13th Month Pay
Penned by Court of Appeals Associate Justice Martin S. Villarama, Jr. as concurred in by
Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda
G.R. No. 145561. June 15, 2005.*
HONDA PHILS., INC., petitioner, vs. SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA,
respondent.
Labor Law; Collective Bargaining Agreements; Definition; 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.—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. As in all contracts, the parties in a CBA may establish
such stipulations, clauses, terms and conditions as they may deem convenient provided these are not
contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by the
express policy of the law.
Same; National Labor Relations Commission; Factual Findings; 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.—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.
Same; Benefits; 13th Month Pay; Basic Salary; Excluded from the computation of “basic salary”
payments for sick, vacation and maternity leaves, night differentials, regular holiday pay and premiums
for work done on rest days and special holidays.—For employees receiving regular wage, we have
interpreted “basic salary” to mean, not the amount actually received by an employee, but 1/12 of their
standard monthly wage multiplied by their length of service within a
_______________
*FIRST DIVISION.
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Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda
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.
Same; Same; Same; Same; 13th month pay primarily given to alleviate the plight of workers and
to help them cope with the exorbitant increases in the cost of living.—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. 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.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Abello, Concepcion, Regala & Cruz for petitioner.
Honorata O. Victoria for respondent.
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.
_______________
1
Associate Justices Salome A. Montoya and Romeo J. Callejo, Sr. (currently Associate Justice of the
Supreme Court).
2 Rollo, pp. 27-32.
3 Id., at p. 34.
188
188 SUPREME COURT REPORTS ANNOTATED
Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda
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,
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VOL. 460, JUNE 15, 2005 189
Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda
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
_______________
4 Id., at pp. 290-291.
5 Id., at pp. 65-66.
 6
Court of Appeals Rollo, pp. 22-33.
190
190 SUPREME COURT REPORTS ANNOTATED
Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda
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
_______________
7
Id., at pp. 32-33.
8Section (jj), Rule I, Book V, Omnibus Rules Implementing the Labor Code; University of the
Immaculate Concepcion, Inc. v. Secretary of Labor and Employment, 425 Phil. 311, 324; 374 SCRA 471,
480 (2002).
9
Article 1306 of the Civil Code; Manila Fashions, Inc. v. National Labor Relations Commission, 332
Phil. 121, 125-126; 264 SCRA 104, 108 (1996).
191
VOL. 460, JUNE 15, 2005 191
Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda
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.
_______________
10
Viviero v. Court of Appeals, G.R. No. 138938, 24 October 2000, 344 SCRA 268, 274,
citing Razon, Inc. v. Secretary of Labor and Employment, G.R. No. 85867, 13 May 1993, 222 SCRA 1,
8.
11 “In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the
safety and decent living for the laborer.”
192
192 SUPREME COURT REPORTS ANNOTATED
Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda
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,
_______________
12 Stamford Marketing Corporation, et al. v. Julian, et al., G.R. No. 145496, 24 February 2004, 423
SCRA 633, 651.
13
Whereas clauses of P.D. No. 851.
14
Section 4(a), paragraph 4.
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Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda
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
_______________
15 San Miguel Corporation Cagayan Coca-Cola Plant v. Inciong, et al., G.R. No. L-49774, 24
February 1981, 103 SCRA 139.
16 349 Phil. 220; 285 SCRA 297 (1998).
17 354 Phil. 491; 292 SCRA 478 (1998).
18
373 Phil. 751; 315 SCRA 129 (1999).
19
Section 6.
20 Rollo, p. 31.
194
194 SUPREME COURT REPORTS ANNOTATED
 should be the primordial and paramount consideration.26 What is more, the factual milieu of this case is
Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda such that to rule otherwise inevitably results to dissuasion, if not a deterrent, for workers from the free
these were dependent upon the company’s financial standing. As held by the Voluntary Arbitrator: exercise of their constitutional rights to self-organization and to strike in accordance with law.27
The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to adopt WHEREFORE, the instant petition is DENIED. The decision and the resolution of the Court of
a pro-rata computation, aside [from] being in [a] state of rehabilitation due to 227M substantial losses in Appeals dated September 14, 2000 and October 18, 2000, respectively, in CA-G.R. SP No. 59052,
1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This is an implicit acceptance that affirming the decision rendered by the Voluntary Arbitrator on May 2, 2000, are hereby AFFIRMED in
prior to the strike, a full month basic pay computation was the “present practice” intended to be toto.
maintained in the CBA.21 SO ORDERED.
The memorandum dated November 22, 1999 which Honda issued shows that it was the first time a pro- Davide, Jr. (C.J., Chairman), Quisumbing, Carpio and Azcuna, JJ., concur.
rating scheme was to be implemented in the company. It was a convenient coincidence for the company Petition denied, judgment and resolution affirmed in toto.
that the work stoppage held by the employees lasted for thirty-one (31) days or exactly one month. This Note.—A bank in a depressed financial condition, reeling from tremendous losses, cannot be legally
enabled them to devise a formula using 11/12 of the total annual salary as base amount for computation compelled to continue paying the same amount of bonuses to its employees. (Producers Bank of the
instead of the entire amount for a 12-month period. Philippines vs. National Labor Relations Commission, 355 SCRA 489 [2001])
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 ——o0o——
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
_______________

21 Court of Appeals Rollo, p. 29.

22
Annexes “E” and “E-1”, Rollo, pp. 295-296.
23
G.R. No. 85073, 24 August 1993, 225 SCRA 562.
195
VOL. 460, JUNE 15, 2005 195

Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda

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
_______________

24
G.R. No. 152456, 28 April 2004, 428 SCRA 239.
25
Id., at p. 249.
196
196 SUPREME COURT REPORTS ANNOTATED

Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda


San Miguel Corp. vs. Inciong
No. L-49774. February 24, 1981.*
SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT), petitioner; vs. Hon. AMADO G.
INCIONG, Deputy Minister of Labor and CAGAYAN COCA-COLA FREE WORKERS UNION,
respondents.
Labor Law; 13th Month Pay; Computation of the 13th month pay under Presidential Decree No.
851 excludes from the basic salary all earnings and other remunerations paid by an employer to an
employee.—Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree
851 is even more emphatic in declaring that earnings and other remunerations which are not part of the
basic salary shall not be included in the computation of the 13th-month pay. While doubt may have been
created by the prior Rules and Regulations Implementing Presidential Decree 851 which defines basic
salary to include all remunerations or earnings paid by an employer to an employee, this cloud is
dissipated in the later and more controlling Supplementary Rules and Regulations which categorically,
exclude from the definition of basic salary earnings and other remunerations paid by employer to an
employee. A cursory perusal of the two sets of Rules indicates that what has hitherto been the subject
of a broad inclusion is now a subject of broad exclusion. The Supplementary Rules and Regulations cure
the seeming tendency of the former rules to include all remunerations and earnings within the definition
of basic salary.
_______________
*
FIRST DIVISION
140
140 SUPREME COURT REPORTS ANNOTATED
San Miguel Corp. vs. Inciong
Same; Same; Same; Phrase “earnings and other remunerations deemed not part of basic salary,”
interpreted.—The all-embracing phrase “earnings and other remunerations” which are deemed not part
of the basic salary includes within its meaning payments for sick, vacation, or maternity leaves, premium
for works performed on rest days and special holidays, pays for regular holidays and night differentials.
As such they are deemed not part of the basic salary and shall not be considered in the computation of
the 13th-month pay. If they were not so excluded, it is hard to find any “earnings and other remunerations”
expressly excluded in the computation of the 13th-month pay. Then the exclusionary provision would
prove to be idle and with no purpose.
Same; Same; Same; Basic Salary; Overtime pay and premium for special holiday considered
additional compensation and are excluded from the definition of basic salary.—It is clear that overtime
pay is an additional compensation other than and added to the regular wage or basic salary, for reason
of which such is categorically excluded from the definition of basic salary under the Supplementary Rules
and Regulations Implementing Presidential Decree 851. x x x It is likewise clear that premium for special
holiday which is at least 30% of the regular wage is an additional compensation other than and added to
the regular wage or basic salary. For similar reason it shall not be considered in the computation of the
13th-month pay.
PETITION to review the order by the Deputy Minister of Labor. Certiorari and prohibition, with
preliminary injunction.
The facts are stated in the opinion of the Court.
DE CASTRO, J.:
Petition for certiorari and prohibition, with preliminary injunction to review the Order1 dated December
19, 1978 rendered by the Deputy Minister of Labor in STF ROX Case No. 009-77 docketed as “Cagayan
Coca-Cola Free Workers Union vs. Cagayan Coca-Cola Plant, San Miguel Corporation,” which denied
herein petitioner’s motion for reconsideration
_______________
1
p. 24, Rollo.
141
VOL. 103, FEBRUARY 24, 1981 141
San Miguel Corp. vs. Inciong
and ordered the immediate execution of a prior Order2 dated June 7, 1978.
On January 3, 1977, Cagayan Coca-Cola Free Workers Union, private respondent herein, filed a
complaint against San Miguel Corporation (Cagayan Coca-Cola Plant), petitioner herein, alleging failure
or refusal of the latter to include in the computation of 13th-month pay such items as sick, vacation or
maternity leaves, premium for work done on rest days and special holidays, including pay for regular
holidays and night differentials.
An Order3 dated February 15, 1977 was issued by Regional Office No. X where the complaint was
filed requiring herein petitioner San Miguel Corporation (Cagayan Coca-Cola Plant) “to pay the difference
of whatever earnings and the amount actually received as 13th month pay excluding overtime premium
and emergency cost of living allowance.”
Herein petitioner appealed from that Order to the Minister of Labor in whose behalf the Deputy
Minister of Labor Amado G. Inciong issued an Order4 dated June 7, 1978 affirming the Order of Regional
Office No. X and dismissing the appeal for lack of merit. Petitioner’s motion for reconsideration having
been denied, it filed the instant petition.
On February 14, 1979, this Court issued a Temporary Restraining Order5 enjoining respondents fro
m enforcing the Order dated December 19, 1978.
The crux of the present co ntroversy is whether or not in the computation of the 13th-month pay
under Presidential Decree 851, payments for sick, vacation or maternity leaves, premium for work done
on rest days and special holidays, including pay for regular holidays and night differentials should be
considered.
Public respondent’s consistent stand on the matter since the effectivity of Presidential Decree 851
is that “payments for sick leave, vacation leave, and maternity benefits, as well as
_______________
2
pp. 22-23, Rollo.
3
p. 20, Rollo.
4
Supra.
5
p. 28-A, Rollo.
142
142 SUPREME COURT REPORTS ANNOTATED
San Miguel Corp. vs. Inciong
salaries paid to employees for work performed on rest days, special and regular holidays are included in
the computation of the 13th-month pay.”6 On its part, private respondent cited innumerable past rulings,
opinions and decisions rendered by then Acting Labor Secretary Amado G. Inciong to the effect that, “in
computing the mandatory bonus, the basis is the total gross basic salary paid by the employer during
the calendar year. Such gross basic salary includes: (1) regular salary or wage; (2) payments for sick,
vacation and maternity leaves; (3) premium for work performed on rest days or holidays; (4) holiday pay
for worked or unworked regular holiday; and (5) emergency allowance if given in the for m of a wage
adjustment.”7
Petitioner, on the other hand, assails as erroneous the aforesaid order, rulings and opinions;
vigorously contends thai Presidential Decree 851 speaks only of basic salary as basis for the
determination of the 13th-month pay; submits that payments for sick, vacation, or maternity leaves, night
differential pay, as well as premium paid for work performed on rest days, special and regular holidays
do not form part of the basic salary; and concludes that the inclusion of those payments in the co mp
utation of the 13th-mo nth pay is clearly not sanctioned by Presidential Decree 851.
The Court finds petitioner’s contention meritorious.
The provision in dispute is Section 1 of Presidential Decree 851 and provides:
“All employers are hereby required to pay all their employees receiving a basic salary of not more than
P1,000 a month, regardless of the nature of the employment, a 13th-month pay not later than December
24 of every year.”
Section 2 of the Rules and Regulations for the implementation of Presidential Decree 851 provides:
_______________
 6
Stated in its Order dated June 7, 1978, supra.
7
L/q. Rizal Rubber Company, Inc., 4 February 1976, p. 44, Rollo; L/q. Makati Supermarket, January
12, 1976, p. 44, Rollo; etc. Rollo, pp. 44-46.
143
VOL. 103, FEBRUARY 24, 1981 143
San Miguel Corp. vs. Inciong
1. “a)Thirteenth-month pay shall mean one twelfth (1/12) of the basic salary of an employee
within a calendar year;
2. “b)Basic salary shall include all remunerations on 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.”
Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as
the basis in the determination of his 13th-month pay. Any compensations or remunerations which are
deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus.
Under the Rules and Regulations Implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary:
1. (a)Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of
Instructions No. 174;
2. (b)Profit sharing payments;
3. (c)All allowances and monetary benefits which are not considered or integrated as part of the
regular basic salary of the employee at the time of the promulgation of the Decree on
December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851 issued
by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are excluded
as part of the basic salary and in the computation of the 13th-month pay.
The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instructions
No. 174, and profit sharing payments indicate the intention to strip basic salary of other payments which
are properly considered as “fringe benefits. Likewise, the catch-all exclusionary phrase all allowances
and monetary benefits which are not considered or integrated as part of the basic salary” shows also the
intention
144
144 SUPREME COURT REPORTS ANNOTATED
San Miguel Corp. vs. Inciong
to strip basic salary of any and all additions which may be in the form of allowances or “fringe” benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even
more emphatic in declaring that earnings and other remunerations which are not part of the basic salary
shall not be included in the computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations Implementing Presidential
Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer to
an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically, exclude from the definition of basic salary earnings and other
remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules indicates
that what has hitherto been the subject of a broad inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the seeming tendency of the former rules to include all
remunerations and earnings within the definition of basic salary.
The all-embracing phrase “earnings and other remunerations” which are deemed not part of the
basic salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for
works performed on rest days and special holidays, pays for regular holidays and night differentials. As
such they are deemed not part of the basic salary and shall not be considered in the computation of the
13th-month pay. If they were not so excluded, it is hard to find any “earnings and other remunerations”
expressly excluded in the computation of the 13th-month pay. Then the exclusionary provision would
prove to be idle and with no purpose.
This conclusion finds strong support under the Labor Code of the Philippines. To cite a few
provisions:
‘Art. 87—overtime work. Work may be performed beyond eight (8) hours a day provided that the
employee is paid for the overtime work, additional compensation equivalent to his regular wage plus at
least twenty-five (25%) percent thereof.”
145
VOL. 103, FEBRUARY 24, 1981 145
San Miguel Corp. vs. Inciong
It is clear that overtime pay is an additional compensation other than and added to the regular wage or
basic salary, for reason of which such is categorically excluded from the definition of basic salary under
the Supplementary Rules and Regulations Implementing Presidential Decree 851.
In Article 93 of the same Code, paragraph
“c.) work performed on any special holiday shall be paid an additional compensation of at least thirty
percent (30%) of the regular wage of the employee.’’
It is likewise clear that premium for special holiday which is at least 30% of the regular wage is
an additional compensation other than and added to the regular wage or basic salary. For similar reason
it shall not be considered in the computation of the 13th-month pay.
WHEREFORE, the Orders of the Deputy Labor Minister dated June 7, 1978 and December 19,
1978 are hereby set aside and a new one entered as above indicated. The Temporary Restraining Order
issued by this Court on February 14, 1979 is hereby made permanent. No pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez, Guerrero and Melencio-Herrera, JJ., concur.
Mr. Justice de Castro was designated to sit with the First Division under Special Order No.
225.
Orders set aside. Temporary restraining order made permanent.
Notes.—Courts cannot enjoin peaceful picketing which is an expression of the freedom of speech.
(Associated Labor Union vs. Gomez, 96 SCRA 541).
The implementing rules and regulations of the Labor Code must be resolved in favor of labor.
(Rambaoa vs. WCC, 96 SCRA 275).
146
146 SUPREME COURT REPORTS ANNOTATED
San Miguel Corp. vs. Inciong
Employees who have been dismissed unlawfully have the right to seek union help. (Guijarno vs. Court
of Industrial Relations, 52 SCRA 307).
A labor union has the requisite legal personality to sue on behalf of its members for their individual
claims. (La Carlota Sugar Central vs. Court of Industrial Relations, 64 SCRA 79).
The factual findings of the National Labor Relations Commission are binding on the courts. (Antipolo
Highway Lines vs. Inciong, 64 SCRA 441).
——o0o——
Davao Fruits Corporation vs. Associated Labor Unions
G.R. No. 85073. August 24, 1993.*
DAVAO FRUITS CORPORATION, petitioner, vs. ASSOCIATED LABOR UNIONS (ALU) for and in
behalf of all the rank-and-file workers/employees of DAVAO FRUITS CORPORATION and NATIONAL
LABOR RELATIONS COMMISSION, respondents.
Labor Law; Benefits; Basic salary does not merely exclude the benefits expressly mentioned but
all payments which may be in the form of fringe benefits or allowances; Overtime pay earnings and other
remunerations shall be excluded in computing the thirteenth month pay.—Clearly, the term “basic salary”
includes all remunerations or earnings paid by the employer to the employee, but excludes cost-of-living
allowances, profit-sharing payments, and all allowances and monetary benefits which have not been
considered as part of the basic salary of the employee as of December 16, 1975. The exclusion of cost-
of-living allowances and profit sharing payments shows the intention to strip “basic salary” of payments
which are otherwise considered as “fringe” benefits. This intention is emphasized in the catch all phrase
“all allowances and monetary benefits which are not considered or integrated as part of the basic salary.”
Basic salary, therefore does not merely exclude the benefits expressly mentioned but all payments which
may be in the form of “fringe” benefits or allowances (San Miguel Corporation v. Inciong, supra, at 143-
144). In fact, the Supplementary Rules and Regulations Implementing P.D. No. 851 are very emphatic
in declaring that overtime pay, earnings and other remunerations shall be excluded in computing the
thirteenth month pay.
Same; Same; Same; Payment for sick, vacation and maternity leaves, premium for work done on
rest days and special holidays as well as pay for regular holidays are likewise excluded in computing the
basic salary for the purpose of determining the thirteenth month pay.—In other words, whatever
compensation an employee receives for an eight-hour work daily or the daily wage rate is the basic
salary. Any compensation or remuneration other than the daily wage rate is excluded. It follows therefore,
that payments for sick, vacation and maternity leaves, premium for work done on rest days and special
holidays, as well as pay for regular holidays, are likewise excluded in computing the basic salary for the
purpose of determining the thirteenth month pay.
_______________
*
FIRST DIVISION.
563
VOL. 225, AUGUST 24, 1993 563
Davao Fruits Corporation vs. Associated Labor Unions
Same; Same; Any benefit and supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer.—A company practice favorable to the
employees had indeed been established and the payments made pursuant thereto, ripened into benefits
enjoyed by them. And any benefit and supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer, by virtue of Section 10 of the Rules and
Regulations Implementing P.D. No. 851, and Article 100 of the Labor Code of the Philippines, which
prohibit the diminution or elimination by the employer of the employees’ existing benefits.
PETITION for certiorari of the resolution of the National Labor Relations Commission.
The facts are stated in the opinion of the Court.
Dominguez & Paderna Law Offices for petitioners.
The Solicitor General for public respondents.
QUIASON, J.:
This is a petition for certiorari to set aside the resolution of the National Labor Relations Commission
(NLRC), dismissing for lack of merit petitioner’s appeal from the decision of the Labor Arbiter in NLRC
Case No. 1791-MC-XI-82.
On December 28, 1982, respondent Associated Labor Unions (ALU), for and in behalf of all the
rank-and-file workers and employees of petitioner, filed a complaint (NLRC Case No. 1791-MC-XI-82)
before the Ministry of Labor and Employment, Regional Arbitration Branch XI, Davao City, against
petitioner, for “Payment of the Thirteenth-Month Pay Differentials.” Respondent ALU sought to recover
from petitioner the thirteenth month pay differential for 1982 of its rank-and-file employees, equivalent to
their sick, vacation and maternity leaves, premium for work done on rest days and special holidays, and
pay for regular holidays which petitioner, allegedly in disregard of company practice since 1975, excluded
from the computation of the thirteenth month pay for 1982.
In its answer, petitioner claimed that it erroneously included items subject of the complaint in the
computation of the thirteenth month pay for the years prior to 1982, upon a doubtful and difficult question
of law. According to petitioner, this mistake
564
564 SUPREME COURT REPORTS ANNOTATED
Davao Fruits Corporation vs. Associated Labor Unions
was discovered only in 1981 after the promulgation of the Supreme Court decision in the case of San
Miguel Corporation v. Inciong (103 SCRA 139).
A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of respondent
ALU. The dispositive portion of the decision reads as follows:
“WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered ordering
respondent to pay the 1982—13 month pay differential to all its rank-and-file workers/employees herein
represented by complainant Union” (Rollo, p. 32).
Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said decision and
accordingly dismissed the appeal for lack of merit.
Petitioner elevated the matter to this Court in a petition for review under Rule 45 of the Revised
Rules of Court. This error notwithstanding and in the interest of justice, this Court resolved to treat the
instant petition as a special civil action for certiorari under Rule 65 of the Revised Rules of Court (P.D.
No. 1391, Sec. 5; Rules Implementing P.D. No. 1391, Rule II, Sec. 7; Cando v. National Labor Relations
Commission, 189 SCRA 666 [1990]: Pearl S. Buck Foundation, Inc. v. National Labor Relations
Commission, 182 SCRA 446 [1990]).
The crux of the present controversy is whether in the computation of the thirteenth month pay given
by employers to their employees under P.D. No. 851, payments for sick, vacation and maternity leaves,
premiums for work done on rest days and special holidays, and pay for regular holidays may be excluded
in the computation and payment thereof, regardless of long-standing company practice.
Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay
their employees a thirteenth month pay. How this pay shall be computed is set forth in Section 2 of the
“Rules and Regulations Implementing Presidential Decree No. 851,” thus:
“SECTION 2. x x x
1. (a)‘Thirteenth month pay’ shall mean one twelfth (1/12) of the basic salary of an employee
within a calendar year.
565
VOL. 225, AUGUST 24, 1993 565
Davao Fruits Corporation vs. Associated Labor Unions
1. (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.”
The Department of Labor and Employment issued on January 16, 1976 the “Supplementary Rules and
Regulations Implementing P.D. No. 851” which in paragraph 4 thereof further defines the term “basic
salary,” thus:
“4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall not be
included in the computation of the 13 month pay.”
Clearly, the term “basic salary” includes all remunerations or earnings paid by the employer to the
employee, but excludes cost-of-living allowances, profit-sharing payments, and all allowances and
monetary benefits which have not been considered as part of the basic salary of the employee as of
December 16, 1975. The exclusion of cost-of-living allowances and profit sharing payments shows the
intention to strip “basic salary” of payments which are otherwise considered as “fringe” benefits. This
intention is emphasized in the catch all phrase “all allowances and monetary benefits which are not
considered or integrated as part of the basic salary.” Basic salary, therefore does not merely exclude the
benefits expressly mentioned but all payments which may be in the form of “fringe” benefits or allowances
(San Miguel Corporation v. Inciong, supra, at 143-144). In fact, the Supplementary Rules and
Regulations Implementing P.D. No. 851 are very emphatic in declaring that overtime pay, earnings and
other remunerations shall be excluded in computing the thirteenth month pay.
In other words, whatever compensation an employee receives for an eight-hour work daily or the
daily wage rate in the basic salary. Any compensation or remuneration other than the daily wage rate is
excluded. It follows therefore, that payments for sick, vacation and maternity leaves, premium for work
done on rest days and special holidays, as well as pay for regular holidays,
566
566 SUPREME COURT REPORTS ANNOTATED
Davao Fruits Corporation vs. Associated Labor Unions
are likewise excluded in computing the basic salary for the purpose of determining the thirteenth month JJ., concur.
pay. Petition dismissed. Questioned decision affirmed.
Petitioner claims that the mistake in the interpretation of “basic salary” was caused by the opinions, Note.—The award of service incentive leave pay is a statutory benefit which can not be denied to
orders and rulings rendered by then Acting Labor Secretary Amado C. Inciong, expressly including the private respondents, the same is true with respect to the 13th month pay is mandated by Presidential
subject items in computing the thirteenth month pay. The inclusion of these items is clearly not sanctioned Decree No. 851 (Osias Academy vs. Department of Labor and Employment, 192 SCRA 612).
under P.D. No. 851, the governing law and its implementing rules, which speak only of “basic salary” as
the basis for determining the thirteenth month pay. ——o0o——
Moreover, whatever doubt arose in the interpretation of P.D. No. 851 was erased by the
Supplementary Rules and Regulations which clarified the definition of “basic salary.”
As pointed out in San Miguel Corporation v. Inciong, (supra):
“While doubt may have been created by the prior Rules and Regulations Implementing Presidential
Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer to
an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically, exclude from the definition of basic salary earnings and other
remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules indicates
that what has hitherto been the subject of a broad inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the seeming tendency of the former rules to include all
remunerations and earnings within the definition of basic salary.
The all-embracing phrase ‘earnings and other remunerations’ which are deemed not part of the
basic salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for
work performed on rest days and special holidays, pay for regular holidays and night differentials. As
such they are deemed not part of the basic salary and shall not be considered in the computation of the
13th-month pay. If they were not so excluded, it is hard to find any ‘earnings and other remunerations’
expressly excluded in the computation of the 13th month-pay. Then the exclusionary provision would
prove to be idle and with no purpose.”
The “Supplementary Rules and Regulations Implementing P.D. No. 851,” which put to rest all doubts in
the computation of the thirteenth month pay, was issued by the Secretary of Labor as early as January
16, 1976, barely one month after the effectiv-
567
VOL. 225, AUGUST 24, 1993 567
Davao Fruits Corporation vs. Associated Labor Unions
ity of P.D. No. 851 and its Implementing Rules. And yet, petitioner computed and paid the thirteenth
month pay, without excluding the subject items therein until 1981. Petitioner continued its practice in
December 1981, after promulgation of the afore-quoted San Miguel decision on February 24, 1981, when
petitioner purportedly “discovered” its mistake.
From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation
of its employees’ thirteenth month pay, the payments for sick, vacation and maternity leaves, premiums
for work done on rest days and special holidays, and pay for regular holidays. The considerable length
of time the questioned items had been included by petitioner indicates a unilateral and voluntary act on
its part, sufficient in itself to negate any claim of mistake.
A company practice favorable to the employees had indeed been established and the payments
made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer,
by virtue of Section 10 of the Rules and Regulations Implementing P.D. No. 851, and Article 100 of the
Labor Code of the Philippines, which prohibit the diminution or elimination by the employer of the
employees’ existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).
Petitioner cannot invoke the principle of solutio indebiti which is a civil law concept that is not
applicable in Labor Law. Besides, in solutio indebiti, the obligee is required to return to the obligor
whatever he received from the latter (Civil Code of the Philippines, Arts. 2154 and 2155). Petitioner in
the instant case, does not demand the return of what it paid respondent ALU from 1975 until 1981; it
merely wants to “rectify” the error it made over these years by excluding unilaterally from the thirteenth
month pay in 1982 the items subject of litigation. Solutio indebiti, therefore, is not applicable to the instant
case.
WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is hereby
DISMISSED, and the questioned decision of respondent NLRC is AFFIRMED accordingly.
Cruz (Chairman), Griño-Aquino, Davide, Jr. and Bellosillo,
568
568 SUPREME COURT REPORTS ANNOTATED

