefits, such as housing, transportation, shipping costs, taxes, and home leave travel allowance, are reasonably related to their status as foreign-hires, and justify the
exclusion of the former from the latter. To include foreign-hires in a bargaining unit with local-hires would not assure either group the exercise of their respective
collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders of the Secretary of Labor and Employment dated June
10, 1996 and March 19, 1997, are hereby REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of according foreign-hires higher
salaries than local-hires.
SO ORDERED.
EXCLUSIONS
G.R. No. 152456

April 28, 2004

SEVILLA TRADING COMPANY, petitioner,

vs.
A.V.A. TOMAS E. SEMANA, SEVILLA TRADING WORKERS UNIONSUPER, respondents.
DECISION
PUNO, J.:
On appeal is the Decision1 of the Court of Appeals in CA-G.R. SP No. 63086 dated 27 November 2001 sustaining the Decision2 of Accredited Voluntary Arbitrator
Tomas E. Semana dated 13 November 2000, as well as its subsequent Resolution3 dated 06 March 2002 denying petitioners Motion for Reconsideration.
The facts of the case are as follows:

For two to three years prior to 1999, petitioner Sevilla Trading Company (Sevilla Trading, for short), a domestic corporation engaged in trading business, organized and
existing under Philippine laws, added to the base figure, in its computation of the 13th-month pay of its employees, the amount of other benefits received by the
employees which are beyond the basic pay. These benefits included:
(a) Overtime premium for regular overtime, legal and special holidays;
(b) Legal holiday pay, premium pay for special holidays;
(c) Night premium;
(d) Bereavement leave pay;
(e) Union leave pay;
(f) Maternity leave pay;
(g) Paternity leave pay;
(h) Company vacation and sick leave pay; and
(i) Cash conversion of unused company vacation and sick leave.
Petitioner claimed that it entrusted the preparation of the payroll to its office staff, including the computation and payment of the 13th-month pay and other benefits.
When it changed its person in charge of the payroll in the process of computerizing its payroll, and after audit was conducted, it allegedly discovered the error of
including non-basic pay or other benefits in the base figure used in the computation of the 13th-month pay of its employees. It cited the Rules and Regulations
Implementing P.D. No. 851 (13th-Month Pay Law), effective December 22, 1975, Sec. 2(b) which stated that:
"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 P.D. No. 525 or Letter of Instruction 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.
Petitioner then effected a change in the computation of the thirteenth month pay, as follows:
net basic pay
13th-month pay

=
12 months

net basic pay

gross pay (non-basic pay or other benefits)

Now excluded from the base figure used in the computation of the thirteenth month pay are the following:
a) Overtime premium for regular overtime, legal and special holidays;
b) Legal holiday pay, premium pay for special holidays;
c) Night premium;
d) Bereavement leave pay;
e) Union leave pay;
f) Maternity leave pay;
g) Paternity leave pay;
h) Company vacation and sick leave pay; and
i) Cash conversion of unused vacation/sick leave.

Hence, the new computation reduced the employees thirteenth month pay. The daily piece-rate workers represented by private respondent Sevilla Trading Workers
Union SUPER (Union, for short), a duly organized and registered union, through the Grievance Machinery in their Collective Bargaining Agreement, contested the
new computation and reduction of their thirteenth month pay. The parties failed to resolve the issue.
On March 24, 2000, the parties submitted the issue of "whether or not the exclusion of leaves and other related benefits in the computation of 13th-month pay is valid"
to respondent Accredited Voluntary Arbitrator Tomas E. Semana (A.V.A. Semana, for short) of the National Conciliation and Mediation Board, for consideration and
resolution.
The Union alleged that petitioner violated the rule prohibiting the elimination or diminution of employees benefits as provided for in Art. 100 of the Labor Code, as
amended. They claimed that paid leaves, like sick leave, vacation leave, paternity leave, union leave, bereavement leave, holiday pay and other leaves with pay in the
CBA should be included in the base figure in the computation of their 13th-month pay.
On the other hand, petitioner insisted that the computation of the 13th-month pay is based on basic salary, excluding benefits such as leaves with pay, as per P.D. No.
851, as amended. It maintained that, in adjusting its computation of the 13th-month pay, it merely rectified the mistake its personnel committed in the previous years.
A.V.A. Semana decided in favor of the Union. The dispositive portion of his Decision reads as follows:
WHEREFORE, premises considered, this Voluntary Arbitrator hereby declared that:
1. The company is hereby ordered to include sick leave and vacation leave, paternity leave, union leave, bereavement leave and other leave with pay in the CBA,
premium for work done on rest days and special holidays, and pay for regular holidays in the computation of the 13th-month pay to all covered and entitled employees;
2. The company is hereby ordered to pay corresponding backwages to all covered and entitled employees arising from the exclusion of said benefits in the computation
of 13th-month pay for the year 1999.
Petitioner received a copy of the Decision of the Arbitrator on December 20, 2000. It filed before the Court of Appeals, a "Manifestation and Motion for Time to File
Petition for Certiorari" on January 19, 2001. A month later, on February 19, 2001, it filed its Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure
for the nullification of the Decision of the Arbitrator. In addition to its earlier allegations, petitioner claimed that assuming the old computation will be upheld, the
reversal to the old computation can only be made to the extent of including non-basic benefits actually included by petitioner in the base figure in the computation of
their 13th-month pay in the prior years. It must exclude those non-basic benefits which, in the first place, were not included in the original computation. The appellate
court denied due course to, and dismissed the petition.
Hence, this appeal. Petitioner Sevilla Trading enumerates the grounds of its appeal, as follows:
1. THE DECISION OF THE RESPONDENT COURT TO REVERT TO THE OLD COMPUTATION OF THE 13th-MONTH PAY ON THE BASIS THAT THE OLD
COMPUTATION HAD RIPENED INTO PRACTICE IS WITHOUT LEGAL BASIS.
2. IF SUCH BE THE CASE, COMPANIES HAVE NO MEANS TO CORRECT ERRORS IN COMPUTATION WHICH WILL CAUSE GRAVE AND
IRREPARABLE DAMAGE TO EMPLOYERS.4
First, we uphold the Court of Appeals in ruling that the proper remedy from the adverse decision of the arbitrator is a petition for review under Rule 43 of the 1997 Rules
of Civil Procedure, not a petition for certiorari under Rule 65. Section 1 of Rule 43 states:
RULE 43
Appeals from the Court of Tax Appeals and
Quasi-Judicial Agencies to the Court of Appeals
SECTION 1. Scope. This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from awards, judgments, final orders or
resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these agencies are the Civil Service Commission, Central
Board of Assessment Appeals, Securities and Exchange Commission, Office of the President, Land Registration Authority, Social Security Commission, Civil
Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer, National Electrification Administration, Energy Regulatory Board, National
Telecommunications Commission, Department of Agrarian Reform under Republic Act No. 6657, Government Service Insurance System, Employees Compensation
Commission, Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy Commission, Board of Investments, Construction Industry Arbitration
Commission, and voluntary arbitrators authorized by law. [Emphasis supplied.]
It is elementary that the special civil action of certiorari under Rule 65 is not, and cannot be a substitute for an appeal, where the latter remedy is available, as it was in
this case. Petitioner Sevilla Trading failed to file an appeal within the fifteen-day reglementary period from its notice of the adverse decision of A.V.A. Semana. It
received a copy of the decision of A.V.A. Semana on December 20, 2000, and should have filed its appeal under Rule 43 of the 1997 Rules of Civil Procedure on or
before January 4, 2001. Instead, petitioner filed on January 19, 2001 a "Manifestation and Motion for Time to File Petition for Certiorari," and on February 19, 2001, it
filed a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Clearly, petitioner Sevilla Trading had a remedy of appeal but failed to use it.
A special civil action under Rule 65 of the Rules of Court will not be a cure for failure to timely file a petition for review on certiorari under Rule 45 (Rule 43, in the
case at bar) of the Rules of Court. Rule 65 is an independent action that cannot be availed of as a substitute for the lost remedy of an ordinary appeal, including that
under Rule 45 (Rule 43, in the case at bar), especially if such loss or lapse was occasioned by ones own neglect or error in the choice of remedies. 5

