CASES ON POWERS OF SOLE contrary, and in cases where the relationship of employer-
employee still exists, the Secretary of Labor and
SOUTH COTABATO COMMUNICATIONS
CORPORATION vs. HON. PATRICIA STO. TOMAS
FACTS: Acting upon a complaint inspection, the inspection
yielded violation of labor standards committed by petitioner.
Thus it ordered the payment to private respondents the
amount constituting illegal deductions and underpayment.
The order, however, did not allege the existence of employer
employee relationship.
ISSUE: Is the order granting the benefits valid?
RULING: NO. Under the VISITORIAL AND
ENFORCEMENT POWER provision, the Secretary of
Labor, or any of his or her authorized representatives, is
granted visitorial and enforcement powers for the purpose of
determining violations of, and enforcing, the Labor Code and
any labor law, wage order, or rules and regulations issued
pursuant thereto. Indispensable to the DOLE'S exercise of
such power is the existence of an actual employer-
employee relationship between the parties.
In this case, the Regional Director merely noted the
discovery of violations of labor standards provisions in the
course of inspection of the DXCP premises. No such
categorical determination was made on the existence of an
employer-employee relationship utilizing any of the
guidelines set forth. In a word, the Regional Director had
presumed, not demonstrated, the existence of the
relationship. Of particular note is the DOLE'S failure to show
that petitioners, thus, exercised control over private
respondents' conduct in the workplace. The power of the
employee to control the work of the employee, or the control
test, is considered the most significant determinant of the
existence of an employer-employee
relationship.27ChanRoblesVirtualawlibrary
Neither did the Orders of the Regional Director and
Secretary of Labor state nor make reference to any concrete
evidence to support a finding of an employer-employee
relationship and justify the monetary awards to private
respondents. Substantial evidence, such as proofs of
employment, clear exercise of control, and the power to
dismiss that prove such relationship and that petitioners
committed the labor laws violations they were adjudged to
have committed, are grossly absent in this case. Furthermore,
the Orders dated May 20, 2004 and November 8, 2004 do
not even allude to the substance of the interviews during the
inspection that became the basis of the finding of an
employer-employee relationship.
Bombo Radyo vs. SOLE
Can the DOLE Regional Director determine employer
employee relationship?
YES. Under Art. 128(b) of the Labor Code, as amended by
RA 7730, the first sentence reads, “Notwithstanding the
provisions of Articles 129 and 217 of this Code to the
Employment or his duly authorized representatives 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 findings of labor employment and
enforcement officers or industrial safety engineers made in
the course of inspection.”
No limitation in the law was placed upon the power of the
DOLE to determine the existence of an employer-employee
relationship. No procedure was laid down where the DOLE
would only make a preliminary finding, that the power was
primarily held by the NLRC. The law did not say that the
DOLE would first seek the NLRC’s determination of the
existence of an employer-employee relationship, or that
should the existence of the employer-employee relationship
be disputed, the DOLE would refer the matter to the NLRC.
The DOLE must have the power to determine whether or not
an employer-employee relationship exists, and from there to
decide whether or not to issue compliance orders in
accordance with Art. 128(b) of the Labor Code, as amended
by RA 7730.
The DOLE, in determining the existence of an employer-
employee relationship, has a ready set of guidelines to
follow, the same guide the courts themselves use. 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; (4) the employer’s power to control the
employee’s conduct.[9] The use of this test is not solely
limited to the NLRC. The DOLE Secretary, or his or her
representatives, can utilize the same test, even in the course
of inspection, making use of the same evidence that would
have been presented before the NLRC.
The determination of the existence of an employer-employee
relationship by the DOLE must be respected. The expanded
visitorial and enforcement power of the DOLE granted by
RA 7730 would be rendered nugatory if the alleged employer
could, by the simple expedient of disputing the employer-
employee relationship, force the referral of the matter to the
NLRC. The Court issued the declaration that at least a prima
facie showing of the absence of an employer-employee
relationship be made to oust the DOLE of jurisdiction. But
it is precisely the DOLE that will be faced with that evidence,
and it is the DOLE that will weigh it, to see if the same does
successfully refute the existence of an employer-employee
relationship.
If a complaint is brought before the DOLE to give effect to
the labor standards provisions of the Labor Code or other
labor legislation, and there is a finding by the DOLE that
there is an existing employer-employee relationship, the
DOLE exercises jurisdiction to the exclusion of the NLRC.