Joya vs. Presidential Commission on Good Government

 2
CA Rollo, pp. 31-43.
Sevilla Trading Company vs. Semana 3Rollo, p. 141.
G.R. No. 152456. April 28, 2004.* 241
SEVILLA TRADING COMPANY, petitioner, vs. A.V.A. TOMAS E. SEMANA, SEVILLA TRADING VOL. 428, APRIL 28, 2004 241
WORKERS UNION-SUPER, respondents.
Remedial Law; Certiorari; The special civil action of certiorari under Rule 65 is not, and cannot Sevilla Trading Company vs. Semana
be a substitute for an appeal, where the latter remedy is available.—It is elementary that the special civil
action of certiorari under Rule 65 is not, and cannot be a substitute for an appeal, where the latter remedy
is available, as it was in this case. Petitioner Sevilla Trading failed to file an appeal within the fifteen-day 1. (i)Cash conversion of unused company vacation and sick leave.
reglementary period from its notice of the adverse decision of A.V.A. Semana. It received a copy of the
decision of A.V.A. Semana on December 20, 2000, and should have filed its appeal under Rule 43 of Petitioner claimed that it entrusted the preparation of the payroll to its office staff, including the
the 1997 Rules of Civil Procedure on or before January 4, 2001. Instead, petitioner filed on January 19, computation and payment of the 13th-month pay and other benefits. When it changed its person in
2001 a “Manifestation and Motion for Time to File Petition for Certiorari,” and on February 19, 2001, it charge of the payroll in the process of computerizing its payroll, and after audit was conducted, it
filed a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Clearly, petitioner Sevilla allegedly discovered the error of including non-basic pay or other benefits in the base figure used in the
Trading had a remedy of appeal but failed to use it. computation of the 13th-month pay of its employees. It cited the Rules and Regulations Implementing
Same; Same; Meaning of Grave Abuse of Discretion.—“Grave abuse of discretion” has been P.D. No. 851 (13th-Month Pay Law), effective December 22, 1975, Sec. 2 (b) which stated that:
interpreted to mean “such capricious and whimsical exercise of judgment as is equivalent to lack of “Basic salary” shall include all remunerations or earnings paid by an employer to an employee for
jurisdiction, or, in other services rendered but may not include cost-of-living allowances granted pursuant to P.D. No. 525 or
_______________ Letter of Instruction No. 174, profit-sharing payments, and all allowances and monetary benefits which
are not considered or integrated as part of the regular or basic salary of the employee at the time of the
* promulgation of the Decree on December 16, 1975.
SECOND DIVISION
240 Petitioner then effected a change in the computation of the thirteenth month pay, as follows:
13th-month pay = net basic pay
240 SUPREME COURT REPORTS ANNOTATED 12 months
where:
Sevilla Trading Company vs. Semana
net basic pay = gross pay - (non-basic pay or other benefits)
words where the power is exercised in an arbitrary or despotic manner by reason of passion or Now excluded from the base figure used in the computation of the thirteenth month pay are the following:
personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined or to act at all in contemplation of law.”
1. (a)Overtime premium for regular overtime, legal and special holidays;
PETITION for review on certiorari of the decision of the Court of Appeals. 2. (b)Legal holiday pay, premium pay for special holidays;
3. (c)Night premium;
4. (d)Bereavement leave pay;
The facts are stated in the opinion of the Court. 5. (e)Union leave pay;
Generoso R.. Jacinto for petitioner. 6. (f)Maternity leave pay;
7. (g)Paternity leave pay;
PUNO, J.: 8. (h)Company vacation and sick leave pay; and

On appeal is the Decision1 of the Court of Appeals in CA-G.R. SP No. 63086 dated 27 November 2001 242
sustaining the Decision2 of Accredited Voluntary Arbitrator Tomas E. Semana dated 13 November 2000,
as well as its subsequent Resolution3 dated 06 March 2002 denying petitioner’s Motion for 242 SUPREME COURT REPORTS ANNOTATED
Reconsideration.
Sevilla Trading Company vs. Semana
The facts of the case are as follows:
For two to three years prior to 1999, petitioner Sevilla Trading Company (Sevilla Trading, for short),
a domestic corporation engaged in trading business, organized and existing under Philippine laws, added 1. (i)Cash conversion of unused vacation/sick leave.
to the base figure, in its computation of the 13th-month pay of its employees, the amount of other benefits
received by the employees which are beyond the basic pay. These benefits included:
Hence, the new computation reduced the employees’ thirteenth month pay. The daily piece-rate workers
represented by private respondent Sevilla Trading Workers Union—SUPER (Union, for short), a duly
1. (a)Overtime premium for regular overtime, legal and special holidays; organized and registered union, through the Grievance Machinery in their Collective Bargaining
2. (b)Legal holiday pay, premium pay for special holidays; Agreement, contested the new computation and reduction of their thirteenth month pay. The parties
3. (c)Night premium; failed to resolve the issue.
4. (d)Bereavement leave pay; On March 24, 2000, the parties submitted the issue of “whether or not the exclusion of leaves and
5. (e)Union leave pay; other related benefits in the computation of 13th-month pay is valid” to respondent Accredited Voluntary
6. (f)Maternity leave pay; Arbitrator Tomas E. Semana (A.V.A. Semana, for short) of the National Conciliation and Mediation
7. (g)Paternity leave pay; Board, for consideration and resolution.
8. (h)Company vacation and sick leave pay; and The Union alleged that petitioner violated the rule prohibiting the elimination or diminution of
employees’ benefits as provided for in Art. 100 of the Labor Code, as amended. They claimed that paid
_______________ leaves, like sick leave, vacation leave, paternity leave, union leave, bereavement leave, holiday pay and
other leaves with pay in the CBA should be included in the base figure in the computation of their 13th-
month pay.
1 CA Rollo, pp. 124-134.
 On the other hand, petitioner insisted that the computation of the 13th-month pay is based on basic
salary, excluding benefits such as leaves with pay, as per P.D. No. 851, as amended. It maintained that,
in adjusting its computation of the 13th-month pay, it merely rectified the mistake its personnel committed
in the previous years.
A.V.A. Semana decided in favor of the Union. The dispositive portion of his Decision reads as
follows:
“WHEREFORE, premises considered, this Voluntary Arbitrator hereby declared that:
1. ‘1.The company is hereby ordered to include sick leave and vacation leave, paternity leave,
union leave, bereavement leave and other leave with pay in the CBA, premium for work
done on rest days and special holidays, and pay for regular holidays in the computation of
the 13th-month pay to all covered and entitled employees;
2. ‘2.The company is hereby ordered to pay corresponding backwages to all covered and
entitled employees arising from the exclusion of said benefits in the computation of 13th-
month pay for the year 1999.’ ”
243
VOL. 428, APRIL 28, 2004 243
Sevilla Trading Company vs. Semana
Petitioner received a copy of the Decision of the Arbitrator on December 20, 2000. It filed before the
Court of Appeals, a “Manifestation and Motion for Time to File Petition for Certiorari” on January 19,
2001. A month later, on February 19, 2001, it filed its Petition for Certiorari under Rule 65 of the 1997
Rules of Civil Procedure for the nullification of the Decision of the Arbitrator. In addition to its earlier
allegations, petitioner claimed that assuming the old computation will be upheld, the reversal to the old
computation can only be made to the extent of including non-basic benefits actually included by petitioner
in the base figure in the computation of their 13th-month pay in the prior years. It must exclude those
non-basic benefits which, in the first place, were not included in the original computation. The appellate
court denied due course to, and dismissed the petition.
Hence, this appeal. Petitioner Sevilla Trading enumerates the grounds of its appeal, as follows:
1. THE DECISION OF THE RESPONDENT COURT TO REVERT TO THE OLD COMPUTATION OF
THE 13TH-MONTH PAY ON THE BASIS THAT THE OLD COMPUTATION HAD RIPENED INTO
PRACTICE IS WITHOUT LEGAL BASIS.
2. IF SUCH BE THE CASE, COMPANIES HAVE NO MEANS TO CORRECT ERRORS IN
COMPUTATION WHICH WILL CAUSE GRAVE AND IRREPARABLE DAMAGE TO EMPLOYERS.4
First, we uphold the Court of Appeals in ruling that the proper remedy from the adverse decision of the
arbitrator is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure, not a petition for
certiorari under Rule 65. Section 1 of Rule 43 states:
RULE 43
Appeals from the Court of Tax Appeals and
Quasi-Judicial Agencies to the Court of Appeals
SECTION 1. Scope.—This Rule shall apply to appeals from judgments or final orders of the Court of Tax
Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial
agency in the exercise of its quasi-judicial functions. Among these agencies are the Civil Service
Commission, Central Board of Assessment Appeals, Securities and Exchange Commission, Office of
the President, Land Regis-
_______________
4
Rollo, p. 22.
244
244 SUPREME COURT REPORTS ANNOTATED
Sevilla Trading Company vs. Semana
tration Authority, Social Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks
and Technology Transfer, National Electrification Administration, Energy Regulatory Board, National
Telecommunications Commission, Department of Agrarian Reform under Republic Act No. 6657,
Government Service Insurance System, Employees’ Compensation Commission, Agricultural Inventions
Board, Insurance Commission, Philippine Atomic Energy Commission, Board of Investments,
Construction Industry Arbitration Commission, and voluntary arbitrators authorized by law. [Emphasis
supplied.]
It is elementary that the special civil action of certiorari under Rule 65 is not, and cannot be a substitute
for an appeal, where the latter remedy is available, as it was in this case. Petitioner Sevilla Trading failed
to file an appeal within the fifteen-day reglementary period from its notice of the adverse decision of
A.V.A. Semana. It received a copy of the decision of A.V.A. Semana on December 20, 2000, and should
have filed its appeal under Rule 43 of the 1997 Rules of Civil Procedure on or before January 4, 2001.
Instead, petitioner filed on January 19, 2001 a “Manifestation and Motion for Time to File Petition for
Certiorari,” and on February 19, 2001, it filed a petition for certiorari under Rule 65 of the 1997 Rules of
Civil Procedure. Clearly, petitioner Sevilla Trading had a remedy of appeal but failed to use it.
A special civil action under Rule 65 of the Rules of Court will not be a cure for failure to timely file a
petition for review on certiorari under Rule 45 (Rule 43, in the case at bar) of the Rules of Court. Rule 65
is an independent action that cannot be availed of as a substitute for the lost remedy of an ordinary
appeal, including that under Rule 45 (Rule 43, in the case at bar), especially if such loss or lapse was
occasioned by one’s own neglect or error in the choice of remedies.5
Thus, the decision of A.V.A. Semana had become final and executory when petitioner Sevilla
Trading filed its petition for certiorari on February 19, 2001. More particularly, the decision of A.V.A.
Semana became final and executory upon the lapse of the fifteen-day reglementary period to appeal, or
on January 5, 2001. Hence, the Court of Appeals is correct in holding that it no longer had
_______________
5
National Irrigation Administration vs. Court of Appeals, 318 SCRA 255, 265 (1999).
245
VOL. 428, APRIL 28, 2004 245
Sevilla Trading Company vs. Semana
appellate jurisdiction to alter, or much less, nullify the decision of A.V.A. Semana.
Even assuming that the present petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure is a proper action, we still find no grave abuse of discretion amounting to lack or excess of
jurisdiction committed by A.V.A. Semana. “Grave abuse of discretion” has been interpreted to mean
“such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or, in other
words where the power is exercised in an arbitrary or despotic manner by reason of passion or personal
hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual
refusal to perform the duty enjoined or to act at all in contemplation of law.”6 We find nothing of that sort
in the case at bar.
On the contrary, we find the decision of A.V.A. Semana to be sound, valid, and in accord with law
and jurisprudence. A.V.A. Semana is correct in holding that petitioner’s stance of mistake or error in the
computation of the thirteenth month pay is unmeritorious. Petitioner’s submission of financial statements
every year requires the services of a certified public accountant to audit its finances. It is quite impossible
to suggest that they have discovered the alleged error in the payroll only in 1999. This implies that in
previous years it does not know its cost of labor and operations. This is merely basic cost accounting.
Also, petitioner failed to adduce any other relevant evidence to support its contention. Aside from its bare
claim of mistake or error in the computation of the thirteenth month pay, petitioner merely appended to
its petition a copy of the 1997-2002 Collective Bargaining Agreement and an alleged “corrected”
computation of the thirteenth month pay. There was no explanation whatsoever why its inclusion of non-
basic benefits in the base figure in the computation of their 13th-month pay in the prior years was made
by mistake, despite the clarity of statute and jurisprudence at that time.
_______________
6 Concurring Opinion of Justice Angelina Sandoval-Gutierrez in the consolidated cases of Tecson
vs. Commission on Elections, G.R. No. 161434, Velez vs. Poe, G.R. No. 161634, and Fornier vs.
Commission on Elections, G.R. No. 161824, 03 March 2004, 424 SCRA 277, citing Benito vs.
Commission on Elections, 349 SCRA 705 (2001).
246
246 SUPREME COURT REPORTS ANNOTATED
Sevilla Trading Company vs. Semana
The instant case needs to be distinguished from Globe Mackay Cable and Radio Corp. vs. NLRC,7 which
petitioner Sevilla Trading invokes. In that case, this Court decided on the proper computation of the cost-
of-living allowance (COLA) for monthly-paid employees. Petitioner Corporation, pursuant to Wage Order
No. 6 (effective 30 October 1984), increased the COLA of its monthly-paid employees by multiplying the
P3.00 daily COLA by 22 days, which is the number of working days in the company. The Union disagreed
with the computation, claiming that the daily COLA rate of P3.00 should be multiplied by 30 days, which
has been the practice of the company for several years. We upheld the contention of the petitioner
corporation. To answer the Union’s contention of company practice, we ruled that:
Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in
compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not be construed as
constitutive of voluntary employer practice, which cannot now be unilaterally withdrawn by petitioner. To
be considered as such, it should have been practiced over a long period of time, and must be shown to
have been consistent and deliberate . . . The test of long practice has been enunciated thus:
. . . Respondent Company agreed to continue giving holiday pay knowing fully well that said employees
are not covered by the law requiring payment of holiday pay.” (Oceanic Pharmacal Employees Union
[FFW] vs. Inciong, 94 SCRA 270 [1979])
Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the
implementation of, the Wage Orders. It was only when the Rules Implementing Wage Order No. 4 were
issued on 21 May 1984 that a formula for the conversion of the daily allowance to its monthly equivalent
was laid down.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous
application of the law . . .
In the above quoted case, the grant by the employer of benefits through an erroneous application of the
law due to absence of clear administrative guidelines is not considered a voluntary act which cannot be
unilaterally discontinued. Such is not the case now. In the case at bar, the Court of Appeals is correct
when it pointed out
_______________
7 In Davao Fruits Corporation vs. Associated Labor Unions, we likewise held that:9
163 SCRA 71 (1988).
247
VOL. 428, APRIL 28, 2004 247
Sevilla Trading Company vs. Semana
that as early as 1981, this Court has held in San Miguel Corporation vs. Inciong 8 that:
Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as
the basis in the determination of his 13th-month pay. Any compensations or remunerations which are
deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus.
Under the Rules and Regulations Implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary:
1. (a)Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of
Instruction No. 174;
2. (b)Profit sharing payments;
3. (c)All allowances and monetary benefits which are not considered or integrated as part of the
regular basic salary of the employee at the time of the promulgation of the Decree on
December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851
issued by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are
excluded as part of the basic salary and in the computation of the 13th-month pay.
The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instruction
No. 174 and profit sharing payments indicate the intention to strip basic salary of other payments which
are properly considered as “fringe” benefits. Likewise, the catch-all exclusionary phrase “all allowances
and monetary benefits which are not considered or integrated as part of the basic salary” shows also the
intention to strip basic salary of any and all additions which may be in the form of allowances or “fringe”
benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even
more empathic in declaring that earnings and other remunerations which are not part of the basic salary
shall not be included in the computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations Implementing Presidential
Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer to
an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically, exclude from the definition of basic salary earnings and other
remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules indicates
that what
_______________
8103 SCRA 139 (1981).
248
248 SUPREME COURT REPORTS ANNOTATED
Sevilla Trading Company vs. Semana
has hitherto been the subject of a broad inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the seeming tendency of the former rules to include all
remunerations and earnings within the definition of basic salary.
The all-embracing phrase “earnings and other remunerations” which are deemed not part of the
basic salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for
works performed on rest days and special holidays, pay for regular holidays and night differentials. As
such they are deemed not part of the basic salary and shall not be considered in the computation of the
13th-month pay. If they were not so excluded, it is hard to find any “earnings and other remunerations”
expressly excluded in the computation of the 13th-month pay. Then the exclusionary provision would
prove to be idle and with no purpose.
In the light of the clear ruling of this Court, there is, thus no reason for any mistake in the construction or
application of the law. When petitioner Sevilla Trading still included over the years non-basic benefits of
its employees, such as maternity leave pay, cash equivalent of unused vacation and sick leave, among
others in the computation of the 13th-month pay, this may only be construed as a voluntary act on its
part. Putting the blame on the petitioner’s payroll personnel is inexcusable.
The “Supplementary Rules and Regulations Implementing P.D. No. 851” which put to rest all doubts in
the computation of the thirteenth month pay, was issued by the Secretary of Labor as early as January
16, 1976, barely one month after the effectivity of P.D. No. 851 and its Implementing Rules. And yet,
petitioner computed and paid the thirteenth month pay, without excluding the subject items therein until
1981. Petitioner continued its practice in December 1981, after promulgation of the aforequoted San
Miguel decision on February 24, 1981, when petitioner purportedly “discovered” its mistake.
From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation
of its employees’ thirteenth month pay, without the payments for sick, vacation and maternity leave,
premium for work done on rest days and special holidays, and pay for regular holidays. The considerable
length of time the questioned items had been included by
_______________
9
225 SCRA 562 (1993).
249
VOL. 428, APRIL 28, 2004 249
Sevilla Trading Company vs. Semana
petitioner indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of
mistake.
A company practice favorable to the employees had indeed been established and the payments
made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer,
by virtue of Sec. 10 of the Rules and Regulations Implementing P.D. No. 851, and Art. 100 of the Labor
Code of the Philippines which prohibit the diminution or elimination by the employer of the em-ployees’
existing benefits. [Tiangco vs. Leogardo, Jr., 122 SCRA 267 (1983)]
With regard to the length of time the company practice should have been exercised to constitute voluntary
employer practice which cannot be unilaterally withdrawn by the employer, we hold that jurisprudence
has not laid down any rule requiring a specific minimum number of years. In the above quoted case
of Davao Fruits Corporation vs. Associated Labor Unions,10 the company practice lasted for six (6) years.
In another case, Davao Integrated Port Stevedoring Services vs. Abarquez,11 the employer, for three (3)
years and nine (9) months, approved the commutation to cash of the unenjoyed portion of the sick leave
with pay benefits of its intermittent workers. While in Tiangco vs. Leogardo, Jr. 12 the employer carried
on the practice of giving a fixed monthly emergency allowance from November 1976 to February 1980,
or three (3) years and four (4) months. In all these cases, this Court held that the grant of these benefits
has ripened into company practice or policy which cannot be peremptorily withdrawn. In the case at bar,
petitioner Sevilla Trading kept the practice of including non-basic benefits such as paid leaves for unused
sick leave and vacation leave in the computation of their 13th-month pay for at least two (2) years. This,
we rule likewise constitutes voluntary employer practice which cannot be unilaterally withdrawn by the
employer without violating Art. 100 of the Labor Code:
Art. 100. Prohibition against elimination or diminution of benefits.—Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at
the time of promulgation of this Code.
_______________

10Ibid.
11220 SCRA 197 (1993).
12
122 SCRA 267 (1983).
250
250 SUPREME COURT REPORTS ANNOTATED

Batangas Power Corporation vs. Batangas City

IN VIEW WHEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No.
63086 dated 27 November 2001 and its Resolution dated 06 March 2002 are hereby AFFIRMED.
SO ORDERED.
Quisumbing, Austria-Martinez and Tinga, JJ., concur.
Callejo, Sr., J., No part.
Petition denied, assailed judgment and resolution affirmed.
Note.—The special civil action of certiorari is not and can not be made a substitute for appeal or a
lapsed appeal. (Government Service Insurance System vs. Olisa, 304 SCRA 421 [1999])