Thus, the decision of A.V.A. Semana had become final and executory when petitioner Sevilla Trading filed its petition for certiorari on February 19, 2001. More
particularly, the decision of A.V.A. Semana became final and executory upon the lapse of the fifteen-day reglementary period to appeal, or on January 5, 2001. Hence,
the Court of Appeals is correct in holding that it no longer had appellate jurisdiction to alter, or much less, nullify the decision of A.V.A. Semana.
Even assuming that the present petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure is a proper action, we still find no grave abuse of discretion
amounting to lack or excess of jurisdiction committed by A.V.A. Semana. "Grave abuse of discretion" has been interpreted to mean "such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction, or, in other words where the power is exercised in an arbitrary or despotic manner by reason of passion or
personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law."6 We find nothing of that sort in the case at bar.
On the contrary, we find the decision of A.V.A. Semana to be sound, valid, and in accord with law and jurisprudence. A.V.A. Semana is correct in holding that
petitioners stance of mistake or error in the computation of the thirteenth month pay is unmeritorious. Petitioners submission of financial statements every year requires
the services of a certified public accountant to audit its finances. It is quite impossible to suggest that they have discovered the alleged error in the payroll only in 1999.
This implies that in previous years it does not know its cost of labor and operations. This is merely basic cost accounting. Also, petitioner failed to adduce any other
relevant evidence to support its contention. Aside from its bare claim of mistake or error in the computation of the thirteenth month pay, petitioner merely appended to
its petition a copy of the 1997-2002 Collective Bargaining Agreement and an alleged "corrected" computation of the thirteenth month pay. There was no explanation
whatsoever why its inclusion of non-basic benefits in the base figure in the computation of their 13th-month pay in the prior years was made by mistake, despite the
clarity of statute and jurisprudence at that time.
The instant case needs to be distinguished from Globe Mackay Cable and Radio Corp. vs. NLRC,7 which petitioner Sevilla Trading invokes. In that case, this Court
decided on the proper computation of the cost-of-living allowance (COLA) for monthly-paid employees. Petitioner Corporation, pursuant to Wage Order No. 6
(effective 30 October 1984), increased the COLA of its monthly-paid employees by multiplying the P3.00 daily COLA by 22 days, which is the number of working days
in the company. The Union disagreed with the computation, claiming that the daily COLA rate of P3.00 should be multiplied by 30 days, which has been the practice of
the company for several years. We upheld the contention of the petitioner corporation. To answer the Unions contention of company practice, we ruled that:
Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11
June 1984), should not be construed as constitutive of voluntary employer practice, which cannot now be unilaterally withdrawn by petitioner. To be considered as such,
it should have been practiced over a long period of time, and must be shown to have been consistent and deliberate . . . The test of long practice has been enunciated
thus:
. . . Respondent Company agreed to continue giving holiday pay knowing fully well that said employees are not covered by the law requiring payment of holiday pay."
(Oceanic Pharmacal Employees Union [FFW] vs. Inciong, 94 SCRA 270 [1979])
Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the implementation of the Wage Orders. It was only when the Rules Implementing
Wage Order No. 4 were issued on 21 May 1984 that a formula for the conversion of the daily allowance to its monthly equivalent was laid down.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law . . .
In the above quoted case, the grant by the employer of benefits through an erroneous application of the law due to absence of clear administrative guidelines is not
considered a voluntary act which cannot be unilaterally discontinued. Such is not the case now. In the case at bar, the Court of Appeals is correct when it pointed out that
as early as 1981, this Court has held in San Miguel Corporation vs. Inciong8 that:
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 Instruction 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 issued by the 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 cost-of-living allowances under Presidential Decree 525 and Letter of Instruction 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 empathic 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 definition of basic salary earnings and other remunerations paid by 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.
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, pay 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 so 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.
In the light of the clear ruling of this Court, there is, thus no reason for any mistake in the construction or application of the law. When petitioner Sevilla Trading still
included over the years non-basic benefits of its employees, such as maternity leave pay, cash equivalent of unused vacation and sick leave, among others in the
computation of the 13th-month pay, this may only be construed as a voluntary act on its part. Putting the blame on the petitioners payroll personnel is inexcusable.
In Davao Fruits Corporation vs. Associated Labor Unions, we likewise held that:9
The "Supplementary Rules and Regulations Implementing P.D. No. 851" which put to rest all doubts in the computation of the thirteenth month pay, was issued by the
Secretary of Labor as early as January 16, 1976, barely one month after the effectivity of P.D. No. 851 and its Implementing Rules. And yet, petitioner computed and
paid the thirteenth month pay, without excluding the subject items therein until 1981. Petitioner continued its practice in December 1981, after promulgation of the
aforequoted San Migueldecision on February 24, 1981, when petitioner purportedly "discovered" its mistake.
From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its employees thirteenth month pay, without the payments for
sick, vacation and maternity leave, premium for work done on rest days and special holidays, and pay for regular holidays. The considerable length of time the
questioned items had been included by petitioner indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake.
A company practice favorable to the employees had indeed been established and the payments made pursuant thereto, ripened into benefits enjoyed by them. And any
benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Sec. 10 of the Rules
and Regulations Implementing P.D. No. 851, and Art. 100 of the Labor Code of the Philippines which prohibit the diminution or elimination by the employer of the
employees existing benefits. [Tiangco vs. Leogardo, Jr., 122 SCRA 267 (1983)]
With regard to the length of time the company practice should have been exercised to constitute voluntary employer practice which cannot be unilaterally withdrawn by
the employer, we hold that jurisprudence has not laid down any rule requiring a specific minimum number of years. In the above quoted case of Davao Fruits
Corporation vs. Associated Labor Unions,10 the company practice lasted for six (6) years. In another case,Davao Integrated Port Stevedoring Services vs.
Abarquez,11 the employer, for three (3) years and nine (9) months, approved the commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its
intermittent workers. While in Tiangco vs. Leogardo, Jr.,12 the employer carried on the practice of giving a fixed monthly emergency allowance from November 1976
to February 1980, or three (3) years and four (4) months. In all these cases, this Court held that the grant of these benefits has ripened into company practice or policy
which cannot be peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of including non-basic benefits such as paid leaves for unused
sick leave and vacation leave in the computation of their 13th-month pay for at least two (2) years. This, we rule likewise constitutes voluntary employer practice which
cannot be unilaterally withdrawn by the employer without violating Art. 100 of the Labor Code:
Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of promulgation of this Code.
IN VIEW WHEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 63086 dated 27 November 2001 and its Resolution dated 06
March 2002 are hereby AFFIRMED.
SO ORDERED.
NON DIMINUTION OF BENEFITS
G.R. No. L-57636 May 16, 1983
REYNALDO TIANGCO and VICTORIA TIANGCO, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., as Deputy Minister of the Ministry of Labor and Employment, AURELIO ILUSTRISIMO, ABRAHAM GILBUENA,
ROGELIO CARABIO, JESUS GILBUENA, PEPITO GILBUENA, DOMINADOR LASERNA, CLEMENTE VILLARUEL, RUSTOM OFQUERIA,
ERNESTO DIONG, GRACIANO DURANA, AGUEDO MARABE, SOLOMON CLARIN, ALCAFONE ESGANA, JUAN CASTRO, ANTONIO GILBUENA,
GREGORIO LAYLAY, DANIEL CABRERA, ROBERTO BAYON-ON, ELIAS ESCARAN, ERNESTO BATOY, EDDIE BATOBALANOS, TOMAS
CAPALAR, JUAN GIHAPON, JOSE OFQUERIA, FRUTO GIHAPON, PEPITO BATOY, and SERAFIO YADAWON, respondents.
Florencio Pineda for petitioners.
The Solicitor General for respondents.

CONCEPCION, JR., J.:

Petition for certiorari and prohibition, with preliminary injunction and/or restraining order, to annul and set aside the order of the respondent Deputy Minister of Labor
which modified and affirmed the order of Director of the National Capitol Region of the Ministry of Labor directing the petitioners to pay the private respondents their
legal holiday pay, service incentive pay, and differentials in their emergency cost of living allowances.
The petitioner, Reynaldo Tiangco, is a fishing operator who owns the Reynaldo Tiangco Fishing Company and a fleet of fishing vessels engaged in deep-sea fishing
which operates from Navotas, Rizal. His business is capitalized at P2,000,000.00, 1 while the petitioner, Victoria Tiangco, is a fish broker whose business is capitalized
at P100,000.00. 2
The private respondents, Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham Gilbuena, Rustom Ofqueria, Ernesto Diong, Jesus Gilbuena, Clemente
(Emerenciano) Villaruel, Dominador Lacerna, and Graciano Durana, are batillos engaged by the petitioner Reynaldo Tiangco to unload the fish catch from the vessels
and take them to the Fish Stall of the petitioner Victoria Tiangco. The private respondents, Eddie Batobalanos, Aguedo Marabe, Gregorio Laylay, Fruto Gihapon,
Solomon Clarin, Pepito Batoy, Jose Ofqueria, Daniel Cabrera, Juan Castro, Alcafone Esgana, Tomas Capalar, Antonio Gilbuena, Ernesto Batoy, Serafio Yadawon, Juan
Gihapon, Elias Escaran and Roberto Bayon-on, were batillos engaged by Victoria Tiangco. 3 The work of these batillos were limited to days of arrival of the fishing
vessels and their working days in a month are comparatively few. Their working hours average four (4) hours a day.
On April 8, 1980, the private respondents filed a complaint against the petitioners with the Ministry of Labor and Employment for non-payment of their legal holiday
pay and service incentive leave pay, as well as underpayment of their emergency cost of living allowances which used to be paid in full irrespective of their working
days, but which were reduced effective February, 1980, in contravention of Article 100 of the new Labor Code which prohibits the elimination or diminution of existing
benefits. 4
The petitioners denied the laborers' contention, claiming that the laborers were all given, in addition to their regular daily wage, a daily extra pay in amounts ranging
from 30 centavos to 10 pesos which are sufficient to offset the laborers' claim for service incentive leave and legal holiday pay. As regards the claim for emergency
allowance differentials, the petitioners admitted that they discontinued their practice of paying their employees a fixed monthly allowance, and effective February, 1980,
they no longer paid allowances for non-working days. They argued, however, that no law was violated as their refusal to pay allowances for non-working days is in
consonance with the principle of "no work, no allowance"; and that they could not pay private respondents a fixed monthly allowance without risking the viability of
their business. 5
Resolving the case, the Director of the National Capitol Region of the Ministry of Labor and Employment ruled that the daily extra pay given to private respondents was
a ,'production incentive benefit", separate and distinct from the service incentive leave pay and legal holiday pay, payment of which cannot be used to offset a benefit
provided by law, and ordered the petitioners to pay the private respondents their service incentive leave pay and legal holiday pay. However, he denied the laborers'
claim for differentials in the emergency cost of living allowance for the reason that the emergency cost of living allowance accrues only when the laborers actually work
following the principle of "no work, no pay," and private respondents are not entitled to a fixed monthly allowance since they work on a part time basis which average
only four (4) days a week. The private respondents should not be paid their allowances during non-working days. 6
From this order, both parties appealed.
On May 22, 1981, the respondent Deputy Minister of Labor and Employment modified the order and directed the petitioners to restore and pay the individual
respondents their fixed monthly allowance from March, 1980 and to pay them the amount of P58,860.00, as underpayment of their living allowance from May, 1977 to
February 21, 1980. 7
When their motion for the reconsideration of the above order was denied, the petitioners interposed the present recourse.
The petitioners claim that the respondent Deputy Minister of Labor and Employment acted in excess of jurisdiction, or with grave abuse of discretion in ordering them to
pay the private respondents a fixed monthly allowance from March, 1980, despite the "no work, no pay," law; the private respondents' consent to receive an allowance
for days worked for, as stated in their appeal; and the findings of the Director of the National Capitol Region that private respondents work for other employers and are
part-time employees of the petitioners.
Indeed, the record shows that the private respondents work for the petitioners on a part-time basis and their work average only four (4) days a week. It is not also
disputed that the private respondents work for more than one employer so that the private respondents should be paid their living allowance only for the days they
actually worked in a week or month and all the employers of the employee shall share proportionately in the payment of the allowance of the employee. Section 12 of
the Rules and Regulations implementing P.D. 525 which made mandatory the payment of emergency cost of living allowances to workers in the private section,
provides, as follows:
Section 12. Allowance on Daily Paid & Part Time employees. Employees who are paid on a daily basis shall be paid their allowances for the number of days they
actually worked in a week or month, on the basis of the scales provided in Section 7 hereof.
In case of part-time employment, the allowances shall be paid in the amount proportionate to the time worked by the employee, or higher. If employed by more than one
employer, all employers of such employee shall share proportionately in the payment of the allowance of the employee.
Section 11 of the Rules implementing P.D. 1123, increasing the emergency allowance under P.D. 525, also provides, as follows:
Section 11. Allowances of full-time and part-time employees. Employees shall be paid in full the monthly allowances on the basis of the scales provided in Section 3
hereof, regardless of the number of their regular working days, if they incur no absence during the month. If they incur absences, the amounts corresponding to their
absences may be deducted from the monthly allowance.

