G.R. No.

79255 January 20, 1992

UNION OF FILIPRO EMPLOYEES (UFE), petitioner, vs.BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTLÉ PHILIPPINES, INC. (formerly
FILIPRO, INC.), respondents.
GUTIERREZ, JR., J.:
This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the change of the divisor in the computation of benefits from 251 to
261 days.
On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor Relations Commission (NLRC) a petition for declaratory
relief seeking a ruling on its rights and obligations respecting claims of its monthly paid employees for holiday pay in the light of the Court's decision in Chartered
Bank Employees Association v. Ople (138 SCRA 273 [1985]).

Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary arbitration and appointed respondent Benigno Vivar, Jr. as voluntary
arbitrator.
On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:
pay its monthly paid employees holiday pay pursuant to Article 94 of the Code, subject only to the exclusions and limitations specified in Article 82 and such other
legal restrictions as are provided for in the Code. (Rollo, p. 31)
Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion of salesmen, sales representatives, truck drivers,
merchandisers and medical representatives (hereinafter referred to as sales personnel) from the award of the holiday pay, and (3) deduction from the holiday pay
award of overpayment for overtime, night differential, vacation and sick leave benefits due to the use of 251 divisor. (Rollo, pp. 138-145)
Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor Code, that their sales personnel are not field personnel
and are therefore entitled to holiday pay, and that the use of 251 as divisor is an established employee benefit which cannot be diminished.
On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday pay award shall retroact to November 1, 1974, the date of
effectivity of the Labor Code. He adjudged, however, that the company's sales personnel are field personnel and, as such, are not entitled to holiday pay. He likewise
ruled that with the grant of 10 days' holiday pay, the divisor should be changed from 251 to 261 and ordered the reimbursement of overpayment for overtime, night
differential, vacation and sick leave pay due to the use of 251 days as divisor.
Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator treated the two motions as appeals and forwarded the case to
the NLRC which issued a resolution dated May 25, 1987 remanding the case to the respondent arbitrator on the ground that it has no jurisdiction to review decisions
in voluntary arbitration cases pursuant to Article 263 of the Labor Code as amended by Section 10, Batas Pambansa Blg. 130 and as implemented by Section 5 of the
rules implementing B.P. Blg. 130.
However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the case reasoning that he had no more jurisdiction to continue as
arbitrator because he had resigned from service effective May 1, 1986.
Hence, this petition.
The petitioner union raises the following issues:
1) Whether or not Nestle's sales personnel are entitled to holiday pay; and
2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days and whether or not the previous use of
251 as divisor resulted in overpayment for overtime, night differential, vacation and sick leave pay.
The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the Labor Code. The respondent company controverts this
assertion.
Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as "non-agritultural 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."
The controversy centers on the interpretation of the clause "whose actual hours of work in the field cannot be determined with reasonable certainty."
It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to the office and come back to the office at 4:00 p.m. or 4:30 p.m. if
they are Makati-based.
The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales personnel's working hours which can be determined with
reasonable certainty.
The Court does not agree. The law requires that the actual hours of work in the field be reasonably ascertained. The company has no way of determining whether or
not these sales personnel, even if they report to the office before 8:00 a.m. prior to field work and come back at 4:30 p.m, really spend the hours in between in actual
field work.
We concur with the following disquisition by the respondent arbitrator:
The requirement for the salesmen and other similarly situated employees to report for work at the office at 8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the
realm of work in the field as defined in the Code but an exercise of purely management prerogative of providing administrative control over such personnel. This does
not in any manner provide a reasonable level of determination on the actual field work of the employees which can be reasonably ascertained. The theoretical
analysis that salesmen and other similarly-situated workers regularly report for work at 8:00 a.m. and return to their home station at 4:00 or 4:30 p.m., creating the
assumption that their field work is supervised, is surface projection. Actual field work begins after 8:00 a.m., when the sales personnel follow their field itinerary, and
ends immediately before 4:00 or 4:30 p.m. when they report back to their office. The period between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours of work
in the field, the extent or scope and result of which are subject to their individual capacity and industry and which "cannot be determined with reasonable certainty."
This is the reason why effective supervision over field work of salesmen and medical representatives, truck drivers and merchandisers is practically a physical
impossibility. Consequently, they are excluded from the ten holidays with pay award. (Rollo, pp. 36-37)
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
Sec. 1. Coverage — This rule shall apply to all employees except:
xxx xxx xxx
(e) Field personnel and other employees whose time and performance is unsupervised by the employer . . . (Emphasis 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 company's 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. 53-55).
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 work in the field cannot be determined with reasonable 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 employee's actual working hours in the field can be determined with reasonable certainty, query must be made
as to whether or not such employee's time and performance is constantly supervised by the employer.
The SOD schedule adverted to by the petitioner does not in the least signify that these sales personnel's time and performance are supervised. The purpose of this
schedule is merely to ensure that the sales personnel are out of the office not later than 8:00 a.m. and are back in the office not earlier than 4:00 p.m.
Likewise, the Court fails to see how the company can monitor the number of actual hours spent in field work by an employee through the imposition of sanctions on
absenteeism contained in the company circular on March 15, 1984.
The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter based on their performance is proof that their actual hours of
work in the field can be determined with reasonable certainty.
The Court thinks otherwise.
The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales target; (2) good collection performance; (3) proper compliance
with good market hygiene; (4) good merchandising work; (5) minimal market returns; and (6) proper truck maintenance. (Rollo, p. 190).
The above criteria indicate that these sales personnel are given incentive bonuses precisely because of the difficulty in measuring their actual hours of field work.
These employees are evaluated by the result of their work and not by the actual hours of field work which are hardly susceptible to determination.

