Labor Standards Cases (Chapter V)

LABOR STANDARDS CASES
Labor Arbiter Augusto L. Villanueva

SSCR
2ndSem A.Y. 2015-2016
Chapter V Conditions of Employment
1.MANILA TERMINAL COMPANY, INC., petitioner vs.

THE COURT OF INDUSTRIAL RELATIONS and
MANILA TERMINAL RELIEF AND MUTUAL AID
ASSOCIATION, respondents.
[No. L4148.July 16, 1952]
EMPLOYER AND EMPLOYEE; EIGHT HOUR
LABOR
LAW;
OVERTIME
COMPENSATION;
CONTRACT TO WORK FOR MORE THAN EIGHT
HOURS AT SPECIFIED DAILY WAGE NOT SUFFICIENT
TO COVER OVERTIME COMPENSATION.Where the
contract of employment requires work for more than eight
hours at specified wages per day, without providing for a fixed
hourly rate or that the daily wages include overtime pay, said
wages cannot be considered as including overtime
compensation required under the Eight Hour Labor Law.
ID.; ID.; ID.; OVERTIME COMPENSATION
CANNOTBE WAIVED.The right of employees and
laborers to overtime compensation cannot be waived expressly
or impliedly.
ID.; ID.; ID.; ID.; ESTOPPEL AND LACHES
CANNOT
BAR
RECOVERY
OF
OVERTIME
COMPENSATION.The principle of estoppel and laches
cannot be invoked against the recovery of overtime
compensation, because that would be contrary to the spirit of
the Eight Hour Labor Law and because the employee or
laborer, who cannot renounce his right to extra compensation,
may be compelled to accomplish the same thing by mere
silence or lapse of time.
ID.; ID.; ID.; NULLITY OR ILLEGALITY OF
EMPLOYMENT
CONTRACT
DOES
NOT
BAR
RECOVERY OF OVERTIME COMPENSATION.The fact
that no permit has previously been obtained from the proper
authorities for the performance of overtime work, or that the
employment contract is illegal because it does not provide for
overtime compensation, will not prevent recovery by the
employee or laborer, because the Eight Hour Labor Law is
intended for the benefit of laborers and employees, and
because the law makes only the employer criminally liable for
any violation.
ID.; ID.; BACK OVERTIME COMPENSATION
COLLECTIBLE.As sections 3 and 5 of Commonwealth Act
No. 444, the Eight Hour Labor Law, expressly provides for the
payment of extra compensation in cases where overtime
services are required, the employees or laborers are entitled to
collect such extra compensation for past overtime work. To
hold otherwise would allow an employer to violate the law by
simply failing to provide for and pay overtime compensation.
FACTS:
On September 1, 1945, the Manila Terminal
Company, Inc. undertook the arrastre service in some of the
piers in Manila's Port Area at the request and under the control
of the United States Army. The petitioner hired some thirty

men as watchmen on twelve hour shifts at a compensation of
P3 per day for the day shift and P6 per day for the night shift.
On February 1, 1946, the petitioner began the
postwar operation of the arrastre service at the request and
under the control of the Bureau of Customs, by virtue of a
contract entered into with the Philippine Government. The
watchmen of the petitioner continued in the service with a
number of substitutions and additions, their salaries having
been raised during the month of February to P4 per day for the
day shift and P6.25 per day for the night shift.
March 28, 1947, Dominador Jimenez, a member of
the Manila Terminal Relief and Mutual Aid Association, sent
a letter to the Department of Labor, requesting that the matter
of overtime pay be investigated, but nothing was done by the
Department.
On April 29, 1947, Victorino Magno Cruz and five
other employees, also members of the Manila Terminal Relief
and Mutual Aid Association, filed a 5point demand with the
Department of Labor, including overtime pay, but the
Department again failed to do anything about the matter.
On May 24, 1947, the petitioner instituted the system
of strict eight hour shifts. On July 28, 1947, the Manila
Terminal Relief and Mutual Aid Association filed an amended
petition with the Court of Industrial Relations praying, among
others, that the petitioner be ordered to pay to its watchmen or
police force overtime pay from the
commencement of their employment.
On May 9, 1949, by virtue of Customs
Administrative Order No. 81 and Executive Order No. 228 the
entire police force of the petitioner was consolidated with the
Manila Harbor Police of the Customs Patrol Service, a
Government agency under the exclusive control of the
Commissioner of Customs and the Secretary of Finance. The
Manila Terminal Relief and Mutual Aid Association will
hereafter be referred to as the Association.
PETITIONERS CONTENTION:
The important point stressed by the petitioner is that
the contract between it and the Association upon the
commencement of the employment of its watchmen was to the
effect that the latter were to work twelve hours a day at certain
rates of pay, including overtime compensation, namely, P3 per
day for the day shift and P6 per day for night shift beginning
September 1, 1945, and P4 per day for the day shift and P6.25
per day for the night shift since
February, 1946. The record does not bear out these
allegations. The petitioner has relied merely on the facts that
its watchmen had worked on twelve hour shifts at specific
wages per day and that no complaint was made about the
matter until, first, on March 28, 1947 and, secondly, on April
29, 1947.
CIR:
Judge V. Jimenez Yanson of the Court of Industrial
Relations in his decision ordered the petitioner to pay to its
police force the necessary compensation for their overtime
work. With reference to the pay for overtime service after the
watchmen had been integrated into the Manila Harbor Police,
Judge Yanson ruled that the court has no jurisdiction because
it affects the Bureau of Customs, an instrumentality of the
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Gloria//Ramirez//Bernardo//DeMesa//Figueroa//Villardo//Queano//Aonuevo//Cureg//Maramag//Pagarigan//Castillo//Tamaca//Corre/
/Clemente//Violago//Del Pilar//Agutaya//Dimer//Morales//Coronel//Lumabas//Rivera
Government having no independent personality and which

cannot be sued without the consent of the State. The petitioner
filed a motion for reconsideration. The Association also filed a
motion for reconsideration in so far as its other demands were
dismissed. Judge Yanson, concurred in by Judge Jose S.
Bautista, promulgated on July 13, 1950, a resolution denying
both motions for reconsideration. Thus, the petitioner filed the
present petition for certiorari.
ISSUE:
1.
2.
3.
WON the agreement under which its police force

were paid certain specific wages for twelve hour
shifts, included overtime compensation is valid.
WON the Association is barred from recovery by
estoppel and laches.
WON the nullity or invalidity of the employment
contract precludes any recovery by the
Association.
HELD:
1.NO. In times of acute unemployment, the people,
urged by the instinct of self-preservation, go from place to
place and from office to office in search for any employment,
regardless of its terms and conditions, their main concern in
the first place being admission to some work. Specially for
positions requiring no special qualifications, applicants would
be good as rejected if they ever try to be inquisitive about the
hours of work or the amount of salary, or ever attempt to
dictate their terms. The petitioner's watchmen must have
railroaded themselves into their employment, so to speak,
happy in the thought that they would then have an income on
which to subsist. But, at the same time, they found themselves
required to work for twelve hours a day. True, there was an
agreement to work, but can it fairly be supposed that they had
the freedom to bargain in any way, much less to insist in the
observance of the Eight Hour Labor Law? . . . "A contract of
employment, which provides for a weekly wage for a
specified number of hours, sufficient to cover both the
statutory minimum wage and overtime compensation, if
computed on the basis of the statutory minimum, and which
makes no provision for a fixed hourly rate or that the weekly
wage includes overtime compensation, does not meet the
requirements of the Act." Moreover, we note that after the
petitioner had instituted the strict eight hour shifts, no
reduction was made in the salaries which its watchmen
received under the twelve hour arrangement. Indeed, as
admitted by the petitioner, "when the members of the
respondent union were placed on strict eight hour shifts, the
lowest salary of all the members of respondent union was
P165 a month, or P5.50 daily, for both day and night shifts."
Although it may be argued that the salary for the night shift
was somewhat lessened, the fact that the rate for the dayshift
was increased in a sense tends to militate against the
contention that the salaries given during the twelve hour shifts
included overtime compensation.
2.NO. The foregoing pronouncements are in point.
The Ask sociation cannot be said to have impliedly waived the
right to overtime compensation, for the obvious reason that
they could not have expressly waived it." The principle of
estoppel and laches cannot well be invoked against the
Association. In the first place, it would be contrary to the spirit

of the Eight Hour Labor Law, under which, as already seen,
the laborers cannot waive their right to extra compensation. In
the second place, the law principally obligates the employer to
observe it, so much so that it punishes the employer for its
violation and leaves the employee or laborer free and
blameless, In the third place, the employee or laborer is in
such a disadvantageous position as to be naturally reluctant or
even apprehensive in asserting any claim which may cause the
employer to devise a way for exercising his right to terminate
the employment. If the principle of estoppel and laches is to be
applied, it may bring about a situation, whereby the employee
or laborer, who cannot expressly renounce their right to extra
compensation under the Eight Hour Labor Law, may be
compelled to accomplish the same thing by mere silence or
lapse of time, thereby frustrating the purpose of the law by
indirection.
3.NO. The argument that the nullity or invalidity of
the employment contract precludes recovery by the
Association of any overtime pay is also untenable. The
argument, based on the supposition that the parties are in pari
delicto, was in effect turned down in Gotamo Lumber Co. vs.
Court of Industrial Relations wherein we ruled: "The
petitioner maintains that as the overtime work had been
performed without a permit from the Department of Labor, no
extra compensation should be authorized. Several decisions of
this court are involved. But those decisions were based on the
reasoning that as both the laborer and employer were duty
bound to secure the permit from the Department of Labor,
both were in pari delicto. However, the present law in effect
imposed that duty upon the employer (C. A. No. 444). Such
employer may not therefore be heard to plead his own neglect
as exemption or defense. "The employee in rendering extra
service at the request of his employer has a right to assume
that the latter has complied with the requirement of the law,
and therefore has obtained the required permission from the
Department of Labor." Moreover, the Eight Hour Law, in
providing that "any agreement or contract between the
employer and the laborer or employee contrary to the
provisions of this Act shall be null and void ab initio,"
(Commonwealth Act No. 444, sec. 6), obviously intended said
provision for the benefit of the laborers or employees. The
employer cannot, therefore, invoke any violation of the Act to
exempt him from liability for extra compensation. This
conclusion is further supported by the fact that the law makes
only the employer criminally liable for any violation. It cannot
be pretended that, for the employer to commit any violation of
the Eight Hour Labor Law, the participation or acquiescence
of the employee or laborer is indispensable, because the latter,
in view of his need and desire to live, cannot be considered as
being on the same level with the employer when it comes to
the question of applying for and accepting an employment.
It is high time that all employers were warned that
the public is interested in the strict enforcement of the Eight
Hour Labor Law. This was designed not only to safeguard the
health and welfare of the laborer or employee, but in a way to
minimize unemployment by forcing employers, in cases where
more than 8 hour operation is necessary, to utilize different
shifts of laborers or employees working only for eight hours
each.
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WHEREFORE, DECISION AFFIRMED.
2.ASIA PACIFIC CHARTERING (PHILS.), INC.,

petitioner, vs. MARIA LINDA R. FAROLAN, respondent.
G.R. No. 151370. December 4, 2002.
SYLLABUS:
Same; Same; Managerial Employees; Distinguished
from Rank-and-File Employees; Recent decisions of this Court
distinguish the treatment of managerial employees from that
of rank and file personnel insofar as the application of the
doctrine of loss of trust and confidence is concerned.Recent
decisions of this Court distinguish the treatment of managerial
employees from that of rank and file personnel insofar as the
application of the doctrine of loss of trust and confidence is
concerned. Thus with respect to rank and file personnel, loss
of trust and confidence as ground for valid dismissal requires
proof of involvement in the alleged events in question and that
mere uncorroborated assertions and accusations by the
employer will not be sufficient. But as regards a managerial
employee, mere existence of a basis for believing that such
employee has breached the trust of his employer would suffice
for his dismissal.
Same; Same; Same; Conditions to be Considered as
Managerial Employee.As enunciated in Samson v. NLRC,
330 SCRA 460, Before one may be properly considered a
managerial employee, all the following conditions must be
met: (1) Their primary duty consists of the management of the
establishment in which they are employed or of a department
or subdivision thereof; (2) They customarily and regularly
direct the work of two or more employees therein; (3) They
have the authority to hire or fire other employees of lower
rank; or their suggestions and recommendations as to the
hiring and firing and as to the promotion or any other change
of status of other employees are given particular weight.
(Section 2(b), Rule I, Book III of the Omnibus Rules
Implementing the Labor Code, emphasis supplied).
Same; Same; Same; Loss of Trust and Confidence;
Definition. Loss of trust and confidence to be a valid ground
for an employees dismissal must be based on a willful breach
and founded on clearly established facts. A breach is willful if
it is done intentionally, knowingly and purposely, without
justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently.
Same; Same; Damages; Award of moral and
exemplary damages for an illegally dismissed employee is
proper where the employee had been harassed and arbitrarily
terminated by the employer.To warrant award of moral
damages, it must be shown that the dismissal of the employee
was attended to by bad faith, or constituted an act opposite to
labor, or was done in a manner contrary to morals, good
customs or public policy. Award of moral and exemplary
damages for an illegally dismissed employee is proper where
the employee had been harassed and arbitrarily terminated by
the employer.
FACTS:
Asia Pacific Chartering (Phils.), Inc. was the general
sales agent (GSA) of the Scandinavian Airline System (SAS),
an offline international airline company with license to do
business in the Philippines. As GSA, petitioner sold passenger

and cargo spaces for airlines operated by SAS.
Maria Linda R. Farolan was on December 16, 1992
hired as Sales Manager of petitioner for its passenger and
cargo GSA operations for SAS, following her conformity to a
December 10, 1992 letter offer of employment from petitioner
through its Vice President/Comptroller Catalino Bondoc.
Soon after respondent assumed her post, she
participated in a number of meetings/seminars including a
Customer Service Seminar in Bangkok, Thailand, a Regional
Sales Meeting on the technical aspects of airline commercial
operations in February 1993, and a course on the highly
technical airline computer reservations system called
Amadeus, all geared towards improving her marketing and
sales skills.
In September of 1993, respondent, upon instruction
of Bondoc, submitted a report. As reflected in respondents
report, there was a drop in SAS sales revenues which to her
was attributable to market forces beyond her control.
Noting the marked decline in SAS sales revenues,
petitioner directed its high ranking officer Roberto Zozobrado
in January 1994 to conduct an investigation on the matter and
identify the problem/s and implement possible solutions.
By petitioners claim, Zozobrado found out that
respondent did not adopt any sales strategy nor conduct any
sales meeting or develop other sources of revenue for SAS,
she having simply let her sales staff perform their functions all
by themselves; in 1994, Soren Jespersen, General Manager of
SAS in Hongkong, Southern China, Taipei and the
Philippines, came to the Philippines to assess the statistics on
SAS sales revenues and SAS was convinced that respondent
was not fit for the job of Sales Manager; and in view of the
changes introduced by Zozobrado, SASGSA sales operations
drew positive results.
On even date, however, petitioner sent respondent a
letter of termination on the ground of loss of confidence.
Thus spawned the filing by respondent of a complaint
for illegal dismissal against petitioner, Bondoc, Zozobrado and
one Donald Marshall, with prayer for damages and attorneys
fees. In her complaint petitioner alleged that Bondoc and
Zozobrado had asked her to tender her resignation as she was
not the person whom SAS was looking for to handle the
position of Sales Manager but that she refused, hence, she
was terminated by the letter of July 18, 1994 letter.
LA:
Promulgated a judgment finding the dismissal of the
complainant Ms. Linda Farolan to be without just cause,
effected with malice, ill will and bad faith, respondent Asian
Pacific Chartering Philippines, Inc. is hereby ordered to pay
her separation pay of Forty Four Thousand Pesos
(P44,000.00), and all the benefit that would have been due her
under the premises.
NLRC
On appeal, the NLRC, by Decision of March 22,
1999, reversed the Labor Arbiters decision, it recognizing the
right of petitioner as employer to terminate or dismiss
employees based on loss of trust and confidence, the right
being a management prerogative. Respondents Motion for
Page | 3
Reconsideration of the NLRC Decision having been denied,

she brought her case to the Court of Appeals via Certiorari.
CA:
By Decision of June 28, 2001, the Court of Appeals,
reversed the NLRC decision and the decision of the Labor
Arbiter was reinstated. Petitioner filed a motion for
reconsideration of the Court of Appeals decision but it was
denied, hence, the present Petition for Review on Certiorari.
ISSUE:
WON Farolan was a managerial employee making
her dismissal valid based on loss of confidence.
HELD:
NO. Farolan was a managerial employee making her
dismissal valid based on loss of confidence. Recent decisions
of this Court distinguish the treatment of managerial
employees from that of rank and file personnel insofar as the
application of the doctrine of loss of trust and confidence is
concerned. Thus with respect to rank and file personnel, loss
of trust and confidence as ground for valid dismissal requires
proof of involvement in the alleged events in question and that
mere uncorroborated assertions and accusations by the
employer will not be sufficient. But as regards a managerial
employee, mere existence of a basis for believing that such
employee has breached the trust of his employer would suffice
for his dismissal. As enunciated in Samson v. NLRC, 330
SCRA 460, Before one may be properly considered a
managerial employee, all the following conditions must be
met: Their primary duty consists of the management of the
establishment in which they are employed or of a department
or subdivision thereof; They customarily and regularly direct
the work of two or more employees therein; They have the
authority to hire or fire other employees of lower rank; or
their suggestions and recommendations as to the hiring and
firing and as to the promotion or any other change of status of
other employees are given particular weight. (Section 2(b),
Rule I, Book III of the Omnibus Rules Implementing the Labor
Code, emphasis supplied). By respondents claim, her
function, as verbally explained to her by Murray, dealt mainly
with servicing of existing clientele. Bondoc, however,
described respondents functions and duties as critical. The
following ruling of this Court in Paper Industries Corp. of the
Philippines v. Laguesma is instructive: Managerial
employees are ranked as Top Managers, Middle Managers and
First Line Managers. The mere fact that an employee is
designated manager does not ipso facto make him one
designation should be reconciled with the actual job
description of the employee for it is the job description that
determines the nature of employment. (Italics supplied). The
absence of a written job description or prescribed work
standards, however, leaves this Court in the dark. Even
assuming, however, that respondent was a
managerial employee, the stated ground (in the letter of
termination) for her dismissal, loss of confidence, should
have a basis and determination thereof cannot be left entirely
to the employer. Loss of trust and confidence to be a valid
ground for an employees dismissal must be based on a willful
breach and founded on clearly established facts. A breach is
willful if it is done intentionally, knowingly and purposely,
without justifiable excuse, as distinguished from an act done

carelessly, thoughtlessly, heedlessly or inadvertently.
Respondents detailed REPORT dated September 8, 1993,
quoted above, relative to SAS profit and loss for 1993, which
was closely examined and analyzed by the Labor Arbiter,
contains an explanation of what brought about the decline in
sales revenues. And it contains too a number of recommended
measures on improvement of sales for the remainder of 1993
and for 1994. As did the Labor Arbiter and the Court of
Appeals, this Court finds respondents explanation in her
Report behind
the decline in sales revenues as due to market forces beyond
respondents control plausible. In any event, there is no
showing that the decline is reflective of any willfull breach of
duties by respondent.
3. Pearanda vs. Baganga Plywood Corporation

G.R. No. 159577. May 3, 2006.
Same; Labor Standards; Managerial Employees Article 82
of the Labor Code exempts managerial employees from the
coverage of labor standards. Labor standards provide the
working conditions of employees, including entitlement to
overtime pay and premium pay for working on rest days.
Under this provision, managerial employees are those whose
primary duty consists of the management of the establishment
in which they are employed or of a department or
subdivision.
Same; Same; Same; Who are deemed managerial
employees. The Implementing Rules of the Labor Code state
that managerial employees are those who meet the following
conditions: (1) Their primary duty consists of the
management of the establishment in which they are employed
or of a department or subdivision thereof; (2) They
customarily and regularly direct the work of two or more
employees therein; (3) They have the authority to hire or fire
other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the
promotion or any other change of status of other employees
are given particular weight.
Same; Same; Same; Like managerial employees, officers and
members of the managerial staff are not entitled to the
provisions of law on labor standards.
FACTS:
Sometime in June 1999, Petitioner Charlito
Pearanda was hired as an employee of Baganga Plywood
Corporation (BPC) to take charge of the operations and
maintenance of its steam plant boiler. 6 In May 2001,
Pearanda filed a Complaint for illegal dismissal with money
claims against BPC and its general manager, Hudson Chua,
before the NLRC. He alleges that he was employed by
respondent [Baganga] on March 15, 1999 with a monthly
salary of P5,000.00 as Foreman/Boiler Head/Shift Engineer
until he was illegally terminated on December 19, 2000.
Further, [he] alleges that his services [were] terminated
without the benefit of due process and valid grounds in
accordance with law. Furthermore, he was not paid his
Page | 4
overtime pay, premium pay for working during holidays/rest

days, night shift differentials and finally claims for payment of
damages and attorneys fees having been forced to litigate the
present complaint.
On the the other hand, respondent [BPC] is a
domestic corporation duly organized and existing under
Philippine laws and is represented herein by its General
Manager HUDSON CHUA, [the] individual respondent.
Respondents thru counsel allege that complainants separation
from service was done pursuant to Art. 283 of the Labor Code.
The respondent [BPC] was on temporary closure due to repair
and general maintenance and it applied for clearance with the
Department of Labor and Employment, Regional Office No.
XI to shut down and to dismiss employees (par. 2 position
paper). And due to the insistence of herein complainant he was
paid his separation benefits. Consequently, when respondent
[BPC] partially reopened in January 2001, [Pearanda] failed
to reapply. Hence, he was not terminated from employment
much less illegally. He opted to severe employment when he
insisted payment of his separation benefits. Furthermore,
being a managerial employee he is not entitled to overtime pay
and if ever he rendered. services beyond the normal hours of
work, [there] was no office order/or authorization for him to
do so. Finally, respondents allege that the claim for damages
has no legal and factual basis and that the instant complaint
must necessarily fail for lack of merit.
LA: The labor arbiter ruled that there was no illegal dismissal
and that petitioners Complaint was premature because he was
still employed by BPC. The temporary closure of BPCs plant
did not terminate his employment, hence, he need not reapply
when the plant reopened. According to the labor arbiter,
petitioners money claims for illegal dismissal was also
weakened by his quitclaim and admission during the
clarificatory conference that he accepted separation benefits,
sick and vacation leave conversions and thirteenth month pay.
Nevertheless, the labor arbiter found petitioner entitled to
overtime pay, premium pay for working on rest days, and
attorneys fees.
NLRC: Respondents filed an appeal to the NLRC, which
deleted the award of overtime pay and premium pay for
working on rest days. According to the Commission,
petitioner was not entitled to these awards because he was a
managerial employee.
CA: CA dismissed Pearandas Petition for Certiorari. In its
later Resolution dated July 4, 2003, the CA denied
reconsideration on the ground that petitioner still failed to
submit the pleadings filed before the NLRC. Hence this
Petition.
ISSUE/S: WON the petitioner is a managerial employee.
WON he is entitled to overtime pay and premium
pay.
HELD:
Petitioner claims that he was not a managerial
employee, and therefore, entitled to the award granted by the
labor arbiter. Article 82 of the Labor Code exempts
managerial employees from the coverage of labor standards.
Labor standards provide the working conditions of employees,

including entitlement to overtime pay and premium pay for
working on rest days. Under this provision, managerial
employees are those whose primary duty consists of the
management of the establishment in which they are employed
or of a department or subdivision. The Implementing Rules
of the Labor Code state that managerial employees are
those who meet the following conditions: 1. Their
primary duty consists of the management of the
establishment in which they are employed or of a
department or subdivision thereof 2. They customarily
and regularly direct the work of two or more employees
therein 3. They have the authority to hire or fire other
employees of lower rank or their suggestions and
recommendations as to the hiring and firing and as to the
promotion or any other change of status of other
employees are given particular weight.
NO. The Court disagrees with the NLRCs finding
that petitioner was a managerial employee. However,
petitioner was a member of the managerial staff, which also
takes him out of the coverage of labor standards. Like
managerial employees, officers and members of the
managerial staff are not entitled to the provisions of law on
labor standards. The Implementing Rules of the Labor Code
define members of a managerial staff as those with the
following duties and responsibilities: 1. The primary duty
consists of the performance of work directly related to
management policies of the employer 2. Customarily and
regularly exercise discretion and independent judgment 3.
(i) Regularly and directly assist a proprietor or a
managerial employee whose primary duty consists of the
management of the establishment in which he is employed
or subdivision thereof or (ii) execute under general
supervision work along specialized or technical lines
requiring special training, experience, or knowledge or
(iii) execute under general supervision special assignments
and tasks and who do not devote more than 20 percent of
their hours worked in a workweek to activities which are
not directly and closely related to the performance of the
work described in paragraphs (1), (2), and (3) above.
As shift engineer, petitioners duties and
responsibilities were as follows: 1. To supply the required
and continuous steam to all consuming units at minimum
cost. 2. To supervise, check and monitor manpower
workmanship as well as operation of boiler and
accessories. 3. To evaluate performance of machinery and
manpower. 4. To followup supply of waste and other
materials for fuel. 5. To train new employees for effective
and safety while working. The foregoing enumeration,
particularly items 1, 2, 3, 5 and 7 illustrates that petitioner was
a member of the managerial staff. His duties and
responsibilities conform to the definition of a member of a
managerial staff under the Implementing Rules. Petitioner
supervised the engineering section of the steam plant boiler.
His work involved overseeing the operation of the machines
and the performance of the workers in the engineering section.
This work necessarily required the use of discretion and
independent judgment to ensure the proper functioning of the
steam plant boiler. As supervisor, petitioner is deemed a
member of the managerial staff.
Page | 5
NO. On the basis of the foregoing, the Court finds no

justification to award overtime pay and premium pay for rest
days to petitioner.
4. Mercidar Fishing Corporation vs. NLRC

G.R. No. 112574. October 8, 1998.
Labor Law; Service Incentive Leave Pay; Words and Phrases;
Phrase Whose Actual Hours of Work in the Field Cannot be
Determined with Reasonable Certainty, Explained.In the
case of Union of Filipro Employees (UFE) v. Vicar, this Court
explained the meaning of the phrase whose actual hours of
work in the field cannot be determined with reasonable
certainty in Art. 82 of the Labor Code, as follows: Moreover,
the requirement that actual hours of work in the field cannot
be determined with reasonable certainty must be read in
conjunction with Rule IV, Book III of the Implementing Rules
which provides: Rule IV Holidays with Pay. Section 1.
CoverageThis rule shall apply to all employees except: . . .
. (e) Field personnel and other employees whose time and
performance is unsupervised by the employer x x x (Italics
supplied) While contending that such rule added another
element not found in the law, the petitioner nevertheless
attempted to show that its affected members are not covered
by the abovementioned rule. The petitioner asserts that the
companys sales personnel are strictly supervised as shown by
the SOD (Supervisor of the Day) schedule and the company
circular dated March 15, 1984. Contrary to the contention of
the petitioner, the Court finds that the aforementioned rule did
not add another element to the Labor Code definition of field
personnel. The clause whose time and performance is
unsupervised by the employer did not amplify but merely
interpreted and expounded the clause whose actual hours of
certainty. The former clause is still within the scope and
purview of Article 82 which defines field personnel. Hence, in
deciding whether or not an employees actual working hours
in the field can be determined with reasonable certainty, query
must be made as to whether or not such employees time and
performance is constantly supervised by the employer.
FACTS:
This case originated from a complaint filed on
September 20, 1990 by private respondent Fermin Agao, Jr.
against petitioner for illegal dismissal, violation of P.D. No.
851, and nonpayment of five days service incentive leave for
1990. Private respondent had been employed as a bodegero
or ships quartermaster on February 12, 1988. He complained
that he had been constructively dismissed by petitioner when
the latter refused him assignments aboard its boats after he had
reported to work on May 28, 1990.
Private respondent alleged that he had been sick and
thus allowed to go on leave without pay for one month from
April 28, 1990 but that when he reported to work at the end of
such period with a health clearance, he was told to come back
another time as he could not be reinstated immediately.
Thereafter, petitioner refused to give him work. For this
reason, private respondent asked for a certificate of
employment from petitioner on September 6, 1990. However,
when he came back for the certificate on September 10,
petitioner refused to issue the certificate unless he submitted

his resignation. Since private respondent refused to submit
such letter unless he was given separation pay, petitioner
prevented him from entering the premises.
Petitioner, on the other hand, alleged that it was
private respondent who actually abandoned his work. It
claimed that the latter failed to report for work after his leave
had expired and was, in fact, absent without leave for three
August 28, 1998. Petitioner further claims that, nonetheless, it
assigned private respondent to another vessel, but the latter
was left behind on September 1, 1990. Thereafter, private
respondent asked for a certificate of employment on
September 6 on the pretext that he was applying to another
fishing company. On September 10, 1990, he refused to get
the certificate and resign unless he was given separation pay.
LA: Labor Arbiter Arthur L. Amansec rendered a decision
ordering the respondents to reinstate complainant with
backwages, pay him his 13th month pay and incentive leave
pay for 1990. All other claims are dismissed.
NLRC: Petitioner appealed to the NLRC which, on August
30, 1993, dismissed the appeal for lack of merit. The NLRC
dismissed petitioners claim that it cannot be held liable for
service incentive leave pay by fishermen in its employ as the
latter supposedly are field personnel and thus not entitled to
such pay under the Labor Code. The NLRC likewise denied
petitioners motion for reconsideration of its decision in its
order dated October 25, 1993.
ISSUE:
WON Fermin Agao is entitled to Service Incentive
Leave.
HELD:
YES. Art. 82 of the Labor Code provides: ART. 82.
Coverage.The provisions of this Title [Working Conditions
and Rest Periods] shall apply to employees in all
establishments and undertakings whether for profit or not, but
not to government employees, field personnel, members of the
family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another,
and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
. . . . Field personnel shall refer to nonagricultural
employees who regularly perform their duties away from the
principal place of business or branch office of the employer
and whose actual hours of work in the field cannot be
determined with reasonable certainty.
Petitioner argues essentially that since the work of
private respondent is performed away from its principal place
of business, it has no way of verifying his actual hours of work
on the vessel. It contends that private respondent and other
fishermen in its employ should be classified as field
personnel who have no statutory right to service incentive
leave pay.
In the case of Union of Filipro Employees (UFE) v.
Vicar, this Court explained the meaning of the phrase whose
actual hours of work in the field cannot be determined with
reasonable certainty in Art. 82 of the Labor Code, as
follows:
Page | 6
Moreover, the requirement that actual hours of

certainty must be read in conjunction with Rule IV, Book III
of the Implementing Rules which provides:
Rule IV Holidays with Pay Section 1. CoverageThis rule
shall apply to all employees except: . . . . (e) Field personnel
and other employees whose time and performance is
unsupervised by the employer xxx (Italics supplied)
While contending that such rule added another
element not found in the law (Rollo, p. 13), the petitioner
nevertheless attempted to show that its affected members are
not covered by the abovementioned rule. The petitioner asserts
that the companys sales personnel are strictly supervised as
shown by the SOD (Supervisor of the Day) schedule and the
company circular dated March 15, 1984 (Annexes 2 and 3,
Rollo, pp. 5355). Contrary to the contention of the petitioner,
the Court finds that the aforementioned rule did not add
another element to the Labor Code definition of field
personnel. The clause whose time and performance is
unsupervised by the employer did not amplify but merely
interpreted and expounded the clause whose actual hours of
certainty. The former clause is still within the scope and
purview of Article 82 which defines field personnel. Hence, in
deciding whether or not an employees actual working hours
in the field can be determined with reasonable certainty, query
must be made as to whether or not such employees time and
performance is constantly supervised by the employer.
In contrast, in the case at bar, during the entire course
of their fishing voyage, fishermen employed by petitioner
have no choice but to remain on board its vessel. Although
they perform nonagricultural work away from petitioners
business offices, the fact remains that throughout the duration
of their work they are under the effective control and
supervision of petitioner through the vessels patron or master
as the NLRC correctly held.
5. Auto Bus Transport Systems, Inc. vs. Bautista

G.R. No. 156367. May 16, 2005
Labor Law; Service Incentive Leave; Field Personnel; Words
and Phrases; The phrase other employees whose
performance is unsupervised by the employer in Section
1(D), Rule V, Book III of the Implementing Rules and
Regulations of the Labor Code must not be understood as a
separate classification of employees to which service incentive
leave shall not be grantedrather, it serves as an
amplification of the interpretation of the definition of field
personnel under the Labor Code as those whose actual hours
of work in the field cannot be determined with reasonable
certainty; Employees engaged on task or contract basis or
paid on purely commission basis are not automatically
exempted from the grant of service incentive leave, unless,
they fall under the classification of field personnel.A
careful perusal of said provisions of law will result in the
conclusion that the grant of service incentive leave has been
delimited by the Implementing Rules and Regulations of the
Labor Code to apply only to those employees not explicitly
excluded by Section 1 of Rule V. According to the
Implementing Rules, Service Incentive Leave shall not apply
to employees classified as field personnel. The phrase other

employees whose performance is unsupervised by the
employer must not be understood as a separate classification
of employees to which service incentive leave shall not be
granted. Rather, it serves as an amplification of the
interpretation of the definition of field personnel under the
Labor Code as those whose actual hours of work in the field
cannot be determined with reasonable certainty. The same is
true with respect to the phrase those who are engaged on task
or contract basis, purely commission basis. Said phrase
should be related with field personnel, applying the rule on
ejusdem generis that general and unlimited terms are
restrained and limited by the particular terms that they follow.
Hence, employees engaged on task or contract basis or paid on
purely commission basis are not automatically exempted from
the grant of service incentive leave, unless, they fall under the
classification of field personnel.
Same; Same; Same; Same; What must be ascertained in order
to resolve the issue of propriety of the grant of service
incentive leave to a bus driver conductor is whether or not he
is a field personnel; According to the Labor Code, field
personnel shall refer to nonagricultural employees who
regularly perform their duties away from the principal place
of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with
reasonable certainty.Petitioners contention that respondent
is not entitled to the grant of service incentive leave just
because he was paid on purely commission basis is misplaced.
What must be ascertained in order to resolve the issue of
propriety of the grant of service incentive leave to respondent
is whether or not he is a field personnel. According to Article
82 of the Labor Code, field personnel shall refer to nonagricultural employees who regularly perform their duties
away from the principal place of business or branch office of
the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. This
definition is further elaborated in the Bureau of Working
Conditions (BWC), Advisory Opinion to Philippine
TechnicalClerical Commercial Employees Association which
states that: As a general rule, [field personnel] are those whose
performance of their job/service is not supervised by the
employer or his representative, the workplace being away
from the principal office and whose hours and days of work
cannot be determined with reasonable certainty; hence, they
are paid specific amount for rendering specific service or
performing specific work. If required to be at specific places
at specific times, employees including drivers cannot be said
to be field personnel despite the fact that they are performing
work away from the principal office of the employee.
Same; Same; Same; Same; The definition of a field
personnel is not merely concerned with the location where
the employee regularly performs his duties but also with the
fact that the employees performance is unsupervised by the
employerin order to conclude whether an employee is a field
employee, it is also necessary to ascertain if actual hours of
work in the field can be determined with reasonable certainty
by the employer.At this
point, it is necessary to stress that the definition of a field
personnel is not merely concerned with the location where
Page | 7
the employee regularly performs his duties but also with the
fact that the employees performance is unsupervised by the
employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of
business of the employer and whose actual hours of work in
the field cannot be determined with reasonable certainty.
Thus, in order to conclude whether an employee is a field
by the employer. In so doing, an inquiry must be made as to
whether or not the employees time and performance are
constantly supervised by the employer.
Same; Same; Same; Same; Bus Drivers and Conductors; A
bus driverconductor, not being a field personnel but a regular
employee who performs tasks usually necessary and desirable
to the usual trade of the companys business, is entitled to the
grant of service incentive leave.As observed by the Labor
Arbiter and concurred in by the Court of Appeals: It is of
judicial notice that along the routes that are plied by these bus
companies, there are its inspectors assigned at strategic places
who board the bus and inspect the passengers, the punched
tickets, and the conductors reports. There is also the
mandatory once a week car barn or shop day, where the bus is
regularly checked as to its mechanical, electrical, and
hydraulic aspects, whether or not there are problems thereon
as reported by the driver and/or conductor. They too, must be
at specific place as [sic] specified time, as they generally
observe prompt departure and arrival from their point of origin
to their point of destination. In each and every depot, there is
always the Dispatcher whose function is precisely to see to it
that the bus and its crew leave the premises at specific times
and arrive at the estimated proper time. These, are present in
the case at bar. The driver, the complainant herein, was
therefore under constant supervision while in the performance
of this work. He cannot be considered a field personnel. We
agree in the above disquisition. Therefore, as correctly
concluded by the appellate court, respondent is not a field
personnel but a regular employee who performs tasks usually
necessary and desirable to the usual trade of petitioners
business. Accordingly, respondent is entitled to the grant of
service incentive leave.
FACTS:
Since 24 May 1995, respondent Antonio Bautista has
been employed by petitioner Auto Bus Transport Systems,
Inc. (Autobus), as driverconductor with travel routes
ManilaTuguegarao via Baguio, BaguioTuguegarao via Manila
and ManilaTabuk via Baguio. Respondent was paid on
commission basis, seven percent (7%) of the total gross
income per travel, on a twice a month basis. On 03 January
2000, while respondent was driving Autobus No. 114 along
Sta. Fe, Nueva Vizcaya, the bus he was driving accidentally
bumped the rear portion of Autobus No. 124, as the latter
vehicle suddenly stopped at a sharp curve without giving any
warning.
Respondent averred that the accident happened
because he was compelled by the management to go back to
Roxas, Isabela, although he had not slept for almost
twentyfour (24) hours, as he had just arrived in Manila from
Roxas, Isabela. Respondent further alleged that he was not
allowed to work until he fully paid the amount of P75,551.50,

representing thirty percent (30%) of the cost of repair of the
damaged buses and that despite respondents pleas for
reconsideration, the same was ignored by management. After
a month, management sent him a letter of termination. Thus,
on 02 February 2000, respondent instituted a Complaint for
Illegal Dismissal with Money Claims for nonpayment of 13th
month pay and service incentive leave pay against Autobus.
LA:
On 29 September 2000, based on the pleadings and
supporting evidence presented by the parties, Labor Arbiter
Monroe C. Tabingan promulgated a Decision, the dispositive
portion of which reads: WHEREFORE, all premises
considered, it is hereby found that the complaint for Illegal
Dismissal has no leg to stand on. It is hereby ordered
DISMISSED, as it is hereby DISMISSED.
However, still based on the above discussed
premises, the respondent must pay to the complainant the
following: his 13th month pay from the date of his hiring to
the date of his dismissal, presently computed at P78,117.87;
his service incentive leave pay for all the years he had been in
service with the respondent, presently computed at
P13,788.05.
NLRC:
[T]he Rules and Regulations Implementing
Presidential Decree No. 851, particularly Sec. 3 provides:
Section 3. Employers covered.The Decree shall apply to all
employers except to: x x x x x x x x x e) employers of those
who are paid on purely commission, boundary, or task basis,
performing a specific work, irrespective of the time consumed
in the performance thereof. x x x. Records show that
complainant, in his position paper, admitted that he was paid
on a commission basis. In view of the foregoing, we deem it
just and equitable to modify the assailed Decision by deleting
the award of 13th month pay to the complainant.
WHEREFORE, the Decision dated 29 September 2000 is
MODIFIED by deleting the award of 13th month pay. The
other findings are AFFIRMED.
In other words, the award of service incentive leave
pay was maintained. Petitioner thus sought reconsideration of
this aspect, which was subsequently denied in a Resolution by
the NLRC dated 31 October 2001.
CA:
The Court of Appeals DISMISSED the case for lack
of merit.
ISSUE: Whether or not the respondent is entitled to service
incentive leave.
HELD:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of
five days with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage.This rule shall apply to all
employees
except:
Page | 8
...
(d) Field personnel and other employees whose performance is
unsupervised by the employer including those who are
engaged on task or contract basis, purely commission basis, or
those who are paid in a fixed amount for performing work
irrespective of the time consumed in the performance thereof;
A careful perusal of said provisions of law will result
in the conclusion that the grant of service incentive leave has
been delimited by the Implementing Rules and Regulations of
the Labor Code to apply only to those employees not
explicitly excluded by Section 1 of Rule V. According to the
cannot be determined with reasonable certainty.
What must be ascertained in order to resolve the issue
of propriety of the grant of service incentive leave to
respondent is whether or not he is a field personnel. According
to Article 82 of the Labor Code, field personnel shall refer
to nonagricultural employees who regularly perform their
duties away from the principal place of business or branch
office of the employer and whose actual hours of work in the
field cannot be determined with reasonable certainty. This
definition is further elaborated in the Bureau of Working
Conditions (BWC), Advisory Opinion to Philippine
TechnicalClerical Commercial Employees Association which
states that: As a general rule, [field personnel] are those whose
performance of their job/service is not supervised by the
employer or his representative, the workplace being away
from the principal office and whose hours and days of work
cannot be determined with reasonable certainty; hence, they
are paid specific amount for rendering specific service or
performing specific work. If required to be at specific places
at specific times, employees including drivers cannot be said
to be field personnel despite the fact that they are performing
work away from the principal office of the employee.
[Emphasis ours]
To this discussion by the BWC, the petitioner differs
and postulates that under said advisory opinion, no employee
would ever be considered a field personnel because every
employer, in one way or another, exercises control over his
employees. Petitioner further argues that the only criterion that
should be considered is the nature of work of the employee in
that, if the employees job requires that he works away from
the principal office like that of a messenger or a bus driver,
then he is inevitably a field personnel.
We are not persuaded. At this point, it is necessary to
stress that the definition of a field personnel is not merely
concerned with the location where the employee regularly
performs his duties but also with the fact that the employees
performance is unsupervised by the employer.
As discussed above, field personnel are those who
regularly perform their duties away from the principal place of
business of the employer and whose actual hours of work in
the field cannot be determined with reasonable certainty.
Thus, in order to conclude whether an employee is a field

by the employer. In so doing, an inquiry must be made as to
whether or not the employees time and performance are
constantly supervised by the employer. As observed by the
Labor Arbiter and concurred in by the Court of Appeals: It is
of judicial notice that along the routes that are plied by these
bus companies, there are its inspectors assigned at strategic
places who board the bus and inspect the passengers, the
punched tickets, and the conductors reports. There is also the
mandatory once a week car barn or shop day, where the bus is
regularly checked as to its mechanical, electrical, and
hydraulic aspects, whether or not there are problems thereon
as reported by the driver and/or conductor. They too, must be
at specific place as [sic] specified time, as they generally
observe prompt departure and arrival from their point of origin
to their point of destination. In each and every depot, there is
always the Dispatcher whose function is precisely to see to it
that the bus and its crew leave the premises at specific times
and arrive at the estimated proper time. These, are present in
the case at bar. The driver, the complainant herein, was
therefore under constant supervision while in the performance
of this work. He cannot be considered a field personnel. We
agree in the above disquisition. Therefore, as correctly
concluded by the appellate court, respondent is not a field
personnel but a regular employee who performs tasks usually
necessary and desirable to the usual trade of petitioners
business. Accordingly, respondent is entitled to the grant of
service incentive leave.
6.Labor Congress of the Philippines vs. NLRC