In case of part-time employment, the allowance to be paid shall be proportionate to the time worked by the employee. This requirement shall apply to any employee with
more than one employer.
However, the respondent Deputy Minister of Labor and Employment correctly ruled that since the petitioners had been paying the private respondents a fixed monthly
emergency allowance since November, 1976 up to February, 1980, as a matter of practice and/or verbal agreement between the petitioners and the private respondents,
the discontinuance of the practice and/or agreement unilaterally by the petitioners contravened the provisions of the Labor Code, particularly Article 100 thereof which
prohibits the elimination or diminution of existing benefits.
Section 15 of the Rules on P.D. 525 and Section 16 of the Rules on P. D. 1123 also prohibits the diminution of any benefit granted to the employees under existing laws,
agreements, and voluntary employer practice. Section 15 of the Rules on P.D. 525 provides, as follows:
Section 15. Relation to Agreement. Nothing herein shall prevent the employer and his employees from entering into any agreement with terms more favorable to the
employees than those provided therein, or be construed to sanction the diminution of any benefit granted to the employees under existing laws, agreements, and
voluntary employer practice.
Section 16 of the Rules on P.D. 1123 similarly prohibits diminution of benefits. It provides, as follows:
Section 16. Relation to other agreements. Nothing herein shall prevent employers from granting allowances to their employees in excess of those provided under the
Decree and the Rules nor shall it be construed to countenance any reduction of benefits already being enjoyed.
The petitioners further claim that the respondent Deputy Minister of Labor and Employment erred in ordering them to pay the amount of P58,860.00 to the private
respondents as underpayment of respondents' allowances from May, 1977 to February 20, 1980. The petitioners contend that the emergency cost of living allowances of
the private respondents had been paid in full.
We find no merit in the contention. However, a revision of the amount due the private respondents is in order for the reason that the respondent Deputy Minister of
Labor and Employment failed to take into consideration, in computing the amount due each worker, the fact that the private respondents are employed by two different
individuals whose businesses are divergent and capitalized at various amounts, contrary to the provisions of P.D. 525 and subsequent amendatory decrees, wherein the
amount of the emergency cost of living allowance to be paid to a worker is made to depend upon the capitalization of the business of his employer or its total assets,
whichever is higher. Thus, Section 7 of the Rules and Regulations implementing P.D. 525 reads, as follows:
Section 7. Amount of Allowances. Every covered employer shall give to each of his employees who is receiving less than P600.00 a month not less than the following
allowances;
(a) P50.00 where the authorized capital stock or total assets, whichever is applicable and higher, is 71 million or more;
(b) P30.00 where the authorized capital stock or total assets, whichever is applicable and higher is at least P100,000.00 but less than P 1miilion and
(c) P15.00 where the authorized capital stock or total assets, whichever is applicable and higher, is less than P100,000.00.
Nothing herein shall prevent employers from granting allowances to their employees who will receive more than P600.00 a month, including the allowances. An
employer, however, may grant his employees an allowance which if added to their monthly salary, will not yield to them more than P600.00 a month.
In this case, the private respondents admit that only ten (10) of them, namely: Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham Gilbuena, Rustom
Ofquiera, Ernesto Diong, Jesus Gilbuena, Emerenciano Villaruel, Dominador Lacerna, and Graciano Durana, were employees of the petitioner Reynaldo Tiangco, while
the remaining seventeen (17) were employed by the petitioner Victoria Tiangco. 8 Accordingly, the workers of the petitioner Victoria Tiangco, whose business as fish
broker is capitalized at P100,000.00, 9 should receive a lesser amount of allowance (P30.00) than those workers employed by the petitioner Reynaldo Tiangco whose
business, as a fishing operator with a fleet of fishing vessels, is capitalized at more than P2,000,000.00, and are entitled to receive a fixed monthly allowance of P50.00 a
month, each.
After P.D. 525, the following amendatory decrees, directing the payment of additional allowances to employees, were promulgated:
1. P.D. 1123. providing for an across-the-board increase of P60.00 a month effective May 1, 1977;
2. P.D. 1614, which directed the payment of P60.00 monthly allowance effective April 1, 1979;
3. P.D. 1634, which provided for the payment of an additional P60.00 a month effective September 1, 1979, and another P30.00 a month beginning January 1, 1980; and
4. P.D. 1678,which directed the payment of an additional P2.00 a day from February 21, 1980.
Hence, for the period from November, 1976 to April 30, 1977, the petitioner Victoria Tiangco should pay her workers a fixed monthly allowance of P 30.00, while the
workers of the petitioner Reynaldo Tiangco were entitled to a fixed monthly allowance of P50.00, each. The record shows that during this period, the petitioner Victoria
Tiangco was paying her workers a monthly allowance of P30.00 each. 10 Accordingly, there was no underpayment for this period insofar as her batillos are concerned.
The petitioner Reynaldo Tiangco, however, paid his employees P30.00, instead of P50.00, as mandated by law. 11 Therefore, there was an underpayment of P20.00 a
month for each batillo under his employ. For the 6-month period, he should pay his workers differentials in the amount of P120.00 each.

For the period from May, 1977 to March 1979, the workers of the petitioner Victoria Tiangco were entitled to a fixed monthly allowance of P90.00 in view of the
promulgation of P.D. 1123 which granted an across-the-board increase of P60.00 a month in their allowances. For this period, however, the said petitioner paid her
workers only P60.00 a month, or a difference of P30.00 a month. 12 There was, therefore, an underpayment of P690.00 for every batillo under her employ for the 23month period.
With the addition of P60.00 across-the-board increase in their allowances, the workers of the petitioner Reynaldo Tiangco were entitled to receive a fixed monthly
allowance of P110.00. However, the record shows that his workers were only paid P60.00 a month, 13 or a difference of P50.00 a month. Consequently, each batillo hired
by him should be paid a differential of P1,150.00 for the 23-month period.
For the period from April, 1979 to August, 1979, the employees of the petitioner Victoria Tiangco were entitled to a fixed monthly allowance of P150.00 while the
workers employed by the petitioner Reynaldo Tiangco were entitled to an allowance of P170.00, pursuant to P.D. 1614. The record shows, however, that both petitioners
paid their workers only P120.00 a month. 14 There was a difference of P30.00 a month in the case of the petitioner Victoria Tiangco, and P50.00, a month, in the case of
the petitioner Reynaldo Tiangco. Hence, for this period, the petitioner Victoria Tiangco should pay the amount of P150.00 to each batillo in her employ, while the
petitioner Reynaldo Tiangco should pay the amount of P250.00, as differentials in the cost of living allowances of the workers under his employ.
Upon the promulgation of P.D. 1634, directing the payment of an additional P60.00 a month effective September, 1979 and another P30.00 effective January 1, 1980, the
workers of the petitioner Victoria Tiangco were entitled to receive a fixed monthly allowance of P210.00 a month from September, 1979, and P340.00, a month
beginning January, 1980. The workers of the petitioner Reynaldo Tiangco, upon the other hand, were entitled to a monthly allowance of P230.00, effective September,
1979, and P260.00, a month beginning January, 1980. The record shows, however, that both petitioners paid their workers the amounts of P180.00 a month for the
months of September to December, 1979, 15 and P210.00 a month for the months of January and February, 1980. 16 There was underpayment, therefore, in the allowances
of the workers of the petitioner Victoria Tiangco in the amount of P30.00, a month, for the months of September, 1979 to February, 1980, or P180.00 for each batillo in
her employ. The private respondents hired by the petitioner Reynaldo Tiangco, upon the other hand, are entitled to differentials in the amount of P50.00 a month for the
same period, or P300.00 each.
Then, beginning February, 21, 1980, the workers should be paid an additional P2.00, a day, pursuant to P.D. 1678. The record shows that the petitioners had complied
with this requirement. 17 The petitioners, however, failed to pay the fixed monthly allowance of their workers which was P240.00, in the case of the workers employed
by the petitioner Victoria Tiangco, and P260.00, in the case of the workers of the petitioner Reynaldo Tiangco. Thus, for the month of March, 1980, the petitioner
Victoria Tiangco paid her workers varying amounts, the lowest of which was P30.00, paid to Eddie Batobalanos and Fruto Gihapon, and the highest of which was
P210.00, paid to Juan Gihapon and Roberto Bayonon. 18 Hence, there was underpayment in their emergency cost of living allowances. But, since, the respondents
employed by Victoria Tiangco are wining to accept P50.00 a month as differentials for the months of March, 1980 to May, 1980, 19 the workers employed by her should
be paid P50.00, each, for the month of March, 1980, except Juan Gihapon and Roberto Bayon-on who should be paid P30.00, each, for the said month, having received
the amount of P210.00, each as allowance for that month.
For the month of April, 1980, the workers of the petitioner, Victoria Tiangco, were paid varying amounts ranging from P120.00 to P210.00. 20 Hence, there was also
underpayment in their allowances. Accordingly, they should be paid the amount of P50.00, each, except for Juan Gihapon, Antonio Gilbuena, Juan Castro, and Aguedo
Marabe, who should be paid P40.00, each, and Solomon Clarin, Daniel Cabrera, and Gregorio Laylay who should be paid P30.00 each.
For the month of May, 1980, the petitioner Victoria Tiangco, paid her workers varying amounts less that what was provided for by law. 21 Hence, they should be paid the
amount of P50.00, each, for this month.
The petitioner, Reynaldo Tiangco, also paid the employees varying amounts, ranging from P210.00 to P250.00, as emergency cost of living allowance, for the month of
March, 22, 1980. 22 Since they were entitled to a fixed monthly allowance of P260.00, each, there was underpayment in their cost of living allowances. Accordingly, the
petitioner should pay the respondent Pepito Gilbuena the amount of P50.00; the respondents Dominador Lacerna and Graciano Durano, the amount of P40.00, each; the
respondent Ernesto Diong, the amount of P30.00; the respondents Rustom Ofqueria and Aurelio Ilustrisimo, the amount of P20.00, each; and the respondents Abraham
Gilbuena, Jesus Gilbuena, Rogelio Carabio, and Emerenciano Villaruel, the amount of P10.00 each.
For the month of April, 1980, the workers of the petitioner Reynaldo Tiangco, were not also paid their emergency cost of living allowance in full. 23 Hence, the said
petitioner should pay his workers the amount of P30.00 each, except for Pepito Gilbuena, who should be paid the amount of P50.00, and Rustom Ofqueria, Jesus
Gilbuena, and Graciano Durano, who are entitled to only P40.00 each.
The petitioner, Reynaldo Tiangco did not also pay his workers their full cost of living allowance for the month of May, 1980. The workers were paid varying amounts of
P130.00 to P150.00, instead of P260.00, as required by law. 24 Hence, they should be paid the amunt of P50.00 each for the month of May, 1980.
WHEREFORE, the petitioners Victoria Tiangco and Reynaldo Tiangco should be, as they are hereby, ordered to PAY the private respondents the following amounts as
differentials in their emergency cost of living allowance:
Petitioner Victoria Tiangco:

Eddie Batobalanos.............

Aguedo Morabe.................

Gregorio Laylay..................

Fruto Gihapon.....................

Solomon Clarin ...................

Pepito Batoy........................

Jose Ofqueria.......................

Daniel Cabrera.....................

Juan Castro..........................

Alcafone Esgana.................

Tomas Capalar ....................

Antonio Gilbuena................

Ernesto Batoy......................

Serapio Yadawon................

Juan Gihapon.......................

Elias Escaran ......................

Roberto Bayon-on..............

Petitioner Reynaldo Tiangco:

Aurelio Ilustrisimo............

Pepito Gilbuena.................

Rogelio Carabio.................

Abraham Gilbuena.............

Rustom Ofqueria................

Ernesto Diong....................

Jesus Gilbuena...................

Emerenciano Villaruel........

Dominador Lacerna............

Graciano Durano.................