In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had occasion to discuss the nature of the job of a salesman. Citing the
case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court stated:
The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to a greater extent, works individually. There are no restrictions respecting the
time he shall work and he can earn as much or as little, within the range of his ability, as his ambition dictates. In lieu of overtime he ordinarily receives commissions
as extra compensation. He works away from his employer's place of business, is not subject to the personal supervision of his employer, and his employer has no way
of knowing the number of hours he works per day.
While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale for their exclusion as field personnel from holiday pay
benefits also applies.
The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261
days to include the additional 10 holidays and the employees should reimburse the amounts overpaid by Filipro due to the use of 251 days' divisor.
Arbitrator Vivar's rationale for his decision is as follows:
. . . The new doctrinal policy established which ordered payment of ten holidays certainly adds to or accelerates the basis of conversion and computation by ten days.
With the inclusion of ten holidays as paid days, the divisor is no longer 251 but 261 or 262 if election day is counted. This is indeed an extremely difficult legal
question of interpretation which accounts for what is claimed as falling within the concept of "solutio indebti."
When the claim of the Union for payment of ten holidays was granted, there was a consequent need to abandon that 251 divisor. To maintain it would create an
impossible situation where the employees would benefit with additional ten days with pay but would simultaneously enjoy higher benefits by discarding the same ten
days for purposes of computing overtime and night time services and considering sick and vacation leave credits. Therefore, reimbursement of such overpayment
with the use of 251 as divisor arises concomitant with the award of ten holidays with pay. (Rollo, p. 34)
The divisor assumes an important role in determining whether or not holiday pay is already included in the monthly paid employee's salary and in the computation of
his daily rate. This is the thrust of our pronouncement in Chartered Bank Employees Association v. Ople (supra). In that case, We held:
It is argued that even without the presumption found in the rules and in the policy instruction, the company practice indicates that the monthly salaries of the
employees are so computed as to include the holiday pay provided by law. The petitioner contends otherwise.
One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing overtime compensation for its employees, employs a
"divisor" of 251 days. The 251 working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar
days in a year. If the employees are already paid for all non-working days, the divisor should be 365 and not 251.
In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows:
monthly rate x 12 months
———————————
251 days
Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by respondent Filipro indicates that holiday pay is not yet included in the
employee's salary, otherwise the divisor should have been 261.
It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for the purpose of computing overtime and night
differential pay and commutation of sick and vacation leave credits. Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.
The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily rate which is violative of the prohibition on non-diminution
of benefits found in Article 100 of the Labor Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the
employee's annual salary, should correspondingly be increased to incorporate the holiday pay. To illustrate, if prior to the grant of holiday pay, the employee's annual
salary is P25,100, then dividing such figure by 251 days, his daily rate is P100.00 After the payment of 10 days' holiday pay, his annual salary already includes holiday
pay and totals P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily rate is still P100.00. There is thus no merit in respondent Nestle's claim of overpayment
of overtime and night differential pay and sick and vacation leave benefits, the computation of which are all based on the daily rate, since the daily rate is still the
same before and after the grant of holiday pay.
Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days as divisor must fail in light of the Labor Code mandate that "all
doubts in the implementation and interpretation of this Code, including its implementing rules and regulations, shall be resolved in favor of labor." (Article 4).
Moreover, prior to September 1, 1980, when the company was on a 6-day working schedule, the divisor used by the company was 303, indicating that the 10 holidays
were likewise not paid. When Filipro shifted to a 5-day working schebule on September 1, 1980, it had the chance to rectify its error, if ever there was one but did not
do so. It is now too late to allege payment by mistake.
Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from November 1, 1974. This ruling was not questioned by the petitioner
union as obviously said decision was favorable to it. Technically, therefore, respondent Nestle should have filed a separate petition raising the issue of effectivity of
the holiday pay award. This Court has ruled that an appellee who is not an appellant may assign errors in his brief where his purpose is to maintain the judgment on
other grounds, but he cannot seek modification or reversal of the judgment or affirmative relief unless he has also appealed. (Franco v. Intermediate Appellate Court,
178 SCRA 331 [1989], citing La Campana Food Products, Inc. v. Philippine Commercial and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in order to fully settle
the issues so that the execution of the Court's decision in this case may not be needlessly delayed by another petition, the Court resolved to take up the matter of
effectivity of the holiday pay award raised by Nestle.
Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when the Chartered Bank decision, promulgated on August 28, 1985,
became final and executory, and not from the date of effectivity of the Labor Code. Although the Court does not entirely agree with Nestle, we find its claim
meritorious.
In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984], hereinafter referred to as the IBAA case, the Court declared that
Section 2, Rule IV, Book III of the implementing rules and Policy Instruction No. 9, issued by the then Secretary of Labor on February 16, 1976 and April 23, 1976,
respectively, and which excluded monthly paid employees from holiday pay benefits, are null and void. The Court therein reasoned that, in the guise of clarifying the
Labor Code's provisions on holiday pay, the aforementioned implementing rule and policy instruction amended them by enlarging the scope of their exclusion. The
Chartered Bank case reiterated the above ruling and added the "divisor" test.
However, prior to their being declared null and void, the implementing rule and policy instruction enjoyed the presumption of validity and hence, Nestle's non-
payment of the holiday benefit up to the promulgation of the IBAA case on October 23, 1984 was in compliance with these presumably valid rule and policy
instruction.
In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the effect to be given to a legislative or executive act subsequently
declared invalid:
xxx xxx xxx
. . . It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with.
This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may
have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive
act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned
with. This is merely to reflect awareness that precisely because the judiciary is the government organ which has the final say on whether or not a legislative or
executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be
to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination of [unconstitutionality], is an operative fact
and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, — with respect to particular relations, individual and corporate, and particular conduct, private and official."
(Chicot County Drainage Dist. v. Baxter States Bank, 308 US 371, 374 [1940]). This language has been quoted with approval in a resolution in Araneta v. Hill (93 Phil.
1002 [1952]) and the decision in Manila Motor Co., Inc. v. Flores (99 Phil. 738 [1956]). An even more recent instance is the opinion of Justice Zaldivar speaking for the
Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435)
The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness and resulting unfairness must be avoided. It is now almost the end
of 1991. To require various companies to reach back to 1975 now and nullify acts done in good faith is unduly harsh. 1984 is a fairer reckoning period under the facts
of this case.

Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on the implicit validity of the implementing rule and policy
instruction before this Court nullified them, and thinking that it was not obliged to give holiday pay benefits to its monthly paid employees, may have been moved to
grant other concessions to its employees, especially in the collective bargaining agreement. This possibility is bolstered by the fact that respondent Nestle's
employees are among the highest paid in the industry. With this consideration, it would be unfair to impose additional burdens on Nestle when the non-payment of
the holiday benefits up to 1984 was not in any way attributed to Nestle's fault.
The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the Chartered Bank case nor from the date of effectivity of
the Labor Code, but from October 23, 1984, the date of promulgation of the IBAA case.
WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in computing holiday pay shall be 251 days. The holiday pay as above
directed shall be computed from October 23, 1984. In all other respects, the order of the respondent arbitrator is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Melencio-Herrera, Paras, Feliciano, Padilla, Bidin, Medialdea, Griño-Aquino, Regalado, Davide, Jr. and Romero, JJ., concur.
Cruz and Nocon, JJ., took no part.

Case Brief: Union of Filipro Employees v. Benigno Vivar, Jr, et al.

OCTOBER 9, 2014JEFF REY
G.R. No. 79255 January 20, 1992

UNION OF FILIPRO EMPLOYEES (UFE), petitioner,

vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTLÉ PHILIPPINES, INC. (formerly FILIPRO, INC.), respondents.

We used to have ten (10) regular holidays. This is the reason for the 251 divisor, used by some companies in computing the daily wage, which represents the 365 days
of the year, less 52 Saturdays, 52 Sundays and the 10 legal holidays. The new law added one more regular holiday – the Eid’l Fitr. We thus have eleven (11) regular
holidays under R.A. 9492:

New Year’s Day (January 1)

Maundy Thursday (Movable date)
Good Friday (Movable date)
Eid’l Fitr (Movable date)
Araw ng Kagitingan – Bataaan and Corregidor Day (Monday nearest April 9)
Labor Day (Monday nearest May 1)
Independence Day (Monday nearest June 12)
National Heroes Day (Last Monday of August)
Bonifacio Day (Monday nearest November 30)
Christmas Day (December 25)
Rizal Day (Monday nearest December 30)
The Labor Code provides that every worker shall be paid his daily wage during regular holidays. Employers are now required to pay for an extra regular holiday.

Facts:

On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor Relations Commission (NLRC) a petition for claims of its
monthly paid employees for holiday pay.

Abitrator Vivar: Filipro to pay its monthly paid employees holiday pay pursuant to Art 94 of Labor Code, subject to exclusions and limitations in Art 82.

Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion of salesmen, sales representatives, truck drivers,
merchandisers and medical representatives (hereinafter referred to as sales personnel) from the award of the holiday pay, and (3) deduction from the holiday pay
award of overpayment for overtime, night differential, vacation and sick leave benefits due to the use of 251 divisor.

Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor Code, that their sales personnel are not field personnel
and are therefore entitled to holiday pay, and that the use of 251 as divisor is an established employee benefit which cannot be diminished.

Arbitrator Vivar: On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday pay award shall retroact to November 1,
1974, the date of effectivity of the Labor Code. He adjudged, however, that the company’s sales personnel are field personnel and, as such, are not entitled to holiday
pay. He likewise ruled that with the grant of 10 days’ holiday pay, the divisor should be changed from 251 to 261 and ordered the reimbursement of overpayment for
overtime, night differential, vacation and sick leave pay due to the use of 251 days as divisor.

Issues:

1) Whether or not Nestle’s sales personnel are entitled to holiday pay; and

2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days and whether or not the previous use of 251 as
divisor resulted in overpayment for overtime, night differential, vacation and sick leave pay.

Held:

1. Sales personnel are not entitled to holiday pay.

Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as “non-agritultural 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.”
The law requires that the actual hours of work in the field be reasonably ascertained. The company has no way of determining whether or not these sales personnel,
even if they report to the office before 8:00 a.m. prior to field work and come back at 4:30 p.m, really spend the hours in between in actual field work.

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

Sec. 1. Coverage — This rule shall apply to all employees except:

xxx xxx xxx

(e) Field personnel and other employees whose time and performance is unsupervised by the employer . . . (Emphasis supplied)

Hence, in deciding whether or not an employee’s actual working hours in the field can be determined with reasonable certainty, query must be made as to whether
or not such employee’s time and performance is constantly supervised by the employer.