——o0o——

JPL Marketing Promotions vs. Court of Appeals
G.R. No. 151966. July 8, 2005.*
JPL MARKETING PROMOTIONS, petitioner, vs. COURT OF APPEALS, NATIONAL LABOR
RELATIONS COMMISSION, NOEL GONZALES, RAMON ABESA III and FAUSTINO ANINIPOT,
respondents.
Labor Law; Separation Pay; Separation pay is authorized only in cases of dismissals due to any
of these reasons—(a) installation of labor saving devices, (b) redundancy, (c) retrenchment, (d) cessation
of the employer’s business, and (e) when the employee is suffering from a disease and his continued
employment is prohibited by law or is prejudicial to his health and to the health of his co-employees.—
Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of dismissals due
to any of these reasons: (a) installation of labor saving devices; (b) redundancy; (c) retrenchment; (d)
cessation of the employer’s business; and (e) when the employee is suffering from a disease and his
continued employment is prohibited by law or is prejudicial to his health and to the health of his co-
employees. However, separation pay shall be allowed as a measure of social justice in those cases
where the employee is validly dismissed for causes other than serious misconduct or those reflecting on
his moral character, but only when he was illegally dismissed. In addition, Sec. 4(b), Rule I, Book VI of
the Implementing Rules to Implement the Labor Code provides for the payment of separation pay to an
employee entitled to reinstatement but the establishment where he is to be reinstated has closed or has
ceased operations or his present position no longer exists at the time of reinstatement for reasons not
attributable to the employer.
Same; Same; The common denominator of the instances where payment of separation pay is
warranted is that the employee was dismissed by the employer.—The common denominator of the
instances where payment of separation pay is warranted is that the employee was dismissed by the
employer. In the instant case, there was no dismissal to speak of. Private respondents were simply not
dismissed at all, whether legally or illegally. What they received from JPL was not a notice of termination
of employment, but a
_______________
*
SECOND DIVISION.
137
VOL. 463, JULY 8, 2005 137
JPL Marketing Promotions vs. Court of Appeals
memo informing them of the termination of CMC’s contract with JPL. More importantly, they were
advised that they were to be reassigned. At that time, there was no severance of employment to speak
of.
Same; Same; “Floating Status”; When the “floating status” of an employee lasts for more than six
months, he may be considered to have been illegally dismissed from the service, entitling him to the
corresponding benefits for his separation.—Art. 286 of the Labor Code allows the bona fide suspension
of the operation of a business or undertaking for a period not exceeding six (6) months, wherein an
employee/employees are placed on the so-called “floating status.” When that “floating status” of an
employee lasts for more than six months, he may be considered to have been illegally dismissed from
the service. Thus, he is entitled to the corresponding benefits for his separation, and this would apply to
suspension either of the entire business or of a specific component thereof.
Same; Same; The principle of awarding separation pay on the ground of compassionate justice,
or on grounds of equity and social consideration, applies only when the employee is dismissed by the
employer, but not where the employee sought and obtained employment elsewhere.—As clearly borne
out by the records of this case, private respondents sought employment from other establishments even
before the expiration of the six (6)-month period provided by law. As they admitted in their comment, all
three of them applied for and were employed by another establishment after they received the notice
from JPL. JPL did not terminate their employment; they themselves severed their relations with JPL.
Thus, they are not entitled to separation pay. The Court is not inclined in this case to award separation
pay even on the ground of compassionate justice. The Court of Appeals relied on the cases wherein the
Court awarded separation pay to legally dismissed employees on the grounds of equity and social
consideration. Said cases involved employees who were actually dismissed by their employers, whether
for cause or not. Clearly, the principle applies only when the employee is dismissed by the employer,
which is not the case in this instance. In seeking and obtaining employment elsewhere, private
respondents effectively terminated their employment with JPL.
Same; Thirteenth Month Pay; Service Incentive Leave Pay; The 13th month pay and service
incentive leave pay are benefits man-
138
138 SUPREME COURT REPORTS ANNOTATED
JPL Marketing Promotions vs. Court of Appeals
dated by law and should be given to employees as a matter of right.—JPL cannot escape the
payment of 13th month pay and service incentive leave pay to private respondents. Said benefits are
mandated by law and should be given to employees as a matter of right. Presidential Decree No. 851,
as amended, requires an employer to pay its rank and file employees a 13th month pay not later than 24
December of every year. However, employers not paying their employees a 13th month pay or its
equivalent are not covered by said law. The term “its equivalent” was defined by the law’s implementing
guidelines as including Christmas bonus, mid-year bonus, cash bonuses and other payment amounting
to not less than 1/12 of the basic salary but shall not include cash and stock dividends, cost-of-living-
allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary
benefits.
Same; Same; Same; Service incentive leave is a yearly leave benefit of five (5) days with pay,
enjoyed by an employee who has rendered at least one year of service—it is clearly demandable after
one year of service.—On the other hand, service incentive leave, as provided in Art. 95 of the Labor
Code, is a yearly leave benefit of five (5) days with pay, enjoyed by an employee who has rendered at
least one year of service. Unless specifically excepted, all establishments are required to grant service
incentive leave to their employees. The term “at least one year of service” shall mean service within
twelve (12) months, whether continuous or broken reckoned from the date the employee started working.
The Court has held in several instances that “service incentive leave is clearly demandable after one
year of service.”
Same; Same; Same; The difference between the minimum wage and the actual salary received
by the employees cannot be deemed as their 13th month pay and service incentive leave pay as such
difference is not equivalent to or of the same import as the said benefits contemplated by law.—
Admittedly, private respondents were not given their 13th month pay and service incentive leave pay
while they were under the employ of JPL. Instead, JPL provided salaries which were over and above the
minimum wage. The Court rules that the difference between the minimum wage and the actual salary
received by private respondents cannot be deemed as their 13th month pay and service incentive leave
pay as such difference is not equivalent to or of the same import as the said benefits contemplated
139
VOL. 463, JULY 8, 2005 139
JPL Marketing Promotions vs. Court of Appeals
by law. Thus, as properly held by the Court of Appeals and by the NLRC, private respondents are
entitled to the 13th month pay and service incentive leave pay.
Same; Same; Same; While computation for the 13th month pay should properly begin from the
first day of employment, the service incentive leave pay should start a year after commencement of
service, for it is only then that the employee is entitled to said benefit.—The Court disagrees with the
Court of Appeals’ ruling that the 13th month pay and service incentive leave pay should be computed
from the start of employment up to the finality of the NLRC resolution. While computation for the 13th
month pay should properly begin from the first day of employment, the service incentive leave pay should
start a year after commencement of service, for it is only then that the employee is entitled to said benefit.
On the other hand, the computation for both benefits should only be up to 15 August 1996, or the last
day that private respondents worked for JPL. To extend the period to the date of finality of the NLRC
resolution would negate the absence of illegal dismissal, or to be more precise, the want of dismissal in
this case. Besides, it would be unfair to require JPL to pay private respondents the said benefits beyond
15 August 1996 when they did not render any service to JPL beyond that date. These benefits are given
by law on the basis of the service actually rendered by the employee, and in the particular case of the
service incentive leave, is granted as a motivation for the employee to stay longer with the employer.
There is no cause for granting said incentive to one who has already terminated his relationship with the
employer.
Same; It should be made clear that when the law tilts the scale of justice in favor of labor, it is but
recognition of the inherent economic inequality between labor and management; There may be cases
where the circumstances warrant favoring labor over the interests of management but never should the
scale be so tilted if the result is an injustice to the employer.—The law in protecting the rights of the
employees authorizes neither oppression nor self-destruction of the employer. It should be made clear
that when the law tilts the scale of justice in favor of labor, it is but recognition of the inherent economic
inequality between labor and management. The intent is to balance the scale of justice; to put the two
parties on relatively equal positions. There may be cases where the circumstances warrant favoring
140
140 SUPREME COURT REPORTS ANNOTATED
JPL Marketing Promotions vs. Court of Appeals
labor over the interests of management but never should the scale be so tilted if the result is an
injustice to the employer. Justitia nemini neganda est (Justice is to be denied to none).
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Engelberto Farol for petitioner.
Eustaquio Beltran for private respondents.
TINGA, J.:
This is a petition for review of the Decision1 of the Court of Appeals in CA-G.R. SP No. 62631 dated 03
October 2001 and its Resolution2 dated 25 January 2002 denying petitioner’s Motion for
Reconsideration, affirming the Resolution of the National Labor Relations Commission (NLRC), Second
Division, dated 27 July 2000, awarding separation pay, service incentive leave pay, and 13th month pay
to private respondents.
JPL Marketing and Promotions (hereinafter referred to as “JPL”) is a domestic corporation engaged
in the business of recruitment and placement of workers. On the other hand, private respondents Noel
Gonzales, Ramon Abesa III and Faustino Aninipot were employed by JPL as merchandisers on separate
dates and assigned at different establishments in Naga City and Daet, Camarines Norte as attendants
to the display of California Marketing Corporation (CMC), one of petitioner’s clients.
On 13 August 1996, JPL notified private respondents that CMC would stop its direct merchandising
activity in the Bicol
_______________
1 Rollo, pp. 13-18.
Seventh Division, penned by Associate Justice Eliezer R. De Los Santos, JJ. Godardo A. Jacinto
and Bernardo P. Abesamis, concurring; Rollo, pp. 27-36.
2
Rollo, pp. 38-40.
141
VOL. 463, JULY 8, 2005 141
JPL Marketing Promotions vs. Court of Appeals
Region, Isabela, and Cagayan Valley effective 15 August 1996.3 They were advised to wait for further
notice as they would be transferred to other clients. However, on 17 October 1996,4 private respondents
Abesa and Gonzales filed before the National Labor Relations Commission Regional Arbitration Branch
(NLRC) Sub V complaints for illegal dismissal, praying for separation pay, 13th month pay, service
incentive leave pay and payment for moral damages.5 Aninipot filed a similar case thereafter.
After the submission of pertinent pleadings by all of the parties and after some clarificatory hearings,
the complaints were consolidated and submitted for resolution. Executive Labor Arbiter Gelacio L.
Rivera, Jr. dismissed the complaints for lack of merit.6 The Labor Arbiter found that Gonzales and Abesa
applied with and were employed by the store where they were originally assigned by JPL even before
the lapse of the six (6)-month period given by law to JPL to provide private respondents a new
assignment. Thus, they may be considered to have unilaterally severed their relation with JPL, and
cannot charge JPL with illegal dismissal.7 The Labor Arbiter held that it was incumbent upon private
respondents to wait until they were reassigned by JPL, and if after six months they were not reassigned,
they can file an action for separation pay but not for illegal dismissal.8 The claims for 13th month pay and
service incentive leave pay was also denied since private respondents were paid way above the
applicable minimum wage during their employment.9
_______________
3
Not 26 December 1997, as stated in the Court of Appeal’s Decision.
4 CA Rollo, p. 41.
5 Id., at pp. 63-64.
6 Joint Decision dated 19 May 1999, Id., at pp. 48-51.
7 Id., at p. 50.
8
Ibid.
9 Ibid.
142
142 SUPREME COURT REPORTS ANNOTATED
JPL Marketing Promotions vs. Court of Appeals
Private respondents appealed to the NLRC. In its Resolution,10 the Second Division of the NLRC agreed
with the Labor Arbiter’s finding that when private respondents filed their complaints, the six-month period
had not yet expired, and that CMC’s decision to stop its operations in the areas was beyond the control
of JPL, thus, they were not illegally dismissed. However, it found that despite JPL’s effort to look for
clients to which private respondents may be reassigned it was unable to do so, and hence they are
entitled to separation pay.11 Setting aside the Labor Arbiter’s decision, the NLRC ordered the payment
of:
1. Separation pay, based on their last salary rate and counted from the first day of their employment with
the respondent JPL up to the finality of this judgment;
2. Service Incentive Leave pay, and 13th month pay, computed as in No. 1 hereof.12
Aggrieved, JPL filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of Appeals,
imputing grave abuse of discretion on the part of the NLRC. It claimed that private respondents are not
by law entitled to separation pay, service incentive leave pay and 13th month pay.
The Court of Appeals dismissed the petition and affirmed in toto the NLRC resolution. While
conceding that there was no illegal dismissal, it justified the award of separation pay on the grounds of
equity and social justice.13 The Court of Appeals rejected JPL’s argument that the difference in the
amounts of private respondents’ salaries and the minimum wage in the region should be considered as
payment for their service incentive leave and 13th month pay. 14 Notwithstanding the absence of a
contractual agreement on the grant of
_______________
10
11 Id., at p. 16.
12 Id., at p. 17.
13 CA Decision, Rollo, pp. 32-33.
14 Id., at p. 35.
143
VOL. 463, JULY 8, 2005 143
JPL Marketing Promotions vs. Court of Appeals
13th month pay, compliance with the same is mandatory under the law. Moreover, JPL failed to show
that it was exempt from paying service incentive leave pay. JPL filed a motion for reconsideration of the
said resolution, but the same was denied on 25 January 2002.15
In the instant petition for review, JPL claims that the Court of Appeals committed reversible error in
rendering the assailed Decision and Resolution.16 The instant case does not fall under any of the
instances where separation pay is due, to wit: installation of labor-saving devices, redundancy,
retrenchment or closing or cessation of business operation,17 or disease of an employee whose
continued employment is prejudicial to him or co-employees,18 or illegal dismissal of an employee but
reinstatement is no longer feasible.19 Meanwhile, an employee who voluntarily resigns is not entitled to
separation unless stipulated in the employment contract, or the collective bargaining agreement, or is
sanctioned by established practice or policy of the employer.20 It argues that private respondents’ good
record and length of service, as well as the social justice precept, are not enough to warrant the award
of separation pay. Gonzales and Aninipot were employed by JPL for more than four (4) years, while
Abesa rendered his services for more than two (2) years, hence, JPL claims that such short period could
not have shown their worth to JPL so as to reward them with payment of separation pay. 21
_______________
 15
CA Resolution, Id., at pp. 38-40.
16
Rollo, p. 16.
17 Art. 283, Labor Code.
18 Art. 284, Id.
19 Sec. 4 (b), Rule I, Book VI of the Implementing Rules and Regulations of the Labor Code.
20
Citing Phimco Industries, Inc. v. National Labor Relations Commission, 339 Phil. 477; 273 SCRA
286 (1997); Hinatuan Mining Corporation v. National Labor Relations Commission, 268 SCRA
622 (1997).
21 Rollo, p. 18.
144
144 SUPREME COURT REPORTS ANNOTATED
JPL Marketing Promotions vs. Court of Appeals
In addition, even assuming arguendo that private respondents are entitled to the benefits awarded, the
computation thereof should only be from their first day of employment with JPL up to 15 August 1996,
the date of termination of CMC’s contract, and not up to the finality of the 27 July 2000 resolution of the
NLRC.22 To compute separation pay, 13th month pay, and service incentive leave pay up to 27 July 2000
would negate the findings of both the Court of Appeals and the NLRC that private respondents were not
unlawfully terminated.23 Additionally, it would be erroneous to compute service incentive leave pay from
the first day of their employment up to the finality of the NLRC resolution since an employee has to render
at least one (1) year of service before he is entitled to the same. Thus, service incentive leave pay should
be counted from the second year of service.24
On the other hand, private respondents maintain that they are entitled to the benefits being claimed
as per the ruling of this Court in Serrano v. NLRC, et al.25 They claim that their dismissal, while not illegal,
was tainted with bad faith.26 They allege that they were deprived of due process because the notice of
termination was sent to them only two (2) days before the actual termination.27 Likewise, the most that
JPL offered to them by way of settlement was the payment of separation pay of seven (7) days for every
year of service.28
Replying to private respondents’ allegations, JPL disagrees that the notice it sent to them was a
notice of actual termination. The said memo merely notified them of the end of merchandising for CMC,
and that they will be transferred to
_______________
22
Id., at pp. 19-20.
23 Id., at p. 22.
24 Id., at pp. 23-24.
25 380 Phil. 416; 331 SCRA 331 (2000).
26
Rollo, p. 48.
27
Id., at p. 47.
28
Id., at p. 48.
145
VOL. 463, JULY 8, 2005 145
JPL Marketing Promotions vs. Court of Appeals
other clients.29 Moreover, JPL is not bound to observe the thirty (30)-day notice rule as there was no
dismissal to speak of. JPL counters that it was private respondents who acted in bad faith when they
sought employment with another establishment, without even the courtesy of informing JPL that they
were leaving for good, much less tender their resignation.30 In addition, the offer of seven (7) days per
year of service as separation pay was merely an act of magnanimity on its part, even if private
respondents are not entitled to a single centavo of separation pay.31
The case thus presents two major issues, to wit: whether or not private respondents are entitled to
separation pay, 13th month pay and service incentive leave pay, and granting that they are so entitled,
what should be the reckoning point for computing said awards.
Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of dismissals
due to any of these reasons: (a) installation of labor saving devices; (b) redundancy; (c) retrenchment;
(d) cessation of the employer’s business; and (e) when the employee is suffering from a disease and his
continued employment is prohibited by law or is prejudicial to his health and to the health of his co-
employees. However, separation pay shall be allowed as a measure of social justice in those cases
where the employee is validly dismissed for causes other than serious misconduct or those reflecting on
his moral character, but only when he was illegally dismissed.32 In addition, Sec. 4(b), Rule I, Book VI of
the Implementing Rules to Implement the Labor Code provides for the payment of separation pay to an
employee entitled to reinstatement but the establishment where he is to be reinstated has closed or has
ceased operations or his present posi-
_______________
29 Id., at pp. 62-63.
30
Id., at p. 64.
31
Ibid.
32 Capili v. National Labor Relations Commission, 337 Phil. 210, 215; 270 SCRA 488 (1997).
146
146 SUPREME COURT REPORTS ANNOTATED
JPL Marketing Promotions vs. Court of Appeals
tion no longer exists at the time of reinstatement for reasons not attributable to the employer.
The common denominator of the instances where payment of separation pay is warranted is that
the employee was dismissed by the employer.33 In the instant case, there was no dismissal to speak of.
Private respondents were simply not dismissed at all, whether legally or illegally. What they received
from JPL was not a notice of termination of employment, but a memo informing them of the termination
of CMC’s contract with JPL. More importantly, they were advised that they were to be reassigned. At that
time, there was no severance of employment to speak of.
Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the operation of a
business or undertaking for a period not exceeding six (6) months, wherein an employee/employees are
placed on the so-called “floating status.” When that “floating status” of an employee lasts for more than
six months, he may be considered to have been illegally dismissed from the service. Thus, he is entitled
to the corresponding benefits for his separation, and this would apply to suspension either of the entire
business or of a specific component thereof.34
As clearly borne out by the records of this case, private respondents sought employment from other
establishments even before the expiration of the six (6)-month period provided by law. As they admitted
in their comment, all three of them applied for and were employed by another establishment after they
received the notice from JPL.35 JPL did not terminate their employment; they themselves severed their
_______________
33
Ibid.
34
Reynaldo Valdez v. National Labor Relations Commission, 349 Phil. 760, 766; 286 SCRA 87, 93
(1998), citing Agro Commercial Security Services Agency, Inc. v. National Labor Relations
Commission, 175 SCRA 790 (1989).
35 Rollo, p. 48.
147
VOL. 463, JULY 8, 2005 147
JPL Marketing Promotions vs. Court of Appeals
relations with JPL. Thus, they are not entitled to separation pay.
The Court is not inclined in this case to award separation pay even on the ground of compassionate
justice. The Court of Appeals relied on the cases36 wherein the Court awarded separation pay to legally
dismissed employees on the grounds of equity and social consideration. Said cases involved employees
who were actually dismissed by their employers, whether for cause or not. Clearly, the principle applies
only when the employee is dismissed by the employer, which is not the case in this instance. In seeking
and obtaining employment elsewhere, private respondents effectively terminated their employment with
JPL.
In addition, the doctrine enunciated in the case of Serrano37 cited by private respondents has
already been abandoned by our ruling in Agabon v. National Labor Relations Commission.38 There we
ruled that an employer is liable to pay indemnity in the form of nominal damages to a dismissed employee
if, in effecting such dismissal, the employer failed to comply with the requirements of due process.
However, private respondents are not entitled to the payment of damages considering that there was no
violation of due process in this case. JPL’s memo dated 13 August 1996 to private respondents is not a
notice of termination, but a mere note informing private respondents of the termination of CMC’s contract
and their re-assignment to other clients. The thirty (30)-day notice rule does not apply.
_______________
36 Philippine National Construction Corporation v. National Labor Relations Commission, 366 Phil.
678; 317 SCRA 186 (1999); United South Dockhandlers, Inc. v. National Labor Relations Commission,
et al., 267 SCRA 401 (1997); Firestone Tire and Rubber Co. of the Philippines v. Lariosa, et al., 148
SCRA 186 (1987); Rollo, pp. 32-33.
37
Supra note 25.
38
G.R. No. 158693, 17 November 2004, 442 SCRA 573.
148
148 SUPREME COURT REPORTS ANNOTATED
JPL Marketing Promotions vs. Court of Appeals
Nonetheless, JPL cannot escape the payment of 13th month pay and service incentive leave pay to
private respondents. Said benefits are mandated by law and should be given to employees as a matter
of right.
Presidential Decree No. 851, as amended, requires an employer to pay its rank and file employees
a 13th month pay not later than 24 December of every year. However, employers not paying their
employees a 13th month pay or its equivalent are not covered by said law. 39 The term “its equivalent”
was defined by the law’s implementing guidelines as including Christmas bonus, mid-year bonus, cash
bonuses and other payment amounting to not less than 1/12 of the basic salary but shall not include
cash and stock dividends, cost-of-living-allowances and all other allowances regularly enjoyed by the
employee, as well as non-monetary benefits.40
On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly
leave benefit of five (5) days with pay, enjoyed by an employee who has rendered at least one year of
service. Unless specifically excepted, all establishments are required to grant service incentive leave to
their employees. The term “at least one year of service” shall mean service within twelve (12) months,
whether continuous or broken reckoned from the date the employee started working. 41 The Court has
held in several instances that “service incentive leave is clearly demandable after one year of service.”42
Admittedly, private respondents were not given their 13th month pay and service incentive leave
pay while they were under the employ of JPL. Instead, JPL provided salaries
_______________
The law in protecting the rights of the employees authorizes neither oppression nor self-destruction
of the employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is
but recognition of the inherent economic inequality between labor and management. The intent is to
balance the scale of justice; to put the two parties on
150
150 SUPREME COURT REPORTS ANNOTATED
JPL Marketing Promotions vs. Court of Appeals
relatively equal positions. There may be cases where the circumstances warrant favoring labor over the
interests of management but never should the scale be so tilted if the result is an injustice to the
employer. Justitia nemini neganda est (Justice is to be denied to none).43
WHEREFORE, the petition is GRANTED IN PART. The Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 62631 are hereby MODIFIED. The award of separation pay is deleted.
Petitioner is ordered to pay private respondents their 13th month pay commencing from the date of
employment up to 15 August 1996, as well as service incentive leave pay from the second year of
employment up to 15 August 1996. No pronouncement as to costs.
SO ORDERED.
Puno (Chairman), Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur.
Petition granted in part, judgment and resolution modified.
Notes.—Separation pay shall be allowed as a measure of social justice only in those instances
where the employee is validly dismissed for causes other than serious misconduct or those reflecting on
his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an
offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer
may not be required to give the dismissed employee separation pay, or financial assistance, or whatever
other name it is called, on the ground of social justice. A contrary rule would have the effect of rewarding
rather than punishing the erring employee for his offense. (Philippine Long Distance Telephone Company
vs. National Labor Relations Commission, 164 SCRA 671 [1988])
_______________
43
Philippine Geothermal, Inc. v. National Labor Relations Commission, 236 SCRA 371, 379 (1994).
151