With this modification, the judgment appealed from is AFFIRMED in all other respects. With costs against the petitioners.
SO ORDERED.
G.R. No. 150092. September 27, 2002]
GLOBE TELECOM, INC., DELFIN LAZARO, JR., and ROBERTO GALANG, Petitioners, v. JOAN FLORENDO-FLORES, Respondent.
DECISION

BELLOSILLO, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking to annul and set aside the Decision[1 of the Court of Appeals of 25 May 2001 in CA-G.R. SP
No. 60284 which affirmed the Decision of the National Labor Relations Commission of 28 January 2000 in NLRC RAB-CAR 05-0170-98, NLRC NCR CA No.
020270-99.[2
Petitioner GLOBE TELECOM, INC. (GLOBE) is a corporation duly organized and existing under the laws of the Philippines. Petitioners Delfin Lazaro Jr. was its
President and Roberto Galang its former Director-Regional Sales. Respondent Joan Florendo-Flores was the Senior Account Manager for Northern Luzon.
On 1 July 1998 Joan Florendo-Flores filed with the Regional Arbitration Branch of the National Labor Relations Commission (NLRC) an amended complaint for
constructive dismissal against GLOBE, Lazaro, Galang, and Cacholo M. Santos, her immediate superior, Luzon Head-Regional Sales. In her affidavit submitted as
evidence during the arbitration proceedings, Florendo-Flores bared that Cacholo M. Santos never accomplished and submitted her performance evaluation report thereby
depriving her of salary increases, bonuses and other incentives which other employees of the same rank had been receiving; reduced her to a house-to-house selling
agent (person-to-person sales agent or direct sales agent) of company products ("handyphone") despite her rank as supervisor of company dealers and agents; never
supported her in the sales programs and recommendations she presented; and, withheld all her other benefits, i.e., gasoline allowance, per diems, representation
allowance, and car maintenance, to her extreme pain and humiliation.[3
GLOBE and its co-petitioners claimed that after receiving her salary in the second week of May 1998 Florendo-Flores went AWOL (Absent Without Leave) without
signifying through letter or any other means that she was resigning from her position; that notwithstanding her absence and the filing of her case, respondent FlorendoFlores' employment was not terminated as shown by the fact that salary was still provided her until July 1998 to be released upon her presentation of the attendancerecord sheet indicating that she already returned and reported for work; that she continued to have the use a of company car and company "handyphone" unit; that she
was replaced only when her absence became indefinite and intolerable as the marketing operations in Northern Luzon began to suffer; that during the pre-trial
conference it was learned that Florendo-Flores' complaint rested on her alleged personal and private disagreement with her immediate superior Cacholo M. Santos; that
there was no official act from GLOBE or from other officers of the company, including respondents Lazaro and Galang, which called for Florendo-Flores' termination,
diminution in rank, seniority and benefits, or would imply, even remotely, any of the same; and, that Florendo-Flores filed the complaint without going through the
grievance process of GLOBE's Human Resources Department and without informing its officers of her problems with Cacholo M. Santos.
Labor Arbiter Monroe C. Tabingan declared Florendo-Flores to have been illegally dismissed and ordered petitioners to reinstate her without loss of seniority rights and
full benefits; and to pay full back wages, inclusive of basic pay, allowances and bonuses as prayed for in the complaint amounting to P307,625.00, exemplary damages
in the sum of P200,000.00, and ten percent (10%) of the total monetary award as attorney's fees. However, the Labor Arbiter set aside the claim of abandonment as the
company failed to send the requisite notice to Florendo-Flores,[4 hence, there was no adherence to procedural due process. Although he recognized that the problem
brewed and eventually boiled over due to the acts of Cacholo M. Santos, GLOBE's former Head of Regional Sales, Luzon Area, the Labor Arbiter found the company
negligent in monitoring all its key personnel, and thus assessed against it exemplary damages at the same time deleting actual and moral damages.[5
Petitioners appealed the decision to the NLRC which modified the judgment of the Labor Arbiter. The NLRC ruled that petitioners did not dismiss Florendo-Flores but
that the latter actually abandoned her employment because of a disagreement with her immediate superior which she failed to bring to the attention of GLOBE and its
officers, particularly petitioners Lazaro and Galang.[6 However, the NLRC declared that if only as an act of grace for the latter's past services with the company,
GLOBE, Lazaro and Galang should be held accountable for the back wages of Florendo-Flores amounting to P307,625.00 minus the amount of P63,000.00 for the value
of the company car in Florendo-Flores' possession, or the net amount of P244,625.00.[7
Both parties elevated the NLRC decision to the Court of Appeals, each side through a petition for certiorari. In its Resolution of 2 September 2000 the appellate court
dismissed the petition of Florendo-Flores for failure to append the required verification and certification of non-forum shopping,[8 while it gave due course to the
petition of GLOBE, Lazaro and Galang.
In their petition before the appellate court, GLOBE, Lazaro and Galang averred that the NLRC committed grave abuse of discretion amounting to lack or excess of
jurisdiction when it ordered them to pay Florendo-Flores full back wages and damages despite its express finding that they did not cause the dismissal of FlorendoFlores as the latter had actually abandoned her employment on account of her personal differences with her superior.
In its Decision of 25 May 2001 the Court of Appeals found that Florendo-Flores was constructively dismissed and that payment of back wages and damages was in
order. On 21 June 2001 GLOBE, Lazaro and Galang filed a motion for reconsideration but the motion was denied in the appellate court's Resolution of 19 September
2001.
Petitioners pose the following questions in this petition: In a special civil action for certiorari where factual findings are deemed to be final and conclusive, can the Court
of Appeals alter or substitute the findings of fact of the lower court/tribunal? In the face of the finding of the NLRC that respondent abandoned her employment because
of a personal squabble with her immediate superior, and that petitioners had nothing to do with the severance of Flores' employment, can petitioners be held legally
liable for back wages while the guilty party Cacholo M. Santos is legally absolved of liability?
Petitioners submit that the answers to both questions must be in the negative. They argue that the appellate court can neither alter nor substitute the factual findings of
the NLRC as they are legally deemed to be final and conclusive in a certiorari proceeding. They contend that a special civil action for certiorari is an extraordinary
remedy created not to correct mistakes in the factual findings or conclusions of the lower court or tribunal, but a remedy intended to rectify jurisdictional errors and
grave abuse of discretion. Thus, the Court of Appeals cannot make its own factual findings and substitute them for the factual findings of the NLRC, and on such basis
render a decision.

Petitioners further note that the appellate court failed to address the issues raised in their petition. They reiterate their position that they cannot be held liable for payment
of back wages as an act of grace in view of the express finding by the NLRC that respondent abandoned her employment because of a personal rift with her immediate
superior and not due to any act attributable to them. They stress that there can be no liability in the absence of any wrongful act.
Invoking the principle of res inter alios acta declaring that the rights of a party cannot be prejudiced by the act, declaration or omission of another, petitioners insist that
since the NLRC found that respondent's problems arose from the acts and deeds of Santos, he alone should be held liable. Petitioners find special exception to the
NLRC's application of the concept of "act of grace" to justify the award since an "act of grace is not a source of demandable obligation. They argue that it is not within
the power of any judicial or administrative agency to compel an employer to be liberal.
In the review of an NLRC decision through a special civil action for certiorari, resolution is confined only to issues of jurisdiction and grave abuse of discretion on the
part of the labor tribunal.[9 Hence, the Court refrains from reviewing factual assessments of lower courts and agencies exercising adjudicative functions, such as the
NLRC. Occasionally, however, the Court is constrained to delve into factual matters where, as in the instant case, the findings of the NLRC contradict those of the Labor
Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look into the records of the case and re-examine the questioned findings.[10 As a corollary, this
Court is clothed with ample authority to review matters, even if they are not assigned as errors in their appeal, if it finds that their consideration is necessary to arrive at a
just decision of the case.[11 The same principles are now necessarily adhered to and are applied by the Court of Appeals in its expanded jurisdiction over labor cases
elevated through a petition for certiorari; thus, we see no error on its part when it made anew a factual determination of the matters and on that basis reversed the ruling
of the NLRC.
Glaring however is the discrepancy between the text of the decision of the appellate court which declares that respondent Florendo-Flores "was unlawfully
constructively dismissed" from employment,[12 and its dispositive portion which declares that "the assailed judgment is affirmed."[13 It should be noted that the
"assailed judgment" referred to the NLRC Decision which declared that respondent was not illegally dismissed but that she abandoned her employment. Even in the
award of back wages and exemplary damages the two (2) decisions are at odds: The award of back wages made by the NLRC was a gratuity or an act of grace from
petitioners while the award made by the Court of Appeals could be assumed to be anchored on its finding of illegal dismissal. How should the inconsistency be
reconciled?
Where there is conflict between the dispositive portion of the decision and the body thereof, the dispositive portion controls irrespective of what appears in the body.
[14 While the body of the decision, order or resolution might create some ambiguity in the manner the court's reasoning preponderates, it is the dispositive portion
thereof that finally invests rights upon the parties, sets conditions for the exercise of those rights, and imposes the corresponding duties or obligations.[15 Hence, for the
Court of Appeals to have affirmed the assailed judgment is to adopt and uphold the NLRC finding of abandonment and its award of full back wages to respondent as an
"act of grace" from petitioners.
However, we believe this is not the proper view as the records reveal that respondent was constructively dismissed from service.
Constructive dismissal exists where there is cessation of work because "continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a
demotion in rank and a diminution in pay."[16 All these are discernible in respondent's situation. She was singularly edged out of employment by the unbearable or
undesirable treatment she received from her immediate superior Cacholo M. Santos who discriminated against her without reason - not preparing and submitting her
performance evaluation report that would have been the basis for her increased salary; not forwarding her project proposals to management that would have been the
source of commendation; diminishing her supervisor stature by assigning her to house-to-house sales or direct sales; and withholding from her the enjoyment of
bonuses, allowances and other similar benefits that were necessary for her efficient sales performance. Although respondent continued to have the rank of a supervisor,
her functions were reduced to a mere house-to-house sales agent or direct sales agent. This was tantamount to a demotion. She might not have suffered any diminution in
her basic salary but petitioners did not dispute her allegation that she was deprived of all benefits due to another of her rank and position, benefits which she apparently
used to receive.
Far from pointing to Santos alone as the source of her woes, respondent attributes her degraded state to petitioners as well. Florendo-Flores cited petitioners' apathy or
indifference to her plight as she was twice left out in a salary increase in August 1987 and May 1998, without petitioners giving her any reason.[17 It eludes belief that
petitioners were entirely in the dark as the salary increases were granted to all employees across-the-board but respondent was the only one left receiving a P19,100.00
per month basic salary while the rest received a basic salary of almost P35,000.00 per month.[18 It is highly improbable that the exclusion of respondent had escaped
petitioners' notice. The absence of an evaluation report from Santos should have been noted by petitioners and looked into for proper action to have been made. If a
salary increase was unwarranted, then it should have been sufficiently explained by petitioners to respondent.
Petitioners argue that respondent Florendo-Flores could have brought to their attention the deplorable treatment she received from Santos by resorting to the company's
grievance machinery so that the problems in her relationship with Santos could then have been easily ironed out, but she did not. It remains uncontroverted that
respondent had inquired from petitioners the reason why her other benefits had been withheld and sought clarification for her undeserved treatment but petitioner
company and Santos remained mum.[19
Thus, contrary to the observation of the NLRC, the dispute was not a mere private spat between respondent Florendo-Flores and her immediate superior Santos.
Granting that this was the case, it had exceeded the periphery of simple personal affairs that overflowed into the realm of respondent's employment.
Respondent narrates that sometime in June 1997 Santos wrote her a baseless accusatory letter, and he together with GLOBE Sales Director Roberto Galang, one of
petitioners herein, verbally told her that she should resign from her job, but she refused.[20 Thereafter, in July 1997 and the months subsequent thereto all of

