Republic of the Philippines


SUPREME COURT

Manila
SECOND DIVISION
G.R. No. 181806 March 12, 2014
WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner, 

vs.

WESLEYAN UNIVERSITY-PHILIPPINES FACULTY and STAFF ASSOCIATION, Respondent.
DECISION
DEL CASTILLO, J.:
A Collective Bargaining Agreement (CBA) is a contract entered into by an employer and a legitimate
labor organization concerning the terms and conditions of employment.1 Like any other contract, it has
the force of law between the parties and, thus, should be complied with in good faith.2 Unilateral changes
or suspensions in the implementation of the provisions of the CBA, therefore, cannot be allowed without
the consent of both parties.
This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the September 25,
2007 Decision4 and the February 5, 2008 Resolution5 of the Court of Appeals (CA) in CA-G.R. SP No.
97053.
Factual Antecedents
Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution duly
organized and existing under the laws of the Philippines.6 Respondent Wesleyan University-Philippines
Faculty and Staff Association, on the other hand, is a duly registered labor organization7 acting as the sole
and exclusive bargaining agent of all rank-and-file faculty and staff employees of petitioner.8
In December 2003, the parties signed a 5-year CBA9 effective June 1, 2003 until May 31, 2008.10
On August 16, 2005, petitioner, through its President, Atty. Guillermo T. Maglaya (Atty. Maglaya), issued
a Memorandum11 providing guidelines on the implementation of vacation and sick leave credits as well as
vacation leave commutation. The pertinent portions of the Memorandum read:
1. VACATION AND SICK LEAVE CREDITS
Vacation and sick leave credits are not automatic. They have to be earned. Monthly, a qualified
employee earns an equivalent of 1.25 days credit each for VL and SL. Vacation Leave and Sick
Leave credits of 15 days become complete at the cut off date of May 31 of each year. (Example,
only a total of 5 days credit will be given to an employee for each of sick leave [or] vacation
leave, as of month end September, that is, 4 months from June to September multiplied by 1.25
days). An employee, therefore, who takes VL or SL beyond his leave credits as of date will have
to file leave without pay for leaves beyond his credit.
2. VACATION LEAVE COMMUTATION
Only vacation leave is commuted or monetized to cash. Vacation leave commutation is effected
after the second year of continuous service of an employee. Hence, an employee who started
working June 1, 2005 will get his commutation on May 31, 2007 or thereabout.12
On August 25, 2005, respondent’s President, Cynthia L. De Lara (De Lara) wrote a letter13 to Atty.
Maglaya informing him that respondent is not amenable to the unilateral changes made by petitioner.14 De
Lara questioned the guidelines for being violative of existing practices and the CBA,15 specifically
Sections 1 and 2, Article XII of the CBA, to wit:
ARTICLE XII

VACATION LEAVE AND SICK LEAVE
SECTION 1. VACATION LEAVE - All regular and non-tenured rank-and-file faculty and staff who are
entitled to receive shall enjoy fifteen (15) days vacation leave with pay annually.
1.1 All unused vacation leave after the second year of service shall be converted into cash and be paid to
the entitled employee at the end of each school year to be given not later than August 30 of each year.
SECTION 2. SICK LEAVE - All regular and non-tenured rank-and-file faculty and staff shall enjoy
fifteen (15) days sick leave with pay annually.16
On February 8, 2006, a Labor Management Committee (LMC) Meeting was held during which petitioner
advised respondent to file a grievance complaint on the implementation of the vacation and sick leave
policy.17 In the same meeting, petitioner announced its plan of implementing a one-retirement policy,
18 which was unacceptable to respondent.

Ruling of the Voluntary Arbitrator

Unable to settle their differences at the grievance level, the parties referred the matter to a Voluntary
Arbitrator. During the hearing, respondent submitted affidavits to prove that there is an established
practice of giving two retirement benefits, one from the Private Education Retirement Annuity
Association (PERAA) Plan and another from the CBA Retirement Plan. Sections 1, 2, 3 and 4 of Article
XVI of the CBA provide:
ARTICLE XVI

SEPARATION, DISABILITY AND RETIREMENT PAY
SECTION 1. ELIGIBILITY FOR MEMBERSHIP - Membership in the Plan shall be automatic for all
full-time, regular staff and tenured faculty of the University, except the University President. Membership
in the Plan shall commence on the first day of the month coincident with or next following his statement
of Regular/Tenured Employment Status.
SECTION 2. COMPULSORY RETIREMENT DATE - The compulsory retirement date of each Member
shall be as follows:
a. Faculty – The last day of the School Year, coincident with his attainment of age sixty (60) with
at least five (years) of unbroken, credited service.
b. Staff – Upon reaching the age of sixty (60) with at least five (5) years of unbroken, credited
service.
SECTION 3. OPTIONAL RETIREMENT DATE - A Member may opt for an optional retirement prior to
his compulsory retirement. His number of years of service in the University shall be the basis of
computing x x x his retirement benefits regardless of his chronological age.
SECTION 4. RETIREMENT BENEFIT - The retirement benefit shall be a sum equivalent to 100% of the
member’s final monthly salary for compulsory retirement.
For optional retirement, the vesting schedule shall be:
x x x x19
On November 2, 2006, the Voluntary Arbitrator rendered a Decision20 declaring the one-retirement policy
and the Memorandum dated August 16, 2005 contrary to law. The dispositive portion of the Decision
reads:
WHEREFORE, the following award is hereby made:
1. The assailed University guidelines on the availment of vacation and sick leave credits and
vacation leave commutation are contrary to law. The University is consequently ordered to
reinstate the earlier scheme, practice or policy in effect before the issuance of the said guidelines
on August 16, 2005;
2. The "one retirement" policy is contrary to law and is hereby revoked and rescinded. The
University is ordered x x x to resume and proceed with the established practice of extending to
qualified employees retirement benefits under both the CBA and the PERAA Plan.
3. The other money claims are denied.21
Ruling of the Court of Appeals
Aggrieved, petitioner appealed the case to the CA via a Petition for Review under Rule 43 of the Rules of
Court.
On September 25, 2007, the CA rendered a Decision22 finding the rulings of the Voluntary Arbitrator
supported by substantial evidence. It also affirmed the nullification of the one-retirement policy and the
Memorandum dated August 16, 2005 on the ground that these unilaterally amended the CBA without the
consent of respondent.23Thus:
WHEREFORE, the instant appeal is DISMISSED for lack of merit.
SO ORDERED.24
Petitioner moved for reconsideration but the same was denied by the CA in its February 5, 2008
Resolution.25
Issues
Hence, this recourse by petitioner raising the following issues:
a.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s ruling
that the Affidavits submitted by Respondent WU-PFSA are substantial evidence as defined by the rules
and jurisprudence that would substantiate that Petitioner WU-P has long been in the practice of granting
its employees two (2) sets of Retirement Benefits.
b.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s ruling
that a university practice of granting its employees two (2) sets of Retirement Benefits had already been
established as defined by the law and jurisprudence especially in light of the illegality and lack of
authority of such alleged grant.
c.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s ruling
that it is incumbent upon Petitioner WU-P to show proof that no Board Resolution was issued granting
two (2) sets of Retirement Benefits.
d.
Whether x x x the [CA] committed grave and palpable error in revoking the 16 August 2005
Memorandum of Petitioner WU-P for being contrary to extant policy.26
Petitioner’s Arguments
Petitioner argues that there is only one retirement plan as the CBA Retirement Plan and the PERAA Plan
are one and the same.27 It maintains that there is no established company practice or policy of giving two
retirement benefits to its employees.28 Assuming, without admitting, that two retirement benefits were
released,29 petitioner insists that these were done by mere oversight or mistake as there is no Board
Resolution authorizing their release.30 And since these benefits are unauthorized and irregular, these
cannot ripen into a company practice or policy.31 As to the affidavits submitted by respondent, petitioner
claims that these are self-serving declarations,32and thus, should not be given weight and credence.33
In addition, petitioner claims that the Memorandum dated August 16, 2005, which provides for the
guidelines on the implementation of vacation and sick leave credits as well as vacation leave
commutation, is valid because it is in full accord with existing policy.34
Respondent’s Arguments
Respondent belies the claims of petitioner and asserts that there are two retirement plans as the PERAA
Retirement Plan, which has been implemented for more than 30 years, is different from the CBA
Retirement Plan.35 Respondent further avers that it has always been a practice of petitioner to give two
retirement benefits36and that this practice was established by substantial evidence as found by both the
Voluntary Arbitrator and the CA.37
As to the Memorandum dated August 16, 2005, respondent asserts that it is arbitrary and contrary to the
CBA and existing practices as it added qualifications or limitations which were not agreed upon by the
parties.38
Our Ruling
The Petition is bereft of merit.
The Non-Diminution Rule found in Article 10039 of the Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received by their employees. This rule, however, applies only if the
benefit is based on an express policy, a written contract, or has ripened into a practice.40 To be considered
a practice, it must be consistently and deliberately made by the employer over a long period of time.41
An exception to the rule is when "the practice is due to error in the construction or application of a
doubtful or difficult question of law."42 The error, however, must be corrected immediately after its
discovery;43 otherwise, the rule on Non-Diminution of Benefits would still apply.
The practice of giving two retirement

benefits to petitioner’s employees is

supported by substantial evidence.
In this case, respondent was able to present substantial evidence in the form of affidavits to support its
claim that there are two retirement plans. Based on the affidavits, petitioner has been giving two
retirement benefits as early as 1997.44 Petitioner, on the other hand, failed to present any evidence to
refute the veracity of these affidavits. Petitioner’s contention that these affidavits are self-serving holds no
water. The retired employees of petitioner have nothing to lose or gain in this case as they have already
received their retirement benefits. Thus, they have no reason to perjure themselves. Obviously, the only
reason they executed those affidavits is to bring out the truth. As we see it then, their affidavits,
corroborated by the affidavits of incumbent employees, are more than sufficient to show that the granting
of two retirement benefits to retiring employees had already ripened into a consistent and deliberate
practice.
Moreover, petitioner’s assertion that there is only one retirement plan as the CBA Retirement Plan and the
PERAA Plan are one and the same is not supported by any evidence. There is nothing in Article XVI of
the CBA to indicate or even suggest that the "Plan" referred to in the CBA is the PERAA Plan. Besides,
any doubt in the interpretation of the provisions of the CBA should be resolved in favor of respondent. In
fact, petitioner’s assertion is negated by the announcement it made during the LMC Meeting on February
8, 2006 regarding its plan of implementing a "one-retirement plan." For if it were true that petitioner was
already implementing a one-retirement policy, there would have been no need for such announcement.
Equally damaging is the letter-memorandum45 dated May 11, 2006, entitled "Suggestions on the defenses
we can introduce to justify the abolition of double retirement policy," prepared by the petitioner’s legal
counsel.
These circumstances, taken together, bolster the finding that the two-retirement policy is a practice.
1âwphi1 Thus, petitioner cannot, without the consent of respondent, eliminate the two-retirement policy
and implement a one-retirement policy as this would violate the rule on non-diminution of benefits.
As a last ditch effort to abolish the two-retirement policy, petitioner contends that such practice is illegal
or unauthorized and that the benefits were erroneously given by the previous administration. No evidence,
however, was presented by petitioner to substantiate its allegations.
Considering the foregoing disquisition, we agree with the findings of the Voluntary Arbitrator, as affirmed
by the CA, that there is substantial evidence to prove that there is an existing practice of giving two
retirement benefits, one under the PERAA Plan and another under the CBA Retirement Plan.
The Memorandum dated August 16,

2005 is contrary to the existing CBA.
Neither do we find any reason to disturb the findings of the CA that the Memorandum dated August 16,
2005 is contrary to the existing CBA.
Sections 1 and 2 of Article XII of the CBA provide that all covered employees are entitled to 15 days sick
leave and 15 days vacation leave with pay every year and that after the second year of service, all unused
vacation leave shall be converted to cash and paid to the employee at the end of each school year, not later
than August 30 of each year.
The Memorandum dated August 16, 2005, however, states that vacation and sick leave credits are not
automatic as leave credits would be earned on a month-to-month basis. This, in effect, limits the available
leave credits of an employee at the start of the school year. For example, for the first four months of the
school year or from June to September, an employee is only entitled to five days vacation leave and five
days sick leave.46 Considering that the Memorandum dated August 16, 2005 imposes a limitation not
agreed upon by the parties nor stated in the CBA, we agree with the CA that it must be struck down.
In closing, it may not be amiss to mention that when the provision of the CBA is clear, leaving no doubt
on the intention of the parties, the literal meaning of the stipulation shall govem.47
However, if there is doubt in its interpretation, it should be resolved in favor of labor,48 as this is
mandated by no less than the Constitution.49
WHEREFORE, the Petition is hereby DENIED. The assailed September 25, 2007 Decision and the
February 5, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 97053 are hereby AFFIRMED.
SO ORDERED.
 Republic of the Philippines

SUPREME COURT

Manila
THIRD DIVISION
G.R. No. 176985 April 1, 2013
RICARDO E. VERGARA, JR., Petitioner, 

vs.

