WAGE FIXING NESTL PHILIPPINES, INC., petitioner, vs.

THE NATIONAL LABOR RELATIONS COMMISSION and UNION OF FILIPRO EMPLOYEES, respondents. GRIO-AQUINO, J.:p Nestl Philippines, Inc., by this petition for certiorari, seeks to annul, on the ground of grave abuse of discretion, the decision dated August 8, 1989 of the National Labor Relations Commission (NLRC), Second Division, in Cert. Case No. 0522 entitled, "In Re: Labor Dispute of Nestl Philippines, Inc." insofar as it modified the petitioner's existing non-contributory Retirement Plan. Four (4) collective bargaining agreements separately covering the petitioner's employees in its: 1. Alabang/Cabuyao factories; 2. Makati Administration Office. (Both Alabang/Cabuyao factories and Makati office were represented by the respondent, Union of Filipro Employees [UFE]); 3. Cagayan de Oro Factory represented by WATU; and 4. Cebu/Davao Sales Offices represented by the Trade Union of the Philippines and Allied Services (TUPAS), all expired on June 30, 1987. Thereafter, UFE was certified as the sole and exclusive bargaining agent for all regular rank-and-file employees at the petitioner's Cagayan de Oro factory, as well as its Cebu/Davao Sales Office. In August, 1987, while the parties, were negotiating, the employees at Cabuyao resorted to a "slowdown" and walk-outs prompting the petitioner to

shut down the factory. Marathon collective bargaining negotiations between the parties ensued. On September 2, 1987, the UFE declared a bargaining deadlock. On September 8, 1987, the Secretary of Labor assumed jurisdiction and issued a return to work order. In spite of that order, the union struck, without notice, at the Alabang/Cabuyao factory, the Makati office and Cagayan de Oro factory on September 11, 1987 up to December 8, 1987. The company retaliated by dismissing the union officers and members of the negotiating panel who participated in the illegal strike. The NLRC affirmed the dismissals on November 2, 1988. On January 26, 1988, UFE filed a notice of strike on the same ground of CBA deadlock and unfair labor practices. However, on March 30, 1988, the company was able to conclude a CBA with the union at the Cebu/Davao Sales Office, and on August 5, 1988, with the Cagayan de Oro factory workers. The union assailed the validity of those agreements and filed a case of unfair labor practice against the company on November 16, 1988. After conciliation efforts of the National Conciliation and Mediation Board (NCMB) yielded negative results, the dispute was certified to the NLRC by the Secretary of Labor on October 28, 1988. After the parties had filed their pleadings, the NLRC issued a resolution on June 5, 1989, whose pertinent disposition regarding the union's demand for liberalization of the company's retirement plan for its workers, provides as follows: xxx xxx xxx 7. Retirement Plan The company shall continue implementing its retirement plan modified as follows: a) for fifteen years of service or less an amount equal to 100% of the employee's monthly salary for every year of service; b) more than 15 but less than 20 years 125% of the employee's monthly salary for every year of service;

c) 20 years or more 150% of the employee's monthly salary for every year of service. (pp. 58-59, Rollo.) Both parties separately moved for reconsideration of the decision. On August 8, 1989, the NLRC issued a resolution denying the motions for reconsideration. With regard to the Retirement Plan, the NLRC held: Anent management's objection to the modification of its Retirement Plan, We find no cogent reason to alter our previous decision on this matter. While it is not disputed that the plan is non-contributory on the part of the workers, tills does not automatically remove it from the ambit of collective bargaining negotiations. On the contrary, the plan is specifically mentioned in the previous bargaining agreements (Exhibits "R-1" and "R-4"), thereby integrating or incorporating the provisions thereof to the agreement. By reason of its incorporation, the plan assumes a consensual character which cannot be terminated or modified at will by either party. Consequently, it becomes part and parcel of CBA negotiations. However, We need to clarify Our resolution on this issue. When we increased the emoluments in the plan, the conditions for the availment of the benefits set forth therein remain the same. (p. 32, Rollo.) On December 14, 1989, the petitioner filed this petition for certiorari, alleging that since its retirement plan is non-contributory, it (Nestl) has the sole and exclusive prerogative to define the terms of the plan "because the workers have no vested and demandable rights thereunder, the grant thereof being not a contractual obligation but merely gratuitous. At most the company can only be directed to maintain the same but not to change its terms. It should be left to the discretion of the company on how to improve or mollify the same" (p. 10, Rollo). The Court agrees with the NLRC's finding that the Retirement Plan was "a collective bargaining issue right from the start" (p. 109, Rollo) for the improvement of the existing Retirement Plan was one of the original CBA proposals submitted by the UFE on May 8, 1987 to Arthur Gilmour,