respondent's other benefits were withheld without any reason nor explanation from the company.[21 Even as petitioners endeavored to lay the blame on Santos alone, he
would not have been able to single-handedly mastermind the entire affair as to influence Sales Director Galang and manipulate the payroll. It only stands to reason that
Santos was acting pursuant to a management directive, or if not, then petitioners had condoned it, or at the very least, were negligent in supervising all of their
employees. As aptly observed by the Labor Arbiter x x x x it would appear however that the respondent company was negligent in monitoring all its key personnel. For it is the bounden duty of the corporate officialdom
to constantly monitor their managerial staff if only to ascertain the smooth flow of work and operations, which includes the inter-personal relations of each and every
key segment of the corporate machinery. For such, it must be assessed with just and reasonable exemplary damages.[22
The unauthorized absence of respondent should not lead to the drastic conclusion that she had chosen to abandon her work. To constitute abandonment, there must be:
(a) failure to report for work or absence without valid or justifiable reason; and, (b) a clear intention, as manifested by some overt act, to sever the employer-employee
relationship,[23 requisites that are negated by the immediate filing by respondent Florendo-Flores of a complaint for constructive dismissal against petitioners. A charge
of abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal; more so, when it includes a prayer for reinstatement.[24
The reduction of respondent's functions which were originally supervisory in nature to a mere house-to-house sales agent or direct sales agent constitutes a demotion in
rank. For this act of illegal dismissal, she deserves no less than full back wages starting from the time she had been illegally dismissed until her actual reinstatement to
her former position without loss of seniority rights and other benefits - earned, accrued and demandable. She shall continue to enjoy her benefits, privileges and
incentives including the use of the company car and "handyphone."
The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion. It must always bear in mind the basic elements of justice and fair
play. Having the right should not be confused with the manner that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker.[25
In constructive dismissal, the employer has the burden of proving that the transfer and demotion of an employee are for just and valid grounds such as genuine business
necessity.[26 The employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee. It must not involve a demotion in
rank or a diminution of salary and other benefits. If the employer cannot overcome this burden of proof, the employee's demotion shall be tantamount to unlawful
constructive dismissal.
It should be noted that the award of back wages in the instant case is justified upon the finding of illegal dismissal, and not under the principle of "act of grace" for past
services rendered. There are occasions when the Court exercises liberality in granting financial awards to employees, but even then they contemplate only the award of
separation pay and/or financial assistance, and only as a measure ofsocial justice when the circumstances of the case so warrant, such as instances of valid dismissal for
causes other than serious misconduct or those reflecting on the employees' moral character.[27 Proper regard for the welfare of the labor sector should not dissuade us
from protecting the rights of management such that an award of back wages should be forthcoming only when valid grounds exist to support it.
An award of actual and moral damages is not proper as the dismissal is not shown to be attended by bad faith, or was oppressive to labor, or done in a manner contrary
to morals, good customs or public policy.[28 Exemplary damages are likewise not proper as these are imposed only if moral, temperate, liquidated or compensatory
damages are awarded.[29
WHEREFORE, the judgment appealed from is MODIFIED. The Decision of the Court of Appeals of 25 May 2001 in CA-G.R. SP No. 60284 affirming the Decision of
the National Labor Relations Commission of 28 January 2000 declaring that respondent Joan Florendo-Flores had abandoned her work is SET ASIDE. Petitioners Globe
Telecom, Inc., Delfin Lazaro, Jr., and Roberto Galang are ordered to pay respondent Joan Florendo-Flores full back wages from the time she was constructively
dismissed on 15 May 1998 until the date of her effective reinstatement, without qualification or deduction. Accordingly, petitioners are ordered to cause the immediate
reinstatement of respondent to her former position, without loss of seniority rights and other benefits. No pronouncement as to costs.
SO ORDERED.
G.R. No. 163419

February 13, 2008

TSPIC CORPORATION, petitioner,

vs.
TSPIC EMPLOYEES UNION (FFW), representing MARIA FE FLORES, FE CAPISTRANO, AMY DURIAS, 1CLAIRE EVELYN VELEZ, JANICE
OLAGUIR, JERICO ALIPIT, GLEN BATULA, SER JOHN HERNANDEZ, RACHEL NOVILLAS, NIMFA ANILAO, ROSE SUBARDIAGA, VALERIE
CARBON, OLIVIA EDROSO, MARICRIS DONAIRE, ANALYN AZARCON, ROSALIE RAMIREZ, JULIETA ROSETE, JANICE NEBRE, NIA
ANDRADE, CATHERINE YABA, DIOMEDISA ERNI,2 MARIO SALMORIN, LOIDA COMULLO,3 MARIE ANN DELOS SANTOS,4 JUANITA YANA, and
SUZETTE DULAY, respondents.
DECISION
VELASCO, JR., J.:
The path towards industrial peace is a two-way street. Fundamental fairness and protection to labor should always govern dealings between labor and management.
Seemingly conflicting provisions should be harmonized to arrive at an interpretation that is within the parameters of the law, compassionate to labor, yet, fair to
management.

In this Petition for Review on Certiorari under Rule 45, petitioner TSPIC Corporation (TSPIC) seeks to annul and set aside the October 22, 2003 Decision 5 and April 23,
2004 Resolution6 of the Court of Appeals (CA) in CA-G.R. SP No. 68616, which affirmed the September 13, 2001 Decision 7 of Accredited Voluntary Arbitrator
Josephus B. Jimenez in National Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57.
TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve the communication, automotive, data processing, and
aerospace industries. Respondent TSPIC Employees Union (FFW) (Union), on the other hand, is the registered bargaining agent of the rank-and-file employees of
TSPIC. The respondents, Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, Rachel
Novillas, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia
Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, are all members of the Union.
In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA)8 for the years 2000 to 2004. The CBA included a provision on yearly salary
increases starting January 2000 until January 2002. Section 1, Article X of the CBA provides, as follows:
Section 1. Salary/ Wage Increases.Employees covered by this Agreement shall be granted salary/wage increases as follows:
a) Effective January 1, 2000, all employees on regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to ten
percent (10%) of their basic monthly salary as of December 31, 1999.
b) Effective January 1, 2001, all employees on regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to twelve
(12%) of their basic monthly salary as of December 31, 2000.
c) Effective January 1, 2002, all employees on regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to eleven
percent (11%) of their basic monthly salary as of December 31, 2001.
The wage salary increase of the first year of this Agreement shall be over and above the wage/salary increase, including the wage distortion adjustment, granted by the
COMPANY on November 1, 1999 as per Wage Order No. NCR-07.
The wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the mandated minimum wage increases under future Wage Orders, that may be
issued after Wage Order No. NCR-07, and shall be considered as correction of any wage distortion that may have been brought about by the said future Wage Orders.
Thus the wage/salary increases in 2001 and 2002 shall be deemed as compliance to future wage orders after Wage Order No. NCR-07.
Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10% increase in their salary. Accordingly, the following nine (9)
respondents (first group) who were already regular employees received the said increase in their salary: Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn
Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, and Rachel Novillas. 9
The CBA also provided that employees who acquire regular employment status within the year but after the effectivity of a particular salary increase shall receive a
proportionate part of the increase upon attainment of their regular status. Sec. 2 of the CBA provides:
SECTION 2. Regularization Increase.A covered daily paid employee who acquires regular status within the year subsequent to the effectivity of a particular
salary/wage increase mentioned in Section 1 above shall be granted a salary/wage increase in proportionate basis as follows:

Regularization Period

Equivalent Increase

Quarter

Quarter

Quarter

Quarter

Thus, a daily paid employee who becomes a regular employee covered by this Agreement only on May 1, 2000, i.e., during the second quarter and subsequent to the
January 1, 2000 wage increase under this Agreement, will be entitled to a wage increase equivalent to seventy-five percent (75%) of ten percent (10%) of his basic pay.
In the same manner, an employee who acquires regular status on December 1, 2000 will be entitled to a salary increase equivalent to twenty-five percent (25%) of ten
percent (10%) of his last basic pay.

On the other hand, any monthly-paid employee who acquires regular status within the term of the Agreement shall be granted regularization increase equivalent to 10%
of his regular basic salary.
Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region, issued Wage Order No. NCR-08 10 (WO No. 8) which raised the
daily minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000. Conformably, the wages of 17 probationary employees, namely: Nimfa Anilao, Rose
Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa
Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay (second group), were increased to PhP 250.00 effective November 1,
2000.
On various dates during the last quarter of 2000, the above named 17 employees attained regular employment 11and received 25% of 10% of their salaries as granted
under the provision on regularization increase under Article X, Sec. 2 of the CBA.
In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine employees (first group), who were senior to the above-listed
recently regularized employees, received less wages.
On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective, TSPICs Human Resources Department notified 24 employees, 12 namely:
Maria Fe Flores, Janice Olaguir, Rachel Novillas, Fe Capistrano, Jerico Alipit, Amy Durias, Glen Batula, Claire Evelyn Velez, Ser John Hernandez, Nimfa Anilao, Rose
Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa
Erni, Mario Salmorin, Loida Comullo, and Marie Ann Delos Santos, that due to an error in the automated payroll system, they were overpaid and the overpayment
would be deducted from their salaries in a staggered basis, starting February 2001. TSPIC explained that the correction of the erroneous computation was based on the
crediting provision of Sec. 1, Art. X of the CBA.
The Union, on the other hand, asserted that there was no error and the deduction of the alleged overpayment from employees constituted diminution of pay. The issue
was brought to the grievance machinery, but TSPIC and the Union failed to reach an agreement.
Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of whether or not the acts of the management in making deductions
from the salaries of the affected employees constituted diminution of pay.
On September 13, 2001, Arbitrator Jimenez rendered a Decision, holding that the unilateral deduction made by TSPIC violated Art. 100 13 of the Labor Code.
The fallo reads:
WHEREFORE, in the light of the law on the matter and on the facts adduced in evidence, judgment is hereby rendered in favor of the Union and the named individual
employees and against the company, thereby ordering the [TSPIC] to pay as follows:
1) to the sixteen (16) newly regularized employees named above, the amount of P12,642.24 a month or a total of P113,780.16 for nine (9) months or P7,111.26 for each
of them as well as an additional P12,642.24 (for all), or P790.14 (for each), for every month after 30 September 2001, until full payment, with legal interests for every
month of delay;
2) to the nine (9) who were hired earlier than the sixteen (16); also named above, their respective amount of entitlements, according to the Unions correct computation,
ranging from P110.22 per month (or P991.98 for nine months) to P450.58 a month (or P4,055.22 for nine months), as well as corresponding monthly entitlements after
30 September 2001, plus legal interests until full payment,
3) to Suzette Dulay, the amount of P608.14 a month (or P5,473.26), as well as corresponding monthly entitlements after 30 September 2001, plus legal interest until full
payment,
4) Attorneys fees equal to 10% of all the above monetary awards.
The claim for exemplary damages is denied for want of factual basis.
The parties are hereby directed to comply with their joint voluntary commitment to abide by this Award and thus, submit to this Office jointly, a written proof of
voluntary compliance with this DECISION within ten (10) days after the finality hereof.
SO ORDERED.14
TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated November 21, 2001.
Aggrieved, TSPIC filed before the CA a petition for review under Rule 43 docketed as CA-G.R. SP No. 68616. The appellate court, through its October 22, 2003
Decision, dismissed the petition and affirmed in toto the decision of the voluntary arbitrator. The CA declared TSPICs computation allowing PhP 287 as daily wages to
the newly regularized employees to be correct, noting that the computation conformed to WO No. 8 and the provisions of the CBA. According to the CA, TSPIC failed
to convince the appellate court that the deduction was a result of a system error in the automated payroll system. The CA explained that when WO No. 8 took effect on
November 1, 2000, the concerned employees were still probationary employees who were receiving the minimum wage of PhP 223.50. The CA said that effective
November 1, 2000, said employees should have received the minimum wage of PhP 250. The CA held that when respondents became regular employees on November
29, 2000, they should be allowed the salary increase granted them under the CBA at the rate of 25% of 10% of their basic salary for the year 2000; thereafter, the 12%
increase for the year 2001 and the 10% increase for the year 2002 should also be made applicable to them. 15
TSPIC filed a Motion for Reconsideration which was denied by the CA in its April 23, 2004 Resolution.