COCA-COLA BOTTLERS PHILIPPINES, INC., Respondent.
DECISION
PERALTA, J.:
Before Us is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure assailing the
January 9, 2007 Decision1 and March 6, 2007 Resolution2 of the Court of Appeals (CA) in CA .. G.R. SP
No. 94622, which affirmed the January 31, 2006 Decision3 and March 8, 2006 Resolution4 of the National
Labor Relations Commission (NLRC) modifying the September 30, 2003 Decision5 of the Labor Arbiter
(LA) by deleting the sales management incentives in the computation of petitioner's retirement benefits.
Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-Cola Bottlers Philippines, Inc.
from May 1968 until he retired on January 31, 2002 as a District Sales Supervisor (DSS) for Las Piñas
City, Metro Manila. As stipulated in respondent’s existing Retirement Plan Rules and Regulations at the
time, the Annual Performance Incentive Pay of RSMs, DSSs, and SSSs shall be considered in the
computation of retirement benefits, as follows: Basic Monthly Salary + Monthly Average Performance
Incentive (which is the total performance incentive earned during the year immediately preceding ÷ 12
months) × No. of Years in Service.6
Claiming his entitlement to an additional PhP474,600.00 as Sales Management Incentives (SMI)7 and to
the amount of PhP496,016.67 which respondent allegedly deducted illegally, representing the unpaid
accounts of two dealers within his jurisdiction, petitioner filed a complaint before the NLRC on June 11,
2002 for the payment of his "Full Retirement Benefits, Merit Increase, Commission/Incentives, Length of
Service, Actual, Moral and Exemplary Damages, and Attorney’s Fees."8
After a series of mandatory conference, both parties partially settled with regard the issue of merit
increase and length of service.9 Subsequently, they filed their respective Position Paper and Reply thereto
dealing on the two remaining issues of SMI entitlement and illegal deduction.
On September 30, 2003, the LA rendered a Decision10 in favor of petitioner, directing respondent to
reimburse the amount illegally deducted from petitioner’s retirement package and to integrate therein his
SMI privilege. Upon appeal of respondent, however, the NLRC modified the award and deleted the
payment of SMI.
Petitioner then moved to partially execute the reimbursement of illegal deduction, which the LA granted
despite respondent’s opposition.11 Later, without prejudice to the pendency of petitioner’s petition for
certiorari before the CA, the parties executed a Compromise Agreement12 on October 4, 2006, whereby
petitioner acknowledged full payment by respondent of the amount of PhP496,016.67 covering the
amount illegally deducted.
The CA dismissed petitioner’s case on January 9, 2007 and denied his motion for reconsideration two
months thereafter. Hence, this present petition to resolve the singular issue of whether the SMI should be
included in the computation of petitioner’s retirement benefits on the ground of consistent company
practice. Petitioner insistently avers that many DSSs who retired without achieving the sales and
collection targets were given the average SMI in their retirement package.
We deny.
This case does not fall within any of the recognized exceptions to the rule that only questions of law are
proper in a petition for review on certiorari under Rule 45 of the Rules of Court. Settled is the rule that
factual findings of labor officials, who are deemed to have acquired expertise in matters within their
respective jurisdiction, are generally accorded not only respect but even finality, and bind us when
supported by substantial evidence.13Certainly, it is not Our function to assess and evaluate the evidence all
over again, particularly where the findings of both the CA and the NLRC coincide.
In any event, even if this Court would evaluate petitioner's arguments on its supposed merits, We still find
no reason to disturb the CA ruling that affirmed the NLRC. The findings and conclusions of the CA show
that the evidence and the arguments of the parties had all been carefully considered and passed upon.
There are no relevant and compelling facts to justify a different resolution which the CA failed to consider
as well as no factual conflict between the CA and the NLRC decisions.
Generally, employees have a vested right over existing benefits voluntarily granted to them by their
employer.14Thus, any benefit and supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer.15 The principle of non-diminution of benefits is
actually founded on the Constitutional mandate to protect the rights of workers, to promote their welfare,
and to afford them full protection.16 In turn, said mandate is the basis of Article 4 of the Labor Code
which states that "all doubts in the implementation and interpretation of this Code, including its
implementing rules and regulations, shall be rendered in favor of labor."17
There is diminution of benefits when the following requisites are present: (1) the grant or benefit is
founded on a policy or has ripened into a practice over a long period of time; (2) the practice is consistent
and deliberate; (3) the practice is not due to error in the construction or application of a doubtful or
difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the employer.18
To be considered as a regular company practice, the employee must prove by substantial evidence that the
giving of the benefit is done over a long period of time, and that it has been made consistently and
deliberately.19Jurisprudence has not laid down any hard-and-fast rule as to the length of time that
company practice should have been exercised in order to constitute voluntary employer practice.20 The
common denominator in previously decided cases appears to be the regularity and deliberateness of the
grant of benefits over a significant period of time.21 It requires an indubitable showing that the employer
agreed to continue giving the benefit knowing fully well that the employees are not covered by any
provision of the law or agreement requiring payment thereof.22 In sum, the benefit must be characterized
by regularity, voluntary and deliberate intent of the employer to grant the benefit over a considerable
period of time.23
Upon review of the entire case records, We find no substantial evidence to prove that the grant of SMI to
all retired DSSs regardless of whether or not they qualify to the same had ripened into company practice.
Despite more than sufficient opportunity given him while his case was pending before the NLRC, the CA,
and even to this Court, petitioner utterly failed to adduce proof to establish his allegation that SMI has
been consistently, deliberately and voluntarily granted to all retired DSSs without any qualification or
conditions whatsoever. The only two pieces of evidence that he stubbornly presented throughout the
entirety of this case are the sworn statements of Renato C. Hidalgo (Hidalgo) and Ramon V. Velazquez
(Velasquez), former DSSs of respondent who retired in 2000 and 1998, respectively. They claimed that
the SMI was included in their retirement package even if they did not meet the sales and collection
qualifiers.24 However, juxtaposing these with the evidence presented by respondent would reveal the
frailty of their statements.
The declarations of Hidalgo and Velazquez were sufficiently countered by respondent through the
affidavits executed by Norman R. Biola (Biola), Moises D. Escasura (Escasura), and Ma. Vanessa R.
Balles (Balles).25 Biola pointed out the various stop-gap measures undertaken by respondent beginning
1999 in order to arrest the deterioration of its accounts receivables balance, two of which relate to the
policies on the grant of SMI and to the change in the management structure of respondent upon its re-
acquisition by San Miguel Corporation. Escasura represented that he has personal knowledge of the
circumstances behind the retirement of Hidalgo and Velazquez. He attested that contrary to petitioner’s
claim, Hidalgo was in fact qualified for the SMI. As for Velazquez, Escasura asserted that even if he
(Velazquez) did not qualify for the SMI, respondent’s General Manager in its Calamba plant still granted
his (Velazquez) request, along with other numerous concessions, to achieve industrial peace in the plant
which was then experiencing labor relations problems. Lastly, Balles confirmed that petitioner failed to
meet the trade receivable qualifiers of the SMI. She also cited the cases of Ed Valencia (Valencia) and
Emmanuel Gutierrez (Gutierrez), both DSSs of respondent who retired on January 31, 2002 and
December 30, 2002, respectively. She noted that, unlike Valencia, Gutierrez also did not receive the SMI
as part of his retirement pay, since he failed to qualify under the policy guidelines. The verity of all these
statements and representations stands and holds true to Us, considering that petitioner did not present any
iota of proof to debunk the same.1âwphi1
Therefore, respondent's isolated act of including the SMI in the retirement package of Velazquez could
hardly be classified as a company practice that may be considered an enforceable obligation. To repeat,
the principle against diminution of benefits is applicable only if the grant or benefit is founded on an
express policy or has ripened into a practice over a long period of time which is consistent and deliberate;
it presupposes that a company practice, policy and tradition favorable to the employees has been clearly
established; and that the payments made by the company pursuant to it have ripened into benefits enjoyed
by them.26 Certainly, a practice or custom is, as a general rule, not a source of a legally demandable or
enforceable right.27 Company practice, just like any other fact, habits, customs, usage or patterns of
conduct, must be proven by the offering party who must allege and establish specific, repetitive conduct
that might constitute evidence of habit or company practice.28
To close, We rule that petitioner could have salvaged his case had he step up to disprove respondent’s
contention that he miserably failed to meet the collection qualifiers of the SMI. Respondent argues that −
An examination of the Company’s aged trial balance reveals that petitioner did not meet the trade
receivable qualifier. On the contrary, the said trial balance reveals that petitioner had a large amount of
uncollected overdue accounts. For the year 2001, his percentage collection efficiency for current issuance
was at an average of 13.5% a month as against the required 70%. For the same, petitioner’s collection
efficiency was at an average of 60.25% per month for receivables aged 1-30 days, which is again, way
below the required 90%. For receivables aged 31-60 days during said year, petitioner’s collection
efficiency was at an average of 56.17% per month, which is approximately half of the required 100%.
Worse, for receivables over 60 days old, petitioner’s average collection efficiency per month was a
reprehensively low 14.10% as against the required 100%.29
The above data was repeatedly raised by respondent in its Rejoinder (To Complainant’s Reply) before the
LA, 30 Memorandum of Appeal 31 and Opposition (To Complainant-Appellee’s Motion for
Reconsideration)32 before the NLRC, and Comment (On the Petition),33 Memorandum (For the Private
Respondent),34 and Comment (On the Motion for Reconsideration)35 before the CA. Instead of frontally
rebutting the data, petitioner treated them with deafening silence; thus, reasonably and logically implying
lack of evidence to support the contrary.
WHEREFORE, the petition is DENIED. The January 9, 2007 Decision and March 6, 2007 Resolution of
the Court of Appeals in CA-G.R. SP No. 94622, which affirmed the January 31, 2006 Decision and
March 8, 2006 Resolution of the NLRC deleting the LA's inclusion of sales management incentives in the
computation of petitioner's retirement benefits, is hereby AFFIRMED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT

Manila
SECOND DIVISION
G.R. No. 188949 July 26, 2010
CENTRAL AZUCARERA DE TARLAC, Petitioner, 

vs.

CENTRAL AZUCARERA DE TARLAC LABOR UNION-NLU, Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the
Decision1dated May 28, 2009, and the Resolution2 dated July 28, 2009 of the Court of Appeals (CA) in
CA-G.R. SP No. 106657.
The factual antecedents of the case are as follows:
Petitioner is a domestic corporation engaged in the business of sugar manufacturing, while respondent is a
legitimate labor organization which serves as the exclusive bargaining representative of petitioner’s rank-
and-file employees. The controversy stems from the interpretation of the term "basic pay," essential in the
computation of the 13th-month pay.
The facts of this case are not in dispute. In compliance with Presidential Decree (P.D.) No. 851, petitioner
granted its employees the mandatory thirteenth (13th) - month pay since 1975. The formula used by
petitioner in computing the 13th-month pay was: Total Basic Annual Salary divided by twelve (12).
Included in petitioner’s computation of the Total Basic Annual Salary were the following: basic monthly
salary; first eight (8) hours overtime pay on Sunday and legal/special holiday; night premium pay; and
vacation and sick leaves for each year. Throughout the years, petitioner used this computation until 2006.3
On November 6, 2004, respondent staged a strike. During the pendency of the strike, petitioner declared a
temporary cessation of operations. In December 2005, all the striking union members were allowed to
return to work. Subsequently, petitioner declared another temporary cessation of operations for the
months of April and May 2006. The suspension of operation was lifted on June 2006, but the rank-and-
file employees were allowed to report for work on a fifteen (15) day-per-month rotation basis that lasted
until September 2006. In December 2006, petitioner gave the employees their 13th-month pay based on
the employee’s total earnings during the year divided by 12.4
Respondent objected to this computation. It averred that petitioner did not adhere to the usual
computation of the 13th-month pay. It claimed that the divisor should have been eight (8) instead of 12,
because the employees worked for only 8 months in 2006. It likewise asserted that petitioner did not
observe the company practice of giving its employees the guaranteed amount equivalent to their one
month pay, in instances where the computed 13th-month pay was less than their basic monthly pay.5
Petitioner and respondent tried to thresh out their differences in accordance with the grievance procedure
as provided in their collective bargaining agreement. During the grievance meeting, the representative of
petitioner explained that the change in the computation of the 13th-month pay was intended to rectify an
error in the computation, particularly the concept of basic pay which should have included only the basic
monthly pay of the employees.6
For failure of the parties to arrive at a settlement, respondent applied for preventive mediation before the
National Conciliation and Mediation Board. However, despite four (4) conciliatory meetings, the parties
still failed to settle the dispute. On March 29, 2007, respondent filed a complaint against petitioner for
money claims based on the alleged diminution of benefits/erroneous computation of 13th-month pay
before the Regional Arbitration Branch of the National Labor Relations Commission (NLRC).7
On October 31, 2007, the Labor Arbiter rendered a Decision8 dismissing the complaint and declaring that
the petitioner had the right to rectify the error in the computation of the 13th-month pay of its employees.
9 The fallo of the Decision reads:

WHEREFORE, premises considered, the complaint filed by the complainants against the respondents
should be DISMISSED with prejudice for utter lack of merit.
SO ORDERED.10
Respondents filed an appeal. On August 14, 2008, the NLRC rendered a Decision11 reversing the Labor
Arbiter. The dispositive portion of the Decision reads:
WHEREFORE, the decision appealed is reversed and set aside and respondent-appellee Central
Azucarera de Tarlac is hereby ordered to adhere to its established practice of granting 13th[-] month pay
on the basis of gross annual basic which includes basic pay, premium pay for work in rest days and
special holidays, night shift differential and paid vacation and sick leaves for each year.
Additionally, respondent-appellee is ordered to observe the guaranteed one[-]month pay by way of 13th
month pay.
SO ORDERED. 12
Petitioner filed a motion for reconsideration. However, the same was denied in a Resolution dated
November 27, 2008. Petitioner then filed a petition for certiorari under Rule 65 of the Rules of Court
before the CA.13
On May 28, 2009, the CA rendered a Decision14 dismissing the petition, and affirming the decision and
resolution of the NLRC, viz.:
WHEREFORE, the foregoing considered, the petition is hereby DISMISSED and the assailed August 14,
2008 Decision and November 27, 2008 Resolution of the NLRC, are hereby AFFIRMED. No costs.
SO ORDERED.15
Aggrieved, petitioner filed the instant petition, alleging that the CA committed a reversible error in
affirming the Decision of the NLRC, and praying that the Decision of the Labor Arbiter be reinstated.
The petition is denied for lack of merit.
The 13th-month pay mandated by Presidential Decree (P.D.) No. 851 represents an additional income
based on wage but not part of the wage. It is equivalent to one-twelfth (1/12) of the total basic salary
earned by an employee within a calendar year. All rank-and-file employees, regardless of their
designation or employment status and irrespective of the method by which their wages are paid, are
entitled to this benefit, provided that they have worked for at least one month during the calendar year. If
the employee worked for only a portion of the year, the 13th-month pay is computed pro rata.16
Petitioner argues that there was an error in the computation of the 13th-month pay of its employees as a
result of its mistake in implementing P.D. No. 851, an error that was discovered by the management only
when respondent raised a question concerning the computation of the employees’
13th-month pay for 2006. Admittedly, it was an error that was repeatedly committed for almost thirty (30)
years. Petitioner insists that the length of time during which an employer has performed a certain act
beneficial to the employees, does not prove that such an act was not done in error. It maintains that for the
claim of mistake to be negated, there must be a clear showing that the employer had freely, voluntarily,
and continuously performed the act, knowing that he is under no obligation to do so. Petitioner asserts
that such voluntariness was absent in this case.17
The Rules and Regulations Implementing P.D. No. 851, promulgated on December 22, 1975, defines
13th-month pay and basic salary as follows:
Sec. 2. Definition of certain terms. - As used in this issuance:
(a) "Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an employee
within a calendar year; (b) "Basic salary" shall include all remunerations or earnings paid by an
employer to an employee for services rendered but may not include cost-of-living allowances
granted pursuant to Presidential Decree No. 525 or Letter 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.
On January 16, 1976, the Supplementary Rules and Regulations Implementing P.D. No. 851 was issued.
The Supplementary Rules clarifies that overtime pay, earnings, and other remuneration that are not part of
the basic salary shall not be included in the computation of the 13th-month pay.
On November 16, 1987, the Revised Guidelines on the Implementation of the 13th-Month Pay Law was
issued. Significantly, under this Revised Guidelines, it was 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.1avvphi1
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.
Based on the foregoing, it is clear that there could have no erroneous interpretation or application of what
is included in the term "basic salary" for purposes of computing the 13th-month pay of employees. From
the inception of P.D. No. 851 on December 16, 1975, clear-cut administrative guidelines have been issued
to insure uniformity in the interpretation, application, and enforcement of the provisions of P.D. No. 851
and its implementing regulations.
As correctly ruled by the CA, 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 and has
ripened into a company policy or practice which cannot be unilaterally withdrawn.
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. 18 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.19
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.
Furthermore, petitioner cannot use the argument that it is suffering from financial losses to claim
exemption from the coverage of the law on 13th-month pay, or to spare it from its erroneous unilateral
computation of the 13th-month pay of its employees. 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.20 In this case, no such prior authorization
has been obtained by petitioner; thus, it is not entitled to claim such exemption.
WHEREFORE, the Decision dated May 28, 2009 and the Resolution dated July 28, 2009 of the Court of
Appeals in CA-G.R. SP No. 106657 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
 Republic of the Philippines

SUPREME COURT

Manila
SECOND DIVISION
G.R. No. L-57636 May 16, 1983
REYNALDO TIANGCO and VICTORIA TIANGCO, petitioners, 

vs.