president of Nestl Philippines. The union's original proposal was to modify the existing plan by including a provision for early retirement. The company did not question the validity of that proposal as a collective bargaining issue but merely offered to maintain the existing non-contributory retirement plan which it believed to be still adequate for the needs of its employees, and competitive with those existing in the industry. The union thereafter modified its proposal, but the company was adamant. Consequently, the impass on the retirement plan become one of the issues certified to the NLRC for compulsory arbitration. The company's contention that its retirement plan is non-negotiable, is not well-taken. The NLRC correctly observed that the inclusion of the retirement plan in the collective bargaining agreement as part of the package of economic benefits extended by the company to its employees to provide them a measure of financial security after they shall have ceased to be employed in the company, reward their loyalty, boost their morale and efficiency and promote industrial peace, gives "a consensual character" to the plan so that it may not be terminated or modified at will by either party (p. 32, Rollo). The fact that the retirement plan is non-contributory, i.e., that the employees contribute nothing to the operation of the plan, does not make it a non-issue in the CBA negotiations. As a matter of fact, almost all of the benefits that the petitioner has granted to its employees under the CBA salary increases, rice allowances, mid-year bonuses, 13th and 14th month pay, seniority pay, medical and hospitalization plans, health and dental services, vacation, sick & other leaves with pay are non-contributory benefits. Since the retirement plan has been an integral part of the CBA since 1972, the Union's demand to increase the benefits due the employees under said plan, is a valid CBA issue. The deadlock between the company and the union on this issue was resolvable by the Secretary of Labor, or the NLRC, after the Secretary had assumed jurisdiction over the labor dispute (Art. 263, subparagraph [i] of the Labor Code). The petitioner's contention, that employees have no vested or demandable right to a non-contributory retirement plan, has no merit for employees do have a vested and demandable right over existing benefits voluntarily granted to them by their employer. The latter may not unilaterally withdraw, eliminate or diminish such benefits (Art. 100, Labor Code; Tiangco, et al. vs. Hon. Leogardo, et al., 122 SCRA 267).

This Court ruled similarly in Republic Cement Corporation vs. Honorable Panel of Arbitrators, G.R. No. 89766, Feb. 19, 1990: . . . Petitioner's claim that retirement benefits, being noncontributory in nature, are not proper subjects for voluntary arbitration is devoid of merit. The expired CBA previously entered into by the parties included provisions for the implementation of a "Retirement and Separation Plan." it is only to be expected that the parties would seek a renewal or an improvement of said item in the new CBA. In fact, the parties themselves expressly included retirement benefits among the economic issues to be resolved by voluntary arbitration. Petitioner is estopped from now contesting the validity of the increased award granted by the arbitrators. (p. 145, Rollo.) The NLRC's resolution of the bargaining deadlock between Nestl and its employees is neither arbitrary, capricious, nor whimsical. The benefits and concessions given to the employees were based on the NLRC's evaluation of the union's demands, the evidence adduced by the parties, the financial capacity of the Company to grant the demands, its longterm viability, the economic conditions prevailing in the country as they affect the purchasing power of the employees as well as its concommitant effect on the other factors of production, and the recent trends in the industry to which the Company belongs (p. 57, Rollo). Its decision is not vitiated by abuse of discretion. WHEREFORE, the petition for certiorari is dismissed, with costs against the petitioner. SO ORDERED.