G.R. No. 123938. May 21, 1998
Same; Same; Same; While petitioners mode of compensation
was on a per piece basis the status and nature of their
employment was that of regular employees.As to the other
benefits, namely, holiday pay, premium pay, 13th month pay
and service incentive leave which the labor arbiter failed to
rule on but which petitioners prayed for in their complaint, we
hold that petitioners are so entitled to these benefits. Three (3)
factors lead us to conclude that petitioners, although piece rate
workers, were regular employees of private respondents. First,
as to the nature of petitioners tasks, their job of repacking
snack food was necessary or desirable in the usual business of
private respondents, who were engaged in the manufacture
and selling of such food products; second, petitioners worked
for private respondents throughout the year, their employment
not having been dependent on a specific project or season; and
third, the length of time that petitioners worked for private
respondents. Thus, while petitioners mode of compensation
was on a per piece basis, the status and nature of their
employment was that of regular employees.
Same; Same; Same; Petitioners are beyond the ambit of
persons and are therefore entitled to overtime pay.As to
overtime pay, the rules, however, are different. According to
Sec. 2(e), Rule I, Book III of the Implementing Rules, workers
who are paid by results including those who are paid on
piecework, takay, pakiao, or task basis, if their output rates are
in accordance with the standards prescribed under Sec. 8, Rule
Page | 9
VII, Book III, of these regulations, or where such rates have

been fixed by the Secretary of Labor in accordance with the
aforesaid section, are not entitled to receive overtime pay.
Here, private respondents did not allege adherence to the
standards set forth in Sec. 8 nor with the rates prescribed by
the Secretary of Labor. As such, petitioners are beyond the
ambit of exempted persons and are therefore entitled to
overtime pay. Once more, the National Labor Relations
Commission would be in a better position to determine the
exact amounts owed petitioners, if any.
FACTS:
The 99 persons named as petitioners in this
proceeding were Rank and file employees of respondent
Empire Food Products. Petitioners filed against private
respondents a complaint for payment of money claim[s] and
for violation of labor standard[s] laws (NLRC Case No.
RAB11110181790).
They also filed a petition for direct certification of
petitioner Labor Congress of the Philippines as their
bargaining representative (Case No. RO3009010RU005). On
October 23, 1990, petitioners represented by LCP President
Benigno B. Navarro, Sr. and private respondents Gonzalo
Kehyeng and Evelyn Kehyeng in behalf of Empire Food
Products, Inc. entered into a Memorandum of Agreement. In
an Order dated October 24, 1990, Mediator Arbiter Antonio
Cortez approved the memorandum of agreement and certified
LCP as the sole and exclusive bargaining agent among the
rank and file employees of Empire Food Products for purposes
of collective bargaining with respect to wages, hours of work
and other terms and conditions of employment (Annex B
of Petition).
On January 23, 1991, petitioners filed a complaint
docketed as NLRC Case No. RABIII01196491 against private
respondents for:
a. Unfair Labor Practice by way of Illegal Lockout
and/or Dismissal;
b. Union busting thru Harassments [sic], threats, and
interfering with the rights of employees to
selforganization; Violation of the Memorandum of
Agreement dated October 23, 1990;
c. Underpayment of Wages in violation of R.A. No.
6640 and R.A. No. 6727, such as Wages promulgated
by
theRegional Wage Board;
d. Actual, Moral and Exemplary Damages. (Annex
D of Petition)
LA:
After the submission by the parties of their respective
position papers and presentation of testimonial evidence,
Labor Arbiter Ariel C. Santos absolved private respondents of
the charges of unfair labor practice, union busting, violation of
the memorandum of agreement, underpayment of wages and
denied petitioners prayer for actual, moral and exemplary
damages. Labor Arbiter Santos, however, directed the
reinstatement of the individual complainants.
NLRC:
On appeal, the National Labor Relations Commission vacated
the Decision dated April 14, 1972 [sic] and remanded the
case to the Labor Arbiter for further proceedings.
LA:
In a Decision dated July 27, 1994, Labor Arbiter
Santos made the following determination: xxxAnent the
charge that there was underpayment of wages, the evidence
points to the contrary. The enumeration of complainants
wages in their consolidated Affidavits of merit and position
paper which implies underpayment has no leg to stand on in
the light of the fact that complainants admission that they
are piece workers or paid on a pakiao [basis] i.e. a certain
amount for every thousand pieces of cheese curls or other
products repacked. The only limitation for piece workers or
pakiao workers is that they should receive compensation
no less than the minimum wage for an eight (8) hour work
[sic].
On appeal, the NLRC, in its Resolution dated 29
March 1995, affirmed in toto the decision of Labor Arbiter
Santos. the claims for underpayment of wages were without
basis as complainants were admittedly pakiao workers and
paid on the basis of their output subject to the lone limitation
that the payment conformed to the minimum wage rate for an
eight hour workday; and (d) petitioners were not underpaid.
ISSUE:
WON labor arbiter & NLRC erred in declaring that
piece workers or pakiao workers are not entitled to benefits
provided by the labor code.
HELD:
In finding that petitioner employees abandoned their
work, the Labor Arbiter and the NLRC relied on the testimony
of Security Guard Rolando Cairo that on January 21, 1991,
petitioners refused to work. As a result of their failure to work,
the cheese curls ready for repacking on said date were spoiled.
The failure to work for one day, which resulted in the
spoilage of cheese curls does not amount to abandonment of
work. In fact two (2) days after the reported abandonment of
work or on January 23, 1991, petitioners filed a complaint for,
among others, unfair labor practice, illegal lockout and/or
illegal dismissal. In several cases, this Honorable Court held
that one could not possibly abandon his work and shortly
thereafter vigorously pursue his complaint for illegal
dismissal
In his first decision, Labor Arbiter Santos expressly
directed the reinstatement of the petitioner employees and
admonished the private respondents that any harassment,
intimidation, coercion or any form of threat as a result of this
immediately executory reinstatement shall be dealt with
accordingly.
In his second decision, Labor Arbiter Santos did not
state why he was abandoning his previous decision directing
the reinstatement of petitioner employees. By directing in his
first decision the reinstatement of petitioner employees, the
Labor Arbiter impliedly held that they did not abandon their
work but were not allowed to work without just cause.
That petitioner employees are pakyao or piece
workers does not imply that they are not regular employees
entitled to reinstatement. Private respondent Empire Food
Products, Inc. is a food and fruit processing company. In
Tabas v. California Manufacturing Co., Inc. (169 SCRA 497),
this Honorable Court held that the work of merchandisers of
Page | 10
processed food, who coordinate with grocery stores and other

outlets for the sale of the processed food is necessary in the
day-to-day operation[s] of the company. With more reason,
the work of processed food repackers is necessary in the dayto-day operation[s] of respondent Empire Food Products.
It may likewise be stressed that the burden of proving
the existence of just cause for dismissing an employee, such as
abandonment, rests on the employer, a burden private
respondents failed to discharge. As to the other benefits,
namely, holiday pay, premium pay, 13th month pay and
service incentive leave which the labor arbiter failed to rule on
but which petitioners prayed for in their complaint, we hold
that petitioners are so entitled to these benefits.
Three (3) factors lead us to conclude that petitioners,
although piece rate workers, were regular employees of
private respondents. First, as to the nature of petitioners tasks,
their job of repacking snack food was necessary or desirable in
the usual business of private respondents, who were engaged
in the manufacture and selling of such food products; second,
petitioners worked for private respondents throughout the
year, their employment not having been dependent on a
specific project or season; and third, the length of time that
petitioners worked for private respondents. Thus, while
petitioners mode of compensation was on a per piece basis,
the status and nature of their employment was that of regular
employees. The Rules Implementing the Labor Code exclude
certain employees from receiving benefits such as nighttime
pay, holiday pay, service incentive leave and 13th month pay,
inter alia, field personnel and other employees whose time
and performance is unsupervised by the employer, including
those who are engaged on task or contract basis, purely
commission basis, or those who are paid a fixed amount for
performing work irrespective of the time consumed in the
performance thereof. Plainly, petitioners as piece rate
workers do not fall within this group.
As mentioned earlier, not only did petitioners labor
under the control of private respondents as their employer,
likewise did petitioners toil throughout the year with the
fulfillment of their quota as supposed basis for compensation.
Further, in Section 8(b), Rule IV, Book III which we quote
hereunder, piece workers are specifically mentioned as being
entitled to holiday pay. In addition, the Revised Guidelines on
the Implementation of the 13th Month Pay Law, in view of the
modifications to P.D. No. 851 by Memorandum Order No. 28,
clearly exclude the employer of piece rate workers from those
exempted from paying 13th month pay, to wit:
EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No.
851: d. Employers of those who are paid on purely
commission, boundary or task basis, and those who are paid a
fixed amount for performing specific work, irrespective of the
time consumed in the performance thereof, except where the
workers are paid on piece rate basis in which case the
employer shall grant the required 13th month pay to such
workers. (italics supplied) The Revised Guidelines as well as
the Rules and Regulations identify those workers who fall
under the piece rate category as those who are paid a standard
amount for every piece or unit of work produced that is more
or less regularly replicated, without regard to the time spent in
producing the same.
As to overtime pay, the rules, however, are different.

According to Sec. 2(e), Rule I, Book III of the Implementing
Rules, workers who are paid by results including those who
are paid on piecework, takay, pakiao, or task basis, if their
output rates are in accordance with the standards prescribed
under Sec. 8, Rule VII, Book III, of these regulations, or
where such rates have been fixed by the Secretary of Labor in
accordance with the aforesaid section, are not entitled to
receive overtime pay. Here, private respondents did not allege
adherence to the standards set forth in Sec. 8 nor with the
raterates prescribed by the Secretary of Labor. As such,
petitioners are beyond the ambit of exempted persons and are
therefore entitled to overtime pay.
7. PHILIPPINE AIRLINES, INC., petitioner, vs.

NATIONAL LABOR RELATIONS COMMISSION,
LABOR ARBITER ROMULUS PROTACIO and DR.
HERMINIO A. FABROS, respondents.
G.R. No. 132805. February 2, 1999.
CASE SYLLABUS:
Same; Same; Same; The eight-hour work period does not
include the meal break; Private respondents act of going
home to take his dinner does not constitute abandonment.
The eight-hour work period does not include the meal break.
Nowhere in the law may it be inferred that employees must
take their meals within the company premises. Employees are
not prohibited from going out of the premises as long as they
return to their posts on time. Private respondents act,
therefore, of going home to take his dinner does not constitute
abandonment.
FACTS:
Private respondent, Dr. Herminio A. Fabros, was employed as
flight surgeon at Philippine Airlines (PAL). He was assigned
at the PAL Medical Clinic at Nichols and was on duty from
4:00 in the afternoon until 12:00 midnight. On February 17,
1994, at around 7:00 in the evening, private respondent left the
clinic to have his dinner at his residence, which was about
five-minute drive away. However, at 7:50 P.M., one of PALs
employees had suffered a heart attack and only the nurse on
duty was at the clinic. The nurse called Dr. Farbos. However,
when the latter arrived at 7:51 P.M. he learned that the nurse
had already brought the patient to the hospital. The patient
died the next day.
The management charged private respondent with
abandonment of post while on duty. After evaluating the
charge as well as the answer of private respondent, PAL
decided to suspend Dr. Fabros.
In his explanation, Dr. Fabros asserted that he was entitled to a
thirty minute meal break; that he immediately left his
residence upon being informed by Mr. Eusebio about the
emergency and he arrived at the clinic a few minutes later; that
the nurse panicked and brought the patient to the hospital
without waiting for him. He said that he only left the clinic to
have his dinner at home. In fact, he returned to the clinic at
7:51 in the evening upon being informed of the emergency.
Labor Arbiter Romulus A. Protacio rendered a decision
declaring the suspension of private respondent illegal.
Petitioner appealed to the NLRC. The NLRC, however,
dismissed the appeal and the subsequent motion for
reconsideration.
Page | 11
ISSUE:
Petitioner argues that being a full-time employee, private
respondent is obliged to stay in the company premises for not
less than eight (8) hours. Hence, he may not leave the
company premises during such time, even to take his meals.
HELD:
The Supreme Court affirmed the assailed decision. It said that
the eight-hour work period does not include the meal break.
Nowhere in the law may it be inferred that employees must
take their meals within the company premises. Employees are
not prohibited from going out of the premises as long as they
return to their posts on time. Private respondents act,
therefore, of going home to take his dinner does not constitute
abandonment.
Articles 83 and 85 of the Labor Code read:
Art. 83. Normal hours of work.The normal hours
of work of any employee shall not exceed eight (8)
hours a day. Health personnel in cities and
municipalities with a population of at least one
million (1,000,000) or in hospitals and clinics with a
bed capacity of at least one hundred (100) shall hold
regular office hours for eight (8) hours a day, for five
(5) days a week, exclusive of time for meals, except
where the exigencies of the service require that such
personnel work for six (6) days or forty-eight (48)
hours, in which case they shall be entitled to an
additional compensation of at least thirty percent
(30%) of their regular wage for work on the sixth
day. For purposes of this Article, health personnel
shall include: resident
physicians,
nurses,
nutritionists, dieticians, pharmacists, social workers,
laboratory technicians, paramedical technicians,
psychologists, midwives, attendants and all other
hospital or clinic personnel.
Art. 85. Meal periods.Subject to such regulations
as the Secretary of Labor may prescribe, it shall be
the duty of every employer to give his employees not
less than sixty (60) minutes time-off for their regular
meals.
Section 7, Rule I, Book III of the Omnibus Rules
Implementing the Labor Code further states: Sec. 7. Meal and
Rest Periods.Every employer shall give his employees,
regardless of sex, not less than one (1) hour time-off for
regular meals, except in the following cases when a meal
period of not less than twenty (20) minutes may be given by
the employer provided that such shorter meal period is
credited as compensable hours worked of the employee:
A. Where the work is non-manual work in nature or
does not involve strenuous physical exertion;
B. Where the establishment regularly operates not less
than sixteen hours a day;
C. In cases of actual or impending emergencies or there
is urgent work to be performed on machineries,
equipment or installations to avoid serious loss which
the employer would otherwise suffer; and
D. Where the work is necessary to prevent serious loss
of perishable goods.
Rest periods or coffee breaks running from five (5) to twenty
(20) minutes shall be considered as compensable working
time.
8. TEOFILO ARICA, ET AL petitioners, vs. NATIONAL

LABOR RELATIONS COMMISSION, HONORABLE
FRANKLIN DRILON, HONORABLE CONRADO B.
MAGLAYA,
HONORABLE
ROSARIO
B.
ENCARNACION, and STANDARD (PHILIPPINES)
FRUIT CORP., respondents.
G.R. No. 78210. February 28, 1989.*
CASE SYLLABUS:
Labor Law Labor Relations Waiting Time; The 30minute assembly time practiced by the employees of the
company (private respondent), cannot be considered waiting
time, and is therefore not compensable. Noteworthy is the
decision of the Minister of Labor, on May 12, 1978 in the
aforecited case (Associated Labor Union vs. Standard (Phil.)
Fruit Corporation, NLRC Case No. 26-LS-XI-76) where
significant findings of facts and conclusions had already been
made on the matter. The Minister of Labor held: The thirty
(30)-minute assembly time long practiced and institutionalized
by mutual consent of the parties under Article IV, Section 3,
of the Collective Bargaining Agreement cannot be considered
as waiting time within the purview of Section 5, Rule I,
Book III of the Rules and Regulations Implementing the Labor
Code. x x x Furthermore, the thirty (30)-minute assembly is a
deeply-rooted, routinary practice of the employees, and the
proceedings attendant thereto are not infected with
complexities as to deprive the workers the time to attend to
other personal pursuits. They are not new employees as to
require the company to deliver long briefings regarding their
respective work assignments. Their houses are situated right
on the area where the farms are located, such that after the roll
call, which does not necessarily require the personal presence,
they can go back to their houses to attend to some chores. In
short, they are not subject to the absolute control of the
company during this period, otherwise, their failure to report
in the assembly time would justify the company to impose
disciplinary measures.
FACTS:
Petitioners contend that the preliminary activities as workers
of respondents STANFILCO in the assembly area is
compensable as working time (from 5:30 to 6:00 oclock in
the morning) since these preliminary activities are necessarily
and primarily for private respondents benefit. These
preliminary activities of the workers are as follows:
A. First there is the roll call. This is followed by getting
their individual work assignments from the foreman.
B. Thereafter, they are individually required to
accomplish the Laborers Daily Accomplishment
Report during which they are often made to explain
about their reported accomplishment the following
day.
C. Then they go to the stockroom to get the working
materials, tools and equipment.
D. Lastly, they travel to the field bringing with them
their tools, equipment and materials.
Contrary to this contention, respondent avers that the instant
complaint is not new, the very same claim having been
brought against herein respondent by the same group of rank
and file employees in the case of Associated Labor Union and
Standard Fruit Corp. In the said case, The Minister of Labor
held: The thirty (30)-minute assembly time long practiced
and institutionalized by mutual consent of the parties under
Page | 12
Article IV, Section 3 (PLEASE SEE Labor Law; Labor

Relations Waiting Time CITATION ABOVE).
The NLRC ruled that the petitioners claim is barred by res
judicata.
ISSUE:
Whether or not the 30-minute activity of the petitioners before
the scheduled working time is compensable under the Labor
Code.
HELD:
The Supreme Court upheld the findings of the NLRC. As aptly
observed by the Solicitor General, the High Court said that
this petition is clearly violative of the familiar principle of res
judicata. There will be no end to this controversy if the light of
the Minister of Labors decision dated May 12, 1979 that had
long acquired the character of finalityand which already
resolved that petitioners thirty (30)-minute assembly time is
not compensable, the same issue can be re-litigated again.
9.UNIVERSITY OF PANGASINAN FACULTY UNION,
petitioner vs. UNIVERSITY OF PANGASINAN And
LABOR RELATIONS COMMISSION, respondents.
G. R. NO. And Date : No. L-63122. February 20, 1984.
CASE SUMMARY :
Same; Semestral breaks may be considered as hours
worked under the Rules implementing the Labor Code.The
break scheduled is an interruption beyond petitioners control
and it cannot be used effectively nor gainfully in the
employees interest. Thus, the semestral break may also be
considered as hours worked. For this, the teachers are paid
regular salaries and, for this, they should be entitled to
ECOLA. Not only do the teachers continue to work during this
short recess but much less do they cease to live for which the
cost of living allowance is intended. The legal principles of
No work, no pay; No pay, no ECOLA must necessarily give
way to the purpose of the law to augment the income of
employees to enable them to cope with the harsh living
conditions brought about by inflation; and to protect
employees and their wages against the ravages brought by
these conditions. Significantly, it is the commitment of the
State to protect labor and to provide means by which the
difficulties faced by the working force may best be alleviated.
To submit to the respondents interpretation of the no work, no
pay policy is to defeat this noble purpose. The Constitution
and the law mandate otherwise.
FACTS :
Petitioner is a labor union composed of faculty
members of the respondent University of Pangasinan, an
educational institution duly organized and existing by virtue of
the laws of the Philippines. On December 18, 1981, the
petitioner, through its President, Miss Consuelo Abad, filed a
complaint against the private respondent with the Arbitration
Branch of the NLRC, Dagupan District Office, Dagupan City.
The complaint seeks: (a) the payment of Emergency Cost of
Living Allowances (ECOLA) for November 7 to December 5,
1981, a semestral break; (b) salary increases from the sixty
(60%) percent of the incremental proceeds of increased tuition
fees; and (c) payment of salaries for suspended extra loads.
The petitioners members are fulltime professors,
instructors, and teachers of respondent University. In
November and December, 1981, the petitioners members
were fully paid their regular monthly salaries. However, from

November 7 to December 5, during the semestral break, they
were not paid their ECOLA. The private respondent claims
that the teachers are not entitled thereto because the semestral
break is not an integral part of the school year and there being
no actual services rendered by the teachers during said period,
the principle of No work, no pay applies.
ISSUE :
Whether or not Semestral breaks maybe considered
"Hours of worked"?
RULING :
It is beyond dispute that the petitioners members are
full-time employees receiving their monthly salaries
irrespective of the number of working days or teaching hours
in a month. However, they find themselves in a most peculiar
situation whereby they are forced to go on leave during
semestral breaks. These semestral breaks are in the nature of
work interruptions beyond the employees control. As such,
these breaks cannot be considered as absences within the
meaning of the law for which deductions may be made from
monthly allowances. The No work, no pay principle does
not apply in the instant case.
This, in itself, is a tacit recognition of the rather
unusual state of affairs in which teachers find themselves.
Although said to be on forced leave, professors and teachers
are, nevertheless, burdened with the task of working during a
period of time supposedly available for rest and private
matters. There are papers to correct, students to evaluate,
deadlines to meet, and periods within which to submit grading
reports. Although they may be considered by the respondent to
be on leave, the semestral break could not be used effectively
for the teachers own purposes for the nature of a teachers job
imposes upon him further duties which must be done during
the said period of time.
Furthermore, we may also by analogy apply the
principle enunciated in the Omnibus Rules Implementing the
Labor Code to wit:
Sec. 4. Principles in Determining Hours Worked.
The following general principles shall govern in
determining whether the time spent by an employee
is considered hours worked for purposes of this Rule:
(d) The time during which an employee is
inactive by reason f interruptions in his work
beyond his control shall be considered time
either if the imminence of the resumption of
work requires the employees presence at
the place of work or if the interval is too
brief to be utilized effectively and gainfully
in the employees own interest. (Italics
ours)
The petitioners members in the case at bar, are
exactly in such a situation. The semestral break scheduled is
an interruption beyond petitioners control and it cannot be
used effectively nor gainfully in the employees interest.
Thus, the semestral break may also be considered as hours
worked. For this, the teachers are paid regular salaries and,
for this, they should be entitled to ECOLA. Not only do the
teachers continue to work during this short recess but much
less do they cease to live for which the cost of living
Page | 13
allowance is intended. The legal principles of No work, no

pay; No pay, no ECOLA must necessarily give way to the
purpose of the law to augment the income of employees to
enable them to cope with the harsh living conditions brought
about by inflation; and to protect employees and their wages
against the ravages brought by these conditions. Significantly,
it is the commitment of the State to protect labor and to
provide means by which the difficulties faced by the working
force may best be alleviated. To submit to the respondents
interpretation of the no work, no pay policy is to defeat this
noble purpose. The Constitution and the law mandate
otherwise.
10.HILARIO RADA, petitioner vs. NATIONAL LABOR

RELATIONS COMMISSIONS (Second Division) and
PHILNOR CONSULTANTS AND PLANNERS INC.,
respondents
G. R. NO. AND DATE : G.R. No. 96078. January 9,1992.
CASE SUMMARY :
Same; Conditions of Employment; Hours of Work;
Hours worked shall include all time during which an employee
is suffered or permitted to work.Anent the claim for
overtime compensation, we hold that petitioner is entitled to
the same. The fact that he picks up employees of Philnor at
certain specified points along EDSA in going to the project
site and drops them off at the same points on his way back
from the field office going home to Marikina, Metro Manila is
not merely incidental to petitioner's job as a driver. On the
contrary, said transportation arrangement had been adopted,
not so much for the convenience of the employees, but
primarily for the benefit of the employer, herein private
respondent. This fact is inevitably deducible from the
Memorandum of respondent company: "The herein
Respondent resorted to the above transport arrangement
because from its previous project construction supervision
experiences, Respondent found out that project delays and
inefficiencies resulted from employees' tardiness; and that the
problem of tardiness, in turn, was aggravated by transportation
problems, which varied in degrees in proportion to the
distance between the project site and the employees' residence.
In view of this lesson from experience, and as a practical, if
expensive, solution to employees' tardiness and its
concomitant problems, Respondent adopted the policy of
allowing certain employeesnot necessarily project drivers
to bring home project vehicles, so that employees could be
afforded fast, convenient and free transportation to and from
the project field office.
FACTS :
Petitioner's initial employment with this Respondent
was under a 'Contract of Employment for a Definite Period'
dated July 7, 1977, copy of which is hereto attached and made
an integral part hereof as Annex A whereby Petitioner was
hired as 'Driver' for the construction supervision phase of the
Manila North Expressway Extension, Second Stage
(hereinafter referred to as MNEE Stage 2) for a term of about
24 months effective July 1, 1977.
In March 1980 some of the areas or phases of the
project were completed, but the bulk of the project was yet to
be finished. By that time some of those project employees

whose contracts of employment expired or were about to
expire because of the completion of portions of the project
were offered another employment in the remaining portion of
the project. Petitioner was among those whose contract was
about to expire, and since his service performance was
satisfactory, respondent renewed his contract of employment
in April 1980, after Petitioner agreed to the offer.
Accordingly, a third contract of employment for a definite
period was executed by and between the Petitioner and the
Respondent whereby the Petitioner was again employed as
Driver for 19 months, from May 1, 1980 to November 30,
1981
Culled from the records, it appears that on May 20,
1987, petitioner filed before the NLRC, National Capital
Region, Department of Labor and Employment, a Complaint
for nonpayment of separation pay and overtime pay. On July
2, 1987, petitioner filed an Amended Complaint alleging that
he was illegally dismissed and that he was not paid overtime
pay although he was made to render three hours overtime
work from Monday to Saturday for a period of three years. On
July 7, 1987, petitioner filed his Position Paper claiming that
he was illegally dismissed since he was a regular employee
entitled to security of tenure; that his position as driver was
essential, necessary and desirable to the conduct of the
business of Philnor; that he rendered overtime work until 6:00
P.M. daily except Sundays and holidays and, therefore, he was
entitled to overtime pay.
On June 3, 1987, Philnor filed its Position Paper
alleging, inter alia, that petitioner was not illegally terminated
since the project for which he was hired was completed; that
he did not render overtime services and that there was no
demand or claim for him for such overtime pay. On July 28,
1987, Philnor filed its Respondent's Supplemental Position
Paper, alleging therein that petitioner was not a company
driver since his job was to drive the employees hired to work
at the MNEE Stage 2 Project to and from the field office at
Sto. Domingo Interchange, Pampanga; that the time used by
petitioner to and from his residence to the project site from
5:30 A.M. to 7:00 A.M. and from 4:00 P.M. to 6:00 P.M., or
about three hours daily, was not overtime work as he was
merely enjoying the benefit and convenience of free
transportation provided by Philnor, otherwise without such
vehicle he would have used at least four hours by using public
transportation and spent P12.00 daily as fare.
ISSUE :
Whether or not the claims for overtime services,
reinstatement and full back wages are valid and meritorious?
RULING :
Anent the claim for overtime compensation, we hold
that petitioner is entitled to the same. The fact that he picks up
employees of Philnor at certain specified points along EDSA
in going to the project site and drops them off at the same
points on his way back from the field office going home to
Marikina, Metro Manila is not merely incidental to petitioner's
job as a driver. On the contrary, said transportation
arrangement had been adopted, not so much for the
convenience of the employees, but primarily for the benefit of
the employer, herein private respondent.
Page | 14
Private respondent does not hesitate to admit that it is

usually the project driver who is tasked with picking up or
dropping off his fellow employees. Proof thereof is the
undisputed fact that when petitioner is absent, another driver is
supposed to replace him and drive the vehicle and likewise
pick up and/or drop off the other employees at the designated
points on EDSA. If driving these employees to and from the
project site is not really part of petitioner's job, then there
would have been no need to find a replacement driver to fetch
these employees. But since the assigned task of fetching and
delivering employees is indispensable and consequently
mandatory, then the time required of and used by petitioner in
going from his residence to the field office and back, that is,
from 5:30 A.M. to 7:00 A.M. and from 4:00 P.M. to around
6:00 P.M., which the labor arbiter rounded off as averaging
three hours each working day, should be paid as overtime
work. Quintessentially, petitioner should be given overtime
pay for the three excess hours of work performed during
working days from January, 1983 to December, 1985.
11.SSS v. Court of Appeals

Topic: Proof of Work/ Employer Obligation
G.R. No. 100388. December 14, 2000
Doctrine: The testimonies of other laborers who did not
waver in their assertion on certain facts of another laborers
employment prevail over the incomplete and inconsistent
documentary evidence of the employer; Where the employeremployee relationship was sufficiently proved by testimonial
evidence, the absence of time sheet, time record or payroll
becomes inconsequential.
FACTS:
In a petition before the Social Security Commission,
Margarita Tana, widow of the late Ignacio Tana, Sr., alleged
that her husband was, before his demise, an employee of
Conchita Ayalde as a farmhand in the two (2) sugarcane
plantations she owned. For his labor, Tana allegedly received
a regular salary according to the minimum wage prevailing at
the time. She further alleged that throughout the given period,
social security contributions, as well as medicare and
employees compensation premiums were deducted from
Tanas wages. It was only after his death that Margarita
discovered that Tana was never reported for coverage, nor
were his contributions/premiums remitted to the Social
Security System (SSS). Consequently, she was deprived of the
burial grant and pension benefits accruing to the heirs of Tana
had he been reported for coverage.
The SSS, in a petition in intervention, revealed that
neither Hda. B70 nor respondents Ayalde and Maghari were
registered members employers of the SSS, and consequently,
Ignacio Tana, Sr. was never registered as a member employee.
Likewise, SSS records reflected that there was no way of
verifying whether the alleged premium contributions were
remitted since the respondents were not registered members
employers
For her part, respondent Ayalde belied the allegation
that Ignacio Tana, Sr. was her employee, admitting only that
he was hired intermittently as an independent contractor to
plow, harrow, or burrow Hda. She alleged that she never
exercised control over the manner by which Tana performed

his work as an independent contractor. Moreover, Ayalde
averred that way back in 1971, the University of the
Philippines had already terminated the lease over Hda. B15M
and she had since surrendered possession thereof to the
University of the Philippines.
SSC: Determined Tanas employment with Respondent
Ayalde
CA: Reversed SSCs decision
ISSUE:
whether or not an agricultural laborer who was hired
on pakyaw basis can be considered an employee entitled to
compulsory coverage and corresponding benefits under the
Social Security Law.
HELD:
The fact that Tanas name does not appear in the

payrolls for the years 1975, 1976 and part of 1978 and 1979, is
no proof that he did not work in Hda. B70. The veracity of the
alleged documents as payrolls are doubtful considering that
the laborers named therein never affixed their signatures. In
light of her incomplete documentary evidence, Ayaldes
denial that Tana was her employee in Hda. B70 or Hda. B15M
must fail. In contrast to Ayaldes evidence, or lack thereof, is
Margarita Tanas positive testimony, corroborated by two (2)
other witnesses.
While Tana was hired by Ayalde as an arador on
pakyaw basis, he was also paid a daily wage which Ayaldes
overseer disbursed every fifteen (15) days. It is also
undisputed that they were made to acknowledge receipt of
their wages by signing on sheets of ruled paper, which are
different from those presented by Ayalde as documentary
evidence.
There is no shred of evidence to show that Tana was
only a seasonal worker, much less a migrant worker. All
witnesses, including Ayalde herself, testified that Tana and his
family resided in the plantation. If he was a mere pakyaw
worker or independent contractor, then there would be no
reason for Ayalde to allow them to live inside her property for
free. The only logical explanation is that he was working for
most part of the year exclusively for Ayalde, in return for
which the latter gratuitously allowed Tana and his family to
reside in her property. Jurisprudence provides other equally
important considerations which support the conclusion that
Tana was not an independent contractor. First, Tana cannot be
said to be engaged in a distinct occupation or business. His
carabao and plow may be useful in his livelihood, but he is not
independently engaged in the business of farming or plowing.
Second, he had been working exclusively for Ayalde for
eighteen (18) years prior to his demise. Third, there is no
dispute that Ayalde was in the business of growing sugar cane
in the two plantations for commercial purposes. There is also
no question that plowing or preparing the soil for planting is a
major part of the regular business of Ayalde. Under the
circumstances, the relationship between Ayalde and Tana has
more of the attributes of employer-employee than that of an
independent contractor hired to perform a specific project.
Page | 15
12.Shell v. National Labor Union (NLU)

Topic: Nightwork; ILO Conventions;
Compensation (Art. 86; Rule II Secs. 1-6)
No. L1309 . July 26, 1948
Additional
Doctrine: Undoubtedly night work not only in the long run

affects the health of the worker, but deprives it of certain
things that make relatively pleasant life, like, viz., A full and
uninterrupted rest and certain moments of solace , leisure or
spiritual and cultural expansion that could have after work in
the evening and during the first hours of the night.
FACTS: The Court of Industrial Relations has issued a
decision in which the Shell oil company is obliged to pay his
workers who work at night an additional compensation of 50%
of their regular wages if they worked day. It seems that the
company needs the night service of a certain number of
workers, because the planes from abroad usually land a
unstuck night, being this necessary that tasks night for the
supply of petrol draw a lubricant, one for other purposes.
The appellant alleges company argues that not only is
there no legal provision empowering the Industrial Relations
Court to order the payment of additional workers who work at
night compensation, but, on the contrary, Commonwealth Act
No. 444 relieve the employer of such an obligation since in
such cases where law is compulsory payment of "overtime"
(additional compensation), an among such cases is not
included night work are provided.
Meanwhile, the labor union respondent argues that
the power is discussed as part of the broad powers one
effective than Commonwealth Act No. 103-la charter
Industrial Relations Court to the court; and that the law No.
444 is invoked Commonwealth has no application to this case
because it is necessarily limited scope, particularly referring
exclusively to maximum hours permitted daily work in
industrial establishments the day of 8 hours.
*The SC determined NLUs power to decide any
wage industrial dispute according to law.
ISSUES: Should night work be granted an additional
compensation being more burdensome than day work
HELD: Yes! Considering night the day as a day full of work;
the of estimating as more burdensome than day by day; and
consequently, that of providing and order remunerated with 50
percent of wages re daytime regular. Our answer is yes: all
this is between the general powers of the Court of Industrial
Relations. If this court has, in cases of dispute, the power to
set wages deemed fair and reasonable for the work day, there
is no reason why it must not have the same power over wages
night: it's so work the one and the other. And with regard to
the assessment that night work is heavier and cumbersome
than the day and therefore deserve higher pay, there is no
reason to revoke or alter it . There is no possible argument
against the universal fact that regular, normal and ordinary
work is the day, and night work is very exceptional and
justified only by certain imperatively unavoidable reasons. For
something humanity he has always worked day
Disadvantages of night work, by reasons of hygiene,
medicine, morality, culture, sociology, set together that night
work has many inconvenience, and when there is no choice
but to do it is only fair to remunerate better than usual to

compensate to some extent the labor of such drawbacks.
Undoubtedly night work not only in the long run affects the
health of the worker, but deprives it of certain things that
make relatively pleasant life, like, viz., A full and
uninterrupted rest and certain moments of solace , leisure or
spiritual and cultural expansion that could have after work in
the evening and during the first hours of the night.
13. Mantrade/FMMC Division Employees and Workers

Union vs Bacungan
G.R. No. L-48437 September 30, 1986
Topic: Coverage/Exclusion
Same; Same; Holiday Pay; Legal duty of a corporation to
grant its monthly salaried employees holiday pay.This issue
was subsequently decided on October 24, 1984 by a division
of this Court in the case of Insular Bank of Asia and America
Employees Union (IBAAEU) vs. Inciong. From the abovecited provisions, it is clear that monthly paid employees are
not excluded from the benefits of holiday pay. However, the
implementing rules on holiday pay promulgated by the then
Secretary of Labor excludes monthly paid employees from the
said benefits by inserting under Rule IV, Book III of the
implementing rules, Section 2, which provides that:
employees who are uniformly paid by the month, irrespective
of the number of working days therein, with a salary of not
less than the statutory or established minimum wage shall be
presumed to be paid for all days in the month whether worked
or not. (132 SCRA 663, 672673)
FACTS:
Petitoner Mantrade Union files a petition for
certiorari and mandamus against the respondent Voluntary
Arbitrator Bacungan and Mantrade Development Corporation.
Bacungan ruled that, Mantrade Development
Corporation is not under legal obligation to pay holiday pay
(as provided for in Article 94 of the Labor Code in the third
official Department of Labor edition) to its monthly paid
employees who are uniformly paid by the month, irrespective
of the number of working days therein, with a salary of not
less than the statutory or established minimum wage.
Mantrade Union questions the validity of the Sec. 2,
Rule IV, Book III of the Rules and Regulations Implementing
the Labor Code as amended on which Bacungan based his
decision.
Respondents raised procedural and substantive
objections. They contend that:
o The decision of the voluntary arbitrator is final, as
provided by law
o Mantrade Development Corp. does not have any
legal obligation to grant its montly salaried employees holiday
pay, unless it is argued that the pertinent section of the Rules
and Regulations implementing Sec. 94 of the Labor Code is
not in conformity with the law, and thus, without force and
effect
o mandamus does not lie to compel the performance
of an act which law does not clearly enjoin as a duty
Mantrade Development Corporations Arguments
Page | 16
a. Petitioner is barred from pursuing the present

action in view of :
Article 263 of the Labor Code, which
provides in part that "voluntary arbitration
awards or decisions shall be final,
inappealable, and executory,"
the rules implementing the Labor Code;
the pertinent provision of the Collective
Bargaining Agreement between petitioner
and respondent corporation; and
b.
c.
d.
e.
Article 2044 of the Civil Code which

provides that "any stipulation that the
arbitrators award or decision shall be final,
is valid, without prejudice to Articles 2038,
2039, and 2040.
the special civil action of certiorari does not lie
because respondent arbitrator is not an "officer
exercising judicial functions" within the
contemplation of Rule 65, Section 1, of the Rules
of Court
the instant petition raises an error of judgment on
the part of respondent arbitrator and not an error
of jurisdiction
It prays for the annulment of certain rules and
regulations issued by the Department of Labor
(not annulment of the voluntary arbitration
proceedings)
appeal by certiorari under Section 29 of the
Arbitration Law, Republic Act No. 876, is not
applicable to the case at bar because arbitration
in labor disputes is expressly excluded by
Section 3 of said law.
On 7 July 1988, Trans-Asia Philippines Employees

Association (TAPEA) entered into a Collective Bargaining
Agreement (CBA) with their employer. The CBA provided
for, among others, the payment of holiday pay with a
stipulation that if an employee is permitted to work on a legal
holiday, the said employee will receive a salary equivalent to
200% of the regular daily wage plus a 60% premium pay.
Despite the conclusion of the CBA, however, an
issue was still left unresolved with regard to the claim of
TAPEA for payment of holiday pay. Since the parties were not
able to arrive at an amicable settlement despite the conciliation
meetings, TAPEA, led by its President, petitioner Arnie
Galvez, filed a complaint for the payment of their holiday pay
in arrears. On 18 September 1988, petitioners amended their
complaint to include the payment of holiday pay for the
duration of the recently concluded CBA (from 1988 to 1991),
unfair labor practice, damages and attorneys fees.
In their Position Paper, TAPEA contended that their
claim for holiday pay in arrears is based on the non-inclusion
of the same in their monthly pay.
In response, Trans-Asia contended that it has always
honored the labor law provisions on holiday pay by
incorporating the same in the payment of the monthly salaries
of its employees. In support of this claim, Trans-Asia pointed
out that it has long been the standing practice of the company
to use the divisor of 286 days in computing for its
employees overtime pay and daily rate deductions for
absences.
52 x 44 / 8 = 286 days
Where: 52 = number of weeks in a year
44 = number of work hours per week
8 = number of work hours per day
ISSUE:
WON monthly salaried workers are excluded from
holiday pay- NO
RULING:
Respondent corporation is under legal obligation to
grant its monthly salaried employees holiday pay. As decided
by the court in Insular Bank of Asia and American
Employees Union v Inciong, Sec. 2, Rule IV, Book III of the
Rules and Regulations Implementing the Labor Code is null
and void for enlarging the scope of the exclusion provided for
in Art. 94. Art. 82 provides for the inclusion, and Art. 94
provides for exclusion. Taken together, it is clear that
monthly-paid employees are not excluded from payment of
holiday pay. An administrative interpretation which
diminishes the benefits of labor more than what the statute
delimits or withholds is ultra vires.
14. CASE: Trans-Asia Phils. Employees Association vs.