39
VOL. 463, JULY 8, 2005 151
Sec. 2, P.D. No. 851.
40
Section 3(e), Rules and Regulations Implementing P.D. No. 851. Brucal vs. Desierto
41 Sec. 3, Rule V, Book III, Rules to Implement the Labor Code.
Separation pay, equivalent to one month’s salary for every year of service, is awarded as an alternative
42 Imbuido v. National Labor Relations Commission, 385 Phil. 999, 1013; 329 SCRA 357, 368
to reinstatement when the latter is no longer an option, and is computed from the commencement of
(2000), citing Fernandez v. National Labor Relations Commission, 285 SCRA 149 (1998). employment up to the time of termination, including the imputed service for which the employee is entitled
149 to back wages, with the salary rate prevailing at the end of the period of putative service being the basis
for computation. (Reformist Union of R.B. Liner, Inc. vs. National Labor Relations Commission, 266
VOL. 463, JULY 8, 2005 149
SCRA 713 [1997])
JPL Marketing Promotions vs. Court of Appeals
which were over and above the minimum wage. The Court rules that the difference between the minimum ——o0o——
wage and the actual salary received by private respondents cannot be deemed as their 13th month pay
and service incentive leave pay as such difference is not equivalent to or of the same import as the said
benefits contemplated by law. Thus, as properly held by the Court of Appeals and by the NLRC, private
respondents are entitled to the 13th month pay and service incentive leave pay.
However, the Court disagrees with the Court of Appeals’ ruling that the 13th month pay and service
incentive leave pay should be computed from the start of employment up to the finality of the NLRC
resolution. While computation for the 13th month pay should properly begin from the first day of
employment, the service incentive leave pay should start a year after commencement of service, for it is
only then that the employee is entitled to said benefit. On the other hand, the computation for both
benefits should only be up to 15 August 1996, or the last day that private respondents worked for JPL.
To extend the period to the date of finality of the NLRC resolution would negate the absence of illegal
dismissal, or to be more precise, the want of dismissal in this case. Besides, it would be unfair to require
JPL to pay private respondents the said benefits beyond 15 August 1996 when they did not render any
service to JPL beyond that date. These benefits are given by law on the basis of the service actually
rendered by the employee, and in the particular case of the service incentive leave, is granted as a
motivation for the employee to stay longer with the employer. There is no cause for granting said
incentive to one who has already terminated his relationship with the employer.
Minimum Wage Rates
Employers Confederation of the Phils. vs. National Wages and Productivity
Commission
G.R. No. 96169. September 24, 1991.*
EMPLOYERS CONFEDERATION OF THE PHILIPPINES, petitioner, vs. NATIONAL WAGES AND
PRODUCTIVITY COMMISSION AND REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY
BOARD-NCR, TRADE UNION CONGRESS OF THE PHILIPPINES, respondents.
Labor Law; Wages; The National Wages and Productivity Commission noted that the
determination of wages has generally involved true methods, the “floor-wage” method and the “salary-
ceiling” method.—In the National Wages and Productivity Commission’s Order of November 6,1990, the
Commission noted that the determination of wages has generally involved two methods, the “floor-wage”
method and the “salary-ceiling” method.
Same; Same; Same; Republic Act No. 6727 was intended to rationalize wages. first, by providing
for full-time boards to police wages round-the-clock and second by giving the boards enough powers to
achieve this objective.—As the Commission noted, the increasing trend is toward the second mode, the
salary-cap method, which has reduced disputes arising from wage distortions (brought about, apparently,
by the floor-wage method), Of course, disputes are appropriate subjects of collective bargaining and
grievance procedures, but as the Commission observed and as we are ourselves agreed, bargaining
has helped very little in correcting wage distortions. Precisely, Republic Act No. 6727 was intended to
rationalize wages, first, by providing for fulltime boards to police wages round-the-clock, and second. by
giving the boards enough powers to achieve this objective.
Same; Same; Same; Court not convinced that the Regional Board of the National Capital Region
in decreeing an across-the-board hike performed an unlawful act of legislation.—The Court is not
convinced that the Regional Board of the National Capital Region, in decreeing an across-the-board hike,
performed an unlawful act of legislation. It is true that wage-fixing, like rate-fixing, constitutes an act
Congress; it is also true, however, that Congress may delegate the power to fix rates provided that, as
in all delegations cases, Congress leaves sufficient standards. As this Court has indicated, it is impressed
that the
________________
* NCR-01, as follows:
SECOND DIVISION.
760
780 SUPREME COURT REPORTS ANNOTATED
Employers Confederation of the Phils. vs. National Wages and Productivity
Commission
above-quoted standards are sufficient, and in the light of the floorwage method’s failure, the Court
believes that the Commission cor-rectly upheld the Regional Board of the National Capital Region.
Same; Same; Same; The Act as meant to nationalize wages that is, by having permanent boards
to decide wages rather than leaving wage determination to Congress year after year and law after law.—
lt is the Court’s thinking, reached after the Court’s own study of the Act, that the Act is meant to rationalize
wages, that is, by having permanent boards to decide wages rather than leaving wage"determination to
Congress year after year-and law-.after law. The Court is not of course saying that the Act is an effort of
Congress to pass the buck, or worse, to abdicate its duty, but simply, to leave the question of wages to
the expertise of experts.
Same; Same; Definition of.—The Labor Code defines “wage” as follows: “Wage” paid to any
employee shall mean the remuneration or earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same; which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for services rendered or to be rendered
and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging,
or other facilities customarily furnished by the employer to the employee “Fair and reasonable value”
shall not include any profit to the employer or to any person affiliated with the employer,,
PETITION for review from the decision of the National Wages and Productivity Commission,
The facts are stated in the opinion of the Court.
Sycip, Salazar, Hernandez & Gatmaitan for petitioner;
Gilbert P. Lorenzo for private respondent.
SARMIENTO, J.;
The petition is given due course and the various pleadings submitted being sufficient to aid the Court in
the proper resolution of the basic issues raised in this case, we decide it without further ado.
The Employers Confederation of the Philippines (ECOP) is
761
VOL. 201, SEPTEMBER 24, 1991 761
Employers Confederation of the Phils. vs. National Wages and Productivity
Commission
questioning the validity of Wage Order No. NCR-01-A dated October 23, 1990 of the Regional Tripartite
Wages and Productivity Board, National Capital Region, promulgated pursuant to the authority of
Republic Act No. 6727, “AN ACT TO RATIONALIZE WAGE POLICY DETERMINATION BY
ESTABLISHING THE MECHANISM AND PROPER STANDARDS THEREFOR, AMENDING FOR THE
PURPOSE ARTICLE 99 OF, AND INCORPORATING ARTICLES 120, 121, 122, 123, 124,126, AND
127 INTO, PRESIDENTIAL DECREE NO. 442 AS AMENDED, OTHERWISE KNOWN AS THE LABOR
CODE OF THE PHILIPPINES, FIXING NEW WAGE RATES, PROVIDING WAGE INCENTIVES FOR
INDUSTRIAL DISPERSAL TO THE COUNTRYSIDE, AND FOR OTHER PURPOSES," was approved
by the President on June 9,1989, Aside from providing new wage rates,1 the “Wage Rationalization Act”
also provides, among other things, for various Regional Tripartite Wages and Productivity Boards in
charge of prescribing minimum wage rates for all workers in the various regions, 2 and for a National
Wages and Productivity Commission to review, among other functions, wage levels determined by the
boards.3
On October 15, 1990, the Regional Board of the National Capital Region issued Wage Order No.
NCR-01, increasing the minimum wage by P17.00 daily in the National Capital Region.4 The Trade Union
Congress of the Philippines (TUCP) moved for reconsideration; so did the Personnel Management
Association of the Philippines (PMAP).5 ECOP opposed.
On October 23, 1990, the Board issued Wage Order No. NCR01-A, amending Wage Order No.
________________
1
Rep. Act No. 6727, sec. 4(a).
2
Supra, art. 3
3
Supra.
4 Wage Order No. NCR-01 (RTWPB) (DOLE), October 15, 1990; the Order exempts, of course,
domestics and other household servants.
5 Wage Order No. NCR-01-A (RTWPB) (DOLE), October 23, 1990.
762
762 SUPREME COURT REPORTS ANNOTATED
Employers Confederation of the Phils. vs. National Wages and Productivity
Commission
Section 1. Upon the effectivity of this Wage Order, all workers and employees in the private sector in the
National Capital Region already receiving wages above the statutory minimum wage rates up to one
hundred and twenty-five pesos (P1 25.00) per day shall also receive an increase of seventeen pesos
(P17.00) per day.
ECOP appealed to the National Wages ‘and Productivity Commission. On November 6, 1990, the
Commission promulgated an Order, dismissing. the appeal for lack of merit. On November 14, 1990, the
Commission denied.reconsideration. The Orders of the Commission (as we’ll as Wage Order No. NCR-
01-A) are the subject of this petition, in which ECOP assails the board’s grant of an “across-the-board”
wage increase to workers already being paid more than existing minimum wage rates (up to P125.00 a
day) as an alleged excess of authority, and” alleges that under the Republic Act No. 6727, the boards
may only prescribe “minimum wages,” not determine “salary ceilings/' ECOP likewise claims that
Republic Act No. 6727 is meant to promote collective bargaining as the primary mode of settling wages,
and in its opinion, the boards can not preempt collective bargaining agreements by establishing ceilings.
ECOP prays for the nullification of Wage Order No. NCR01-A and for the “reinstatement” of Wage Order
No. NCR-01 The Court directed the Solicitor General to comment on behalf of the Government, and in
the Solicitor General’s opinion, the Board, in prescribing an across-the-board hike did not, in reality,
“grant additional or other benefits to workers and employees, such as the extension of wage increases
to employees and workers already receiving more than minimum wages . . ."6 but rather, fixed minimum
wages according to the “salary-ceiling method,”
ECOP insists, in its reply, that wage-fixing is a legislative function, and Republic Act No. 6727
delegated to the regional boards no more “than the power to grant minimum wage adjustments"7 and “in
the absence of clear statutory authority,"8
________________
6Id., 76.
7Id., 91.
8
Id.
763
VOL. 201, SEPTEMBER 24, 1991 763
Employers Confederation of the Phils. vs. National Wages and Productivity
Commission
the boards may no more than adjust “floor wages."9
The Solicitor General, in his rejoinder, argues that Republic Act No. 6727 is intended to correct
“wage distortions” and the salary-ceiling method (of determining wages) is meant, precisely, to rectify
wage distortions.10
The Court is inclined to agree with the Government. In the National Wages and Productivity
Commission’s Order of November 6,1990, the Commission noted that the determination of wages has
generally involved two methods, the “floor-wage” method and the “salary-ceiling” method. We quote:
Historically, legislation involving the adjustment of the minimum wage made use of two methods. The
first method involves the fixing of determinate amount that would be added to the prevailing statutory
minimum wage. The other involves “the salary-ceiling method” whereby the wage adjustment is applied
to employees receiving a certain denominated salary ceiling. The first method was adopted in the earlier
wage orders, while the latter method was used in R.A. Nos. 6640 and 6727. Prior to this, the salary-
ceiling method was also used in no less than eleven issuances mandating the grant of cost-of-living
allowances (P.D. Nos. 525, 1123, 1614, 1634, 1678, 1713 and Wage Order Nos. 1, 2, 3, 5 and 6). The
shift from the first method to the second method was brought about by labor disputes arising from wage
distortions, a consequence of the implementation of the said wage orders. Apparently, the wage order
provisions that wage distortions shall be resolved through the grievance procedure was perceived by
legislators as ineffective in checking industrial unrest resulting from wage order implementations. With
the establishment of the second method as a practice in minimum wage fixing, wage distortion disputes
were minimized.11
As the Commission noted, the increasing trend is toward the second mode, the salary-cap method, which
has reduced disputes arising from wage distortions (brought about, apparently, by the floor-wage
method). Of course, disputes are appropriate subjects of collective bargaining and grievance procedures,
but
________________
9 Id.
10 Id., 122.
11 Id., 27.
764
764 SUPREME COURT REPORTS -ANNOTATED
Employers Confederation of the Phils. us. National Wages and Productivity
Commission
as the Commission observed and as we are ourselves agreed, bargaining has helped very little in
correcting wage distortions. Precisely, Republic Act No. 6727 was intended to rationalize wages, first, by
providing for full-time boards to police wages round-the-clock, and second, by giving the boards enough
powers to achieve this objective. The Court is of the opinion that Congress meant the boards to be
creative in resolving ;the annual question of wages without labor and management knocking on the
legislature’s door at every turn. The Court’s opinion is that if Republic No. 6727 intended the boards
alone to set floor wages, the Act would have no need for a board but an accountant to keep track of the
latest consumer price index, or better. would have Congress done it as the need arises, as the legislature,
prior to the Act, has done so for years. The fact of the matter is that the Act sought a “thinking” group of
men and women bound by statutory standards. We quote:
ART. 124. Standards/Criteria for Minimum Wage Fixing.—The regional minimum wages to be
established by the Regional Board shall be as nearly adequate as is economically feasible to maintain
the minimum standards of living necessary for the health, efficiency and general well-being of the
employees within the framework of the national economic and social development program. In the
determination of such regional minimum wages, the Regional Board shall, among other relevant factors,
consider the following:
1. "(a)The demand for living wages;
2. "(b)Wage adjustment vis-a-vis the consumer price index;
3. "(c)The cost of living and changes or increases therein;
4. "(d)The needs of workers and their families;
5. "(e)The need to induce industries to invest in the countryside;
6. "(f)Improvements in standards of living;
7. "(g)The prevailing wage levels;
8. "(h)Fair return of the capital invested and capacity to pay of employers;
9. "(i)Effects of employment generation and family income; and
10. "(j)The equitable distribution of income and wealth along the imperatives of economic and
social development."12
________________
12Rep. Act No. 6727, supra.
765
VOL. 201, SEPTEMBER 24, 1991 765
Employers Confederation of the Phils. vs. National Wages and Productivity
Commision
The Court is not convinced that the Regional Board of the National Capital Region, in decreeing an
across-the-board hike, performed an unlawful act of legislation. It is true that wagefixing, like rate-fixing,
constitutes an act Congress;13 it is also true, however, that Congress may delegate the power to fix
rates14 provided that, as in all delegations cases, Congress leaves sufficient standards. As this Court
has indicated, it is impressed that the above-quoted standards are sufficient, and in the light of the floor-
wage method’s failure, the Court believes that the Commission correctly upheld the Regional Board of
the National Capital Region.
Apparently, ECOP is of the mistaken impression that Republic Act No. 6727 is meant to “get the
Government out of the industry” and leave labor and management alone in deciding wages. The Court
does not think that the law intended to deregulate the relation between labor and capital for several
reasons: (1) The Constitution calls upon the State to protect the rights of workers and promote their
welfare;15 (2) the Constitution also makes it a duty of the State “to intervene when the common goal so
demands” in regulating property and property relations;16 (3) the Charter urges Congress to give priority
to the enactment of measures, among other things, to diffuse the wealth of the nation and to regulate the
use of property;17 (4) the Charter recognizes the “just share of labor in the fruits of production;"18 (5)
under the Labor Code, the State shall regulate the relations between labor and management;19 (6) under
Republic Act No. 6727 itself, the State is interested in seeing
________________
13
Shreveport Rate Case, 234, U.S. 342 (1914). But see Philippine Communications Satellite
Corporation v. Alcuaz, G.R. 84818, December 18, 1989,180 SCRA 218. on when rate-fixing is quasi-
judicial for purposes of determining compliance with due process.
14 Supra.
15 CONST., art II, sec. 18.
16 Supra, art, XII, sec. 6.
17 Supra, art, XIII, sec. 1.
18 Supra, sec. 3.
19
Pres. Decree No. 442, art 3.
766
 25
Rep. Act No. 6727, supra, sec. 1.
766 SUPREME COURT REPORTS ANNOTATED 26CONST., art. II, sec. 18, supra,
Employers Confederation of the Phils, vs. National Wages and Productivity 768

Commission 768 SUPREME COURT REPORTS ANNOTATED

that workers receive fair and equitable wages;20 and (7) the Constitution is primarily a document of social Johnson & Johnson (Phils.) Inc. vs. Court of Appeals,
justice, and although it has recognized the importance of the private sector,21 it has not embraced fully Paras, J., No part. Son is member of counsel for petitioner.
the concept of laissez faire22 or otherwise, relied on pure market forces to govern the economy; We can Petition denied.
not give to the Act a meaning or intent that will conflict with these basic principles.
It is the Court’s thinking, reached after the Court’s own study of the Act, that the Act is meant to
rationalize wages;that is, by having permanent boards to decide wages rather than leaving wage
determination to Congress year after year and law after law. The Court is not of course saying that’ the
Act is an effort of Congress to pass the buck, or worse, to -abdicate its duty, but simply, to leave the
question of wages to the expertise of experts. As Justice Cruz observed, "[w]ith the proliferation of
specialized activities and their attendant peculiar problems, the national legislature has found it more
necessary to entrust to administrative agencies the power of subordinate legislation” as it is called."23
The Labor Code defines “wage” as follows:
“Wage” paid to any employee shall mean the remuneration or earnings, however designated, capable of
being expressed in terms of money. whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under
a written or unwritten contract of employment for work done or to be done, or for services rendered or to
be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to the employee. “Fair and
reasonable value” shall not include any profit to the employer or to any person affiliated with the
employer.24
________________

20 Rep. Act No. 6727, supra.

21
e.g., CONST., art. II, sec. 20.
22 Philippine Association of Service Exporters v. Drilon, G.R. No. 81958, June 30, 1988, 163 SCRA
386.
23
CRUZ, PHILIPPINE POLITICAL LAW 96 (1987).
24Pres. Decree No. 442, art. 97(f).
767
VOL. 201; SEPTEMBER 24, 1991 767

Employers Confederation of the Phils. vs. National Wages and Productivity

Commission
The concept of “minimum wage” is, however, a different thing, and certainly, it means more than setting
a floor wage to upgrade existing wages, as ECOP takes it to mean. “Minimum wages” underlies the effort
of the State, as Republic Act No. 6727 expresses it, “to promote productivity-improvement and gain-
sharing measures to ensure a decent standard of living for the workers and their families; to guarantee
the rights of labor to its just share in the fruits of production; to enhance employment generation in the
countryside through industry dispersal; and to allow business and industry reasonable returns on
investment, expansion and growth,"25 and as the Constitution expresses it, to affirm “labor as a primary
social economic force."26 As the Court indicated, the statute would have no need for a board if the
question were simply “how much”. The State is concerned, in addition, that wages are not distributed
unevenly, and more important, that social justice is subserved.
It is another question, to be sure, had Congress created “roving” boards, and were that the case, a
problem of undue delegation would have ensued; but as we said, we do not see a Board (National Capital
Region) “running riot” here, and Wage Order No. NCR-01-A as an excess of authority.
It is also another question whether the salary-cap method utilized by the Board may serve the
purposes of Republic Act No. 6727 in future cases and whether that method is after all, a lasting policy
of the Board; however, it is a question on which we may only speculate at the moment. At the moment,
we find it to be reasonable policy (apparently, it has since been Government policy); and if in the future
it would be perceptibly unfair to management, we will take it up then.
WHEREFORE, premises considered, the petition is DENIED. No pronouncement as to costs.
IT IS SO ORDERED.
Melencio-Herrera (Chairman), Padilla and Regalado, JJ., concur.
________________