2. The divisor in computing the award of holiday pay should still be 251 days.

While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale for their exclusion as field personnel from holiday pay
benefits also applies.

The petitioner union also assails the respondent arbitrator’s ruling that, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261
days to include the additional 10 holidays and the employees should reimburse the amounts overpaid by Filipro due to the use of 251 days’ divisor.

The 251 working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar days in a year. If the
employees are already paid for all non-working days, the divisor should be 365 and not 251.

In the petitioner’s case, its computation of daily ratio since September 1, 1980, is as follows:

monthly rate x 12 months / 251 days

The use of 251 days’ divisor by respondent Filipro indicates that holiday pay is not yet included in the employee’s salary, otherwise the divisor should have been 261.

It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for the purpose of computing overtime and night
differential pay and commutation of sick and vacation leave credits. Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.

The respondent arbitrator’s order to change the divisor from 251 to 261 days would result in a lower daily rate which is violative of the prohibition on non-diminution
of benefits found in Article 100 of the Labor Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the
employee’s annual salary, should correspondingly be increased to incorporate the holiday pay.

To illustrate, if prior to the grant of holiday pay, the employee’s annual salary is P25,100, then dividing such figure by 251 days, his daily rate is P100.00 After the
payment of 10 days’ holiday pay, his annual salary already includes holiday pay and totals P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily rate is still
P100.00. There is thus no merit in respondent Nestle’s claim of overpayment of overtime and night differential pay and sick and vacation leave benefits, the
computation of which are all based on the daily rate, since the daily rate is still the same before and after the grant of holiday pay.

SC Decision:

The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the Chartered Bank case nor from the date of effectivity of
the Labor Code, but from October 23, 1984, the date of promulgation of the IBAA case (Insular Bank of Asia and America Employees’ Union (IBAAEU) v. Inciong,
where the court declared that Sec 2, Rule IV, Book III of IRR which excluded monthly paid employees from holiday pay benefits, are null and void).

WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in computing holiday pay shall be 251 days. The holiday pay as above
directed shall be computed from October 23, 1984. In all other respects, the order of the respondent arbitrator is hereby AFFIRMED.
G.R. Nos. 117442-43 January 11, 1995

FEM'S ELEGANCE LODGING HOUSE, FENITHA SAAVEDRA and IRIES ANTHONY SAAVEDRA, petitioners,
vs.
The Honorable LEON P. MURILLO, Labor Arbiter, Regional Arbitration Branch, Region X, National Labor Relations Commission, Cagayan de Oro City, ALFONSO
GALLETO, GEORGE VEDAD, ROLAND PANTONIAL, REYNALDO DELAORAO, FELICISIMO BAQUILID, CECILIO SAJOL, ANNABEL CASTRO, BENJAMIN CABRERA,
RHONDEL PADERANGA, ZENAIDA GUTIB, AIDA IMBAT and MARIA GRACE ATUEL, respondents.

RESOLUTION

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of court with temporary restraining order to reverse and set aside the Order dated September 21,
1994 of the Labor Arbiter in the NLRC RAB X Cases Nos. 10-04-00232 (-00233)-94.

Petitioner FEM's elegance Lodging House is a business enterprise engaged in providing lodging accommodations. It is owned by petitioner Fenitha Saavedra and
managed by petitioner Iries Anthony Saavedra. Private respondents are former employees of petitioners whose services were terminated between March and April,
1994.

Sometime after their dismissal from the employment of petitioners, private respondents separately filed two cases against petitioners before the National Labor
Relations Commission (NLRC), Regional Arbitration Branch No. X, Cagayan de Oro City, docketed as NLRC RAB X Cases Nos. 10-04-00232-(0023)-94. Private
respondents sought for unpaid benefits such as minimum wage, overtime pay, rest day pay, holiday pay, full thirteenth-month pay and separation pay (Rollo, pp. 40-
42).