NLRC
G.R. No. 118289. December 13, 1999
Topic: Holiday Pay, Division as Factor
FACTS:
Trans-Asia further clarified that the 286 days

divisor already takes into account the ten (10) regular holidays
in a year since it only subtracts from the 365 calendar days the
unworked and unpaid 52 Sundays and 26 Saturdays
(employees are required to work half-day during Saturdays).
Trans-Asia claimed that if the ten (10) regular holidays were
not included in the computation of their employees monthly
salary, the divisor which they would have used would only be
277 days which is arrived at by subtracting 52 Sundays, 26
Saturdays and the 10 legal holidays from 365 calendar days.
Labor Arbiter and NLRC: Dismissed the complaint for lack of
merit.
ISSUE:
Whether the Trans-Asias use of 286 days as divisor
is invalid.
RULING:
No, it is not in such a way that the Supreme Court
adjusted the divisor.
Trans-Asias inclusion of holiday pay in petitioners
monthly salary is clearly established by its consistent use of
the divisor of 286 days in the computation of its employees
Page | 17
benefits and deductions. The use by Trans-Asia of the 286

days divisor was never disputed by petitioners. A simple
application of mathematics would reveal that the ten (10) legal
holidays in a year are already accounted for with the use of the
said divisor. As explained by Trans-Asia, if one is to deduct
the unworked 52 Sundays and 26 Saturdays (derived by
dividing 52 Saturdays in half since petitioners are required to
work half-day on Saturdays) from the 365 calendar days in a
year, the resulting divisor would be 286 days (should actually
be 287 days). Since the ten (10) legal holidays were never
included in subtracting the unworked and unpaid days in a
calendar year, the only logical conclusion would be that the
payment for holiday pay is already incorporated into the said
divisor.
However, SC held that that there is a need to adjust
the divisor used by Trans-Asia to 287 days, instead of only
286 days, in order to properly account for the entirety of
regular holidays and special days in a year as prescribed by
Executive Order No. 203 in relation to Section 6 of the Rules
Implementing Republic Act 6727.
Sec. 1 of Executive Order No. 203 provides:
Unless otherwise modified by law, order or
proclamation, the following regular holidays and special days
shall be observed in the country:
A. Regular Holidays
New Years Day January 1
Maundy Thursday Movable Date
Good Friday Movable Date
Araw ng Kagitingan April 9
(Bataan and Corregidor Day)
Labor Day May 1
Independence Day June 12
National Heroes Day Last Sunday of August
Bonifacio Day November 30
Christmas Day December 25
Rizal Day December 30
B. Nationwide Special Days
All Saints Day November 1
Last Day of the Year December 31
2 days Special days (If considered paid; if actually worked,

this is equivalent to 2.6
Based on the above, the proper divisor that should be
used for a situation wherein the employees do not work and
are not considered paid on Saturdays and Sundays or rest days
is 262 days. In the present case, since the employees of TransAsia are required to work half-day on Saturdays, 26 days
should be added to the divisor of 262 days, thus, resulting to
288 days. However, due to the fact that the rest days of
petitioners fall on a Sunday, the number of unworked but paid
legal holidays should be reduced to nine (9), instead of ten
(10), since one legal holiday under E.O. No. 203 always falls
on the last Sunday of August, National Heroes Day. Thus, the
divisor that should be used in the present case should be 287
days.
However, the Court notes that if the divisor is
increased to 287 days, the resulting daily rate for purposes of
overtime pay, holiday pay and conversions of accumulated
leaves would be diminished. To illustrate, if an employee
receives P8,000.00 as his monthly salary, his daily rate would
be P334.49, computed as follows:
P8,000.00 x 12 months / 287 days = P334.49/day
Whereas if the divisor used is only 286 days, the employees
daily rate would be P335.66, computed as follows:
P8,000.00 x 12 months / 286 days = P335.66/day
Clearly, this muddled situation would be violative of
the proscription on the non-diminution of benefits under
Section 100 of the Labor Code. On the other hand, the use of
the divisor of 287 days would be to the advantage of
petitioners if it is used for purposes of computing for
deductions due to the employees absences. In view of this
situation, the Court rules that the adjusted divisor of 287 days
should only be used by Trans-Asia for computations which
would be advantageous to petitioners (i.e., deductions for
absences), and not for computations which would diminish the
existing benefits of the employees (i.e., overtime pay, holiday
pay and leave conversions.)
SC Decision: Affirmed with Modification
On the other hand, Section 6 of the Implementing Rules and

Regulations of Republic Act No. 6727 provides:
Sec. 6. Suggested Formula in Determining the Equivalent
Monthly Statutory Minimum Wage Rates. Without
prejudice from existing company practices, agreements or
policies, the following formulas may be used as guides in
determining the equivalent monthly statutory minimum wage
rates:
xxx xxx xxx
d) For those who do not work and are not considered paid on
Saturdays and Sundays or rest days:
Equivalent Monthly = Average Daily Wage Rate x 262 days /
12 months
Where 262 days =
250 days Ordinary working days
10 days Regular holidays
15.WELLINGTON
INVESTMENT
AND
MANUFACTURING CORPORATION, petitioner, vs.
CRESENCIANO B. TRAJANO, UnderSecretary of Labor
and Employment, ELMER ABADILLA, and 34 others,
respondents.
Labor Law Wages Every worker should be paid his
regular daily wage during regular holidays, except in retail
and service establishments regularly employing less than ten
(10) workers. Every worker should, according to the Labor
Code, be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly
employing less than ten (10) workers; this, of course, even if
the worker does no work on these holidays. The regular
holidays include: New Years Day, Maundy Thursday, Good
Friday, the ninth of April, the first of May, the twelfth of June,
the fourth of July, the thirtieth of November, the twentyfifth of
Page | 18
December, and the day designated by law for holding a

general election (or national referendum or plebiscite).
Facts:
The case arose from a routine inspection conducted
by a Labor Enforcement Officer on August 6, 1991 of the
Wellington Flour Mills, an establishment owned and operated
by petitioner Wellington Investment and Manufacturing
Corporation (hereafter, simply Wellington). The officer
thereafter drew up a report, a copy of which was "explained to
and received by" Wellington's personnel manager, in which he
set forth his finding of "(n)on-payment of regular holidays
falling on a Sunday for monthly-paid employees.
Petitioners Argument:
Wellington sought reconsideration of the Labor
Inspectors report, by letter dated August 10, 1991. It argued
that the monthly salary of the companys monthlysalaried
employees already includes holiday pay for all regular
holidays ** (and hence) there is no legal basis for the finding
of alleged nonpayment of regular holidays falling on a
Sunday. It expounded on this thesis in a position paper
subsequently submitted to the Regional Director, asserting
that it pays its monthlypaid employees a fixed monthly
compensation using the 314 factor which undeniably covers
and already includes payment for all the working days in a
month as well as all the 10 unworked regular holidays within
a year.
Respondent Argument:
He pointed out that in 1988 there was "an increase of
three (3) working days resulting from regular holidays falling
on Sundays;" hence Wellington "should pay for 317 days,
instead of 314 days." By the same process of ratiocination,
respondent Undersecretary theorized that there should be
additional payment by Wellington to its monthly-paid
employees for "an increment of three (3) working days" for
1989 and again, for 1990. What he is saying is that in those
years, Wellington should have used the "317 factor," not the
"314 factor."
(such as transportation strikes, riots, or typhoons or other

natural calamities), or cause not imputable to the worker.
16.SAN MIGUEL CORPORATION, petitioner, vs. THE

HONORABLE
COURT
OF
APPEALSFORMER
THIRTEENTH DIVISION, HON. UNDERSECRETARY
JOSE M. ESPAOL, JR., HON. CRESENCIANO B.
TRAJANO, and HON. REGIONAL DIRECTOR ALLAN
M. MACARAYA, respondents.
Doctrine:
Considering that all private corporations, offices,
agencies, and entities or establishments operating within the
designated Muslim provinces and cities are required to
observe Muslim holidays, both Muslim and Christians
working within the Muslim areas may not report for work on
the days designated by law as Muslim holidays.
Facts:
October 1992, the Department of Labor and
Employment (DOLE), Iligan District Office, conducted a
routine inspection in the premises of San Miguel Corporation
(SMC) in Sta. Filomena, Iligan City. In the course of the
inspection, it was discovered that there was underpayment by
SMC of regular Muslim holiday pay to its employees. DOLE
sent a copy of the inspection result to SMC and it was
received by and explained to its personnel officer Elena dela
Puerta. SMC contested the findings and DOLE conducted
summary hearings on 19 November 1992, 28 May 1993 and 4
and 5 October 1993. Still, SMC failed to submit proof that it
was paying regular Muslim holiday pay to its employees.
Hence, Alan M. Macaraya, Director IV of DOLE Iligan
District Office issued a compliance order, dated 17 December
1993, directing SMC to consider Muslim holidays as regular
holidays and to pay both its Muslim and non-Muslim
employees holiday pay within thirty (30) days from the receipt
of the order.
"Whether or not a monthly-paid employee, receiving

a fixed monthly compensation, is entitled to an additional pay
aside from his usual holiday pay, whenever a regular holiday
falls on a Sunday."
Petitioners argument:
Petitioner asserts that Article 3(3) of Presidential
Decree No. 1083 provides that (t)he provisions of this Code
shall be applicable only to Muslims x x x. However, there
should be no distinction between Muslims and non-Muslims as
regards payment of benefits for Muslim holidays.
Ruling:
Issue:
Issue:
There is no provision of law requiring any employer

to make such adjustments in the monthly salary rate set by him
to take account of legal holidays falling on Sundays in a given
year, or, contrary to the legal provisions bearing on the point,
otherwise to reckon a year at more than 365 days. As earlier
mentioned, what the law requires of employers opting to pay
by the month is to assure that "the monthly minimum wage
shall not be less than the statutory minimum wage multiplied
by 365 days divided by twelve," and to pay that salary "for all
days in the month whether worked or not," and "irrespective
of the number of working days therein." That salary is due and
payable regardless of the declaration of any special holiday in
the entire country or a particular place therein, or any
fortuitous cause precluding work on any particular day or days
WoN non-muslims are entitled to regular holiday pay

on a muslim holiday
Held:
Assuming arguendo that the respondents position is correct,
then by the same token, Muslims throughout the Philippines
are also not entitled to holiday pays on Christian holidays
declared by law as regular holidays. We must remind the
respondent-appellant that wages and other emoluments
granted by law to the working man are determined on the
basis of the criteria laid down by laws and certainly not on the
basis of the workers faith or religion. At any rate, Article 3(3)
of Presidential Decree No. 1083 also declares that x x x
nothing herein shall be construed to operate to the prejudice
of a non-Muslim.
Page | 19
and Casimiro Zapata to only one (1) year. The respondents

filed a motion for reconsideration but was denied.
17. MAKATI HABERDASHERY, INC., JORGE
LEDESMA and CECILIO G. INOCENCIO, petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION,
CEFERINA J. DIOSANA (Labor Arbiter, Department of
Labor and Employment, National Capital Region),
SANDIGAN NG MANGGAGAWANG PILIPINO
(SANDIGAN)TUCP and its members, CASIMIRO
ZAPATA, et. al., respondents
G.R. Nos. 83380-81. November 15, 1989
ISSUE:
Whether or not the respondents are entitled to
payment of their service incentive leave despite findings that
they are not entitled to minimum wage.
HELD:
CASE SUMMARY:
Labor Standards; Private respondents are not
entitled to service incentive leave pay and holiday pay because
as piece-rate workers they fall under the exceptions set forth
in the implementing rules.On the other hand, while private
respondents are entitled to Minimum Wage, COLA and 13th
Month Pay, they are not entitled to service incentive leave pay
because as piece-rate workers being paid at a fixed amount for
performing work irrespective of time consumed in the
performance thereof, they fall under one of the exceptions
stated in Section 1(d), Rule V, Implementing Regulations,
Book III, Labor Code. For the same reason private
respondents cannot also claim holiday pay (Section 1(e), Rule
IV, Implementing Regulations, Book III, Labor Code).
FACTS:
Respondents herein, have been working for petitioner
Makati Haberdashery, Inc. as tailors, seamstress, sewers,
basters (manlililip) and plantsadoras. They are paid on a
piece-rate basis except Maria Angeles and Leonila Serafina
who are paid on a monthly basis. In addition to their piecerate, they are given a daily allowance of three (P3.00) pesos
provided they report for work before 9:30 a.m. everyday.
Respondents work from or before 9:30 a.m. up to
6:00 or 7:00 p.m. from Monday to Saturday and during peak
periods even on Sundays and holidays.
Consequently, the Sandigan ng Manggagawang
Pilipino, a labor organization of the respondent workers, filed
a complaint docketed as NLRC for underpayment of basic
wage, living allowance and non-payment of service incentive
and other benefits.
During the pendency of the case, private respondent
Dioscoro Pelobello left with Salvador Rivera, a salesman of
petitioner Haberdashery, an open package which was
discovered to contain a jusi barong tagalog. Pelobello
replied that the same was ordered by respondent Casimiro
Zapata for his customer. Zapata allegedly admitted that he
copied the design of petitioner Haberdashery. Both denied the
allegations and they were eventually dismissed.
The NLRC rendered a decision in favor of the
respondents and found Makati Haberdashery guilty of illegal
dismissal. The decision of the NLRC was affirmed on appeal,
but limited the backwages awarded the Dioscoro Pelobello
No. Despite the fact that the Supreme Court ruled

that there exists an employee-employer relationship and that
the respondents were regular employees by Makati
Haberdashery, they are not entitled to their service incentive
leave.
Since private respondents are regular employees,
necessarily the argument that they are independent contractors
must fail and with this they are entitled to minimum wage has
been established in this case.
But all these notwithstanding, the question as to
whether or not there is in fact an underpayment of minimum
wages to private respondents has already been resolved in the
decision of the Labor Arbiter where he stated: Hence, for
lack of sufficient evidence to support the claims of the
complainants for alleged violation of the minimum wage, their
claims for underpayment re violation of the Minimum Wage
Law must fail.
The records show that private respondents did not
appeal the above ruling of the Labor Arbiter to the NLRC;
neither did they file any petition raising that issue in the
Supreme Court. The judgment has already attained finality. As
consequence of their status as regular employees, they are
entitled to payment of their cost of living allowance and 13 th
month pay.
However, they are not entitled to service incentive
leave pay because as piece-rate workers being paid at a fixed
amount for performing work irrespective of time consumed in
work irrespective of time consumed in the performance
thereof, they fall under one of the exceptions stated in Section
1(d), Rule V, Implementing Regulations, Book III, Labor
Code. For the same reason private respondents cannot also
claim holiday pay (Section 1(e), Rule IV, Implementing
Regulations, Book III, Labor Code).
With regard to respondents Pellobello and Zapanta,
they were not illegally dismissed since it was found that after
they committed the offense, they went on AWOL and and
waited for the period to expire before filing an explanation.
They were then dismissed from service and thereafter filed the
instant case. Their act constituted abandonment of work and
assuming such acts do not constitute the same, their disregard
for the memorandum requiring an explanation was a blatant
disregard and defiance to their employers orders and is a
justifiable ground for dismissal under the Labor Code.
Page | 20
Wherefore, the decision of the NLRC was upheld

with modifications ordering Makati Haberdashery to pay
respondents their COLA and 13th month pay and absolved
claims of illegal dismissal as against Pelobello and Zapanta.
18. LABOR CONGRESS OF THE PHILIPPINES, et al.,
petitioners vs. NATIONAL LABOR RELATIONS
COMMISSION, EMPIRE FOOD PRODUCTS, its
Proprietor/President & Manager, MR. GONZALO
KEHYENG
and
MRS.
EVELYN
KEHYENG,
respondents.
G.R. No. 123938. May 21, 1998
CASE SUMMARY:
Labor Law; Dismissals; Abandonment; While
petitioners mode of compensation was on a per piece basis
the status and nature of their employment was that of regular
employees.As to the other benefits, namely, holiday pay,
premium pay, 13th month pay and service incentive leave
which the labor arbiter failed to rule on but which petitioners
prayed for in their complaint, we hold that petitioners are so
entitled to these benefits. Three (3) factors lead us to conclude
that petitioners, although piece-rate workers, were regular
employees of private respondents. First, as to the nature of
petitioners tasks, their job of repacking snack food was
necessary or desirable in the usual business of private
respondents, who were engaged in the manufacture and selling
of such food products; second, petitioners worked for private
respondents throughout the year, their employment not having
been dependent on a specific project or season; and third, the
length of time that petitioners worked for private respondents.
Thus, while petitioners mode of compensation was on a per
piece basis, the status and nature of their employment was
that of regular employees.
FACTS:
The 99 persons named as petitioners in this
proceeding were rank-and-file employees of respondent
Empire Food Products, which hired them on various dates.
Petitioners filed against private respondents a complaint for
payment of money claim[s] and for violation of labor
standard[s] laws with the Labor Arbiter. They also filed a
petition for direct certification of petitioner Labor Congress of
the Philippines as their bargaining representative.
On October 23, 1990, petitioners represented by LCP
President Benigno B. Navarro, Sr. and private respondents
Gonzalo Kehyeng and Evelyn Kehyeng in behalf of Empire
Food Products, Inc. entered into a Memorandum of
Agreement which provided, among others, the following:
Status of LCP as sole and exclusive Bargaining
Agent and Representative for all rank and file
employees of the Empire Food Products regarding
"wages, hours of work, and other terms and
conditions of employment";
With regard to the NLRC complaint, all parties
agree to resolve the issues during the Collective
Bargaining Agreement;
Proper adjustment of wages, withdrawal of case

from the Calendar of NLRC, non-interference or
any ULP act, etc.
On Oct. 24, 1990, the Mediator Arbiter approved the
memorandum and certified LCP as the sole and exclusive
bargaining agent for the rank-and-file employees of Empire.
On November 1990, LCP President Navarro
submitted to Empire a proposal for collective bargaining.
However, on January 1991, the private petitioners Ana Marie
et al filed a complaint for:
Unfair Labor Practices via Illegal Lockout and
Dismissal;
Union-Busting through harassment, threats and
interference to the right for self-organization;
Violation of the Oct. 23, 1990 memorandum
Underpayment of wages
Actual, moral and exemplary damages
Labor Arbiter Ariel C. Santos absolved private
respondents of the charges of unfair labor practice, union
busting, violation of the memorandum of agreement,
underpayment of wages and denied petitioners prayer for
actual, moral and exemplary damages. Labor Arbiter Santos,
however, directed the reinstatement of the individual
complainants due to the fact that Empire did not keep its
payroll records as per requirement of the DOLE. The LA
admonished Empire given their further harassment and
intimidation.
On appeal, the National Labor Relations Commission
vacated the Decision dated April 14, 1972 [sic] and remanded
the case to the Labor Arbiter for further proceedings due to
overlooking the testimonies of some of the individual
complainants which are now on record.
In a Decision dated July 27, 1994, Labor Arbiter
Santos made the following determination:
Complainants failed to present with definiteness
and clarity the particular act or acts constitutive
of unfair labor practice.
Declaration of Unfair Labor practice connotes a
finding of prima facie evidence of probability
that a criminal offense may have been committed
so as to warrant the filing of a criminal
information before the regular court.
As regards the issue of harassment, threats and
interference with the rights of employees to selforganization which is actually an ingredient of
unfair labor practice, complainants failed to
specify what type of threats or intimidation was
committed and who committed the same.
Claim for moral and exemplary damages has no
leg to stand on when no malice, bad faith or
fraud was ever proven to have been perpetuated
by respondents.
Anent the charge that there was underpayment of
wages, the evidence points to the contrary. The enumeration of
Page | 21
complainants wages in their consolidated Affidavits of merit

and position paper which implies underpayment has no leg to
stand on in the light of the fact that complainants admission
that they are piece workers or paid on a pakiao [basis] i.e. a
certain amount for every thousand pieces of cheese curls or
other products repacked. The only limitation for piece workers
or pakiao workers is that they should receive compensation no
less than the minimum wage for an eight (8) hour work [sic].
And compliance therewith was satisfactorily explained by the
respondents.
The NLRC rendered a resolution, affirming in toto
the decision of the Labor Arbiter. Petitioners filed an MR and
contended that the fact that they are piece workers does not
imply that they are not regular employees entitled for
reinstatement. In a comment by the OSG which sided with the
petitioners, the LA and NLRC decisions were not supported
by substantial evidence. It pointed out that finding that
petitioners abandoned their jobs, relied solely on the testimony
of the respondents security guard that petitioners refused to
work on 21 January 1991, resulting in the spoilage of cheese
curls ready for repacking. However, the OSG argued, this
refusal to report for work for a single day did not constitute
abandonment, which pertains to a clear, deliberate and
unjustified.
The OSG stressed, two days after allegedly
abandoning their work, petitioners filed a complaint for, inter
alia, illegal lock-out or illegal dismissal. Finally, the OSG
questioned the lack of explanation on the part of Labor Arbiter
Santos as to why he abandoned his original decision to
reinstate petitioners.
In its comment, the NLRC invokes the general rule
that factual findings of an administrative agency bind a
reviewing court and asserts that this case does not fall under
the exceptions. The NLRC further argues that grave abuse of
discretion may not be imputed to it, as it affirmed the factual
findings and legal conclusions of the Labor Arbiter only after
carefully reviewing, weighing and evaluating the evidence in
support thereof, as well as the pertinent provisions of law and
jurisprudence.
The SC required the parties to submit a memoranda
but only the petitioners and respondents filed their filed their
memoranda, with the NLRC merely adopting its Comment as
its Memorandum.
ISSUES:
1.
2.
HELD:
Whether or not the petitioners are entitled to Labor

Standards Benefits, considering their status as piecerate workers.
Whether or not the actions of the petitioners
constituted abandonment of work.
1.
Yes. Petitioners are entitled to labor standards

benefits, namely, holiday pay, premium pay, 13th
month pay and service incentive leave.
Supreme Court decision cites that the petitioners, despite

being pakyao or piece workers does not imply that they are
not regular employees entitled to reinstatement. Applying the
two-fold test from LC Article 286(n) [Art. 280 (old)], the SC
found that the supposedly piece workers had three factors in
their favor:
a) The nature of the tasks of the petitioners of repacking
snack food items was NECESSARY and
DESIRABLE in the usual business of Empire Foods,
which is a food and fruit processing company.
According to Tabas vs California Manufacturing,
merchandisers of processed food who coordinates for
sales of processed food was a necessity and was
desirable for the day-to-day operations of a food
processing company. With more reason would the
job of food packers be necessary for the day-to-day
operations of a food processing plant.
b) Petitioners worked throughout the year, with their
employment being independent from a specific
project or season.
c) The length of time that petitioners fulfilled the
requirement of Article 286(n).
Therefore, the SC considered the employees as regular
employees despite their status as piece workers, according
them benefits such as holiday pay, premium pay, and 13th
month pay and service incentive leave.
The Rules Implementing the Labor Code exclude certain
employees from receiving benefits such as nighttime pay,
holiday pay, service incentive leave and 13th month pay, inter
alia, "field personnel and other employees whose time and
performance is unsupervised by the employer, including those
who are engaged on task or contract basis, purely commission
basis, or those who are paid a fixed amount for performing
work irrespective of the time consumed in the performance
thereof." However, petitioners as piece-rate workers do not
fall within this group. Not only did the employees labor under
the control of Empire, the employees also worked throughout
the year to fulfil their quota as basis for compensation.
Further, in Section 8 (b), Rule IV, Book III, piece workers
are specifically mentioned as being entitled to holiday pay.
Sec. 8. Holiday pay of certain employees.
(b) Where a covered employee is paid by results or
output, such as payment on piece work, his holiday
pay shall not be less than his average daily earnings
for the last seven (7) actual working days preceding
the regular holiday: Provided, however, that in no
case shall the holiday pay be less than the applicable
statutory minimum wage rate.
In addition, the Revised Guidelines on the
Implementation of the 13th Month Pay Law, in view of the
modifications to P.D. No. 851 19 by Memorandum Order No.
Page | 22
28, clearly exclude the employer of piece rate workers from

those exempted from paying 13th month pay, to wit:
2. EXEMPTED EMPLOYERS - The following
employers are still not covered by P.D. No. 851:
d. Employers of those who are paid on
purely commission, boundary or task basis,
and those who are paid a fixed amount for
performing specific work, irrespective of the
time consumed in the performance thereof,
except where the workers are paid on piecerate basis in which case the employer shall
grant the required 13th month pay to such
workers.
However, the Revised Guidelines as well as the Rules
and Regulations identify those workers who fall under the
piece-rate category as those who are paid a standard amount
for every piece or unit of work produced that is more or less
regularly replicated, without regard to the time spent in
producing the same.
They should also be paid for overtime pay, even
though Sec. 2(e), Rule I, Book III of the Implementing Rules
states that:
workers who are paid by results including those
who are paid on piece-work, takay, pakiao, or task
basis, if their output rates are in accordance with the
standards prescribed under Sec. 8, Rule VII, Book
III, of these regulations, or where such rates have
been fixed by the Secretary of Labor in accordance
with the aforesaid section, are not entitled to receive
overtime pay.
In this case, Empire Foods did not allege that they
adheredtothestandardsset forthin Sec. 8, Rule VII,
Book
III,
norwiththeratesprescribedbytheSecretaryofLabor.
Therefore, even though they are piece workers, they are
entitled to overtime pay.
2.
No. The Supreme Court held that failure to appear to

work did not constitute abandonment.
With regard to the issue of abandonment of work, the SC

cited the Office of Solicitor Generals observations:
In finding that petitioner employees abandoned their work,
the Labor Arbiter and the NLRC relied on the testimony of
Security Guard Rolando Cairo that on January 21, 1991,
petitioners refused to work. As a result of their failure to work,
the cheese curls ready for repacking on said date were
spoiledxxxx
xxxx The failure to work for one day, which resulted in the
spoilage of cheese curls does not amount to abandonment of
work. In fact two (2) days after the reported abandonment of
work or on January 23, 1991, petitioners filed a complaint for,
among others, unfair labor practice, illegal lockout and/or
illegal dismissal.
Furthermore, the SC stressed that the burden of

proving the existence of just cause for dismissing an
employee, such as abandonment, rests on the employer.
According to the SC, Empire Foods failed to discharge this
burden as basis for dismissing the employees.
Also, the SC considered that, in terminating the
employees for abandonment of work, Empire failed to serve to
the employees a written notice of termination (as required by
the Two-Notice rule and Section 2, Rule XIV, Book V of the
Omnibus Rules), violating the employees right to security of
tenure and the constitutional right to due process.
19. Sentinel Security Agency, Inc. vs. NLRC
G.R. No. 122468. September 3, 1998.
Labor Law; Security Guards; Words and Phrases; Off
Detail or Floating Status, Explained; Being sidelined
temporarily is a standard stipulation in employment contracts,
as the availability of assignment for security guards is
primarily dependent on the contracts entered into by the
agency with third parties; In security agency parlance, being
placed off detail or on floating status means waiting to
be posted.Being sidelined temporarily is a standard
stipulation in employment contracts, as the availability of
assignment for security guards is primarily dependent on the
contracts entered into by the agency with third parties. Most
contracts for security services, as in this case, stipulate that the
client may request the replacement of the guards assigned to it.
In security agency parlance, being placed off detail or on
floating status means waiting to be posted. This
circumstance is not equivalent to dismissal, so long as such
status does not continue beyond a reasonable time.
Same; Same; Transfers; Retirement; Relief and transfer order
per se do not sever employment relationship between security
guards and the Agency; Despite the fact that the security
guards were no longer assigned to the Client, Article 287 of
the Labor Code, as amended by RA 7641, still binds the
Agency to provide themupon their reaching the retirement
age of sixty to sixty five yearsretirement pay or whatever
else was established in the collective bargaining agreement or
in any other applicable employment contract.
In the case at bar, the relief and transfer order per se
did not sever the employment relationship between
the complainants and the Agency. Thus, despite the
fact that complainants were no longer assigned to the
Client, Article 287 of the Labor Code, as amended by
RA 7641, still binds the Agency to provide them
upon their reaching the retirement age of sixty to
sixty five years retirement pay or whatever else was
established in the collective bargaining agreement or
in any other applicable employment contract. On the
other hand, the Client is not liable to the
complainants for their retirement pay because of the
absence of an employer-employee relationship
between them.
Same; Same; Same; Abandonment; That complainants did not
pray for reinstatement is not sufficient proof of abandonment.
Abandonment, as a just and valid cause for termination,
Page | 23
requires a deliberate and unjustified refusal of an employee to

resume his work, coupled with a clear absence of any intention
of returning to his or her work. That complainants did not pray
for reinstatement is not sufficient proof of abandonment. A
strong indication of the intention of complainants to resume
work is their allegation that on several dates they reported to
the Agency for reassignment, but were not given any. In fact,
the contention of complainants is that the Agency
constructively dismissed them.
Abandonment has recently been ruled to be incompatible with
constructive dismissal. We, thus, rule that complainants did
not abandon their jobs.
as it could not, illegally dismiss the complainants. Thus, it

should not be held liable for separation pay and back wages.
But even if the Client is not responsible for the illegal
dismissal of the complainants, it is jointly and severally liable
with the Agency for the complainants service incentive leave
pay. In Rosewood Processing, Inc. vs. National Labor
Relations Commission, the Court explained that,
notwithstanding the service contract between the client and the
security agency, the two are solidarily liable for the proper
wages prescribed by the Labor Code, pursuant to Articles 106,
107 and 109 thereof.
Facts:
Same; Same; Same; Words and Phrases; Transfer and

Promotion, Distinguished - A transfer means a movement
(1) from one position to another of equivalent rank, level or
salary, without a break in the service; and (2) from one office
to another within the same business establishment. It is
distinguished from a promotion in the sense that it involves a
lateral change as opposed to a scalar ascent.
Same; Same; Same; A floating status requires the dire
exigency of the employers bona fide suspension of operation,
business or undertakingin security services, this happens
when the clients that do not renew their contracts with a
security agency are more than those that do and the new ones
that the agency gets. A floating status requires the dire
exigency of the employers bona fide suspension of operation,
business or undertaking. In security services, this happens
when the clients that do not renew their contracts with a
security agency are more than those that do and the new ones
that the agency gets. However, in the case at bar, the Agency
was awarded a new contract by the Client. There was no
surplus of security guards over available assignments. If there
were, it was because the Agency hired new security guards.
Thus, there was no suspension of operation, business or
undertaking, bona fide or not, that would have justified
placing the complainants off detail and making them wait for
a period of six months. If indeed they were merely transferred,
there would have been no need to make them wait for six
months.
Same; Same; Dismissals; Reinstatements; The refusal of the
complainants to be reinstated is indicative of strained
relations. The only logical conclusion from the foregoing
discussion is that the Agency illegally dismissed the
complainants. Hence, as a necessary consequence, the
complainants are entitled to reinstatement and back wages.
However, reinstatement is no longer feasible in this case. The
Agency cannot reassign them to the Client, as the former has
recruited new security guards; The complainants, on the other
hand, refuse to accept other assignments. Verily, complainants
do not pray for reinstatement; In fact, they refused to be
reinstated. Such refusal is indicative of strained relations.
Thus, separation pay is awarded in lieu of reinstatement.
Same; Same; Same; Independent Contractors; Indirect
Employers; The client of a service contractor is not liable for
separation pay and back wages of latters employees but is
jointly and severally liable with the contractor for the
employees service incentive leave pay.The Client did not,
Complainants were employees of Sentinel Security Agency

Inc. since March 1, 1966. They were assigned to render guard
duty at the premises of Philippine American Life Insurance
Co. at Jones Avenue, Cebu City and on December 16, 1993
said Insurance Company sent a notice to all concerned that
Sentinel was again awarded the security agency contract along
with a request to replace all security guards in the companys
offices in Cebu. As such a relief and transfer order effective
Jan. 16, 1994 was issued replacing the complainant as guards
and for them to be reassigned to other clients. Complainants
reported to but were never assigned any duty and was simply
told that they were replaced due to old age prompting them to
file an illegal dismissal case on Jan. 18, 2016.
Respondent Agency however content that there was no
dismissal whether constructive or not as they were under the
protection of the contract of security services which allows the
recall of security guards from their assigned posts at the will
of either party and further contends the prematurity of the
complaint because they never gave the Agency a chance to
give them assignments. Respondent Insurance Agency further
avers lack of employer-employee relationship between them
and complainants as they were merely assigned to its Cebu
branch under a job contract, that the Security Agency had its
own separate corporate personality distinct from the Insurance
Company and functions of the complainants werent
necessarily desirable to the usual business or trade of the client
and in finality maintains that complainants have no cause of
action against them.
Respondent Commission ruled that constructive dismissal was
done the recall of the complainants from their long time posts
at the premises of the Client without any good reason is a
scheme to justify or camouflage illegal dismissal. In the
present case, the complainants were told by the Agency that
they lost their assignment at the Clients premises because
they were already old, and not because they had committed
any infraction or irregularity. The NLRC applied RA 7641,
which gives retirement benefits of one half month pay per year
of service to retirable employees. As complainants were
illegally dismissed, the NLRC ruled that they were entitled to
the twin remedies of back wages for one (1) year from the
time of their dismissal on January 15, 1994, payable by both
the Client and the Agency, and separation pay of one half
month pay or every year of service payable only by the
Agency.
Page | 24
Issue:
Whether or not Client is liable for the dismissal of the
complainants?
Held:
The Client did not, as it could not, illegally dismiss the
complainants. Thus, it should not be held liable for separation
pay and back wages. But even if the Client is not responsible
for the illegal dismissal of the complainants, it is jointly and
severally liable with the Agency for the complainants service
incentive leave pay. Notwithstanding the service contract
between client and the security agency, the two are solidarily
liable for the proper wages prescribed by the Labor Code
pursuant to Art. 106, 107, 109 under which the indirect
employer who is the client in the case at bar, is jointly and
severally liable with the contractor for the workers wages in
the same manner and extent that it is liable to its direct
employees. This liability of the Client covers the payment of
the service incentive leave pay of the complainants during the
time they were posted at the Cebu Branch of the Client. As
service had been rendered, the liability accrued, even if the
complainants were eventually transferred or reassigned. The
service incentive leave is expressly granted by Art. 95 and
under the Implementing Rules and Regulations of the Labor
Code, an unused service incentive leave is commutable to its
money equivalent as stated under Sec. 5 Treatment of
benefit.The service incentive leave shall be commutable to
its money equivalent if not used or exhausted at the end of the
year.
20. Auto Bus Transport Systems, Inc. vs. Bautista
G.R. No. 156367. May 16, 2005
Labor Law; Service Incentive Leave; Field Personnel; Words
and Phrases; The phrase other employees whose
performance is unsupervised by the employer in Section
1(D), Rule V, Book III of the Implementing Rules and
Regulations of the Labor Code must
not be understood as a separate classification of employees to
which service incentive leave shall not be grantedrather, it
serves as an amplification of the interpretation of the
definition of field personnel under the Labor Code as those
whose actual hours of work in the field cannot be determined
with reasonable certainty; Employees engaged on task or
contract basis or paid on purely commission basis are not
automatically exempted from the grant of service incentive
leave, unless, they fall under the classification of field
personnel.A careful perusal of said provisions of law will
result in the conclusion that the grant of service incentive
leave has been delimited by the Implementing Rules and
Regulations of the Labor Code to apply only to those
employees not explicitly excluded by Section 1 of Rule V.
According to the Implementing Rules, Service Incentive
Leave shall not apply to employees classified as field
personnel. The phrase other employees whose performance
is unsupervised by the employer must not be understood as a
separate classification of employees to which service incentive
leave shall not be granted. Rather, it serves as an amplification
of the interpretation of the definition of field personnel under
the Labor Code as those whose actual hours of work in the
field cannot be determined with reasonable certainty. The

same is true with respect to the phrase those who are engaged
on task or contract basis, purely commission basis. Said
phrase should be related with field personnel, applying the
rule on ejusdem generis that general and unlimited terms are
restrained and limited by the particular terms that they follow.
Hence, employees engaged on task or contract basis or paid on
purely commission basis are not automatically exempted from
the grant of service incentive leave, unless, they fall under the
classification of field personnel.
Same; Same; Same; It is essential to recognize that the service
incentive leave is a curious animal in relation to other benefits
granted by law to every employee; If the employee entitled to
service incentive leave does not use or commute the same, he
is entitled upon his resignation or separation from work to the
commutation of his accrued service incentive leave.It is
essential at this point, however, to recognize that the service
incentive leave is a curious animal in relation to other benefits
granted by the law to every employee. In the case of service
incentive leave, the employee may choose to either use his
leave credits or commute it to its monetary equivalent if not
exhausted at the end of the year. Furthermore, if the employee
entitled to service incentive leave does not use or commute the
same, he is entitled upon his resignation or separation from
work to the commutation of his accrued service incentive
leave. As enunciated by the Court in Fernandez v. NLRC: The
clear policy of the Labor Code is to grant service incentive
leave pay to workers in all establishments, subject to a few
exceptions. Section 2, Rule V, Book III of the Implementing
Rules and Regulations provides that every employee who has
rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.Service
incentive leave is a right which accrues to every employee
who has served within 12 months, whether continuous or
broken reckoned from the date the employee started working,
including authorized absences and paid regular holidays unless
the working days in the establishment as a matter of practice
or policy, or that provided in the employment contracts, is less
than 12 months, in which case said period shall be considered
as one year. It is also commutable to its money equivalent if
not used or exhausted at the end of the year. In other words,
an employee who has served for one year is entitled to it. He
may use it as leave days or he may collect its monetary value.
To limit the award to three years, as the solicitor general
recommends, is to unduly restrict such right.
Same; Same; Same; With regard to service incentive leave, the
three year prescriptive period commences, not at the end of
the year when the employee becomes entitled to the
commutation of his service incentive leave, but from the time
when the employer refuses to pay its monetary equivalent after
demand or commutation or upon termination of the
employees services, as the case may be.Correspondingly, it
can be conscientiously deduced that the cause of action of an
entitled employee to claim his service incentive leave pay
accrues from the moment the employer refuses to remunerate
its monetary equivalent if the employee did not make use of
said leave credits but instead chose to avail of its
commutation. Accordingly, if the employee wishes to
accumulate his leave credits and opts for its commutation
Page | 25
upon his resignation or separation from employment, his cause