HON. VICENTE LEOGARDO, JR., as Deputy Minister of the Ministry of Labor and Employment,
AURELIO ILUSTRISIMO, ABRAHAM GILBUENA, ROGELIO CARABIO, JESUS
GILBUENA, PEPITO GILBUENA, DOMINADOR LASERNA, CLEMENTE VILLARUEL,
RUSTOM OFQUERIA, ERNESTO DIONG, GRACIANO DURANA, AGUEDO MARABE,
SOLOMON CLARIN, ALCAFONE ESGANA, JUAN CASTRO, ANTONIO GILBUENA,
GREGORIO LAYLAY, DANIEL CABRERA, ROBERTO BAYON-ON, ELIAS ESCARAN,
ERNESTO BATOY, EDDIE BATOBALANOS, TOMAS CAPALAR, JUAN GIHAPON, JOSE
OFQUERIA, FRUTO GIHAPON, PEPITO BATOY, and SERAFIO YADAWON, respondents.
CONCEPCION, JR., J.:
Petition for certiorari and prohibition, with preliminary injunction and/or restraining order, to annul and
set aside the order of the respondent Deputy Minister of Labor which modified and affirmed the order of
Director of the National Capitol Region of the Ministry of Labor directing the petitioners to pay the
private respondents their legal holiday pay, service incentive pay, and differentials in their emergency cost
of living allowances.
The petitioner, Reynaldo Tiangco, is a fishing operator who owns the Reynaldo Tiangco Fishing
Company and a fleet of fishing vessels engaged in deep-sea fishing which operates from Navotas, Rizal.
His business is capitalized at P2,000,000.00, 1 while the petitioner, Victoria Tiangco, is a fish broker
whose business is capitalized at P100,000.00. 2
The private respondents, Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham Gilbuena,
Rustom Ofqueria, Ernesto Diong, Jesus Gilbuena, Clemente (Emerenciano) Villaruel, Dominador
Lacerna, and Graciano Durana, are batillos engaged by the petitioner Reynaldo Tiangco to unload the fish
catch from the vessels and take them to the Fish Stall of the petitioner Victoria Tiangco. The private
respondents, Eddie Batobalanos, Aguedo Marabe, Gregorio Laylay, Fruto Gihapon, Solomon Clarin,
Pepito Batoy, Jose Ofqueria, Daniel Cabrera, Juan Castro, Alcafone Esgana, Tomas Capalar, Antonio
Gilbuena, Ernesto Batoy, Serafio Yadawon, Juan Gihapon, Elias Escaran and Roberto Bayon-on, were
batillos engaged by Victoria Tiangco. 3 The work of these batillos were limited to days of arrival of the
fishing vessels and their working days in a month are comparatively few. Their working hours average
four (4) hours a day.
On April 8, 1980, the private respondents filed a complaint against the petitioners with the Ministry of
Labor and Employment for non-payment of their legal holiday pay and service incentive leave pay, as
well as underpayment of their emergency cost of living allowances which used to be paid in full
irrespective of their working days, but which were reduced effective February, 1980, in contravention of
Article 100 of the new Labor Code which prohibits the elimination or diminution of existing benefits. 4
The petitioners denied the laborers' contention, claiming that the laborers were all given, in addition to
their regular daily wage, a daily extra pay in amounts ranging from 30 centavos to 10 pesos which are
sufficient to offset the laborers' claim for service incentive leave and legal holiday pay. As regards the
claim for emergency allowance differentials, the petitioners admitted that they discontinued their practice
of paying their employees a fixed monthly allowance, and effective February, 1980, they no longer paid
allowances for non-working days. They argued, however, that no law was violated as their refusal to pay
allowances for non-working days is in consonance with the principle of "no work, no allowance"; and that
they could not pay private respondents a fixed monthly allowance without risking the viability of their
business. 5
Resolving the case, the Director of the National Capitol Region of the Ministry of Labor and Employment
ruled that the daily extra pay given to private respondents was a ,'production incentive benefit", separate
and distinct from the service incentive leave pay and legal holiday pay, payment of which cannot be used
to offset a benefit provided by law, and ordered the petitioners to pay the private respondents their service
incentive leave pay and legal holiday pay. However, he denied the laborers' claim for differentials in the
emergency cost of living allowance for the reason that the emergency cost of living allowance accrues
only when the laborers actually work following the principle of "no work, no pay," and private
respondents are not entitled to a fixed monthly allowance since they work on a part time basis which
average only four (4) days a week. The private respondents should not be paid their allowances during
non-working days. 6
From this order, both parties appealed.
On May 22, 1981, the respondent Deputy Minister of Labor and Employment modified the order and
directed the petitioners to restore and pay the individual respondents their fixed monthly allowance from
March, 1980 and to pay them the amount of P58,860.00, as underpayment of their living allowance from
May, 1977 to February 21, 1980. 7
When their motion for the reconsideration of the above order was denied, the petitioners interposed the
present recourse.
The petitioners claim that the respondent Deputy Minister of Labor and Employment acted in excess of
jurisdiction, or with grave abuse of discretion in ordering them to pay the private respondents a fixed
monthly allowance from March, 1980, despite the "no work, no pay," law; the private respondents'
consent to receive an allowance for days worked for, as stated in their appeal; and the findings of the
Director of the National Capitol Region that private respondents work for other employers and are part-
time employees of the petitioners.
Indeed, the record shows that the private respondents work for the petitioners on a part-time basis and
their work average only four (4) days a week. It is not also disputed that the private respondents work for
more than one employer so that the private respondents should be paid their living allowance only for the
days they actually worked in a week or month and all the employers of the employee shall share
proportionately in the payment of the allowance of the employee. Section 12 of the Rules and Regulations
implementing P.D. 525 which made mandatory the payment of emergency cost of living allowances to
workers in the private section, provides, as follows:
Section 12. Allowance on Daily Paid & Part — Time employees. — Employees who are
paid on a daily basis shall be paid their allowances for the number of days they actually
worked in a week or month, on the basis of the scales provided in Section 7 hereof.
In case of part-time employment, the allowances shall be paid in the amount
proportionate to the time worked by the employee, or higher. If employed by more than
one employer, all employers of such employee shall share proportionately in the payment
of the allowance of the employee.
Section 11 of the Rules implementing P.D. 1123, increasing the emergency allowance
under P.D. 525, also provides, as follows:
Section 11. Allowances of full-time and part-time employees. — Employees shall be paid
in full the monthly allowances on the basis of the scales provided in Section 3 hereof,
regardless of the number of their regular working days, if they incur no absence during
the month. If they incur absences, the amounts corresponding to their absences may be
deducted from the monthly allowance.
In case of part-time employment, the allowance to be paid shall be proportionate to the
time worked by the employee. This requirement shall apply to any employee with more
than one employer.
However, the respondent Deputy Minister of Labor and Employment correctly ruled that since the
petitioners had been paying the private respondents a fixed monthly emergency allowance since
November, 1976 up to February, 1980, as a matter of practice and/or verbal agreement between the
petitioners and the private respondents, the discontinuance of the practice and/or agreement unilaterally
by the petitioners contravened the provisions of the Labor Code, particularly Article 100 thereof which
prohibits the elimination or diminution of existing benefits.
Section 15 of the Rules on P.D. 525 and Section 16 of the Rules on P. D. 1123 also prohibits the
diminution of any benefit granted to the employees under existing laws, agreements, and voluntary
employer practice. Section 15 of the Rules on P.D. 525 provides, as follows:
Section 15. Relation to Agreement. — Nothing herein shall prevent the employer and his
employees from entering into any agreement with terms more favorable to the employees
than those provided therein, or be construed to sanction the diminution of any benefit
granted to the employees under existing laws, agreements, and voluntary employer
practice.
Section 16 of the Rules on P.D. 1123 similarly prohibits diminution of benefits. It
provides, as follows:
 Section 16. Relation to other agreements. — Nothing herein shall prevent employers
from granting allowances to their employees in excess of those provided under the
Decree and the Rules nor shall it be construed to countenance any reduction of benefits
already being enjoyed.
The petitioners further claim that the respondent Deputy Minister of Labor and Employment erred in
ordering them to pay the amount of P58,860.00 to the private respondents as underpayment of
respondents' allowances from May, 1977 to February 20, 1980. The petitioners contend that the
emergency cost of living allowances of the private respondents had been paid in full.
We find no merit in the contention. However, a revision of the amount due the private respondents is in
order for the reason that the respondent Deputy Minister of Labor and Employment failed to take into
consideration, in computing the amount due each worker, the fact that the private respondents are
employed by two different individuals whose businesses are divergent and capitalized at various amounts,
contrary to the provisions of P.D. 525 and subsequent amendatory decrees, wherein the amount of the
emergency cost of living allowance to be paid to a worker is made to depend upon the capitalization of
the business of his employer or its total assets, whichever is higher. Thus, Section 7 of the Rules and
Regulations implementing P.D. 525 reads, as follows:
Section 7. Amount of Allowances. — Every covered employer shall give to each of his
employees who is receiving less than P600.00 a month not less than the following
allowances;
(a) P50.00 where the authorized capital stock or total assets, whichever is applicable and
higher, is 71 million or more;
(b) P30.00 where the authorized capital stock or total assets, whichever is applicable and
higher is at least P100,000.00 but less than P 1miilion and
(c) P15.00 where the authorized capital stock or total assets, whichever is applicable and
higher, is less than P100,000.00.
Nothing herein shall prevent employers from granting allowances to their employees who
will receive more than P600.00 a month, including the allowances. An employer,
however, may grant his employees an allowance which if added to their monthly salary,
will not yield to them more than P600.00 a month.
In this case, the private respondents admit that only ten (10) of them, namely: Aurelio Ilustrisimo, Pepito
Gilbuena, Rogelio Carabio, Abraham Gilbuena, Rustom Ofquiera, Ernesto Diong, Jesus Gilbuena,
Emerenciano Villaruel, Dominador Lacerna, and Graciano Durana, were employees of the petitioner
Reynaldo Tiangco, while the remaining seventeen (17) were employed by the petitioner Victoria
Tiangco. 8 Accordingly, the workers of the petitioner Victoria Tiangco, whose business as fish broker is
capitalized at P100,000.00, 9 should receive a lesser amount of allowance (P30.00) than those workers
employed by the petitioner Reynaldo Tiangco whose business, as a fishing operator with a fleet of fishing
vessels, is capitalized at more than P2,000,000.00, and are entitled to receive a fixed monthly allowance
of P50.00 a month, each.
After P.D. 525, the following amendatory decrees, directing the payment of additional allowances to
employees, were promulgated:
1. P.D. 1123. providing for an across-the-board increase of P60.00 a month effective May
1, 1977;
 2. P.D. 1614, which directed the payment of P60.00 monthly allowance effective April 1,
1979;
3. P.D. 1634, which provided for the payment of an additional P60.00 a month effective
September 1, 1979, and another P30.00 a month beginning January 1, 1980; and
4. P.D. 1678,which directed the payment of an additional P2.00 a day from February 21,
1980.
Hence, for the period from November, 1976 to April 30, 1977, the petitioner Victoria Tiangco should pay
her workers a fixed monthly allowance of P 30.00, while the workers of the petitioner Reynaldo Tiangco
were entitled to a fixed monthly allowance of P50.00, each. The record shows that during this period, the
petitioner Victoria Tiangco was paying her workers a monthly allowance of P30.00 each. 10 Accordingly,
there was no underpayment for this period insofar as her batillos are concerned. The petitioner Reynaldo
Tiangco, however, paid his employees P30.00, instead of P50.00, as mandated by law. 11 Therefore, there
was an underpayment of P20.00 a month for each batillo under his employ. For the 6-month period, he
should pay his workers differentials in the amount of P120.00 each.
For the period from May, 1977 to March 1979, the workers of the petitioner Victoria Tiangco were
entitled to a fixed monthly allowance of P90.00 in view of the promulgation of P.D. 1123 which granted
an across-the-board increase of P60.00 a month in their allowances. For this period, however, the said
petitioner paid her workers only P60.00 a month, or a difference of P30.00 a month. 12 There was,
therefore, an underpayment of P690.00 for every batillo under her employ for the 23-month period.
With the addition of P60.00 across-the-board increase in their allowances, the workers of the petitioner
Reynaldo Tiangco were entitled to receive a fixed monthly allowance of P110.00. However, the record
shows that his workers were only paid P60.00 a month, 13 or a difference of P50.00 a month.
Consequently, each batillo hired by him should be paid a differential of P1,150.00 for the 23-month
period.
For the period from April, 1979 to August, 1979, the employees of the petitioner Victoria Tiangco were
entitled to a fixed monthly allowance of P150.00 while the workers employed by the petitioner Reynaldo
Tiangco were entitled to an allowance of P170.00, pursuant to P.D. 1614. The record shows, however, that
both petitioners paid their workers only P120.00 a month. 14 There was a difference of P30.00 a month in
the case of the petitioner Victoria Tiangco, and P50.00, a month, in the case of the petitioner Reynaldo
Tiangco. Hence, for this period, the petitioner Victoria Tiangco should pay the amount of P150.00 to
each batillo in her employ, while the petitioner Reynaldo Tiangco should pay the amount of P250.00, as
differentials in the cost of living allowances of the workers under his employ.
Upon the promulgation of P.D. 1634, directing the payment of an additional P60.00 a month effective
September, 1979 and another P30.00 effective January 1, 1980, the workers of the petitioner Victoria
Tiangco were entitled to receive a fixed monthly allowance of P210.00 a month from September, 1979,
and P340.00, a month beginning January, 1980. The workers of the petitioner Reynaldo Tiangco, upon the
other hand, were entitled to a monthly allowance of P230.00, effective September, 1979, and P260.00, a
month beginning January, 1980. The record shows, however, that both petitioners paid their workers the
amounts of P180.00 a month for the months of September to December, 1979, 15 and P210.00 a month for
the months of January and February, 1980. 16 There was underpayment, therefore, in the allowances of the
workers of the petitioner Victoria Tiangco in the amount of P30.00, a month, for the months of
September, 1979 to February, 1980, or P180.00 for each batillo in her employ. The private respondents
hired by the petitioner Reynaldo Tiangco, upon the other hand, are entitled to differentials in the amount
of P50.00 a month for the same period, or P300.00 each.
Then, beginning February, 21, 1980, the workers should be paid an additional P2.00, a day, pursuant to
P.D. 1678. The record shows that the petitioners had complied with this requirement. 17 The petitioners,
however, failed to pay the fixed monthly allowance of their workers which was P240.00, in the case of the
workers employed by the petitioner Victoria Tiangco, and P260.00, in the case of the workers of the
petitioner Reynaldo Tiangco. Thus, for the month of March, 1980, the petitioner Victoria Tiangco paid her
workers varying amounts, the lowest of which was P30.00, paid to Eddie Batobalanos and Fruto Gihapon,
and the highest of which was P210.00, paid to Juan Gihapon and Roberto Bayonon. 18 Hence, there was
underpayment in their emergency cost of living allowances. But, since, the respondents employed by
Victoria Tiangco are wining to accept P50.00 a month as differentials for the months of March, 1980 to
May, 1980, 19 the workers employed by her should be paid P50.00, each, for the month of March, 1980,
except Juan Gihapon and Roberto Bayon-on who should be paid P30.00, each, for the said month, having
received the amount of P210.00, each as allowance for that month.
For the month of April, 1980, the workers of the petitioner, Victoria Tiangco, were paid varying amounts
ranging from P120.00 to P210.00. 20 Hence, there was also underpayment in their allowances.
Accordingly, they should be paid the amount of P50.00, each, except for Juan Gihapon, Antonio
Gilbuena, Juan Castro, and Aguedo Marabe, who should be paid P40.00, each, and Solomon Clarin,
Daniel Cabrera, and Gregorio Laylay who should be paid P30.00 each.
For the month of May, 1980, the petitioner Victoria Tiangco, paid her workers varying amounts less that
what was provided for by law. 21 Hence, they should be paid the amount of P50.00, each, for this month.
The petitioner, Reynaldo Tiangco, also paid the employees varying amounts, ranging from P210.00 to
P250.00, as emergency cost of living allowance, for the month of March, 22, 1980. 22 Since they were
entitled to a fixed monthly allowance of P260.00, each, there was underpayment in their cost of living
allowances. Accordingly, the petitioner should pay the respondent Pepito Gilbuena the amount of P50.00;
the respondents Dominador Lacerna and Graciano Durano, the amount of P40.00, each; the respondent
Ernesto Diong, the amount of P30.00; the respondents Rustom Ofqueria and Aurelio Ilustrisimo, the
amount of P20.00, each; and the respondents Abraham Gilbuena, Jesus Gilbuena, Rogelio Carabio, and
Emerenciano Villaruel, the amount of P10.00 each.
For the month of April, 1980, the workers of the petitioner Reynaldo Tiangco, were not also paid their
emergency cost of living allowance in full. 23 Hence, the said petitioner should pay his workers the
amount of P30.00 each, except for Pepito Gilbuena, who should be paid the amount of P50.00, and
Rustom Ofqueria, Jesus Gilbuena, and Graciano Durano, who are entitled to only P40.00 each.
The petitioner, Reynaldo Tiangco did not also pay his workers their full cost of living allowance for the
month of May, 1980. The workers were paid varying amounts of P130.00 to P150.00, instead of P260.00,
as required by law. 24 Hence, they should be paid the amunt of P50.00 each for the month of May, 1980.
WHEREFORE, the petitioners Victoria Tiangco and Reynaldo Tiangco should be, as they are hereby,
ordered to PAY the private respondents the following amounts as differentials in their emergency cost of
living allowance:
Petitioner Victoria Tiangco:
1. E d d i e Pl,170.00
Batobalanos.............
2. A g u e d o 1,160.00
Morabe.................
 3. G r e g o r i o 1,150.00
Laylay..................
4. F r u t o 1,170.00
Gihapon....................
.
5. S o l o m o n 1,150.00
Clarin ...................
6. P e p i t o 1,170.00
Batoy........................
7. J o s e 1,170.00
Ofqueria....................
...
8. D a n i e l 1,150.00
Cabrera.....................
9. J u a n 1,160.00
Castro........................
..
10. A l c a f o n e 1,170.00
Esgana.................
11. T o m a s 1,170.00
Capalar ....................
12. A n t o n i o 1,160.00
Gilbuena................
13. E r n e s t o 1,170.00
Batoy......................
14. S e r a p i o 1,150.00
Yadawon................
15. J u a n 1,140.00
Gihapon....................
...
16. E l i a s 1,150.00
Escaran .....................
.
17. Roberto Bayon- 1,130.00
on..............