TSPIC filed the instant petition which raises this sole issue for our resolution: Does the TSPICs decision to deduct the alleged overpayment from the salaries of the
affected members of the Union constitute diminution of benefits in violation of the Labor Code?
TSPIC maintains that the formula proposed by the Union, adopted by the arbitrator and affirmed by the CA, was flawed, inasmuch as it completely disregarded the
"crediting provision" contained in the last paragraph of Sec. 1, Art. X of the CBA.
We find TSPICs contention meritorious.
A Collective Bargaining Agreement is the law between the parties
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply with its provisions. 16 We said so
in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work
and all other terms and conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and
conditions as they may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law. 17
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of their stipulations shall
control.18 However, sometimes, as in this case, though the provisions of the CBA seem clear and unambiguous, the parties sometimes arrive at conflicting interpretations.
Here, TSPIC wants to credit the increase granted by WO No. 8 to the increase granted under the CBA. According to TSPIC, it is specifically provided in the CBA that
"the salary/wage increase for the year 2001 shall be deemed inclusive of the mandated minimum wage increases under future wage orders that may be issued after Wage
Order No. 7." The Union, on the other hand, insists that the "crediting" provision of the CBA finds no application in the present case, since at the time WO No. 8 was
issued, the probationary employees (second group) were not yet covered by the CBA, particularly by its crediting provision.
As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued. 19 Littera necat spiritus vivificat. An instrument must be interpreted
according to the intention of the parties. It is the duty of the courts to place a practical and realistic construction upon it, giving due consideration to the context in which
it is negotiated and the purpose which it is intended to serve.20 Absurd and illogical interpretations should also be avoided. Considering that the parties have
unequivocally agreed to substitute the benefits granted under the CBA with those granted under wage orders, the agreement must prevail and be given full effect.
Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that, effective January 1, 2001, all employees on regular status and within the
bargaining unit on or before said date shall be granted a salary increase equivalent to twelve (12%) of their basic monthly salary as of December 31, 2000. The 12%
salary increase is granted to all employees who (1) are regular employees and (2) are within the bargaining unit.
Second paragraph of (c) provides that the salary increase for the year 2000 shall not include the increase in salary granted under WO No. 7 and the correction of the
wage distortion for November 1999.
The last paragraph, on the other hand, states the specific condition that the wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the mandated
minimum wage increases under future wage orders, that may be issued after WO No. 7, and shall be considered as correction of the wage distortions that may be brought
about by the said future wage orders. Thus, the wage/salary increases in 2001 and 2002 shall be deemed as compliance to future wage orders after WO No. 7.
Paragraph (b) is a general provision which allows a salary increase to all those who are qualified. It, however, clashes with the last paragraph which specifically states
that the salary increases for the years 2001 and 2002 shall be deemed inclusive of wage increases subsequent to those granted under WO No. 7. It is a familiar rule in
interpretation of contracts that conflicting provisions should be harmonized to give effect to all. 21 Likewise, when general and specific provisions are inconsistent, the
specific provision shall be paramount to and govern the general provision.22 Thus, it may be reasonably concluded that TSPIC granted the salary increases under the
condition that any wage order that may be subsequently issued shall be credited against the previously granted increase. The intention of the parties is clear: As long as
an employee is qualified to receive the 12% increase in salary, the employee shall be granted the increase; and as long as an employee is granted the 12% increase, the
amount shall be credited against any wage order issued after WO No. 7.
Respondents should not be allowed to receive benefits from the CBA while avoiding the counterpart crediting provision. They have received their regularization
increases under Art. X, Sec. 2 of the CBA and the yearly increase for the year 2001. They should not then be allowed to avoid the crediting provision which is an
accompanying condition.
Respondents attained regular employment status before January 1, 2001. WO No. 8, increasing the minimum wage, was issued after WO No. 7. Thus, respondents
rightfully received the 12% salary increase for the year 2001 granted in the CBA; and consequently, TSPIC rightfully credited that 12% increase against the increase
granted by WO No. 8.
Proper formula for computing the salaries for the year 2001
Thus, the proper computation of the salaries of individual respondents is as follows:
(1) With regard to the first group of respondents who attained regular employment status before the effectivity of WO No. 8, the computation is as follows:
For respondents Jerico Alipit and Glen Batula:23

Wage rate before WO No. 8

Increase due to WO No. 8

setting the minimum wage at PhP 250....

Total Salary upon effectivity of WO No. 8.

Increase for 2001 (12% of 2000 salary)......

Less the wage increase under WO No. 8.

Total difference between the wage increase

for 2001 and the increase granted under WO No. 8..

Wage rate by December 2000.

Plus total difference between the wage increase for 2001 and the increase granted under WO No. 8..

(Wage rate range beginning January 1, 2001)

For respondents Ser John Hernandez and Rachel Novillas:24

Wage rate range before WO No. 8..

Increase due to WO No. 8

setting the minimum wage at PhP 250

Total Salary upon effectivity of WO No. 8.

Increase for 2001 (12% of 2000 salary)..

Less the wage increase under WO No. 8

Total difference between the wage increase

for 2001 and the increase granted under WO No. 8

Wage rate by December 2000.

Plus total difference between the wage increase for 2001 and the increase granted under WO No. 8

(Wage rate range beginning January 1, 2001)

For respondents Amy Durias, Claire Evelyn Velez, and Janice Olaguir:25

Wage rate range before WO No. 8..

Increase due to WO No. 8

setting the minimum wage at PhP 250

Total Salary upon effectivity of WO No. 8.

Increase for 2001 (12% of 2000 salary)

Less the wage increase under WO No. 8

Total difference between the wage increase for 2001

and the increase granted under WO No. 8

Wage rate by December 2000

Plus total difference between the wage increase for 2001 and the increase granted under WO No. 8

(Wage rate range beginning January 1, 2001)

For respondents Ma. Fe Flores and Fe Capistrano:26

Wage rate range before WO No. 8

Increase due to WO No. 8

setting the minimum wage at PhP 250..

Total Salary upon effectivity of WO No. 8...

Increase for 2001 (12% of 2000 salary)

Less the wage increase under WO No. 8.........

Total difference between the wage increase for 2001

and the increase granted under WO No. 8

Wage rate by December 2000

Plus total difference between the wage increase for 2001 and the increase granted under WO No. 8

(Wage rate range beginning January 1, 2001)

(2) With regard to the second group of employees, who attained regular employment status after the implementation of WO No. 8, namely: Nimfa Anilao, Rose
Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa
Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, the proper computation of the salaries for the year 2001, in accordance
with the CBA, is as follows:
Compute the increase in salary after the implementation of WO No. 8 by subtracting the minimum wage before WO No. 8 from the minimum wage per the wage order
to arrive at the wage increase, thus:

Minimum Wage per Wage Order..

Wage rate before Wage Order..

Wage Increase.

Upon attainment of regular employment status, the employees salaries were increased by 25% of 10% of their basic salaries, as provided for in Sec. 2, Art. X of the
CBA, thus resulting in a further increase of PhP 6.25, for a total of PhP 256.25, computed as follows:

Wage rate after WO No. 8.

Regularization increase (25 % of 10% of basic salary)

Total (Salary for the end of year 2000).

To compute for the increase in wage rates for the year 2001, get the increase of 12% of the employees salaries as of December 31, 2000; then subtract from that amount,
the amount increased in salaries as granted under WO No. 8 in accordance with the crediting provision of the CBA, to arrive at the increase in salaries for the year 2001
of the recently regularized employees. Add the result to their salaries as of December 31, 2000 to get the proper salary beginning January 1, 2001, thus:

Increase for 2001 (12% of 2000 salary)...

Less the wage increase under WO No. 8.

Difference between the wage increase

for 2001 and the increase granted under WO No. 8

Wage rate after regularization increase...

Plus total difference between the wage increase and

the increase granted under WO No. 8.

(Wage rate beginning January 1, 2001).

With these computations, the crediting provision of the CBA is put in effect, and the wage distortion between the first and second group of employees is cured. The first
group of employees who attained regular employment status before the implementation of WO No. 8 is entitled to receive, starting January 1, 2001, a daily wage rate
within the range of PhP 264.67 to PhP 275.85, depending on their wage rate before the implementation of WO No. 8. The second group that attained regular
employment status after the implementation of WO No. 8 is entitled to receive a daily wage rate of PhP 260.50 starting January 1, 2001.
Diminution of benefits
TSPIC also maintains that charging the overpayments made to the 16 respondents through staggered deductions from their salaries does not constitute diminution of
benefits.
We agree with TSPIC.
Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the employees. There is diminution of benefits when it is shown that:
(1) the grant or benefit is founded on a policy or has ripened into a practice over a long period; (2) the practice is consistent and deliberate; (3) the practice is not due to
error in the construction or application of a doubtful or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the employer.27
As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This error was immediately rectified by TSPIC upon its discovery. We
have ruled before that an erroneously granted benefit may be withdrawn without violating the prohibition against non-diminution of benefits. We ruled in Globe-Mackay
Cable and Radio Corp. v. NLRC:
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law. Payment may be said to have been made by reason
of a mistake in the construction or application of a "doubtful or difficult question of law". (Article 2155, in relation to Article 2154 of the Civil Code). Since it is a past
error that is being corrected, no vested right may be said to have arisen nor any diminution of benefit under Article 100 of the Labor Code may be said to have resulted
by virtue of the correction.28

Here, no vested right accrued to individual respondents when TSPIC corrected its error by crediting the salary increase for the year 2001 against the salary increase
granted under WO No. 8, all in accordance with the CBA.
Hence, any amount given to the employees in excess of what they were entitled to, as computed above, may be legally deducted by TSPIC from the employees salaries.
It was also compassionate and fair that TSPIC deducted the overpayment in installments over a period of 12 months starting from the date of the initial deduction to
lessen the burden on the overpaid employees. TSPIC, in turn, must refund to individual respondents any amount deducted from their salaries which was in excess of
what TSPIC is legally allowed to deduct from the salaries based on the computations discussed in this Decision.
As a last word, it should be reiterated that though it is the states responsibility to afford protection to labor, this policy should not be used as an instrument to oppress
management and capital.29 In resolving disputes between labor and capital, fairness and justice should always prevail. We ruled in Norkis Union v. Norkis Trading that in
the resolution of labor cases, we have always been guided by the State policy enshrined in the Constitution: social justice and protection of the working class. Social
justice does not, however, mandate that every dispute should be automatically decided in favor of labor. In any case, justice is to be granted to the deserving and
dispensed in the light of the established facts and the applicable law and doctrine.30
WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor Arbitrator in National Conciliation and Mediation Board Case No. JBJ-AVA-200107-57 and the October 22, 2003 CA Decision in CA-G.R. SP No. 68616 are hereby AFFIRMED with MODIFICATION. TSPIC is hereby ORDERED to pay
respondents their salary increases in accordance with this Decision, as follows:

Name of Employee

Daily Wage Rate

No. of Working Days in a Month
No. of Months in a YearTotal Salary for 2001

Nimfa Anilao

260.5

26

12

81,276.00

Rose Subardiaga

260.5

26

12

81,276.00

Valerie Carbon

260.5

26

12

81,276.00

Olivia Edroso

260.5

26

12

81,276.00

Maricris Donaire

260.5

26

12

81,276.00

Analyn Azarcon

260.5

26

12

81,276.00

Rosalie Ramirez

260.5

26

12

81,276.00

Julieta Rosete

260.5

26

12

81,276.00

Janice Nebre

260.5

26

12

81,276.00

Nia Andrade

260.5

26

12

81,276.00

Catherine Yaba

260.5

26

12

81,276.00

Diomedisa Erni

260.5

26

12

81,276.00

Mario Salmorin

260.5

26

12

81,276.00

Loida Camullo

260.5

26

12

81,276.00

Marie Ann Delos Santos

260.5

26

12

81,276.00

Juanita Yana

260.5

26

12

81,276.00

Suzette Dulay

260.5

26

12

81,276.00

264.67

26

12

82,577.04

264.67

26

12

82,577.04

Ser John Hernandez

264.68

26

12

82,580.16

Rachel Novillas

264.68

26

12

82,580.16

270.26

26

12

84,321.12

Claire Evelyn Velez

270.26

26

12

84,321.12

Janice Olaguir

270.26

26

12

84,321.12

Maria Fe Flores

275.85

26

12

86,065.20

Fe Capistrano

275.85

26

12

86,065.20

The award for attorneys fees of ten percent (10%) of the total award is MAINTAINED.
SO ORDERED.