Kar Asia, Inc. vs. Corona
G.R. No. 154985. August 24, 2004.*
KAR ASIA, INC. and/or CELESTINO S. BARETTO, petitioners, vs. MARIO CORONA, RICKY
HEPGANO, JOHNNY COLLADOS, CONSTANTINO LAGARAS, RANEL BALANSAG, ARNOLD AVILA,
PETER ARCENAL, ARNOLD CABAHUG, BERNARD BETE, RUPERTO RESTAURO, WILLY CRUZ,
RANDY BASNILLO, ARMAN BASTE, ERNESTO ESPINA, PATRICIO AGUDELA, IRENEO BANGOY,
PALERMO AUTENTICO, GEORGE TAGAYTAY, BENITO MATUGAS, and WILFREDO ESPINA,
respondents.
Labor Law; Benefits; Respondent’s averment that the petitioner company harassed them into
signing the said payroll without giving them its cash equivalent cannot be given credence.—A close
scrutiny of the payroll for the December 1993 COLA readily disclose the signatures of the respondents
opposite their printed names and the numeric value of P654.00. Respondents’ averment that the
petitioner company harassed them into signing the said payroll without giving them its cash equivalent
cannot be given credence. Their self-serving and unsubstantiated declarations cannot overturn the
evidentiary weight of the signatures. The allegations of harassment are inadmissible as self-serving
statements and therefore cannot be repositories of truth. He who asserts not he who denies must
_______________
* scared off potential customers and caused a substantial reduction in the income of the petitioner
FIRST DIVISION.
185
VOL. 437, AUGUST 24, 2004 185
Kar Asia, Inc. vs. Corona
prove; unfortunately, the respondents miserably failed to discharge this burden.
Same; Same; All money claims arising from employer-employee relations shall be filed within 3
years from the time that the cause of action accrued; otherwise they shall be barred forever.—The
unreasonable length of time in pursuing respondents’ claim for the December 1993 COLA militates
against its grant. Article 291 of the Labor Code requires that all money claims arising from employer-
employee relations shall be filed within 3 years from the time that the cause of action accrued; otherwise
they shall be barred forever. In the present case, the respondents filed the complaint for underpayment
of wage on September 24, 1997. Thus, the action for the payment of the December 1993 COLA has
already prescribed.
Same; Same; Entries in the payroll, being entries in the course of business, enjoy the
presumption of regularity under Rule 130, Section 43 of the Rules of Court.—The affidavits of Ermina
Daray and Cristita Arana, whose verity we find no reason to suspect, confirmed the truthfulness of the
entries in the payrolls and affirmed the receipt by the respondents of their full compensation. Entries in
the payroll, being entries in the course of business, enjoy the presumption of regularity under Rule 130,
Section 43 of the Rules of Court. It is therefore incumbent upon the respondents to adduce clear and
convincing evidence in support of their claim. Unfortunately, respondents’ naked assertions without proof
in corroboration will not suffice to overcome the disputable presumption.
Same; Same; There is no hard-and-fast rule requiring that the employee’s signature in the payroll
is the only acceptable proof of payment.—It appears that the payslips for the same period bear the
signatures of the respondents plus a certification that they received the full compensation for the services
rendered. While ordinarily a payslip is only a statement of the gross monthly income of the employee,
his signature therein coupled by an acknowledgement of full compensation alter the legal complexion of
the document. The payslip becomes a substantial proof of actual payment. Moreover, there is no hard-
and-fast rule requiring that the employee’s signature in the payroll is the only acceptable proof of
payment. By implication, the respondents, in signing the payslips with their acknowledgement of full
compensation, unqualifiedly admitted the receipt thereof, including the COLA for December 1994. The
Court of Appeals erred when it placed undue reliance on the unsigned payrolls and disregarded the
signed payslips.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
186
186 SUPREME COURT REPORTS ANNOTATED
Kar Asia, Inc. vs. Corona
The facts are stated in the opinion of the Court.
Cariaga Law Offices for petitioners.
Danilo A. Cullo for respondents.
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the February 28,
2002 Decision1 of the Court of Appeals2 in CA-G.R. SP No. 57972, and its August 9, 2002 Resolution
denying petitioners’ motion for reconsideration.
The undisputed facts are as follows:
Respondents, regular employees of petitioner KAR ASIA, Inc., an automotive dealer in Davao City,
filed on September 24, 1997 a complaint3 for underpayment of wages and attorney’s fees before Branch
XI, Regional Arbitration Branch of Davao City. They claimed that they were not paid their cost of living
allowance (COLA), as mandated by the Regional Tripartite and Wages Productivity Board (RTWPB) XI
Wage Order No. 3, for the months of December 1993 and December 1994, and prayed that petitioner
be ordered to pay the same with 1% interest per month, as well as attorney’s fees equivalent to 10% of
the total monetary award.
Petitioner company and its president Celestino Barretto countered that the complaint was false and
malicious; that respondents had already been paid their COLA for the said periods; and that respondents
company estimated at, more or less, P1,000,000.00 when they picketed and put up streamers with
insulting and derogatory slogans. Petitioners presented in evidence the payrolls for December 1993 and
December 1994 showing that the respondents acknowledged in writing the receipt of their COLA, and
the affidavits of Ermina Daray and Cristina Arana, cashiers of KAR ASIA, refuting respondents’ claim
that they were made to sign blank pieces of paper.
_______________
1
Rollo p. 45.
2 Penned by Associate Justice Romeo A. Brawner (Chairman), concurred in by Associate Justices
Eliezer de los Santos and Rebecca de Guia-Salvador, Special Thirteenth Division, Court of Appeals.
3 CA Rollo, p. 64.
187
VOL. 437, AUGUST 24, 2004 187
Kar Asia, Inc. vs. Corona
On August 31, 1998, the Labor Arbiter rendered a decision in favor of petitioners, the dispositive portion
of which reads:
“WHEREFORE, judgment is hereby rendered:
1. 1.Ordering the complainants jointly and severally to pay respondents the sum of P50,000.00
representing attorney’s fee of respondents;
2. 2.Ordering complainants jointly and severally to pay respondent Celestino S. Barretto the sum
of P150,000.00 in concept of moral damages;
3. 3.Ordering the complainants jointly and severally to pay respondents the sum of P5,000.00
as litigation expenses.
“SO ORDERED.”4
Respondents appealed to the NLRC, which affirmed the decision of the Labor Arbiter but deleted the
award of moral damages, attorney’s fees, and litigation expenses for lack of sufficient basis in a
Resolution5 dated August 23, 1999.
Respondents filed a petition for certiorari with the Court of Appeals, which reversed the decision of
the NLRC and ordered petitioner company to pay the respondents the P25.00 per day COLA for the
period December 1 to 31, 1994, plus interest thereon at the rate of 1% per month computed from the
time the same was withheld from respondents up to the time they were actually paid the respective sums
due them.
In support of its decision, the appellate court stated:6
As aforesaid, the claim for the December 01 to 31, 1993 COLA had already prescribed at the time the
complaint for underpayment was filed with the labor arbiter. However, there appears to be insufficient
evidence in the records to justify a finding that COLA for the period December 01 to 31, 1994 had already
been paid. The December 01 to 15 and 16 to 31, 1994 payroll adduced as evidence of payment does
not meet the “substantial evidence” test. The same does not bear the signatures of the respondent
company’s employees acknowledging receipt of the same amount. Moreover, the same was signed by
Ermina I. Daray, the paymaster and private respondent Celestino S. Barretto, the president cum C.E.O.
of respondent company and the same was not covered by any affidavit of either signatory that the
required COLA had already been actually paid, the payroll pre-
_______________
4
Rollo, p. 158.
5 Id., p. 203.
6 Id., p. 50.
188
188 SUPREME COURT REPORTS ANNOTATED
Kar Asia, Inc. vs. Corona
sented being merely the copy approved for payment, and not the copy disclosing actual payment.
Hence this petition for review based on the following grounds:
1. 1.IN ITS ASSAILED DECISION, THE HONORABLE COURT OF APPEALS MADE A
MISAPPREHENSION OF FACTS AND IT PREMISED ITS FINDING OF FACT ON A
SUPPOSED ABSENCE OF EVIDENCE BUT THIS IS CONTRADICTED BY THE
EVIDENCE ON RECORD CONSIDERING THAT:
1. a.THE PRESIDENT AND CEO EXECUTED THE POSITION PAPER UNDER OATH WHERE
THE PAYROLL EVIDENCING PAYMENT OF THE DECEMBER 1994 COLA, WHICH HE
ALSO SIGNED, WAS ANNEXED AND ATTACHED, HENCE THERE WAS NO NEED FOR
HIM TO MAKE A SEPARATE AFFIDAVIT;
2. b.THE PAYMASTER CERTIFIED IN EACH PAGE OF THE PAYROLL THAT SHE
HAD ACTUALLY PAID THE AMOUNTS TO THE PERSONS LISTED IN THE DECEMBER
1994 PAYROLL THAT INCLUDED HEREIN RESPONDENTS. HENCE, THE PAYROLL IS
NOT MERELY AN APPROVAL FOR PAYMENT BUT IS AN EVIDENCE
THAT ACTUAL PAYMENT WAS MADE.
3. c.THE LABOR ARBITER CONDUCTED A CLARIFICATORY HEARING WHEREIN THE
CASHIERS OF PETITIONER, ONE OF WHOM WAS THE PAYMASTER REFERRED TO
ABOVE, CONFIRMED THAT THEY HAVE ACTUALLY PAID THE RESPONDENTS THEIR
ALLEGED UNPAID COLA.
1. 2.THE HONORABLE COURT OF APPEALS EXCEEDED THE LIMITS OF ITS POWER TO
REVIEW THE ACTS OF THE LABOR ARBITER AND THE NLRC BY NOT CONFINING
ITSELF IN DETERMINING WHETHER THE SAID QUASI-JUDICIAL BODIES LACKED OR
ACTED IN EXCESS OF JURISDICTION OR COMMITTED GRAVE ABUSE OF
DISCRETION BUT PROCEEDED TO INQUIRE ON THE CORRECTNESS OF THE
EVALUATION OF EVIDENCE BY THE SAID AGENCIES WHICH IS BEYOND THE
OFFICE OF AN EXTRAORDINARY WRIT OF CERTIORARI.7
In support of the first assigned error, petitioners argue that the factual findings of the Court of Appeals
are in conflict with the evidence on record and those of the Labor Arbiter and the NLRC. They contend
that the proceedings and pleadings before the Labor
_______________
7Id., pp. 29-30.
189
VOL. 437, AUGUST 24, 2004 189
Kar Asia, Inc. vs. Corona
Arbiter and the NLRC showed that the respondents have abandoned their claim for non-payment of the
December 1994 COLA. They insist that in their position paper and Memorandum on Appeal, the
respondents only demanded the payment of the December 1993 COLA but not the December 1994
COLA. They further insist that there is sufficient evidence that the respondents had already been paid
their COLA.
Anent the second assigned error, petitioners argue that the respondents having filed a petition for
certiorari under Rule 65 of the Rules of Court, the Court of Appeals should have limited the exercise of
its judicial review to issues of want of jurisdiction and/or grave abuse of discretion on the part of the Labor
Arbiter and the NLRC, instead of evaluating the correctness and sufficiency of the evidence upon which
the labor tribunals based their decisions.
The issue is simple: whether or not the petitioner company paid the respondents the COLA for
December 1993 and December 1994 as mandated by RTWPB XI Wage Order No. 3.
We find merit in the petition.
A close scrutiny of the payroll for the December 1993 COLA8 readily disclose the signatures of the
respondents opposite their printed names and the numeric value of P654.00. Respondents’ averment
that the petitioner company harassed them into signing the said payroll without giving them its cash
equivalent cannot be given credence. Their self-serving and unsubstantiated declarations cannot
overturn the evidentiary weight of the signatures. The allegations of harassment are inadmissible as self-
serving statements and therefore cannot be repositories of truth. He who asserts not he who denies must
prove; unfortunately, the respondents miserably failed to discharge this burden. We also agree with the
observation of the Labor Arbiter that in 1993 there was no labor dispute since the labor unrest took place
only in the later part of 1997. Hence, there was no reason for management to harass its employees.
More importantly, the unreasonable length of time in pursuing respondents’ claim for the December
1993 COLA militates against its grant. Article 291 of the Labor Code requires that all money claims
arising from employer-employee relations shall be filed within 3 years from the time that the cause of
action accrued; oth-
_______________
8CA Rollo, Annexes “2”-“4”, pp. 159-161.
190
190 SUPREME COURT REPORTS ANNOTATED
Kar Asia, Inc. vs. Corona
erwise they shall be barred forever. In the present case, the respondents filed the complaint for
underpayment of wage on September 24, 1997. Thus, the action for the payment of the December 1993
COLA has already prescribed.
With respect to the December 1994 COLA, we find that the respondents alleged its non-payment
only in the complaint. Subsequent pleadings reveal that they opted to pursue their demand only for
December 1993 COLA and forego that of the December 1994. Even assuming that the neglect by the
respondents in asserting their claim for the December 1994 COLA does not amount to an abandonment
on the ground that they should not be deprived of their rightful monetary claims if they were so entitled,
still the paucity of evidence to substantiate their bare assertions negates such an award.
The payrolls9 for December 1 to 15, 1994 and December 16 to 31, 1994 indicate an allowance of
P327.00 for each period, or a total of P654.00 for the entire month. However, a casual observation of the
payroll for the December 1993 COLA will also show that the respondents signed for the amount of
P654.00. Also, the allowances appearing in the two separate payslips10 for December 1 to 15, 1994 and
December 16 to 31, 1994 sum up to a total of P654.00. Although the numeric figures in the December
1994 payroll and the payslips for the same period were denominated merely as allowances while those
in the December 1993 payroll were specifically identified as COLA, the fact that they add up to the same
figure, i.e., P654.00, is not a coincidence. Whether designated merely as an allowance or COLA, it is
unmistakable that they all represent the cost of living allowance for the given periods under RTWPB XI
Wage Order No. 3.
Moreover, the affidavits of Ermina Daray and Cristita Arana, whose verity we find no reason to
suspect, confirmed the truthfulness of the entries in the payrolls and affirmed the receipt by the
respondents of their full compensation. Entries in the payroll, being entries in the course of business,
enjoy the presumption of regularity under Rule 130, Section 43 of the Rules of Court. It is therefore
incumbent upon the respondents to adduce clear and convincing evidence in support of their claim.
Unfortunately, re-
_______________
9CA Rollo, Annexes “5”-“14”, pp. 162-171.
10Rollo, Annexes “P” to “P-17”, pp. 290-306.
191
 VOL. 437, AUGUST 24, 2004 191

Kar Asia, Inc. vs. Corona

spondents’ naked assertions without proof in corroboration will not suffice to overcome the disputable
presumption.
In disputing the probative value of the payrolls for December 1994, the appellate court observed
that the same contain only the signatures of Ermina Daray and Celestino Barreto, the paymaster and the
president, respectively. It further opined that the payrolls presented were only copies of the approved
payment, and not copies disclosing actual payment.
The December 1994 payrolls11 contain a computation of the amounts payable to the employees for
the given period, including a breakdown of the allowances and deductions on the amount due, but the
signatures of the respondents are conspicuously missing. Ideally, the signatures of the respondents
should appear in the payroll as evidence of actual payment. However, the absence of such signatures
does not necessarily lead to the conclusion that the December 1994 COLA was not received. It appears
that the payslips12 for the same period bear the signatures of the respondents plus a certification that
they received the full compensation for the services rendered. While ordinarily a payslip is only a
statement of the gross monthly income of the employee, his signature therein coupled by an
acknowledgement of full compensation alter the legal complexion of the document. The payslip becomes
a substantial proof of actual payment. Moreover, there is no hard-and-fast rule requiring that the
employee’s signature in the payroll is the only acceptable proof of payment. By implication, the
respondents, in signing the payslips with their acknowledgement of full compensation, unqualifiedly
admitted the receipt thereof, including the COLA for December 1994. The Court of Appeals erred when
it placed undue reliance on the unsigned payrolls and disregarded the signed payslips.
Factual findings by quasi-judicial agencies, such as the National Labor Relations Commission,
which have acquired expertise because their jurisdiction is confined to specific matters, are generally
accorded not only respect but even finality.13
_______________

11
Supra, note 9.
12
Supra, note 10.
13
Columbus Philippine Bus Corporation v. National Labor Relations Commission, G.R. Nos.
114858-59, 7 September 2001, 364 SCRA 606; Conti v. National Labor Relations Commission, G.R. No.
119253, 10 April 1997, 271 SCRA 114.
192
192 SUPREME COURT REPORTS ANNOTATED

Re: Habitual Tardiness of Julie M. Maycacayan, RTC, Br. 165, Pasig City
WHEREFORE, based on the foregoing, the petition is GRANTED. The February 28, 2002 decision of
the Court of Appeals in CA-G.R. SP No. 57972 is REVERSED and SET ASIDE. The Decision of the
NLRC dated August 23, 1999 dismissing respondents’ claims of unpaid COLA for December 1993 and
December 1994, and deleting the awards for moral damages, attorney’s fees and litigation expenses for
lack of sufficient basis, is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Davide, Jr., C.J., Quisumbing, Carpio and Azcuna, JJ., concur.
Carpio, J., On Official Leave.
Petition granted, judgment reversed and set aside.
Note.—The long inaction of the employees to file their claim for unpaid wages cast doubts as to the
veracity of their claim. (Aklan Electric Cooperative Incorporated vs. National Labor Relations
Commission, 323 SCRA 258 [2000])

——o0o——

G & M (Phils.), Inc. vs. Cruz
G.R. No. 140495. April 15, 2005.*
G & M (PHILS.), INC., petitioner, vs. EPIFANIO CRUZ, respondent.
Labor Law; 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 Supreme Court when supported by substantial evidence.—This petition mainly involves factual
issues, i.e., whether or not there is evidence on record to support the findings of the Labor Arbiter, the
NLRC and the Court of Appeals that respondent is entitled to the payment of salary differential and
unpaid wages. This calls for a re-examination of the evidence, which the Court cannot entertain. As
stated earlier, 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 Arbiter and the Court of Appeals
concur.
Same; The burden of proving payment of monetary claims rests on the employer.—The rule is
that the burden of proving payment of monetary claims rests on the employer, in this case, herein peti-
_______________
* Juan De Dios Educational Foundation, G.R. No. 143341, May 28, 2004, 430 SCRA 193, 205-206.
SECOND DIVISION.
216
216 SUPREME COURT REPORTS ANNOTATED
G & M (Phils.), Inc. vs. Cruz
tioner, it being the employment agency or recruitment entity, and agent of the foreign principal,
Salim Al Yami Est., which recruited respondent. In Jimenez vs. NLRC, which involves a claim for unpaid
wages/commissions, separation pay and damages against an employer, the Court ruled that where a
person is sued for a debt admits that the debt was originally owed, and pleads payment in whole or in
part, it is incumbent upon him to prove such payment. This is based on the principle of evidence that
each party must prove his affirmative allegations. Since petitioner asserts that respondent has already
been fully paid of his stipulated salary, the burden is upon petitioner to prove such fact of full payment.
Same; As a general rule, the Supreme Court is not duty-bound to delve into the accuracy of the
NLRC’s factual findings in the absence of a clear showing that these were arbitrary and bereft of any
rational basis.—With regard to the admissibility of the pay slips, both the Labor Arbiter and the NLRC
found that it was admissible as evidence. As a general rule, the Court is not duty-bound to delve into the
accuracy of the NLRC’s factual findings in the absence of a clear showing that these were arbitrary and
bereft of any rational basis. In the present case, petitioner failed to demonstrate any arbitrariness or lack
of rational basis on the part of the NLRC.
Same; Proceedings before the NLRC are not covered by the technical rules of evidence and
procedure.—Article 221 of the Labor Code provides that proceedings before the NLRC are not covered
by the technical rules of evidence and procedure. The probative value of the copy of the pay slips is aptly
justified by the NLRC, as follows: . . . the payslips are original duplicates of computerized
payslips issued by the employer, Salim Al Yami Est., to its workers which contain entries such as pay
date, employee’s I.D. number, employee name, category, basic rate, overtime hours and other relevant
information, including an itemization of earnings (basic pay, overtime pay, meal allowance for the period
covered) and deductions. The fact that the payslips are not authenticated will not militate against
complainant’s claim, considering that in presenting the payslips, complainant has established the fact of
underpayment, and the burden has shifted to the respondent to prove that complainant was totally
compensated for actual services rendered.
217
VOL. 456, APRIL 15, 2005 217
G & M (Phils.), Inc. vs. Cruz
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Fernandez, Panganiban, Beloso, Saldivar & Associates for petitioner.
AUSTRIA-MARTINEZ, J.:
The well-entrenched rule, especially in labor cases, is that findings of fact of quasi-judicial bodies, like
the National Labor Relations Commission (NLRC), are accorded with respect, even finality, if supported
by substantial evidence. Particularly when passed upon and upheld by the Court of Appeals, they are
binding and conclusive upon the Supreme Court and will not normally be disturbed.1
The Court finds no reason in this case to depart from such doctrine.
Petitioner G & M (Phils.), Inc. recruited respondent Cruz as trailer driver for its foreign principal,
Salim Al Yami Est., for a period of two years, and with a stipulated monthly salary of US$625, starting
June 6, 1990. Respondent alleged that when he arrived in the Kingdom of Saudi Arabia, he was made
to sign an employment contract in blank and his salary was reduced to SR604.00. Seven months into
employment, his employer deported him on December 28, 1990. According to respondent, the cause for
his dismissal was his complaint for sub-human working conditions, non-payment of wages and overtime
pay, salary deduction and change of employer. Hence, he filed with the Labor Arbiter an
Affidavit/Complaint against petitioner for illegal dismissal, underpayment and non-payment of wages,
and refund of transportation expenses. Respondent claims that he was only paid in an
_______________
1 San Juan De Dios Educational Foundation Employees Union-Alliance of Filipino Workers vs. San
218
218 SUPREME COURT REPORTS ANNOTATED
G & M (Phils.), Inc. vs. Cruz
amount equivalent to five months salary and he did not receive his salary for the last two months.
Respondent submitted a copy of his pay slip showing the amount of SR604.00 as his basic salary. 2
Petitioner contends that respondent abandoned his job when he joined an illegal strike and refused
to report for work, constituting a breach of his employment contract and a valid cause for termination of
employment. Petitioner also claims that the pay slip submitted by respondent is inadmissible because
the original copy was not presented and that its existence, due execution, genuineness and authenticity
were not established.3
The Labor Arbiter found merit in petitioner’s claim that respondent abandoned his job, but
nevertheless granted respondent’s claim for underpayment of wages and two months unpaid salary. The
dispositive portion of the Labor Arbiter’s decision reads:
“WHEREFORE, premises considered, the charge of illegal dismissal is hereby denied for lack of merit.
However, respondent G & M (Phils.), Inc., is hereby ordered to pay within ten (10) days from receipt
hereof, herein complainant Epifanio Cruz, the sums of P77,455.00 to be adjusted as earlier stated, and
US$1,250.00 or its peso equivalent at the time of payment.
SO ORDERED.”4
On partial appeal to the NLRC, the same was dismissed per Resolution dated June 10, 1998, with the
following dispositive portion:
“WHEREFORE, the appeal is Dismissed for lack of merit. Respondent G & M (Phils.), Inc., and Salim Al
Yami Est., are hereby ordered jointly and severally liable to pay complainant Epifanio Cruz
_______________
2 CA Rollo, p. 34.
3 Id., pp. 35-36, Labor Arbiter’s Decision dated October 29, 1997.
4 Id., pp. 38-39.
219
VOL. 456, APRIL 15, 2005 219
G & M (Phils.), Inc. vs. Cruz
the Philippine Peso equivalent at the time of actual payment of the following sums:
1. a)THREE THOUSAND ONE HUNDRED TWENTY FIVE US DOLLARS (US$3,125.00) less
THREE THOUSAND TWENTY SAUDI RIYALS (SR3,020.000) representing salary
differentials for five months; and
2. b)ONE THOUSAND TWO HUNDRED FIFTY US DOLLARS (US$1,250.00) representing
unpaid salaries for two (2) months.
 Other dispositions of the appealed Decision stand AFFIRMED.
SO ORDERED.”5
Petitioner filed a special civil action for certiorari in the Court of Appeals, docketed as CA-G.R. SP No.
49729, but it was dismissed for lack of merit.6
Hence, this petition for review on certiorari under Rule 45 of the Rules of Court, based on the
following grounds:
THE COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT WITH THE RESPONDENT’S
ADMISSION OF RECEIPT OF THE PAYMENTS OF HIS SALARIES ALTHOUGH ALLEGEDLY SHORT
OF WHAT WAS STIPULATED IN HIS CONTRACT—THE “BURDEN OF EVIDENCE” IS NOW SHIFTED
UPON HIM TO SHOW CONCRETE PROOF THAT INDEED HE WAS SHORTCHANGED OF HIS
SALARIES.
CONTRARY TO THE COURT OF APPEAL’S [sic] CONCLUSION, THE “PAYROLL ISSUE” IS OF
GREAT IMPORTANCE IN THE DETERMINATION OF THE ISSUES IN THE CASE AT BAR INASMUCH
AS IT IS THE RESPONDENT WHO HAS THE BURDEN OF PRESENTING EVIDENCE OF SHORT
PAYMENT AFTER HAVING ADMITTED TO HAVE RECEIVED CERTAIN AMOUNTS FOR HIS
SALARIES.7
_______________
5
Id., pp. 23-24.
6
Id., p. 64, Court of Appeals Decision dated June 7, 1999, penned by Associate Justice Portia Aliño-
Hormachuelos, with Associate Justices Bernardo P. Abesamis and Eloy R. Bello, Jr., concurring.
7 Rollo, p. 13.
220
220 SUPREME COURT REPORTS ANNOTATED
G & M (Phils.), Inc. vs. Cruz
This petition mainly involves factual issues, i.e., whether or not there is evidence on record to support
the findings of the Labor Arbiter, the NLRC and the Court of Appeals that respondent is entitled to the
payment of salary differential and unpaid wages. This calls for a re-examination of the evidence, which
the Court cannot entertain. As stated earlier, 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 Arbiter
and the Court of Appeals concur.8
Nevertheless, even if the Court delves into the issues posed by petitioner, there is still no reason to
grant the petition.
It was the finding of the Court of Appeals that it is the burden of petitioner to prove that the salaries
paid by its foreign principal complied with the contractual stipulations of their agency-worker agreement.
Since petitioner failed to discharge such burden, then it was correct for the NLRC to rely on respondent’s
claim of underpayment.9
The Court of Appeals also ruled that since the positive testimony of respondent, as creditor, is
sufficient to prove non-payment even without the indefinite testimony of petitioner, as debtor, then the
payroll (pay slip), presented by respondent to prove that he only received the amount of SR604.00 as
basic monthly salary, is immaterial.10
Petitioner, however, insists that since respondent already admitted that his employer paid him, albeit
short of what was stipulated upon, then petitioner has no more obligation to show that respondent was
paid, and it now rests upon re-
_______________
8Stamford Marketing Corp. vs. Julian, G.R. No. 145496, February 24, 2004, 423 SCRA 633, 651.
9CA Rollo, p. 63.
10Id., pp. 63-64.
221
VOL. 456, APRIL 15, 2005 221
G & M (Phils.), Inc. vs. Cruz
spondent to prove underpayment, and the pay slip submitted by respondent, which is of “questionable
authenticity,” is not enough to prove the same.11
The rule is that the burden of proving payment of monetary claims rests on the employer, 12 in this
case, herein petitioner, it being the employment agency or recruitment entity, and agent of the foreign
principal, Salim Al Yami Est.,13 which recruited respondent. In Jimenez vs. NLRC,14 which involves a
claim for unpaid wages/commissions, separation pay and damages against an employer, the Court ruled
that where a person is sued for a debt admits that the debt was originally owed, and pleads payment in
whole or in part, it is incumbent upon him to prove such payment. This is based on the principle of
evidence that each party must prove his affirmative allegations. Since petitioner asserts that respondent
has already been fully paid of his stipulated salary, the burden is upon petitioner to prove such fact of full
payment.
In this case, while respondent may have admitted that he has actually been paid the amount of
SR604.00 as monthly salary, it does not discharge petitioner from proving full payment of the stipulated
monthly salary of US$625.00 based on the Agency-Worker Agreement. Respondent’s admission that
some payments have been made does not change the burden of proof. Petitioner still has the burden of
establishing payments beyond those admitted by respondent.15
Thus, it was stated in the Jimenez case that:
_______________
11
Rollo, p. 14.
12
Villar vs. National Labor Relations Commission, G.R. No. 130935, May 11, 2000, 331 SCRA 686,
695.
13 MC Engineering, Inc. vs. National Labor Relations Commission, G.R. No. 142314, June 28,
2001, 360 SCRA 183, 190; Royal Crowne Internationale vs. National Labor Relations Commission, G.R.
No. 78085, October 16, 1989, 178 SCRA 569, 575-576.
14 G.R. No. 116960, April 2, 1996, 256 SCRA 84.
15
Jimenez case, supra, at pp. 89-90.
222
222 SUPREME COURT REPORTS ANNOTATED
G & M (Phils.), Inc. vs. Cruz
As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must
allege non-payment, the general rule is that the burden rests on the defendant to prove payment, rather
than on the plaintiff to prove non-payment. The debtor has the burden of showing with legal certainty that
the obligation has been discharged by payment.
When the existence of a debt is fully established by the evidence contained in the record, the burden
of proving that it has been extinguished by payment devolves upon the debtor who offers such a defense
to the claim of the creditor. Where the debtor introduces some evidence of payment, the burden of going
forward with the evidence—as distinct from the general burden of proof—shifts to the creditor, who is
then under a duty of producing some evidence to show non-payment.
Petitioner merely denied respondent’s claim of underpayment. It did not present any controverting
evidence to prove full payment. Hence, the findings of the Labor Arbiter, the NLRC and the Court of
Appeals that respondent was not fully paid of his wages stand.
The positive testimony of a creditor may be sufficient of itself to show non-payment, even when met by
indefinite testimony of the debtor. Similarly, the testimony of the debtor may also be sufficient to show
payment, but, where his testimony is contradicted by the other party or by a disinterested witness, the
issue may be determined against the debtor since he has the burden of proof. The testimony of the
debtor creating merely an inference of payment will not be regarded as conclusive on that issue.
Hence, for failure to present evidence to prove payment, petitioners defaulted in their defense and
in effect admitted the allegations of private respondents.16
With regard to the admissibility of the pay slips, both the Labor Arbiter and the NLRC found that it was
admissible as evidence. As a general rule, the Court is not duty-bound to delve into the accuracy of the
NLRC’s factual findings in the
_______________
16Id., pp. 90-91.
223
VOL. 456, APRIL 15, 2005 223
G & M (Phils.), Inc. vs. Cruz
absence of a clear showing that these were arbitrary and bereft of any rational basis. 17 In the present
case, petitioner failed to demonstrate any arbitrariness or lack of rational basis on the part of the NLRC.18
 Article 221 of the Labor Code provides that proceedings before the NLRC are not covered by the
technical rules of evidence and procedure. The probative value of the copy of the pay slips is aptly
justified by the NLRC, as follows:
. . . the payslips are original duplicates of computerized payslips issued by the employer, Salim Al
Yami Est., to its workers which contain entries such as pay date, employee’s I.D. number, employee
name, category, basic rate, overtime hours and other relevant information, including an itemization of
earnings (basic pay, overtime pay, meal allowance for the period covered) and deductions. The fact that
the payslips are not authenticated will not militate against complainant’s claim, considering that in
presenting the payslips, complainant has established the fact of underpayment, and the burden has
shifted to the respondent to prove that complainant was totally compensated for actual services
rendered.19 (Emphasis supplied)
WHEREFORE, the petition is DENIED for lack merit.
SO ORDERED.
Puno (Chairman), Callejo, Sr., Tinga and Chico-Nazario, JJ., concur.
Petition denied.
Notes.—The right of an employee to demand for separation pay and backwages is always premised
on the fact that
_______________

17
Hacienda Fatima vs. National Federation of Sugarcane Workers-Food and General Trade, G.R.
No. 149440, January 28, 2003, 396 SCRA 518, 527-528.
18 Tan vs. National Labor Relations Commission, G.R. No. 128290, November 24, 1998, 299 SCRA

169, 179.
19 CA Rollo, pp. 21-22.