PAG-ASA STEEL WORKS, INC., Petitioner, vs. COURT OF APPEALS, FORMER SIXTH DIVISION and PAG-ASA STEEL WORKERS UNION (PSWU), Respondent. DECISION CALLEJO, SR., J.: This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 65171 ordering Pag-Asa Steel Works, Inc. to pay the members of Pag-Asa Steel Workers Union (Union) the wage increase prescribed under Wage Order No. NCR-08. Also assailed in this petition is the CA Resolution denying the corporations motion for reconsideration. Petitioner Pag-Asa Steel Works, Inc. is a corporation duly organized and existing under Philippine laws and is engaged in the manufacture of steel bars and wire rods. Pag-Asa Steel Workers Union is the duly authorized bargaining agent of the rank-and-file employees of petitioner. On January 8, 1998, the Regional Tripartite Wages and Productivity Board (Wage Board) of the National Capital Region (NCR) issued Wage Order No. NCR-06.2 It provided for an increase of P13.00 per day in the salaries of employees receiving the minimum wage, and a consequent increase in the minimum wage rate to P198.00 per day. Petitioner and the Union negotiated on how to go about the wage adjustments. Petitioner forwarded a letter3 dated March 10, 1998 to the Union with the list of the salary adjustments of the rank-and-file employees after the implementation of Wage Order No. NCR06, and the notation that said "adjustments [were] in accordance with the formula [they] have discussed and [were] designed so as no distortion shall result from the implementation of Wage Order No. NCR-06." NAME 1. PEPINO EMMANUEL 2. SEVANDRA RODOLFO 3. BERNABE ALFREDO 4. UMBAL ADOLFO DATE REGULAR 08.01.97 01.17.98 10.24.97 08.18.97 PRESENT RATE 191.00 192.00 200.00 215.00

AD EFF

13.0

13.0

13.0

12.0

5. AQUINO JONAS 6. AGCAOILI JAIME 7. BERMEJO JIMMY JR. 8. EDRADAN ELDEMAR P. 9. REBOTON RONILO 10. TABAOG ALBERT 11. SALEN EDILBERTO 13. PAEZ REYNALDO 14. HERNANDEZ ALFREDO 15. BANIA LUIS JR. 16. MAGBOO VICTOR 17. NINORA BONIFACIO 18. ALANCADO RODERICK 19. PUTONG PASCUAL 20. PAR EULOGIO JR. 21. SALON FONDADOR 22. RODA GEORGE 23. RIOJA JOSEPH 24. RAYMUNDO ANTONIO 25. BUGTAI ROBERTO 26. RELATO RAMON 27. REGACHUELO DENNIS 28. ORNOPIA REYNALDO 29. PULPULAAN JAIME 30. PANLAAN FERDINAND 31.BAGASBAS EULOGIO JR. 32. ALEJANDRO OLIVER 33. PRIELA DANILO 34. NOBELJAS EDGAR 35. SAJOT RONNIE 36. WHITING JOEL

08.25.97 01.08.98 04.01.97 04.17.97 05.14.97 04.10.97 02.10.97 02.27.97. 03.23.96 12.08.95 05.25.96 03.22.96 11.10.95 06.23.96 08.16.95 11.16.95 10.11.95 12.28.95 06.05.96 04.10.96 07.07.96 11.30.95 08.09.94 01.18.96 01.18.96 01.18.96 12.03.95 11.30.95 07.10.95 10.02.93 09.30.93

215.00 220.00 221.00 221.00 221.00 221.00 221.00 235.00 246.00 246.00 246.00 246.00 246.00 246.00 246.00 246.00 246.00 246.00 246.00 246.00 265.00 265.00 268.00 275.00 275.00 275.00 275.00 280.00 283.00 288.00 288.00

12.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00

37. SURINGA FRANKLIN 227.00 38. SIBOL MICHAEL 231.00 39. SOLO JOSE 232.00 40. TIZON JOEL 232.00 41. SABATIN GILBERT 232.00 42. REYES RONALDO 232.00 43. AMANIA WILFREDO 232.00 44. QUIDATO ARISTON 246.00 45. LAROGA CLAUDIO JR. 256.00 46. MORALES LUIS 256.00 47. ANTOLO DANILO 256.00 48. EXMUNDO HERCULES 256.00 49. AMPER VALENTINO 256.00 50. BAYO-ANG ALDEN JR. 256.00 51. BASCONES NELSON 256.00 52. DECENA LAURO 256.00 53. CHUA MARLONITO 256.00 54. CATACUTAN JUNE 256.00 55.DE LOS SANTOS REYNALDO 256.00 56. REYES EFREN 256.00 57. CAGOMOC DANILO 275.00 58. DOROL ERWIN 275.00 59. CURAMBAO TIRSO 278.00 60. VENTURA FERDINAND 285.00 61. ALBANO JESUS 285.00 62. CALLEJA JOSEPH 285.00 63. PEREZ DANILO 285.00 64. BATOY ERNIE 290.00 65. SAMPAGA EDGARDO 293.00 66. SOLON ROBINSON 298.00 67. ELEDA FULGENIO 298.00