G.R. No. 170734

May 14, 2008

ARCO METAL PRODUCTS, CO., INC., and MRS. SALVADOR UY, petitioners,
SAMAHAN NG MGA MANGGAGAWA SA ARCO METAL-NAFLU (SAMARM-NAFLU), respondent.

DECISION

This treats of the Petition for Review1 of the Resolution2 and Decision3 of the Court of Appeals dated 9 December 2005 and 29 September 2005, respectively in
CA-G.R. SP No. 85089 entitled
Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU) v. Arco Metal Products Co., Inc. and/or Mr. Salvador Uy/Accredited Voluntary
Arbitrator Apron M. Mangabat,4which ruled that the 13th month pay, vacation leave and sick leave conversion to cash shall be paid in full to the employees of
petitioner regardless of the actual service they rendered within a year.
Petitioner is a company engaged in the manufacture of metal products, whereas respondent is the labor union of petitioners rank and file employees. Sometime in
December 2003, petitioner paid the 13th month pay, bonus, and leave encashment of three union members in amounts proportional to the service they actually
rendered in a year, which is less than a full twelve (12) months. The employees were:

1. Rante Lamadrid

27 August 2003 to 27 February 2004

2. Alberto Gamban

10 June 2003 to 1 July 2003

3. Rodelio Collantes

August 2003 to February 2004

Respondent protested the prorated scheme, claiming that on several occasions petitioner did not prorate the payment of the same benefits to seven (7) employees
who had not served for the full 12 months. The payments were made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004. According to respondent, the prorated
payment violates the rule against diminution of benefits under Article 100 of the Labor Code. Thus, they filed a complaint before the National Conciliation and
Mediation Board (NCMB). The parties submitted the case for voluntary arbitration.
The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that the giving of the contested benefits in full, irrespective of the actual
service rendered within one year has not ripened into a practice. He noted the affidavit of Joselito Baingan, manufacturing group head of petitioner, which states
that the giving in full of the benefit was a mere error. He also interpreted the phrase "for each year of service" found in the pertinent CBA provisions to mean that
an employee must have rendered one year of service in order to be entitled to the full benefits provided in the CBA. 5
Unsatisfied, respondent filed a Petition for Review6 under Rule 43 before the Court of Appeals, imputing serious error to Mangabats conclusion. The Court of
Appeals ruled that the CBA did not intend to foreclose the application of prorated payments of leave benefits to covered employees. The appellate court found that
petitioner, however, had an existing voluntary practice of paying the aforesaid benefits in full to its employees, thereby rejecting the claim that petitioner erred in
paying full benefits to its seven employees. The appellate court noted that aside from the affidavit of petitioners officer, it has not presented any evidence in
support of its position that it has no voluntary practice of granting the contested benefits in full and without regard to the service actually rendered within the year.
It also questioned why it took petitioner eleven (11) years before it was able to discover the alleged error. The dispositive portion of the courts decision reads:
WHEREFORE, premises considered, the instant petition is hereby GRANTED and the Decision of Accredited Voluntary Arbiter Apron M. Mangabat in NCMBNCR Case No. PM-12-345-03, dated June 18, 2004 is hereby AFFIRMED WITH MODIFICATION in that the 13th month pay, bonus, vacation leave and sick
leave conversions to cash shall be paid to the employees in full, irrespective of the actual service rendered within a year.7
Petitioner moved for the reconsideration of the decision but its motion was denied, hence this petition.
Petitioner submits that the Court of Appeals erred when it ruled that the grant of 13th month pay, bonus, and leave encashment in full regardless of actual service
rendered constitutes voluntary employer practice and, consequently, the prorated payment of the said benefits does not constitute diminution of benefits under
Article 100 of the Labor Code.8
The petition ultimately fails.
First, we determine whether the intent of the CBA provisions is to grant full benefits regardless of service actually rendered by an employee to the company.
According to petitioner, there is a one-year cutoff in the entitlement to the benefits provided in the CBA which is evident from the wording of its pertinent
provisions as well as of the existing law.
We agree with petitioner on the first issue. The applicable CBA provisions read:

ARTICLE XIV-VACATION LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year of service shall be entitled to sixteen (16) days vacation leave
with pay for each year of service. Unused leaves shall not be cumulative but shall be converted into its cash equivalent and shall become due and payable every
Saturday of December of each year.
However, if the 1st Saturday of December falls in December 1, November 30 (Friday) being a holiday, the management will give the cash conversion of leaves in
November 29.
Section 2. In case of resignation or retirement of an employee, his vacation leave shall be paid proportionately to his days of service rendered during the year.
ARTICLE XV-SICK LEAVE
Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year of service shall be entitled to sixteen (16) days of sick leave with
pay for each year of service. Unused sick leave shall not be cumulative but shall be converted into its cash equivalent and shall become due and payable every
Saturday of December of each year.
Section 2. Sick Leave will only be granted to actual sickness duly certified by the Company physician or by a licensed physician.
Section 3. All commutable earned leaves will be paid proportionately upon retirement or separation.
ARTICLE XVI EMERGENCY LEAVE, ETC.
Section 1. The Company shall grant six (6) days emergency leave to employees covered by this agreement and if unused shall be converted into cash and become
due and payable on the 1st Saturday of December each year.
Section 2. Employees/workers covered by this agreement who have rendered at least one (1) year of service shall be entitled to seven (7) days of Paternity Leave
with pay in case the married employees legitimate spouse gave birth. Said benefit shall be non-cumulative and non-commutative and shall be deemed in
compliance with the law on the same.
Section 3. Maternity leaves for married female employees shall be in accordance with the SSS Law plus a cash grant of P1,500.00 per month.

ARTICLE XVIII- 13TH MONTH PAY & BONUS

Section 1. The Company shall grant 13th Month Pay to all employees covered by this agreement. The basis of computing such pay shall be the basic salary per day
of the employee multiplied by 30 and shall become due and payable every 1st Saturday of December.
Section 2. The Company shall grant a bonus to all employees as practiced which shall be distributed on the 2 nd Saturday of December.
Section 3. That the Company further grants the amount of Two Thousand Five Hundred Pesos (P2,500.00) as signing bonus plus a free CBA
(Underscoring ours)
There is no doubt that in order to be entitled to the full monetization of sixteen (16) days of vacation and sick leave, one must have rendered at least one year of
service. The clear wording of the provisions does not allow any other interpretation. Anent the 13th month pay and bonus, we agree with the findings of Mangabat
that the CBA provisions did not give any meaning different from that given by the law, thus it should be computed at 1/12 of the total compensation which an
employee receives for the whole calendar year. The bonus is also equivalent to the amount of the 13 th month pay given, or in proportion to the actual service
rendered by an employee within the year.
On the second issue, however, petitioner founders.
As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not normally embark on a re-examination of the evidence
presented by the contending parties during the trial of the case considering that the findings of facts of the Court of Appeals are conclusive and binding on the
The rule, however, admits of several exceptions, one of which is when the findings of the Court of Appeals are contrary to that of the lower tribunals.
Such is the case here, as the factual conclusions of the Court of Appeals differ from that of the voluntary arbitrator.
Petitioner granted, in several instances, full benefits to employees who have not served a full year, thus:

1. Percival Bernas

July 1992 to November 1992

2. Cezar Montero

21 Dec. 1992 to February 1993

3. Wilson Sayod

May 1994 to July 1994

4. Nomer Becina

1 Sept. 1996 to 5 Oct. 1996

5. Ronnie Licuan

8 Nov. 1999 to 9 Dec. 1999

6. Guilbert Villaruel

23 Aug. 2002 to 4 Feb. 2003

7. Melandro Moque

29 Aug. 2003 to 30 Sept. 200311

Petitioner claims that its full payment of benefits regardless of the length of service to the company does not constitute voluntary employer practice. It points out
that the payments had been erroneously made and they occurred in isolated cases in the years 1992, 1993, 1994, 1999, 2002 and 2003. According to petitioner, it
was only in 2003 that the accounting department discovered the error "when there were already three (3) employees involved with prolonged absences and the
error was corrected by implementing the pro-rata payment of benefits pursuant to law and their existing CBA." 12 It adds that the seven earlier cases of full payment
of benefits went unnoticed considering the proportion of one employee concerned (per year) vis vis the 170 employees of the company. Petitioner describes the
situation as a "clear oversight" which should not be taken against it.13 To further bolster its case, petitioner argues that for a grant of a benefit to be considered a
practice, it should have been practiced over a long period of time and must be shown to be consistent, deliberate and intentional, which is not what happened in
this case. Petitioner tries to make a case out of the fact that the CBA has not been modified to incorporate the giving of full benefits regardless of the length of
service, proof that the grant has not ripened into company practice.
We disagree.
Any benefit and supplement being enjoyed by employees cannot be reduced, diminished, discontinued or eliminated by the employer.14 The principle of nondiminution of benefits is founded on the Constitutional mandate to "protect the rights of workers and promote their welfare," 15 and "to afford labor full
16
Said mandate in turn is the basis of Article 4 of the Labor Code which states that "all doubts in the implementation and interpretation of this Code,
including its implementing rules and regulations shall be rendered in favor of labor." Jurisprudence is replete with cases which recognize the right of employees to
benefits which were voluntarily given by the employer and which ripened into company practice. Thus in Davao Fruits Corporation v. Associated Labor Unions,
where an employer had freely and continuously included in the computation of the 13th month pay those items that were expressly excluded by the law, we
held that the act which was favorable to the employees though not conforming to law had thus ripened into a practice and could not be withdrawn, reduced,
diminished, discontinued or eliminated. In Sevilla Trading Company v. Semana,18 we ruled that the employers act of including non-basic benefits in the
computation of the 13th month pay was a voluntary act and had ripened into a company practice which cannot be peremptorily withdrawn. Meanwhile in
Integrated Port Stevedoring Services v. Abarquez,19 the Court ordered the payment of the cash equivalent of the unenjoyed sick leave benefits to its intermittent
workers after finding that said workers had received these benefits for almost four years until the grant was stopped due to a different interpretation of the CBA
provisions. We held that the employer cannot unilaterally withdraw the existing privilege of commutation or conversion to cash given to said workers, and as also
noted that the employer had in fact granted and paid said cash equivalent of the unenjoyed portion of the sick leave benefits to some intermittent workers.
In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely, voluntarily and consistently granting full benefits to its employees
regardless of the length of service rendered. True, there were only a total of seven employees who benefited from such a practice, but it was an established practice
nonetheless. Jurisprudence has not laid down any rule specifying a minimum number of years within which a company practice must be exercised in order to
constitute voluntary company practice.20 Thus, it can be six (6) years,21 three (3) years,22 or even as short as two (2) years.23 Petitioner cannot shirk away from its
responsibility by merely claiming that it was a mistake or an error, supported only by an affidavit of its manufacturing group head portions of which read:
month pay, bonus, and cash conversion of unused/earned vacation leave, sick leave and emergency leave are computed and paid in full to employees who
rendered services to the company for the entire year and proportionately to those employees who rendered service to the company for a period less than one (1)

year or twelve (12) months in accordance with the CBA provision relative thereto.
6. It was never the intention much less the policy of the management to grant the aforesaid benefits to the employees in full regardless of whether or not the
employee has rendered services to the company for the entire year, otherwise, it would be unjust and inequitable not only to the company but to other employees