224
224 SUPREME COURT REPORTS ANNOTATED

Korea Exchange Bank vs. Gonzales

the employee was terminated either legally or illegally. (Jo Cinema Corporation vs. Abellana, 360 SCRA
142 [2001])
Judicial review of the decisions of the NLRC by way of a special civil action for certiorari under Rule
65 is confined only to issues of want or excess of jurisdiction and grave abuse of discretion on the part
of the tribunal rendering them. (Sea Power Shipping Enterprises, Inc. vs. Court of Appeals, 360 SCRA
173 [2001])

——o0o——

G.R. No. 146530. January 17, 2005.*
PEDRO CHAVEZ, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, SUPREME
PACKAGING, INC. and ALVIN LEE, Plant Manager, respondents.
Labor Law; Elements of an employer-employee relationship.—The elements to determine the
existence of an employment relationship are: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee’s
conduct. The most important element is the employer’s control of the employee’s conduct, not only as to
the result of the work to be done, but also as to the means and methods to accomplish it. All the four
elements are present in this case.
Same; Same; Benefits; Wages; Definition of Wages.—Wages are defined as “remuneration or
earnings, however designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece or commission basis, or other method of calcu-
_______________
* SECOND DIVISION.
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VOL. 448, JANUARY 17, 2005 479
Chavez vs. National Labor Relations Commission
lating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for service rendered or to be rendered.” That the
petitioner was paid on a per trip basis is not significant. This is merely a method of computing
compensation and not a basis for determining the existence or absence of employer-employee
relationship. One may be paid on the basis of results or time expended on the work, and may or may not
acquire an employment status, depending on whether the elements of an employer-employee
relationship are present or not. In this case, it cannot be gainsaid that the petitioner received
compensation from the respondent company for the services that he rendered to the latter.
Same; Same; Same; Same; Under the Rules Implementing the Labor Code, every employer is
required to pay his employees by means of payroll.—Under the Rules Implementing the Labor Code,
every employer is required to pay his employees by means of payroll. The payroll should show, among
other things, the employee’s rate of pay, deductions made, and the amount actually paid to the employee.
Interestingly, the respondents did not present the payroll to support their claim that the petitioner was not
their employee, raising speculations whether this omission proves that its presentation would be adverse
to their case.
Same; Same; Dismissals; Respondent’s power to dismiss the petitioner was inherent in the fact
that they engaged the services of the petitioner as truck driver.—The respondents’ power to dismiss the
petitioner was inherent in the fact that they engaged the services of the petitioner as truck driver. They
exercised this power by terminating the petitioner’s services albeit in the guise of “severance of
contractual relation” due allegedly to the latter’s breach of his contractual obligation.
Same; Same; Same; While an independent contractor enjoys independence and freedom from
the control and supervision of his principal, an employee is subject to the employer’s power to control
the means and methods by which the employee’s work is to be performed and accomplished.—Of the
four elements of the employer-employee relationship, the “control test” is the most important. Compared
to an employee, an independent contractor is one who carries on a distinct and independent business
and undertakes to perform the job, work, or service on its own account and under its
480
480 SUPREME COURT REPORTS ANNOTATED
Chavez vs. National Labor Relations Commission
own responsibility according to its own manner and method, free from the control and direction
of the principal in all matters connected with the performance of the work except as to the results thereof.
Hence, while an independent contractor enjoys independence and freedom from the control and
supervision of his principal, an employee is subject to the employer’s power to control the means and
methods by which the employee’s work is to be performed and accomplished.
Same; Same; Same; The employment status of a person is defined and prescribed by law and
not by what the parties say it should be.—It bears stressing that the existence of an employer-employee
relationship cannot be negated by expressly repudiating it in a contract and providing therein that the
employee is an independent contractor when, as in this case, the facts clearly show otherwise. Indeed,
the employment status of a person is defined and prescribed by law and not by what the parties say it
should be.
Same; Same; Same; Abandonment; As a rule, the employer bears the burden to prove that the
dismissal was for a valid and just cause; Factors to constitute abandonment; A charge of abandonment
is totally inconsistent with the immediate filing of a complaint for illegal dismissal more so when it includes
a prayer for reinstatement.—As a rule, the employer bears the burden to prove that the dismissal was
for a valid and just cause. In this case, the respondents failed to prove any such cause for the petitioner’s
dismissal. They insinuated that the petitioner abandoned his job. To constitute abandonment, these two
factors must concur: (1) the failure to report for work or absence without valid or justifiable reason; and
(2) a clear intention to sever employer-employee relationship. Obviously, the petitioner did not intend to
sever his relationship with the respondent company for at the time that he allegedly abandoned his job,
the petitioner just filed a complaint for regularization, which was forthwith amended to one for illegal
dismissal. A charge of abandonment is totally inconsistent with the immediate filing of a complaint for
illegal dismissal, more so when it includes a prayer for reinstatement.
Same; Same; Same; The negligence, to warrant removal from service, should not merely be
gross but also habitual.—Neither can the respondents’ claim that the petitioner was guilty of gross
negligence in the proper maintenance of the truck constitute a valid and
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VOL. 448, JANUARY 17, 2005 481
Chavez vs. National Labor Relations Commission
just cause for his dismissal. Gross negligence implies a want or absence of or failure to exercise
slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences
without exerting any effort to avoid them. The negligence, to warrant removal from service, should not
merely be gross but also habitual. The single and isolated act of the petitioner’s negligence in the proper
maintenance of the truck alleged by the respondents does not amount to “gross and habitual neglect”
warranting his dismissal.
Same; Same; Same; The lack of a valid and just cause in terminating the services of the petitioner
renders his dismissal illegal.—The lack of a valid and just cause in terminating the services of the
petitioner renders his dismissal illegal. Under Article 279 of the Labor Code, an employee who is unjustly
dismissed is entitled to reinstatement, without loss of seniority rights and other privileges, and to the
payment of full backwages, inclusive of allowances, and other benefits or their monetary equivalent,
computed from the time his compensation was withheld from him up to the time of his actual
reinstatement.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Danilo S. Capuli for petitioner.
Tan, Acut & Lopez for private respondents.
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the Resolution1 dated December 15, 2000
of the Court of Appeals (CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485. The
assailed resolution reinstated the Decision dated July 10, 1998 of the National Labor Relations
Commission (NLRC), dismissing the complaint for illegal
_______________
1 Penned by Associate Justice Oswaldo D. Agcaoili (retired), with Associate Justices Renato C.
Dacudao and Andres B. Reyes, Jr., concurring.
482
482 SUPREME COURT REPORTS ANNOTATED
Chavez vs. National Labor Relations Commission
dismissal filed by herein petitioner Pedro Chavez. The said NLRC decision similarly reversed its earlier
Decision dated January 27, 1998 which, affirming that of the Labor Arbiter, ruled that the petitioner had
been illegally dismissed by respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
 The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons
and other packaging materials for export and distribution. It engaged the services of the petitioner, Pedro
Chavez, as truck driver on October 25, 1984. As such, the petitioner was tasked to deliver the respondent
company’s products from its factory in Mariveles, Bataan, to its various customers, mostly in Metro
Manila. The respondent company furnished the petitioner with a truck. Most of the petitioner’s delivery
trips were made at nighttime, commencing at 6:00 p.m. from Mariveles, and returning thereto in the
afternoon two or three days after. The deliveries were made in accordance with the routing slips issued
by respondent company indicating the order, time and urgency of delivery. Initially, the petitioner was
paid the sum of P350.00 per trip. This was later adjusted to P480.00 per trip and, at the time of his
alleged dismissal, the petitioner was receiving P900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent company’s plant
manager, his (the petitioner’s) desire to avail himself of the benefits that the regular employees were
receiving such as overtime pay, nightshift differential pay, and 13th month pay, among others. Although
he promised to extend these benefits to the petitioner, respondent Lee failed to actually do so.
On February 20, 1995, the petitioner filed a complaint for regularization with the Regional Arbitration
Branch No. III of the NLRC in San Fernando, Pampanga. Before the case could be heard, respondent
company terminated the services of the petitioner. Consequently, on May 25, 1995, the petitioner filed
an amended complaint against the respondents for illegal
483
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Chavez vs. National Labor Relations Commission
dismissal, unfair labor practice and non-payment of overtime pay, nightshift differential pay, 13th month
pay, among others. The case was docketed as NLRC Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-employee relationship between
the respondent company and the petitioner. They averred that the petitioner was an independent
contractor as evidenced by the contract of service which he and the respondent company entered into.
The said contract provided as follows:
“That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and the
Contractor [referring to Pedro Chavez], by nature of their specialized line or service jobs, accepts the
services to be rendered to the Principal, under the following terms and covenants heretofore mentioned:
1. That the inland transport delivery/hauling activities to be performed by the contractor
to the principal, shall only cover travel route from Mariveles to Metro Manila. Otherwise, any
change to this travel route shall be subject to further agreement by the parties concerned.
2. That the payment to be made by the Principal for any hauling or delivery transport
services fully rendered by the Contractor shall be on a per trip basis depending on the size or
classification of the truck being used in the transport service, to wit:
a) If the hauling or delivery service shall require a truck of six wheeler, the
payment on a per trip basis from Mariveles to Metro Manila shall be THREE
HUNDRED PESOS (P300.00) and EFFECTIVE December 15, 1984.
b) If the hauling or delivery service require a truck of ten wheeler, the payment
on a per trip basis, following the same route mentioned, shall be THREE HUNDRED
FIFTY (P350.00) Pesos and Effective December 15, 1984.
3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least two
(2) helpers;484
484 SUPREME COURT REPORTS ANNOTATED
Chavez vs. National Labor Relations Commission
4. The Contractor shall exercise direct control and shall be responsible to the Principal
for the cost of any damage to, loss of any goods, cargoes, finished products or the like, while
the same are in transit, or due to reckless [sic] of its men utilized for the purpose above
mentioned;
5. That the Contractor shall have absolute control and disciplinary power over its men
working for him subject to this agreement, and that the Contractor shall hold the Principal free
and harmless from any liability or claim that may arise by virtue of the Contractor’s non-
compliance to the existing provisions of the Minimum Wage Law, the Employees Compensation
Act, the Social Security System Act, or any other such law or decree that may hereafter be
enacted, it being clearly understood that any truck drivers, helpers or men working with and for
the Contractor, are not employees who will be indemnified by the Principal for any such claim,
including damages incurred in connection therewith;
6. This contract shall take effect immediately upon the signing by the parties, subject to
renewal on a year-to-year basis.”2
This contract of service was dated December 12, 1984. It was subsequently renewed twice, on July
10, 1989 and September 28, 1992. Except for the rates to be paid to the petitioner, the terms of the
contracts were substantially the same. The relationship of the respondent company and the petitioner
was allegedly governed by this contract of service.
The respondents insisted that the petitioner had the sole control over the means and methods by
which his work was accomplished. He paid the wages of his helpers and exercised control over them.
As such, the petitioner was not entitled to regularization because he was not an employee of the
respondent company. The respondents, likewise, maintained that they did not dismiss the petitioner.
Rather, the severance of his contractual relation with the respondent company was due to his violation
of the terms and conditions of their con-
_______________
2 Rollo, pp. 113-114.
485
VOL. 448, JANUARY 17, 2005 485
Chavez vs. National Labor Relations Commission
tract. The petitioner allegedly failed to observe the minimum degree of diligence in the proper
maintenance of the truck he was using, thereby exposing respondent company to unnecessary
significant expenses of overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision dated
February 3, 1997, finding the respondents guilty of illegal dismissal. The Labor Arbiter declared that the
petitioner was a regular employee of the respondent company as he was performing a service that was
necessary and desirable to the latter’s business. Moreover, it was noted that the petitioner had
discharged his duties as truck driver for the respondent company for a continuous and uninterrupted
period of more than ten years.
The contract of service invoked by the respondents was declared null and void as it constituted a
circumvention of the constitutional provision affording full protection to labor and security of tenure. The
Labor Arbiter found that the petitioner’s dismissal was anchored on his insistent demand to be
regularized. Hence, for lack of a valid and just cause therefor and for their failure to observe the due
process requirements, the respondents were found guilty of illegal dismissal. The dispositive portion of
the Labor Arbiter’s decision states:
“WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent
SUPREME PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with business address at BEPZ,
Mariveles, Bataan guilty of illegal dismissal, ordering said respondent to pay complainant his separation
pay equivalent to one (1) month pay per year of service based on the average monthly pay of P10,800.00
in lieu of reinstatement as his reinstatement back to work will not do any good between the parties as
the employment relationship has already become strained and full backwages from the time his
compensation was withheld on February 23, 1995 up to January 31, 1997 (cut-off date) until compliance,
otherwise, his backwages shall continue to run. Also to pay complainant his 13th month pay, night shift
differential pay and service incentive leave pay hereunder computed as follows:
a) Backwages ………………….. P248,400.00486
486 SUPREME COURT REPORTS ANNOTATED
Chavez vs. National Labor Relations Commission
b) Separation Pay ………….…... P140,400.00
c) 13th month pay ………….….. P 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL P401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorney’s fees.
SO ORDERED.”3
The respondents seasonably interposed an appeal with the NLRC. However, the appeal was
dismissed by the NLRC in its Decision4 dated January 27, 1998, as it affirmed in toto the decision of the
Labor Arbiter. In the said decision, the NLRC characterized the contract of service between the
respondent company and the petitioner as a “scheme” that was resorted to by the respondents who,
taking advantage of the petitioner’s unfamiliarity with the English language and/or legal niceties, wanted
to evade the effects and implications of his becoming a regularized employee.5
 The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting
thereon, the NLRC rendered another Decision6 dated July 10, 1998, reversing its earlier decision and,
this time, holding that no employer-employee relationship existed between the respondent company and
the petitioner. In reconsidering its earlier decision, the NLRC stated that the respondents did not exercise
control over the means and methods by which the petitioner accomplished his delivery services. It upheld
the validity of the contract of service as it pointed out that said contract was
_______________
3 Id., at p. 151.
4 Penned by Commissioner Rogelio I. Rayala, with Presiding Commissioner Raul T. Aquino and
Commissioner Victoriano R. Calaycay, concurring; Id., at pp. 177-184.
5 Rollo, pp. 183-184.
6 Penned by Commissioner Angelita A. Gacutan, with Presiding Commissioner Raul T. Aquino and
Commissioner Victoriano R. Calaycay, concurring; Id., at pp. 60-73.
487
VOL. 448, JANUARY 17, 2005 487
Chavez vs. National Labor Relations Commission
silent as to the time by which the petitioner was to make the deliveries and that the petitioner could hire
his own helpers whose wages would be paid from his own account. These factors indicated that the
petitioner was an independent contractor, not an employee of the respondent company.
The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the Labor
Code on the regularization of employees. Said contract, including the fixed period of employment
contained therein, having been knowingly and voluntarily entered into by the parties thereto was declared
valid citing Brent School, Inc. v. Zamora.7 The NLRC, thus, dismissed the petitioner’s complaint for illegal
dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the NLRC
in its Resolution dated September 7, 1998. He then filed with this Court a petition for certiorari, which
was referred to the CA following the ruling in St. Martin Funeral Home v. NLRC.8
The appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998 Decision
of the NLRC and reinstating the decision of the Labor Arbiter. In the said decision, the CA ruled that the
petitioner was a regular employee of the respondent company because as its truck driver, he performed
a service that was indispensable to the latter’s business. Further, he had been the respondent company’s
truck driver for ten continuous years. The CA also reasoned that the petitioner could not be considered
an independent contractor since he had no substantial capital in the form of tools and machinery. In fact,
the truck that he drove belonged to the respondent company. The CA also observed that the routing slips
that the respondent company issued to the petitioner showed that it exercised control over the latter. The
routing slips indicated the chronological order and priority of
_______________
7 181 SCRA 702 (1990).
8 295 SCRA 494 (1998).
488
488 SUPREME COURT REPORTS ANNOTATED
Chavez vs. National Labor Relations Commission
delivery, the urgency of certain deliveries and the time when the goods were to be delivered to the
customers.
The CA, likewise, disbelieved the respondents’ claim that the petitioner abandoned his job noting
that he just filed a complaint for regularization. This actuation of the petitioner negated the respondents’
allegation that he abandoned his job. The CA held that the respondents failed to discharge their burden
to show that the petitioner’s dismissal was for a valid and just cause. Accordingly, the respondents were
declared guilty of illegal dismissal and the decision of the Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent
company and the petitioner in this wise:
“In summation, we rule that with the proliferation of contracts seeking to prevent workers from
attaining the status of regular employment, it is but necessary for the courts to scrutinize with extreme
caution their legality and justness. Where from the circumstances it is apparent that a contract has been
entered into to preclude acquisition of tenurial security by the employee, they should be struck down and
disregarded as contrary to public policy and morals. In this case, the ‘contract of service’ is just another
attempt to exploit the unwitting employee and deprive him of the protection of the Labor Code by making
it appear that the stipulations of the parties were governed by the Civil Code as in ordinary transactions.”9
However, on motion for reconsideration by the respondents, the CA made a complete turn around
as it rendered the assailed Resolution dated December 15, 2000 upholding the contract of service
between the petitioner and the respondent company. In reconsidering its decision, the CA explained that
the extent of control exercised by the respondents over the petitioner was only with respect to the result
but not to the means and methods used by him. The CA cited the following circumstances: (1) the
respondents had no say on how the
_______________
9 Rollo, pp. 42-43.
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Chavez vs. National Labor Relations Commission
goods were to be delivered to the customers; (2) the petitioner had the right to employ workers who
would be under his direct control; and (3) the petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than ten years was,
according to the CA, of no moment because his status was determined not by the length of service but
by the contract of service. This contract, not being contrary to morals, good customs, public order or
public policy, should be given the force and effect of law as between the respondent company and the
petitioner. Consequently, the CA reinstated the July 10, 1998 Decision of the NLRC dismissing the
petitioner’s complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution
of the appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO
EXCESS OF JURISDICTION IN GIVING MORE CONSIDERATION TO THE “CONTRACT OF
SERVICE” ENTERED INTO BY PETITIONER AND PRIVATE RESPONDENT THAN ARTICLE 280 OF
THE LABOR CODE OF THE PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR
EMPLOYMENT NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND
REGARDLESS OF THE ORAL AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO
EXCESS OF JURISDICTION IN REVERSING ITS OWN FINDINGS THAT PETITIONER IS A
REGULAR EMPLOYEE AND IN HOLDING THAT THERE EXISTED NO EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN PRIVATE RESPONDENT AND PETITIONER IN AS MUCH AS THE
“CONTROL TEST” WHICH IS CONSIDERED THE MOST
490
490 SUPREME COURT REPORTS ANNOTATED
Chavez vs. National Labor Relations Commission
ESSENTIAL CRITERION IN DETERMINING THE EXISTENCE OF SAID RELATIONSHIP IS NOT
PRESENT.10
The threshold issue that needs to be resolved is whether there existed an employer-employee
relationship between the respondent company and the petitioner. We rule in the affirmative.
The elements to determine the existence of an employment relationship are: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employer’s power to control the employee’s conduct.11 The most important element is the employer’s
control of the employee’s conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish it.12 All the four elements are present in this case.
First. Undeniably, it was the respondents who engaged the services of the petitioner without the
intervention of a third party.
Second. Wages are defined as “remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis,
or other method of calculating the same, which is payable by an employer to an employee under a written
or unwritten contract of employment for work done or to be done, or for service rendered or to be
rendered.”13 That the petitioner was paid on a per trip basis is not significant. This is merely a method of
computing compensation and not a basis for determining the existence or absence of employer-
employee relationship. One may be paid on the basis of results or time expended on the work, and may
or may not acquire an employment status, depending on whether the elements of an employer-employee
relationship are present or
_______________
10 Id., at pp. 13-14.
11 Sy v. Court of Appeals, 398 SCRA 301 (2003).
12 Id., at pp. 307-308.
13 LABOR CODE, ART. 97(f).
491
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Chavez vs. National Labor Relations Commission
not.14 In this case, it cannot be gainsaid that the petitioner received compensation from the respondent
company for the services that he rendered to the latter.
Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his
employees by means of payroll.15 The payroll should show, among other things, the employee’s rate of
pay, deductions made, and the amount actually paid to the employee. Interestingly, the respondents did
not present the payroll to support their claim that the petitioner was not their employee, raising
speculations whether this omission proves that its presentation would be adverse to their case. 16
Third. The respondents’ power to dismiss the petitioner was inherent in the fact that they engaged
the services of the petitioner as truck driver. They exercised this power by terminating the petitioner’s
services albeit in the guise of “severance of contractual relation” due allegedly to the latter’s breach of
his contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee relationship, the “control
test” is the most important. Compared to an employee, an independent contractor is one who carries on
a distinct and independent business and undertakes to perform the job, work, or service on its own
account and under its own responsibility according to its own manner and method, free from the control
and direction of the principal in all matters connected with the performance of the work except as to the
results thereof.17 Hence, while an independent contractor enjoys independence and freedom from the
control and supervision of his principal, an employee is subject to the employer’s power to control the
means and
_______________
14 Tan v. Lagrama, 387 SCRA 393 (2002).
15 Book III, Rule X, Sec. 6(a).
16 Tan v. Lagrama, supra.
17 Id., at p. 399.
492
492 SUPREME COURT REPORTS ANNOTATED
Chavez vs. National Labor Relations Commission
methods by which the employee’s work is to be performed and accomplished. 18
Although the respondents denied that they exercised control over the manner and methods by which
the petitioner accomplished his work, a careful review of the records shows that the latter performed his
work as truck driver under the respondents’ supervision and control. Their right of control was manifested
by the following attendant circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck shall be used exclusively
to deliver respondent company’s goods; 19
3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either
of two specific places only, to wit: at its office in Metro Manila at 2320 Osmeña Street, Makati City or at
BEPZ, Mariveles, Bataan;20 and
4. Respondents determined how, where and when the petitioner would perform his task by issuing
to him gate passes and routing slips.21
a. The routing slips indicated on the column REMARKS, the chronological order and
priority of delivery such as 1st drop, 2nd drop, 3rd drop, etc. This meant that the petitioner had
to deliver the same according to the order of priority indicated therein.
b. The routing slips, likewise, showed whether the goods were to be delivered urgently
or not by the word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the goods were to be
delivered to the customers as, for
_______________
18 Id.
19 Annex “C” of Respondents’ Position Paper; Rollo, p. 117.
20 Ibid.
21 Annexes “A” to “C” of Petitioner’s Reply to Respondents’ Position Paper.
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Chavez vs. National Labor Relations Commission
example, the words “tomorrow morning” was written on slip No. 2776.
These circumstances, to the Court’s mind, prove that the respondents exercised control over the
means and methods by which the petitioner accomplished his work as truck driver of the respondent
company. On the other hand, the Court is hard put to believe the respondents’ allegation that the
petitioner was an independent contractor engaged in providing delivery or hauling services when he did
not even own the truck used for such services. Evidently, he did not possess substantial capitalization
or investment in the form of tools, machinery and work premises. Moreover, the petitioner performed the
delivery services exclusively for the respondent company for a continuous and uninterrupted period of
ten years.
The contract of service to the contrary notwithstanding, the factual circumstances earlier discussed
indubitably establish the existence of an employer-employee relationship between the respondent
company and the petitioner. It bears stressing that the existence of an employer-employee relationship
cannot be negated by expressly repudiating it in a contract and providing therein that the employee is an
independent contractor when, as in this case, the facts clearly show otherwise. Indeed, the employment
status of a person is defined and prescribed by law and not by what the parties say it should be. 22
Having established that there existed an employer-employee relationship between the respondent
company and the petitioner, the Court shall now determine whether the respondents validly dismissed
the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a valid and just
cause.23 In this case, the
_______________
22 AZUCENA, I THE LABOR CODE (1999 ed.) 127.
23 Hacienda Fatima v. National Federation of Sugarcane Workers-Food and General Trade, 396
SCRA 518 (2003).
494
494 SUPREME COURT REPORTS ANNOTATED
Chavez vs. National Labor Relations Commission
respondents failed to prove any such cause for the petitioner’s dismissal. They insinuated that the
petitioner abandoned his job. To constitute abandonment, these two factors must concur: (1) the failure
to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever
employer-employee relationship.24 Obviously, the petitioner did not intend to sever his relationship with
the respondent company for at the time that he allegedly abandoned his job, the petitioner just filed a
complaint for regularization, which was forthwith amended to one for illegal dismissal. A charge of
abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal, more so
when it includes a prayer for reinstatement.25
Neither can the respondents’ claim that the petitioner was guilty of gross negligence in the proper
maintenance of the truck constitute a valid and just cause for his dismissal. Gross negligence implies a
want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces
a thoughtless disregard of consequences without ex-
_______________ Petition granted, resolution reversed and set aside. That of the Labor Arbiter reinstated.
Note.—The filing by an employee of a complaint for illegal dismissal is proof enough of his desire
Article 282 of the Labor Code provides: An employer may terminate an employment for any of the to return to work thus negating the employer’s charge of abandonment. (Millares vs. National Labor
following causes: Relations Commission, 328 SCRA 79 [2000])
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his ——o0o——
employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer
or any immediate member of his family or his duly authorized representative;
(e) Other causes analogous to the foregoing.
24 Buenviaje v. Court of Appeals, 391 SCRA 440 (2002).
25 Globe Telecom, Inc. v. Florendo-Flores, 390 SCRA 201 (2002).
495
VOL. 448, JANUARY 17, 2005 495