Petitioner Reynaldo Tiangco:

1. A u r e l i o P l,
Ilustrisimo............ 920.00
 2. P e p i t o 1,970.00
Gilbuena.................
3. R o g e l i o 1,910.00
Carabio.................
4. A b r a h a m 1,910.00
Gilbuena.............
5. R u s t o m 1,930.00
Ofqueria................
6. E r n e s t o 1,930.00
Diong....................
7. J e s u s 1,920.00
Gilbuena.................
..
8. Emerenciano 1,910.00
Villaruel........
9. D o m i n a d o r 1,940.00
Lacerna............
10. G r a c i a n o 1,950.00
Durano.................
With this modification, the judgment appealed from is AFFIRMED in all other respects. With costs
against the petitioners.
SO ORDERED.

Republic of the Philippines


SUPREME COURT

Manila
SECOND DIVISION
G.R. No. 74156 June 29, 1988
GLOBE MACKAY CABLE AND RADIO CORPORATION, FREDERICK WHITE and JESUS
SANTIAGO, petitioners, 

vs.

NATIONAL LABOR RELATIONS COMMISSION, FFW-GLOBE MACKAY EMPLOYEES
UNION and EDA CONCEPCION, respondents.
MELENCIO-HERRERA, J.:
A special civil action for certiorari with a prayer for a Temporary Restraining Order to enjoin respondents
from enforcing the Decision of 10 March 1986 of the National Labor Relations Commission (NLRC), in
NCR Case No. 1-168-85 entitled "FFW-Globe Mackay Employees Union, et al., vs. Globe Mackay Cable
& Radio Corporation, et al.," the dispositive portion of which reads:
WHEREFORE, premises considered, the appealed Decision is as it is hereby SET ASIDE
and another one issued:
1. Declaring respondents-appellees (petitioners herein) guilty of illegal deductions of
cost-of-living allowance;
2. Ordering respondents-appellees to pay complainants-appellants their back allowances
reckoned from the time of illegal deduction; and
3. Ordering respondents-appellees from further illegally deducting the allowances of
complainants-appellants.
SO ORDERED.
Presiding Commissioner of the NLRC, Diego P. Atienza, concurred in the result, while Commissioner
Cleto T. Villaltuya dissented and voted to affirm in toto the Labor Arbiter's Decision.
On 19 May 1986, we issued the Temporary Restraining Order enjoining respondents from enforcing the
assailed Decision. On 2 September 1987, we gave due course to the petition and required the submittal of
memoranda, by the parties, which has been complied with.
The facts follow:
Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance of non-
agricultural workers in the private sector. Petitioner corporation complied with the said Wage Order by
paying its monthly-paid employees the mandated P3.00 per day COLA. However, in computing said
COLA, Petitioner Corporation multiplied the P 3.00 daily COLA by 22 days, which is the number of
working days in the company.
Respondent Union disagreed with the computation of the monthly COLA claiming that the daily COLA
rate of P3.00 should be multiplied by 30 days to arrive at the monthly COLA rate. The union alleged
furthermore that prior to the effectivity of Wage Order No. 6, Petitioner Corporation had been computing
and paying the monthly COLA on the basis of thirty (30) days per month and that this constituted an
employer practice, which should not be unilaterally withdrawn.
After several grievance proceedings proved futile, the Union filed a complaint against Petitioner
Corporation, its President, F. White, and Vice-President, J. Santiago, for illegal deduction, underpayment,
unpaid allowances, and violation of Wage Order No. 6. Petitioners White and Santiago were sought to be
held personally liable for the money claims thus demanded.
Labor Arbiter Adelaido F. Martinez sustained the position of Petitioner Corporation by holding that since
the individual petitioners acted in their corporate capacity they should not have been impleaded; and that
the monthly COLA should be computed on the basis of twenty two (22) days, since the evidence showed
that there are only 22 paid days in a month for monthly-paid employees in the company. His
reasoning, inter alia, was as follows:
To compel the respondent company to use 30 days in a month to compute the allowance
and retain 22 days for vacation and sick leave, overtime pay and other benefits is
inconsistent and palpably unjust. If 30 days is used as divisor, then it must be used for the
computation of all benefits, not just the allowance. But this is not fair to complainants,
not to mention that it will contravene the provision of the parties' CBA.
On appeal, the NLRC reversed the Labor Arbiter, as heretofore stated, and held that Petitioner
Corporation was guilty of illegal deductions, upon the following considerations: (1) that the P3.00 daily
COLA under Wage Order No. 6 should be paid and computed on the basis of thirty (30) days instead of
twenty-two (22) days since workers paid on a monthly basis are entitled to COLA on Saturdays, Sundays
and legal holidays "even if unworked;" (2) that the full allowance enjoyed by Petitioner Corporation's
monthly-paid employees before the CBA executed between the parties in 1982 constituted voluntary
employer practice, which cannot be unilaterally withdrawn; and (3) that petitioners White and Santiago
were properly impleaded as respondents in the case below.
Hence, this Petition, anchored on the charge of grave abuse of discretion by the NLRC.
We are constrained to reverse the reversal.
Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as follows:
Section 5. Allowance for Unworked Days.
All covered employees shall be entitled to their daily living allowance during the days
that they are paid their basic wage, even if unworked. (Emphasis supplied)
The primordial consideration, therefore, for entitlement to COLA is that basic wage is being paid. In other
words, the payment of COLA is mandated only for the days that the employees are paid their basic wage,
even if said days are unworked. So that, on the days that employees are not paid their basic wage, the
payment of COLA is not mandated. As held in University of Pangasinan Faculty Union vs. University of
Pangasinan, L-63122, February 20, 1984, 127 SCRA 691):
... it is evident that the intention of the law is to grant ECOLA upon the payment of basic
wages. Hence, we have the principle of 'No Pay, No ECOLA.
Applied to monthly-paid employees if their monthly salary covers all the days in a month, they are
deemed paid their basic wages for all those days and they should be entitled to their COLA on those days
"even if unworked," as the NLRC had opined. Peculiar to this case, however, is the circumstance that
pursuant to the Collective Bargaining Agreement (CBA) between Petitioner Corporation and Respondent
Union, the monthly basic pay is computed on the basis of five (5) days a week, or twenty two (22) days a
month. Thus, the pertinent provisions of that Agreement read:
Art. XV(a)—Eight net working hours shall constitute the regular work day for five days.
Art. XV(b)—Forty net hours of work, 5 working days, shall constitute the regular work
week.
Art. XVI, Sec. 1(b)—All overtime worked in excess of eight net hours daily or in excess
of 5 days weekly shall be computed on hourly basis at the rate of time and one half.
The Labor Arbiter also found that in determining the hourly rate of monthly paid employees for purposes
of computing overtime pay, the monthly wage is divided by the number of actual work days in a month
and then, by eight (8) working hours. If a monthly-paid employee renders overtime work, he is paid his
basic salary rate plus one-half thereof. For example, after examining the specimen payroll of employee
Jesus L. Santos, the Labor Arbiter found:
the employee Jesus L. Santos, who worked on Saturday and Sunday was paid base pay
plus 50% premium. This is over and above his monthly basic pay as supported by the fact
that base pay was paid. If the 6th and 7th days of the week are deemed paid even if
unworked and included in the monthly salary, Santos should not have been paid his base
pay for Saturday and Sunday but should have received only the 50% overtime premium.
Similarly, the specimen payrolls of employees, Dennis Dungon and Rene Sanvictores, showed that in
computing the vacation and sick leaves of the employees, Petitioner Corporation consistently used
twenty-two (22) days.
Under the peculiar circumstances obtaining, therefore, where the company observes a 5-day work week, it
will have to be held that the COLA should be computed on the basis of twenty two (22) days, which is the
period during which the monthly-paid employees of Petitioner Corporation receive their basic wage. The
CBA is the law between the parties and, if not acceptable, can be the subject of future re-negotiation.
2) Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in
compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not be construed as
constitutive of voluntary employer practice, which cannot now be unilaterally withdrawn by petitioner. To
be considered as such, it should have been practiced over a long period of time, and must be shown to
have been consistent and deliberate. Adequate proof is wanting in this respect. The test of long practice
has been enunciated thus:
... Respondent Company agreed to continue giving holiday pay knowing fully well that
said employees are not covered by the law requiring payment of holiday pay.' (Oceanic
Pharmacal Employees Union [FFW] vs. Inciong, L-50568, November 7, 1979, 94 SCRA
270). (Emphasis ours)
Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the implementation
of the Wage Orders. It was only when the Rules Implementing Wage Order No. 4 were issued on 21 May
1984 that a formula for the conversion of the daily allowance to its monthly equivalent was laid down,
thus:
Section 3. Application of Section 2--
xxx xxx xxx
(a) Monthly rates for non-agricultural workers covered Under PDs 1614, 1634, 1678 and
1713:
xxx xxx xxx
(3) For workers who do not work and are not considered paid on Saturdays and Sundays:
P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70 (Emphasis ours)
As the Labor Arbiter had analyzed said formula:
Under the aforecited formula/guideline, issued for the first time, when applied to a
company like respondent which observes a 5-day work week (or where 2 days in a week,
not necessarily Saturday and Sunday, are not considered paid), the monthly equivalent of
a daily allowance is arrived at by multiplying the daily allowance by 262 divided by 12.
This formula results in the equivalent of 21.8 days in a month.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application
of the law. Payment may be said to have been made by reason of a mistake in the construction or
application of a "doubtful or difficult question of law." (Article 2155, 1 in relation to Article 2154 2 of the
Civil Code). Since it is a past error that is being corrected, no vested right may be said to have arisen nor
any diminution of benefit under Article 100 of the Labor Code 3 may be said to have resulted by virtue of
the correction.
With the conclusions thus reached, there is no further need to discuss the liability of the officers of
Petitioner Corporation.
WHEREFORE, certiorari is granted, the Decision of the National Labor Relations Commission, dated 10
March 1986, is SET ASIDE, and the Decision of the Labor Arbiter, dated 9 May 1985, is hereby
REINSTATED. The Temporary Restraining Order heretofore issued is hereby made permanent.
SO ORDERED.

Republic of the Philippines


SUPREME COURT

Manila
THIRD DIVISION
G.R. No. 121004 January 28, 1998
ROMEO LAGATIC, petitioner, 

vs.