12.19.93 12.11.93 02.20.94 12.23.93 04.19.94 04.14.94 01.06.94 12.12.93 10.13.93 09.30.93 12.26.93 05.13.94 08.02.93 07.14.93 02.26.94 09.18.93 10.20.93 03.02.94 12.23.93 10.23.93 01.13.94 09.16.93 09.23.93 09.20.94 01.06.94 05.10.93 03.01.93 06.15.93 06.07.93 05.10.94 06.07.93

288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 288.00 292.00 297.00 303.00 303.00 305.00 307.00 315.00 322.00

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

10.0

68. CASCARA RODRIGO 69. ROMANOS ARNULFO 70. LUMANSOC MARIANO 71. RAMOS GRACIANO 72. MAZON NESTOR 73. BRIN LUCENIO 74. SE FREDIE 75. RONCALES DIOSDADO 76. DISCAYA EDILBERTO 77. SUAREZ LUISTO 78. CASTRO PEDRO 79. CLAVECILLA AMBROSIO 80. YSON ROMEO 81. JUMAWAN URBANO JR. 82. MARASIGAN GRACIANO 83. MAGLENTE ROLANDO 84. NEBRIA CALIX 85. BARBIN DANIEL 86. CAMAING CARLITO 87. BUBAN JONATHAN 88. GUEVARRA ARNOLD 89. MALAPO MARCOS JR. 90. ZUNIEGA CARLOS 91. SABORNIDO JULITO 92. DALUYO LOTERIO 93. AGUILLON GRACIANO 94. CRISTY EMETERIO 95. FULGUERAS DOMINGO 96. ZIPAGAN NELSON 97. LAURIO JESUS 98. ACASIO PEDRO

06.07.93 06.07.93 06.07.93 06.07.93 07.24.90 07.26.90 03.25.90 04.30.90 09.06.89 06.10.92 10.30.92 09.09.88 09.11.88 12.20.87 05.20.88 09.03.87 02.25.88 09.03.87 12.22.87 10.22.87 10.04.87 08.04.87 02.19.88 12.20.87 04.02.88 05.27.87 04.06.87 01.25.87 02.07.84 06.01.82 11.21.79

322.00 322.00 322.00 322.00 330.00 330.00 340.00 340.00 340.00 347.00 348.00 351.00 351.00 354.00 354.00 354.00 354.00 354.00 354.00 354.00 354.00 354.00 354.00 354.00 354.00 359.00 359.50 362.00 370.00 371.00 372.00

10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00

99. MACALISANG EPIFANIO 332.00 100. OFILAN ANTONIO 332.00 101. SEVANDRA ALFREDO 332.00 102. VILLAMER JOEY 332.00 103. GRIPON GIL 340.00 104. CARLON HERMINIGILDO, JR. 340.00 105. MANLABAO HEROHITO 350.00 106. VILLANUEVA DOMINGO 350.00 107. APITAN NAZARIO 350.00 108. SALAMEDA EDUARDO 357.00 109. ARNALDO LOPE 358.00 110. SURIGAO HERNANDO 361.00 111. DE LA CRUZ CHARLIE 361.00 112. ROSAURO JUAN 364.00 113 HILOTIN ARLEN 364.00

02.01.88 03.12.79 05.02.69 11.04.81 01.17.76 04.17.87 04.14.81 12.01.77 09.04.79 02.13.79 05.02.69 12.29.79 07.14.76 07.15.76 10.10.77

372.00 374.50 374.50 374.50 374.75 375.00 375.00 375.50 376.00 377.00 378.50 379.00 379.00 379.50 383.00

10.0

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10.00 364.00 On September 23, 1999, petitioner and the Union entered into a Collective 10.00 364.00 Bargaining Agreement (CBA), effective July 1, 1999 until July 1, 2004. 10.00 Section 1, 364.00 VI (Salaries and Wage) of said CBA provides: Article 10.00 364.00 Section 1. 364.00 ADJUSTMENT - The COMPANY agrees to grant all the WAGE 10.00 workers, who are already regular and covered by this AGREEMENT at the 10.00 effectivity364.00 AGREEMENT, a general wage increase as follows: of this 10.00 364.00 July 1, 1999 . . . . . . . . . . . P15.00 per day per employee 10.00 364.00 10.00 10.00 10.00 364.00 July 1, 2000 . . . . . . . . . . . P25.00 per day per employee 364.00 July 1, 2001 . . . . . . . . . . . P30.00 per day per employee 369.00