If the DOLE finds that there is no employer-employee
relationship, the jurisdiction is properly with the NLRC. If
a complaint is filed with the DOLE, and it is accompanied
by a claim for reinstatement, the jurisdiction is properly with
the Labor Arbiter, under Art. 217(3) of the Labor Code,
which provides that the Labor Arbiter has original and
exclusive jurisdiction over those cases involving wages,
rates of pay, hours of work, and other terms and conditions
of employment, if accompanied by a claim for reinstatement.
If a complaint is filed with the NLRC, and there is still an
existing employer-employee relationship, the jurisdiction is
properly with the DOLE. The findings of the DOLE,
however, may still be questioned through a petition for
certiorari under Rule 65 of the Rules of Court.
Mateoro vs. Creative Creatures Inc.
FACTS: Petitioners were hired by respondent as contract
workers. Petitioners filed their claim for non-payment of
benefits with the Regional Director. The DOLE conducted
inspection of the business pursuant to Art. 128. After
inspection, the labor inspector noted that "the records were
not made available at the time of the inspection;" that
respondent claimed that petitioners were contractual
employees and/or independent talent workers; and that
petitioners were required to punch their cards. Likewise in
their position papers, they claimed that the DOLE had no
jurisdiction because of absence of employer employee
relationship. The DOLE granted the money claims.
ISSUE: Does the DOLE have jurisdiction over the case?
RULING: NONE. The DOLE Secretary and her authorized
representatives, such as the DOLE-NCR Regional 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 Republic Act (R.A.) No. 7730, to wit:
Art. 128. Visitorial and Enforcement Power –
(a) The Secretary of Labor or his duly authorized
representatives, including labor regulation officers, shall
have access to employer's records and premises at anytime
of the day or night whenever work is being undertaken
therein, and the right to copy therefrom, to question any
employee and investigate any fact, condition or matter which
may be necessary to determine violations or which may aid
in the enforcement of this Code and of any labor law, wage
order or rules and regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Article 129 and 217 of
this Code to the contrary, and in cases where the relationship
of employer-employee relation still exists, the Secretary of
Labor and Employment or his duly authorized
representatives 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 findings of
labor employment and enforcement officers 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.
This notwithstanding, the power of the Regional Director
to hear and decide the monetary claims of employees is
not absolute. The last sentence of Article 128 (b) of the
Labor Code, otherwise known as the "exception clause,"
provides an instance when the Regional 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) 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 case at bar, 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
normal course of inspection. Indeed, the contracts of
independent services, as well as the check vouchers, were
kept and maintained in or about the premises of the
workplace and were, therefore, verifiable in the course of
inspection. However, respondent likewise claimed that
petitioners were not precluded from working outside the
service contracts they had entered into with it (respondent);
and that there were instances when petitioners abandoned
their service contracts with the respondent, because they had
to work on another project with a different company.
Undoubtedly, the resolution of these issues requires the
examination of evidentiary matters not verifiable in the
normal course of inspection. Verily, the Regional Director
and the Secretary of Labor are divested of jurisdiction to
decide the case.
In sum, respondent contested the findings of the labor
inspector during and after the inspection and raised issues the
resolution of which necessitated the examination of
evidentiary matters not verifiable in the normal course of
inspection. Hence, the Regional Director was divested of
jurisdiction and should have endorsed the case to the
appropriate Arbitration Branch of the NLRC.
Bay Heaven vs. Abuan
FACTS: Upon inspection of the premises of the employer,
violations of labor standards law were found. During the
hearing, petitioners-employers submitted their Position
Paper attaching thereto payroll sheets and waivers and
quitclaims allegedly signed by the respondents to prove that
petitioner properly paid respondents the amounts due them.
The Regional Director ruled in favor of the employees.
The employers argue that the DOLE was divested with
jurisdiction due to the application of the EXCEPTION
CLAUSE.
ISSUE: Does the DOLE have jurisdiction over the case?
RULING
NO. Under prevailing jurisprudence, the so-called exception
clause in Art. 128(b) of the Labor Code has the following
elements, which must all concur to divest the regional
director of jurisdiction over workers' claims:
(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.
Thus, the key requirement for the Regional Director and the
DOLE Secretary to be divested of jurisdiction is that the
evidentiary matters are 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 them; and these officers are not
divested of jurisdiction to decide the case.