NATIONAL LABOR RELATIONS COMMISSION, CITYLAND DEVELOPMENT
CORPORATION, STEPHEN ROXAS, JESUS GO, GRACE LIUSON, and ANDREW
LIUSON, respondents.
ROMERO, J.:
Petitioner seeks, in this petition for certiorari under Rule 65, the reversal of the resolution of the National
Labor Relations Commission dated May 12, 1995, affirming the February 17, 1994, decision of Labor
Arbiter Ricardo C. Nora finding that petitioner had been validly dismissed by private respondent Cityland
Development Corporation (hereafter referred to as Cityland) and that petitioner was not entitled to
separation pay, premium pay and overtime pay.
The facts of the case are as follows:
Petitioner Romeo Lagatic was employed in May 1986 by Cityland, first as a probationary sales agent, and
later on as a marketing specialist. He was tasked with soliciting sales for the company, with the
corresponding duties of accepting call-ins, referrals, and making client calls and cold calls. Cold calls
refer to the practice of prospecting for clients through the telephone directory. Cityland, believing that the
same is an effective and cost-efficient method of finding clients, requires all its marketing specialists to
make cold calls. The number of cold calls depends on the sales generated by each: more sales mean less
cold calls. Likewise, in order to assess cold calls made by the sales staff, as well as to determine the
results thereof, Cityland requires the submission of daily progress reports on the same.
On October 22, 1991, Cityland issued a written reprimand to petitioner for his failure to submit cold call
reports for September 10, October 1 and 10, 1991. This notwithstanding, petitioner again failed to submit
cold call reports for September 2, 5, 8, 10, 11, 12, 15, 17, 18, 19, 20, 22, and 28, as well as for October 6,
8, 9, 10, 12, 13 and 14, 1992. Petitioner was required to explain his inaction, with a warning that further
non-compliance would result in his termination from the company. In a reply dated October 18, 1992,
petitioner claimed that the same was an honest omission brought about by his concentration on other
aspects of his job. Cityland found said excuse inadequate and, on November 9, 1992, suspended him for
three days, with a similar warning.
Notwithstanding the aforesaid suspension and warning, petitioner again failed to submit cold call reports
for February 5, 6, 8, 10 and 12, 1993. He was verbally reminded to submit the same and was even given
up to February 17, 1993 to do so. Instead of complying with said directive, petitioner, on February 16,
1993, wrote a note, "TO HELL WITH COLD CALLS! WHO CARES?" and exhibited the same to his co-
employees. To worsen matters, he left the same lying on his desk where everyone could see it.
On February 23, 1993, petitioner received a memorandum requiring him to explain why Cityland should
not make good its previous warning for his failure to submit cold call reports, as well as for issuing the
written statement aforementioned. On February 24, 1993, he sent a letter-reply alleging that his failure to
submit cold call reports should trot be deemed as gross insubordination. He denied any knowledge of the
damaging statement, "TO HELL WITH COLD CALLS!"
Finding petitioner guilty of gross insubordination, Cityland served a notice of dismissal upon him on
February 26, 1993. Aggrieved by such dismissal, petitioner filed a complaint against Cityland for illegal
dismissal, illegal deduction, underpayment, overtime and rest day pay, damages and attorney's fees. The
labor arbiter dismissed the petition for lack of merit. On appeal, the same was affirmed by the NLRC;
hence the present recourse.
Petitioner raises the following issues:
1. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED
ITS DISCRETION 1N NOT FINDING THAT PETITIONER WAS
ILLEGALLY DISMISSED;
 2. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED
ITS DISCRETION IN RULING THAT PETITIONER IS NOT
ENTITLED TO SALARY DIFFERENTIALS, BACKWAGES,
SEPARATION PAY, OVERTIME PAY, REST DAY PAY, UNPAID
COMMISSIONS, MORAL AND EXEMPLARY DAMAGES AND
ATTORNEY'S FEES.
The petition lacks merit.
To constitute a valid dismissal from employment, two requisites must be met, namely: (1) the employee
must be afforded due process, and (2) the dismissal must be for a valid cause. 1 In the case at bar,
petitioner contends that his termination was illegal on both substantive and procedural aspects. It is his
submission that the failure to submit a few cold calls does not qualify as willful disobedience, as, in his
experience, cold calls are one of the least effective means of soliciting sales. He thus asserts that a couple
of cold call reports need not be accorded such tremendous significance as to warrant his dismissal for
failure to submit them on time.
These arguments are specious. Petitioner loses sight of the fact that "(e)xcept as provided for, or limited
by, special laws, an employer is free to regulate, according to his discretion and judgment, all aspects of
employment." 2 Employers may, thus, make reasonable rules and regulations for the government of their
employees, and when employees, with knowledge of an established rule, enter the service, the rule
becomes a part of the contract of employment. 3 It is also generally recognized that company policies and
regulations, unless shown to be grossly oppressive or contrary to law, are generally valid and binding on
the parties and must be complied with. 4 "Corollarily, an employee may be validly dismissed for violation
of a reasonable company rule or regulation adopted for the conduct of the company business. An
employer cannot rationally be expected to retain the employment of a person whose . . . lack of regard for
his employer's rules . . . has so plainly and completely been bared." 5 Petitioner's continued infraction of
company policy requiring cold call reports, as evidenced by the 28 instances of non-submission of
aforesaid reports, justifies his dismissal. He cannot be allowed to arrogate unto himself the privilege of
setting company policy on the effectivity of solicitation methods. To do so would be to sanction
oppression and the self-destruction of the employer.
Moreover, petitioner made it worse for himself when he wrote the statement, "TO HELL WITH COLD
CALLS! WHO CARES?" When required to explain, he merely denied ally knowledge of the same.
Cityland, on the other hand, submitted the affidavits of his co-employees attesting to his authorship of the
same. Petitioner's only defense is denial. The rule, however, is that denial, if unsubstantiated by clear and
convincing evidence, is negative and self-serving evidence which has no weight in law. 6 More telling,
petitioner, while making much capital out of his lack of opportunity to confront the affiants, never, in all
of his pleadings, categorically denied writing the same. He only denied knowledge of the allegation that
he issued such a statement.
Based on the foregoing, we find petitioner guilty of willful disobedience. Willful disobedience requires
the concurrence of at least two requisites: the employee's assailed conduct must have been willful or
intentional, the willfulness being characterized by a wrongful and perverse attitude; and the order violated
must have been reasonable, lawful, made known to the employee and must pertain to the duties which he
had been engaged to discharge. 7
Petitioner's failure to comply with Cityland's policy of requiring cold call reports is clearly willful, given
the 28 instances of his failure to do so, despite a previous reprimand and suspension. More than that, his
written statement shows his open defiance and disobedience to lawful rules and regulations of the
company. Likewise, said company policy of requiring cold calls and the concomitant reports thereon is
clearly reasonable and lawful, sufficiently known to petitioner, and in connection with the duties which he
had been engaged to discharge. There is, thus, just cause for his dismissal.
On the procedural aspect, petitioner claims that he was denied due process. Well settled is the dictum that
the twin requirements of notice and hearing constitute the elements of due process in the dismissal of
employees. Thus, the employer must furnish the employee with two written notices before the termination
of employment can be effected. The first apprises the employee of the particular acts or omissions for
which his dismissal is sought; the second informs him of the employer's decision to dismiss him. 8
In the case at bar, petitioner was notified of the charges against him in a memorandum dated February 19,
1993, which he received on February 23, 1993. He submitted a letter-reply thereto on February 24, 1993,
wherein he asked that his failure to submit cold call reports be not interpreted as gross
insubordination. 9 He was given notice of his termination on February 26, 1993. This chronology of
events clearly show that petitioner was served with the required written notices.
Nonetheless, petitioner contends that he has not been given the benefit of an effective hearing. He alleges
that he was not adequately informed of the results of the investigation conducted by the company, nor was
he able to confront the affiants who attested to his writing the statement, "TO HELL WITH COLD
CALLS!" While we have held that in dismissing employees, the employee must be afforded ample
opportunity to be heard, "ample opportunity" connoting every kind of assistance that management must
afford the employee to enable him to prepare adequately for his defense, 10 it is also true that the
requirement of a hearing is complied with as long as there was an opportunity to be heard, and not
necessarily that an actual hearing be conducted. 11 Petitioner had an opportunity to be heard as he
submitted a letter-reply to the charge. He, however, adduced no other evidence on his behalf. In fact, he
admitted his failure to submit cold call reports, praying that the same be not considered as gross
insubordination. As held by this Court in Bernardo vs. NLRC, 12 there is no necessity for a formal hearing
where an employee admits responsibility for an alleged misconduct. As to the written statement, "TO
HELL WITH COLD CALLS!," petitioner merely denied knowledge of the same. He failed to submit
controverting evidence thereon although the memorandum of February 19, 1993, clearly charged that he
had shown said statement to several sales personnel. Denials are weak forms of defenses, particularly
when they are not substantiated by clear and convincing evidence. Given the foregoing, we hold that
petitioner's constitutional right to due process has not been violated.
As regards the second issue, petitioner contends that he is entitled to amounts illegally deducted from his
commissions, to unpaid overtime, rest day and holiday premiums, to moral and exemplary damages, as
well as attorney's fees and costs.
Petitioner anchors his claim for illegal deductions of commissions on Cityland's formula for determining
commissions, viz:
COMMISSIONS = Credits Earned (CE) less CUMULATIVE NEGATIVE

(CN) less AMOUNTS RECEIVED (AR)
= (CE - CN) - AR where CE = Monthly Sales Volume x

Commission Rate (CR)

AR = Monthly Compensation/.75

CR = 4.5%
Under said formula, an increase in salary would entail an increase in AR, thus diminishing the amount of
commissions that petitioner would receive. Petitioner construes the same as violative of the non-
diminution of benefits clause embodied in the wage orders applicable to petitioner. Inasmuch as Cityland
has paid petitioner commissions based on a higher AR each time there has been a wage increase, the
difference between the original AR and the subsequent ARs have been viewed by petitioner as illegal
deductions, to wit:

Wage Order D a t e o f Amount of Corresponding Duration Up Total

Effectivity Increase Increase in To 2/26/93
Quota (AR)
RA 6640 1/1/88 P265.75 P 353.33 X 62 mos. P 2 1,906.46
RA 6727 7/1/89 780.75 1,040.00 X 44 mos. 45,760.00
NCR 01 11/1/90 785.75 1,046.67 X 28 mos. 29,306.76
NCR 01-A Grand Total P 96,973.22 13

Petitioner even goes as far as to claim that with the use of Cityland's formula, he is indebted to the
company in the amount of P1,410.00, illustrated as follows:
Petitioner' s Basic Salary = P 4,230.00
= 4,230.00/.75
A.R. = 5,640.00
Petitioner's Basic Salary — AR = P 1,410.00
While it is true that an increase in salary would cause an increase in AR, with the same being deducted
from credits earned, thus lessening his commissions, the fact remains that petitioner still receives his basic
salary without deductions. Petitioner's argument that he is indebted to respondent by P1,410.00 is
fallacious as his basic salary remains the same and he continues to receive the same, regardless of his
collections. The failure to attain a CE equivalent to the AR of P5,640.00 only means that the difference
would be credited to his CN for the next month. Clearly, the purpose of the same is to encourage sales
personnel to accelerate their sales in order for them to earn commissions.
Additionally, there is no law which requires employers to pay commissions, and when they do so, as
stated in the letter-opinion of the Department of Labor and Employment dated February 19, 1993, "there
is no law which prescribes a method for computing commissions. The determination of the amount of
commissions is the result of collective bargaining negotiations, individual employment contracts or
established employer practice." 14 Since the formula for the computation of commissions was presented to
and accepted by petitioner, such prescribed formula is in order. As to the allegation that said formula
diminishes the benefits being received by petitioner whenever there is a wage increase, it must be noted
that his commissions are not meant to be in a fixed amount. In fact, there was no assurance that he would
receive any commission at all. Non-diminution of benefits, as applied here, merely means that the
company may not remove the privilege of sales personnel to earn a commission, not that they are entitled
to a fixed amount thereof.
With respect to petitioner's claims for overtime pay, rest day pay and holiday premiums, Cityland
maintains that Saturday and Sunday call-ins were voluntary activities on the part of sales personnel who
wanted to realize more sales and thereby earn more commissions. It is their contention that sales
personnel were clamoring for the "privilege" to attend Saturday and Sunday call-ins, as well as to
entertain walk-in clients at project sites during weekends, that Cityland had to stagger the schedule of
sales employees to give everyone a chance to do so. But simultaneously, Cityland claims that the same
were optional because call-ins and walk-ins were not scheduled every weekend. If there really were a
clamor on the part of sales staff to "voluntarily" work on weekends, so much so that Cityland needed to
schedule them, how come no call-ins or walk-ins were scheduled on some weekends?
In addition to the above, the labor arbiter and the NLRC sanctioned respondent's practice of offsetting rest
day or holiday work with equivalent time on regular workdays on the ground that the same is authorized
by Department Order 21, Series of 1990. As correctly pointed out by petitioner, said D.O. was misapplied
in this case. The D.O. involves the shortening of the workweek from six days to five days but with
prolonged hours on those five days. Under this scheme, non-payment of overtime premiums was allowed
in exchange for longer weekends for employees. In the instant case, petitioner's workweek was never
compressed. Instead, he claims payment for work over and above his normal 5 1/2 days of work in a
week. Applying by analogy the principle that overtime cannot be offset by undertime, to allow off-setting
would prejudice the worker. He would be deprived of the additional pay for the rest day work he has
rendered and which is utilized to offset his equivalent time off on regular workdays. To allow Cityland to
do so would be to circumvent the law on payment of premiums for rest day and holiday work.
Notwithstanding the foregoing discussion, petitioner failed to show his entitlement to overtime and rest
day pay due, to the lack of sufficient evidence as to the number of days and hours when he rendered
overtime and rest day work. Entitlement to overtime pay must first be established by proof that said
overtime work was actually performed, before an employee may avail of said benefit. 15 To support his
allegations, petitioner submitted in evidence minutes of meetings wherein he was assigned to work on
weekends and holidays at Cityland's housing projects. Suffice it to say that said minutes do not prove that
petitioner actually worked on said dates. It is a basic rule in evidence that each party must prove his
affirmative allegations. 16 This petitioner failed to do. He explains his failure to submit more concrete
evidence as being due to the decision rendered by the labor arbiter without resolving his motion for the
production and inspection of documents in the control of Cityland. Petitioner conveniently forgets that on
January 27, 1994, he agreed to submit the case for decision based on the records available to the labor
arbiter. This amounted to an abandonment of above-said motion, which was then pending resolution.
Lastly, with the finding that petitioner's dismissal was for a just and valid cause, his claims for moral and
exemplary damages, as well as attorney's fees, must fail.
WHEREFORE, premises considered, the assailed Resolution is AFFIRMED and this petition is hereby
DISMISSED for lack of merit. Costs against petitioner. SO ORDERED.
Republic of the Philippines

SUPREME COURT

Manila
FIRST DIVISION
G.R. No. 167760 March 7, 2007
MANILA JOCKEY CLUB EMPLOYEES LABOR UNION-PTGWO, Petitioner, 

vs.