of action to claim the whole amount of his accumulated
service incentive leave shall arise when the employer fails to
pay such amount at the time of his resignation or separation
from employment. Applying Article 291 of the Labor Code in
light of this peculiarity of the service incentive leave, we can
conclude that the three (3) year prescriptive period
commences, not at the end of the year when the employee
becomes entitled to the commutation of his service incentive
leave, but from the time when the employer refuses to pay its
monetary equivalent after demand of commutation or upon
termination of the employees services, as the case may be.
Facts:
Respondent Bautista has been under the employment of
Petitioner Auto Bus Transport Systems Inc. since May 24,
1995 on commission basis of 7% total gross income per travel
paid on a twice a month basis. During one of his trips, he
accidentally bumped the rear portion of Autobus No. 124 as
the latter had suddenly stopped at a sharp curve without any
warning. Respondent averred that such accident occurred
because he was compelled by the management to go back to
Roxas, Isabela despite not having slept for almost 24 hours has
he had just arrived in Manila from Roxas also further alleging
that he was not allowed to work until he fully paid the amount
representing 30% of the cost of repair of the damaged buses
and that despite respondents please for reconsideration, the
same was ignored. He was sent a notice of termination a
month after the incident thus prompting him to file an illegal
dismissal case.
Petitioners on the other hand contend that respondents
employment was filled with offenses involving reckless
imprudence, gross negligence and dishonesty supported by
various documents pertaining to infractions involving the
respondent. Furthermore, petitioner avers that in the exercise
of its management prerogative, respondents employment was
terminated only after the latter was provided with an
opportunity to explain his side regarding the accident on Jan.
3, 2000.
The Labor Arbiter ruled that the illegal dismissal complaint
had no leg to stand on and dismissed the case and but still
ordered Petitioner to pay respondent his 13th month pay as
well as service incentive leave pay. Petitioner appealed such
decision to the NLRC which modified the decision by the
deleting the award of 13th month pay. Petitioner thus sought
reconsideration which has denied by the NLRC prompting an
appeal of the CA who as well denied such hence the present
case.
Issue:
Whether or not respondent is entitled to service incentive
leave
Whether or not the three (3) year prescriptive period
provided under Article 291 of the Labor Code, as
amended, is applicable to respondents claim of service
incentive leave pay.
Held:
A careful perusal of said provisions of law will result in the
conclusion that the grant of service incentive leave has been
delimited by the Implementing Rules and Regulations of the
Labor Code to apply only to those employees not explicitly
excluded by Section 1 of Rule V. According to the
cannot be determined with reasonable certainty.
The same is true with respect to the phrase those who are
engaged on task or contract basis, purely commission basis.
Said phrase should be related with field personnel, applying
the rule on ejusdem generis that general and unlimited terms
are restrained and limited by the particular terms that they
follow. Hence, employees engaged on task or contract basis or
paid on purely commission basis are not automatically
exempted from the grant of service incentive leave, unless,
they fall under the classification of field personnel. As such
petitioners contention that respondent is not entitled to the
grant of service incentive leave just because he was paid on
purely commission basis is misplaced and the CA correctly
ruled that respondent is a regular employee who performs
tasks usually and necessary and desirable to the usual trade of
petitioners business.
Article 291 of the Labor Code states that all money claims
arising from employer-employee relationship shall be filed
within three (3) years from the time the cause of action
accrued; otherwise, they shall be forever barred. It can be
conscientiously deduced that the cause of action of an entitled
employee to claim his service incentive leave pay accrues
from the moment the employer refuses to remunerate its
monetary equivalent if the employee did not make use of said
leave credits but instead chose to avail of its commutation.
Accordingly, if the employee wishes to accumulate his leave
credits and opts for its commutation upon his resignation or
separation from employment, his cause of action to claim the
whole amount of his accumulated service incentive leave shall
arise when the employer fails to pay such mount at the time of
his resignation or separation from employment.
Applying Article 291 of the Labor Code in light of this
peculiarity of the service incentive leave, we can conclude that
the three (3) year prescriptive period commences, not at the
end of the year when the employee becomes entitled to the
commutation of his service incentive leave, but from the time
when the employer refuses to pay its monetary equivalent after
demand of commutation or upon termination of the
employees services, as the case may be.
In the case at bar, respondent had not made use of his service
incentive leave nor demanded for its commutation until his
employment was terminated by petitioner. Neither did
petitioner compensate his accumulated service incentive leave
pay at the time of his dismissal. It was only upon his filing of a
Page | 26
complaint for illegal dismissal, one month from the time of his
dismissal, that respondent demanded from his former
employer commutation of his accumulated leave credits. His
cause of action to claim the payment of his accumulated
service incentive leave thus accrued from the time when his
employer dismissed him and failed to pay his accumulated
leave credits.
Therefore, the prescriptive period with respect to his claim for
service incentive leave pay only commenced from the time the
employer failed to compensate his accumulated service
incentive leave pay at the time of his dismissal. Since
respondent had filed his money claim after only one month
from the time of his dismissal, necessarily, his money claim
was filed within the prescriptive period provided for by Article
291 of the Labor Code.
21.
PHILIPPINE
FISHERIES
DEVELOPMENT
AUTHORITY, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, and ODIN SECURITY
AGENCY, as representative of its Security Guards,
respondents.
G.R. No. 94825. September 4, 1992
Labor Laws; Job contracting; National Labor Relations
Commission; Jurisdiction; Employer includes government-owned or controlled corporations.Notwithstanding that the
petitioner is a government agency, its liabilities, which are
joint and solidary with that of the contractor, are provided in
Articles 106, 107 and 109 of the Labor Code. This places the
petitioners liabilities under the scope of the NLRC.
Moreover, Book Three, Title II on Wages specifically
provides that the term employer includes any person acting
directly or indirectly in the interest of an employer in relation
to an employee and shall include the Government and all its
branches, subdivisions and instrumentalities, all government
owned or controlled corporations and institutions as well as
nonprofit private institutions, or organizations (Art. 97 [b],
Labor Code) The NLRC, therefore, did not commit grave
abuse of discretion in assuming jurisdiction to set aside the
Order of dismissal by the Labor Arbiter.
FACTS:
The petitioner is a government-owned or controlled
corporation created by P.D. No. 977. On November 11, 1985,
it entered into a contract with the Odin Security Agency for
security services of its Iloilo Fishing Port Complex in Iloilo
City. The Security Group of the AGENCY will be headed by a
detachment commander whose main function shall consist of
the administration and supervision control of the AGENCYs
personnel in the FISHING PORT COMPLEX. There shall be
one supervisor per shift who shall supervise the guards on
duty during a particular shift. The contract for security
services also provided for a one year renewable period unless
terminated by either of the parties. On October 24, 1987, and
during the effectivity of the said Security Agreement, the
private respondent requested the petitioner to adjust the
contract rate in view of the implementation of Wage Order
No. 6 which took effect on November 1, 1984 which states
that in the case of contracts for construction projects and for
security, janitorial and similar services, the increases in the
minimum wage and allowance rates of the workers shall be
borne by the principal or client of the construction/service

contractor and the contracts shall be deemed amended
accordingly, subject to the provisions of Section 3(c) of this
Order. Requests for adjustment of the contract price were
reiterated on January 14, 1988 and February 19, 1988 but were
ignored by the petitioner. Thus on June 7, 1988, the private
respondent filed with the Office of the Sub-Regional
Arbitrator in Region VI, Iloilo City a complaint for unpaid
amount of readjustment rate under Wage Order No. 6 together
with wage salary differentials arising from the integration of
the cost of living allowance.
On July 29, 1988, the petitioner filed a Motion to
Dismiss on the following grounds: (1) The Commission has no
jurisdiction to hear and try the case; (2) Assuming it has
jurisdiction, the security guards of Odin Security Agency have
no legal personality to sue or be sued; and (3) Assuming the
individual guards have legal personality the action involves
interpretation of contract over which it has no authority.
On August 19, 1988, the Labor Arbiter issued an
Order dismissing the complaint stating that the petitioners
being a government-owned or controlled corporation would
place it under the scope and jurisdiction of the Civil Service
Commission and not within the ambit of the NLRC. This
Order of dismissal was raised on Appeal to the NLRC and on
January 17, 1989 the NLRC issued the questioned resolution
setting aside the order and entered a decision granting reliefs
to the private respondent. A motion for reconsideration was
subsequently filed but was denied. Hence this petition.
ISSUE:
Whether or not an indirect employer is bound by the
rulings of the NLRC
HELD:
The petitioner is a government-owned or controlled
corporation with a special charter. This places it under the
scope of the civil service. However, the guards are not
employees of the petitioner. The contract of services explicitly
states that the security guards are not considered employees of
the petitioner. There being no employer-employee relationship
between the petitioner and the security guards, the jurisdiction
of the Civil Service Commission may not be invoked in this
case.
The contract entered into by the petitioner which is
merely job contracting makes the petitioner an indirect
employer. Notwithstanding that the petitioner is a government
agency, its liabilities, which are joint and solidary with that of
the contractor, are provided in Articles 106, 107 and 109 of
the Labor Code. This places the petitioners liabilities under
the scope of the NLRC.
Moreover, Book Three, Title II on Wages specifically
provides that the term employer includes any person acting
directly or indirectly in the interest of an employer in relation
to an employee and shall include the Government and all its
branches, subdivisions and instrumentalities, all government-owned or controlled corporations and institutions as well as
nonprofit private institutions, or organizations. The NLRC,
therefore, did not commit grave abuse of discretion in
assuming jurisdiction to set aside the Order of dismissal by the
Labor Arbiter.
Page | 27
22. PEDRO CHAVEZ, petitioner, vs. NATIONAL

LABOR RELATIONS COMMISSION, SUPREME
PACKAGING, INC. and ALVIN LEE, Plant Manager,
respondents.
G.R. No. 146530. January 17, 2005
Labor Law; Elements of an employer-employee relationship;
Benefits; Wages; Definition of Wages.Wages are defined as
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 service
rendered or to be rendered. That the petitioner was paid on a
per trip basis is not significant. This is merely a method of
computing compensation and not a basis for determining the
existence or absence of employer-employee relationship. One
may be paid on the basis of results or time expended on the
work, and may or may not acquire an employment status,
depending on whether the elements of an employer-employee
relationship are present or not. In this case, it cannot be
gainsaid that the petitioner received compensation from the
respondent company for the services that he rendered to the
latter.
FACTS:
The respondent company, Supreme Packaging, Inc.,
is in the business of manufacturing cartons and other
packaging materials for export and distribution. It engaged the
services of the petitioner, Pedro Chavez, as truck driver and
was tasked to deliver the respondent companys products from
its factory in Mariveles, Bataan, to its various customers,
mostly in Metro Manila. The respondent company furnished
the petitioner with a truck. Most of the petitioners delivery
trips were made at nighttime and the deliveries were made in
accordance with the routing slips issued by respondent
company indicating the order, time and urgency of delivery.
Initially, the petitioner was paid the sum of P350.00 per trip.
This was later adjusted to P480.00 per trip and, at the time of
his alleged dismissal, the petitioner was receiving P900.00 per
trip.
Sometime in 1992, the petitioner expressed to
respondent Alvin Lee, respondent companys plant manager,
his (the petitioners) desire to avail himself of the benefits that
the regular employees were. Although he promised to extend
these benefits to the petitioner, respondent Lee failed to
actually do so. The petitioner filed a complaint for
regularization with the Regional Arbitration of the NLRC in
Pampanga. Before the case could be heard, respondent
company terminated the services of the petitioner.
Consequently, the petitioner filed an amended complaint
against the respondents for illegal dismissal, unfair labor
practice and nonpayment of overtime pay, nightshift
differential pay, 13th month pay, among others.
The respondents, denied the existence of an
employer-employee relationship between the respondent
company and the petitioner. They averred that the petitioner
was an independent contractor as evidenced by the contract of
service which he and the respondent company entered into.
The respondents insisted that the petitioner had the sole

control over the means and methods by which his work was
accomplished. He paid the wages of his helpers and exercised
control over them. As such, the petitioner was not entitled to
regularization because he was not an employee of the
respondent company. The respondents, likewise, maintained
that they did not dismiss the petitioner.
The Labor Arbiter rendered the Decision finding the
respondents guilty of illegal dismissal and declared that the
petitioner was a regular employee of the respondent company
as he was performing a service that was necessary and
desirable to the latters business. Moreover, it was noted that
the petitioner had discharged his duties as truck driver for the
respondent company for a continuous and uninterrupted period
of more than ten years. The contract of service invoked by the
respondents was declared null and void as it constituted a
circumvention of the constitutional provision affording full
protection to labor and security of tenure. The Labor Arbiter
found that the petitioners dismissal was anchored on his
insistent demand to be regularized. Hence, for lack of a valid
and just cause therefore and for their failure to observe the due
process requirements, the respondents were found guilty of
illegal dismissal.
The respondents filed an appeal with the NLRC.
However, it was dismissed by the NLRC and it affirmed in
toto the decision of the Labor Arbiter.
The NLRC
characterized the contract of service between the respondent
company and the petitioner as a scheme that was resorted to
by the respondents who, taking advantage of the petitioners
unfamiliarity with the English language and/or legal niceties,
wanted to evade the effects and implications of his becoming a
regularized employee.
The respondents sought reconsideration of the
NLRCs decision rendered another Decision reversing its
earlier decision and, this time, holding that no employer-employee relationship existed between the respondent
company and the petitioner. The NLRC stated that the
respondents did not exercise control over the means and
methods by which the petitioner accomplished his delivery
services. It upheld the validity of the contract of service as it
pointed out that said contract was silent as to the time by
which the petitioner was to make the deliveries and that the
petitioner could hire his own helpers whose wages would be
paid from his own account. These factors indicated that the
petitioner was an independent contractor, not an employee of
the respondent
company.
The petitioner
sought
reconsideration but it was denied by the NLRC. He then filed
with this Court a petition for certiorari, and rendered the
Decision reversing the Decision of the NLRC and reinstating
the decision of the Labor Arbiter. However, on motion for
reconsideration by the respondents, the CA made a complete
turn around as it rendered the assailed Resolution upholding
the contract of service between the petitioner and the
respondent company. In reconsidering its decision, the CA
explained that the extent of control exercised by the
respondents over the petitioner was only with respect to the
result but not to the means and methods used by him.
ISSUE:
Page | 28
Whether there existed an employer-employee

relationship between the respondent company and the
petitioner.
means and methods by which the employees work is to be

performed and accomplished.
HELD:
23.AKLAN
ELECTRIC
COOPERATIVE
INCORPORATED (AKELCO), vs. NATIONAL LABOR
RELATIONS
COMMISSION
(Fourth
Division),
RODOLFO M. RETISO and 165 OTHERS
323 SCRA 259 (2000)
We rule in the affirmative. The elements to determine

the existence of an employment relationship are: (1) the
selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the employers
power to control the employees conduct. 11 The most
important element is the employers control of the employees
conduct, not only as to the result of the work to be done, but
also as to the means and methods to accomplish it. 12 All the
four elements are present in this case.
First. Undeniably, it was the respondents who
engaged the services of the petitioner without the intervention
of a third party.
Second. Wages are defined as 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 service rendered or to be rendered. That
the petitioner was paid on a per trip basis is not significant.
This is merely a method of computing compensation and not a
basis for determining the existence or absence of employeremployee relationship. One may be paid on the basis of results
or time expended on the work, and may or may not acquire an
employment status, depending on whether the elements of an
employer-employee relationship are present or not. In this
case, it cannot be gainsaid that the petitioner received
compensation from the respondent company for the services
that he rendered to the latter. Moreover, under the Rules
Implementing the Labor Code, every employer is required to
pay his employees by means of payroll. The payroll should
show, among other things, the employees rate of pay,
deductions made, and the amount actually paid to the
employee. Interestingly, the respondents did not present the
payroll to support their claim that the petitioner was not their
employee, raising speculations whether this omission proves
that its presentation would be adverse to their case.
Third. The respondents power to dismiss the
petitioner was inherent in the fact that they engaged the
services of the petitioner as truck driver. They exercised this
power by terminating the petitioners services albeit in the
guise of severance of contractual relation due allegedly to
the latters breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the
employer-employee relationship, the control test is the most
important. Compared to an employee, an independent
contractor is one who carries on a distinct and independent
business and undertakes to perform the job, work, or service
on its own account and under its own responsibility according
to its own manner and method, free from the control and
direction of the principal in all matters connected with the
performance of the work except as to the results thereof.
Hence, while an independent contractor enjoys independence
and freedom from the control and supervision of his principal,
an employee is subject to the employers power to control the
No Work, No Pay Principle The ageold rule governing

the relation between labor and capital, or management and
employee of a fair day's wage for a fair day's labor
remains as the basic factor in determining employees
wages.The ageold rule governing the relation between labor
and capital, or management and employee of a fair days
wage for a fair days laborremains as the basic factor in
determining employees wages. If there is no work performed
by the employee there can be no wage or pay unless, of
course, the laborer was able, willing and ready to work but
was illegally locked out, suspended or dismissed, or otherwise
illegally prevented from working, a situation which we find is
not present in the instant case. It would neither be fair nor just
to allow private respondents to recover something they have
not earned and could not have earned because they did not
render services at the Kalibo office during the stated period.
Facts:
Rodolfo M. Retiso and 163 others filed a complaint against
Aklan Electric Cooperative Inc. (AKELCO) for non-payment
of salaries, wages and 13th month pay. Complainants alleged
that prior to the temporary transfer of the office of AKELCO
from Lezo Aklan to Amon Theater, Kalibo, Aklan, they were
continuously performing their task and were duly paid of their
salaries at their main office located at Lezo, Aklan.
Respondent AKELCO allowed the temporary transfer holding
of office at Amon Theater, Kalibo, Aklan per information by
their Project Supervisor that their head office is closed and
that it is dangerous to hold office thereat so majority of the
employees including herein complainants continued to report
for work at Lezo Aklan and were paid of their salaries.
On February 11, 1992, unnumbered resolution was passed by
the Board of AKELCO withdrawing the temporary
designation of office at Kalibo, Aklan, and stating that the
daily operations must be held again at the main office of Lezo,
Aklan. Complainants who were then reporting at the Lezo
office from January 1992 up to May 1992 were duly paid of
their salaries, while in the meantime some of the employees
continued to remain and work at Kalibo, Aklan. Complainants
who continuously reported for work at Lezo, Aklan in
compliance with the aforementioned resolution were not paid
their salaries.
On March 19, 1993 up to the present, complainants were again
allowed to draw their salaries; with the exception of a few
complainants who were not paid their salaries for the months
of April and May 1993.
Page | 29
Respondents alleged that these complainants voluntarily

abandoned their respective work/job assignments, without any
justifiable reason and without notifying the management of the
Aklan Electric Cooperative, Inc. (AKELCO), hence the
cooperative suffered damages and systems loss. The
complainants were requested to report to work at the Kalibo
office but despite these lawful orders of the General Manager,
they did not follow and wilfully and maliciously defied said
orders and issuance of the General Manager. Respondents also
stated that the Board of Directors passed a Resolution resisting
and denying the claims of these complainants under the
principle of "no work no pay" which is legally justified.
complainant's letter for payment of wages did not constitute

approval or assurance of payment.
Labor Arbiter rendered a decision dismissing the complaints.

On appeal, the NLRC reversed and set aside the Labor
Arbiters decision and held that private respondents are entitled
to unpaid wages. According to NLRC, the respondents did not
submit any proof to substantiate their allegation that
complainants were not paid during this interim period under
the principle of no work, no pay,. A motion for
reconsideration was filed by petitioner but the same was
denied by public respondent hence this petition.
The age-old rule governing the relation between labor and

capital, or management and employee of a fair days wage
for a fair days labor remains as the basic factor in
determining employees wages. If there is no work performed
by the employee there can be no wage or pay
unless, of course, the laborer was able, willing and ready to
work but was illegally locked out, suspended or dismissed or
otherwise illegally prevented from working, a situation which
we find is not present in the instant case. It would neither be
fair nor just to allow private respondents to recover something
they have not earned and could not have earned because they
did not render services at the Kalibo office during the stated
period.
Issue:
Whether or not public respondent NLRC committed grave
abuse of discretion amounting to excess or want of jurisdiction
when it reversed the findings of the Labor Arbiter that private
respondents refused to work under the lawful orders of the
petitioner AKELCO management; hence they are covered by
the no work, no payprinciple and are thus not entitled to
the claim for unpaid wages.
Ruling:
Yes. Petitioner was able to show that private respondents did
not render services during the stated period. Pieces of
evidence show that on January 22, 1992, their Board of
Directors passed a resolution ordering the temporary transfer
of their Office from Lezo, Aklan to Amon Theater, Kalibo,
Aklan on the ground that the office at Lezo was dangerous and
unsafe. NEA Administrator even requested for military
assistance for maintaining peace and order in the cooperatives
coverage area and in retrieving and transferring their
equipments from Lezo to Kalibo. This establishes the fact that
the continuous operation of the petitioners business office in
Lezo Aklan would pose a serious and imminent threat to
petitioners officials and other employees, hence the necessity
of temporarily transferring the operation of its business office
from Lezo to Kalibo. Thus private respondents allegations
that they continued to report for work at Lezo to support their
claim for wages has no basis.
The allegation of private respondents that petitioner had
already approved payment of their wages is also without basis.
The General Managers offer to recommend the payment of
private respondents wages is hardly approval of their claim
for wages. It is just an undertaking to recommend payment.
Moreover, the offer is conditional. It is subject to the condition
that petitioners Board of Directors will give its approval and
that funds were available. The General Managers reply to
Private respondents were dismissed by petitioner effective

January 31, 1992 and were accepted back by petitioner, as an
act of compassion, subject to the condition of no work, no
pay effective March 1993 which explains why private
respondents were allowed to draw their salaries again. It took
private respondents about ten months before they requested
for the payment of their backwages, the long inaction of
private respondents to file their claim for unpaid wages cast
doubts as to the veracity of their claim.
24. VIRGINIA A. SUGUE and THE HEIRS OF RENATO

S. VALDERRAMA v. TRIUMPH INTERNATIONAL
(PHILS.), INC
577 SCRA 323 (2009)
Same Leave Privileges In the grant of vacation and sick
leave privileges to an employee, the employer is given leeway
to impose conditions on the entitlement to the same as the
grant of vacation and sick leave is not a standard of law, but
a prerogative of managementit is a mere concession or act
of grace of the employer and not a matter of right on the part
of the employee.It is worth stressing that in the grant of
vacation and sick leave privileges to an employee, the
employer is given leeway to impose conditions on the
entitlement to the same as the grant of vacation and sick leave
is not a standard of law, but a prerogative of management. It is
a mere concession or act of grace of the employer and not a
matter of right on the part of the employee. Thus, it is well
within the power and authority of an employer to deny an
employees application for leave and the same cannot be
perceived as discriminatory or harassment.
Facts:
Petitioners filed a complaint with the NLRC against Triumph
for payment of money claims arising from allegedly unpaid
vacation and sick leave credits, birthday leave and 14th month
pay for the period 1999-2000.
On June 28, 2000, Triumph charged the one-half day utilized
by petitioners in attending the NLRC hearing on June 19, 2000
to their vacation leave credits.
Valderrama complained that his request for an executive
checkup was disapproved by Triumph. Thereafter, he did not
Page | 30
report for work on July 3 to 5, 2000 due allegedly to persistent

cough and vertigo, but his request for sick leave on those dates
was disapproved by respondent because he failed to submit a
medical certificate as required by the companys rules and
policies. He then wrote the company a letter stating that he
considered himself constructively dismissed due to the
unreasonable pressures and harassments he suffered the past
months which prevented him from effectively exercising his
tasks as Direct Sales Manager.
The respondent in return issued a memorandum requiring him
to explain his continued absences without official leave in
which Valderrama failed to respond. Triumph then decided to
terminate his employment for abandonment of work.
Sugues charge of constructive dismissal was based on the fact
that her request for vacation leave from July 14 to 15, 2000
was subject to the condition that she first submit a report on
the companys 2001 Marketing Plan. The approval of her
request for executive checkup was deferred.
Respondent required Sugue to explain why she should not be
terminated for continued absences without official leave.
Petitioner failed to comply, thus, her employment was
terminated for abandonment of work.
Prior to the actual termination of their employment by
Triumph, petitioners filed on July 31, 2000 a complaint for
constructive dismissal against Triumph.
Labor Arbiter rendered a decision, declaring that petitioners
were constructively dismissed. Respondent filed an appeal
with the NLRC, and it granted the appeal and reversed the
ruling of Labor Arbiter. Not satisfied with the NLRC decision,
petitioners elevated the matter to the CA by way of a petition
for certiorari. The Court of Appeals rendered its assailed
decision partly granting the petition, setting aside the decision
of NLRC. Triumphs subsequent motion for reconsideration
and motion for partial reconsideration filed by petitioners were
both denied by the appellate court. Hence, the parties filed the
present petitions.
Issue:
1.
2.
Whether or not petitioners were constructively

dismissed by Triumph.
Whether or not there is bad faith or malice on the part
of the respondent when they charged to the leave
credits of petitioners the half day that they spent in
attending the preliminary conference of the case they
instituted against Triumph.
Ruling:
1. No. Constructive dismissal is defined as an
involuntary resignation resorted to when continued
employment becomes impossible, unreasonable or
unlikely; when there is a demotion in rank or a
diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes
unbearable to an employee.
According to the petitioners, the acts of charging to

the leave credits of the petitioners the half day they
spent in attending the NLRC hearing and act of
disapproving petitioners sick leaves purportedly
show discrimination and bad faith on the part of
Triumph.
2.
No. There is no bad faith or malice on the part of

Triumph when it charged to the leave credits of
petitioners the half day that they spent in attending
the preliminary conference of the case they instituted
against Triumph. It is fair and reasonable for
Triumph to do so considering that petitioners did not
perform work for one half day.
In the case of of J.B. Heilbronn Co. v. National
Labor Union,29 this Court held that:
When the case of strikes, and according to the CIR
even if the strike is legal, strikers may not collect
their wages during the days they did not go to work,
for the same reasons if not more, laborers who
voluntarily absent themselves from work to attend the
hearing of a case in which they seek to prove and
establish their demands against the company, the
legality and propriety of which demands is not yet
known, should lose their pay during the period of
such absence from work. The age-old rule governing
the relation between labor and capital or management
and employee is that a fair days wage for a fair
days labor. If there is no work performed by the
employee there can be no wage or pay, unless of
course, the laborer was able, willing and ready to
work but was illegally locked out, dismissed or
suspended. It is hardly fair or just for an employee or
laborer to fight or litigate against his employer on the
employers time. In a case where a laborer absents
himself from work because of a strike or to attend a
conference or hearing in a case or incident between
him and his employer, he might seek reimbursement
of his wages from his union which had declared the
strike or filed the case in the industrial court. Or, in
the present case, he might have his absence from his
work charged against his vacation leave. x x x
(Emphasis ours)
Triumph is, thus, justified in charging petitioners
half day absence to their vacation leave credits.
25. International School Alliance of Educators v. Hon.

Leonardo A. Quisumbing
G.R. No. 128845, June 1, 2000
Case Summary:
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
favorable conditions of work, which ensure, in
particular:
Page | 31
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;
x x x.
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.
Facts:
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. 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 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 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 pathall for the purpose of
pursuing his profession as an educator, but this time in a
foreign land. The compensation scheme is simply the Schools
adaptive measure to remain competitive on an international
level in terms of attracting competent professionals in the field
of international education.
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 of
the School, contested the difference in salary rates between
foreign and local hires. 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 petitioners motion for reconsideration in

an Order dated March 19, 1997. Hence, this petition.
Issue:
Whether or not the difference in salary rates between
local and foreign hires are justified?
Ruling:
No. International law, which springs from general
principles of law, likewise proscribes discrimination. General
principles of law include principles of equity, i.e., the general
principles of fairness and justice, based on the test of what is
reasonable. The Universal Declaration of Human Rights, the
International Covenant on Economic, Social, and Cultural
Rights, the International Convention on the Elimination of All
Forms of Racial Discrimination, the Convention against
Discrimination in Education, the Convention (No. 111)
Concerning Discrimination in Respect of Employment and
Occupationall 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 specifically provides that labor is entitled to
humane conditions of work. These conditions are not
restricted to the physical workplacethe factory, the office or
the fieldbut include as well the manner by which employers
treat their employees. The Constitution also directs the State to
promote equality of employment opportunities for all.
Similarly, the Labor Code provides that the State shall ensure
equal work opportunities regardless of sex, race or creed.
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. Discrimination, particularly in terms of wages,
is frowned upon by the Labor Code. Article 135, for example,
prohibits and penalizes 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
favorable 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;
x x x.
The
foregoing
provisions
impregnably
institutionalize in this jurisdiction the long honored legal
truism of equal pay for equal work. Persons who work
Page | 32
with substantially equal qualifications, skill, effort and

responsibility, under similar conditions, should be paid similar
salaries.
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. 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 local hires. 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. 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, to
afford labor full protection. The State, therefore, has the right
and duty to regulate the relations between labor and capital.
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. 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.
26. Arms Taxi and/or Dorothea Tanongon v. NLRC and

Ludivico Cullla
G. R. No. 104523, March 8, 1993
Case Summary:
Labor Law; Salaries & Wages; Civil Law; Contracts;
Payment of employee's monthly salary not considered as
partial compliance of employer's undertaking to pay

commission, thus, removing latter from the operation of the
Statute of Frauds.The payment of a P5,000.00 monthly
salary to the petitioner for his services may not be considered
as partial compliance by his employers with the alleged
agreement to pay him a commission or percentage of the daily
earnings of their taxi business because, as correctly pointed
out by the Solicitor General, a salary is different from a
commission xxx Thus, before invoking the exception to the
Statute of Frauds, petitioner should have proven that he had
received a commission, or part of it, in the past.
Same; Same; Same; Same; Considerable delay in the
enforcement of alleged agreement affects credibility of
existence thereof.Furthermore, as aptly noted by the NLRC,
if it were true that there had been an agreement regarding the
payment of a 15% commission to him, the petitioner would
not have waited almost six (6) years to claim it. Considerably
delay in asserting one's right is strongly persuasive of the lack
of merit of one's claim (Quinsay vs. Intermediate Appellate
Court, 195 SCRA 268).
Facts:
The spouses Tanongon own and operate taxicabs
under the names of Arms taxi and Lin-lin taxi. However, the
taxicabs are registered under the kabit system in the name of
Aida dela Cruz who holds a certificate of public convenience
to operate a taxicab service. In the early part of 1980, Culla
was hired by the Tanongon spouses to work as mechanic, shop
manager, garage caretaker, dispatcher, and liaison man in their
taxi business, at a monthly salary of 5k plus commission on
the daily or monthly gross income of the business in addition
to the payment of his SSS premiums. On June 11, 1986,
without Culla's consent, the Tanongon spouses asked one of
their taxi drivers to force open his quarters in the Tanongon
compound at the St. Francis Subdivision in Cainta, Rizal.
They removed his personal belongings and brought them to
his residence in Sta. Ana Manila.
Culla filed with the Arbitration Branch of the then
Ministy of Labor and Employment, a complaint alleging that
his ejectment from his living quarters and dismissal from
employment were illegal because there was no prior
investigation or written notice of the charges against him. His
dismissal was allegedly due to his demands "for the payment
of the benefits, percentage and privileges and premiums to the
SSS." He prayed for reinstatement with backwages, plus his
commission of 15% of the gross income of the taxi business,
in the amount of P480k with legal interest, plus moral,
nominal and exemplary damages in the total sum of P300k
and actual or compensatory damages and litigation expenses.
In their position paper, the Tanongon spouses denied
that they were the operators of the Arms Taxi and Linlin Taxi.
They denied the existence of an employer-employee
relationship between them and Culla. They averred that Arms
Taxi is owned and operated by Aida dela Cruz. That on April
25, 1986, they bought Linlin Taxi from one Jose Lim, but its
ownership has not yet been transferred to them as their
application with the Land Transportation Office is still
pending. For her part, Aida dela Cruz admitted ownership and
operation of a fleet of taxicabs under the name Arms Taxi and
that she had entered into an agreement with Dorothea
Page | 33
Tanongon for the latter to manage for a fee the operation of

several of her taxi units. She denied that she hired Culla,
Labor Arbiter Ricardo Nora found for Culla. He
declared that Culla was an employee of the Tanongon spouses;
that Culla was illegally dismissed from employment and that
Aida dela Cruz should be considered an indirect employer of
Culla pursuant to Arts. 106, 107 and 109 of the Labor Code.
However, he denied Culla's claim for 15% commission on the
gross earnings of the taxi business as Culla failed "to
substantially prove the same by some precise, concrete and
convincing evidence". The agreement on the commission
"should have been in writing, note or memorandum, and
subscribed by the parties, to be enforceable.
Both parties appealed to the NLRC. The NLRC
affirmed the decision of the Labor Arbiter. It denied Culla's
claim for the 15% commission on the ground that: "There is
nothing on record to substantiate this claim. If, as complainant
claims, he is entitled to a commission as part of his wage
and/or in addition to his basic pay, we cannot understand why
he never made any claims therefor during his six years of
service." Hence, this separate petitions for certiorari before
the SC by both parties. Culla argues in his petition that the
payment to him of P5k a month for his services was in partial
fulfillment of Tanongon's promise to pay him a 15%
commission, removing said agreement from coverage of the
Statute of Frauds.
Issue:
Whether or not Culla is entitled to the said
commission?
Ruling:
No. Culla's reference to the Statute of frauds under
Art. 1403, par. 2 of the Civil Code is misplaced. An agreement
for compensation of services rendered is not one of the
contracts mentioned in Art. 1403 which must be in writing to
be enforceable by action. The payment of a 5k monthly salary
to the petitioner for his services may not be considered as
partial compliance by his employers with the alleged
agreement to pay him a commission or percentage of the daily
earnings of their taxi business because, as correctly pointed
out by the Solicitor General, a salary is different from a
commission. While a salary is a fixed compensation for
regular work or for continuous service rendered over a period
of time, a commission is a percentage or allowance made to a
factor or agent for transacting business for other. Thus, before
invoking the exception to the Statute of Frauds, petitioner
should have proven that he had received a commission, or
part of it, in the past. Furthermore, as aptly noted by the
NLRC, if it were true that there had been an agreement
regarding the payment of a 15% commission to him, the
petitioner would not have waited almost six (6) years to claim
it. Considerably delay in asserting one's right is strongly
persuasive of the lack of merit of one's claim (Quinsay vs.
Intermediate Appellate Court, 195 SCRA 268).
Art. 1403. The following contracts are unenforceable
unless they are ratified.
xxxxxxxxx
(2) Those that do not comply with the Statute of Frauds as set
forth in this number. In the following cases an agreement
hereafter made shall be unenforceable, by action, unless the
same, or some note or memorandum thereof, be in writing,

and subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
a. An agreement that by its terms is not to be
performed within a year from the making thereof;
b. A special promise to answer for the debt, default,
or miscarriage of another;
c. An agreement made in consideration of marriage,
other than a mutual promise to marry;
d. An agreement for the sale of goods, chattels or
things in action, at a price not less than five hundred pesos,
unless the buyer accept and receive part of such goods and
chattels, or the evidences, or some of them, of such things in
action, or pay at the time some part of the purchase money;
but when a sale is made by auction and entry is made by the
auctioner in his sales book, at the time of the sale, of the
amount and kind of property sold, terms of sale, price, names
of the purchasers and person on whose account the sale is
made, it is a sufficient memorandum;
e. An agreement for the leasing for a longer period
than one year, or for the sale of real property or of an interest
therein;
f. A representation to the credit of a third person.
27.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.
[G.R. No. 121927. April 22, 1998]
Facts:
Petitioner Antonio Iran is engaged in soft drinks
merchandising and distribution in Mandaue City, Cebu,
employing truck drivers who double as salesmen, truck
helpers, and non-field personnel in pursuit thereof. Petitioner
hired private respondents Godofredo Petralba, Moreno
Cadalso, Celso Labiaga and Fernando Colina as
drivers/salesmen while private respondents Pepito Tecson,
Apolinario Gimena, Jesus Bandilao, Edwin Martin and
Diosdado Gonzalgo were hired as truck helpers.
Drivers/salesmen drove petitioners delivery trucks and
promoted, sold and delivered soft drinks to various outlets in
Mandaue City. As part of their compensation, the
driver/salesmen and truck helpers of petitioner received
commissions per case of softdrinks sold.
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
Page | 34
reporting for work, prompting petitioner to conclude that the

former had abandoned their employment. Consequently,
petitioner terminated their services. He also filed on
November 7, 1991, a complaint for estafa against private
respondents.
On the other hand, private respondents, on December
5, 1991, filed complaints against petitioner for illegal
dismissal, illegal deduction, underpayment of wages, premium
pay for holiday and rest day, holiday pay, service incentive
leave pay, 13th month pay, allowances, separation pay,
recovery of cash bond, damages and attorneys fees
The labor arbiter found that petitioner had validly terminated
private respondents, there being just cause for the latters
dismissal. Nevertheless, he also ruled that petitioner had not
complied with minimum wage requirements in compensating
private respondents. In arriving at this conclusion, the Labor
Arbiter refused to include the commissions paid to the workers
in determining compliance with the minimum wage
requirement. As part of their compensation, the workers
received commissions per case of softdrinks sold.
Issue:
Whether or not commissions are included in
determining compliance with the minimum wage requirement.
Ruling:
Article 97(f) of the Labor Code defines wage as
follows:
Art. 97(f) Wage paid to any employee shall mean the
ascertained on a time, task, piece, or commission basis, or
other method of calculating the same
The definition of the term wage in the Labor Code explicitly
includes commissions. While commissions are incentives or
forms of encouragement to inspire workers to put a little more
industry on their jobs, still these commissions are direct
remunerations for services rendered. There is no law
mandating that commissions be paid only after the minimum
wage has been paid to the worker. The establishment of a
minimum wage only sets a floor below which an employees
remuneration cannot fall, not that commissions are excluded
from wages in determining compliance with the minimum
wage law.
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.
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. 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.
28.LIDUVINO M. MILLARES vs. NATIONAL LABOR

RELATIONS COMMISSION, (FIFTH DIVISION), and
PAPER INDUSTRIES CORPORATION

PHILIPPINES (PICOP)
[G.R. No. 122827. March 29, 1999]
OF
THE
Facts:
Petitioners (116) occupied the positions 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 brought about by the restrictive
government regulations on logging and the economic crisis.
To avert further losses, it retrenched and terminated the
services of petitioners. The petitioners received separation
pay 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 filed a complaint for separation pay differentials.
The allowances in question 1. Staff/Manager's Allowance -Due to the shortage of
facilities, it granted Staff allowance to those who live in rented
houses outside. But the allowance ceases whenever a vacancy
occurs in the company's housing facilities since grantee is
directed to fill the vacancy.
2. Transportation Allowance - Granted to key officers and
Managers assigned in the mill site who use their own vehicles
in the performance of their duties. The recipients are
required to liquidate by submitting a report with a detailed
enumeration of expenses incurred.
3. Bislig Allowance -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.
The labor arbiter ordered PICOP to pay petitioners
P4,481,000.00 representing separation pay differentials.
Applying Art.,97, par. (f), of the Labor Code which defines
wage," -the allowances, being customarily furnished by
respondent PICOP and regularly received by petitioners,
formed part of the latter's wages.
Issue:
Whether or not the above mentioned allowances be included
in the computation of their separation pay
Ruling:
No. 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.
Meaning of PAY in Art. 97 and WAGE in Art. 283 generally
refer to one and the same meaning, i.e., a reward or
recompense for services performed. "Wage" is defined in
letter (f) as the remuneration or earnings, however designated,
Page | 35
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.
Meaning, 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, 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 and
reasonable value as determined by the Secretary of Labor."
Regularity Test:
a.) "Customary" is founded on long-established and
constant practice connoting regularity. 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 x x x x
On the other hand, the transportation allowance is in the
form of advances for actual transportation expenses subject to
liquidation x x x 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.
Employees' Benefit Test:
b.) "board" and "lodging," is comprehensible, 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 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.
That the allowances were for the benefit and

convenience of PICOP was supported by the fact that the
retrenched employees were not subjected to withholding tax
since the allowances were ultimately for the benefit of
PICOP.
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 given 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. Hence, subject allowances did not
form part of petitioners' wages.
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 were not regularly received by petitioners
herein, there was no reason at all for petitioners to resort to the
above cases.
29.JOSE SONGCO, ROMEO CIPRES, and AMANCIO
MANUEL, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION (FIRST DIVISION),
LABOR ARBITER FLAVIO AGUAS, and F.E. ZUELLIG
(M), INC., respondents.
G.R. Nos. 5099951000. March 23, 1990.
CASE SUMMARY:
Labor Law; Commissions; 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 petitioners wage or salary.We agree with the
Solicitor General that granting, in gratia argumenti, that the
commissions were in the form of incentives or encouragement,
so that the petitioners would be inspired to put a little more
industry on the jobs particularly assigned to them, still
commissions are direct remunerations for services rendered
which contributed to the increase of income of Zuellig.
Commission is 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
(Blacks Law Dictionary, 5th Ed., citing Weiner v. Swales,
217 Md. 123, 141 A.2d 749, 750). The nature of the work of a
salesman and the reason for such type of remuneration for
part of petitioners wage or salary. We take judicial notice of
the fact that some salesmen do not receive any basic salary but
depend on commissions and allowances or commissions
alone, although an employeremployee relationship exists.
FACTS:
Private respondent F.E. Zuellig Inc., filed with the
Department of Labor an application seeking clearance to
terminate the services of petitioners Jose Songco, Romeo
Cipres, and Amanciono Manuel alleg edly on the ground of
retrenchment due to financial losses. They alleged further that
Page | 36
they are being dismissed because of their membership in the

union. At the last hearing of the case, however, petitioners
manifested that they are no longer contesting their dismissal.
The parties then agreed that the sole issue to be resolved is the
basis of the separation pay due to petitioners. Petitioners, who
were in the sales force of Zuellig received monthly salaries of
at least P400.00. In addition, they received commissions for
every sale they made. The Collective Bargaining Agreement
entered into between Zuellig and F.E. Zuellig Employees
Association, of which petitioners are members.
On June 26, 1978, the Labor Arbiter rendered a
decision, the dispositive portion of which reads:
RESPONSIVE TO THE FOREGOING, respondent should
be as it is hereby, ordered to pay the complainants separation
pay equivalent to their one month salary (exclusive of
commissions, allowances, etc.) for every year of service that
they have worked with the company. SO ORDERED.
The appeal by petitioners to the National Labor
Relations Commission was dismissed for lack of merit. Hence,
the present petition. On June 2, 1980, the Court, acting on the
verified Notice of Voluntary Abandonment and Withdrawal
of Petition dated April 7, 1980 filed by petitioner Romeo
Cipres, based on the ground that he wants to abide by the
decision appealed from since he had received, to his full and
complete satisfaction, his separation pay, resolved to dismiss
the petition as to him. The petition is impressed with merit.
Petitioners position was that in arriving at the correct and
legal amount of separation pay due them, whether under the
Labor Code or the CBA, their basic salary, earned sales
commissions and allowances should be added together. They
cited Article 97(f) of the Labor Code which includes
commission as part of ones salary.
Zuellig argues that if it were really the intention of
the Labor Code as well as its implementing rules to include
commission in the computation of separation pay, it could
have explicitly said so in clear and unequivocal terms.
Furthermore, in the definition of the term wage,
commission is used only as one of the features or
designations attached to the word remuneration or earnings.
ISSUE:
Whether or not earned sales commissions and
allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation
pay?
RULING:
The ambiguity between Article 97(f), which defines
the term wage and Article XIV of the CBA, Article 284 of
the Labor Code and Sections 9(b) and 10 of the Implementing
Rules, which mention the terms pay and salary, is more
apparent than real. Broadly, the word salary means a
recompense or consideration made to a person for his pains or
industry in another mans business. It carries with it the
fundamental idea of compensation for services rendered.
Inasmuch as the words wages, pay and salary have the
same meaning, and commission is included in the definition of
wage, the logical conclusion, therefore, is, in the
computation of the separation pay of petitioners, their salary
base should include also their earned sales commissions. The
aforequoted provisions are not the only consideration for
deciding the petition in favor of the petitioners. We agree with

the Solicitor General that granting, in gratia argumenti, that
the commissions were in the form of incentives or
encouragement, so that the petitioners would be inspired to put
a little more industry on the jobs particularly assigned to them,
still these commissions are direct remunerations for services
rendered which contributed to the increase of income of
Zuellig. In the computation thereof, what should be taken into
account is the average commissions earned during their last
year of employment. The final consideration is, in carrying out
and interpreting the Labor Codes provisions and its
implementing regulations, the workingmans welfare should
be the primordial and paramount consideration. This kind of
interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of
the Labor Code which states that all doubts in the
implementation and interpretation of the provisions of the
Labor Code including its implementing rules and regulations
shall be resolved in favor of labor and Article 1702 of the
Civil Code which provides that in case of doubt, all labor
legislation and all labor contracts shall be construed in favor
of the safety and decent living for the laborer.
ACCORDINGLY, the petition is hereby GRANTED. The
decision of the respondent National Labor Relations
Commission is MODIFIED by including allowances and
commissions in the separation pay of petitioners Jose Songco
and Amancio Manuel. The case is remanded to the Labor
Arbiter for the proper computation of said separation pay. SO
ORDERED.
30. BOIETAKEDA CHEMICALS, INC., petitioner, vs.