In the present case, petitioners' pieces of evidence of the
alleged contract of lease, payroll sheets, and quitclaims were
all verifiable in the normal course of inspection and, granting
that they were not examined by the labor inspector, they have
nevertheless been thoroughly examined by the Regional
Director and the DOLE Secretary. For these reasons, the
exclusion clause of Art. 128(b) does not apply.
CASES ON WAGES
OUR HAUS REALTY DEVELOPMENT
CORPORATION vs. ALEXANDER PARIAN, JAY C.
ERINCO, ALEXANDER CANLAS, BERNARD
TENEDERO and JERRY SABULAO
G.R. No. 204651
August 6, 2014
Is the subsidized meals and free lodging given to its
construction workers facilities, thereby deductible to
their wages? NO
UNDER THE PURPOSE TEST: if a benefit or privilege
granted to the employee is clearly for the employer’s
convenience, it will not be considered as a facility but a
supplement. Here, careful consideration is given to the
nature of the employer’s business in relation to the work
performed by the employee. This test is used to address
inequitable situations wherein employers consider a benefit
deductible from the wages even if the factual circumstances
show that it clearly redounds to the employers’ greater
advantage.
In the ultimate analysis, the purpose test seeks to prevent
a circumvention of the minimum wage law.
Under the law, only the value of the facilities may be
deducted from the employees’ wages but not the value of
supplements. Facilities include articles or services for the
benefit of the employee or his family but exclude tools of
the trade or articles or services primarily for the benefit
of the employer or necessary to the conduct of the
employer’s business.
The law also prescribes that the computation of wages shall
exclude whatever benefits, supplements or allowances given
to employees. Supplements are paid to employees on top of
their basic pay and are free of charge. Since it does not form
part of the wage, a supplement’s value may not be included
in the determination of whether an employer complied with
the prescribed minimum wage rates.
Ultimately, the real difference lies not on the kind of the
benefit but on the purpose why it was given by the
employer. If it is primarily for the employee’s gain, then
the benefit is a facility; if its provision is mainly for the
employer’s advantage, then it is a supplement.
The subsidized meals and free lodging provided by Our Haus
are actually supplements. Although they also work to benefit
the respondents, an analysis of the nature of these benefits in
relation to Our Haus’ business shows that they were given
primarily for Our Haus’ greater convenience and advantage.
If weighed on a scale, the balance tilts more towards Our
Haus’ side. Accordingly, their values cannot be
considered in computing the total amount of the
respondents’ wages. Under the circumstances, the daily
wages paid to the respondents are clearly below the
prescribed minimum wage rates in the years 2007-2010.
SLL INTERNATIONAL CABLES SPECIALIST and
SONNY L. LAGON vs. NATIONAL LABOR
RELATIONS COMMISSION, 4th DIVISION,
ROLDAN LOPEZ, EDGARDO ZUÑIGA and DANILO
CAÑETE
G.R. No. 172161
March 2, 2011
Are the food and lodging, or the electricity and water
allegedly consumed by private respondents is facilities?
NO
For facilities to be deducted from the employees’ wages, the
following requisites must all be attendant: first, proof must
be shown that such facilities are customarily furnished
by the trade; second, the provision of deductible facilities
must be voluntarily accepted in writing by the employee;
and finally, facilities must be charged at reasonable
value. Mere availment is not sufficient to allow deductions
from employees’ wages.
These requirements, however, have not been met in this case.
SLL failed to present any company policy or guideline
showing that provisions for meals and lodging were part of
the employee’s salaries. It also failed to provide proof of the
employees’ written authorization, much less show how they
arrived at their valuations. At any rate, it is not even clear
whether private respondents actually enjoyed said facilities.
Supplements," therefore, constitute extra remuneration or
special privileges or benefits given to or received by the
laborers over and above their ordinary earnings or wages.
"Facilities," on the other hand, are items of expense
necessary for the laborer's and his family's existence and
subsistence so that by express provision of law (Sec. 2[g]),
they form part of the wage and when furnished by the
employer are deductible therefrom, since if they are not so
furnished, the laborer would spend and pay for them just the
same.