MANILA JOCKEY CLUB, INC., Respondent.
DECISION
GARCIA, J.:
Challenged in this petition for review under Rule 45 of the Rules of Court is the decision1 dated
December 17, 2004 of the Court of Appeals (CA), as reiterated in its resolution2 of April 4, 2005,
dismissing the petition for review of herein petitioner in CA-G.R. SP No. 69240, entitled Manila Jockey
Club Employees Labor Union- PTGWO v. Manila Jockey Club, Inc.
The facts:
Petitioner Manila Jockey Club Employees Labor Union-PTGWO and respondent Manila Jockey Club,
Inc., a corporation with a legislative franchise to conduct, operate and maintain horse races, entered into a
Collective Bargaining Agreement (CBA) effective January 1, 1996 to December 31, 2000. The CBA
governed the economic rights and obligations of respondent’s regular monthly paid rank-and-file
employees.3 In the CBA, the parties agreed to a 7-hour work schedule from 9:00 a.m. to 12:00 noon and
from 1:00 p.m. to 5:00 p.m. on a work week of Monday to Saturday, as contained under Section 1, Article
IV,4 of the same CBA, to wit:
Section 1. Both parties to this Agreement agree to observe the seven-hour work schedule herewith
scheduled to be from 9:00 a.m. to 12:00 noon and 1:00 p.m. to 5 p.m. on work week of Monday to
Saturday. All work performed in excess of seven (7) hours work schedule and on days not included within
the work week shall be considered overtime and paid as such. Except those monthly compensation which
includes work performed during Saturday, Sunday, and Holiday when races are held at the Club.
xxx xxx xxx
Accordingly, overtime on an ordinary working day shall be remunerated in an amount equivalent to the
worker's regular basic wage plus twenty five percent (25%) thereof. Where the employee is permitted or
suffered to work on legally mandated holidays or on his designated rest day which is not a legally
mandated holiday, thirty percent (30%) shall be added to his basic wage for a seven hour work; while
work rendered in excess of seven hours on legally mandated holidays and rest days not falling within the
aforestated categories day shall be additionally compensated for the overtime work equivalent to his rate
for the first seven hours on a legally mandated holiday or rest day plus thirty percent (30%) thereof.
The CBA likewise reserved in respondent certain management prerogatives, including the determination
of the work schedule, as provided under Section 2, Article XI:
Section 2. The COMPANY shall have exclusive control in the management of the offices and direction of
the employees. This shall include, but shall not be limited to, the right to plan, direct and control office
operations, to hire, assign and transfer employees from one job to another or from one department to
another; to promote, demote, discipline, suspend, discharge or terminate employees for proper cause and/
or in accordance with law, to relieve employees from duty because of lack of work or for other legitimate
reasons; or to introduce new or improved methods or facilities; or to change existing methods or facilities
to change the schedules of work; and to make and enforce rules and regulations to carry out the functions
of management, provided, however, that the COMPANY will not use these rights for the purpose of
discrimination against any employee because of his membership in the UNION. Provided, further, that the
prerogatives provided for under this Section shall be subject to, and in accordance with pertinent
directives, proclamations and their implementing rules and regulations.
On April 3, 1999, respondent issued an inter-office memorandum declaring that, effective April 20, 1999,
the hours of work of regular monthly-paid employees shall be from 1:00 p.m. to 8:00 p.m. when horse
races are held, that is, every Tuesday and Thursday. The memorandum, however, maintained the 9:00 a.m.
to 5:00 p.m. schedule for non-race days.
On October 12, 1999, petitioner and respondent entered into an Amended and Supplemental CBA
retaining Section 1 of Article IV and Section 2 of Article XI, supra, and clarified that any conflict arising
therefrom shall be referred to a voluntary arbitrator for resolution.
Subsequently, before a panel of voluntary arbitrators of the National Conciliation and Mediation Board
(NCMB), petitioner questioned the above office memorandum as violative of the prohibition against non-
diminution of wages and benefits guaranteed under Section 1, Article IV, of the CBA which specified the
work schedule of respondent's employees to be from 9:00 a.m. to 5:00 p.m. Petitioner claimed that as a
result of the memorandum, the employees are precluded from rendering their usual overtime work from
5:00 p.m. to 9:00 p.m.
The NCMB’s panel of voluntary arbitrators, in a decision dated October 18, 2001, upheld respondent's
prerogative to change the work schedule of regular monthly-paid employees under Section 2, Article XI,
of the CBA. Petitioner moved for reconsideration but the panel denied the motion.
Dissatisfied, petitioner then appealed the panel’s decision to the CA in CA-G.R. SP No. 69240. In the
herein assailed decision of December 17, 2004, the CA upheld that of the panel and denied petitioner’s
subsequent motion for reconsideration via its equally challenged resolution of April 4, 2005.
Hence, petitioner’s present recourse, raising the following issues:
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
RESPONDENT MJCI DID NOT RELINQUISH PART OF ITS MANAGEMENT PREROGATIVE
WHEN IT STIPULATED A WORK SCHEDULE IN THE CBA.
II
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
RESPONDENT MJCI DID NOT VIOLATE THE NON-DIMINUTION PROVISION CONTAINED IN
ARTICLE 100 OF THE LABOR CODE.
We DENY.
Respondent, as employer, cites the change in the program of horse races as reason for the adjustment of
the employees’ work schedule. It rationalizes that when the CBA was signed, the horse races started at
10:00 a.m. When the races were moved to 2:00 p.m., there was no other choice for management but to
change the employees' work schedule as there was no work to be done in the morning. Evidently, the
adjustment in the work schedule of the employees is justified.
We are not unmindful that every business enterprise endeavors to increase profits. As it is, the Court will
not interfere with the business judgment of an employer in the exercise of its prerogative to devise means
to improve its operation, provided that it does not violate the law, CBAs, and the general principles of
justice and fair play. We have thus held that management is free to regulate, according to its own
discretion and judgment, all aspects of employment, including hiring, work assignments, working
methods, time, place and manner of work, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, layoff of workers and discipline, dismissal, and
recall of workers.5
While it is true that Section 1, Article IV of the CBA provides for a 7-hour work schedule from 9:00 a.m.
to 12:00 noon and from 1:00 p.m. to 5:00 p.m. from Mondays to Saturdays, Section 2, Article XI,
however, expressly reserves on respondent the prerogative to change existing methods or facilities to
change the schedules of work. As aptly ruled by the CA:
x x x. Such exact language lends no other meaning but that while respondent may have allowed the initial
determination of the work schedule to be done through collective bargaining, it expressly retained the
prerogative to change it.
Moreover, it cannot be said that in agreeing to Section 1 of Article IV, respondent already waived that
customary prerogative of management to set the work schedule. Had that been the intention, Section 2 of
Article XI would not have made any reference at all to the retention by respondent of that prerogative.
The CBA would have instead expressly prohibited respondent from exercising it. x x x As it were,
however, the CBA expressly recognized in respondent the prerogative to change the work schedule. This
effectively rules out any notion of waiver on the part of respondent of its prerogative to change the work
schedule.
The same provision of the CBA also grants respondent the prerogative to relieve employees from duty
because of lack of work. Petitioner’s argument, therefore, that the change in work schedule violates
Article 100 of the Labor Code because it resulted in the diminution of the benefit enjoyed by regular
monthly-paid employees of rendering overtime work with pay, is untenable. Section 1, Article IV, of the
CBA does not guarantee overtime work for all the employees but merely provides that "all work
performed in excess of seven (7) hours work schedule and on days not included within the work week
shall be considered overtime and paid as such.".5
While it is true that Section 1, Article IV of the CBA provides for a 7-hour work schedule from 9:00 a.m.
to 12:00 noon and from 1:00 p.m. to 5:00 p.m. from Mondays to Saturdays, Section 2, Article XI,
however, expressly reserves on respondent the prerogative to change existing methods or facilities to
change the schedules of work. As aptly ruled by the CA:
x x x. Such exact language lends no other meaning but that while respondent may have allowed the initial
determination of the work schedule to be done through collective bargaining, it expressly retained the
prerogative to change it.
Moreover, it cannot be said that in agreeing to Section 1 of Article IV, respondent already waived that
customary prerogative of management to set the work schedule. Had that been the intention, Section 2 of
Article XI would not have made any reference at all to the retention by respondent of that prerogative.
The CBA would have instead expressly prohibited respondent from exercising it. x x x As it were,
however, the CBA expressly recognized in respondent the prerogative to change the work schedule. This
effectively rules out any notion of waiver on the part of respondent of its prerogative to change the work
schedule.
The same provision of the CBA also grants respondent the prerogative to relieve employees from duty
because of lack of work. Petitioner’s argument, therefore, that the change in work schedule violates
Article 100 of the Labor Code because it resulted in the diminution of the benefit enjoyed by regular
monthly-paid employees of rendering overtime work with pay, is untenable. Section 1, Article IV, of the
CBA does not guarantee overtime work for all the employees but merely provides that "all work
performed in excess of seven (7) hours work schedule and on days not included within the work week
shall be considered overtime and paid as such."
Respondent was not obliged to allow all its employees to render overtime work everyday for the whole
year, but only those employees whose services were needed after their regular working hours and only
upon the instructions of management. The overtime pay was not given to each employee consistently,
deliberately and unconditionally, but as a compensation for additional services rendered. Thus, overtime
pay does not fall within the definition of benefits under Article 100 of the Labor Code on prohibition
against elimination or diminution of benefits.
While the Constitution is committed to the policy of social justice and the protection of the working class,
it should not be presumed that every labor dispute will be automatically decided in favor of labor. The
partiality for labor has not in any way diminished our belief that justice in every case is for the deserving,
to be dispensed in the light of the established facts and the applicable law and doctrine.6
WHEREFORE, the instant petition is DENIED and the assailed decision and resolution of the CA are
AFFIRMED.
Costs against petitioner.
SO ORDERED.

Republic of the Philippines


SUPREME COURT

Manila
SECOND DIVISION
G.R. No. 172161 March 2, 2011
SLL INTERNATIONAL CABLES SPECIALIST and SONNY L. LAGON, Petitioners, 

vs.

NATIONAL LABOR RELATIONS COMMISSION, 4th DIVISION, ROLDAN LOPEZ,
EDGARDO ZUÑIGA and DANILO CAÑETE, Respondents.
DECISION
MENDOZA, J.:
Assailed in this petition for review on certiorari are the January 11, 2006 Decision1 and the March 31,
2006 Resolution2 of the Court of Appeals (CA), in CA-G.R. SP No. 00598 which affirmed with
modification the March 31, 2004 Decision3 and December 15, 2004 Resolution4 of the National Labor
Relations Commission (NLRC). The NLRC Decision found the petitioners, SLL International Cables
Specialist (SLL) and its manager, Sonny L. Lagon (petitioners), not liable for the illegal dismissal of
Roldan Lopez, Danilo Cañete and Edgardo Zuñiga (private respondents) but held them jointly and
severally liable for payment of certain monetary claims to said respondents.
A chronicle of the factual antecedents has been succinctly summarized by the CA as follows:
Sometime in 1996, and January 1997, private respondents Roldan Lopez (Lopez for brevity) and Danilo
Cañete (Cañete for brevity), and Edgardo Zuñiga (Zuñiga for brevity) respectively, were hired by
petitioner Lagon as apprentice or trainee cable/lineman. The three were paid the full minimum wage and
other benefits but since they were only trainees, they did not report for work regularly but came in as
substitutes to the regular workers or in undertakings that needed extra workers to expedite completion of
work. After their training, Zuñiga, Cañete and Lopez were engaged as project employees by the
petitioners in their Islacom project in Bohol. Private respondents started on March 15, 1997 until
December 1997. Upon the completion of their project, their employment was also terminated. Private
respondents received the amount of P145.00, the minimum prescribed daily wage for Region VII. In July
1997, the amount of P145 was increased to P150.00 by the Regional Wage Board (RWB) and in October
of the same year, the latter was increased to P155.00. Sometime in March 1998, Zuñiga and Cañete were
engaged again by Lagon as project employees for its PLDT Antipolo, Rizal project, which ended
sometime in (sic) the late September 1998. As a consequence, Zuñiga and Cañete’s employment was
terminated. For this project, Zuñiga and Cañete received only the wage of P145.00 daily. The minimum
prescribed wage for Rizal at that time was P160.00.
Sometime in late November 1998, private respondents re-applied in the Racitelcom project of Lagon in
Bulacan. Zuñiga and Cañete were re-employed. Lopez was also hired for the said specific project. For
this, private respondents received the wage of P145.00. Again, after the completion of their project in
March 1999, private respondents went home to Cebu City.
On May 21, 1999, private respondents for the 4th time worked with Lagon’s project in Camarin,
Caloocan City with Furukawa Corporation as the general contractor. Their contract would expire on
February 28, 2000, the period of completion of the project. From May 21, 1997-December 1999, private
respondents received the wage of P145.00. At this time, the minimum prescribed rate for Manila
was P198.00. In January to February 28, the three received the wage of P165.00. The existing rate at that
time was P213.00.
For reasons of delay on the delivery of imported materials from Furukawa Corporation, the Camarin
project was not completed on the scheduled date of completion. Face[d] with economic problem[s],
Lagon was constrained to cut down the overtime work of its worker[s][,] including private respondents.
Thus, when requested by private respondents on February 28, 2000 to work overtime, Lagon refused and
told private respondents that if they insist, they would have to go home at their own expense and that they
would not be given anymore time nor allowed to stay in the quarters. This prompted private respondents
to leave their work and went home to Cebu. On March 3, 2000, private respondents filed a complaint for
illegal dismissal, non-payment of wages, holiday pay, 13th month pay for 1997 and 1998 and service
incentive leave pay as well as damages and attorney’s fees.
In their answers, petitioners admit employment of private respondents but claimed that the latter were
only project employees[,] for their services were merely engaged for a specific project or undertaking and
the same were covered by contracts duly signed by private respondents. Petitioners further alleged that the
food allowance of P63.00 per day as well as private respondents allowance for lodging house,
transportation, electricity, water and snacks allowance should be added to their basic pay. With these,
petitioners claimed that private respondents received higher wage rate than that prescribed in Rizal and
Manila.
Lastly, petitioners alleged that since the workplaces of private respondents were all in Manila, the
complaint should be filed there. Thus, petitioners prayed for the dismissal of the complaint for lack of
jurisdiction and utter lack of merit. (Citations omitted.)
On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) rendered his decision5 declaring that his
office had jurisdiction to hear and decide the complaint filed by private respondents. Referring to Rule IV,
Sec. 1 (a) of the NLRC Rules of Procedure prevailing at that time,6 the LA ruled that it had jurisdiction
because the "workplace," as defined in the said rule, included the place where the employee was supposed
to report back after a temporary detail, assignment or travel, which in this case was Cebu.
As to the status of their employment, the LA opined that private respondents were regular employees
because they were repeatedly hired by petitioners and they performed activities which were usual,
necessary and desirable in the business or trade of the employer.
With regard to the underpayment of wages, the LA found that private respondents were underpaid. It
ruled that the free board and lodging, electricity, water, and food enjoyed by them could not be included
in the computation of their wages because these were given without their written consent.
The LA, however, found that petitioners were not liable for illegal dismissal. The LA viewed private
respondents’ act of going home as an act of indifference when petitioners decided to prohibit overtime
work.7
In its March 31, 2004 Decision, the NLRC affirmed the findings of the LA. In addition, the NLRC noted
that not a single report of project completion was filed with the nearest Public Employment Office as
required 

by the Department of Labor and Employment (DOLE) Department Order No. 19, Series of 1993.8 The
NLRC later denied9 the motion for reconsideration10 subsequently filed by petitioners.
When the matter was elevated to the CA on a petition for certiorari, it affirmed the findings that the
private respondents were regular employees. It considered the fact that they performed functions which
were the regular and usual business of petitioners. According to the CA, they were clearly members of a
work pool from which petitioners drew their project employees.
The CA also stated that the failure of petitioners to comply with the simple but compulsory requirement to
submit a report of termination to the nearest Public Employment Office every time private respondents’
employment was terminated was proof that the latter were not project employees but regular employees.
The CA likewise found that the private respondents were underpaid. It ruled that the board and lodging,
electricity, water, and food enjoyed by the private respondents could not be included in the computation
of their wages because these were given without their written consent. The CA added that the private
respondents were entitled to 13th month pay.
The CA also agreed with the NLRC that there was no illegal dismissal. The CA opined that it was the
petitioners’ prerogative to grant or deny any request for overtime work and that the private respondents’
act of leaving the workplace after their request was denied was an act of abandonment.
In modifying the decision of the labor tribunal, however, the CA noted that respondent Roldan Lopez did
not work in the Antipolo project and, thus, was not entitled to wage differentials. Also, in computing the
differentials for the period January and February 2000, the CA disagreed in the award of differentials
based on the minimum daily wage of P223.00, as the prevailing minimum daily wage then was
only P213.00. Petitioners sought reconsideration but the CA denied it in its March 31, 2006 Resolution.11
In this petition for review on certiorari,12 petitioners seek the reversal and setting aside of the CA decision
anchored on this lone:
GROUND/ASSIGNMENT OF ERROR
THE PUBLIC RESPONDENT NLRC COMMITTED A SERIOUS ERROR IN LAW IN AWARDING
WAGE DIFFERENTIALS TO THE PRIVATE COMPLAINANTS ON THE BASES OF MERE
TECHNICALITIES, THAT IS, FOR LACK OF WRITTEN CONFORMITY x x x AND LACK OF
NOTICE TO THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE)[,] AND THUS, THE
COURT OF APPEALS GRAVELY ERRED IN AFFIRMING WITH MODIFICATION THE NLRC
DECISION IN THE LIGHT OF THE RULING IN THE CASE OF JENNY M. AGABON and VIRGILIO
AGABON vs, NLRC, ET AL., GR NO. 158963, NOVEMBER 17, 2004, 442 SCRA 573, [AND
S U B S E Q U E N T LY I N T H E C A S E O F G L A X O W E L L C O M E P H I L I P P I N E S , I N C .
VS. NAGAKAKAISANG EMPLEYADO NG WELLCOME-DFA (NEW –DFA), ET AL., GR NO.
149349, 11 MARCH 2005], WHICH FINDS APPLICATION IN THE INSTANT CASE BY ANALOGY.
13