Chavez vs. National Labor Relations Commission

erting any effort to avoid them.26 The negligence, to warrant removal from service, should not merely
be gross but also habitual.27 The single and isolated act of the petitioner’s negligence in the proper
maintenance of the truck alleged by the respondents does not amount to “gross and habitual neglect”
warranting his dismissal.
The Court agrees with the following findings and conclusion of the Labor Arbiter:
“. . . As against the gratuitous allegation of the respondent that complainant was not dismissed from
the service but due to complainant’s breach of their contractual relation, i.e., his violation of the terms
and conditions of the contract, we are very much inclined to believe complainant’s story that his dismissal
from the service was anchored on his insistent demand that he be considered a regular employee.
Because complainant in his right senses will not just abandon for that reason alone his work especially
so that it is only his job where he depends chiefly his existence and support for his family if he was not
aggrieved by the respondent when he was told that his services as driver will be terminated on February
23, 1995.”28
Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his
dismissal illegal. Under Article 279 of the Labor Code, an employee who is unjustly dismissed is entitled
to reinstatement, without loss of seniority rights and other privileges, and to the payment of full
backwages, inclusive of allowances, and other benefits or their monetary equivalent, computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.29 However, as
found by the Labor Arbiter, the circumstances obtaining in this case do not warrant the peti-

_______________

26 Philippine Aeolus Automotive United Corporation v. National Labor Relations Commission, 331
SCRA 237 (2000).
27 Id., at p. 247.
28 Rollo, pp. 149-150.
29 Cebu Marine Beach Resort v. National Labor Relations Commission, 414 SCRA 173 (2003).
496
496 SUPREME COURT REPORTS ANNOTATED

Chavez vs. National Labor Relations Commission

tioner’s reinstatement. A more equitable disposition, as held by the Labor Arbiter, would be an award of
separation pay equivalent to one month for every year of service from the time of his illegal dismissal up
to the finality of this judgment in addition to his full backwages, allowances and other benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of the
Court of Appeals reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is REVERSED
and SET ASIDE. The Decision dated February 3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-
02-6181-5, finding the respondents guilty of illegally terminating the employment of petitioner Pedro
Chavez, is REINSTATED.
SO ORDERED.
Puno (Chairman), Austria-Martinez, Tinga and Chico-Nazario, JJ., concur.

BERNARDO JIMENEZ and JOSE JIMENEZ, as Operators of JJ’s TRUCKING,
petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, PEDRO JUANATAS and
FREDELITO JUANATAS, respondents.
Labor Law; Administrative Law; Certiorari; The review of labor cases elevated to the Supreme
Court on certiorari is confined to questions of jurisdiction or grave abuse of discretion; The review of the
records with an assessment of the facts is necessary where the factual findings of the NLRC and the
labor arbiter are at odds with each other.—The review of labor cases elevated to us on certiorari is
confined to questions of jurisdiction or grave abuse of discretion. As a rule, this Court does not review
supposed errors in the decision of the NLRC which raise factual issues, because factual findings of
agencies exercising quasi-judicial functions are accorded not only respect but even finality, aside from
the consideration that the Court is essentially not a trier of facts. However, in the case at bar, a review of
the records thereof with an assessment of the facts is necessary since the factual findings of the NLRC
and the labor arbiter are at odds with each other.
Same; Evidence; Burden of Proof; It is a basic rule in evidence that each party must prove his
affirmative allegation.—On the first issue, we find no reason to disturb the findings of respondent NLRC
that the entire amount of commissions was not paid, this by reason of the evident failure of herein
petitioners to present evidence that full payment thereof has been made. It is a basic rule in evidence
that each party must prove his affirmative allegation. Since the burden of evidence lies with the party
who asserts an affirmative allegation, the plaintiff or complainant has to prove his affirmative allegations
in the complaint and the defendant or respondent has to prove the affirmative allegations in his affirmative
defenses and counterclaim. Considering that petitioners herein assert that the disputed commissions
have been paid, they have the bounden duty to prove that fact.
_______________
*SECOND DIVISION.
85
VOL. 256, APRIL 2, 1996 85
Jimenez vs. National Labor Relations Commission
Same; Same; Same; Obligations; Debts; Even where the plaintiff must allege non-payment, the
general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to
prove non-payment—the debtor has the burden of showing with legal certainty that the obligation has
been discharged by payment.—As a general rule, one who pleads payment has the burden of proving
it. Even where the plaintiff must allege non-payment, the general rule is that the burden rests on the
defendant to prove payment, rather than on the plaintiff to prove non-payment. The debtor has the burden
of showing with legal certainty that the obligation has been discharged by payment.
Same; Same; Same; Same; Same; Where the debtor introduces some evidence of payment, the
burden of going forward with the evidence—as distinct from the general burden of proof—shifts to the
creditor, who is then under a duty of producing some evidence to show non-payment.—When the
existence of a debt is fully established by the evidence contained in the record, the burden of proving
that it has been extinguished by payment devolves upon the debtor who offers such a defense to the
claim of the creditor. Where the debtor introduces some evidence of payment, the burden of going
forward with the evidence—as distinct from the general burden of proof—shifts to the creditor, who is
then under a duty of producing some evidence to show non-payment.
Same; Same; Same; Same; Same; That a plaintiff admits that some payments have been made
does not change the burden of proof—the defendant still has the burden of establishing payments
beyond those admitted by plaintiff.—In the instant case, the right of respondent Pedro Juanatas to be
paid a commission equivalent to 17%, later increased to 20%, of the gross income is not disputed by
petitioners. Although private respondents admit receipt of partial payment, petitioners still have to present
proof of full payment. Where the defendant sued for a debt admits that the debt was originally owed, and
pleads payment in whole or in part, it is incumbent upon him to prove such payment. That a plaintiff
admits that some payments have been made does not change the burden of proof. The defendant still
has the burden of establishing payments beyond those admitted by plaintiff.
Same; Employer-Employee Relationship; Control Test; Elements considered in determining the
existence of employer-employee
86
86 SUPREME COURT REPORTS ANNOTATED
Jimenez vs. National Labor Relations Commission
relationship.—We have consistently ruled that in determining the existence of an employer-
employee relationship, the elements that are generally considered are the following: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
power to control the employee’s conduct, with the control test assuming primacy in the overall
consideration.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the Court.
Fernandez Law Office for petitioners.
Alejandro M. Villamil for private respondents.
REGALADO, J.:
This petition for certiorari seeks the annulment of the decision of respondent National Labor Relations
Commission (NLRC), dated May 27, 1994, as well as its resolution, dated August 8, 1994, denying
petitioner’s motion for reconsideration,1 which assailed decision affirmed with modifications the adverse
decision of the labor arbiter against herein petitioners.
On June 29, 1990, herein private respondents Pedro and Fredelito Juanatas, father and son, filed
a claim for unpaid wages/commissions, separation pay and damages against JJ’s Trucking and/or Dr.
Bernardo Jimenez. Said respondents, as complainants therein, alleged that in December, 1987, they
were hired by herein petitioner Bernardo Jimenez as driver/mechanic and helper, respectively, in his
trucking firm, JJ Trucking. They were assigned to a ten-wheeler truck to haul soft drinks of Coca-Cola
Bottling Company and paid on commission basis, initially fixed at 17% but later increased to 20% in
1988.
_______________
1 Penned by Presiding Commissioner Lourdes C. Javier, with Commissioners Ireneo B. Bernardo
and Joaquin A. Tanodra, concurring.
87
VOL. 256, APRIL 2, 1996 87
Jimenez vs. National Labor Relations Commission
Private respondents further alleged that for the years 1988 and 1989 they received only a partial
commission of P84,000.00 from petitioners’ total gross income of almost P1,000,000.00 for the said two
years. Consequently, with their commission for that period being computed at 20% of said income, there
was an unpaid balance to them of P106,211.86; that until March, 1990 when their services were illegally
terminated, they were further entitled to P15,050.309 which, excluding the partial payment of P7,000.00,
added up to a grand total of P114,261.86 due and payable to them; and that petitioners’ refusal to pay
their aforestated commission was a ploy to unjustly terminate them.
Disputing the complaint, petitioners contend that respondent Fredelito Juanatas was not an
employee of the firm but was merely a helper of his father Pedro; that all commissions for 1988 and
1989, as well as those up to March, 1990, were duly paid; and that the truck driven by respondent Pedro
Juanatas was sold to one Winston Flores in 1991 and, therefore, private respondents were not illegally
dismissed.2
After hearings duly conducted, and with the submission of the parties’ position/supporting papers,
Labor Arbiter Roque B. de Guzman rendered a decision dated March 9, 1993, with this decretal portion:
“WHEREFORE, decision is hereby issued ordering respondents JJ’s Trucking and/or Dr. Bernardo
Jimenez to pay jointly and severally complainant Pedro Juanatas a separation pay of FIFTEEN
THOUSAND FIFTY (P15,050.00) PESOS, plus attorney’s fee equivalent to ten percent (10%) of the
award. The complaint of Fredelito Juanatas is hereby dismissed for lack of merit.”3
On appeal filed by private respondents, the NLRC modified the decision of the labor arbiter and disposed
as follows:
“PREMISES CONSIDERED, the Decision of March 9, 1993 is hereby MODIFIED, to wit:
_______________
2
Rollo, 107; NLRC Decision, 2.
3
Ibid., 82.
88

88 SUPREME COURT REPORTS ANNOTATED
Jimenez vs. National Labor Relations Commission
1. 1.Complainant Fredelito Juanatas is hereby declared respondents’ employee and shares in
(the) commission and separation pay awarded to complainant Pedro Juanatas, his father.
2. 2.Respondent JJ’s Trucking and Dr. Bernardo Jimenez are jointly and severally liable to pay
complainants their unpaid commissions in the total amount of Eighty Four Thousand Three
Hundred Eighty Seven Pesos and 05/100 (P84,387.05).
3. 3.The award of attorney’s fees is reduced accordingly to eight thousand four hundred thirty
eight pesos and 70/100 (P8,438.70).
4. 4.The other findings stand affirmed.”4
Petitioners’ motion for reconsideration having been denied thereafter in public respondent’s resolution
dated August 8, 1994,5 petitioners have come to us in this recourse, raising for resolution the issues as
to whether or not respondent NLRC committed grave abuse of discretion in ruling (a) that private
respondents were not paid their commissions in full, and (b) that respondent Fredelito Juanatas was an
employee of JJ’s Trucking.
The review of labor cases elevated to us on certiorari is confined to questions of jurisdiction or grave
abuse of discretion.6 As a rule, this Court does not review supposed errors in the decision of the NLRC
which raise factual issues, because factual findings of agencies exercising quasi-judicial functions are
accorded not only respect but even finality,7 aside from the consideration that the Court is essentially not
a trier of facts. However, in the case at bar, a review of the records thereof with an assessment of the
facts is necessary since the factual findings of the NLRC and the labor arbiter
_______________
4
Ibid., 112-113.
5Ibid., 122-123.
6 Loadstar Shipping Co., Inc. vs. Gallo, et al., G.R. No. 102845, February 4, 1994, 229 SCRA
654; Philippine Overseas Drilling and Oil Development Corporation vs. Ministry of Labor, et al., G.R. No.
55703, November 27, 1986, 146 SCRA 79.
7
Sta. Fe Construction Co., et al. vs. NLRC, et al., G.R. No. 101280, March 2, 1994, 230 SCRA
593; San Miguel Corporation vs. Javate, Jr., et al., G.R. No. 54244, January 27, 1992, 205 SCRA 469.
89
VOL. 256, APRIL 2, 1996 89
Jimenez vs. National Labor Relations Commission
are at odds with each other.8
On the first issue, we find no reason to disturb the findings of respondent NLRC that the entire
amount of commissions was not paid, this by reason of the evident failure of herein petitioners to present
evidence that full payment thereof has been made. It is a basic rule in evidence that each party must
prove his affirmative allegation. Since the burden of evidence lies with the party who asserts an
affirmative allegation, the plaintiff or complainant has to prove his affirmative allegations in the complaint
and the defendant or respondent has to prove the affirmative allegations in his affirmative defenses and
counterclaim. Considering that petitioners herein assert that the disputed commissions have been paid,
they have the bounden duty to prove that fact.
As a general rule, one who pleads payment has the burden of proving it.9 Even where the plaintiff
must allege non-payment, the general rule is that the burden rests on the defendant to prove payment,
rather than on the plaintiff to prove non-payment.10 The debtor has the burden of showing with legal
certainty that the obligation has been discharged by
payment.11 When the existence of a debt is fully established by the evidence contained in the record,
the burden of proving that it has been extinguished by payment devolves upon the debtor who offers
such a defense to the claim of the creditor.12 Where the debtor introduces some evidence of payment,
the burden
_______________
8 See Prieto, et al. vs. NLRC, et al., G.R. No. 93699, September 10, 1993, 226 SCRA 232; Rapiz,
et al. vs. NLRC, et al., G.R. No. 91122, March 16, 1992, 207 SCRA 243; Llobrera vs. NLRC, et al., G.R.
No. 76271, June 28, 1988, 162 SCRA 788.
9
Simonton vs. Winter, 30 U.S. 141, 8 L Ed 75; Levy vs. Chicago National Bank, 158 Ill. 88, 42 N.E.
129.
10
60 Am. Jur. 2d, Payment, Sec. 171, 997.
Motor Finance Co. vs. Universal Motors, La. App., 182 So. 143—Moreira’s Succession, 16 La.
11
Ann. 368.
12
Biala vs. Court of Appeals, et al., G.R. No. 43503, October 31, 1990, 191 SCRA 50; Servicewide
Specialists, Inc. vs. Intermediate Appellate Court, et al., G.R. No. 74553, June 8, 1989, 174 SCRA 80.
90
90 SUPREME COURT REPORTS ANNOTATED
Jimenez vs. National Labor Relations Commission
of going forward with the evidence—as distinct from the general burden of proof—shifts to the creditor,
who is then under a duty of producing some evidence to show non-payment.13
In the instant case, the right of respondent Pedro Juanatas to be paid a commission equivalent to
17%, later increased to 20%, of the gross income is not disputed by petitioners. Although private
respondents admit receipt of partial payment, petitioners still have to present proof of full payment. Where
the defendant sued for a debt admits that the debt was originally owed, and pleads payment in whole or
in part, it is incumbent upon him to prove such payment. That a plaintiff admits that some payments have
been made does not change the burden of proof. The defendant still has the burden of establishing
payments beyond those admitted by plaintiff.14
The testimony of petitioners which merely denied the claim of private respondents, unsupported by
documentary evidence, is not sufficient to establish payment. Although petitioners submitted a notebook
showing the alleged vales of private respondents for the year 1990,15 the same is inadmissible and
cannot be given probative value considering that it is not properly accomplished, is undated and
unsigned, and is thus uncertain as to its origin and authenticity.16
The positive testimony of a creditor may be sufficient of itself to show non-payment, even when met
by indefinite testimony of the debtor. Similarly, the testimony of the debtor may also be sufficient to show
payment, but, where his testimony is contradicted by the other party or by a disinterested witness, the
issue may be determined against the debtor since he has the burden of proof. The testimony of the
debtor creating merely an inference of payment will not be
_______________
13
60 Am. Jur. 2d, Payment, Sec. 174, 998.
14 Ibid., id., Sec. 171, 996-997.
15 Original Record, 375-377.
16
See Callanta vs. NLRC, et al., G.R. No. 105083, August 20, 1993, 225 SCRA 526.
91
VOL. 256, APRIL 2, 1996 91
Jimenez vs. National Labor Relations Commission
regarded as conclusive on that issue.17
Hence, for failure to present evidence to prove payment, petitioners defaulted in their defense and
in effect admitted the allegations of private respondents.
With respect to the second issue, however, we agree with petitioners that the NLRC erred in holding
that the son, Fredelito, was an employee of petitioners.
We have consistently ruled that in determining the existence of an employer-employee relationship,
the elements that are generally considered are the following: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employee’s conduct,18 with the control test assuming primacy in the overall consideration.
In the case at bar, the aforementioned elements are not present. The agreement was between
petitioner JJ’s Trucking and respondent Pedro Juanatas. The hiring of a helper was discretionary on the
part of Pedro. Under their contract, should he employ a helper, he would be responsible for the latter’s
compensation. With or without a helper, respondent Pedro Juanatas was entitled to the same percentage
of commission. Respondent Fredelito Juanatas was hired by his father, Pedro, and the compensation
he received was paid by his father out of the latter’s commission. Further, Fredelito was not subject to
the control and supervision of and dismissal by petitioners but of and by his father.
Even the Solicitor General, in his comment, agreed with the finding of the labor arbiter that Fredelito
was not an employee of petitioners, to wit:
_______________
 17
70 C.J.S., Payment, Sec. 121, 334.
18
Canlubang Security Agency vs. NLRC, et al., G.R. No. 97492, December 8, 1992, 216 SCRA
280; Ruga, et al. vs. NLRC, et al., G.R. Nos. 72654-61, January 22, 1990, 181 SCRA 266; Makati
Haberdashery, Inc., et al. vs. NLRC, et al., G.R. Nos. 83380-81, November 15, 1989, 179 SCRA 448.
92
92 SUPREME COURT REPORTS ANNOTATED

Jimenez vs. National Labor Relations Commission

“Public respondent committed grave abuse of discretion in holding that said private respondent is an
employee of JJ’s Trucking on the ground that, citing Article 281 of the Labor Code, ‘Fredelito’s functions
as helper was (sic) necessary and desirable to respondent’s trucking business.’
“In the first place, Article 281 of the Labor Code does not refer to the basic factors that must underlie
every existing employer-employee relationship, the absence of any of which will negate such existence.
It refers instead to the qualifications of ‘(A)n employee who is allowed to work after a probationary period’
and who, as a consequence, ‘shall be considered a regular employee.’ Secondly, the test in determining
the existence of an employee-employer relationship is not the necessity and/or desirability of one’s
functions in relation to an employer’s business, but ‘(1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s
conduct. The latter is the most important element’ (Singer Sewing Machine Company vs. Drilon, 193
SCRA 270, 275; Deferia vs. NLRC, 194 SCRA 531, 525; Ecal vs. NLRC, 224, 228; Hijos De F. Escano,
Inc. vs. NLRC, 224 SCRA 781, 785). The aforequoted pertinent findings of the Labor Arbiter indicate
(that) the foregoing requirements do not exist between petitioner and private respondent Fredelito
Juanatas. Thus, the labor arbiter stated that respondent Fredelito Juanatas was never hired by
petitioners. Instead the former’s services were availed of by respondent Pedro Juanatas his father, who,
at the same time, supervised and controlled his work and paid his commissions. Respondent NLRC’s
ruling did not traverse these findings of the labor arbiter.”19
WHEREFORE, the judgment of respondent National Labor Relations Commission is hereby AFFIRMED,
with the MODIFICATION that paragraph 1 thereof, declaring Fredelito Juanatas an employee of
petitioners and entitled to share in the award for commission and separation pay, is hereby DELETED.
SO ORDERED.
Romero, Puno and Mendoza, JJ., concur.
_______________

19Rollo, 166-167.
93
VOL. 256, APRIL 10, 1996 93

Mendaño vs. Maceda

Torres, Jr., J., On leave.
Judgment affirmed with modification.
Notes.—In civil cases, the party having the burden of proof must establish his case by a
preponderance of evidence. (The New Testament Church of God vs. Court of Appeals, 246 SCRA
266 [1995])
Each party must prove his own affirmative allegations by the amount of evidence required by law.
(People vs. Cabacang, 246 SCRA 530 [1995])
The burden of proving payment lies with the debtor. (Philippine National Bank vs. Court of
Appeals, 256 SCRA 44 [1996])