In short, the benefit or privilege given to the employee which
constitutes an extra remuneration above and over his basic
or ordinary earning or wage is supplement; and when said
benefit or privilege is part of the laborers' basic wages, it is a
facility. The distinction lies not so much in the kind of
benefit or item (food, lodging, bonus or sick leave) given,
but in the purpose for which it is given. In the case at
bench, the items provided were given freely by SLL for the
purpose of maintaining the efficiency and health of its
workers while they were working at their respective projects.
EMER MILAN, RANDY MASANGKAY, WILFREDO
JAVIER, RONALDO DAVID, BONIFACIO
MATUNDAN, NORA MENDOZA, ET AL., Petitioners,
v. NATIONAL LABOR RELATIONS COMMISSION,
SOLID MILLS, INC., AND/OR PHILIP ANG
G.R. No. 202961
February 04, 2015
Can the employer withheld the salaries of the employees
subject to the return of the land occupied in SMI village?
YES.
As a general rule, employers are prohibited from
withholding wages from employees.
However, our law supports the employers institution of
clearance procedures before the release of wages As an
exception to the general rule that wages may not be withheld
and benefits may not be diminished, the Labor Code provide:
In cases where the employer is authorized by law or
regulations issued by the Secretary of Labor and
Employment.
The Civil Code provides that the employer is authorized to
withhold wages for debts due:
Article 1706. Withholding of the wages, except for a debt
due, shall not be made by the employer.
Debt in this case refers to any obligation due from the
employee to the employer. It includes any accountability that
the employee may have to the employer. There is no reason
to limit its scope to uniforms and equipment.
Withholding of payment by the employer does not mean that
the employer may renege on its obligation to pay employees
their wages, termination payments, and due benefits. The
employee’s benefits are also not being reduced. It is only
subjected to the condition that the employees return
properties properly belonging to the employer. This is only
consistent with the equitable principle that no one shall be
unjustly enriched or benefited at the expense of another.
An employer is allowed to withhold terminal pay and
benefits pending the employee’s return of its properties.
THE NATIONAL WAGES AND PRODUCTIVITY
COMMISSION (NWPC) and THE REGIONAL
TRIPARTITE WAGES AND PRODUCTIVITY
BOARD (RTWPB)- NCR vs.
THE ALLIANCE OF PROGRESSIVE LABOR (APL)
and THE TUNAY NA NAGKAKAISANG
MANGGAGAwA SA ROYAL (TNMR-APL)
G.R. No. 150326
March 12, 2014
Can RTWPBs in determining the applicable minimum
wages to be imposed, also determine and expand the
industries and sectors exempt from the coverage of their
wage orders? YES provided it complies with the following
requisites:
(1) In accord with the rationale for exemption;
(2) Reviewed/approved by the NWPC; and
(3) Upon review, the RTWPB issuing the wage order
must submit a strong and justifiable reason or
reasons for the inclusion of such category. It is the
compliance with the second requisite that is at issue
here.
Indisputably, the NWPC had the authority to prescribe the
rules and guidelines for the determination of the minimum
wage and productivity measures, and the RTWPB-NCR had
the power to issue wage orders.
PHILIPPINE SPRING WATER RESOURCES INC.
/DANILO Y. LUA vs.
COURT OF APPEALS and JUVENSTEIN B.
MAHILUM
G.R. No. 205278
June 11, 2014
Are commissions included in determining backwages? IT
DEPENDS
It is well-established in jurisprudence that the determination
of whether or not a commission forms part of the basic salary
depends upon the circumstances or conditions for its
payment. In Phil Duplicators, Inc. v. NLRC, the Court held
that commissions earned by salesmen form part of their
basic salary. The salesmen’s commissions, comprising a
predetermined percentage of the selling price of the goods
sold by each salesman, were properly included in the term
basic salary for purposes of computing the 13th month pay.
The salesmen’s commissions are not overtime payments,
nor profit-sharing payments nor any other fringe benefit,
but a portion of the salary structure which represents an
automatic increment to the monetary value initially
assigned to each unit of work rendered by a salesman. On
the other hand, in Boie-Takeda Chemicals, Inc. v. De la
Serna, the so-called commissions paid to or received by
medical representatives were excluded from the term basic
salary because these were paid to the medical representatives
and rank-and-file employees as productivity bonuses,
which were generally tied to the productivity, or capacity
for revenue production, of a corporation and such bonuses
closely resemble profit-sharing payments and had no clear
direct or necessary relation to the amount of work actually
done by each individual employee.