Petitioners reiterated their position that the value of the facilities that the private respondents enjoyed
should be included in the computation of the "wages" received by them. They argued that the rulings in
Agabon v. NLRC14and Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado Ng Wellcome-
DFA15 should be applied by analogy, in the sense that the lack of written acceptance of the employees of
the facilities enjoyed by them should not mean that the value of the facilities could not be included in the
computation of the private respondents’ "wages."
On November 29, 2006, the Court resolved to issue a Temporary Restraining Order (TRO) enjoining the
public respondent from enforcing the NLRC and CA decisions until further orders from the Court.
After a thorough review of the records, however, the Court finds no merit in the petition.
This petition generally involves factual issues, such as, whether or not there is evidence on record to
support the findings of the LA, the NLRC and the CA that private respondents were project or regular
employees and that their salary differentials had been paid. This calls for a re-examination of the
evidence, which the Court cannot entertain. Settled is the rule that factual findings of labor officials, who
are deemed to have acquired expertise in matters within their respective jurisdiction, are generally
accorded not only respect but even finality, and bind the Court when supported by substantial evidence. It
is not the Court’s function to assess and evaluate the evidence
all over again, particularly where the findings of both the Labor tribunals and the CA concur. 16
As a general rule, on payment of wages, a party who alleges payment as a defense has the burden of
proving it.17 Specifically with respect to labor cases, the burden of proving payment of monetary claims
rests on the employer, the rationale being that the pertinent personnel files, payrolls, records, remittances
and other similar documents — which will show that overtime, differentials, service incentive leave and
other claims of workers have been paid — are not in the possession of the worker but in the custody and
absolute control of the employer.18
In this case, petitioners, aside from bare allegations that private respondents received wages higher than
the prescribed minimum, failed to present any evidence, such as payroll or payslips, to support their
defense of payment. Thus, petitioners utterly failed to discharge the onus probandi.
Private respondents, on the other hand, are entitled to be paid the minimum wage, whether they are
regular or non-regular employees.
Section 3, Rule VII of the Rules to Implement the Labor Code19 specifically enumerates those who are
not covered by the payment of minimum wage. Project employees are not among them.
On whether the value of the facilities should be included in the computation of the "wages" received by
private respondents, Section 1 of DOLE Memorandum Circular No. 2 provides that an employer may
provide subsidized meals and snacks to his employees provided that the subsidy shall not be less that 30%
of the fair and reasonable value of such facilities. In such cases, the employer may deduct from the wages
of the employees not more than 70% of the value of the meals and snacks enjoyed by the latter, provided
that such deduction is with the written authorization of the employees concerned.
Moreover, before the value of facilities can 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.20 Mere availment is not sufficient to
allow deductions from employees’ wages.21
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.
The Court, at this point, makes a distinction between "facilities" and "supplements." It is of the view that
the food and lodging, or the electricity and water allegedly consumed by private respondents in this case
were not facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co.,22 the two
terms were distinguished from one another in this wise:
"Supplements," therefore, constitute extra remuneration or special privileges or benefits given to or
received by the laborers 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.23 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.1avvphi1
For said reason, the cases of Agabon and Glaxo are inapplicable in this case. At any rate, these were cases
of dismissal with just and authorized causes. The present case involves the matter of the failure of the
petitioners to comply with the payment of the prescribed minimum wage.
The Court sustains the deletion of the award of differentials with respect to respondent Roldan Lopez. As
correctly pointed out by the CA, he did not work for the project in Antipolo.
WHEREFORE, the petition is DENIED. The temporary restraining order issued by the Court on
November 29, 2006 is deemed, as it is hereby ordered, DISSOLVED.
SO ORDERED.
 Republic of the Philippines

SUPREME COURT

Manila
FIRST DIVISION
G.R. No. 107994 August 14, 1995
PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKERS UNION
(PACIWU)-TUCP, petitioner, 

vs.

NATIONAL LABOR RELATIONS COMMISSION AND VALLACAR TRANSIT,
INC., respondents.
KAPUNAN, J.:
This is a petition for certiorari seeking to reverse the decision of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-0159-92 which dismissed the appeal of petitioner union and
in effect, affirmed the decision of the Labor Arbiter ordering the dismissal of the complaint of petitioner
for payment of 13th month pay to the drivers and conductors of respondent company.
Petitioner Philippine Agricultural Commercial and Agricultural Workers Union — TUCP is the exclusive
bargaining agent of the rank and file employees of respondent Vallacar Transit, Inc. Petitioner union
instituted a complaint with NLRC Regional Arbitration Branch No. VI, Bacolod City, for payment of 13th
month pay in behalf of the drivers and conductors of respondent company's Visayan operation on the
ground that although said drivers and conductors are compensated on a "purely commission" basis as
described in their Collective Bargaining Agreement (CBA), they are automatically entitled to the basic
minimum pay mandated by law should said commission be less than their basic minimum for eight (8)
hours work. 1
In its position paper, respondent Vallacar Transit, Inc. contended that since said drivers and conductors are
compensated on a purely commission basis, they are not entitled to 13th month pay pursuant to the
exempting provisions enumerated in paragraph 2 of the Revised Guidelines on the Implementation of the
Thirteenth Month Pay Law. 2 It further contended that Section 2 of Article XIV of the Collective
Bargaining Agreement (CBA) concluded on October 17, 1988 expressly provided that "drivers and
conductors paid on a purely commission are not legally entitled to 13th month pay." Said CBA, being the
law between the parties, must be respected, respondent opined.
On May 22, 1992, Labor Arbiter Reynaldo Gulmatico rendered a decision dismissing the complaint. 3
The appeal of the petitioner to the National Labor Relations Commission was likewise dismissed 4 so was
the motion for reconsideration of the said decision. 5
Hence, the present petition.
The principal issue posed for consideration is whether or not the bus drivers and conductors of respondent
Vallacar Transit, Inc. are entitled to 13th month pay.
We rule in the affirmative.
It may be recalled that on December 16, 1975, P.D. 851, otherwise known as the "13th Month Pay" Law,
was promulgated. The same prescribed payment of 13th month pay in the following terms:
Sec. 1. All employers are hereby required to pay all their employees receiving a basic salary of
not more than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay
not later than December 24 of every year.
Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not
covered by this Decree.
The Rules and Regulations Implementing P.D. No. 851, issued by the then Secretary of Labor and
Employment on December 22, 1975, defined the following basic terms:
xxx xxx xxx
(a) 13th month pay shall mean one-twelfth (1/12) of the basic salary of an employee within a
calendar year;
(b) basic salary shall include all remunerations or earnings paid by an employer to an employer
for services rendered, but may not include cost of living allowances granted pursuant to
Presidential Decree No. 525 or Letter of Instructions No. 174, profitsharing 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.
xxx xxx xxx
On August 13, 1986, President Corazon C. Aquino, exercising both executive and legislative authority,
issued Memorandum Order No. 28 which provided as follows:
xxx xxx xxx
Sec.1. of Presidential Decree No. 851 is hereby modified to the extent that all employers are
hereby required to pay all their rank-and-file employees a 13th month pay not later than
December 24 of every year.
xxx xxx xxx
In connection with and in implementation of Memorandum Order No. 28, the then Minister of Labor and
Employment issued MOLE Explanatory Bulletin No. 86-12 on November 24, 1986. Item No. 5 (a) of the
said issuance read:
xxx xxx xxx
 Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the
mandated 13th month pay, based on their total earning(s) during the calendar year, i.e., on both
their fixed and guaranteed wage and commission.
xxx xxx xxx
(emphasis ours)
From the foregoing legal milieu, it is clear that every employee receiving a commission in addition to a
fixed or guaranteed wage or salary, is entitled to a 13th month pay. For purposes of entitling rank and file
employees a 13th month pay, it is immaterial whether the employees concerned are paid a guaranteed
wage plus commission or a commission with guaranteed wage inasmuch as the botton line is that they
receive a guaranteed wage. This is correctly construed in the MOLE Explanatory Bulletin No. 86-12.
In the case at bench, while the bus drivers and conductors of respondent company are considered by the
latter as being compensated on a commission basis, they are not paid purely by what they receive as
commission. As admitted by respondent company, the said bus drivers and conductors are automatically
entitled to the basic minimum pay mandated by law in case the commissions they earned be less than their
basic minimum for eight (8) hours work. 6 Evidently therefore, the commissions form part of the wage or
salary of the bus drivers and conductors. A contrary interpretation would allow an employer to skirt the
law and would result in an absurd situation where an employee who receives a guaranteed minimum basic
pay cannot be entitled to a 13th month pay simply because he is technically referred to by his employer
per the CBA as an employee compensated on a purely commission basis. Such would be a narrow
interpretation of the law, certainly not in accord with the liberal spirit of our labor laws. Moreover, what is
controlling is not the label attached to the remuneration that the employee receives but the nature of the
remuneration 7 and the purpose for which the 13th month pay was given to alleviate the plight of the
working masses who are receiving low wages. This is extant from the "WHEREASES" of PD 851, to wit:
WHEREAS, it is necessary to further protect the level of real wages from the ravage of world-
wide inflation.
WHEREAS, there has been no increase in the legal minimum wage since 1970.
WHEREAS, the Christmas season is an opportune time for society to show its concern for the
plight of the working masses so they may properly celebrate Christmas and New Year.
Misplaced legal hermeneutics cannot be countenanced to evade paying the rank and file what is due to
them under the law.
Commission is the recompense, compensation, reward of an employee, 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 of the principal. 8 While said commissions may be in the form of incentives or
encouragement to inspire said bus drivers and conductors to put a little more zeal and industry on their
jobs, still, it is safe to say that the same are direct remunerations for services rendered, given the small
remuneration they receive for the services they render, 9 which is precisely the reason why private
respondent allowed the drivers and conductors a guaranteed minimum wage. The conclusion is
ineluctable that said commissions are part of their salary. In Philippine Duplicators, Inc. v. National
Labor Relations Commission, 10 we had the occasion to estate that:
. . . Article 97 (f) of the Labor Code defines the term "wage" (which is equivalent to "salary," as
used in P.D. No. 851 and Memorandum Order No. 28) in the following terms:
(f) "Wage" paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in term of money, 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 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.
In the instant case, there is no question that the sales commissions earned by salesmen who make
or close a sale of duplicating machines distributed by petitioner corporation, constitute part of the
compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the
"wage" or "salary" of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a
small fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being
composed of the sales or incentive commissions earned on actual sales closed by them. No doubt
this particular salary structure was intended for the benefit of petitioner corporation, on the
apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence
and close more sales in the expectation of increasing their sales commissions. This, however,
does not detract from the character of such commissions as part of the salary or wage paid to each
or its salesmen for rendering services to petitioner corporation. 11
In sum, the 13th month pay of the bus drivers and conductors who are paid a fixed or guaranteed
minimum wage in case their commissions be less than the statutory minimum, and commissions only in
case where the same is over and above the statutory minimum, must be equivalent to one-twelfth (1/12) of
their total earnings during the calendar year.
WHEREFORE, the petition is hereby GRANTED. The decision of respondent National Labor Relations
Commission is hereby REVERSED and SET ASIDE. The case is remanded to the labor Arbiter for the
proper computation of 13th month pay.
SO ORDERED.
 Republic of the Philippines

SUPREME COURT

Manila
FIRST DIVISION
G.R. No. 145561 June 15, 2005
HONDA PHILS., INC., petitioner, 

vs.

SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review under Rule 45 seeks the reversal of the Court of Appeals’ decision1 dated
September 14, 20002 and its resolution3 dated October 18, 2000, in CA-G.R. SP No. 59052. The appellate
court affirmed the decision dated May 2, 2000 rendered by the Voluntary Arbitrator who ruled that
petitioner Honda Philippines, Inc.’s (Honda) pro-rated payment of the 13th and 14th month pay and
financial assistance to its employees was invalid.
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 re-negotiations 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 Department of Labor and Employment (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, 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 National Labor Relations Commission (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 memorandum4 announcing its new
computation of the 13th and 14th month pay to be granted to all its employees whereby the thirty-one
(31)-day long strike shall be considered unworked days for purposes of computing said benefits. As per
the company’s 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 pro-rated 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, 2000,5 the BWC agreed with the pro-rata 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. In his decision6 dated
May 2, 2000, Voluntary Arbitrator Herminigildo C. Javen invalidated Honda’s computation, to wit:
WHEREFORE, in view of all foregoing premises being duly considered and evaluated, it is hereby ruled
that the Company’s implementation of pro-rated 13th Month pay, 14th Month pay and Financial
Assistance [is] invalid. The Company is thus ordered to compute each provision in full month basic pay
and pay the amounts in question within ten (10) days after this Decision shall have become final and
executory.
The three (3) days Suspension of the twenty one (21) employees is hereby affirmed.
SO ORDERED.7
Honda’s Motion for Partial Reconsideration was denied in a resolution dated May 22, 2000. Thus, a
petition was filed with the Court of Appeals, however, the petition was dismissed for lack of merit.
Hence, the instant petition for review on the sole issue of whether the pro-rated computation of the 13th
month pay and the other bonuses in question is valid and lawful.
The petition lacks merit.
A collective bargaining agreement refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit.8 As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary
to law, morals, good customs, public order or public policy.9 Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by the
express policy of the law.10
In some instances, however, the provisions of a CBA may become contentious, as in this case. Honda
wanted to implement a pro-rated computation of the benefits based on the "no work, no pay" rule.
According to the company, the phrase "present practice" as mentioned in the CBA refers to the manner
and requisites with respect to the payment of the bonuses, i.e., 50% to be given in May and the other 50%
in December of each year. Respondent union, however, insists that the CBA provisions relating to the
implementation of the 13th month pay necessarily relate to the computation of the same.
We agree with the findings of the arbitrator that the assailed CBA provisions are far from being
unequivocal. A cursory reading of the provisions will show that they did not state categorically whether
the computation of the 13th month pay, 14th month pay and the financial assistance would be based on
one full month’s basic salary of the employees, or pro-rated based on the compensation actually received.
The arbitrator thus properly resolved the ambiguity in favor of labor as mandated by Article 1702 of the
Civil Code.11 The Court of Appeals affirmed the arbitrator’s 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.
We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings of labor officials, who
are deemed to have acquired expertise in matters within their respective jurisdiction, are generally
accorded not only respect but even finality, and bind us when supported by substantial evidence. It is not
our function to assess and evaluate the evidence all over again, particularly where the findings of both the
arbiter and the Court of Appeals coincide.12
Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, which required all employers
to pay their employees a 13th month pay, was issued to protect the level of real wages from the ravages of
worldwide inflation. It was enacted on December 16, 1975 after it was noted that there had been no
increase in the minimum wage since 1970 and the Christmas season was an opportune time for society to
show its concern for the plight of the working masses so that they may properly celebrate Christmas and
New Year.13
Under the Revised Guidelines on the Implementation of the 13th month pay issued on November 16, 1987,
the salary ceiling of P1,000.00 under P.D. No. 851 was removed. It further provided 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. 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
allowances and monetary benefits which are not considered or integrated as part of the regular or basic
salary, such as the cash equivalent of unused vacation and sick leave credits, overtime premium, night
differential and holiday pay, and cost-of-living allowances.14 (Emphasis supplied)
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.15 In Hagonoy Rural Bank v. NLRC,16 St. Michael
Academy v. NLRC,17 Consolidated Food Corporation v. NLRC,18 and similar cases, the 13th month pay
due an employee was computed based on the employee’s 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 pro-ration 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.19 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 pro-rated but should be given in full.20 (Emphasis supplied)
More importantly, it has not been refuted that Honda has not implemented any pro-rating 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 pro-rating or that
these were dependent upon the company’s financial standing. As held by the Voluntary Arbitrator:
The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to adopt a pro-
rata computation, aside [from] being in [a] state of rehabilitation due to 227M substantial losses in 1997,
114M in 1998 and 215M lost of sales in 1999 due to strike. This is an implicit acceptance that prior to the
strike, a full month basic pay computation was the "present practice" intended to be maintained in the
CBA.21
The memorandum dated November 22, 1999 which Honda issued shows that it was the first time a pro-
rating scheme was to be implemented in the company. It was a convenient coincidence for the company
that the work stoppage held by the employees lasted for thirty-one (31) days or exactly one month. This
enabled them to devise a formula using 11/12 of the total annual salary as base amount for computation
instead of the entire amount for a 12-month period.
That a full month payment of the 13th month pay is the established practice at Honda is further bolstered
by the affidavits executed by Feliteo Bautista and Edgardo Cruzada. Both attested that when they were
absent from work due to motorcycle accidents, and after they have exhausted all their leave credits and
were no longer receiving their monthly salary from Honda, they still received the full amount of their
13th month, 14th month and financial assistance pay.22
The case of Davao Fruits Corporation v. Associated Labor Unions, et al.23 presented an example of a
voluntary act of the employer that has ripened into a company practice. In that case, the employer, from
1975 to 1981, freely and continuously included in the computation of the 13th month pay those items that
were expressly excluded by the law. We have held that this act, which was favorable to the employees
though not conforming to law, has ripened into a practice and therefore can no longer be withdrawn,
reduced, diminished, discontinued or eliminated. Furthermore, in Sevilla Trading Company v. Semana,
24 we stated:

With regard to the length of time the company practice should have been exercised to constitute voluntary
employer practice which cannot be unilaterally withdrawn by the employer, we hold that jurisprudence
has not laid down any rule requiring a specific minimum number of years. In the above quoted case
of Davao Fruits Corporation vs. Associated Labor Unions, the company practice lasted for six (6) years.
In another case, Davao Integrated Port Stevedoring Services vs. Abarquez, the employer, for three (3)
years and nine (9) months, approved the commutation to cash of the unenjoyed portion of the sick leave
with pay benefits of its intermittent workers. While in Tiangco vs. Leogardo, Jr. the employer carried on
the practice of giving a fixed monthly emergency allowance from November 1976 to February 1980, or
three (3) years and four (4) months. In all these cases, this Court held that the grant of these benefits
has ripened into company practice or policy which cannot be peremptorily withdrawn. In the case at
bar, petitioner Sevilla Trading kept the practice of including non-basic benefits such as paid leaves for
unused sick leave and vacation leave in the computation of their 13th-month pay for at least two (2)
years. This, we rule likewise constitutes voluntary employer practice which cannot be unilaterally
withdrawn by the employer without violating Art. 100 of the Labor Code.25 (Emphasis supplied)
Lastly, the foregoing interpretation of law and jurisprudence is more in keeping with the underlying
principle for the grant of this benefit. It is primarily given to alleviate the plight of workers and to help
them cope with the exorbitant increases in the cost of living. To allow the pro-ration of the 13th month pay
in this case is to undermine the wisdom behind the law and the mandate that the workingman’s welfare
should be the primordial and paramount consideration.26 What is more, the factual milieu of this case is
such that to rule otherwise inevitably results to dissuasion, if not a deterrent, for workers from the free
exercise of their constitutional rights to self-organization and to strike in accordance with law.27
WHEREFORE, the instant petition is DENIED. The decision and the resolution of the Court of Appeals
dated September 14, 2000 and October 18, 2000, respectively, in CA-G.R. SP No. 59052, affirming the
decision rendered by the Voluntary Arbitrator on May 2, 2000, are hereby AFFIRMED in toto. SO
ORDERED.
Republic of the Philippines

SUPREME COURT

Manila
SECOND DIVISION
G.R. No. 166208 June 29, 2007
KING OF KINGS TRANSPORT INC., CLAIRE DELA FUENTE and MELISSA LIM, petitioners, 

vs.

SANTIAGO O. MAMAC, respondent.
DECISION
VELASCO, JR., J.:
Is a verbal appraisal of the charges against the employee a breach of the procedural due process? This is
the main issue to be resolved in this plea for review under Rule 45 of the September 16, 2004
Decision1 of the Court of Appeals (CA) in CA-GR SP No. 81961. Said judgment affirmed the dismissal of
bus conductor Santiago O. Mamac from petitioner King of Kings Transport, Inc. (KKTI), but ordered the
bus company to pay full backwages for violation of the twin-notice requirement and 13th-month pay.
Likewise assailed is the December 2, 2004 CA Resolution2 rejecting KKTI’s Motion for Reconsideration.
The Facts
Petitioner KKTI is a corporation engaged in public transportation and managed by Claire Dela Fuente and
Melissa Lim.
Respondent Mamac was hired as bus conductor of Don Mariano Transit Corporation (DMTC) on April
29, 1999. The DMTC employees including respondent formed the Damayan ng mga Manggagawa,
Tsuper at Conductor-Transport Workers Union and registered it with the Department of Labor and
Employment. Pending the holding of a certification election in DMTC, petitioner KKTI was incorporated
with the Securities and Exchange Commission which acquired new buses. Many DMTC employees were
subsequently transferred to KKTI and excluded from the election.
The KKTI employees later organized the Kaisahan ng mga Kawani sa King of Kings (KKKK) which was
registered with DOLE. Respondent was elected KKKK president.
Respondent was required to accomplish a "Conductor’s Trip Report" and submit it to the company after
each trip. As a background, this report indicates the ticket opening and closing for the particular day of
duty. After submission, the company audits the reports. Once an irregularity is discovered, the company
issues an "Irregularity Report" against the employee, indicating the nature and details of the irregularity.
Thereafter, the concerned employee is asked to explain the incident by making a written statement or
counter-affidavit at the back of the same Irregularity Report. After considering the explanation of the
employee, the company then makes a determination of whether to accept the explanation or impose upon
the employee a penalty for committing an infraction. That decision shall be stated on said Irregularity
Report and will be furnished to the employee.
Upon audit of the October 28, 2001 Conductor’s Report of respondent, KKTI noted an irregularity. It
discovered that respondent declared several sold tickets as returned tickets causing KKTI to lose an
income of eight hundred and ninety pesos. While no irregularity report was prepared on the October 28,
2001 incident, KKTI nevertheless asked respondent to explain the discrepancy. In his letter,3 respondent
said that the erroneous declaration in his October 28, 2001 Trip Report was unintentional. He explained
that during that day’s trip, the windshield of the bus assigned to them was smashed; and they had to cut
short the trip in order to immediately report the matter to the police. As a result of the incident, he got
confused in making the trip report.
On November 26, 2001, respondent received a letter4 terminating his employment effective November 29,
2001. The dismissal letter alleged that the October 28, 2001 irregularity was an act of fraud against the
company. KKTI also cited as basis for respondent’s dismissal the other offenses he allegedly committed
since 1999.
On December 11, 2001, respondent filed a Complaint for illegal dismissal, illegal deductions,
nonpayment of 13th-month pay, service incentive leave, and separation pay. He denied committing any
infraction and alleged that his dismissal was intended to bust union activities. Moreover, he claimed that
his dismissal was effected without due process.
In its April 3, 2002 Position Paper,5 KKTI contended that respondent was legally dismissed after his
commission of a series of misconducts and misdeeds. It claimed that respondent had violated the trust and
confidence reposed upon him by KKTI. Also, it averred that it had observed due process in dismissing
respondent and maintained that respondent was not entitled to his money claims such as service incentive
leave and 13th-month pay because he was paid on commission or percentage basis.
On September 16, 2002, Labor Arbiter Ramon Valentin C. Reyes rendered judgment dismissing
respondent’s Complaint for lack of merit.6
Aggrieved, respondent appealed to the National Labor Relations Commission (NLRC). On August 29,
2003, the NLRC rendered a Decision, the dispositive portion of which reads:
WHEREFORE, the decision dated 16 September 2002 is MODIFIED in that respondent King of Kings
Transport Inc. is hereby ordered to indemnify complainant in the amount of ten thousand pesos (P10,000)
for failure to comply with due process prior to termination.
The other findings are AFFIRMED.
SO ORDERED.7
Respondent moved for reconsideration but it was denied through the November 14, 2003 Resolution8 of
the NLRC.
Thereafter, respondent filed a Petition for Certiorari before the CA urging the nullification of the NLRC
Decision and Resolution.
The Ruling of the Court of Appeals
Affirming the NLRC, the CA held that there was just cause for respondent’s dismissal. It ruled that
respondent’s act in "declaring sold tickets as returned tickets x x x constituted fraud or acts of dishonesty
justifying his dismissal."9
Also, the appellate court sustained the finding that petitioners failed to comply with the required
procedural due process prior to respondent’s termination. However, following the doctrine in Serrano v.
NLRC,10 it modified the award of PhP 10,000 as indemnification by awarding full backwages from the
time respondent’s employment was terminated until finality of the decision.
Moreover, the CA held that respondent is entitled to the 13th-month pay benefit.
Hence, we have this petition.
The Issues
Petitioner raises the following assignment of errors for our consideration:
Whether the Honorable Court of Appeals erred in awarding in favor of the complainant/private
respondent, full back wages, despite the denial of his petition for certiorari.
Whether the Honorable Court of Appeals erred in ruling that KKTI did not comply with the requirements
of procedural due process before dismissing the services of the complainant/private respondent.
Whether the Honorable Court of Appeals rendered an incorrect decision in that [sic] it awarded in favor of
the complaint/private respondent, 13th month pay benefits contrary to PD 851.11
The Court’s Ruling
The petition is partly meritorious.
The disposition of the first assigned error depends on whether petitioner KKTI complied with the due
process requirements in terminating respondent’s employment; thus, it shall be discussed secondly.
Non-compliance with the Due Process Requirements
Due process under the Labor Code involves two aspects: first, substantive––the valid and authorized
causes of termination of employment under the Labor Code; and second, procedural––the manner of
dismissal.12 In the present case, the CA affirmed the findings of the labor arbiter and the NLRC that the
termination of employment of respondent was based on a "just cause." This ruling is not at issue in this
case. The question to be determined is whether the procedural requirements were complied with.
Art. 277 of the Labor Code provides the manner of termination of employment, thus:
Art. 277. Miscellaneous Provisions.––x x x
(b) Subject to the constitutional right of workers to security of tenure and their right to be protected
against dismissal except for a just and authorized cause without prejudice to the requirement of notice
under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be
terminated a written notice containing a statement of the causes for termination and shall afford the latter
ample opportunity to be heard and to defend himself with the assistance of his representative if he so
desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the
Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to
the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the
regional branch of the National Labor Relations Commission. The burden of proving that the termination
was for a valid or authorized cause shall rest on the employer.
Accordingly, the implementing rule of the aforesaid provision states:
SEC. 2. Standards of due process; requirements of notice.––In all cases of termination of employment, the
following standards of due process shall be substantially observed:
I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination, and giving
said employee reasonable opportunity within which to explain his side.
(b) A hearing or conference during which the employee concerned, with the assistance of counsel if he so
desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence presented
against him.
(c) A written notice of termination served on the employee, indicating that upon due consideration of all
the circumstances, grounds have been established to justify his termination. 13
In case of termination, the foregoing notices shall be served on the employee’s last known address.14
To clarify, the following should be considered in terminating the services of employees:
(1) The first written notice to be served on the employees should contain the specific causes or grounds
for termination against them, and a directive that the employees are given the opportunity to submit their
written explanation within a reasonable period. "Reasonable opportunity" under the Omnibus Rules
means every kind of assistance that management must accord to the employees to enable them to prepare
adequately for their defense.15 This should be construed as a period of at least five (5) calendar days from
receipt of the notice to give the employees an opportunity to study the accusation against them, consult a
union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as
basis for the charge against the employees. A general description of the charge will not suffice. Lastly, the
notice should specifically mention which company rules, if any, are violated and/or which among the
grounds under Art. 282 is being charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct a hearing or conference
wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the
charge against them; (2) present evidence in support of their defenses; and (3) rebut the evidence
presented against them by the management. During the hearing or conference, the employees are given
the chance to defend themselves personally, with the assistance of a representative or counsel of their
choice. Moreover, this conference or hearing could be used by the parties as an opportunity to come to an
amicable settlement.
(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the charge
against the employees have been considered; and (2) grounds have been established to justify the
severance of their employment.
In the instant case, KKTI admits that it had failed to provide respondent with a "charge sheet."16 However,
it maintains that it had substantially complied with the rules, claiming that "respondent would not have
issued a written explanation had he not been informed of the charges against him."17
We are not convinced.
First, respondent was not issued a written notice charging him of committing an infraction. The law is
clear on the matter. A verbal appraisal of the charges against an employee does not comply with the first
notice requirement. In Pepsi Cola Bottling Co. v. NLRC,18 the Court held that consultations or
conferences are not a substitute for the actual observance of notice and hearing. Also, in Loadstar
Shipping Co., Inc. v. Mesano,19 the Court, sanctioning the employer for disregarding the due process
requirements, held that the employee’s written explanation did not excuse the fact that there was a
complete absence of the first notice.
Second, even assuming that petitioner KKTI was able to furnish respondent an Irregularity Report
notifying him of his offense, such would not comply with the requirements of the law. We observe from
the irregularity reports against respondent for his other offenses that such contained merely a general
description of the charges against him. The reports did not even state a company rule or policy that the
employee had allegedly violated. Likewise, there is no mention of any of the grounds for termination of
employment under Art. 282 of the Labor Code. Thus, KKTI’s "standard" charge sheet is not sufficient
notice to the employee.
Third, no hearing was conducted. Regardless of respondent’s written explanation, a hearing was still
necessary in order for him to clarify and present evidence in support of his defense. Moreover, respondent
made the letter merely to explain the circumstances relating to the irregularity in his October 28, 2001
Conductor’s Trip Report. He was unaware that a dismissal proceeding was already being effected. Thus,
he was surprised to receive the November 26, 2001 termination letter indicating as grounds, not only his
October 28, 2001 infraction, but also his previous infractions.
Sanction for Non-compliance with Due Process Requirements
As stated earlier, after a finding that petitioners failed to comply with the due process requirements, the
CA awarded full backwages in favor of respondent in accordance with the doctrine in Serrano v. NLRC.
20 However, the doctrine in Serrano had already been abandoned in Agabon v. NLRC by ruling that if the

dismissal is done without due process, the employer should indemnify the employee with nominal
damages.21
Thus, for non-compliance with the due process requirements in the termination of respondent’s
employment, petitioner KKTI is sanctioned to pay respondent the amount of thirty thousand pesos (PhP
30,000) as damages.
Thirteenth (13th)-Month Pay
Section 3 of the Rules Implementing Presidential Decree No. 85122 provides the exceptions in the
coverage of the payment of the 13th-month benefit. The provision states:
SEC. 3. Employers covered.––The Decree shall apply to all employers except to:
xxxx
e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in which case the employer shall be
covered by this issuance insofar as such workers are concerned.
Petitioner KKTI maintains that respondent was paid on purely commission basis; thus, the latter is not
entitled to receive the 13th-month pay benefit. However, applying the ruling in Philippine Agricultural
Commercial and Industrial Workers Union v. NLRC,23 the CA held that respondent is entitled to the said
benefit.
It was erroneous for the CA to apply the case of Philippine Agricultural Commercial and Industrial
Workers Union. Notably in the said case, it was established that the drivers and conductors praying for
13th- month pay were not paid purely on commission. Instead, they were receiving a commission in
addition to a fixed or guaranteed wage or salary. Thus, the Court held that bus drivers and conductors who
are paid a fixed or guaranteed minimum wage in case their commission be less than the statutory
minimum, and commissions only in case where they are over and above the statutory minimum, are
entitled to a 13th-month pay equivalent to one-twelfth of their total earnings during the calendar year.
On the other hand, in his Complaint,24 respondent admitted that he was paid on commission only.
Moreover, this fact is supported by his pay slips25 which indicated the varying amount of commissions he
was receiving each trip. Thus, he was excluded from receiving the 13th-month pay benefit.
WHEREFORE, the petition is PARTLY GRANTED and the September 16, 2004 Decision of the CA is
MODIFIED by deleting the award of backwages and 13th-month pay. Instead, petitioner KKTI is ordered
to indemnify respondent the amount of thirty thousand pesos (PhP 30,000) as nominal damages for failure
to comply with the due process requirements in terminating the employment of respondent.
No costs.
SO ORDERED.