Villar vs. National Labor Relations Commission
G.R. No. 130935. May 11, 2000.*
ALLAN VILLAR, DANILO INDITA, ARTURO MANIMTIM, GERSON DATALIO, GERRY VILLARALBO,
ALFONSO PIPINO, NOEL ANGAY and EXEQUIEL MANIMTIM, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and HI-TECH MANUFACTURING CORPORATION, respondents.
Labor Law; National Labor Relations Commission; Well-settled that factual findings of quasi-
judicial agencies such as the NLRC are generally accorded not only respect but at times even finality;
Rule is not absolute and admits of certain well-recognized exceptions.—It is well-settled that factual
findings of quasi-judicial agencies such as the NLRC are generally accorded not only respect but, at
times, even finality. However, the rule is not absolute and admits of certain well-recognized exceptions.
Thus, when the findings of fact of the NLRC are not supported by substantial evidence, capricious or
arbitrary, and directly at variance with those of the Labor Arbiter, this Court may make an independent
evaluation of the facts of the case.
Same; Dismissal; Abandonment; An employee who took steps to protest his layoff could not by
any logic be said to have abandoned his work.—We find sufficient cause to deviate from the findings of
the NLRC. It is clear from the records that sometime in August 1994, immediately after petitioners
supposedly “refused to work” having lost earlier in the certification election, several complaints for illegal
dismissal, against HI-TECH were filed by petitioners. These are sufficient proofs that they were never
guilty of leaving their jobs. The concept of abandonment of work is inconsistent with the immediate filing
of complaints for illegal dismissal. An employee who took steps to protest his layoff could not by any
logic be said to have abandoned his work.
Same; Same; Same; To constitute abandonment, there must be clear proof of deliberate and
unjustified intent to sever the employer-employee relationship.—Abandonment is a matter of intention
and cannot lightly be presumed from certain equivocal acts. To consti-
_______________
*
SECOND DIVISION.
687
VOL. 331, MAY 11, 2000 687
Villar vs. National Labor Relations Commission
tute abandonment, there must be clear proof of deliberate and unjustified intent to sever the
employer-employee relationship. Mere absence of the employee is not sufficient. The burden of proof to
show a deliberate and unjustified refusal of an employee to resume his employment without any intention
of returning rests on the employer.
Same; Same; Same; Petitioners having been illegally dismissed are entitled to reinstatement with
full back wages, undiminished by earnings elsewhere, to be computed from their illegal dismissal to their
actual reinstatement.—We conclude that petitioners did not abandon their jobs but were illegally
dismissed therefrom by private respondent. As a consequence, they are entitled to reinstatement with
full back wages, undiminished by earnings elsewhere, to be computed from their illegal dismissal to their
actual reinstatement.
Same; Same; Quitclaims; A deed of release or quitclaim cannot bar employees from demanding
benefits to which they are legally entitled, or stop them from contesting the legality of their dismissal.—
We note that the handwritten letters and affidavits executed by Arturo Manimtim and Exequiel Manimtim
partake of the nature of quitclaims. Nevertheless, a deed of release or quitclaim cannot bar employees
from demanding benefits to which they are legally entitled, or stop them from contesting the legality of
their dismissal. The acceptance of these benefits does not amount to an estoppel. However, it is but just
that the amounts received by Arturo and Exequiel Manimtim as consideration for the quitclaims be
deducted from their respective monetary awards.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the Court.
Jose C. Evangelista for petitioners.
Raul E. Espinosa for private respondent.
BELLOSILLO, J.:
ALLAN VILLAR, DANILO INDITA, ARTURO MANIMTIM, GERSON DATALIO, GERRY VILLARALBO,
ALFONSO PIPINO, NOEL ANGAY and EXEQUIEL MANIM-
688
688 SUPREME COURT REPORTS ANNOTATED
Villar vs. National Labor Relations Commission
TIM, in this petition for certiorari, assail for having been rendered with grave abuse of discretion the 30
May 1997 Decision of the National Labor Relations Commission (NLRC) vacating and setting aside the
Decision of the Labor Arbiter, as well as its 31 July 1997 Resolution denying reconsideration.1
HI-TECH MANUFACTURING CORPORATION (HITECH), a corporation duly organized and
existing under Philippine laws, is engaged in the business of manufacturing cartons for commercial
purposes. On different dates, HITECH hired petitioners to perform various jobs for the company such as
slitter machine operator, inkman, silk screen printer, truck helper, rubber dye setter, forklift operator and
stitching machine operator.
Sometime in March 1994 petitioners, who were members of the Federation of Free Workers Union,
filed before the Department of Labor a petition for certification election among the rank-and-file
employees of HI-TECH. The petition was granted and a certification election was conducted inside the
company premises on 31 July 1994. However, petitioners lost in the election as the HI-TECH employees
voted for “No Union.”
On 1 August 1994 and the succeeding days thereafter, petitioners failed to report for work. They
alleged that they were barred from entering the premises of HI-TECH; hence, they immediately filed
before the Labor Arbiter separate complaints for illegal dismissal and labor standards claims against HI-
TECH, Herman T. Go, owner, and Carmen Belano, general manager.
Petitioners claimed that they were summarily dismissed from employment by the management of
HI-TECH in retalia-
_______________
1 Mario G. Frondoza, et al. v. Hi-Tech Manufacturing Corp., et al., NLRC NCR CA No. 011793-93,
NLRC NCR 00-08-05864-94, and Allan S. Villar, et al. v. Hi-Tech Manufacturing Corp., et al., NLRC NCR
CA No. 00-08-06381-94; Decision penned by Commissioner Victoriano R. Calaycay, concurred in by
Presiding Commissioner Raul T. Aquino and Commissioner Rogelio I. Rayala.
689
VOL. 331, MAY 11, 2000 689
Villar vs. National Labor Relations Commission
tion for organizing a labor union in the work premises as well as in filing the petition for certification
election before the Department of Labor. They further averred that they were paid daily wages ranging
from P81.00 to P145.00 which were below the minimum fixed by law and that they were required to work
six (6) days a week from 8 o’clock in the morning to 7 o’clock in the evening without being paid for the
overtime. Neither were they paid their service incentive leave pay and 13th month pay.
Petitioners originally numbered twenty-three (23) but fifteen (15) of them desisted in the course of
the proceedings thus leaving only the eight (8) petitioners who pursued their cause to the end.2
On the other hand, HI-TECH denied having dismissed petitioners. It contended that petitioners were
probably stung by their defeat in the certification election such that they refused to work thereafter; that
the HI-TECH management called their attention concerning their unauthorized absences without leave
but petitioners continued with their leave en masse with the sole intention of crippling the company
operations; and, that petitioners could return to their jobs at HI-TECH any time at their discretion. In
support of these allegations, private respondent presented in evidence the affidavits3 of employees who
initially joined petitioners in filing their complaints but later desisted from pursuing their claims. The
pertinent portions of the affidavits uniformly read—
1. 2.That I hereby state that I was not dismissed by the company or its officials, the truth of the
matter being that I did not report for work anymore after the certification election on July 31,
1994, when our Union lost in the said election; that I wanted to resign from the company, as
I am hereby resigning voluntarily from my job with HI-TECH MANUFACTURING
CORPORATION;
________________
 2
Petitioners Arturo Manimtim and Exequiel Manimtim later executed affidavits of desistance during
the pendency of this case with the NLRC. However, when the case was elevated to us on certiorari, they
continued to be active parties thereto.
3 Rollo, pp. 39-40, 43-44.
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690 SUPREME COURT REPORTS ANNOTATED
Villar vs. National Labor Relations Commission
1. 3.That it is not likewise true that I was underpaid, or that I was paid salary below the minimum
fixed by law; that I was receiving my daily salary in accordance with law; and that I received
all the benefits due me as employee like holiday pay, service incentive leave and 13th month
pay for 1994 that I have no claims whatsoever against the company or its officials in
connection with or arising from my employment with the company, and that the complaint I
filed against the company was due to misunderstanding and misconception of what I
perceived I am entitled to; that now I realize that I have nothing or I do not have any valid
complaint or claim against the HI-TECH MANUFACTURING x x x x
They further submitted the handwritten notes of petitioners Arturo Manimtim and Exequiel Manimtim
addressed to the management of HI-TECH. The letter of Arturo Manimtim, the contents of which were
substantially the same as those of Exequiel Manimtim, read—
Ako po si Mr. Arturo Manimtim ay kusang loob na pumunta at lumapit sa pamunuan upang humingi nang
anumang financial assistance o tulong na inyong maibibigay sa akin lalung-lalo na po para sa aking
pamilya, at kabilang na rin po ang aking tuwirang pag-amin sa kasalanang aming ginawa laban sa
management na kami po ang nagdulot ng malaking kasiraan at perwisyo sa inyong kumpanya noong
nakaraan dahil sa aming ginawang pagtigil sa aming trabaho ng sabay-sabay ng walang paalam o
pahintulot sa management at naging sanhi ng malaking pagkalugi ng kumpanya.
Ako po ay kusang loob na humihingi ng inyong kapatawaran sa pagkakataong ito bilang inyong
dating manggagawa at sa tagal po rin ng aking serbisyo sa inyong kumpanya na sana’y malugod po
ninyong pagbigyan ang aking kahilingan.
Ako po ay humihingi ng kapatawaran sa management sa aming maling pamamaraan o pagturing
sa management.
Ang inyong lingkod,
(Sgd.) Arturo Manimtim
On 15 August 1996 a consolidated decision was rendered by Lfbor Arbiter Emerson C. Tumanon in favor
of petitioners ordering HI-TECH to reinstate petitioners to their former
691
VOL. 331, MAY 11, 2000 691
Villar vs. National Labor Relations Commission
positions without loss of seniority rights and with full back wages, and to pay their mandated monetary
benefits computed as follows—
We have pored (over) the records and we find no proof to support the [labor arbiter’s] contention that
soon after the union to which complainants belong lost in the certification election, said complainants
were summarily dismissed without even the benefit of due process. There was no record that the
complainants were terminated from their employment. What is very revealing is that the day after they
lost in the certification election, they refused to report to work for no justifiable reason which makes us
believe that they voluntarily resigned x x x x the finding of the Labor Arbiter that the mere fact that they
(complainants) filed the complaint for illegal dismissal negates a notion of abandonment is so speculative
and conjectural to be sustained. The filing of their complaint for illegal dismissal indicates that it was
nothing but an attempt on their part to give verisimilitude to their desire to get even with respondents.
In view of all the foregoing, the finding of the Labor Arbiter for illegal dismissal against respondents,
the award of backwages in favor of complainants is without any factual or legal basis. However,
complainants in their own free will and volition may return to work with respondents who are directed to
accept them without loss of seniority rights and benefits but without backwages based on the
692
692 SUPREME COURT REPORTS ANNOTATED
Villar vs. National Labor Relations Commission
principle of a fair day’s work for a fair day’s pay x x x x the allegation of complainants that they were
underpaid without stating their respective specific basic pay and the basis of their claim that they were
underpaid cannot be given credence. Mere allegations without supporting proofs are not evidence in
themselves.
Their motion for reconsideration having been denied by the NLRC in its Resolution dated 31 July 1997,
petitioners are now before us imputing grave abuse of discretion to the NLRC: (a) in ruling that petitioners
voluntarily resigned from their jobs and were not illegally dismissed; (b) in refusing to correctly apply the
law and jurisprudence relative to burden of proof in termination cases and money claims of workers,
abandonment of work and offers made by a party in the course of litigation; and, (c) in ruling that
petitioners did not state their respective specific basic pay and the basis of their claim that they were
underpaid.
The pivotal issues to be resolved are: first, whether petitioners deliberately and unjustifiably
abandoned their employment, or were illegally dismissed by the management of HI-TECH;
and second, whether petitioners are entitled to back wages and other monetary benefits.
The first issue involves a question of fact. It is well-settled that factual findings of quasi-judicial
agencies such as the NLRC are generally accorded not only respect but, at times, even finality. However,
the rule is not absolute and admits of certain well-recognized exceptions. Thus, when the findings of fact
of the NLRC are not supported by substantial evidence,4 capricious or arbitrary, and directly at variance
with those of the Labor Arbiter,5 this Court may make an independent evaluation of the facts of the case.
________________
4
Pepsi-Cola Distributors of the Philippines, Inc. v. National Labor Relations Commission, G.R. No.
106831, 6 May 1997, 272 SCRA 267.
5
Industrial Timber Corporation v. National Labor Relations Commission, G.R. Nos. 107302 and
107306, 108559-60, 10 June 1997, 273 SCRA 200; Atlas Fertilizer Corporation v. National Labor
693

NAME B/WAGES U/PAYMENT 13TH MP SILP VOL. 331, MAY 11, 2000 693

A. VILLAR P100,062.05 P24,026.00 P2,002.10 P1,855.00 Villar vs. National Labor Relations Commission
We find sufficient cause to deviate from the findings of the NLRC. It is clear from the records that
D. INDITA 100,062.05 12,913.00 1,076.05 675.00 sometime in August 1994, immediately after petitioners supposedly “refused to work” having lost earlier
in the certification election, several complaints for illegal dismissal against HI-TECH were filed by
G. DATALIO 100,062.05 10,734.00 895.00 675.00
petitioners. These are sufficient proofs that they were never guilty of leaving their jobs. The concept of
G. VILLARALBO 100,062.00 16,163.00 1,347.35 1,855.00 abandonment of work is inconsistent with the immediate filing of complaints for illegal dismissal. An
employee who took steps to protest his layoff could not by any logic be said to have abandoned his
A. PIPINO 100,062.05 520.00 430.00 2,145.00 work.6
Abandonment is a matter of intention and cannot lightly be presumed from certain equivocal acts.
A. MANIMTIM 100,062.05 5,930.90 495.90 1,855.00
To constitute abandonment, there must be clear proof of deliberate and unjustified intent to sever the
N. ANGAY 115,456.25 944.00 78.65 1,855.00 employer-employee relationship.7 Mere absence of the employee is not sufficient. The burden of proof
to show a deliberate and unjustified refusal of an employee to resume his employment without any
E. MANIMTIM 122,091.65 5,938.00 494.90 1,855.00 intention of returning rests on the employer.8
On appeal by HI-TECH, the NLRC in its Decision of 30 May 1997 vacated and set aside the Labor HI-TECH failed to discharge its burden. We find its evidence—consisting mainly of the affidavit of
Arbiter’s Decision and ordered petitioners to report back to work, or if no longer feasible, directed HI- employees and the handwritten notes of Arturo Manimtim and Exequiel Manimtim—not enough to
TECH to pay petitioners their separation benefits. The NLRC ruled— establish that petitioners indeed deliberately and unjustifiably abandoned their jobs. The statements of
the employees in these documents, readily acknowledging their guilt and absolutely exonerating their
employer from any liability, were rigidly and uniformly stated, and appeared too good to be true. We are
not unaware
_______________
Relations Commission, G.R. No. 120030, 17 June 1997, 273 SCRA 549.
6 See Jones v. National Labor Relations Commission, et al., G.R. No. 107729, 6 December
1995, 250 SCRA 668.
7
Shin I Industrial Philippines v. National Labor Relations Commission, G.R. No. 74489, 3 August
1988, 164 SCRA 8; Asphalt and Cement Pavers, Inc. v. Leogardo, Jr., G.R. No. 74563, 20 June
1988, 162 SCRA 312.
8 Labor, et al. v. National Labor Relations Commission, G.R. No. 110388, 14 September 1995, 248
SCRA 183, 198.
694
694 SUPREME COURT REPORTS ANNOTATED
Villar vs. National Labor Relations Commission
of the schemes employed by management to extract favorable statements from their employees and
entice them to desist from pursuing their claims in exchange for some financial considerations or promise
of immediate employment or at some future time.
The handwritten letters of Arturo Manimtim and Exequiel Manimtim spoke of their financial plight.
Without work they found it difficult to know how their basic needs could be met. They are likely to be
family men, horrified by the thought that they could not even provide sufficiently for their young ones. It
is precisely this situation that must have compelled them to surrender to HI-TECH and seek financial
assistance.
Neither do we subscribe to HI-TECH’s argument that petitioners were highly skilled workers, and
that to abruptly terminate their services would have a debilitating effect on the company. In this country,
labor supply far exceeds the demand. Sooner or later, equally skilled workers would be lining up to fill
the job vacancies. HI-TECH apparently adopted a rather unsound business policy in terminating
petitioners’ employment, preferring to bear the immediate and inconsequential losses in profit which, it
hoped, would prove to be temporary and minimal in the long run, as compared to the long-term company
losses that would result if they complied with union demands. Unfortunately, they miscalculated its
repercussions.
HI-TECH next avers that it had expressed willingness to reinstate petitioners to their former positions
in the company, but the latter adamantly refused. Suffice it to say that such refusal is understandable
and should not be taken against petitioners. Yielding to the company offer would deprive them of back
wages to which they are entitled thus effectively negating their cause.
We conclude that petitioners did not abandon their jobs but were illegally dismissed therefrom by
private respondent. As a consequence, they are entitled to reinstatement with full back wages,
undiminished by earnings elsewhere, to be com-
695
VOL. 331, MAY 11, 2000 695
Villar vs. National Labor Relations Commission
puted from their illegal dismissal to their actual reinstatement.9
On the second issue, the NLRC held that petitioners’ claims for underpayment of wages, 13th month
pay and service incentive leave pay are without basis.
We disagree. First, petitioners executed a JOINT AFFIDAVIT10 specifying their daily wages,
positions and periods of employment, which was made the basis of the Labor Arbiter’s computation of
the monetary awards. Second, all that the NLRC needed to do was to refer to the prevailing minimum
wage to ascertain the correctness of petitioners’ claims. Third, and most importantly, the burden of
proving payment of monetary claims rests on the employer.11 In Jimenez v. National Labor Relations
Commission 12 we held—
As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must
allege non-payment, the general rule is that the burden rests on the defendant to prove payment, rather
than on the plaintiff to prove non-payment. The debtor has the burden of showing with legal certainty that
the obligation has been discharged with payment.
The reason for the rule is 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. Thus, in choosing not to present evidence to prove that it had paid all the
monetary claims of petitioners, HI-TECH failed once again to discharge the onus
______________
9 Tomas Lao Construction v. National Labor Relations Commission, G.R. No. 116781, 5 September
1997, 278 SCRA 716.
10
Rollo, p. 88; Annex “A.”
11
See National Semiconductor (HK) Distribution, Ltd. v. National Labor Relations Commission, G.R.
No. 123520, 26 June 1998, 291 SCRA 348.
12 G.R. No. 116960, 2 April 1996, 256 SCRA 84.
696
696 SUPREME COURT REPORTS ANNOTATED
Villar vs. National Labor Relations Commission
probandi. Consequently, we have no choice but to award those claims to petitioners.
Finally, we note that the handwritten letters and affidavits executed by Arturo Manimtim and Exequiel
Manimtim partake of the nature of quitclaims. Nevertheless, a deed of release or quitclaim cannot bar
employees from demanding benefits to which they are legally entitled, or stop them from contesting the
legality of their dismissal. The acceptance of these benefits does not amount to an estoppel.13 However,
it is but just that the amounts received by Arturo and Exequiel Manimtim as consideration for the
quitclaims be deducted from their respective monetary awards.
WHEREFORE, the petition is GRANTED. The assailed Decision dated 30 May 1997 and Resolution
dated 31 July 1997 of the National Labor Relations Commission are SET ASIDE, and the Labor Arbiter’s
Decision of 15 August 1996 is REINSTATED. Private respondent is directed to reinstate petitioners to
their former positions without loss of seniority rights and with full back wages, as well as to pay their
monetary benefits in accordance with the computation made by Labor Arbiter Emerson C. Tumanon in
his Decision of 15 August 1996. However, insofar as Arturo Manimtim and Exequiel Manimtim are
concerned, this case is remanded to the Labor Arbiter for purposes of determining the amounts they
received as consideration for their quitclaims and thereafter deducting these amounts from their
monetary awards. No costs.
SO ORDERED.
Mendoza, Quisumbing and Buena, JJ., concur. De Leon, Jr., J., On leave.
Petition granted. Contested judgment and resolution of NLRC set aside. That of the Labor Arbiter
reinstated.
________________
13 Olacao v. National Labor Relations Commission, G.R. No. 81390, 29 August 1989, 177 SCRA
38.
697
VOL. 331, MAY 11, 2000 697
Kenneth Roy Savage/K Angelin Export Trading vs. Taypin
Note.—Mere absence or failure to report for work is not enough to amount to such abandonment.
(Tan vs. National Labor Relations Commission, 271 SCRA 216 [1997])
——o0o——
PRESIDENTIAL DECREE No. 851 December 16, 1976
REQUIRING ALL EMPLOYERS TO PAY THEIR EMPLOYEES A 13th-MONTH PAY
WHEREAS, it is necessary to further protect the level of real wages from the ravage of worldwide
inflation;
WHEREAS, there has been no increase in the legal minimum wage rates 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.
NOW, THEREFORE, I, FERDINAND E. MARCOS, by virtue of the powers vested in me by the
Constitution, do hereby decree as follows:
Section 1. All employers are hereby required to pay all their employees receiving a basic salary
of not more than P1,000 a month, regardless of the nature of their employment, a 13th-month pay
not later than December 24 of every year.
Section 2. Employers already paying their employees a 13th-month pay or its equivalent are not
covered by this Decree.
Section 3. This Decree shall take effect immediately.
Done in the City of Manila, this 16th day of December 1975.
RULES AND REGULATIONS IMPLEMENTING PRESIDENTIAL DECREE NO. 851
By virtue of the powers vested in me by law, the following rules and regulations implementing
Presidential Decree No. 851 are hereby issued for the guidance of all concerned.
Section 1. Payment of 13-month Pay All employers covered by Presidential Decree No. 851,
hereinafter referred to as the "Decree", shall pay to all their employees receiving a basic salary of
not more than P1,000 a month a thirteenth-month pay not later than December 24 of every year.
Section 2. Definition of certain terms As used in this issuance.
(a) "Thirteenth-moth 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.
Section 3. Employers covered The Decree shall apply to all employers except to:
(a) Distressed employers, such as (1) those which are currently incurring substantial
losses or (2) in the case of non-profit institutions and organizations, where their income,
whether from donations, contributions, grants and other earnings from any source, has
consistently declined by more than forty (40%) percent of their normal income for the
last two (2) years, subject to the provision of Section 7 of this issuance;
(b) The Government and any of its political subdivisions, including government-owned
and controlled corporations, except those corporations operating essentially as private
subsidiaries of the Government;
(c) Employers already paying their employees 13-month pay or more in a calendar year
of its equivalent at the time of this issuance;
(d) Employers of household helpers and persons in the personal service of another in
relation to such workers; and
(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.
As used herein, workers paid on piece-rate basis shall refer to those who are paid a standard
amount for every piece or unit of work produced that is more or less regularly replicated, without
regard to the time spent in producing the same.
The term "its equivalent" as used in paragraph c) hereof shall include Christmas bonus, mid-year
bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the
basic salary but shall not include cash and stock dividends, cost of living allowances and all other
allowances regularly enjoyed by the employee, as well as non-monetary benefits. Where an
employer pays less than 1/12th of the employees basic salary, the employer shall pay the
difference.
Section 4. Employees covered Except as provided in Section 3 of this issuance, all employees of
covered employers shall be entitled to benefit provided under the Decree who are receiving not
more than P1,000 a month, regardless of their position, designation or employment status, and
irrespective of the method by which their wages are paid, provided that they have worked for at
least one month during the calendar year.
Section 5. Option of covered employers A covered employer may pay one-half of the 13th-month
pay required by the Decree before the opening of the regular school year and the other half on or
before the 24th day of December of every year.
In any establishment where a union has been recognized or certified as the collective bargaining
agent of the employees therein, the periodicity or frequency of payment of the 13th month pay
may be the subject of agreement.
Nothing herein shall prevent employers from giving the benefits provided in the Decree to their
employees who are receiving more than One Thousand (P1,000) Pesos a month or benefits higher
than those provided by the Decree.
Section 6. Special feature of benefit The benefits granted under this issuance shall not be credited
as part of the regular wage of the employees for purposes of determining overtime and premium
pay, fringe benefits, as well as premium contributions to the State Insurance Fund, social security,
medicare and private welfare and retirement plans.
Section 7. Exemption of Distressed employers Distressed employers shall qualify for exemption
from the requirement of the Decree upon prior authorization by the Secretary of Labor. Petitions
for exemptions may be filed within the nearest regional office having jurisdiction over the employer
not later than January 15, 1976. The regional offices shall transmit the petitions to the Secretary
of Labor within 24 hours from receipt thereof.
Section 8. Report of compliance Every covered employer shall make a report of his compliance
with the Decree to the nearest regional labor office not later than January 15 of each year.
The report shall conform substantially with the following form:
REPORT ON COMPLIANCE WITH PD NO. 851
1. Name of establishment
2. Address
3. Principal product or business
4. Total employment
5. Total number of workers benefited
6. Amount granted per employee
7. Total amount of benefits granted
8. Name, position and tel. no. of person giving information
Section 9. Adjudication of claims Non-payment of the thirteenth-month pay provided by the
Decree and these rules shall be treated as money claims cases and shall be processed in
accordance with the Rules Implementing the Labor Code of the Philippines and the Rules of the
National Labor Relations Commission.
Section 10. Prohibition against reduction or elimination of benefits Nothing herein shall be
construed to authorize any employer to eliminate, or diminish in any way, supplements, or other
employee benefits or favorable practice being enjoyed by the employee at the time of promulgation
of this issuance.

Section 11. Transitory Provision These rules and regulations shall take effect immediately and for
purposes of the 13-month pay for 1975, the same shall apply only to those who are employees as
of December 16, 1975.
Manila, Philippines, 22 December 1975.

SUPPLEMENTARY RULES AND REGULATIONS IMPLEMENTING P.D. NO. 851

To insure uniformity in the interpretation, application and enforcement of the provisions of P.D.
No. 851 and its implementing regulations, the following clarifications are hereby made for the
information and guidance of all concerned:
1. Contractors and Subcontractors, including Security and Watchman Agencies, are
exempt for the year 1975 subject to the following conditions:
(a) that the contracts of such enterprises were entered into before December
16, 1975;
(b) that such enterprises have complied with all labor standards laws during
the year;
(c) that the contract cannot really accomodate 13-month pay or its equivalent;
and
(d) that the contract does not provide for cost escalation clause.
This exemption is without prejudice on the part of the workers to negotiate with their
employers or to seek payment thereof by filing appropriate complaints with the Regional
Offices of the Department of Labor.
2. Private school teachers, including faculty members of colleges and universities, are
entitled to 1/12 of their annual basic pay regardless of the number of months they teach
or are paid within a year.
3. New establishments operating for less than one year are not covered except
subsidiaries or branches of foreign and domestic corporations.
4. Overtime pay, earnings and other remunerations which are not part of the basic salary
shall not be included in the computation of the 13-month pay.
5. In view of the lack of sufficient time for the dissemination of the provisions of P.D. No.
851 and its Rules and the unavailability of adequate cash flow due to the long holiday
season, compliance and reporting of compliance with this Decree are hereby extended
up to March 31, 1976 except in private schools where compliance for 1975 may be
made not later than 30 June 1976.
6. Nothing herein shall sanction the withdrawal or diminution of any compensation,
benefits or any supplements being enjoyed by the employees on the effective date of
this issuance.