In Mahilum’s case, Phil. Duplicator cannot be automatically
applied without considering his position as Vice-President
for sales and marketing of the PSWRI’s Bulacan-South
Luzon Area. This factor constrains the Court to hold that
Mahilum’s 0.25% commission based on the monthly
sales and 0.25% commission for cash payments must be
taken to come in the nature of overriding commission,
not sales commission. The latter is not properly includable
in the basic salary as it must be earned by actual market
transactions attributable to the claimant. Curiously, Mahilum
did not comment on the petitioners’ objection to the award.
Not being a salesman who directly effected any sale of a
product, the commission embodied in the agreement partook
of the nature of profit-sharing business based on quota.
In fine, the alleged commissions were profit-sharing
payments and had no clear, direct or necessary relation
to the amount of work he actually performed.
CENTURY PROPERTIES, INC. vs. EDWIN J.
BABIANO AND EMMA B. CONCEPCION G.R. No.
220978
July 05, 2016
Can payment of commissions be subject to a condition?
YES
In the "Confidentiality of Documents and Non-Compete
Clause”, it provided therein that: And in order to ensure
strict compliance herewith, you shall not work for
whatsoever capacity, either as an employee, agent or
consultant with any person whose business is in direct
competition with the company while you are employed and
for a period of one year from date of resignation or
termination from the company.
Finally, if undersigned breaches any terms of this contract,
forms of compensation including commissions and
incentives will be forfeited.
Indubitably, obligations arising from contracts, including
employment contracts, have the force of law between the
contracting parties and should be complied with in good
faith. Corollary thereto, parties are bound by the stipulations,
clauses, terms, and conditions they have agreed to, provided
that these stipulations, clauses, terms, and conditions are not
contrary to law, morals, public order or public policy, as in
this case.
Respondent sought employment from First Global, and five
(5) days later, was admitted thereto as vice president. From
the foregoing, it is evidently clear that when he sought and
eventually accepted the said position with First Global, he
was still employed by CPI as he has not formally resigned at
that time. Irrefragably, this is a glaring violation of the
"Confidentiality of Documents and Non-Compete Clause" in
his employment contract with CPI, thus, justifying the
forfeiture of his unpaid commissions.
TOYOTA PASIG, INC. vs. VILMA S. DE PERALTA
G.R. No. 213488
November 07, 2016
Are commissions part of wages? YES
Wage paid to any employee shall mean the remuneration of
earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis.
While commissions are, indeed, incentives or forms of
encouragement to inspire employees to put a little more
industry on the jobs particularly assigned to them, still
these commissions are direct remunerations for services
rendered. In fact, commissions have been defined as the
recompense, compensation or reward of an agent, salesman,
executor, trustee, receiver, factor, broker or bailee, when the
same is calculated as a percentage on the amount of his
transactions or on the profit to the principal. The nature of
the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly that
commissions are part of a salesman's wage or salary.
Can a reinstated employee ask for the prevailing wage and
benefit given by employer to new hires? NO
When Ampeloquio was reinstated without loss of seniority
rights and benefits, this does not necessarily mean equal or
more rights than those employees hired by JAKA prior
or subsequent to his reinstatement. The rule on how much
pay a reinstated employee shall receive is governed by
paragraph 3 of Article 223 of the Labor Code which provides
as follows:
x x x In any event, the decision of the Labor Arbiter
reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be
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 a bond by the employer shall not stay
the execution for reinstatement provided therein.

xxxx
When Ampeloquio was reinstated on August 6, 2004, he is
entitled to receive a salary under the same terms and
conditions prevailing prior to his dismissal, provided this
complies with the minimum wage law prevailing at the time
of reinstatement, in consonance to Article 99, 100 of P.D.
No. 442, as amended. While he Ampeloquio may have been
ordered reinstated to his former position without loss of
seniority rights and benefits, this Court cannot agree [with]
the strained interpretation given by Ampeloquio that since he
is the most senior among his co-employees, he should be
entitled to the same amount of wages and benefits as that
being received by them. x x x Thus, when he was reinstated
on August 6, 2004, the salary scale that governs shall be the
minimum wage rate then prevailing or his actual daily wage
rate, which ever is higher.
He is not entitled to the same terms and conditions of
employment as that which was offered to the other regular
employees (not merchandisers) subsequently hired by
JAKA.
JAKA’s decision to grant or withhold certain benefits to
other employees is part of its management prerogative as
a function of an employer’s constitutionally protected
right to reasonable return on investments.