HON. DIONISIO C. DE LA SERNA, Acting Secretary of
the Department of Labor and Employment, respondent.
G.R. No. 92174. December 10, 1993.
CASE SUMMARY
Labor Law; 13th Month Pay; Memorandum Order
No. 28 did not repeal, supersede or abrogate P.D. 851, thus the
interpretation given to the term basic salary remains the
same.Contrary to respondents contention, Memorandum
Order No. 28 did not repeal, supersede or abrogate P.D. 851.
As may be gleaned from the language of Memorandum Order
No. 28, it merely modified Section 1 of the decree by
removing the P1,000.00 salary ceiling. The concept of 13th
Month Pay as envisioned, defined and implemented under
P.D. 851 remained unaltered, and while entitlement to said
benefit was no longer limited to employees receiving a
monthly basic salary of not more than P1,000.00, said benefit
was, and still is, to be computed on the basic salary of the
employeerecipient as provided under P.D. 851. Thus, the
interpretation given to the term basic salary as defined in
P.D. 851 applies equally to basic salary under Memorandum
Order No. 28.
FACTS:
P.D. No. 851 provides for the Thirteen-Month Pay
Law. Under Sec. 1 of said law, all employers are required to
pay all their employees receiving basic salary of not more than
P1,000.00 a month, regardless of the nature of the
employment, and such should be paid on December 24 of
Page | 37
every year. The Rules and Regulations Implementing P.D.

851 contained provisions defining 13-month pay and basic
salary and the employers exempted from giving it and to
whom it is made applicable.
Supplementary Rules and Regulations Implementing
P.D. 851 were subsequently issued by Minister Ople which
inter alia set items of compensation not included in the
computation of 13-month pay. (overtime pay, earnings and
other
remunerations
which
are
not
part
of
basic salary shall not be included in the computation of 13th
month pay). Pres. Corazon Aquino promulgated on August 13,
1985 M.O.No. 28, containing a single provision that modifies
P.D. 851 by removing the salary ceiling of P1,000.00 a month.
More than a year later, Revised Guidelines on the
Implementation of the13-month pay law was promulgated by
the then Labor Secretary Drilon, among other things, defined
particularly
what
remunerative items were and were not included in the concept
of 13-month pay, and specifically dealt with employees who
are paid a fixed or guaranteed wage plus commission or
commissions were included in the computation of 13thmonth
pay)
A routine inspection was conducted in the premises o
f petitioner. Finding thatpetitioner had not been including the
commissions earned by its medical representatives in the
computation of their 1-month pay, a Notice of Inspection
Result was served on petitioner to effect restitution or
correction of the underpayment of 13-month pay for the
years, 1986 to1988 of Medical representatives. Petitioner
wrote the Labor Department contesting the Notice
of Inspection
Results,
and expressing the view that the commission paid to its medic
alrepresentatives are not to be included in the computation of
the 13th month pay since the law and its implementing rules
speak of REGULAR or BASIC salary and therefore exclude
all remunerations which are not part of the REGULAR salary.
Regional Dir. Luna Piezas issued an order for the payment of
underpaid 13-month pay for the years 1986, 1987 and 1988.
Amotion for reconsideration was filed and the then Acting
labor Secretary Dionisio de la Sema affirmed
affirmed the order with modification that the sales commission
earned of medicalrepresentatives before August 13, 1989 (eff
ectivity date of MO 28 and its implementingguidelines) shall
be excluded in the computation of the 13-month pay.
ISSUES:
Whether or not 13-Month pay is considered as
regular and basic salary?
RULING:
We rule for the petitioners. Contrary to respondents
contention, Memorandum Order No. 28 did not repeal,
supersede or abrogate P.D. 851. As may be gleaned from the
language of Memorandum Order No. 28, it merely modified
Section 1 of the decree by removing the P1,000.00 salary
ceiling. The concept of 13th Month Pay as envisioned, defined
and implemented under P.D. 851 remained unaltered, and
while entitlement to said benefit was no longer limited to
employees receiving a monthly basic salary of not more than
P1,000.00, said benefit was, and still is, to be computed on
the basic salary of the employee recipient as provided
under P.D. 851. Thus, the interpretation given to the term

basic salary as defined in P.D. 851 applies equally to basic
salary under Memorandum Order No. 28.
Having reached this conclusion, we deem it
unnecessary to discuss the other issues raised in these
petitions. WHEREFORE, the consolidated petitions are
hereby GRANTED. The second paragraph of Section 5(a) of
the Revised Guidelines on the Implementation of the 13th
Month Pay Law issued on November 16, 1987 by then Labor
Secretary Franklin M. Drilon is declared null and void as
being violative of the law said Guidelines were issued to
implement, hence issued with grave abuse of discretion
correctible by the writ of prohibition and certiorari. The
assailed Orders of January 17, 1990 and October 10, 1991
based thereon are SET ASIDE. SO ORDERED.
31. PHILIPPINE DUPLICATORS, INC. vs. NATIONAL

LABOR RELATIONS COMMISSION and PHILIPPINE
DUPLICATORS EMPLOYEES UNION-TUPAS
G.R. No. 110068 February 15, 1995
CASE SUMMARY:
Productivity bonuses are generally tied to the
productivity or profit generation of the employer corporation.
Productivity bonuses are not directly dependent on the extent
an individual employee exerts himself. A productivity bonus is
something extra for which no specific additional services are
rendered by any particular employee and hence not legally
demandable, absent a contractual undertaking to pay it. Sales
commissions, on the other hand, such as those paid in
Duplicators, are intimately related to or directly proportional
to the extent or energy of an employee's endeavors.
Commissions are paid upon the specific results achieved by a
salesman-employee. It is a percentage of the sales closed by a
salesman and operates as an integral part of such salesman's
basic pay.
FACTS:
Petitioner Corporation pays its salesmen a small fixed
or guaranteed wage; the greater part of the latters wages or
salaries being composed of the sales or incentive commissions
earned on actual sales of duplicating machines closed by them.
Thus, the sales commissions received for every duplicating
machine sold constituted part of the basic compensation or
remuneration of the salesmen of the Philippine Duplicators for
doing their job.
LA: Labor Arbiter Felipe T. Garduque II directing petitioner
to pay 13th month pay to private respondent employees
computed on the basis of their fixed wages plus sales
commissions.
NLRC: Respondent National Labor Relations Commission
upheld the decision of the Labor Arbiter.
Petitioner Duplicators filed (a) a Motion for Leave to Admit
Second Motion for Reconsideration and (b) a Second Motion
for Reconsideration. The Third Division of this Court referred
the petitioner's Second Motion for Reconsideration, and its
Page | 38
Motion for Leave to Admit the Second Motion for

Reconsideration, to the Court en banc en consulta.
Petitioners Contention
Petitioner invoked the decision handed down by this Court in
the two (2) consolidated cases of Boie-Takeda Chemicals, Inc.
vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox Corp.
vs. Hon. Cresenciano B. Trajano. In its decision, the Second
Division inter alia declared null and void the second
paragraph of Section 5 (a) 1 of the Revised Guidelines issued
by then Secretary of Labor Drilon. Petitioner submits that the
decision in the Duplicators case should now be considered as
having been abandoned or reversed by the Boie-Takeda
decision, considering that the latter went "directly opposite
and contrary to" the conclusion reached in the former.
Petitioner prays that the decision rendered in Duplicators be
set aside and another be entered directing the dismissal of the
money claims of private respondent Philippine Duplicators'
Employees' Union.
ISSUES:
1. Whether or not the sales commissions comprising a
pre-determined percent of the selling price of the
goods are included in the computation of the 13th
month pay.
2. Whether or not productivity bonus shall be
considered as part of wages in 13th month pay
HELD:
1. Yes. The decision rendered in Boie-Takeda cannot
serve as a precedent under the doctrine of stare
decisis. petitioner Duplicators did not put in issue the
validity of the Revised Guidelines on the
Implementary on of the 13th Month Pay Law either
in its Petition for Certiorari or in its (First) Motion
for Reconsideration
The sales commissions received for every duplicating
machine sold constituted part of the basic
compensation or remuneration of the salesmen of
Philippine Duplicators for doing their job. The
portion of the salary structure representing
commissions simply comprised an automatic
increment to the monetary value initially assigned to
each unit of work rendered by a salesman. Especially
significant here also is the fact that the fixed or
guaranteed portion of the wages paid to the
Philippine Duplicators' salesmen represented only
15%-30% of an employee's total earnings in a year.
The sales commissions were an integral part of the
basic salary structure of Philippine Duplicators'
employees salesmen. These commissions are not
overtime payments, nor profit-sharing payments nor
any other fringe benefit. Thus, the salesmen's
commissions, comprising a pre-determined percent of
the selling price of the goods sold by each salesman,
were properly included in the term "basic salary" for
purposes of computing their 13th month pay.
2.
No. Productivity bonuses are generally tied to the

productivity, or capacity for revenue production, of a
corporation; such bonuses closely resemble profit-
sharing payments and have no clear director

necessary relation to the amount of work actually
done by each individual employee. More generally, a
bonus is an amount granted and paid ex gratia to the
employee; its payment constitutes an act of
enlightened generosity and self-interest on the part of
the employer, rather than as a demandable or
enforceable obligation.
If an employer cannot be compelled to pay a
productivity bonus to his employees, it should follow
that such productivity bonus, when given, should not
be deemed to fall within the "basic salary" of
employees when the time comes to compute their
13th month pay.
Productivity bonuses are generally tied to the productivity or
profit generation of the employer corporation. Productivity
bonuses are not directly dependent on the extent an individual
employee exerts himself. A productivity bonus is something
extra for which no specific additional services are rendered by
any particular employee and hence not legally demandable,
absent a contractual undertaking to pay it. Sales commissions,
on the other hand, such as those paid in Duplicators, are
intimately related to or directly proportional to the extent or
energy of an employee's endeavors. Commissions are paid
upon the specific results achieved by a salesman-employee. It
is a percentage of the sales closed by a salesman and operates
as an integral part of such salesman's basic pay.
32. PLASTIC TOWN CENTER CORPORATION

vs.NATIONAL LABOR RELATIONS COMMISSION
AND NAGKAKAISANG LAKAS NG MANGGAGAWA
(NLM)-KATIPUNAN
G.R. No. 81176 April 19, 1989
CASE SUMMARY:
Gratuity pay is 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."
FACTS:
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.
Page | 39
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.
In the CBA, it was provided that:
Company agreed to grant regular workers who rendered at
least one year of continuous service of P1 per worked day and
that the Company will grant gratuity pay to a resigning
employee or laborer amounting to, among others, one month
salary for those who rendered two to five years of service.
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.
Respondents Contention
A month salary pertains to salary for 30 days, citing the
provision of the Civil Code on the matter.
LA: The Labor Arbiter agrees with the petitioners
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.
NLRC: The National Labor Relations Commission reversed
the decision of the Labor Arbiter and ordered respondent 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.
ISSUE:
Whether or not Plastic Town Centers contention that the
gratuity pay should be computed on the basis of 26 days for
one month salary instead of 30 days is valid.
HELD:
No. 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
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 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.
33. DAVAO FRUITS CORPORATION, petitioner, vs.

ASSOCIATED LABOR UNIONS (ALU) for and in behalf
of all the rank and file workers/employees of DAVAO
FRUITS CORPORATION and NATIONAL LABOR
RELATIONS COMMISSION, respondents
G.R. No. 85073. August 24, 1993
Labor Law; Benefits; Basic salary does not merely exclude the
benefits expressly mentioned but all payments which may be in
the form of fringe benefits or allowances; Overtime pay
earnings and other remunerations shall be excluded in
computing the thirteenth month pay.Clearly, the term basic
salary includes all remunerations or earnings paid by the
employer to the 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 of living 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. In fact, the Supplementary Rules and Regulations
Implementing P.D. No.851 are very emphatic in declaring that
overtime pay, earnings and other remunerations shall be
excluded in computing the thirteenth month pay.
FACTS:
Respondent Associated Labor Unions (ALU), for and
in behalf of all the rank and file workers and employees of
petitioner, filed a complaint 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
Page | 40
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.
ISSUE:
whether or not 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 included in the
computation thereof
HELD:
NO. 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 remunerations which are not
part of the basic salary shall not be included in the
computation of the 13 month pay.
Clearly, the term basic salary includes all
remunerations or earnings paid by the employer to the
employee, but excludes cost of living allowances, profitsharing 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
of living 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.
In other words, whatever compensation an employee
receives for an eight hour work daily or the daily wage rate is
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 and special holidays, as well as pay for
regular holidays, are likewise excluded in computing the basic
salary for the purpose of determining the thirteenth month pay.
However, 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. 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 Code of the Philippines, which prohibit the
diminution or elimination by the employer of the employees
existing benefits.
34.NASIPIT LUMBER COMPANY,

INC.,
and
PHILIPPINE
WALLBOARD
CORPORATION,
petitioners,
vs.
NATIONAL
WAGES
AND
PRODUCTIVITY COMMISSION, WESTERN AGUSAN
WORKERS UNION (WAWUULGWP LOCAL 101),
TUNGAO LUMBER WORKERS UNION (TULWUULGWP LOCAL 102) and UNITED WORKERS UNION
(UWUULGWP LOCAL 103), respondents
G.R. No. 113097. April 27, 1998.
Labor Law; Wage Orders; It is the National Wages and
Productivity Commission (NWPC), not the Regional Tripartite
Wages and Productivity Boards (RTWPB), which has the
power to prescribe the rules and guidelines for the
determination of minimum wage and productivity measures.
The foregoing clearly grants the NWPC, not the RTWPB, the
power to prescribe the rules and guidelines for the
determination of minimum wage and productivity measures.
While the RTWPB has the power to issue wage orders under
Article 122(b) of the Labor Code, such orders are subject to
the guidelines prescribed by the NWPC. One of these
guidelines is the Rules on Minimum Wage Fixing, which
was issued on June 4, 1990. Rule IV, Section 2 thereof, allows
the RTWPB to issue wage orders exempting enterprises from
the coverage of the prescribed minimum wages. However, the
NWPC has the power not only to prescribe guidelines to
govern wage orders, but also to issue exemptions therefrom, as
the said rule provides that whenever a wage order provides
for exemption, applications thereto shall be filed with the
appropriate Board which shall process the same, subject to
guidelines issued by the Commission. In short, the NWPC
lays down the guidelines which the RTWPB implements.
FACTS:
Region X Tripartite Wages and Productivity Board
issued Wage Order No. RX-01 and RX-01-A which provide
for an increase in the minimum wage rates applicable to
workers and employees in the private sector in Northern
Mindanao (Region X).
Nasipit Lumber Company, Inc. (NALCO), Philippine
Wallboard Corporation (PWC), and Anakan Lumber
Company (ALCO) jointly filed an application for exemption
from the abovementioned Wage Orders as distressed
establishments under Guidelines No. 3 issued by the herein
Board. Guidelines No. 3 provides: Establishment belonging
to distressed industry - an establishment that is engaged in an
industry that is distressed due to conditions beyond its control
as may be determined by the Board in consultation with DTI
and NWPC. Petitioners aver that they are engaged in logging
Page | 41
and integrated wood processing industry but are distressed due

to conditions beyond their control.
Private respondent unions, on the other hand, jointly
opposed the application for exemption on the ground that said
companies are not distressed establishments since their
capitalization has not been impaired by 25%.
Citing liquidity problems and business decline in the
wood processing industry, the RTWPB approved the
applicants joint application for exemption.
Dissatisfied with the RTWPBs Decision, the private
respondents lodged an appeal with the NWPC, which affirmed
ALCOs application but reversed the applications of herein
petitioners,
NALCO
and
PWC.
The
NWPC
reasoned: The Guideline No. 3 dated November 26, 1990,
issued by the herein Board cannot be used as valid basis for
granting applicants application for exemption since it did not
pass the approval of this Commission. Until and unless said
Guidelines No. 3 is approved by the Commission, it has no
operative force and effect.
ISSUE: whether or not a guideline issued by an RTWPB
without the approval of NWPC is valid
HELD: NO. The Labor Code lists the respective powers and
functions of the NWPC and RTWPB. It grants the NWPC, not
the RTWPB, the power to prescribe the rules and guidelines
for the determination of minimum wage and productivity
measures. While the RTWPB has the power to issue wage
orders under Article 122(b) of the Labor Code, such orders are
subject to the guidelines prescribed by the NWPC. One of
these guidelines is the Rules on Minimum Wage Fixing,
which was issued on June 4, 1990. Rule IV, Section 2 thereof,
allows the RTWPB to issue wage orders exempting
enterprises from the coverage of the prescribed minimum
wages. However, the NWPC has the power not only to
prescribe guidelines to govern wage orders, but also to issue
exemptions therefrom, as the said rule provides that
whenever a wage order provides for exemption, applications
thereto shall be filed with the appropriate Board which shall
process the same, subject to guidelines issued by the
Commission. In short, the NWPC lays down the guidelines
which the RTWPB implements.
Significantly, the NWPC authorized the RTWPB to
issue exemptions from wage orders, but subject to its review
and approval. Since the NWPC never assented to Guideline
No. 3 of the RTWPB, the said guideline is inoperative and
cannot be used by the latter in deciding or acting on
petitioners application for exemption.
To justify the exemption of a distressed establishment
from effects of wage orders, the NWPC requires the applicant,
if a stock corporation like petitioners, to prove that its
accumulated losses impaired its paid-up capital by at least 25
percent in the last full accounting period preceding the
application or the effectivity of the order. In the case at bar, it
is undisputed that during the relevant accounting period,
NALCO, ALCO and PWC sustained capital impairments of
1.89, 28.72 and 5.03 percent, respectively. Clearly, it was only
ALCO which met the exemption standard. Hence, the NWPC
did not commit grave abuse of discretion in approving the
application only of ALCO and in denying those of petitioners.
35. EMPLOYERS CONFEDERATION OF THE

PHILIPPINES, petitioner, vs. NATIONAL WAGES AND
PRODUCTIVITY COMMISSION AND REGIONAL
TRIPARTITE
WAGES
AND
PRODUCTIVITY
BOARDNCR, TRADE UNION CONGRESS OF THE
PHILIPPINES, respondents.
G.R. No. 96169. September 24, 1991.
CASE SUMMARY: Same; Same; Same; Republic Act No.
6727 was intended to rationalize wages. first, by providing for
fulltime boards to police wages roundtheclock and second by
giving the boards enough powers to achieve this objective.
As the Commission noted, the increasing trend is toward the
second mode, the salarycap method, which has reduced
disputes arising from wage distortions (brought about,
apparently, by the floorwage method), Of course, disputes are
appropriate subjects of collective bargaining and grievance
procedures, but as the Commission observed and as we are
ourselves agreed, bargaining has helped very little in
correcting wage distortions. Precisely, Republic Act No. 6727
was intended to rationalize wages, first, by providing for
fulltime boards to police wages roundtheclock, and second. by
giving the boards enough powers to achieve this objective.
FACTS: The Employers Confederation of the Philippines
(ECOP) is questioning the validity of Wage Order No. NCR01A dated October 23, 1990 of the Regional Tripartite Wages
and Productivity Board, National Capital Region, promulgated
pursuant to the authority of Republic Act No. 6727, AN ACT
TO RATIONALIZE WAGE POLICY DETERMINATION
BY ESTABLISHING THE MECHANISM AND PROPER
STANDARDS THEREFOR, AMENDING FOR THE
PURPOSE ARTICLE 99 OF, AND INCORPORATING
ARTICLES 120, 121, 122, 123, 124,126, AND 127 INTO,
PRESIDENTIAL DECREE NO. 442 AS AMENDED,
OTHERWISE KNOWN AS THE LABOR CODE OF THE
PHILIPPINES, FIXING NEW WAGE RATES, PROVIDING
WAGE INCENTIVES FOR INDUSTRIAL DISPERSAL TO
THE COUNTRYSIDE, AND FOR OTHER PURPOSES,"
was approved by the President on June 9,1989, T h e wa g e
or d e r i n cr e a s e d t h e minimum wage by P17.00 daily in
the National Capital Region.
The wage order is applied to all workers and employ
ees in the private sector of anincrease
of
P
17.00
including those who are paid above the statutory
wage rate. ECOP appealed with the NWPC but dismissed
the petition.
The Solicitor General in its comment posits that the B
oard upon the issuance of thewage order fixed minimum
wages according to the salary method. Petitioners insist that
the power of RTWPB was delegated,through RA 6727, to
grant minimum wage adjustments and the absence of
authority, it can only adjust floor wages
ISSUE: WON the wage order issued by RTWPB dated
October 23, 1990 is valid.
HELD:
Wage
order
is
valid.
The Court agrees with the Solicitor General. It noted
Page | 42
that there are two ways in the determination of wage,

these are floor wage method and salary ceiling
method. The floor wage method involves the fixing of
determinate amount that would be added tothe
prevailing statutory minimum wage while the
salary ceiling method
involves
wherethe
wage
adjustment is applied to employees receiving a certain
denominated salaryceiling.RA 6727 gave statutory
standards for fixing the minimum wage.
ART. 124. Standards/Criteria for Minimum Wage Fixing The
regional minimum wages to be established by the Regional Board shall be
as nearly adequate as is economically feasible to maintain standards of
living necessary for the health, efficiency and general well-being of the
employees within the framework of the national economic and social
development program. In the determination of such regional minimum
wages the Regional Board shall among other relevant factors,consider the
following:
A. The demand for living wages;
B. Wage adjustments vis--vis the consumer price
index;
C. The cost of living and changes or increases
therein;
D. The needs of workers and their families;
E. The need to induce industries to invest in the
countryside;
F. Improvements in the standards of living;
G. The prevailing wage levels;
H. Fair return of the capital invested and capacity to
pay of employers;
I. Effects of employment generation and family
income; and
J. The equitable distribution of income and wealth
along the imperatives economic and social
development.
The wage order was not acted in excess of boards
authority.The law gave reasonable limitations to the delegated
power of the board.
36. CAGAYAN SUGAR MILLING COMPANY,
petitioner, vs. SECRETARY OF LABOR AND
EMPLOYMENT,
DIRECTOR
RICARDO
S.
MARTINEZ, SR., and CARSUMCO EMPLOYEES
UNION, respondents.
G.R. No. 128399. January 15, 1998.
CASE SUMMARY: Labor Law; Minimum Wage; Wage
Orders; Due Process; It is a fundamental rule, borne out of a
sense of fairness, that the public is first notified of a law or
wage order before it can be held liable for violation thereof.
In wage fixing, factors such as fair return of capital invested,
the need to induce industries to invest in the countryside and
the capacity of employers to pay are, among others, taken into
consideration. Hence, our legislators provide for the creation
of Regional Tripartite Boards composed of representatives
from the government, the workers and the employers to
determine the appropriate wage rates per region to ensure that
all sides are heard. For the same reason, Article 123 of the
Labor Code also provides that in the performance of their
wagedetermining functions, the Regional Board shall conduct
public hearings and consultations, giving notices to interested

parties. Moreover, it mandates that the Wage Order shall take
effect only after publication in a newspaper of general
circulation in the region. It is a fundamental rule, borne out of
a sense of fairness, that the public is first notified of a law or
wage order before it can be held liable for violation thereof. In
the case at bar, it is indisputable that there was no public
consultation or hearing conducted prior to the passage of RO202A. Neither was it published in a newspaper of general
circulation as attested in the February 3, 1995 minutes of the
meeting of the Regional Wage Board that the non publication
was by consensus of all the board members. Hence, RO202A
must be struck down for violation of Article 123 of the Labor
Code.
FACTS: On November 16, 1993, Regional Wage Order No.
RO202 1 was issued by the Regional Tripartite Wage and
Productivity Board, Regional Office No. II of the Department
of Labor and Employment (DOLE). It provided, inter alia, that
upon the effectivity of this Wage Order, the statutory
minimum wage rates applicable to workers and employees in
the private sector in Region II shall increase P14.00 per day.
On September 12 and 13, 1994, labor inspectors from
the DOLE Regional Office examined the books of petitioner
and they found that petitioner violated the wage order as it did
not implement an across the board increase in the salary of its
employees. At the hearing at the DOLE Regional Office for
the alleged violation, petitioner maintained that it complied
with Wage Order No. RO202 as it paid the mandated increase
in the minimum wage. In an Order dated December 16, 1994,
public respondent Regional Director Ricardo S. Martinez, Sr.
ruled that petitioner violated Wage Order RO202 by failing to
implement an across the board increase in the salary of its
employees.
Wage Order No. RO202, passed on November 16,
1993, provided for an increase in the statutory minimum wage
rates for Region II. More than a year later, or on January 6,
1995, the Regional Board passed Wage Order RO202A
amending the earlier wage order and providing instead for an
across the board increase in wages of employees in Region II,
retroactive to the date of effectivity of Wage Order RO202.
Petitioner assails the validity of Wage Order RO202A on the ground that it was passed without the required public
consultation and newspaper publication.
ISSUE: WON the contention of the petitioner has a merit.
HELD: The petition has merit.
Article 123 of the Labor Code provides: ART. 123.
Wage Order.Whenever conditions in the region so warrant,
the Regional Board shall investigate and study all pertinent
facts, and, based on the standards and criteria herein
prescribed, shall proceed to determine whether a Wage Order
should be issued. Any such Wage Order shall take effect after
fifteen (15) days from its complete publication in at least one
(1) newspaper of general circulation in the region. In the
performance of its wage determining functions, the Regional
Board shall conduct public hearings/consultations, giving
Page | 43
notices to employees and employers groups and other

interested parties.
orders. It then demanded that the wage orders be applied

nationwide to the branches of the Bank.
The record shows that there was no prior public

consultation or hearings and newspaper publication insofar as
Wage Order No. RO202A is concerned. The court said that
there was no ambiguity in the provision of Wage Order RO202 as it provided in clear and categorical terms for an increase
in statutory minimum wage of workers in the region. Hence,
the subsequent passage of RO202A providing instead for an
across the board increase in wages did not clarify the earlier
Order but amended the same. In truth, it changed the essence
of the original Order. In passing RO202A without going
through the process of public consultation and hearings, the
Regional Board deprived petitioner and other employers of
due process as they were not given the opportunity to ventilate
their positions regarding the proposed wage increase. Hence,
RO202A must be struck down for violation of Article 123 of
the Labor Code.
PETITIONERS ARGUMENT:
The implementation of the wage orders resulted in
the discrepancy in the compensation of the employees of
similar pay claasification in different regions. Hence, the wage
orders increase the compensation of the employees in a given
region than their counters parts in the other regions.
37. PRUBANKERS ASSOCIATION, petitioner, vs.

PRUDENTIAL BANK
& TRUST COMPANY,
respondent.
302 SCRA 74 (1999)
Labor Law; Wage Distortion; Where a significant
change occurs at the lowest level of positions in terms of basic
wage without acorresponding change in the other level in the
hierarchy ofpositions, negating as a result thereof the
distinction between one level of position from the next higher
level, and resulting in a parity between the lowest level and
the next higher level or rank, between new entrants and old
hires, there exists a wage distortion.
Same; Same; The concept of wage distortion assumes
an existing grouping or classification of employees which
establishes distinctions among such employees on some
relevant or legitimate basis.
Same; Same; Elements.Wage distortion involves
four elements: 1. An existing hierarchy of positions with
corresponding salary rates; 2. A significant change in the
salary rate of a lower pay class without a concomitant increase
in the salary rate of a higher one; 3. The elimination of the
distinction between the two levels; 4. The existence of the
distortion in the same region of the country.
Same; Same; Where the hierarchy of positions based
on skills, length of service and other logical bases of
differentiation was preserved, it cannot be said that there was a
wage distortion.
FACTS:
The Regional Tripartite Wages and Productivity
Board (RTWB) of Region 5 issued Wage Order No. RB-05-03
which provide for Cost of Living Allowance (COLA) to
workers who had rendred of atleast 3 months of service before
the effectivity of the wage order. Subsequently, RTWB of
Region 7 issued Wage Order No. RO VII-02-A and RO VII03-A, integrating COLA into the basic pay of all the workers..
It also establish an increase in the wage rates of all employees.
Respondent Bank implemented the wage orders in its affected
branches. The petitioner Union wrote the Bank requesting that
the Labor Management Committee be convene to resolve the
alleged wage distortion due to the implementation of the wage
RESPONDENTS ARGUMENT:
There exist no wage distortion since the distinction
between employee groups in a particular region are
maintained.
ISSUE:
Whether or not a wage distortion resulted from
respondents implementation of the aforecited Wage Orders.
RULING:
There exist no wage distortion. Wage distortion shall
mean a situation where an increase in prescribed wage results
in the elimination or severe contraction of intentional
quantitative differences in wage or salary rates between and
among employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure
based on skills, length of service, or other logical bases of
differentiation.Wage distortion presupposes a classification
of positions and ranking of these positions at various levels.
One visualizes a hierarchy of positions with corresponding
ranks basically in terms of wages and other emoluments.
Where a significant change occurs at the lowest level
ofpositions in terms of basic wage without a corresponding
change in the other level in the hierarchy of positions,
negating as a result thereof the distinction between one level
of position from the next higher level, and resulting in a parity
between the lowest level and the next higher level or rank,
between new entrants and old hires, there exists a wage
distortion.
Wage distortion involves four elements: An existing
hierarchy of positions with corresponding salary rates,
significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher
one, elimination of the distinction between the two levels and
the existence of the distortion in the same region of the
country.
In the present case, it is clear that no wage distortion resulted
when respondent implemented the subject Wage Orders in the
covered branches. In the said branches, there was an increase
in the salary rates of all pay classes. Furthermore, the
hierarchy of positions based on skills, length of service and
other logical bases of differentiation was preserved. In other
words, the quantitative difference in compensation between
different pay classes remained the same in all branches in the
affected region.
Disparity in wagesbetween employees holding
similar positions but in different regions does not constitute
wage distortion as contemplated by law. As previously
enunciated, it is the hierarchy of positions and the disparity of
their corresponding wages and other emoluments that are
sought to be preserved by the concept of wage distortion. Put
Page | 44
differently, a wage distortion arises when a wage order

engenders wage parity between employees in different rungs
of the organizational ladder of the same establishment. It bears
emphasis that wage distortion involves a parity in the salary
rates of different pay classes which, as a result, eliminates the
distinction between the different ranks in the same region.
38.BANKARD
EMPLOYEES
UNION-WORKERS
ALLIANCE TRADE UNIONS, petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION and BANKARD,
INC., respondents.
423 SCRA 148 (2004)
Labor Law; Wage Distortion; In a problem dealing
with wage distortion, the basic assumption is that there
exists a grouping or classification of employees that
establishes distinctions among them on some relevant or
legitimate bases.
Same; Same; For purposes of determining the
existence of wage distortion, employees cannot create their
own independent classification and use it as a basis to demand
an across-the-board increase in salary.
Same; Same; The formulation of a wage structure
through the classification of employees is a matter of
management judgment and discretion.
FACTS:
Bankard Inc., classifies its employees to Level I to
Level V. The Board of Directors approved a new salary
schedule for purpose of making its hiring competitive in the
market. The new salary scale increase the compensation of
Level I and V employees by P1,000 and Level II to IV by 900.
Accordingly, the salaries of employees who fell below the
minimum rates were adjusted to reach such rates under their
levels. The move of Bankard preempt the Union to press for
the salary increased of the old and regular employees. Due to
the nature of the case and the probability of strike, the case
was certified by the Secretary of Labor for compulsary
arbitration.
Petitioner maintains that for purposes of wage distortion, the
classification is not one based on levels or ranks but on
two groups of employees, the newly hired and the old, in each
and every level, and not between and among the different
levels or ranks in the salary structure. Petitioner legally
obligate Bankard to correct the alleged wage distortion as
the increase in the wages and salaries of the newly-hired
Bankard took the position, however, that there was no wage
distortion and that there exost no obligation on the part of the
management to grant to all its employees the same increase in
an across-the-board manner.
ISSUE:
Whether or not there exist a wage distortion and, if
any, may Bankard be compelled to grant all employees the
same increase to cure such distortion.
RULING:
There exist no wage distortion. Prubankers
Association v. Prudential Bank and Trust Company laid down
the four elements of wage distortion, to wit: (1.) An existing

hierarchy of positions with corresponding salary rates; (2) A
significant change in thesalary rate of a lower pay class
without a concomitant increase in the salary rate of a higher
one; (3) The elimination of the distinction between the two
levels; and (4) The existence of the distortion in the same
region of the country.
To determine the existence of wage distortion, the
historical classification of the employees prior to the wage
increase must be established. Likewise, it must be shown that
as between the different classification of employees, there
exists a historical gap or difference. Thus the employees of
private respondent have been historically classified into
levels, i.e. I to V, and not on the basis of their length of
service. Put differently, the entry of new employees to the
company ipso facto place[s] them under any of the levels
mentioned in the new salary scale.
It is thus clear that there is no hierarchy of positions
between the newly hired and regular employees of Bankard,
hence, the first element of wage distortion provided in
Prubankers is wanting. While seniority may be a factor in
determining the wages of employees, it cannot be made the
sole basis in cases where the nature of their work differs.
Moreover, for purposes of determining the existence of wage
distortion, employees cannot create their own independent
classification and use it as a basis to demand an
across-the-board increase in salary.
Some of the elements of wage distortion are absent,
petitioner cannot legally obligate Bankard to correct the
alleged wage distortion as the increase in the wages and
salaries of the newly-hired was not due to a prescribed law or
wage order.The mere factual existence of wage distortion does
not, however, ipso facto result to an obligation to rectify it,
absent a law or other source of obligation which requires its
rectification.
39. DOMINICO C. CONGSON, petitioner, vs.

NATIONAL LABOR RELATIONS COMMISSION, NOE
BARGO, ROGER HIMENO, RAYMUNDO BADAGOS,
PATRICIO SALVADOR, SR., NEHIL BARGO, JOEL
MENDOZA,
and
EMMANUEL
CALIXIHAN,
respondents.
G.R. 114250. April 5, 1995.*
Labor Law; Wages; Wages shall be paid only by means of
legal tender.Undoubtedly, petitioners practice of paying
the private respondents the minimum wage by means of legal
tender combined with tuna liver and intestines runs counter to
the abovecited provision of the Labor Code. The fact that said
method of paying the minimum wage was not only agreed
upon by both parties in the employment agreement but even
expressly requested by private respondents, does not shield
petitioner. Article 102 of the Labor Code is clear. Wages shall
be paid only by means of legal tender. The only instance when
an employer is permitted to pay wages in forms other than
legal tender, that is, by checks or money order, is when the
circumstances prescribed in the second paragraph of Article
102 are present.
Page | 45
FACTS: Private respondents were hired on various dates by

petitioner as regular piece rate workers. They were uniformly
paid at a rate of P1.00 per tuna weighing 30 to 80 kilos per
movement. During the first week of June 1990, petitioner
notified his workers of his proposal to reduce the rates per
tuna movement due to the scarcity of tuna. Private respondents
resisted petitioners proposed rate reduction and were later on
replaced by new workers.
Private respondents filed a case against petitioner for
underpayment of wages (noncompliance with Rep. Act Nos.
6640 and 6727) and nonpayment of overtime pay, 13th month
pay, holiday pay, rest day pay, and five day service incentive
leave pay; and for constructive dismissal. With respect to their
monetary claims, private respondents charged petitioner with
violation of the Minimum Wage Law, alleging that with
petitioners rates and the scarcity of tuna catches, private
respondents average monthly earnings each did not exceed
P1,000.00.
Petitioner admits that the P1.00 per tuna movement is the
actual wage rate applied to private respondents as expressly
agreed upon by both parties. Petitioner further admits that
private respondents, per their request, were entitled to retrieve
the tuna intestines and liver as part of their compensation.
Finally, petitioner does not refute Labor Arbiter Aponesto
when the latter fixed private respondents individual monthly
wage at P2,670 computed at the mandatory daily wage of
P89.00. However, it is the contention of petitioner that
notwithstanding the fact that private respondents actual cash
wage fell below the minimum wage fixed by law, respondent
NLRC should have considered as forming a substantial part of
private respondents total wages the cash value of the tuna
liver and intestines private respondents were entitled to
retrieve. Petitioner therefore argues that the combined value of
private respondents cash wage and the monetary value of the
tuna liver and intestines clearly exceeded the minimum wage
fixed by law.
EMPLOYER
AND
EMPLOYEE;
STEVEDORING;
CONTRACT TO PERFORM SERVICE BY A GROUP;
PAYMENT OF WAGES TO LEADER OF GROUP NOT A
VIOLATION OF DIRECT PAYMENT.The work of
stevedoring was undertaken by the laborers, not in their
individual capacities, but as a group. The contract to perform
the service was made by the leader of the group, for and in
behalf of the latter, not for each and every one of them
individually. As the group undertook to render service for
vessels other than those of the respondent company, it was
necessary that some sort of leadership be instituted in the
group to determine which of the members will work for one
vessel and which for another. Leadership is essential not only
to secure work for the group but to determine which laborers
are to perform the service. The leadership must be paid for
and it was not shown that the head of the groups got the lion's
share of the cost of the services rendered. Held: The provision
of law on direct payment of wages has not been violated. If
racketeering was employed by the leaders, the remedy can not
be found in this court; it is for the group to organize into a
closely knitted union which will secure the privileges that the
members desire thru the selection of officers among
themselves who would not exploit them.
FACTS: Petitioners instituted this action before the Court of
Industrial Relations on August 5, 1952, praying for, among
others, direct payment of wages to the laborers instead of
through the union. The court found that there was no reason
for changing the practice of apportioning the wages for their
joint labor and sharing therein, because of the 150 members
only 5 were dissatisfied.
Petitioners argue before us that the decision violates the law
on direct payment of wages. The law relied upon by them is
Section 10, par. (b) of Republic Act No. 602, which
provides as follows:
ISSUE: Whether or not the value of tuna liver and intestines

should be included in arriving at the daily wage rate of the
private respondents.
SEC. 10. (b) Wages, including wages which may

be paid retroactively for whatever reason, shall be
paid directly to the employee to whom they are
due, except:
HELD: NO. Undoubtedly, petitioners practice of paying the

private respondents the minimum wage by means of legal
tender combined with tuna liver and intestines runs counter to
the provision of the Labor Code. The fact that said method of
paying the minimum wage was not only agreed upon by both
parties in the employment agreement but even expressly
requested by private respondents, does not shield petitioner.
Article 102 of the Labor Code is clear. Wages shall be paid
only by means of legal tender. The only instance when an
employer is permitted to pay wages in forms other than legal
tender, that is, by checks or money order, is when the
circumstances prescribed in the second paragraph of Article
102 are present.
(1) In cases where the employee is insured

with his consent by the employer, the
latter shall entitled to deduct from the
wage of the employee the amount paid by
the employer for premiums on the
insurance;
(2) cases of force majeure rendering such
payments impossible; and
(3) cases where the right of the employee
or his union to check-off has been
recognized
by
the
employer
or
authorized in writing by the individual
employees concerned.
40. EUFROCIO BERMISO, ET AL., petitioners, vs.