10.00 369.50 The aforesaid wage increase shall be implemented across the board. Any 10.00 372.00 Wage Order to be implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the wage increase adverted to 10.00 380.00 above. However, if no wage increase is given by the Wage Board within six 10.00 381.00 (6) months from the signing of this AGREEMENT, the Management is 10.00 willing to 382.00 following increases, to wit: give the

24. June Catacutan 343.00 76. Diosdado Roncales 395 25. Marlonito Chua 343.00 77. Gilbert Sabatin 343 July 1, 2000 . . . . . . . . . . . P25.00 per day per employee 26. Ambrocio Clavecilla 406.00 78. Julito Sabornido 409 27. Emeterio Cristy 414.50 79. Ronnie Sajot 343 July 1, 2001 . . . . . . . . . . . P30.00 per day per employee 28. Tirso Curambao 343.00 80. Eduardo Salameda 432 29. Loterio Daluyo 409.00 81. Edilberto Salen 277 The difference of the first year adjustment to retroact to July 1, 1999. 30. Lauro Decena 343.00 82. Fundador Salon 301 31. Charlie dela Cruz 434.00 83. Edgar Sampaga 362 The across-the-board wage increase for the 4th and 5th year of this 32. 343.00 84. Fredie Se 395 AGREEMENT shall be subject for a re-opening or renegotiation as provided Raynaldo delos Santos 5 33. Edilberto Discaya 395.00 85. Rodolfo Sevandra 250 for by Republic Act No. 6715. 34. Erwin Dorol 343.00 86. Jose Solo 343 35. Eldemar Edradan 277.00 87. Robinson Solon 370 For the first year of the CBAs effectivity, the salaries of Union members 36. Fulgencio Eleda 377.00 88. Luisito Suarez 402 were increased as follows: 37. Hercules Exmundo 343.00 89. Jeriel Suico 223 NAME WAGE NAME WAGE 38. Domingo Fulgueras 417.00 90. Hernando Surigao 434 edro Acasio P427.00 53. Nestor Mazon P385.00 39. Federico Garcia 277.00 91. Franklin Suringa 343 Roderick Alancado 301.00 54. Luis Morales 343.00 40. Gil Gripon 429.75 92. Albert Tabaog 277 esus Albano 352.00 55. Calix Nebria 409.00 41. Arnold Guevarra 409.00 93. Joel Tizon 343 Oliver Alejandro 330.00 56. Bonifacio Ninora Jr. 42. Arlen301.00 Hilotin 438.00 94. Alfredo Umbal 272 Welfredo Amania 343.00 57. Edgar Noblejas 338.00 43. Urbano Jumawan, Jr. 409.00 95. Ferdinand Ventura 347 Valentino Amper 343.00 58. Antonio Ofilan 429.50 44. Ronilo Lacandoze 265.00 96. Joey Villamer 429.50 Danilo Antolo 343.00 59. Reynaldo Ornopia 323.00 45. Claudio Laroga, Jr. 343.00 97.Domingo Villanueva 430.50 Nazario Apitan 431.00 60. Reynaldo Paez 46. Jesus 291.00 Laurio 426.00 98. Joel Whiting 343.00 onas Aquino 272.00 61. Ferdinand Panlaan 330.00 47. Mariano Lumansoc 377.00 99. Romeo Yson 406.00 Eulogio Bagasbas, Jr. 330.00 62. Eulogio Par Jr. 301.00 48. Victor Magboo 301.00 100. Carlos Zuniega 409.00 Luis Bania, Jr. 301.00 63. Marvin Peco 223.00 49. Rolando Maglente 409.00 101. Nelson Zipagan 425.00 Daniel Barbin 409.00 64. Emmanuel Pepino 249.00 50. Marcos Malapo Jr. 409.00 102. Michael Sibol 343.00 Nelson Bascones 343.00 65. Danilo Perez 358.00 51. Herohito Manlabao 430.00 103. Renante Tangian 223.00 Alden Bayo-ang, Jr. 343.00 66. Jaime Pulpulaan 330.00 52. Graciano Marasigan 409.00 104. Rodrigo Cascara 377.006 Jimmy Bermejo 277.00 67. Ariston Quidato 343.00 On Alfredo Bernabe 258.00 68. Graciano Ramos Jr. 377.00October 14, 1999, Wage Order No. NCR-077 was issued, and on October 26, Lucenio Brin 385.00 69. Antonio Raymundo 301.001999, its Implementing Rules and Regulations. It provided for a P25.50 per day increase in the salary of employees receiving the minimum wage and Jonathan Buban 409.00 70. Ronilo Reboton 277.00 increased the minimum wage to P223.50 per day. Petitioner paid the P25.50 Roberto Bugtai 301.00 71. Ramon Relato 320.00 per day increase to all of its rank-and-file employees. Danilo Cagomoc 343.00 72. Efren Reyes 343.00 Joseph Calleja 358.00 73. Ronaldo Reyes 343.00 On July 1, 2000, the rank-and-file employees were granted the second year Carlito Camaing 409.00 74. Joseph Rioja 301.00 increase provided in the CBA in the amount of P25.00 per day.8 Hermenigildo Carlon, Jr. 430.00 75. George Roda 301.00