In cases involving money claims of employees, the employer has the burden of proving that the employees did receive the wages and benefits and that the same
were paid in accordance with law.25
Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have easily presented other proofs, such as the names of other employees
who did not fully serve for one year and thus were given prorated benefits. Experientially, a perfect attendance in the workplace is always the goal but it is seldom
achieved. There must have been other employees who had reported for work less than a full year and who, as a consequence received only prorated benefits. This
could have easily bolstered petitioners theory of mistake/error, but sadly, no evidence to that effect was presented.
IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 85089 dated 29 September 2005 is and its Resolution
dated 9 December 2005 are hereby AFFIRMED.
SO ORDERED.
G.R. No. 74156 June 29, 1988
GLOBE MACKAY CABLE AND RADIO CORPORATION, FREDERICK WHITE and JESUS SANTIAGO,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FFW-GLOBE MACKAY EMPLOYEES UNION and EDA CONCEPCION, respondents.
Castillo, Laman, Tan & Pantaleon for petitioners.
Edwin D. Dellaban for private respondents.

MELENCIO-HERRERA, J.:
A special civil action for certiorari with a prayer for a Temporary Restraining Order to enjoin respondents from enforcing the Decision of 10 March 1986 of the National
Labor Relations Commission (NLRC), in NCR Case No. 1-168-85 entitled "FFW-Globe Mackay Employees Union, et al., vs. Globe Mackay Cable & Radio
Corporation, et al.," the dispositive portion of which reads:
WHEREFORE, premises considered, the appealed Decision is as it is hereby SET ASIDE and another one issued:
1. Declaring respondents-appellees (petitioners herein) guilty of illegal deductions of cost-of-living allowance;
2. Ordering respondents-appellees to pay complainants-appellants their back allowances reckoned from the time of illegal deduction; and
3. Ordering respondents-appellees from further illegally deducting the allowances of complainants-appellants.
SO ORDERED.
Presiding Commissioner of the NLRC, Diego P. Atienza, concurred in the result, while Commissioner Cleto T. Villaltuya dissented and voted to affirm in toto the Labor
Arbiter's Decision.
On 19 May 1986, we issued the Temporary Restraining Order enjoining respondents from enforcing the assailed Decision. On 2 September 1987, we gave due course to
the petition and required the submittal of memoranda, by the parties, which has been complied with.
The facts follow:
Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance of non-agricultural workers in the private sector. Petitioner corporation
complied with the said Wage Order by paying its monthly-paid employees the mandated P3.00 per day COLA. However, in computing said COLA, Petitioner
Corporation multiplied the P 3.00 daily COLA by 22 days, which is the number of working days in the company.

Respondent Union disagreed with the computation of the monthly COLA claiming that the daily COLA rate of P3.00 should be multiplied by 30 days to arrive at the
monthly COLA rate. The union alleged furthermore that prior to the effectivity of Wage Order No. 6, Petitioner Corporation had been computing and paying the monthly
COLA on the basis of thirty (30) days per month and that this constituted an employer practice, which should not be unilaterally withdrawn.
After several grievance proceedings proved futile, the Union filed a complaint against Petitioner Corporation, its President, F. White, and Vice-President, J. Santiago, for
illegal deduction, underpayment, unpaid allowances, and violation of Wage Order No. 6. Petitioners White and Santiago were sought to be held personally liable for the
money claims thus demanded.
Labor Arbiter Adelaido F. Martinez sustained the position of Petitioner Corporation by holding that since the individual petitioners acted in their corporate capacity they
should not have been impleaded; and that the monthly COLA should be computed on the basis of twenty two (22) days, since the evidence showed that there are only 22
paid days in a month for monthly-paid employees in the company. His reasoning, inter alia, was as follows:
To compel the respondent company to use 30 days in a month to compute the allowance and retain 22 days for vacation and sick leave, overtime pay and other benefits
is inconsistent and palpably unjust. If 30 days is used as divisor, then it must be used for the computation of all benefits, not just the allowance. But this is not fair to
complainants, not to mention that it will contravene the provision of the parties' CBA.
On appeal, the NLRC reversed the Labor Arbiter, as heretofore stated, and held that Petitioner Corporation was guilty of illegal deductions, upon the following
considerations: (1) that the P3.00 daily COLA under Wage Order No. 6 should be paid and computed on the basis of thirty (30) days instead of twenty-two (22) days
since workers paid on a monthly basis are entitled to COLA on Saturdays, Sundays and legal holidays "even if unworked;" (2) that the full allowance enjoyed by
Petitioner Corporation's monthly-paid employees before the CBA executed between the parties in 1982 constituted voluntary employer practice, which cannot be
unilaterally withdrawn; and (3) that petitioners White and Santiago were properly impleaded as respondents in the case below.
Hence, this Petition, anchored on the charge of grave abuse of discretion by the NLRC.
We are constrained to reverse the reversal.
Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as follows:
Section 5. Allowance for Unworked Days.
All covered employees shall be entitled to their daily living allowance during the days that they are paid their basic wage, even if unworked. (Emphasis supplied)
The primordial consideration, therefore, for entitlement to COLA is that basic wage is being paid. In other words, the payment of COLA is mandated only for the days
that the employees are paid their basic wage, even if said days are unworked. So that, on the days that employees are not paid their basic wage, the payment of COLA is
not mandated. As held in University of Pangasinan Faculty Union vs. University of Pangasinan, L-63122, February 20, 1984, 127 SCRA 691):
... it is evident that the intention of the law is to grant ECOLA upon the payment of basic wages. Hence, we have the principle of 'No Pay, No ECOLA.
Applied to monthly-paid employees if their monthly salary covers all the days in a month, they are deemed paid their basic wages for all those days and they should be
entitled to their COLA on those days "even if unworked," as the NLRC had opined. Peculiar to this case, however, is the circumstance that pursuant to the Collective
Bargaining Agreement (CBA) between Petitioner Corporation and Respondent Union, the monthly basic pay is computed on the basis of five (5) days a week, or twenty
two (22) days a month. Thus, the pertinent provisions of that Agreement read:
Art. XV(a)Eight net working hours shall constitute the regular work day for five days.
Art. XV(b)Forty net hours of work, 5 working days, shall constitute the regular work week.
Art. XVI, Sec. 1(b)All overtime worked in excess of eight net hours daily or in excess of 5 days weekly shall be computed on hourly basis at the rate of time and one
half.
The Labor Arbiter also found that in determining the hourly rate of monthly paid employees for purposes of computing overtime pay, the monthly wage is divided by the
number of actual work days in a month and then, by eight (8) working hours. If a monthly-paid employee renders overtime work, he is paid his basic salary rate plus
one-half thereof. For example, after examining the specimen payroll of employee Jesus L. Santos, the Labor Arbiter found:
the employee Jesus L. Santos, who worked on Saturday and Sunday was paid base pay plus 50% premium. This is over and above his monthly basic pay as supported by
the fact that base pay was paid. If the 6th and 7th days of the week are deemed paid even if unworked and included in the monthly salary, Santos should not have been
paid his base pay for Saturday and Sunday but should have received only the 50% overtime premium.
Similarly, the specimen payrolls of employees, Dennis Dungon and Rene Sanvictores, showed that in computing the vacation and sick leaves of the employees,
Petitioner Corporation consistently used twenty-two (22) days.

Under the peculiar circumstances obtaining, therefore, where the company observes a 5-day work week, it will have to be held that the COLA should be computed on
the basis of twenty two (22) days, which is the period during which the monthly-paid employees of Petitioner Corporation receive their basic wage. The CBA is the law
between the parties and, if not acceptable, can be the subject of future re-negotiation.
2) Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in compliance with Wage Orders Nos. 1 (26 March 1981) to 5
(11 June 1984), should not be construed as constitutive of voluntary employer practice, which cannot now be unilaterally withdrawn by petitioner. To be considered as
such, it should have been practiced over a long period of time, and must be shown to have been consistent and deliberate. Adequate proof is wanting in this respect. The
test of long practice has been enunciated thus:
... Respondent Company agreed to continue giving holiday pay knowing fully well that said employees are not covered by the law requiring payment of holiday pay.'
(Oceanic Pharmacal Employees Union [FFW] vs. Inciong, L-50568, November 7, 1979, 94 SCRA 270). (Emphasis ours)
Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the implementation of the Wage Orders. It was only when the Rules Implementing
Wage Order No. 4 were issued on 21 May 1984 that a formula for the conversion of the daily allowance to its monthly equivalent was laid down, thus:
Section 3. Application of Section 2-xxx xxx xxx
(a) Monthly rates for non-agricultural workers covered Under PDs 1614, 1634, 1678 and 1713:
xxx xxx xxx
(3) For workers who do not work and are not considered paid on Saturdays and Sundays:
P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70 (Emphasis ours)
As the Labor Arbiter had analyzed said formula:
Under the aforecited formula/guideline, issued for the first time, when applied to a company like respondent which observes a 5-day work week (or where 2 days in a
week, not necessarily Saturday and Sunday, are not considered paid), the monthly equivalent of a daily allowance is arrived at by multiplying the daily allowance by 262
divided by 12. This formula results in the equivalent of 21.8 days in a month.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law. Payment may be said to have been made by reason
of a mistake in the construction or application of a "doubtful or difficult question of law." (Article 2155, 1 in relation to Article 2154 2 of the Civil Code). Since it is a
past error that is being corrected, no vested right may be said to have arisen nor any diminution of benefit under Article 100 of the Labor Code 3 may be said to have
resulted by virtue of the correction.
With the conclusions thus reached, there is no further need to discuss the liability of the officers of Petitioner Corporation.
WHEREFORE, certiorari is granted, the Decision of the National Labor Relations Commission, dated 10 March 1986, is SET ASIDE, and the Decision of the Labor
Arbiter, dated 9 May 1985, is hereby REINSTATED. The Temporary Restraining Order heretofore issued is hereby made permanent.
SO ORDERED.