HIJOS DE F. ESC O, INC., ET AL., respondents
G.R. L11606. February 28, 1959
ISSUE: Whether or not the provision on direct payment of

wages has been violated.
Page | 46
HELD: NO. There is no question that the work of

stevedoring was undertaken by the laborers, not in their
individual capacities, but as a group. The contract to
perform the service was made by the leader of the
group, for and on behalf of the latter, not for each and
every one of them individually. For the sake of
convenience it was necessary that the group must be
large enough to be able to perform the task of loading
and unloading in as short time as possible. As the group
undertook to render service for vessels other than those
of the Hijos de F. Escao, it was absolutely necessary
that some sort of leadership be instituted in the group to
determine which of the members will work for one
vessel and which for another. Leadership is also essential
to obtain work for the group as employers naturally
prefer to deal with a leader of a group than with each
member individually. Leadership was, therefore, essential
not only to secure work for the group but to arrange the
laborers who are to perform the service. The leadership
must be paid for and it was not shown that the head of
the groups got the lion's share of the cost of the service
rendered. Under the circumstances we are not prepared to
say that the provision of law on direct payment of wages
has been violated. The lower court did not find sufficient
evidence to show that racketeering was employed by the
leaders. If any existed the remedy can not be found in
this court; it is for the group or organize into a closely
knitted union which would secure the privileges that the
selves who would not exploit them.
41.APODACA v NLRC
172 SCRA 442 (1989)
FACTS:
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.
ISSUE:
WON The NLRC has jurisdiction to determine such
intra-corporate dispute between stockholder and corporation.
WON Employer has no right to withhold payment of
wages already earned.
RESOLUTION:
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.
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. 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. 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.
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
Page | 47
filing of the complaint on December 19, 1986, with costs

against private respondents.
42.GENESIS TRANSPORT SERVICE v UMMGT

617 SCRA 352 (2010)
FACTS:
Respondent Juan Taroy was hired on February 2,
1992 by petitioner Genesis Transport Service, Inc. (Genesis
Transport) as driver on commission basis at 9% of the gross
revenue per trip.
On May 10, 2002, Taroy was, after due notice and
hearing, terminated from employment after an accident on
April 20, 2002 where he was deemed to have been driving
recklessly.
Taroy thus filed on June 7, 2002 a complaint for
illegal dismissal and payment of service incentive leave pay,
claiming that he was singled out for termination because of his
union activities, other drivers who had met accidents not
having been dismissed from employment.
Taroy later amended his complaint to implead his
herein co-respondent Unyon ng Malayang Manggagawa ng
Genesis Transport (the union) as complainant and add as
grounds of his cause of action unfair labor practice (ULP),
reimbursement of illegal deductions on tollgate fees, and
payment of service incentive leave pay
Taroy alleged that in 1997, petitioner started
deducting from his weekly earnings an amount ranging
from P160 to P900 representing toll fees, without his consent
and written authorization as required under Article 113 of the
Labor Code and contrary to company practice; and that
deductions were also taken from the bus conductors earnings
to thus result to double deduction.
Genesis Transport countered that Taroy committed several
violations of company rules for which he was given warnings
or disciplined accordingly; that those violations, the last of
which was the April 20, 2002 incident, included poor driving
skills, tardiness, gambling inside the premises, use of shabu,
smoking while driving, insubordination and reckless
driving; and that Taroys dismissal was on a valid cause and
after affording him due process.
Genesis Transport went on to claim that as the result
of the investigation showed that the cause of the accident was
Taroys reckless driving, and his immediate past infraction of
company rules on January 25, 2001 smoking inside the bus
already merited a final warning, it validly terminated his
employment.
the Labor Arbiter found that Genesis Transport
discharged the burden of proof that Taroys dismissal was on a
valid cause; that while Taroys past infractions can not be used
against him, still, they showed habituality; and that Genesis
Transport complied with the twin requirements of notice and
hearing, hence, Taroys dismissal was effected with due
process.
As to the charge of ULP, the Labor Arbiter ruled that
the respondent union failed to prove that Taroys dismissal
was due to his union membership and/or activities.
On the claim for service incentive leave pay, the Labor Arbiter
ruled that Taroy was not entitled thereto since he was a field
personnel paid on commission basis.
With respect to Taroys claim for refund, however,

the Labor Arbiter ruled in his favor for if, as contended by
Genesis Transport, tollgate fees form part of overhead
expense, why were not expenses for fuel and maintenance also
charged to overhead expense. The Labor Arbiter thus
concluded that "it would appear that the tollgate fees are
deducted from the gross revenues and not from the salaries of
drivers and conductors, but certainly the deduction thereof
diminishes the take home pay of the employees.
The NLRC affirmed the Labor Arbiters decision
with modification. It deleted the award to Taroy of attorneys
fees. It brushed aside Taroys claim of having been illegally
suspended, it having been raised for the first time on appeal.
he Court of Appeals, by the assailed Decision of August 24,
2007, partly granted the same, it ruling that petitioner Genesis
Transport violated Taroys statutory right to due process when
he was preventively suspended for more than thirty (30) days,
in violation of the Implementing Rules and Regulations of the
Labor Code.
The appellate court thus held Taroy to be entitled to
nominal damages in the amount of P30,000. And it reinstated
the Labor Arbiters order for petitioners to refund Taroy "the
underpayment."
ISSUE:
WON Taroy is entitled to incentive leave pay since
he was a field personnel paid on commission basis.
RESOLUTION:
The Court cannot take judicial notice of petitioners
claim that the deduction of tollgate fees from the gross
earnings of drivers is an accepted and long-standing practice
in the transportation industry. Expertravel & Tours, Inc. v.
Court of Appeals10 instructs:
Generally speaking, matters of judicial notice have three
material requisites: (1) the matter must be one of common and
general knowledge; (2) it must be well and authoritatively
settled and not doubtful or uncertain; and (3) it must be known
to be within the limits of the jurisdiction of the court. The
principal guide in determining what facts may be assumed to
be judicially known is that of notoriety. Hence, it can be said
that judicial notice is limited to facts evidenced by public
records and facts of general notoriety. Moreover, a judicially
noticed fact must be one not subject to a reasonable dispute in
that it is either: (1) generally known within the territorial
jurisdiction of the trial court; or (2) capable of accurate and
ready determination by resorting to sources whose accuracy
cannot reasonably be questionable.
Things of "common knowledge," of which courts
take judicial matters coming to the knowledge of men
generally in the course of the ordinary experiences of life, or
they may be matters which are generally accepted by mankind
as true and are capable of ready and unquestioned
demonstration. Thus, facts which are universally known, and
which may be found in encyclopedias, dictionaries or other
publications, are judicially noticed, provided, they are of such
universal notoriety and so generally understood that they may
be regarded as forming part of the common knowledge of
every person. As the common knowledge of man ranges far
and wide, a wide variety of particular facts have been
judicially noticed as being matters of common knowledge. But
Page | 48
a court cannot takejudicial notice of any fact which, in part, is

dependent on the existence or non-existence of a fact of which
the court has no constructive knowledge. (emphasis supplied)
None of the material requisites for the Court to take judicial
notice of a particular matter was established by petitioners.
Albeit the amounts representing tollgate fees were deducted
from gross revenues and not directly from Taroys
commissions, the labor tribunal and the appellate court
correctly held that the withholding of those amounts reduced
the amount from which Taroys 9% commission would be
computed. Such a computation not only marks a change in the
method of payment of wages, resulting in a diminution of
Taroys wages in violation of Article 113 vis--vis Article 100
of the Labor Code, as amended. It need not be underlined that
without Taroys written consent or authorization, the
deduction is considered illegal.
Besides, the invocation of the rule on "company
practice" is generally used with respect to the grant of
additional benefits to employees, not on issues involving
diminution of benefits.
Respecting the issue of statutory due process, the
Court holds that Taroys right thereto was not violated.
Sections 8 and 9 of Rule XXIII, Book V of the Implementing
Rules and Regulations of the Labor Code provide:
Section 8. Preventive suspension. The employer may place
the worker concerned under preventive suspension if his
continued employment poses a serious and imminent threat to
the life or property of the employer or his co-workers.
xxxx
Section 9. Period of Suspension No preventive suspension
shall last longer than thirty (30) days. The employer shall
thereafter reinstate the worker in his former or in a
substantially equivalent position or the employer may extend
the period of suspension provided that during the period of
extension, he pays the wages and other benefits due to the
worker. In such case, the worker shall not be bound to
reimburse the amount paid to him during the extension if the
employer decides, after completion of the hearing, to dismiss
the worker. (emphasis supplied)
To the appellate court, Genesis Transports act of
"placing Taroy under preventive suspension for more than
thirty (30) days was a predetermined effort to dismiss [him]
from employment, negating the argument that the delay in the
service of the notice of dismissal was not an issue and that the
same was allegedly due to Taroys inaction to receive the
same." Hence, the appellate court concluded, while there was
a just and valid cause for the termination of his services, his
right to statutory due process was violated to entitle him to
nominal damages, following Agabon v. NLRC. 11
The propriety of Taroys preventive suspension was
raised by respondents for the first time on appeal, however.
The well-settled rule, which also applies in labor cases, is that
issues not raised below cannot be raised for the first time on
appeal. Points of law, theories, issues and arguments not
brought to the attention of the lower court need not be, and
ordinarily will not be, considered by the reviewing court, as
they cannot be raised for the first time at that late stage. Basic
considerations of due process impel the adoption of this rule.12
In any event, what the Rules require is that the
employer act on the suspended workers status of employment
within the 30-day period by concluding the investigation
either by absolving him of the charges, or meting the

corresponding penalty if liable, or ultimately dismissing him.
If the suspension exceeds the 30-day period without any
corresponding action on the part of the employer, the
employer must reinstate the employee or extend the period of
suspension, provided the employees wages and benefits are
paid in the interim.
In the present case, petitioner company had until May
20, 2002 to act on Taroys case. It did by terminating him
through a notice dated May 10, 2002, hence, the 30-day
requirement was not violated even if the termination notice
was received only on June 4, 2002, absent any showing that
the delayed service of the notice on Taroy was attributable to
Genesis Transport.
The Court of Appeals Decision of August 24, 2007
and Resolution13 of March 13, 2008 are AFFIRMED, with the
MODIFICATION that the award of nominal damages to
respondent Juan Taroy is DELETED.
43. DENTECH MANUFACTURING CORPORATION

and JACINTO LEDESMA in his capacity as General
Manager,
petitioners,
vs.
NATIONAL
LABOR
RELATIONS COMMISSION, CCLU, BENJAMIN
MARBELLA, ARMANDO TORNO, JUANITO TAJAN,
JR. and JOEL TORNO, respondents.
G.R. No. 81477. April 19, 1989.
Doctrine:
Refund of cash bond; An employer is prohibited from
requiring his employees to file a cash bond or to make
deposits for loss or damage to tools or equipment; Case at
bar.The refund of the cash bond filed by the private
respondents is in order. Article 114 of the Labor Code
prohibits an employer from requiring his employees to file a
cash bond or to make deposits, subject to certain exceptions.
Facts:
The herein petitioner Dentech Manufacturing Corporation is a
domestic corporation organized under Philippine laws. Before
the firm became a corporate entity, it was known as the J.L.
Ledesma Enterprises, a sole proprietorship owned by the
herein petitioner Jacinto Ledesma. At present, he is the
president and general manager of the corporation as well as
the owner of the controlling interest thereof. The firm is
engaged in the manufacture and sale of dental equipment and
supplies.
The herein private respondents Benjamin Marbella, Armando
Torno, Juanito Tajan, Jr. and Joel Torno are members of the
Confederation of Citizens Labor Union, a labor organization
registered with the Department of Labor and Employment.
They used to be the employees of the petitioner firm, working
therein as welders, upholsterers and painters. They were
already employed with the company when it was still a sole
proprietorship. They were dismissed from the firm beginning
February 14, 1985.
At first, they only sought the payment of their 13th month pay
under Presidential Decree No. 851 as well as their separation
pay, and the refund of the cash bond they filed with the
Page | 49
company at the start of their employment. Later on, they

sought their reinstatement as well as the payment of their 13th
month pay and service incentive leave pay, and separation pay
in the event that they are not reinstated. It is alleged in the
Complaint and Position Paper accompanying the same that
they were dismissed from the firm for pursuing union
activities.
Labor Code where there is no showing that the Secretary of

Labor has recognized the same as a practice in the taxi
industry. Article 114 of the Labor Code provides the rule on
deposits for loss or damage to tools, materials or equipment
supplied by the employer. It does not permit deposits to defray
any deficiency which the taxi driver may incur in the
remittance of his boundary.
The position of the petitioners that the refund of the cash bond
filed by the private respondents is improper inasmuch as the
proceeds of the same had already been given to a certain
carinderia to pay for the outstanding accounts of the private
respondents therein.
The allegation of the petitioners to the effect that the proceeds

of the cash bond had already been given to a certain carinderia
to pay for the accounts of the private respondents therein does
not merit serious consideration. As correctly observed by the
Solicitor General, no evidence or receipt has been shown to
prove such payment.
Facts:
Private respondents Domingo Maldigan and Gilberto Sabsalon
were hired by the petitioners as taxi drivers and,
as such, they worked for 4 days weekly on a 24hour shifting
schedule. Aside from the daily boundary of P700.00 for
airconditioned taxi or P450.00 for nonairconditioned taxi, they
were also required to pay P20.00 for car washing, and to
further make a P15.00 deposit to answer for any deficiency in
their boundary, for every actual working
day. In less than 4 months after Maldigan was hired as an
extra driver by the petitioners, he already failed to report
for work for unknown reasons. Later, petitioners learned that
he was working for Mine of Gold Taxi Company. With
respect to Sabsalon, while driving a taxicab of petitioners on
September 6, 1983, he was held up by his armed passenger
who took all his money and thereafter stabbed him. He was
hospitalized and after his discharge,
he went to his home province to recuperate. In January, 1987,
Sabsalon was readmitted By petitioners as a taxi driver under
the same terms and conditions as when he was first employed,
but his working schedule was made on an alternative basis,
that is, he drove only every other day. However, on several
occasions, he failed to report for work during his schedule. On
September 22, 1991, Sabsalon failed to remit his boundary
of P700.00 for the previous day. Also, he abandoned his
taxicab in Makati without fuel refill worth P300.00. Despite
repeated requests of petitioners for him to report for work, he
adamantly refused. Afterwards it was revealed that he was
driving a taxi for Bulaklak Company. Sometime in 1989,
Maldigan requested petitioners for the reimbursement of his
daily cash deposits for 2 years, but herein petitioners told him
that not a single centavo was left of his deposits as these were
not even enough to cover the amount spent for the repairs of
the taxi he was driving. This was allegedly the practice
adopted by petitioners to recoup the expenses incurred in the
repair of their taxicab units. When Maldigan insisted on the
refund of his deposit, petitioners terminated his services.
Sabsalon, on his part, claimed that his termination from
employment was effected when he refused to pay for the
washing of his taxi seat covers. Private respondents filed for
illegal dismissal and illegal deductions with the Manila
Arbitration Office of the National Labor Relations
Commission.
44.FIVE J TAXI and/or JUAN S. ARMAMENTO,

petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION,
DOMINGO
MALDIGAN
and
GILBERTO SABSALON, respondents.
G.R. No. 111474. August 22, 1994.
LA: Dismissed. The labor arbiter holding that it took private

respondents two years to file the same and such unreasonable
delay was not consistent with the natural reaction of a person
who claimed to be unjustly treated, hence the filing of the case
could be interpreted as a mere afterthought.
Doctrine:
Labor Code; Article 114; Deposits; The P15.00 daily deposits
to defray shortage in boundary is violative of Article 114 of
NLRC: Affirmed the ruling of the labor arbiter that private

respondents services were not illegally terminated.
LA: Reinstate complainants to their former positions, without

backwages and to pay them a sum of money.
NLRC: Affirmed the LA decision.
Issue: Whether or not the cash bond they filed with the
company at the start of their employment was illegal hence,
refund.
Held:
The refund of the cash bond filed by the private respondents is
in order. Article 114 of the Labor Code prohibits an employer
from requiting his employees to file a cash bond or to make
deposits, subject to certain exceptions, to witArt. 114. Deposits for loss or damage.- No employer shall
require his worker to make deposits from which deductions
shall be made for the reimbursement of loss of or damage to
tools, materials, or equipment supplied by the employer,
except when the employer is engaged in such trades,
occupations or business where the practice of making
deductions or requiring deposits is a recognized one, or is
necessary or desirable as determined by the Secretary of Labor
in appropriate rules and regulations.
The petitioners have not satisfactorily disputed the
applicability of this provision of the Labor Code to the case at
bar. Considering further that the petitioners failed to show that
the company is authorized by law to require the private
respondents to file the cash bond in question, the refund
thereof is in order.
Page | 50
It, however, modified the decision of the labor arbiter by

ordering petitioners to pay private respondents the awards
stated at the beginning of this resolution. (National Labor
Relations Commission ordering petitioners to pay private
respondents Domingo Maldigan and Gilberto Sabsalon their
accumulated deposits and car wash payments, plus interest
thereon at the legal rate from the date of promulgation of
judgment to the date of actual payment, and 10% of the total
amount as and for attorneys fees.)
Issue: Whether or not the deductions made were illegal and if
illegal, considered a prohibition regarding wages.
Held:
The Court held that the deposits made were illegal and the
respondents must be refunded therefor. Article 114 of the
Labor Code provides as follows: Article 114. Deposits for
loss or damage.No employer shall require his worker to
make deposits from which deductions shall be made for the
reimbursement of loss of or damage to tools, materials, or
equipment supplied by the employer, except when the
employer is engaged in such trades, occupations or business
where the practice of making deposits is a recognized one, or
is necessary or desirable as determined by the Secretary of
Labor in appropriate rules and regulations. It can be deduced
therefrom that the said article provides the rule on deposits for
loss or damage to tools, materials or equipment supplied by
the employer. Clearly the same does not apply to or permit
deposits not to defray any deficiency which the taxi driver
may incur in the remittance of his boundary. Also, when
private respondents stopped working for petitioners, the
alleged purpose for which petitioners required such
unauthorized deposits no longer existed. In other case, any
balance due to private respondents after proper accounting
must be returned to them with legal interest. On the matter of
the car wash payments, private respondents are not entitled to
the refund of the P20.00 car wash payments they made. It will
be noted that there was nothing to prevent private respondents
from cleaning the taxi units themselves, if they wanted to save
their P20.00. Also, as the Solicitor General correctly noted, car
washing after a tour of duty is a practice in the taxi industry,
and is, in fact, dictated by fair play.
Facts:
Sometime in January of 1983, complaints for nonpayment of emergency cost of living allowances were filed by
46 workers, Tosoc, et als., against SOUTH MOTORISTS
before the Naga City District Office of Regional Office No. 5
of the then Ministry of Labor. On 10 January 1983 a Special
Order was issued by the District Labor Officer directing its
Labor Regulation Officers to conduct an inspection and
verification of SOUTH MOTORISTS' employment records.
On the date of the inspection and verification,
SOUTH MOTORISTS was unable to present its employment
records on the allegation that they had been sent to the main
office in Manila. The case was then set for conference on 25
January 1983 but had to be reset to 8 February 1983 upon the
request of SOUTH MOTORISTS to enable it to present all the
employment records on such date. However, on 7 February
1983 SOUTH MOTORISTS asked for another deferment to
16 February 1983 due to its lawyer's tight schedule. On 16
February 1983, SOUTH MOTORISTS again requested for a
resetting to 3 March 1983 because of the alleged voluminous
records it had to locate and its desire to submit a memorandum
regarding complainants' claims. On 2 March 1983, SOUTH
MOTORISTS once again requested an extension of 30 days
on the ground that the documents were still being prepared
and collated and that a formal manifestation or motion would
follow. Nothing did.
On 7 March 1983, the assigned Labor Regulation
Officers submitted an Inspection Report on the basis of which
an Order dated 14 April 1983 was issued by Labor Officer
Domingo Reyes directing SOUTH MOTORISTS to pay
Tosoc, et als., the total amount of One Hundred Eighty Four
Thousand Six Hundred Eighty Nine and 12/100 Pesos
(P184,689.12) representing the latter's corresponding
emergency cost of living allowances.
SOUTH MOTORISTS moved for reconsideration of
the Order, which was denied. On 11 July 1988, the Secretary
of Labor and Employment affirmed the appealed Order. On 28
July 1988, SOUTH MOTORISTS moved for reconsideration
but this proved unsuccessful. A Second Motion for
Reconsideration was filed, which was likewise denied in an
Order dated 7 March 1989.
ISSUE: Wether or not the award for money claims given by
the Secretary of Labor to the employees is valid?
45. SOUTH MOTORISTS ENTERPRISES, petitioner, vs.

ROQUE TOSOC, ET AL., and HON. SECRETARY OF
LABOR AND EMPLOYMENT, respondents.
GR and date : G.R. No. 87449. January 23, 1990.
CASE SUMMARY:
Employment records of employees must be kept in or
about the premises of the workplace; the keeping of such
records in another place is prohibited.As to the matter that
the respondent Secretary of Labor and Employment erred in
affirming the award based on a mere Inspection Report, we
see no reason for SOUTH MOTORISTS to complain as it was
afforded ample opportunity to present its side. It failed to
present employment records giving as an excuse that they
were sent to the main office in Manila, in violation of Section
11 of Rule X.
RULING: YES. As to the matter that the respondent

Secretary of Labor and Employment erred in affirming the
award based on a mere Inspection Report, we see no reason
for SOUTH MOTORISTS to complain as it was afforded
ample opportunity to present its side. It failed to present
employment records giving as an excuse that they were sent to
the main office in Manila, in violation of Section 11 of Rule
X, Book II of the Omnibus Rules Implementing the Labor
Code providing that:
All employment records of the employees of the employer
shall be kept and maintained in or about the premises of the
workplace. The premises of a workplace shall be understood
to mean the main or branch office or establishment, if any,
depending., upon where the employees are regularly assigned.
Page | 51
The keeping of the employee's records in another place is

prohibited.
SOUTH MOTORISTS also caused the resettings of all
subsequent hearingsfrom 25 January 1983 to 8 February
1983, then to 16 February 1983, then to 3 March and finally,
again requested for another 30-day-extension on the ground
that the documents, were still being prepared and collated.
Having been given the opportunity to put forth its case,
SOUTH MOTORISTS has only itself to blame for having
failed to avail of the same (Adamson and Adamson, Inc. vs.
Judge Amores, G.R. No. 58292, 23 July 1987,152 SCRA
237). What is more, its repeated failure to attend the hearings,
and to submit any motion as manifested may be construed as a
waiver of its right to adduce evidence to controvert the
worker's claims.
having become final and executory, a writ of garnishment was

issued pursuant to which Deputy Sheriff Cesar A. Roxas on
August 1, 1975 served a Notice of Garnishment upon El
Grande Hotel, where petitioner was then employed, garnishing
her "salary, commission and/or remuneration." Petitioner then
filed with the Court of First Instance of Manila a motion to lift
said garnishment on the ground that her "salaries, commission
and/or remuneration" are exempted from execution under
Article 1708 of the New Civil Code.
On March 30, 1976, the Court of Appeals dismissed
the petition for certiorari. In dismissing the petition, the Court
of Appeals held that petitioner is not a mere laborer as
contemplated under Article 1708 as the term laborer does not
apply to one who holds a managerial or supervisory position
like that of petitioner, but only to those "laborers occupying
the lower strata."
46. ROSARIO A. GAA, petitioner, vs. THE

HONORABLE COURT OF APPEALS, EUROPHIL
INDUSTRIES CORPORATION, and CESAR R. ROXAS,
Deputy Sheriff of Manila, respondents.
GR AND DATE: No. L44169. December 3, 1985.
ISSUE: Wether or not petitioner (Gaa) salary is exempted

from execution of garnishment under Art. 1708 of the NCC.
CASE SUMMARY:
The legislature intended the exemption in Article
1708 of the New Civil Code to operate in favor of any but
those who are laboring men or women in the sense that their
work is manual. Persons belonging to this class usually look to
the reward of a day's labor for immediate or present support,
and such person are more in need of the exemption than any
others. Petitioner Rosario A. Gaa is definitely not within that
class.
Article 1708 used the word "wages" and not "salary" in
relation to "laborer" when it declared what are to be exempted
from attachment and execution. The term "wages" as
distinguished from "salary", applies to the compensation for
manual labor, skilled or unskilled, paid at stated times, and
measured by the day, week, month, or season, while "salary"
denotes a higher degree of employment, or a superior grade of
services, and implies a position of office: by contrast, the term
"wages" indicates considerable pay for a lower and less
responsible character of employment, while "salary" is
suggestive of a larger and more important service (35 Am. Jur.
496).
FACTS:
Respondent Europhil Industries Corporation was
formerly one of the tenants in Trinity Building at T.M. Kalaw
Street, Manila, while petitioner Rosario A. Gaa was then the
building administrator. On December 12, 1973, Europhil
Industries commenced an action (Civil Case No. 92744) in the
Court of First Instance of Manila for damages against
petitioner "for having perpetrated certain acts that Europhil
Industries considered a trespass upon its rights, namely,
cutting of its electricity, and removing its name from the
building directory and gate passes of its officials and
employees" (p. 87, Rollo). On June 28, 1974, said court
rendered judgment in favor of respondent Europhil Industries,
ordering petitioner to pay the former the sum of P10,000.00 as
actual damages, P5,000.00 as moral damages, P5,000.00 as
exemplary damages and to pay the costs. The said decision
RULING:
NO. Article 1708 used the word "wages" and not
"salary" in relation to "laborer" when it declared what are to
be exempted from attachment and execution. The term
"wages" as distinguished from "salary", applies to the
compensation for manual labor, skilled or unskilled, paid at
stated times, and measured by the day, week, month, or
season, while "salary" denotes a higher degree of employment,
or a superior grade of services, and implies a position of
office: by contrast, the term "wages" indicates considerable
pay for a lower and less responsible character of employment,
while "salary" is suggestive of a larger and more important
service (35 Am. Jur. 496). The distinction between wages and
salary was adverted to in Bell vs. Indian Livestock Co. (Tex.
Sup.), 11 S.W. 344, wherein it was said: " 'Wages' are the
compensation given to a hired person for service, and the same
is true of 'salary'. The words seem to be synonymous,
convertible terms, though we believe that use and general
acceptation have given to the word 'salary' a significance
somewhat different from the word 'wages' in this: that the
former is understood to relate to position of office, to be the
compensation given for official or other service, as
distinguished from 'wages', the compensation for labor."
Annotation 102 Am. St. Rep. 81, 95. We do not think that the
legislature intended the exemption in Article 1708 of the New
Civil Code to operate in favor of any but those who are
laboring men or women in the sense that their work is manual.
Persons belonging to this class usually look to the reward of a
day's labor for immediate or present support, and such persons
are more in need of the exemption than any others. Petitioner
Rosario A. Gaa is definitely not within that class.
47.Republic vs. Peralta

No. L56568. May 20, 1987
Labor Law; Wage; Termination or Separation Pay
Construed; Wages under Article 110 of the Labor Code may
be regarded as embracing within its scope severance pay or
termination or separation pay. In Philippine Commercial
and Industrial Bank (PCIB) vs. National Mines and Allied
Page | 52
Workers Union, the Solicitor General took a different view

and there urged that the term "wages" under Article 110 of the
Labor Code may be regarded as embracing within its scope
severance pay or termination or separation pay. In PCIB, this
Court agreed with the position advanced by the Solicitor
General. We see no reason for overturning this particular
position. We continue to believe that, for the specific purposes
of Article 110 and in the context of insolvency, termination or
separation pay is reasonably regarded as forming part of the
remuneration or other money benefits accruing to employees
or workers by reason of their having previously rendered
services to their employer; as such, they fall within the scope
of "remuneration or earningsfor services rendered or to be
rendered." Liability for separation pay might indeed have
the effect of a penalty, so far as the employer is concerned. So
far as concerns the employees, however, separation pay is
additional remuneration to which they become entitled
because, having previously rendered services, they are
separated from the employer's service. The relationship
between separation pay and services rendered is underscored
by the fact that separation pay is measured by the amount (i.e.,
length) of the services rendered. This construction is sustained
both by the specific terms of Article 110 and by the major
purposes and basic policy embodied in the Labor Code. It is
also the construction that is suggested by Article 4 of the
Labor Code which directs that doubtsassuming that any
substantial rather than merely frivolous doubts remainin the
interpretation of the provisions of the Labor Code and its
implementing rules and regulations shall be "resolved in favor
of labor."
Same; Same; Insolvency; Classification, concurrence
and preference or credits; Duties, taxes and fees due on
specific movable property of the insolvent to the state or any
subdivision thereof and taxes due upon the insolvent's land or
building are preferred in respect of the particular movable or
immovable property to which the tax liens have attached.
Article 110 of the Labor Code, in determining the reach of its
terms, cannot be viewed in isolation. Rather, Article 110 must
be read in relation to the provisions of the Civil Code
concerning the classification, concurrence and preference of
credits, which provisions find particular application in
insolvency proceedings where the claims of all creditors,
preferred or non-preferred, may be adjudicated in a binding
manner. It is thus important to begin by outlining the scheme
constituted by the provisions of the Civil Code on this subject.
Those provisions may be seen to classify credits against a
particular insolvent into three general categories, namely: (a)
special preferred credits listed in Articles 2241 and 2242, (b)
ordinary preferred credits listed in Article 2244; and (c)
common credits under Article 2245. Turning first to special
preferred credits under Articles 2241 and 2242, it should be
noted at once that these credits constitute liens or
encumbrances on the specific movable or immovable property
to which they relate. Article 2243 makes clear that these
credits "shall be considered as mortgages or pledges of real or
personal property, or liens within the purview of legal
provisions governing insolvency." It should be emphasized in
this connection that "duties, taxes and fees due [on specific
movable property of the insolvent] to the State or any
subdivision thereof" (Article 2241 [1]) and "taxes due upon
the [insolvent's] land or building (2242 [1])" stand first in

preference in respect of the particular movable or immovable
property to which the tax liens have attached. Article 2243 is
quite explicit: "[T]axes mentioned in number 1, Article 2241
and number 1, Article 2242 shall first be satisfied." The claims
listed in numbers 2 to 13 in Article 2241 and in numbers 2 to
10 in Articles 2242, all come after taxes in order of
precedence; such claims enjoy their privileged character as
liens and may be paid only to the extent that taxes have been
paid from the proceeds of the specific property involved (or
from any other sources) and only in respect of the remaining
balance of such proceeds. What is more, these other (nontax)
credits, although constituting liens attaching to particular
property, are not preferred one over another inter se. Provided
tax liens shall have been satisfied, non-tax liens or special
preferred credits which subsist in respect of specific movable
or immovable property are to be treated on an equal basis and
to be satisfied concurrently and proportionately. Put
succinctly, Articles 2241 and 2242 jointly with Articles 2246
to 2249 establish a two-tier order of preference. The first tier
includes only taxes, duties and fees due on specific movable or
immovable property. All other special preferred credits stand
on the same second tier to be satisfied, pari passu and pro
rata, out of any residual value of the specific property to
which such other credits relate. Credits which are specially
preferred because they constitute liens (tax or nontax) in turn,
take precedence over ordinary preferred credits so far as
concerns the property to which the liens have attached. The
specially preferred credits must be discharged first out of the
proceeds of the property to which they relate, before ordinary
preferred creditors may lay claim to any part of such proceeds.
Same; Same; Same; Same; Claims for unpaid wages
do not fall within the category of specially preferred claims
under Articles 2241 and 2242 of the Civil Code as they are
covered by Article 2241 No, 6 and Article 2242 No. 3.
Article 110 of the Labor Code does not purport to create a lien
in favor of workers or employees for unpaid wages either
upon all of the properties or upon any particular property
owned by their employer. Claims for unpaid wages do not
therefore fall at all within the category of specially preferred
claims established under Articles 2241 and 2242 of the Civil
Code, except to the extent that such claims for unpaid wages
are already covered by Article 2241, number 6: "claims for
laborers' wages, on the goods manufactured or the work
done;" or by Article 2242, number 3: "claims of laborers and
other workers engaged in the construction, reconstruction or
repair of buildings, canals and other works, upon said
buildings, canals or other works." To the extent that claims for
unpaid wages fall outside the scope of Article 2241, number 6
and 2242, number 3, they would come within the ambit of the
category of ordinary preferred credits under Article 2244.
Applying Article 2241, number 6 to the instant case, the
claims of the Unions for separation pay of their members
constitute liens attaching to the processed leaf tobacco, cigars
and cigarettes and other products produced or manufactured
by the Insolvent, but not to other assets owned by the
Insolvent. And even in respect of such tobacco and tobacco
products produced by the Insolvent, the claims of the Unions
may be given effect only after the Bureau of Internal
Revenue's claim for unpaid tobacco inspection fees shall have
Page | 53
been satisfied out of the products so manufactured by the