July 1, 1999 . . . . . . . . . . . P20.00 per day per employee

On November 1, 2000, Wage Order No. NCR-089 took effect. Section 1 thereof provides: Section 1. Upon the effectivity of this Wage Order, private sector workers and employees in the National Capital Region receiving the prescribed daily minimum wage rate of P223.50 shall receive an increase of TWENTY SIX PESOS and FIFTY CENTAVOS (P26.50) per day, thereby setting the new minimum wage rate in the National Capital Region at TWO HUNDRED FIFTY PESOS (P250.00) per day.10 Then Union president Lucenio Brin requested petitioner to implement the increase under Wage Order No. NCR-08 in favor of the companys rank-andfile employees. Petitioner rejected the request, claiming that since none of the employees were receiving a daily salary rate lower than P250.00 and there was no wage distortion, it was not obliged to grant the wage increase. The Union elevated the matter to the National Conciliation and Mediation Board. When the parties failed to settle, they agreed to refer the case to voluntary arbitration. In the Submission Agreement, the parties agreed that the sole issue is "[w]hether or not the management is obliged to grant wage increase under Wage Order No. NCR #8 as a matter of practice,"11 and that the award of the Voluntary Arbitrator (VA) shall be final and binding.12 In its Position Paper, the Union alleged that it has been the companys practice to grant a wage increase under a government-issued wage order, aside from the yearly wage increases in the CBA. It averred that petitioner paid the salary increases provided under the previous wage orders in full (aside from the yearly CBA increases), regardless of whether there was a resulting wage distortion, or whether Union members salaries were above the minimum wage rate. Wage Order No. NCR-06, where rank-and-file employees were given different wage increases ranging from P10.00 to P13.00, was an exception since the adjustments were the result of the formula agreed upon by the Union and the employer after negotiations. The Union averred that all of their CBAs with petitioner had a "collateral agreement" where petitioner was mandated to pay the equivalent of the wage orders across-the-board, or at least to negotiate how much will be paid. It pointed out that an established practice cannot be discontinued without running afoul of Article 100 of the Labor Code on non-diminution of benefits.13 For its part, petitioner alleged that there is no such company practice and that it complied with the previous wage orders (Wage Order Nos. NCR-01-05)