On May 31, 1994, a pre-arbitration conference of the cases took place before the Labor Arbiter. It was agreed therein: (1) that both labor cases should be
consolidated; and (2) that the parties would file their respective position papers within thirty days from said date or until June 30, 1994, after which the cases would
be deemed submitted for resolution (Rollo, p. 14).

On June 29, petitioners filed their position paper. On July 7, they inquired from the NLRC whether private respondents had filed their position paper. The receiving
clerk of the NLRC confirmed that as of said date private respondents had not yet filed their position paper.

The following events then transpired: on July 8, petitioners filed a Motion to dismiss for failure of private respondents to file their position paper within the agreed
period (Rollo, p. 38); on July 15, private respondents belatedly filed their position paper; on July 18, petitioners filed a Motion to Expunge [private respondents']
Position Paper from the records of the case (Rollo, p. 45); and on August 23, the Labor Arbiter issued a notice of clarificatory hearing, which was set for September 7
(Rollo, p. 47). Prior to the hearing, petitioners filed a Motion to Resolve [petitioners'] Motion to dismiss and Motion to Expunge [private respondent'] Position Paper
from the Records of the Case (Rollo, p. 48).

On September 21, the Labor Arbiter issued the order denying the motions filed by petitioners. He held that a fifteen-day delay in filing the position paper was not
unreasonable considering that the substantive rights of litigants should not be sacrificed by technicality. He cited Article 4 of the Labor Code of the Philippines, which
provides that all doubts in the interpretation thereof shall be resolved in favor of labor. He said that even under Section 15, Rule 5 of the Revised Rules of Court, a
delay in the filing of a position paper is not a ground for a motion to dismiss under the principle of exclusio unius est excludio alterius (Rollo, pp. 51-52).

Hence, the present petition where petitioners charged the Labor Arbiter with grave abuse of discretion for issuing the order in contravention of Section 3, Rule V of
The New Rules of Procedure of the NLRC, Said section provides:

Submission of Position Papers/Memorandum. — . . . Unless otherwise requested in writing by both parties, the Labor Arbiter shall direct both parties to submit
simultaneously their position papers/memorandum with the supporting documents and affidavits within fifteen (15) calendar days from the date of the last
conference, with proof of having furnished each other with copies thereof (Emphasis supplied).

Petitioners claimed that they were denied due process and that the Labor Arbiter should have cited private respondents in contempt for their failure to comply with
their agreement in the pre-arbitration conference.

We dismiss the petition for failure of petitioners to exhaust their remedies, particularly in seeking redress from the NLRC prior to the filing of the instant petition.
Article 223 of the Labor code of the Philippines provides that decisions, awards or orders of the Labor Arbiter are appealable to the NLRC. Thus, petitioners should
have first appealed the questioned order of the Labor Arbiter to the NLRC, and not to this court. their omission is fatal to their cause.

However, even if the petition was given due course, we see no merit in petitioners' arguments. The delay of private respondents in the submission of their position
paper is a procedural flaw, and the admission thereof is within the discretion of the Labor Arbiter.

Well-settled is the rule that technical rules of procedure are not binding in labor cases, for procedural lapses may be disregarded in the interest of substantial justice,
particularly where labor matters are concerned (Ranara v. National Labor Relations commission, 212 SCRA 631 [1992]).

The failure to submit a position paper on time is not on of the grounds for the dismissal of a complaint in labor cases (The New Rules of procedure of the NLRC, Rule
V, Section 15). It cannot therefore be invoked by petitioners to declare private respondents as non-suited. This stance is in accord with Article 4 of the Labor Code of
the Philippines, which resolves that all doubts in the interpretation of the law and its implementing rules and regulations shall be construed in favor of labor. Needless
to state, our jurisprudence is rich with decisions adhering to the State's basic policy of extending protection to Labor where conflicting interests between labor and
management exist (Aquino v. National Labor Relations Commission, 206 SCRA 118 [1992]).

Petitioners cannot claim that they were denied due process inasmuch as they were able to file their position paper. The proper party to invoke due process would
have been private respondents, had their position paper been expunged from the records for mere technicality. Since petitioners assert that their defense is
meritorious, it is to their best interest that the cases be resolved on the merits. In this manner, the righteousness of their cause can be vindicated.