Insolvent.
Same; Same; Same; Same; Same; Article 110 of the
Labor Code modified in two respect Article 2244 of the Civil
Code.We, however, do not believe that Article 110 has had
no impact at all upon the provisions of the Civil Code. Bearing
in mind the overriding precedence given to taxes, duties and
fees by the Civil Code and the fact that the Labor Code does
not impress any lien on the property of an employer, the use of
the phrase "first preference" in Article 110 indicates that what
Article 110 intended to modify is the order of preference
found in Article 2244, which order relates, as we have seen, to
property of the Insolvent created or recognized by Articles
2241 and 2242. We have noted that Article 2244, number 2,
establishes second priority for claims for wages for services
rendered by employees or laborers of the Insolvent "for one
year preceding the commencement of the proceedings in
insolvency." Article 110 of the Labor Code establishes "first
preference" for services rendered "during the period prior to
the bankruptcy or liquidation," a period not limited to the year
immediately prior to the bankruptcy or liquidation. Thus, very
substantial effect may be given to the provisions of Article
110 without grievously distorting the framework established in
the Civil Code by holding, as we so hold, that Article 110 of
the Labor Code has modified Article 2244 of the Civil Code in
two respects: (a) firstly, by removing the one year limitation
found in Article 2244, number 2; and (b) secondly, by moving
up claims for unpaid wages of laborers or workers of the
Insolvent from second priority to first priority in the order of
preference established by Article 2244.
FACTS:
The Republic of the Philippines seeks the review on
certiorari of the Order dated 17 November 1980 of the Court
of First Instance of Manila in its Civil Case No. 108395
entitled "In the Matter of Voluntary Insolvency of Quality
Tobacco Corporation, Quality Tobacco Corporation,
Petitioner," and of the Order dated 19 January 1981 of the
same court denying the motion for reconsideration of the
earlier Order filed by the Bureau of Internal Revenue and the
Bureau of Customs for the Republic.
In the voluntary insolvency proceedings commenced in
May 1977 by private respondent Quality Tobacco Corporation
(the "Insolvent"), the following claims of creditors were filed:
1. P2,806,729.92, by the USTC Association of
Employees
and
Workers
UnionPTGWO
("USTC"), as separation pay sum of P280,672.99 as
attorney's fees had been awarded by the National
Labor Relations Commission in NLRC Case No.
RBIV977577.
2. P53,805.05 by the Federacion de la Industria
Tabaquera y Otros Trabajadores de Filipinas
("FOITAF"), as separation pay for their members, an
amount similarly awarded by the NLRC in the same
NLRC Case.
3. P1,085,188.22 by the Bureau of Internal Revenue for
tobacco inspection fees covering the period 1 October
1967 to 28 February 1973; P276,161.00 by the
Bureau of Customs for customs duties and taxes
payable on various importations by the Insolvent.
These obligations appear to be secured by surety
bonds. Some of these imported items are apparently

still in customs custody so far as the record before
this Court goes.
In its questioned Order of 17 November 1980, the trial court
held that the above enumerated claims of USTC and FOITAF
(hereafter collectively referred to as the "Unions") for
separation pay of their respective members embodied in final
awards of the National Labor Relations Commission were to
be preferred over the claims of the Bureau of Customs and the
Bureau of Internal Revenue.
RTC:
The trial court, in so ruling, relied primarily upon
Article 110 of the Labor Code which reads thus: "Article 110.
Worker preference in case of bankruptcy.ln the event of
bankruptcy or liquidation of an employer's business, his
workers shall enjoy first preference as regards wages due them
for services rendered during the period prior to the bankruptcy
or liquidation, any provision of law to the contrary
notwithstanding. Unpaid wages shall be paid in full before
other creditors may establish any claim to a share in the assets
of the employer."
SG:
The Solicitor General, in seeking the reversal of the
questioned Orders, argues that Article 110 of the Labor Code
is not applicable as it speaks of "wages," a term which he
asserts does not include the separation pay claimed by the
Unions. "Separation pay," the Solicitor General contends, "is
given to a laborer for a separation from employment computed
on the basis of the number of years the laborer was employed
by the employer; it is a form of penalty or damage against the
employer in favor of the employee for the latter's dismissal or
separation from service. Article 97 (f) of the Labor Code
defines "wages" in the following terms: " 'Wage' paid to any
employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or
to be done, or for services rendered or to be rendered, and
includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. 'Fair
and reasonable value' shall not include any profit to the
employer or to any person affiliated with the employer."
ISSUES:
1. WON separation pay is a form of penalty or wage
2.
Work preference in the event of
insolvency/bankruptcy
HELD:
1. We are unable to subscribe to the view urged by the
Solicitor General. We note, in this connection, that in
Philippine Commercial and Industrial Bank (PCIB)
vs. National Mines and Allied Workers Union, the
Solicitor General took a different view and there
urged that the term "wages" under Article 110 of the
Page | 54
Labor Code may be regarded as embracing within its

scope severance pay or termination or separation pay.
In PCIB, this Court agreed with the position
advanced by the Solicitor General. We see no reason
for overturning this particular position. We continue
to believe that, for the specific purposes of Article
110 and in the context of insolvency, termination or
separation pay is reasonably regarded as forming part
of the remuneration or other money benefits accruing
to employees or workers by reason of their having
previously rendered services to their employer; as
such, they fall within the scope of "remuneration or
earningsfor services rendered or to be rendered."
Liability for separation pay might indeed have the
effect of a penalty, so far as the employer is
concerned. So far as concerns the employees,
however, separation pay is additional remuneration to
which they become entitled because, having
previously rendered services, they are separated from
the employer's service. The relationship between
separation pay and services rendered is underscored
by the fact that separation pay is measured by the
amount (i.e., length) of the services rendered. This
construction is sustained both by the specific terms of
Article 110 and by the major purposes and basic
policy embodied in the Labor Code.
It is also the construction that is suggested by Article
4 of the Labor Code which directs that doubts
assuming that any substantial rather than merely
frivolous doubts remainin the interpretation of the
provisions of the Labor Code and its implementing
rules and regulations shall be "resolved in favor of
labor.''
2.
Article 110 of the Labor Code, in determining the

reach of its terms, cannot be viewed in isolation.
Rather, Article 110 must be read in relation to the
provisions ofthe Civil Code concerning the
classification, concurrence and preference of credits,
which provisions find particular application in
insolvency proceedings where the claims of all
creditors, preferred or non-preferred, may be
adjudicated in a binding manner. It is thus important
to begin by outlining the scheme constituted by the
provisions of the Civil Code on this subject. Those
provisions may be seen to classify credits against a
particular insolvent into three general categories,
namely: (a) special preferred credits listed in Articles
2241 and 2242, (b) ordinary preferred credits listed in
Article 2244; and (c) common credits under Article
2245.
Turning first to special preferred credits under Articles 2241
and 2242, it should be noted at once that these credits
constitute liens or encumbrances on the specific movable or
immovable property to which they relate. Article 2243 makes
clear that these credits "shall be considered as mortgages or
pledges of real or personal property, or liens within the
purview of legal provisions governing insolvency." It should
be emphasized in this connection that "duties, taxes and fees
due [on specific movable property of the insolvent] to the
State or any subdivision thereof" (Article 2241 [1]) and "taxes

due upon the [insolvent's] land or building (2242 [1])" stand
first in preference in respect of the particular movable or
immovable property to which the tax liens have attached.
Article 2243 is quite explicit: "[T]axes mentioned in number
1, Article 2241 and number 1, Article 2242 shall first be
satisfied." The claims listed in numbers 2 to 13 in Article 2241
and in numbers 2 to 10 in Articles 2242, all come after taxes
in order of precedence; such claims enjoy their privileged
character as liens and may be paid only to the extent that taxes
have been paid from the proceeds of the specific property
involved (or from any other sources) and only in respect of the
remaining balance of such proceeds. What is more, these other
(nontax) credits, although constituting liens attaching to
particular property, are not preferred one over another inter se.
Provided tax liens shall have been satisfied, non-tax liens or
special preferred credits which subsist in respect of specific
movable or immovable property are to be treated on an equal
basis and to be satisfied concurrently and proportionately. Put
succinctly, Articles 2241 and 2242 jointly with Articles 2246
to 2249 establish a two-tier order of preference.
The first tier includes only taxes, duties and fees due
on specific movable or immovable property. All other special
preferred credits stand on the same second tier to be satisfied,
pari passu and pro rata, out of any residual value of the
specific property to which such other credits relate. Credits
which are specially preferred because they constitute liens (tax
or nontax) in turn, take precedence over ordinary preferred
credits so far as concerns the property to which the liens have
attached. The specially preferred credits must be discharged
first out of the proceeds of the property to which they relate,
before ordinary preferred creditors may lay claim to any part
of such proceeds.
Article 110 of the Labor Code does not purport to
create a lien in favor of workers or employees for unpaid
wages either upon all of the properties or upon any particular
property owned by their employer. Claims for unpaid wages
do not therefore fall at all within the category of specially
preferred claims established under Articles 2241 and 2242 of
the Civil Code, except to the extent that such claims for
unpaid wages are already covered by Article 2241, number 6:
"claims for laborers' wages, on the goods manufactured or the
work done;" or by Article 2242, number 3: "claims of laborers
and other workers engaged in the construction, reconstruction
or repair of buildings, canals and other works, upon said
buildings, canals or other works." To the extent that claims for
unpaid wages fall outside the scope of Article 2241, number 6
and 2242, number 3, they would come within the ambit of the
category of ordinary preferred credits under Article 2244.
Applying Article 2241, number 6 to the instant case, the
claims of the Unions for separation pay of their members
constitute liens attaching to the processed leaf tobacco, cigars
and cigarettes and other products produced or manufactured
by the Insolvent, but not to other assets owned by the
Insolvent. And even in respect of such tobacco and tobacco
products produced by the Insolvent, the claims of the Unions
may be given effect only after the Bureau of Internal
Revenue's claim for unpaid tobacco inspection fees shall have
been satisfied out of the products so manufactured by the
Insolvent.
Page | 55
We, however, do not believe that Article 110 has had

no impact at all upon the provisions of the Civil Code. Bearing
in mind the overriding precedence given to taxes, duties and
fees by the Civil Code and the fact that the Labor Code does
not impress any lien on the property of an employer, the use of
the phrase "first preference" in Article 110 indicates that what
Article 110 intended to modify is the order of preference
found in Article 2244, which order relates, as we have seen, to
property of the Insolvent created or recognized by Articles
2241 and 2242. We have noted that Article 2244, number 2,
establishes second priority for claims for wages for services
rendered by employees or laborers of the Insolvent "for one
year preceding the commencement of the proceedings in
insolvency." Article 110 of the Labor Code establishes "first
preference" for services rendered "during the period prior to
the bankruptcy or liquidation," a period not limited to the year
immediately prior to the bankruptcy or liquidation.
Thus, very substantial effect may be given to the
provisions of Article 110 without grievously distorting the
framework established in the Civil Code by holding, as we so
hold, that Article 110 of the Labor Code has modified Article
2244 of the Civil Code in two respects: (a) firstly, by
removing the one year limitation found in Article 2244,
number 2; and (b) secondly, by moving up claims for unpaid
wages of laborers or workers of the Insolvent from second
priority to first priority in the order of preference established
by Article 2244.
48. THE M NIL B NKING CORP. (Manilabank)

and ARNULFO B. AURELLANO in his capacity as
Statutory Receiver of Manilabank, petitioners, vs. THE
VICTOR L. MENDOZA, ET AL.
G.R. No. 107487. September 29, 1997.
CASE SYLLABUS:
Same; Same; Bankruptcy; Employees enjoy first
preference in the event of bankruptcy or liquidation of an
employers business.With respect to G.R. No. 107487, the
same is dismissed, the issues raised therein having been
rendered moot and academic by the foregoing disquisitions
and disposition. Besides, it is beyond dispute that employees
indeed enjoy first preference in the event of bankruptcy or
liquidation of an employers business.
FACTS:
On June 5, 1984, petitioner Manila Banking
Corporation (Manilabank) was placed under comptrollership
by then Central Bank Governor Jose B. Fernandez in view of
the banks financial distress. Consequently, on May 22, 1987,
Manilabank was prohibited from doing business in the
Philippines. Feliciano Miranda, Jr. was designated as receiver.
He immediately took charge of the banks assets and
liabilities; and terminated the employment of about 343
officers and top managers of the bank. All these officers and
top managers, who are private respondents herein, were paid
whatever separation and/or retirement benefits were due them.
On November 11, 1988, the Monetary Board issued another
resolution ordering the liquidation of Manilabank on account
of insolvency.
Private respondents filed a complaint against

Manilabank and its statutory receiver with the arbitration
branch of the National Labor Relations Commission (NLRC)
claiming entitlement to the following additional benefits
alleged to have accrued from 1984 to their effective dates of
termination, viz.: (a) Wage increases; (b) Christmas bonuses;
(c) Mid-year bonuses; (d) Profit sharing; (e) Car and travel
plans; (f) Gasoline allowances; (g) Differentials on accrued
leaves, retirement and other bonuses; (h) Longevity pay and
loyalty pay; (i) Medical, dental and optical benefits; and (j)
Uniform allowances. The claims were based on Manilabanks
alleged practice, policy and tradition of awarding said
benefits. They contended that the policy has ripened into
vested property rights in their favor.
Manilabank, on its part, alleged that the additional
benefits sought are without basis in fact and in law. It argued
that the same are conferred by management only when it
deems necessary to do so. The award of the said benefits is in
the nature of a management prerogative which, it contended,
can be withheld by management upon a clear showing that the
company is not in a position to grant them either because of
financial difficulties or circumstances which do not warrant
conferment of such benefits. And since it was experiencing
financial distress, it claimed that it was in no position to give
the benefits sought. Additionally, it asseverated that it was
deprived of its right to present evidence in a full-blown trial by
the labor arbiter.
Labor Arbiter rendered a decision ordering
Manilabank and its statutory receiver to pay in full all the
claims of private respondents amounting to P212 million. On
appeal, the NLRC affirmed with slight modification of the
claims and the interest. Manilabank filed a motion for
reconsideration but was required to renew its bond. In
response, petitioners Manilabank and Arnulfo Aurellano filed
a petition for certiorari (G.R. No. 107902) before the Supreme
Court. The NLRC subsequently denied the motion for
reconsideration while Manilabank filed another petition for
certiorari.
HELD:
The Supreme Court in G.R. No. 107902 debunked the findings
of both the Labor Arbiter and the NLRC that some of the
additional benefits sought are in the nature of bonuses which
when made part of the wage or salary or compensation of an
employee become demandable and enforceable. 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 employees basic salaries or wages, especially so if it
is incapable of doing so. With respect to G.R. No. 107487, the
same was dismissed, the issues raised therein having been
rendered moot and academic by the foregoing disquisitions
and disposition. Besides, it is beyond dispute that employees
indeed enjoy first preference in the event of bankruptcy or
liquidation of an employers business.
ART. 110. Worker preference in case of
bankruptcy.In the event of bankruptcy or
liquidation of an employers business, his workers
Page | 56
shall enjoy first preference as regards their wages and

other monetary claims, any provisions of law to the
contrary notwithstanding. Such unpaid wages and
monetary claims shall be paid in full before claims of
the government and other creditors may be paid.
WHEREFORE, premises considered, G.R. No. 107902 is
GRANTED and is hereby REMANDED to the Labor Arbiter
for the proper computation of the monetary awards in
accordance with the foregoing disquisition and with
reasonable dispatch. G.R. No. 107487 is hereby DISMISSED.
49. CIRINEO BOWLING PLAZA, INC., petitioner, vs.

GERRY SENSING, BELEN FERNANDEZ, MIRASOL
DIAZ, MARGARITA ABRIL, DARIO BENITEZ,
MANUEL BENITEZ, RONILLO TANDOC, EDGAR
DIZON, JOVELYN QUINTO, KAREN REMORAN,
JENIFFER RINGOR, DEPARTMENT OF LABOR AND
EMPLOYMENT
and
COURT
OF
APPEALS,
respondents.
G. R. NO. AND DATE : G.R. No. 146572. January 14, 2005.
CASE SUMMARY :
Same; Visitorial Powers; The visitorial and
enforcement powers of the DOLE Regional Director to order
and enforce compliance with labor standard laws can be
exercised even where the individual claim exceeds
P5,000.00.We sustain the jurisdiction of the DOLE
Regional Director. The visitorial and enforcement powers of
the DOLE Regional Director to order and enforce compliance
with labor standard laws can be exercised even where the
individual claim exceeds P5,000.00.
FACTS :
On November 27, 1995, Eligio Paolo, Jr., an
employee of petitioner, filed a letter complaint with the
Department of Labor and Employment (DOLE for short),
Dagupan District Office, Dagupan City, requesting for the
inspection/investigation of petitioner for various labor law
violations like underpayment of wages, 13th month pay,
non-payment of rest day pay, overtime pay, holiday pay and
service incentive leave pay. Pursuant to the visitorial and
enforcement powers of the Secretary of Labor and
Employment, his duly authorized representative under Article
128 of the Labor Code, as amended, conducted inspections on
petitioners establishment the following day. In his inspection
report, Labor and Employment Officer III, Crisanto Rey
Dingle, found that petitioner has thirteen employees and had
committed the following violations: underpayment of
minimum wage, 13th month pay, holiday premiums, overtime
premiums, and nonpayment of rest day. The findings in the
inspection report were explained to petitioners officer-in-charge, Ma. Fe Boquiren, who signed the same.
On May 27, 1996, petitioners representative, Carmen Zapata,
appeared before the DOLE Regional Office and submitted the
quitclaims, waivers and releases of employees-awardees.
Later, however, Benitez, Tandoc, Quinto and Dizon wrote
DOLE a letter denying having received any amount from
petitioner. Thus, DOLEs inspector Dingle went to petitioners
establishment to confirm the authenticity of the quitclaims and
releases and talked to the employees concerned who stated
that they signed the document without knowing its contents

but they are willing to settle if they will be given the amount
computed by DOLE.
On June 19, 1996, Luisito Cirineo and a certain Fe
Cirineo Octaviano, owner of Esperanza Seafoods Kitchenette
stationed in petitioners establishment, wrote DOLE a letter
requesting that the case be endorsed to the National Labor
Relations Commission since the resolution of the case
required evidentiary matters not disclosed or verified in the
normal course of inspection. On October 21, 1996, DOLE
Regional Director Maximo B. Lim issued a writ of execution.
On November 13, 1996, petitioner filed a motion to quash the
writ of execution alleging :
The Writ of Execution seeks to enforce an Order
issued beyond the quasi-judicial authority of the Regional
Director
.
ISSUE :
Whether or not the Regional Director of DOLE has
jurisdiction over the case?
RULING :
On the issue of jurisdiction, we rule that the Regional
Director has jurisdiction over the instant case. The old rule
limiting the jurisdiction of the Secretary of Labor and
Employment or his duly authorized representatives to money
claims not exceeding P5,000.00 has been repealed by the
passage of R.A. No. 7730, Section 1 of which reads:
Section 1. Paragraph (b) of Article 128 of the Labor Code. As
amended, is hereby further amended to read as follows:
Art. 128. Visitorial and Enforcement Power.
... (b) Notwithstanding the provisions of Articles 129 and 217
of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representative
shall have the power to issue compliance orders to give effect
to the labor standards provisions of this Code and other labor
legislation based on the finding of the labor employment and
enforcement officer or industrial safety engineers made in the
course of inspection. The Secretary or his duly authorized
representatives shall issue writs of execution to the appropriate
authority for the enforcement of their orders, except in cases
where the employer contests the findings of the labor
employment and enforcement officer and raises issues
supported by documentary proofs which were not considered
in the course of inspection.
The visitorial and enforcement powers of the DOLE Regional
Director to order and enforce compliance with labor standard
laws can be exercised even where the individual claim exceeds
P5,000.00
The aforequoted provision explicitly excludes from its
coverage Articles 129 and 217 of the Labor Code by the
phrase Notwithstanding the provisions of Articles 129 and
217 of this Code to the contrary . . . thereby retaining and
further strengthening the power of the Secretary of Labor or
his duly authorized representative to issue compliance orders
to give effect to the labor standards provisions of said Code
and other labor legislation based on the findings of labor
employment and enforcement officers or industrial safety
engineers made in the course of inspection.
Page | 57
In the case at bar, the Office of respondent Regional Director

conducted inspection visits at petitioners establishment on
February 9 and 14, 1995 in accordance with the
above-mentioned provision of law. In the course of said
inspection, several violations of the labor standard provisions
of the Labor Code were discovered and reported by Senior
Labor Enforcement Officer Eduvigis A. Acero in his Notice of
Inspection Results. It was on the bases (sic) of the aforesaid
findings (which petitioner did not contest), that respondent
Regional Director issued the assailed Order for petitioner to
pay private respondents the respective wage differentials due
them.
Clearly, as the duly authorized representative of respondent
Secretary of Labor, and in the lawful exercise of the
Secretarys visitorial and enforcement powers under Article
128 of the Labor Code, respondent Regional Director had
jurisdiction to issue his impugned Order.
50. Balladares et al v. Peak Venture Corp

TOPIC: Wage Recovery/ Jurisdiction (Art. 128,129, 217,
111, Book III Rule X, Secs 1-5)
G.R. No. 161794. June 16, 2009
Doctrine: The Secretary of Labor or his duly authorized
representatives is now empowered to hear and decide, in a
summary proceeding, any matter involving the recovery of
any wages and other monetary claims arising out of
employer-employee relations at the time of the inspection,
even if the amount of the money claim exceeds P5,000.00.
FACTS: Petitioner Balladares et al were employed by
respondent Peak Ventures as security guards and were
assigned at the premises of respondent Yangco Market
Owners and Administrators Association (YMOAA). They
filed a complaint for underpayment of wages against their
employer, Peak Ventures, with the Department of Labor and
Employment (DOLE).
Acting on the complaint, DOLE conducted an inspection of
Peak Ventures. A Notice of Inspection Result was issued to
and received by Peak Ventures and was instructed to effect
restitution and/or to file its objections within five (5) working
days from receipt thereof.
Peak Ventures moved to implead its client, YMOAA as party
respondent. YMOAA opposed on the ground that it was not
the employer of petitioners. Peak Ventures filed a Third Party
Complaint alleging that Peak Ventures was entitled to
indemnity or subrogation from YMOAA in respect to the
monetary claims of petitioners, because the cause of the
underpayment of wages arose from the failure of the YMOAA
to pay the security agency the correct amount due petitioners
as prescribed by various Wage Orders.
Peak Ventures questions the inspection conducted by the
DOLE using the visitorial and enforcement powers of the
Secretary of Labor and Employment because the instant case
arose from a complaint for recovery of wages, simple money
claims and other benefits, and the claims exceeded P5,000.00
which thereby vests exclusive jurisdiction over the LA.
ISSUES: Whether or not the Regional Director can validly

exercise his visitorial power in the case at bar?
HELD: Cirineo Bowling Plaza, Inc. v. Sensing, where we
sustained the jurisdiction of the DOLE Regional Director and
held that: the visitorial and enforcement powers of the
DOLE Regional director to order and enforce compliance
with labor standard laws can be exercised even where the
individual claim exceeds P5,000. However, if the labor
standards case is covered by the exception clause in Article
128 (b) of the Labor Code, then the Regional Director will
have to endorse the case to the appropriate Arbitration Branch
of the NLRC. In order to divest the Regional Director or his
representatives of jurisdiction, the following elements must be
present: (a) that the employer contests the findings of the labor
regulations officer and raises issues thereon; (b) that in order
to resolve such issues, there is a need to examine evidentiary
matters; and (c) that such matters are not verifiable in the
normal course of inspection. The rules also provide that the
employer shall raise such objections during the hearing of the
case or at any time after receipt of the notice of inspection
results. In this case, the Regional Director validly assumed
jurisdiction over the money claims of private respondents even
if the claims exceeded P5,000 because such jurisdiction was
exercised in accordance with Article 128(b) of the Labor Code
and the case does not fall under the exception clause.
Accordingly, we find no sufficient reason to warrant the
certification of the instant case to the Labor Arbiter and divest
the Regional Director of jurisdiction. Respondent did not
contest the findings of the labor regulations officer. Even
during the hearing, respondent never denied that petitioners
were not paid correct wages and benefits. This was, in fact,
even admitted by respondent in its petition filed before the
CA. It bears stressing that this petition clearly involves a
labor standards case, and it is in keeping with the law that
the worker need not litigate to get what legally belongs to
him, for the whole enforcement machinery of the DOLE exists
to insure its expeditious delivery to him free of charge. We,
therefore, sustain the jurisdiction of the DOLE Regional
Director in this case.
51. CASE: Meteoro et al. vs. Creative Creatures Inc.

G.R. No. 171275
July 13, 2009.
Topic: Wage recovery/ Jurisdiction
Same; Labor Standards; Raising lack of jurisdiction
alone is not the contest contemplated by the exception
clauseit is necessary that the employer contest the findings
of the labor regulations officer during the hearing or after
receipt of the notice of inspection results.We would like to
emphasize that to contest means to raise questions as to the
amounts complained of or the absence of violation of labor
standards laws; or, as in the instant case, issues as to the
complainants right to labor standards benefits. To be sure,
raising lack of jurisdiction alone is not the contest
contemplated by the exception clause. It is necessary that the
employer contest the findings of the labor regulations officer
Page | 58
during the hearing or after receipt of the notice of inspection

results. More importantly, the key requirement for the
Regional Director and the DOLE Secretary to be divested of
jurisdiction is that the evidentiary matters be not verifiable in
the course of inspection. Where the evidence presented was
verifiable in the normal course of inspection, even if presented
belatedly by the employer, the Regional Director, and later the
DOLE Secretary, may still examine it; and these officers are
not divested of jurisdiction to decide the case.
FACTS:
Creative Creatures hired Victor Meteoro and the rest
of the petitioners on various dates as artists,carpenters, and
welders, tasked to design, create, assemble, set-up, and
dismantle props, and provide sound effects to Creatives
various TV programs and movies.In 1999, Meteoro and the
others filed a complaint against Creative for non-payment of
labor standards incentives with the DOLE-NCR. An
inspection was conducted.Creative claimed that the petitioners
were only contractual workers, and as such, no employeremployee relationship existed. Thus, the DOLE could not
have exercised jurisdiction over the case, for it had none. It
added that the petitioners were free-lance individuals,
performing special services with skills and expertise
inherently exclusive to them like actors, actresses, directors,
producers, and script writers, such that they were treated as
special types of workers. Petitioners, on the other hand, aver
that they were employees because the elements of an
employer-employee
relationship
existed.Subsequently,
petitioners filed a complaint for illegal dismissal against
Creative, with prayer for payment of overtime pay, premium
pay for holiday and rest day, holiday pay, service incentive
leave pay, 13th month pay, and attorney's fees before the
NLRC. A few months after, DOLE Regional Director Maximo
Baluyot Lim issued an order directing Creative to pay
petitioners. On appeal, DOLE Secretary Patricia Sto. Tomas
upheld the DOLE Regional Director's findings. She stated that
the Secretary of Labor or his duly authorized representative is
allowed to use his visitorial and enforcement powers to give
effect to labor legislation, regardless of the amount involved.
On appeal, the CA dismissed the case against Creative for lack
of jurisdiction. Petition for review on certiorari.
ISSUE: W/N the DOLE-NCR properly exercised its
jurisdiction over the case.
RULING:
NO. The DOLE Secretary and her authorized
representatives, such as the DOLE-NCR Director, have
jurisdiction to enforce compliance with labor standards laws
under the broad visitorial and enforcement powers conferred
by Article 128 of the Labor Code, and expanded by RA No.
7730. But this notwithstanding,the power of the Regional
Director to hear and decide money claims is not absolute. The
last sentence of Article 128 (b) of the Labor Code, otherwise
known as the "exception clause,"provides an instance when
theRegional Director or his representatives may be divested of
jurisdiction over a labor standards case. Under prevailing
jurisprudence, the so-called "exception clause has the
following elements, all of which must concur:
(a) That the employer contests the findings of the labor

regulations officer and raises issues thereon;(b)
(b)That in order to resolve such issues, there is a need to
examine evidentiary matters; and
(c) That such matters are not verifiable in the normal course of
inspection.
In the instant case, Creative registered its objection to
the findings of the labor inspector at the earliest opportunity. It
is clear that Creative contested and continues to contest the
findings and conclusions of the labor inspector. Also, the
question of whether or not petitioners were independent
contractors/project employees/free-lance workers is a question
of fact that necessitates the examination of evidentiary matters
not verifiable in the course of inspection. Verily, the Regional
Director and the Secretary of Labor are divested of jurisdiction
to decide the case, and the NLRC is the agency clothed with
authority to do so.Petition denied for lack of merit. CA
decision affirmed.
52. DENTECH MANUFACTURING CORPORATION

and JACINTO LEDESMA in his capacity as General
Manager,
petitioners,
vs.
NATIONAL
LABOR
RELATIONS COMMISSION, CCLU, BENJAMIN
MARBELLA, ARMANDO TORNO, JUANITO TAJAN,
JR. and JOEL TORNO, respondents.
Labor Law; Thirteenth month pay No basis for companys
claim that it is exempted from PD 851 which mandated the
payment of 13th month compensation to employees receiving
less than P1,000.00 a month; The P1,000.00 salary ceiling
under PD 851 pertains to basic salary, not total monthly
compensation.The P1,000.00 salary ceiling provided in
Presidential Decree No. 851 pertains to basic salary, not total
monthly compensation. The petitioners admit that the private
respondents work only five days a week and that they each
receive a basic daily wage of P40.00 only. A simple
computation of the basic daily wage multiplied by the number
of working days in a month results in an amount of less than
P1,000.00. Thus, there is no basis for the contention that the
company is exempted from the provision of Presidential
Decree No. 851 which mandated the payment of 13th month
compensation to employees receiving less than P1,000.00 a
month.
Facts:
On June 26, 1985, the private respondents filed a Complaint
with the arbitration branch of the respondent National Labor
Relations Commission (NLRC) against the petitioners for,
among others, illegal dismissal and violation of Presidential
Decree No. 851. 1 They were originally joined by another
employee, one Raymundo Labarda, who later withdrew his
Complaint.
At first, they only sought the payment of their 13th month pay
under Presidential Decree No. 851 as well as their separation
pay, and the refund of the cash bond they filed with the
company at the start of their employment. Later on, they
sought their reinstatement as well as the payment of their 13th
Page | 59
month pay and service incentive leave pay, and separation pay
in the event that they are not reinstated. It is alleged in the
Complaint and Position Paper accompanying the same that
they were dismissed from the firm for pursuing union
activities.
Petitioners argument:
The petitioners alleged in their Position Paper that the private
respondents were not dismissed from the firm on account of
their union activities. They maintained that the private
respondents abandoned their work without informing the
company about their reasons for doing so and that,
accordingly, the private respondents are not entitled to service
incentive leave pay and separation pay.
The petitioners added that the refund of the cash bond filed by
the private respondents should not have been ordered by the
labor arbiter inasmuch as the proceeds of the same had already
been given by the company to a certain carinderia 5 to pay for
the outstanding accounts of the private respondents therein.
Issue:
WoN the respondents are entitled to refund of cash bond
Held:
The refund of the cash bond filed by the private respondents is
in order. Article 114 of the Labor Code prohibits an employer
from requiting his employees to file a cash bond or to make
deposits, subject to certain exceptions, to witArt. 114. Deposits for loss or damage.- No employer shall
require his worker to make deposits from which deductions
shall be made for the reimbursement of loss of or damage to
tools, materials, or equipment supplied by the employer,
except when the employer is engaged in such trades,
occupations or business where the practice of making
deductions or requiring deposits is a recognized one, or is
necessary or desirable as determined by the Secretary of
Labor in appropriate rules and regulations.
The petitioners have not satisfactorily disputed the
applicability of this provision of the Labor Code to the case at
bar. Considering further that the petitioners failed to show that
the company is authorized by law to require the private
respondents to file the cash bond in question, the refund
thereof is in order.
The allegation of the petitioners to the effect that the proceeds
of the cash bond had already been given to a certain
carinderia to pay for the accounts of the private respondents
therein does not merit serious consideration. As correctly
observed by the Solicitor General, no evidence or receipt has
been shown to prove such payment.
53. ARCHILLES MANUFACTURING CORPORATION,
ALBERTO YU and ADRIAN YU, petitioners, vs.
GERONIMO MANUEL, ARNULFO DIAZ, JAIME
CARUNUNGAN and BENJAMIN RINDON, respondents.
G.R. No. 107225. June 2, 1995
The payment of 13th month pay may be demanded by

the employee upon the cessation of the employer-employee
relationship.On the second issue, which refers to the
propriety of the award of a 13th month pay, paragraph 6 of the
Revised Guidelines on the Implementation of the 13th Month
Pay Law (P.D. 851) provides that (a)n employee who has
resigned or whose services were terminated at any time before
the payment of the 13th month pay is entitled to this monetary
benefit in proportion to the length of time he worked during
the year, reckoned from the time he started working during the
calendar year up to the time of his resignation or termination
from the service x x x x The payment of the 13th month pay
may be demanded by the employee upon the cessation of
employer-employee relationship. This is consistent with the
principle of equity that as the employer can require the
employee to clear himself of all liabilities and property
accountability, so can the employee demand the payment of all
benefits due him upon the termination of the relationship.
Employers are mandated to pay their employees a 13th month
pay not later than the 24th of December every year, provided
that they have worked for at least one (1) month during a
calendar year.Furthermore, Sec. 4 of the original
Implementing Rules of P.D. 851 mandates employers to pay
their employees a 13th month pay not later than the 24th of
December every year provided that they have worked for at
least one (1) month during a calendar year. In effect, this
statutory benefit is automatically vested in the employee who
has at least worked for one month during the calendar year. As
correctly stated by the Solicitor General, such benefit may not
be lost or forfeited even in the event
of the employees subsequent dismissal for cause without
violating his property rights.
FACTS:
Private respondents Geronimo Manuel, Arnulfo Diaz,
Jaime Carunungan and Benjamin Rindon were employed by
ARCHILLES as laborers in its steel factory located in
Barangay Pandayan, Meycauayan, Bulacan, each receiving a
daily wage of 96.00php.
ARCHILLES was maintaining a bunkhouse in the
work area which served as resting place for its workers
including private respondents. In 1988, a mauling incident
nearly took place involving a relative of an employee. As a
result ARCHILLES prohibited its workers from bringing any
member of their family to the bunkhouse. But despite this
prohibition, private respondents continued to bring their
respective families to the bunkhouse, causing annoyance and
discomfort to the other workers. This was brought to the
attention of ARCHILLES who ordered the respondents to
remove their families from the bunkhouse and explain their
violation of the company policies.
The petitioners removed their families but failed to
report to the management as required, instead absented
themselves from work. ARCHILLES terminated their
employment for abandonment and for violation of company
rules.
Page | 60
Private respondents filed a complaint for illegal

dismissal. The Labor Arbiter found the dismissal of private
respondents illegal and ordered their reinstatement as well as
the payment to them of backwages, proportionate 13th month
pay for the year 1990 and attorneys fees. ARCHILLES
appealed.
During the pendency of the appeal, the respondents
filed a motion for the issuance of a writ of execution for their
immediate reinstatement, pending appeal, either physically or
in the company payroll, which ARCHILLES opposed. NLRC
took no action on the motion for execution and a subsequent
motion for execution was again filed by the respondents, to
date both motions remained unresolved.
The NLRC vacated and set aside the decision of the
Labor Arbiter and ruled that the dismissal of private
respondents was valid since they wilfully disobeyed a lawful
order of their employer requiring them to explain their
infraction of a company rule.
In the disputed part of its decision, however, NLRC
ordered ARCHILLES to pay private respondents their
withheld salaries from 19 September 1991 when it filed its
opposition to the motion for issuance of a writ of execution
until the promulgation of the NLRC Decision (11 August
1992) on the ground that the order of reinstatement of the
Labor Arbiter was immediately executory.
ARCHILLES contended that reinstatement is no
longer possible as it would disrupt the peace and order in the
steel factory, in which case, the petitioner opted instead for
payroll reinstatement of the respondents. NLRC ordered
ARCHILLES to pay their proportionate 13th month pay for
1990.
ARCHILLES filed a Motion for reconsideration,
hence this petition.
the employer shall not stay the execution for reinstatement

provided herein.
It must be stressed, however, that although the
reinstatement aspect of the decision is immediately executory,
it does not follow that it is self-executory. There must be a writ
of execution which may be issued motu proprio or on motion
of an interested party.
Art. 224 of the Labor Code provides:
Art. 224. Execution of decisions, orders or awards.a) The
Secretary of Labor and Employment or any Regional Director,
the Commission or any Labor Arbiter, or med-arbiter or
voluntary arbitrator may, motu proprio or on motion of any
interested party, issue a writ of execution on a judgment
within five (5) years from the date it becomes final and
executory x x x x
In the absence x x x of an order for the issuance of a
writ of execution on the reinstatement aspect of the decision of
the Labor Arbiter, the petitioner was under no legal obligation
to admit back to work the private respondent under the terms
and conditions prevailing prior to her dismissal or, at the
petitioners option, to merely reinstate her in the payroll. An
option is a right of election to exercise a privilege, and the
option in Article 223 of the Labor Code is exclusively granted
to the employer.
In the case at bench, there was no occasion for
petitioners to exercise their option under Art. 223 of the Labor
Code in connection with the reinstatement aspect of the
decision of the Labor Arbiter. The motions of private
respondents for the issuance of a writ of execution were not
acted upon by NLRC. It was not shown that respondents
exerted efforts to have their motions resolved. They are
deemed to have abandoned their motions for execution
pending appeal. They cannot now ask that the writ of
execution be issued since their dismissal was found to be for
cause.
ISSUES:
1.
2.
Whether or not writ of execution is still necessary to

enforce the Labor Arbiters order of immediate
reinstatement even when pending appeal.
Whether or not the respondents are entitled to the
payment of their 13th month pay.
HELD:
1.
Yes. The third paragraph of Art. 223 of the Labor

Code provides:
In any event, the decision of the Labor Arbiter reinstating a
dismissed or separated employee, insofar as the reinstatement
aspect is concerned, shall be immediately executory, even
pending appeal. The employee shall either be admitted back to
work under the same terms and conditions prevailing prior to
his dismissal or separation or, at the option of the employer,
merely reinstated in the payroll. The posting of the bond by
2.
Yes. The respondents are entitled to the payment of

their 13th month pay.
Paragraph 6 of the Revised Guidelines on the

Implementation of the 13th Month Pay Law (P.D. 851)
provides
that (a)n employee who has resigned or whose services
were terminated at any time before the payment of the 13th
month pay is entitled to this monetary benefit in
proportion to the length of time he worked during the
year, reckoned from the time he started working during
the calendar year up to the time of his resignation or
termination from the service x x x x The payment of the
13th month pay may be demanded by the employee upon
the cessation of employer-employee relationship. This is
consistent with the principle of equity that as the
employer can require the employee to clear himself of all
liabilities and property accountability, so can the
Page | 61
employee demand the payment of all benefits due him

upon the termination of the relationship.
Furthermore, Sec. 4 of the original Implementing
Rules of P.D. 851 mandates employers to pay their
employees a 13th month pay not later than the 24th of
December every year provided that they have worked for
at least one (1) month during a calendar year. In effect,
this statutory benefit is automatically vested in the
employee who has at least worked for one month during
the calendar year.
As correctly stated by the Solicitor General, such
benefit may not be lost or forfeited even in the event of the
employees subsequent dismissal for cause without violating
his property rights.
54. Ultra Villa Food Haus vs. Geniston
G.R. No. 120473. June 23, 1999
Labor Law; Presidential Decree No. 851; 13th Month Pay
Law; The Revised Guidelines on the Implementation of the
13th Month Pay Law also excludes employers of household
helpers from the coverage of Presidential Decree No. 851.
employing the same line of analysis, it would seem that
private respondent is not entitled to 13th month pay. The
Revised Guidelines on the Implementation of the 13th Month
Pay Law also excludes employers of household helpers from
the coverage of Presidential Decree No. 851.
Same; Dismissal; Abandonment; The burden of proving
abandonment as a just cause for dismissal is on the
employer.To constitute abandonment, two requisites must
concur: (1) the failure to report to work or absence without
valid or justifiable reason, and (2) a clear intention to sever the
employer-employee relationship as manifested by some overt
acts, with the second requisite as the more determinative
factor. The burden of proving abandonment as a just cause for
dismissal is on the employer. Petitioner failed to discharge this
burden. The only evidence adduced by petitioner to prove
abandonment is her affidavit.
Facts:
Private respondent was an employee under Ultra Villa Food
Hause owned by Rose Tio. He alleged that he was employed
as a do it all guy, acting as waiter, driver, and maintenance
man, in said restaurant. His employment therein spanned from
March 1, 1989 until he was dismissed on May 13, 1992.
During the elections of May 11, 1992, private respondent
acted as a Poll Watcher for the National Union of Christian
Democrats. The counting of votes lasted until 3:00 p.m. the
next day, May 12. Private respondent did not report for work
on both days on account of his poll-watching. Upon arriving
home on May 12, private respondent discovered that Tio
phoned his mother that early morning verbally lashing out at
her and informing his mother that private respondent was
dismissed from work prompting him to plead his case to Tio
only to be forced further into signing a resignation letter.
Petitioner Tio on the other hand maintained that respondent
was her personal driver and not an employee of her restaurant
and as such, as her personal driver, private respondent was
required to work at 7:00 am to drive petitioner to Mandaue

City where petitioner worked as the Manager of CFC
Corporation. Petitioner claims private respondent abandoned
his job. Though well aware that May 12, 1992 was a holiday,
petitioner called up private respondent that day to ask him to
report for work as she had some important matters to attend to.
Private respondents wife, however, coldly told petitioner that
private respondent was helping in the counting of ballots.
Petitioner was thus forced to hire another driver to replace
private respondent. Private respondent came back a week after
but only to collect his salary.
The Labor Arbiter ruled in favor of petitioner finding that
private respondent was indeed petitioners personal driver and
that private respondents claim that he was an employee was
merely an afterthought as such he was not entitled to overtime
pay, service incentive leave pay and 13th month pay. An
appeal was made to the NLRC questioning the LAs decision
requiring her to pay respondent P 1000.00 for failure to
observe procedural due process. Petitioner maintained that
private respondent abandoned his job, and was not
constructively dismissed as found by the Labor Arbiter.
Petitioner concluded that she could not be held liable for
failing to observe procedural due process in dismissing private
respondent, there being no dismissal to speak of. On the other
hand, private respondent denied admitting that he was
employed as petitioners personal driver. He alleged that what
was admitted during the mandatory conference was that he
was made to drive for the manager NLRC found respondents
arguments with merit and ordered his reinstatement and
payment of incentives such as 13th month pay.
Issue:
Whether or not respondent is entitled to 13th month pay?
Held:
The courts find that private respondent was indeed the
personal driver of petitioner, and not an employee of the Ultra
Villa Food Haus supported by various statements as opposed
to private respondent who has not presented any evidence
other than his self-serving allegation to show that he was
employed in the restaurant.
Accordingly, the terms and conditions of private respondents
employment are governed by Chapter III, Title III, and Book
III of the Labor Code as well as by the pertinent provisions of
the Civil Code. Thus, Article 141 of the Labor Code provides:
Art. 141. Coverage.This Chapter shall apply to all persons
rendering services in households for compensation. Domestic
or household service shall mean services in the employers
home which is usually necessary or desirable for the
maintenance and enjoyment thereof and includes ministering
to the personal comfort and convenience of the members of
the employers household, including services of family drivers.
The specific provisions mandating the grant of overtime pay,
holiday pay, premium pay and service incentive leave to those
engaged in the domestic or household service are found in
Book 3, Title I of the Labor Code and Article 82, which
defines the scope of the application of these provisions,
expressly excludes domestic helpers from its coverage. Art.
Page | 62
82. Coverage.The provision of this title shall apply to

employees in all establishments and undertakings whether for
profit or not, but not to government employees, managerial
employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and
workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
Clearly then, petitioner is not obliged by law to grant private
respondent any of these benefits. Employing the same line of
analysis, it would seem that private respondent is not entitled
to 13th month pay. The Revised Guidelines on the
Implementation of the 13th Month Pay Law also excludes
employers of household helpers from the coverage of
Presidential Decree No. 851, thus:
2. Exempted Employers
The following employers are still not
covered by P.D. No. 851:
a. x x x;
b. Employers of household helpers x x x;
Nevertheless, the court finds it just to award private
respondent 13th month pay in view of petitioners practice of
according private respondent such benefit. Indeed, petitioner
admitted that she gave private respondent 13th month pay
every December.
55. BOIETAKEDA CHEMICALS, INC., petitioner, vs.
HON. DIONISIO C. DE LA SERNA, Acting Secretary of
the Department of Labor and Employment, respondent.
G.R. No. 92174. December 10, 1993.
PHILIPPINE FUJI XEROX CORP., petitioner, vs.
CRESENCIANO B. TRAJANO, Undersecretary of the
Department of Labor and Employment, and PHILIPPINE
FUJI XEROX EMPLOYEES UNION, respondents.
G.R. No. 102552. December 10, 1993.
Labor Law; Basic salary; Commissions do not form part of
the basic salary.In remunerative schemes consisting of a
fixed or guaranteed wage plus commission, the fixed or
guaranteed wage is patently the basic salary for this is
what the employee receives for a standard work period.
Commissions are given for extra efforts exerted in
consummating sales or other related transactions. They are,
as such, additional pay, which this Court has made clear do
not form part of the basic salary.
items of compensation not included in the computation of13month pay. (overtime pay, earnings and other remunerations
which are not part of basic salary shall not be included in the
computation of 13th month pay). Pres. Corazon Aquino
promulgated on August 13, 1985 M.O.No. 28, containing a
single provision that modifies P.D. 851 by removing the salary
ceiling of P1,000.00 a month. More than a year later, Revised
Guidelines on the Implementation of the13-month pay law
was promulgated by the then Labor Secretary Drilon, among
other
things,
defined
particularly
what
remunerative items were and were not included in the concept
of 13-month pay, and specifically dealt with employees who
are paid a fixed or guaranteed wage plus commission or
commissions were included in the computation of 13thmonth
pay)
A routine inspection was conducted in the premises o
f petitioner. Finding thatpetitioner had not been including the
commissions earned by its medical representatives in the
computation of their 1-month pay, a Notice of Inspection
Result was served on petitioner to effect restitution or
correction of the underpayment of 13-month pay for the
years, 1986 to1988 of Medical representatives. Petitioner
wrote the Labor Department contesting the Notice
of Inspection
Results,
and expressing the view that the commission paid to its medic
alrepresentatives are not to be included in the computation of
the 13th month pay since the law and its implementing rules
speak of REGULAR or BASIC salary and therefore exclude
all remunerations which are not part of the REGULAR salary.
Regional Dir. Luna Piezas issued an order for the payment of
underpaid 13-month pay for the years 1986, 1987 and 1988.
Amotion for reconsideration was filed and the then Acting
labor Secretary Dionisio de la Sema affirmed
affirmed the order with modification that the sales commission
earned of medicalrepresentatives before August 13, 1989 (eff
ectivity date of MO 28 and its implementingguidelines) shall
be excluded in the computation of the 13-month pay.
(G.R. No. 102552) Similar routine inspection was
conducted in the premises of Phil. Fuji Xerox where it was
found there was underpayment of 13th month pay since
commissions were not included. In their almost identicallyworded petitioner, petitioners, through common counsel,
attribute grave abuse of discretion to respondent labor officials
Hon. Dionisio dela Serna and Undersecretary Cresenciano B.
Trajano
.
ISSUE:
Whether or not commissions are included in the
computation of 13th month pay.
FACTS:
(G.R. No. 92174) P.D. No. 851 provides for the
Thirteen-Month Pay Law. Under Sec. 1 of said law, all
employers are required to pay all their employees receiving
basic salary of not more than P1,000.00 a month, regardless of
the nature of the employment, and such should be paid on
December 24 of every year. The Rules and Regulations
Implementing P.D. 851 contained provisions defining 13month pay and basic salary and the employers exempted
from giving it and to whom it is made applicable.
Supplementary Rules and Regulations Implementing P.D. 851
were subsequently issued by Minister Ople which inter alia set
HELD:
NO. Contrary to respondents contention,
Memorandum Order No. 28 did not repeal, supersede or
abrogate P.D. 851. As may be gleaned from the language of
Memorandum Order No. 28, it merely modified Section 1 of
the decree by removing the P1,000.00 salary ceiling. The
concept of 13th Month Pay as envisioned, defined and
implemented under P.D. 851 remained unaltered, and while
entitlement to said benefit was no longer limited to employees
receiving a monthly basic salary of not more than P1,000.00,
said benefit was, and still is, to be computed on the basic
Page | 63
salary of the employee recipient as provided under P.D. 851.