BARAYOGA vs. ASSET PRIVATIZATION TRUST
GR No. 160073
October 24, 2005
Does the right of employees to be paid benefits due them
from the properties of their employer have any
preference over the latter’s mortgage credit? NONE
Article 110 of the Labor Code, as amended by Republic Act
No. 6715, which reads:
Article 110. Workers preference in case of bankruptcy. In the
event of bankruptcy or liquidation of the employers business,
his workers shall enjoy first preference as regards their
unpaid wages and other monetary claims shall be paid in full
before the claims of the Government and other creditors may
be paid.
This Court has ruled in a long line of cases that under
Articles 2241 and 2242 of the Civil Code, a mortgage credit
is a special preferred credit that enjoys preference with
respect to a specific/determinate property of the debtor.
On the other hand, the workers preference under Article
110 of the Labor Code is an ordinary preferred credit.
While this provision raises the workers money claim to first
priority in the order of preference established under Article
2244 of the Civil Code, the claim has no preference over
special preferred credits.
A preference applies only to claims which do not attach to
specific properties. A lien creates a charge on a particular
property. The right of first preference as regards unpaid
wages recognized by Article 110 does not constitute a lien
on the property of the insolvent debtor in favor of
workers. It is but a preference of credit in their favor, a
preference in application. It is a method adopted to
determine and specify the order in which credits should be
paid in the final distribution of the proceeds of the insolvents
assets. It is a right to a first preference in the discharge of the
funds of the judgment debtor. x x x
Furthermore, workers claims for unpaid wages and monetary
benefits cannot be paid outside of a bankruptcy or judicial
liquidation proceedings against the employer. It is settled
that the application of Article 110 of the Labor Code is
contingent upon the institution of those proceedings, during
which all creditors are convened, their claims ascertained
and inventoried, and their preferences determined. Assured
thereby is an orderly determination of the preference given
to creditors’ claims; and preserved in harmony is the legal
scheme of classification, concurrence and preference of
credits in the Civil Code, the Insolvency Law, and the Labor
Code.
EASTERN TELECOMMUNICATIONS
PHILIPPINES, INC. vs. EASTERN TELECOMS
EMPLOYEES UNION
G.R. No. 185665
February 8, 2012
Can a 14th, 15th, and 16th bonuses be unilaterally
withdrawn if the same has been given by the employer as
part of a company practice? NO.
As a general rule, 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. The grant 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.
A bonus, however, becomes a demandable or
enforceable obligation when it is made part of the wage
or salary or compensation of the employee.
A reading from the CBA Agreement reveals that the same
provides for the giving of 14th, 15th and 16th month bonuses
without qualification. The wording of the provision does not
allow any other interpretation. There were no conditions
specified in the CBA Side Agreements for the grant of the
benefits contrary to the claim of ETPI that the same is
justified only when there are profits earned by the company.
Terse and clear, the said provision does not state that the
subject bonuses shall be made to depend on the ETPIs
financial standing or that their payment was contingent upon
the realization of profits. Neither does it state that if the
company derives no profits, no bonuses are to be given to the
employees. In fine, the payment of these bonuses was not
related to the profitability of business operations. Thus, the
giving of such bonuses is part of the wages of the employees.

The act of granting the same has become an established
company practice such that it has virtually become part
of the employees salary or wage. A bonus may be granted
on equitable consideration when the giving of such bonus
has been the companys long and regular practice. In
Philippine Appliance Corporation v. Court of Appeals, it was
pronounced: 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.
The giving of the subject bonuses cannot be peremptorily
withdrawn by ETPI without violating Article 100 of the
Labor Code: Art. 100. Prohibition against elimination or
diminution of benefits. Nothing in this Book shall be
construed to eliminate or in any way diminish supplements,
or other employee benefits being enjoyed at the time of
promulgation of this Code.
The rule is settled that any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished,
discontinued or eliminated by the employer. The principle
of non-diminution of benefits is founded on the
constitutional mandate to protect the rights of workers and to
promote their welfare and to afford labor full protection.
Interestingly, ETPI never presented countervailing evidence
to refute ETEUs claim that the company has been
continuously paying bonuses since 1975 up to 2002
regardless of its financial state. Its failure to controvert the
allegation, when it had the opportunity and resources to do
so, works in favor of ETEU. Time and again, it has been held
that should doubts exist between the evidence presented by
the employer and the employee, the scales of justice must be
tilted in favor of the latter.