IN VIEW OF THE FOREGOING, the Court Resolved to DISMISS the petition for lack of merit.

SO ORDERED.

Davide, Jr., Bellosillo and Kapunan, JJ., concur.

Separate Opinions

PADILLA, J., concurring:

The petition in this case should be dismissed because petitioners did not exhaust their remedies in the National Labor Relations Commission (NLRC) before coming to
this Court.

It is clear from Article 223 of the Labor Code that decisions, awards or orders of the labor arbiter are appealable to the National Labor Relations Commission. The
proper remedy which petitioners should have taken was to appeal to the NLRC the labor arbiter's order denying their motion to dismiss and motion to expunge
private respondents' position paper. The present petition is therefore clearly premature, a procedural flaw and should on this score be dismissed.

If this Court were to entertain appeals from orders of labor arbiters, even in the form of a petition for certiorari for alleged grave abuse of discretion under Rule 65 of
the Rules of Court, we will be opening the flood gates to petitions for certiorari against orders (including interlocutory ones) of labor arbiters when the clear intent of
the law is to subject the decisions, awards and orders of labor arbiters to review by the NLRC before they are brought to this Court.

Separate Opinions

PADILLA, J., concurring:

The petition in this case should be dismissed because petitioners did not exhaust their remedies in the National Labor Relations Commission (NLRC) before coming to
this Court.

It is clear from Article 223 of the Labor Code that decisions, awards or orders of the labor arbiter are appealable to the National Labor Relations Commission. The
proper remedy which petitioners should have taken was to appeal to the NLRC the labor arbiter's order denying their motion to dismiss and motion to expunge
private respondents' position paper. The present petition is therefore clearly premature, a procedural flaw and should on this score be dismissed.

If this Court were to entertain appeals from orders of labor arbiters, even in the form of a petition for certiorari for alleged grave abuse of discretion under Rule 65 of
the Rules of Court, we will be opening the flood gates to petitions for certiorari against orders (including interlocutory ones) of labor arbiters when the clear intent of
the law is to subject the decisions, awards and orders of labor arbiters to review by the NLRC before they are brought to this Court.

DIGEST

FEM’S ELEGANCE LODGING HOUSE vs. The Honorable LEON P. MURILLO G.R. Nos. 117442-43, January 11, 1995

FACTS:

Petitioner filed a Motion to dismiss for failure of private respondents to file their position paper within the agreed period and also filed a Motion to Expunge private
respondents’ Position Paper from the records of the case.

The Labor Arbiter denied the motions filed by petitioners. He held that a fifteen-day delay in filing the position paper was not unreasonable considering that the
substantive rights of litigants should not be sacrificed by technicality. He cited Article 4 of the Labor Code of the Philippines, which provides that all doubts in the
interpretation thereof shall be resolved in favor of labor. He said that even under Section 15, Rule 5 of the Revised Rules of Court, a delay in the filing of a position
paper is not a ground for a motion to dismiss under the principle of exclusio unius est excludio alterius.

ISSUE:

Whether or not the Labor Arbiter’s acceptance of the position paper beyond reglementary period constitutes grave abuse of discretion.

HELD:

No, it is not constitutive of grave abuse of discretion. Well-settled is the rule that technical rules of procedure are not binding in labor cases, for procedural lapses
may be disregarded in the interest of substantial justice, particularly where labor matters are concerned (Ranara v. National Labor Relations commission, 212 SCRA
631 [1992]).

The failure to submit a position paper on time is not one of the grounds for the dismissal of a complaint in labor cases (The New Rules of procedure of the NLRC, Rule
V, Section 15). It cannot therefore be invoked by petitioners to declare private respondents as non-suited. This stance is in accord with Article 4 of the Labor Code of
the Philippines, which resolves that all doubts in the interpretation of the law and its implementing rules and regulations shall be construed in favor of labor. Needless
to state, our jurisprudence is rich with decisions adhering to the State’s basic policy of extending protection to Labor where conflicting interests between labor and
management exist (Aquino v. National Labor Relations Commission, 206 SCRA 118 [1992]).