Thus, the interpretation given to the term basic salary as
defined in P.D. 851 applies equally to basic salary under
Memorandum Order No. 28. The term basic salary is to be
understood in its common, generally accepted meaning, i.e., as
a rate of pay for a standard work period exclusive of such
additional payments as bonuses and overtime. In remunerative
schemes consisting of a fixed or guaranteed wage plus
commission, the fixed or guaranteed wage is patently the
basic salary for this is what the employee receives for a
standard work period. Commissions are given for extra efforts
exerted in consummating sales or other related transactions.
They are, as such, additional pay, which this Court has made
clear do not form part of the basic salary.
Moreover, the Supreme Court held that, in including
commissions in the computation of the 13th month pay, the
second paragraph of Section 5(a) of the Revised Guidelines on
the Implementation of the 13th Month Pay Law unduly
expanded the concept of basic salary as defined in P.D. 851.
It is a fundamental rule that implementing rules cannot add to
or detract from the provisions of the law it is designed to
implement. Administrative regulations adopted under
legislative authority by a particular department must be in
harmony with the provisions of the law they are intended to
carry into effect. They cannot widen its scope. An
administrative agency cannot amend an act of Congress.
56. ANTONIO W. IRAN (doing business under the name

and style of Tones Iran Enterprises), 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.
Labor Law Benefits Commissions are part of a salesmans
wage or salary Commissions, defined.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
part of a salesmans wage or salary.
Same Same Same Commissions earned by private
respondents considered part of the wages paid them.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.
Same Same Same Commissions are included in

determining
compliance
with
minimum
wage
requirements.Likewise, there is no law mandating that
commissions be paid only after the minimum wage has been
paid to the employee. Verily, the establishment of a minimum
wage only sets a floor below which an employees
remuneration cannot fall, not that commissions are excluded
from wages in determining compliance with the minimum
wage law. This conclusion is bolstered by Philippine
Agricultural Commercial and Industrial Workers Union vs.
NLRC, 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.
Facts:
Petitioner employed respondents as truck drivers who double
as salesmen, truck helpers, and non-field personnel. Petitioner
hired private respondents as drivers/salesmen and truck
helpers. As part of their compensation, the drivers/salesmen
and truck helpers of petitioner received commissions based on
the case of soft drinks sold.
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 every day. They were not allowed, to go on
their respective routes. A few days after, 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.
On the other hand, private respondents, filed complaints
against petitioner for illegal dismissal, illegal deduction,
underpayment of wages, premium pay for holiday and rest
day, holiday pay, service incentive leave pay, 13th month pay,
allowances, separation pay, recovery of cash bond, damages
and attorneys fees.
The labor arbiter found that petitioner had validly terminated
private respondents, there being just cause for the latters
dismissal. Nevertheless, he also ruled that petitioner had not
complied with minimum wage requirements in compensating
private respondents
Both parties seasonably appealed to the NLRC, with petitioner
contesting the labor arbiters refusal to include the
commissions he paid to private respondents in determining
compliance with the minimum wage requirement.
The NLRC, in its decision, affirmed the validity of private
respondents dismissal, but found that said dismissal did not
Page | 64
comply with the procedural requirements for dismissing

employees.
Issue:
Whether or not commissions are included in determining
compliance with the minimum wage requirement
Ruling:
Yes. Article 97(f) of the Labor Code defines wage as follows:
Art. 97(f)Wage paid to any employee shall mean the
ascertained on a time, task, piece, or commission basis, or
other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract
of employment for work done or to be done, or for services
rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the
employer to the employee. x x x x x x x x x. (Emphasis
supplied)
This definition explicitly includes commissions as part of
wages. While commissions are, indeed, incentives or forms of
encouragement to inspire employees to put a little more
industry on the jobs particularly assigned to them, still these
commissions are direct remunerations for services rendered. In
fact, commissions have been defined as the recompense,
compensation or reward of an agent, salesman, executor,
trustee, receiver, factor, broker or bailee, when the same is
calculated as a percentage on the amount of his transactions or
on the profit to the principal. The nature of the work of a
part of a salesmans wage or salary.
below which an employees remuneration cannot fall, not that

commissions are excluded from wages in determining
compliance with the minimum wage law.
This conclusion is bolstered by Philippine Agricultural
Commercial and Industrial Workers Union vs. NLRC, 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.
57. Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda
G.R. No. 145561, june 15, 2005
Case Summary:
Same; Benefits; 13th Month Pay; Basic Salary;
Excluded from the computation of basic salary payments
for sick, vacation and maternity leaves, night differentials,
regular holiday pay and premiums for work done on rest days
and special holidays.For employees receiving regular wage,
we have interpreted basic salary to mean, not the amount
actually received by an employee, but 1/12 of their standard
monthly wage multiplied by their length of service within a
given calendar year. Thus, we exclude from the computation
of basic salary payments for sick, vacation and maternity
leaves, night differentials, regular holiday pay and premiums
for work done on rest days and special holidays.
Facts:
Thus, the commissions earned by private respondents in

selling soft drinks 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. The 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.
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 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.
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
As found by the Court of Appeals, the case stems

from the Collective Bargaining Agreement (CBA) forged
between petitioner Honda and respondent union Samahan ng
Malayang Manggagawa sa Honda (respondent union) which
contained the following provisions:
Section 3. 13th Month Pay
The COMPANY shall maintain the present practice in the
implementation of the 13th month pay.
Section 6. 14th Month Pay
The COMPANY shall grant a 14th Month Pay, computed on
the same basis as computation of 13th Month Pay.
Section 7. The COMPANY agrees to continue the practice of
granting, in its discretion, financial assistance to covered
employees in December of each year, of not less than 100% of
basic pay.
This CBA is effective until year 2000. In the latter
part of 1998, the parties started renegotiations for the fourth
and fifth years of their CBA. When the talks between the
parties bogged down, respondent union filed a Notice of Strike
on the ground of bargaining deadlock. Thereafter, Honda filed
a Notice of Lockout. On March 31, 1999, then DOLE
Secretary Laguesma assumed jurisdiction over the labor
dispute and ordered the parties to cease and desist from
committing acts that would aggravate the situation. Both
parties complied accordingly. On May 11, 1999, however,
Page | 65
respondent union filed a second Notice of Strike on the ground

of unfair labor practice alleging that Honda illegally
contracted out work to the detriment of the workers.
Respondent union went on strike and picketed the premises of
Honda on May 19, 1999. On June 16, 1999, DOLE Acting
Secretary Felicisimo Joson, Jr. assumed jurisdiction over the
case and certified the same to the NLRC for compulsory
arbitration. The striking employees were ordered to return to
work and the management accepted them back under the same
terms prior to the strike staged.
On November 22, 1999, the management of Honda
issued a memorandum announcing its new computation of the
13th and 14th month pay to be granted to all its employees
whereby the 31-day long strike shall be considered unworked
days for purposes of computing said benefits. As per the
companys new formula, the amount equivalent to 1/12 of the
employees basic salary shall be deducted from these bonuses,
with a commitment however that in the event that the strike is
declared legal, Honda shall pay the amount deducted.
Respondent union opposed the prorated computation of the
bonuses in a letter dated November 25, 1999. Honda sought
the opinion of the Bureau of Working Conditions (BWC) on
the issue. In a letter dated January 4, 2000, the BWC agreed
with the prorate payment of the 13th month pay as proposed
by Honda. The matter was brought before the Grievance
Machinery in accordance with the parties existing CBA but
when the issue remained unresolved, it was submitted for
voluntary arbitration. Voluntary Arbitrator Herminigildo C.
Javen ruled that the Companys implementation of prorated
13th Month pay, 14th Month pay and Financial Assistance is
invalid. Hondas Motion for Partial Reconsideration was
denied. Thus, a petition was filed with the Court of Appeals;
however, the petition was dismissed for lack of merit. The
Court of Appeals affirmed the arbitrators finding and added
that the computation of the 13th month pay should be based on
the length of service and not on the actual wage earned by the
worker. Hence, the instant petition for review.
Issue:
Whether or not the prorated computation of the 13th
month pay and the other bonuses is valid?
Ruling:
No. Under the Revised Guidelines on the
Implementation of the 13th month pay issued on November
16, 1987, the salary ceiling of 1k under P.D. No. 851 was
removed. It further provided that the minimum 13th month pay
required by law shall not be less than (1/12) of the total basic
salary earned by an employee within a calendar year. The
guidelines pertinently provides: The basic salary of an
employee for the purpose of computing the 13th month pay
shall include all remunerations or earnings paid by his
employer for services rendered but does not include
integrated as part of the regular or basic salary, such as the
cash equivalent of unused vacation and sick leave credits,
overtime premium, night differential and holiday pay, and cost
of living allowances.
For employees receiving regular wage, we have
interpreted basic salary to mean, not the amount actually
received by an employee, but 1/12 of their standard monthly
wage multiplied by their length of service within a given

calendar year. Thus, we exclude from the computation of
basic salary payments for sick, vacation and maternity
leaves, night differentials, regular holiday pay and premiums
for work done on rest days and special holidays. In Hagonoy
Rural Bank v. NLRC, St. Michael Academy v. NLRC,
Consolidated Food Corporation v. NLRC, and similar cases,
the 13th month pay due an employee was computed based on
the employees basic monthly wage multiplied by the number
of months worked in a calendar year prior to separation from
employment. The revised guidelines also provided for a
proration of this benefit only in cases of resignation or
separation from work. As the rules state, under these
circumstances, an employee is entitled to a pay in proportion
to the length of time he worked during the year, reckoned
from the time he started working during the calendar year. The
Court of Appeals thus held that: Considering the foregoing,
the computation of the 13th month pay should be based on the
length of service and not on the actual wage earned by the
worker. In the present case, there being no gap in the service
of the workers during the calendar year in question, the
computation of the 13th month pay should not be prorated but
should be given in full.
More importantly, it has not been refuted that Honda
has not implemented any prorating of the 13th month pay
before the instant case. Honda did not adduce evidence to
show that the 13th month, 14th month and financial assistance
benefits were previously subject to deductions or prorating or
that these were dependent upon the companys financial
standing.
58. FRAMANLIS FARMS, INC., ELOISA SYCIP and

LINCOLN SYCIP, petitioners vs. HON. MINISTER OF
LABOR, MANILA
G.R. No. 72616-17 March 8, 1989
Facts:
Eighteen (18) employees of Framanlis Farms, Inc. filed
against their employer two labor standard cases alleging that
in 1977 to 1979 they were not paid emergency cost of living
allowance (ECOLA) minimum wage, 13th month pay, holiday
pay, and service incentive leave pay. In their answer,
Framanlis Farms alleged that the employees were not regular
workers on their hacienda but were migratory (sacadas) or
pakyaw workers who worked on-and-off and were hired
seasonally, or only during the milling season, to do piece-work
on the farms, hence, they were not entitled to the benefits
claimed by them. The Minister of Labor directed Framanlis
Farms to pay the deficiency payment of emergency living
allowance and service incentive leave pay, holiday pay and
social amelioration bonus for 3 years for 1977 to 1979. Upon
the petitioners' appeal of that Order, the Deputy Minister of
Labor modified it by ordering the employer to pay all nonpakyaw workers their claim for holiday and incentive leave
pay for the years 1977, 1978, all 'pakyaw' workers their pay
differentials for the same period on days they worked for at
least eight (8) hours and earned below P8.06 daily, and all
complainants their 13th month pay for the years 1978 and
1979. The Deputy Minister clarified that pakyaw workers
were excluded from holiday and service incentive leave pay.
Page | 66
Issue:
Whether or not Framanlis Farm is required to pay 13th month
pay despite the fact that they had substantially complied with
the requirement by extending yearly bonuses and other
benefits in kind and in cash to the complainants, pursuant to
Section 3(c) of PD 851 which exempts the employer from
paying 13th month pay when its equivalent has already been
given;
Ruling:
Petitioners admitted that they failed to pay their workers 13th
month pay in 1978 and 1979. However, they argued that they
substantially complied with the law by giving their workers a
yearly bonus and other non-monetary benefits amounting to
not less than 1/12th of their basic salary, in the form of:
1. a weekly subsidy of choice pork meat for only P9.00 per
kilo and later increased to P11 per kilo in March 1980, instead
of the market price of P10 to P15 per kilo;
2. free choice pork meat in May and December of every year;
and
3. free light or electricity.
4. all of which were allegedly "the equivalent" of the 13th
month pay.
Unfortunately, under Section 3 of PD No. 851, such benefits
in the form of food or free electricity, assuming they were
given, were not a proper substitute for the 13th month pay
required by law. PD 851 provides:
Section 3. Employees covered The Decree shall apply to all
employees except to:
x x x. x x x x x x
The term 'its equivalent' as used in paragraph (c) hereof shall
include Christmas bonus, mid-year bonus, profit-sharing
payments and other cash bonuses amounting to not less than
1/12 of the basic salary but shall not include cash and stock
dividends, cost of living allowances and all other allowances
regularly enjoyed by the employee, as well as non-monetary
benefits.
Where an employer pays less than 1/12 of the employee's
basic salary, the employer shall pay the difference."
Neither may year-end rewards for loyalty and service be
considered in lieu of 13th month pay. Section 10 of the Rules
and Regulations Implementing Presidential Decree No. 851
provides:
Section 10. Prohibition against reduction or elimination of
benefits-Nothing herein shall be construed to authorize any
employer to eliminate, or diminish in any way, supplements,
or other employee benefits or favorable practice being enjoyed
by the employee at the time of promulgation of this issuance."
The failure of the Minister's decision to identify the pakyaw
and non-pakyaw workers does not render said decision
invalid. The workers may be identified or determined in the
proceedings for execution of the judgment.
59. Kamaya Port Hotel v. NLRC

177 SCRA 160 (1989)
14th Month Pay
FACTS: Respondent Memia Quiambao with 30 others who
are members of private respondent Federation of Free
Workers (FFW) was employed by petitioner as hotel crew. On
the basis of the profitability of the companys business

operations, management granted a 14th month pay to its
employees or 3 years. Operations ceased to give way to the
hotels conversion into a training center for Libyan scholars.
However, due to technical and financing problems, the
Libyans pre-terminated the program, leaving petitioner
without any business. Although petitioner reopened the hotel
premises to the public, it was not able to pick up its lost
patronage. In a couple of months it affected a retrenchment
program until finally it totally closed its business. FFW filed a
complaint against Kamaya, among other things for nonpayment of 14th month pay.
ISSUE: WON an employer may be obliged to grant 14th
month.
RULING: NO. There is no law that mandates the payment of
the 14th month pay, only the 13th month pay is mandated.
Having enjoyed the additional income in the form of the 13th
month pay, private respondents insistence on the 14th month
pay is already an unwarranted expansion of the liberality of
the law. A 14th month pay is a misnomer because it is
basically a bonus and, therefore, gratuitous in nature. The
granting of the 14th month pay is a management prerogative
which cannot be forced upon the employer. It is something
given in addition to what is ordinarily received by or strictly
due the recipient. It is a gratuity to which the recipient has no
right to make a demand. An employer may not be obliged to
assume the onerous burden of granting bonuses or other
benefits aside from the employees basic salaries or wages in
addition to the required 13th month pay.
60. DAVAO FRUITS CORPORATION vs. ASSOCIATED
LABOR UNIONS (ALU) for in behalf of all the rank-andfile
workers/employees
of
DAVAO
FRUITS
CORPORATION and NATIONAL LABOR RELATIONS
COMMISSION
G.R. No. 85073 August 24, 1993
CASE SUMMARY:
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.
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.
FACTS:
Page | 67
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-XI82) 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.
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.
LA: Labor Arbiter Pedro C. Ramos ruled in favor of
respondent ALU and ordered respondent to pay the 1982
13th month pay differential to all its rank-and-file
workers/employees herein represented by complainant Union.
NLRC: NLRC affirmed the said decision accordingly
dismissed the appeal for lack of merit.
ISSUE:
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.
HELD:
Yes. 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 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 costof-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. The
exclusion of cost-of-living 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
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 143144). 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.
Whatever compensation an employee receives for an eighthour 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.
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.
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.
Petitioner had freely, voluntarily and continuously included in
the computation of its employees' thirteenth month pay, the
Page | 68
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.
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.
61. PHILIPPINE DUPLICATORS, INC., petitioner, vs.

NATIONAL LABOR RELATIONS COMMISSION and
PHILIPPINE
DUPLICATORS
EMPLOYEES
UNIONTUPAS, respondents
G.R. No. 110068. February 15, 1995.
Labor Law; Basic Salary; Thirteenth Month Pay; Bonus;
Benefits; The salesmen's commissions, comprising a
predetermined percent of the selling price of the goods sold by
each salesman, were properly included in the term "basic
salary" for purposes of computing their 13th month pay.
Considering the above circumstances, the Third Division held,
correctly, that the sales commissions were an integral part of
the basic salary structure of Philippine Duplicators' employees
salesmen. These commissions are not overtime payments, nor
profit-sharing payments nor any other fringe benefit. Thus, the
salesmen's commissions, comprising a predetermined percent
of the selling price of the goods sold by each salesman, were
properly included in the term "basic salary" for purposes of
computing their 13th month pay.
FACTS: This Court, through its Third Division, rendered a
decision dismissing the Petition for Certiorari filed by
petitioner Philippine Duplicators, Inc. (Duplicators). The
Court upheld the decision of public respondent National Labor
Relations Commission (NLRC), which affirmed the order of
Labor Arbiter Felipe T. Garduque II directing petitioner to pay
13th month pay to private respondent employees computed on
the basis of their fixed wages plus sales commissions. The
Third Division also denied with finality the Motion for
Reconsideration filed by petitioner.
Petitioner Duplicators filed a Second Motion for
Reconsideration. The petitioner argues that the doctrine laid
down by the Court in BoieTakeda Chemicals, Inc. vs. Hon.
Dionisio de la Serna, where it was held that commissions paid
to or received by medical representatives of BoieTakeda

Chemicals were excluded from the term "basic salary" for
purposes of computing their 13th month pay, should be
applied to its case.
ISSUE: whether or not the sales commission paid to
petitioners employees may be considered as bonus and hence
excluded in the basic salary.
HELD: NO. The Third Division held, correctly, that the sales
commissions were an integral part of the basic salary structure
of Philippine Duplicators' employees salesmen. These
commissions are not overtime payments, nor profit sharing
payments nor any other fringe benefit. Thus, the salesmen's
commissions, comprising a predetermined percent of the
selling price of the goods sold by each salesman, were
properly included in the term "basic salary" for purposes of
computing their 13th month pay.
The doctrine laid down in Boie-Takeda is not
applicable to petitioners case. In BoieTakeda, the socalled
commissions "paid to or received by medical representatives
of Boie-Takeda Chemicals were excluded from the term
"basic salary" because these were paid to the medical
representatives and rank-and-file employees as "productivity
bonuses." The Second Division characterized these payments
as additional monetary benefits not properly included in the
term "basic salary" in computing their 13th month pay. We
note that productivity bonuses are generally tied to the
productivity, or capacity for revenue production, of a
corporation; such bonuses closely resemble profit-sharing
payments and have no clear, direct or necessary relation to the
amount of work actually done by each individual employee.
More generally, a bonus is an amount granted and paid ex
gratia to the employee; its payment constitutes an act of
enlightened generosity and self-interest on the part of the
employer, rather than as a demandable or enforceable
obligation.
Whether or not a bonus forms part of wages depends
upon the circumstances or conditions 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 wages.
In principle, where these earnings and remuneration
are closely akin to fringe benefits, overtime pay or profitsharing payments, they are properly excluded in computing the
13th month pay. However, sales commissions which are
effectively an integral portion of the basic salary structure of
an employee shall be included in determining his 13th month
pay. We recognize that both productivity bonuses and sales
commissions may have an incentive effect. But there is reason
to distinguish one from the other here. Productivity bonuses
are generally tied to the productivity or profit generation of the
employer corporation. Productivity bonuses are not directly
dependent on the extent an individual employee exerts
himself. A productivity bonus is something extra for which no
specific additional services are rendered by any particular
employee and hence not legally demandable, absent a
contractual undertaking to pay it. Sales commissions, on the
Page | 69
other hand, such as those paid in Duplicators, are intimately

related to or directly proportional to the extent or energy of an
employee's endeavors. Commissions are paid upon the
specific results achieved by a salesman employee. It is a
percentage of the sales closed by a salesman and operates as
an integral part of such salesman's basic pay.
62. LOURDES G. MARCOS, ALEJANDRO T.

ANDRADA, BALTAZARA J. LOPEZ and VILMA L.
CRUZ, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and INSULAR LIFE ASSURANCE CO.,
LTD., respondents
G.R. No. 111744. September 8, 1995
CASE SUMMARY: Same; Words and Phrases; Bonus,
Explained.A bonus is not a gift or gratuity, but is paid for
some services or consideration and is in addition to what
would ordinarily be given. The term bonus as used in
employment contracts, also conveys an idea of something
which is gratuitous, or which may be claimed to be gratuitous,
over and above the prescribed wage which the employer
agrees to pay. ; After the acceptance of a promise by an
employer to pay the bonus, the same cannot be withdrawn, but
may be enforced by the employee.The weight of authority
in American jurisprudence, with which we are persuaded to
agree, is that after the acceptance of a promise by an employer
to pay the bonus, the same cannot be withdrawn, but may be
enforced by the employee. However, in the case at bar, equity
demands that the performance and anniversary bonuses should
be prorated to the number of months that petitioners actually
served respondent company in the year 1990. This observation
should be taken into account in the computation of the
amounts to be awarded to petitioners.
FACTS: Petitioners were regular employees of private
respondent Insular Life Assurance Co:, Ltd., but they were
dismissed when their positions were declared redundant. A
special redundancy benefit was paid to them, which included
payment of accrued vacation leave and fifty percent(50%) of
unused current sick leave, special redundancy benefit,
equivalent to three (3) months salary for every year of service;
and additional cash benefits, in lieu of other benefits provided
by the company or required by law.
Before the termination of their services, petitioner Marcos had
been in the employ of private respondent for more than twenty
(20) years; petitioner Andrada, more than twenty-five (25)
years; petitioner Lopez, exactly thirty (30) years;
and petitioner Cruz, more than twenty (20) years.
Petitioners, particularly Baltazara J. Lopez, sent a letter dated
October 23, 1990 to respondent company questioning the
redundancy package, She claimed that they should receive
their respective service awards and other prorated bonuses
which they had earned at the time they were dismissed. In
addition, Lopez argued that "the cash service awards have
already been budgeted in a fund distinct and apart from
redundancy fund.
Thereafter, private respondent required petitioners to execute a
"Release and Quitclaim," and petitioners complied but with
a written protest reiterating their previous demand that they
were nonetheless entitled to receive their service awards.

Meanwhile, in the same year, private respondent celebrated its
80th anniversary wherein the management approved the grant
of an anniversary bonus equivalent to one (1) month salary
only to permanent and probationary employees as of
November 15, 1990.
On March 26, 1991, respondent company announced the grant
of performance bonus to both rank and file employees and
supervisory specialist grade and managerial staff equivalent to
two(2) months salary and 2.75 basic salary, respectively, as of
December 30, 1990. The performance bonus, however, would
be given only to permanent employees as of March 30,1991.
In a decision dated October 8, 1992, the labor arbiter ordered
respondent company to pay petitioners their service awards,
anniversary bonuses and prorated performance bonuses,
including ten percent (10%) thereof as attorney's fees.
ISSUE: WON respondent NLRC committed reversible error
or grave abuse of discretion in affirming the validity of the
"Release and Quitclaim" and, consequently, that petitioners
are not entitled to payment of service awards and other
bonuses.
HELD: Under prevailing jurisprudence, the fact that an
employee has signed a satisfaction receipt for his claims does
not necessarily result in the waiver thereof. The law does not
consider as valid any agreement whereby a worker agrees to
receive less compensation than what he is entitled to recover.
A deed of release or quitclaim cannot bar an employee from
demanding benefits to which he is legally entitled.
Furthermore, in the instant case, it is an undisputed
fact that when petitioners signed the instrument of release and
quitclaim, they made a written manifestation reserving their
right to demand the payment of their service awards. The
element of total voluntariness in executing that instrument is
negated by the fact that they expressly stated therein their
claim for the service awards, a manifestation equivalent to a
protest and a disavowal of any waiver thereof.
The grant of service awards in favor of petitioners is
more importantly underscored in the precedent case of Insular
Life Assurance Co., Ltd., et al. vs. NLRC, et al., where this
Court ruled that "as to the service award differentials claimed
by some respondent union members ,the company policy shall
likewise prevail, the same being based on the employment
contracts or collective bargaining agreements between the
parties. As the petitioners had explained,pursuant to their
policies on the matter, the service award differential is given at
the end of the year to an employee who has completed years
of service divisible by 5.
A bonus is not a gift or gratuity, but is paid for some
services or consideration and is in addition to what would
ordinarily be given. The term "bonus" as used in employment
contracts, also conveys an idea of something which is
gratuitous, or which may be claimed to be gratuitous,over and
above the prescribed wage which the employer agrees to pay.
While there is a conflict of opinion as to the validity
of an agreement to pay additional sums for the performance of
that which the promisee is already under obligation to
perform, so as to give the latter the right to enforce such
Page | 70
promise after performance, the authorities hold that if one

enters into a contract of employment under an agreement that
he shall be paid a certain salary by the week or some other
stated period and, in addition, a bonus, in case he serves for a
specified length of time, there is no reason for refusing to
enforce the promise to pay the bonus,if the employee has
served during the stipulated time, on the ground that it was a
promise of amere gratuity.
This is true if the contract contemplates a
continuance of the employment for a definite term,and the
promise of the bonus is made at the time the contract is
entered into. If no time is fixed for the duration of the contract
of employment, but the employee enters upon or continues in
service under an offer of a bonus if he remains therein for a
certain time, his service, in case he remains for the required
time, constitutes an acceptance of the offer of the employer to
pay the for the required time, constitutes an acceptance of the
offer of the employer to pay the bonus and, after that
acceptance, the offer cannot be withdrawn, but can be
enforced by the employee.
The weight of authority in American jurisprudence, with
which we are persuaded to agree, is that after the acceptance
of a promise by an employer to pay the bonus, the same
cannot be withdrawn, but may be enforced by the employee.
However, in the case at bar, equity demands that the
performance and anniversary bonuses should be prorated to
the number of months that petitioners actually served
respondent company in the year 1990. This observation should
be taken into account in the computation of the amounts to be
awarded to petitioners.
WHEREFORE the decision of Labor Arbiter Alex
Arcadio Lopez is upheld.
63. BUSINESS DAY INFORMATION SYSTEMS AND

SERVICES, INC., AND RAUL LOCSIN, petitioners, vs.
NEMESIO MOYA, ALFREDO AMANTE, EDWIN
BERSAMINA, SAMUEL CUELA, ROMEO DELA
CRUZ, MANUEL DE JESUS, SEVERINO DELA CRUZ,
DANILO ESPIRITU, ANGEL FLORES, DANILO
FRANCISCO, FLORENCIO GLORIOSO, GERARDO
MANUEL,ARMANDO MENDOZA, PEDRO MORELOS,
ALEXON ORBETA, ROMEO PEREZ, ALFREDO
SABANDO,NESTOR SANTOS, ALFREDO SEPTRIMO,
OSCAR SEVILLA, EDUARDO SIOSON, REYMUNDO
TIONGCO, TERESITA REYES, CARMENCITA
CARPIO, GENARO NABUTAS, DANILO MAMPLATA,
AND ROLANDO GAMIT, respondents.
Labor Law; Grant of bonus is an exclusive prerogative of
management. Employees cannot complain they were not given
bonus while others were given bonus.
FACTS:
BSSI was engaged in manufacture and sale of
computer forms. Due to financial reverses, its creditors atke
possession of its assets. Some plant employees, inclyding
herein respondents, were laid off and separated. They were
paid to one-half month of salary for every year of service. In a
bid to rehabilitate the company, BSSI retained sone of its

employees, but the same were terminated as the company
decide to cease operations. The said batch of enployees were
paid one month salary for every year of service plus mid-year
bonus. Respondents alleging discrimination in the payments of
benefits, particularly the mid year bonus, filed a complaint
before the Labor Arbiter. The Labor Arbiter ordered, among
others, the payment of mid-year bonus to the first bacth of
employees that are separated from the service. On appeal, the
NLRC affirmed the said order of the Labor Arbiter.
Petitioners denied that there was unlawful
discrimination in the payment of separation benefits to the
employees. They argued that the first batch of employees was
paid retrenchment benefits mandated by law, while the
remaining employees were granted higher separation
benefits because their termination was on account of the
closure of the business.
Reapondents imputed that there exist unlawdul
discrimination in the payments of benefits by the company as
againts the first batch of workers.
ISSUE:
Whether or not it is proper, on the part of the NLRC
and the Labor Arbiter, to order the payment of mid-year bonus
to the first batch of employees.
RULING:
The award of mid-year bonus must be deleted. It is
settled doctrine that the grant of a bonus is a prerogative, not
an obligation, of the employer (Traders Royal Bank vs.
NLRC, 189 SCRA 274). The matter of giving a bonus over
and above the workers lawful salaries and allowances is
entirely dependent on the financial capability of the employer
to give it. The fact that the companys business was no longer
profitable (it was in fact moribund) plus the fact that the
private respondents did not work up to the middle of the year
were valid reasons for not granting them a mid-year bonus.
Requiring the company to pay a mid-year bonus to them also
would in effect penalize the company for its generosity to
those workers who remained with the company till the end
of its days.
64.
PHILIPPINE
APPLIANCE
CORPORATION
(PHILACOR), petitioner, vs. THE COURT OF
APPEALS, THE HONORABLE SECRETARY OF
LABOR BIENVENIDO E. LAGUESMA and UNITED
PHILACOR WORKERS UNIONNAFLU, respondents.
G.R. 149434. June 3, 2004.*
Labor Law; Collective Bargaining Agreements; Signing
Bonus; The signing bonus is a grant motivated by the goodwill
generated when a CBA is successfully negotiated and signed
between the employer and the union.In the case of
MERALCO v. The Honorable Secretary of Labor, we stated
that the signing bonus is a grant motivated by the goodwill
Page | 71
generated when a CBA is successfully negotiated and signed

between the employer and the union. In that case, we
sustained the argument of the Solicitor General, viz: When
negotiations for the last two years of the 1992-1997 CBA
broke down and the parties sought the assistance of the
NCMB, but which failed to reconcile their differences, and
when petitioner MERALCO bluntly invoked the jurisdiction of
the Secretary of Labor in the resolution of the labor dispute,
whatever goodwill existed between petitioner MERALCO and
respondent union disappeared. . . . Verily, a signing bonus is
justified by and is the consideration paid for the goodwill that
existed in the negotiations that culminated in the signing of a
CBA.
FACTS: During the collective bargaining negotiations
between petitioner and respondent union in 1997, petitioner
offered the amount of P4,000.00 to each employee as an
early conclusion bonus. Petitioner claims that this bonus
was promised as a unilateral incentive for the speeding up
of negotiations between the parties and to encourage
respondent union to exert their best efforts to conclude a
CBA.
In view of the expiration of this CBA, respondent union sent
notice to petitioner of its desire to negotiate a new CBA. At
the meeting on November 20, 1999, respondent union
accepted petitioners proposals on fourteen items, leaving
the following items unresolved: wages, rice subsidy, signing,
and retroactive bonus. Petitioner and respondent union failed
to arrive at an agreement concerning these four remaining
items. Labor Secretary Bienvenido Laguesma assumed
jurisdiction over the dispute and ruled in favor of Companys
proposal on signing bonus.
Petitioner argued that the award of the signing bonus was
patently erroneous since it was not part of the employees
salaries or benefits or of the collective bargaining agreement.
It is not demandable or enforceable since it is in the nature of
an incentive. As no CBA was concluded through the mutual
efforts of the parties, the purpose for the signing bonus was
not served.
On May 22, 2000, Secretary Laguesma issued an Order ruling
that while the bargaining negotiations might have failed and
the signing of the agreement was delayed, this cannot be
attributed solely to respondent union. Moreover, the Secretary
noted that the signing bonus was granted in the previous CBA.
The Labor Secretarys award of the signing bonus was also
affirmed by the Court of Appeals noting that petitioner itself
offered the same as an incentive to expedite the CBA
negotiations. This offer was not withdrawn and was still
outstanding when the dispute reached the DOLE. As such,
petitioner can no longer adopt a contrary stand and dispute its
own offer.
ISSUE: Whether or not private respondents can demand
signing bonus.
HELD: NO. As clearly explained by [Caltex], a signing
bonus may not be demanded as a matter of right. If it is
not agreed upon by the parties or unilaterally offered as

an additional incentive by [Caltex], the condition for
awarding it must be duly satisfied.
In the case at bar, two things militate against the grant
of the signing bonus: first, the non-fulfillment of the
condition for which it was offered, i.e., the speedy and
amicable conclusion of the CBA negotiations; and second,
the failure of respondent union to prove that the grant of
the said bonus is a long established tradition or a
regular practice on the part of petitioner. Petitioner
admits, and respondent union does not dispute, that it
offered an early conclusion bonus or an incentive for a
swift finish to the CBA negotiations. The offer was first
made during the 1997 CBA negotiations and then again
at the start of the 1999 negotiations. The bonus offered is
consistent with the very concept of a signing bonus.
In MERALCO v. The Honorable Secretary of Labor, we
stated that the signing bonus is a grant motivated by the
goodwill generated when a CBA is successfully negotiated
and signed between the employer and the union. Verily, a
signing bonus is justified by and is the consideration
paid for the goodwill that existed in the negotiations that
culminated in the signing of a CBA.
In the case at bar, the CBA negotiation between
petitioner and respondent union failed notwithstanding the
intervention of the NCMB. Respondent union went on
strike for 11 days and blocked the ingress to and egress
from petitioners two work plants. The labor dispute had
to be referred to the Secretary of Labor and Employment
because neither of the parties was willing to compromise
their respective positions regarding the four remaining items
which stood unresolved. While we do not fault any one
party for the failure of the negotiations, it is apparent
that there was no more goodwill between the parties and
that the CBA was clearly not signed through their mutual
efforts alone. Hence, the payment of the signing bonus is
no longer justified and to order such payment would be
unfair and unreasonable for petitioner.
Furthermore, we have consistently ruled that a bonus is
not a demandable and enforceable obligation. True, it may
nevertheless be granted on equitable considerations as
when the giving of such bonus has been the companys
long and regular practice. To be considered a regular
practice, however, the giving of the bonus should have
been done over a long period of time, and must be
shown to have been consistent and deliberate. The test or
rationale of this rule on long practice requires an
indubitable showing that the employer agreed to continue
giving the benefits knowing fully well that said employees
are not covered by the law requiring payment thereof.
Respondent does not contest the fact that petitioner
initially offered a signing bonus only during the previous
CBA negotiation. Previous to that, there is no evidence
on record that petitioner ever offered the same or that the
parties included a signing bonus among the items to be
resolved in the CBA negotiation. Hence, the giving of
such bonus cannot be deemed as an established practice
Page | 72
considering that the same was given only once, that is, during
the 1997 CBA negotiation.
Page | 73

Labor Standards Cases (Chapter V)

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LABOR STANDARDS CASES

Labor Arbiter Augusto L. Villanueva

1.MANILA TERMINAL COMPANY, INC., petitioner vs.

of the United States Army. The petitioner hired some thirty

Government having no independent personality and which

WON the agreement under which its police force

Association. In the first place, it would be contrary to the spirit

WHEREFORE, DECISION AFFIRMED.

2.ASIA PACIFIC CHARTERING (PHILS.), INC.,

business in the Philippines. As GSA, petitioner sold passenger

Reconsideration of the NLRC Decision having been denied,

without justifiable excuse, as distinguished from an act done

3. Pearanda vs. Baganga Plywood Corporation

overtime pay, premium pay for working during holidays/rest

Labor standards provide the working conditions of employees,

NO. On the basis of the foregoing, the Court finds no

4. Mercidar Fishing Corporation vs. NLRC

petitioner refused to issue the certificate unless he submitted

Moreover, the requirement that actual hours of

5. Auto Bus Transport Systems, Inc. vs. Bautista

to employees classified as field personnel. The phrase other

allowed to work until he fully paid the amount of P75,551.50,

employee, it is also necessary to ascertain if actual hours of

6.Labor Congress of the Philippines vs. NLRC

VII, Book III, of these regulations, or where such rates have

processed food, who coordinate with grocery stores and other

As to overtime pay, the rules, however, are different.

7. PHILIPPINE AIRLINES, INC., petitioner, vs.

8. TEOFILO ARICA, ET AL petitioners, vs. NATIONAL

Article IV, Section 3 (PLEASE SEE Labor Law; Labor

were fully paid their regular monthly salaries. However, from

allowance is intended. The legal principles of No work, no

10.HILARIO RADA, petitioner vs. NATIONAL LABOR

be finished. By that time some of those project employees

Private respondent does not hesitate to admit that it is

11.SSS v. Court of Appeals

exercised control over the manner by which Tana performed

The fact that Tanas name does not appear in the

12.Shell v. National Labor Union (NLU)

Doctrine: Undoubtedly night work not only in the long run

but to do it is only fair to remunerate better than usual to

13. Mantrade/FMMC Division Employees and Workers

a. Petitioner is barred from pursuing the present

Article 2044 of the Civil Code which

On 7 July 1988, Trans-Asia Philippines Employees

14. CASE: Trans-Asia Phils. Employees Association vs.

Trans-Asia further clarified that the 286 days

benefits and deductions. The use by Trans-Asia of the 286

2 days Special days (If considered paid; if actually worked,

On the other hand, Section 6 of the Implementing Rules and

December, and the day designated by law for holding a

(such as transportation strikes, riots, or typhoons or other

16.SAN MIGUEL CORPORATION, petitioner, vs. THE

"Whether or not a monthly-paid employee, receiving

There is no provision of law requiring any employer

WoN non-muslims are entitled to regular holiday pay

and Casimiro Zapata to only one (1) year. The respondents

No. Despite the fact that the Supreme Court ruled

Wherefore, the decision of the NLRC was upheld

Proper adjustment of wages, withdrawal of case

complainants wages in their consolidated Affidavits of merit

Whether or not the petitioners are entitled to Labor

Yes. Petitioners are entitled to labor standards