Will financial distress exculpate the employer from
liability? NO
The parties to the contract must be presumed to have
assumed the risks of unfavorable developments. It is,
therefore, only in absolutely exceptional changes of
circumstances that equity demands assistance for the debtor.
In the case at bench, the Court determines that ETPIs claimed
depressed financial state will not release it from the binding
effect of the 2001-2004 CBA Side Agreement.
ETPI appears to be well aware of its deteriorating financial
condition when it entered into the 2001-2004 CBA Side
Agreement with ETEU and obliged itself to pay bonuses to
the members of ETEU. Considering that ETPI had been
continuously suffering huge losses from 2000 to 2002, its
business losses in the year 2003 were not exactly unforeseen
or unexpected. Consequently, it cannot be said that the
difficulty in complying with its obligation under the Side
Agreement was manifestly beyond the contemplation of the
parties. Besides, as held in Central Bank of the Philippines
v. Court of Appeals, mere pecuniary inability to fulfill an
engagement does not discharge a contractual obligation.
Contracts, once perfected, are binding between the
contracting parties. Obligations arising therefrom have
the force of law and should be complied with in good
faith. ETPI cannot renege from the obligation it has freely
assumed when it signed the 2001-2004 CBA Side
Agreement.
CENTRAL AZUCARERA DE TARLAC vs.
CENTRAL AZUCARERA DE TARLAC LABOR
UNION-NLU
G.R. No. 188949
July 26, 2010
Are overtime pay, earnings, and other remuneration part
of the basic salary that shall be included in the
computation of the 13th-month pay? NO
The Revised Guidelines on the Implementation of the 13th-
Month Pay Law specifically stated that the minimum 13th-
month pay required by law shall not be less than one-twelfth
(1/12) of the total basic salary earned by an employee within
a calendar year.
Furthermore, the term basic salary of an employee for the
purpose of computing the 13th-month pay was
interpreted to include all remuneration or earnings paid
by the employer for services rendered, but does not
include allowances and monetary benefits which are not
integrated as part of the regular or basic salary, such as
the cash equivalent of unused vacation and sick leave credits,
overtime, premium, night differential and holiday pay, and
cost-of-living allowances. However, these salary-related
benefits should be included as part of the basic salary in
the computation of the 13th-month pay if, by individual
or collective agreement, company practice or policy, the
same are treated as part of the basic salary of the
employees.
Is the practice of petitioner in giving 13th-month pay
based on the employees gross annual earnings which
included the basic monthly salary, premium pay for
work on rest days and special holidays, night shift
differential pay and holiday pay continued for almost
thirty (30) years ripened into a company policy or
practice which cannot be unilaterally withdrawn? NO
Article 100 of the Labor Code, otherwise known as the Non-
Diminution Rule, mandates that benefits given to employees
cannot be taken back or reduced unilaterally by the employer
because the benefit has become part of the employment
contract, written or unwritten. The rule against diminution of
benefits applies if it is shown that the grant of the benefit is
based on an express policy or has ripened into a practice over
a long period of time and that the practice is consistent and
deliberate. Nevertheless, the rule will not apply if the
practice is due to error in the construction or application
of a doubtful or difficult question of law. But even in
cases of error, it should be shown that the correction is
done soon after discovery of the error.

The argument of petitioner that the grant of the benefit was

not voluntary and was due to error in the interpretation of
what is included in the basic salary deserves scant
consideration. No doubtful or difficult question of law is
involved in this case. The guidelines set by the law are not
difficult to decipher. The voluntariness of the grant of the
benefit was manifested by the number of years the employer
had paid the benefit to its employees. Petitioner only
changed the formula in the computation of the 13th-month
pay after almost 30 years and only after the dispute between
the management and employees erupted. This act of
petitioner in changing the formula at this time cannot be
sanctioned, as it indicates a badge of bad faith.

Can financial distress be a ground to defer in the

payment of 13th month pay?

Under Section 7 of the Rules and Regulations Implementing

P.D. No. 851, distressed employers shall qualify for
exemption from the requirement of the Decree only upon
prior authorization by the Secretary of Labor. In this
case, no such prior authorization has been obtained by
petitioner; thus, it is not entitled to claim such exemption.