because some of its employees were receiving wages below the minimum prescribed under said orders. As for Wage Order No. NCR-07, petitioner alleged that its compliance was in accordance with its verbal commitment to the Union during the CBA negotiations that it would implement any wage order issued in 1999. Petitioner further averred that it applied the wage distortion formula prescribed under Wage Order Nos. NCR-06 and NCR-07 because an actual distortion occurred as a result of their implementation. It asserted that at present, all its employees enjoy regular status and that none receives a daily wage lower than the P250.00 minimum wage rate prescribed under Wage Order No. NCR-08.14 In reply to the Unions position paper, petitioner contended that the full implementation of the previous wage orders did not give rise to a company practice as it was not given to the workers within the bargaining unit on a silver platter, but only per request of the Union and after a series of negotiations. In fact, during CBA negotiations, it steadfastly rejected the following proposal of the Unions counsel, Atty. Florente Yambot, to include an across-the-board implementation of the wage orders:15 x x x To supplement the above wage increases, the parties agree that additional wage increases equal to the wage orders shall be paid across-theboard whenever the Regional Tripartite Wage and Productivity Board issues wage orders. It is understood that these additional wage increases will be paid not as wage orders but as agreed additional salary increases using the wage orders merely as a device to fix or determine how much the additional wage increases shall be paid.16 The Union, however, insisted that there was such a company practice. It pointed out that despite the fact that all the employees were already receiving salaries above the minimum wage, the CBA still provided for the payment of a wage increase using wage orders as the yardstick. It claimed that the parties intended that petitioner-employer would pay the additional increases apart from those in the CBA. 17 The Union further asserted that the CBA did not include all the agreements of the parties; hence, to determine the true intention of the parties, parol evidence should be resorted to. Thus, Atty. Yambots version of the wage adjustment provision should be considered.18 On June 6, 2001, the VA rendered judgment in favor of the company and ordered the case dismissed.19 It held that there was no company practice of granting a wage order increase to employees across-the-board, and that there is no provision in the CBA that would oblige petitioner to grant the wage increase under Wage Order No. NCR08 across-the-board.20

The Union filed a petition for review with the CA under Rule 43 of the Rules of Court. It defined the issue for resolution as follows: The principal issue in the present petition is whether or not the wage increase of P26.50 under Wage Order No. NCR-08 must be paid to the union members as a matter of practice and whether or not parol evidence can be resorted to in proving or explaining or elucidating the existence of a collateral agreement/company practice for the payment of the wage increase under the wage order despite that the employees were already receiving wages way above the minimum wage of P250.00/day as prescribed by Wage Order No. NCR-08 and irrespective of whether wage distortion exists.21 On September 23, 2004, the CA rendered judgment in favor of the Union and reversed that of the VA. The fallo of the decision reads: WHEREFORE, the assailed Decision dated June 6, 2001 of public respondent Voluntary Arbitrator is REVERSED and SET ASIDE. Private respondent Pag-Asa Steel Works, Inc. is ordered to pay the members of the petitioner union the P26.50 daily wage by applying the wage increase prescribed under Wage Order No. NCR-08. Costs against private respondent. SO ORDERED.22 The CA stressed that the CBA constitutes the law between the employer and the Union. It held that the CBA is plain and clear, and leaves no doubt as to the intention of the parties, that is, to grant a wage increase that may be ordered by the Wage Board in addition to the CBA-mandated salary increases regardless of whether the employees are already receiving wages way above the minimum wage. The appellate court further held that the employer has no valid reason not to implement the wage increase mandated by Wage Order No. NCR-08 because prior thereto, it had been paying the wage increase provided for in the CBA even though the employees concerned were already receiving wages way above the applicable minimum wage. 23 Petitioner filed a motion for reconsideration which the CA denied for lack of merit on January 11, 2005.24 Petitioner then filed the instant petition in which it raises the following issues: I. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN NOT FINDING THAT THE

INCREASES PROVIDED FOR UNDER WAGE ORDER NO. 8 CANNOT BE DEMANDED AS A MATTER OF RIGHT BY THE RESPONDENT UNDER THE 1999 CBA, in that: a) Issue not averred in the complaint nor raised during the trial cannot be raised for the first time on appeal; and b) The Rules of Statutory Construction, in relation to Article 1370 and 1374 of the New Civil Code, as well as Section 11 of the Rules of Court, requires that contract must be read in its entirety and the various stipulations in a contract must be read together to give effect to all. II. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN NOT FINDING THAT THE INCREASES PROVIDED FOR UNDER WAGE ORDER NO. 8 CANNOT BE DEMANDED BY THE RESPONDENT UNION AS A MATTER OF PRACTICE.25 Petitioner points out that the only issue agreed upon during the voluntary arbitration proceedings was whether or not the company was obliged to grant the wage increase under Wage Order No. NCR-08 as a matter of practice. It posits that the respondent did not anchor its claim for such wage increase on the CBA but on an alleged company practice of granting the increase pursuant to a wage order. According to petitioner, respondent Union changed its theory on appeal when it claimed before the CA that the CBA is ambiguous.26 Petitioner contends that respondent Union was precluded from raising this issue as it was not raised during the voluntary arbitration. It insists that an issue cannot be raised for the first time on appeal.27 Petitioner further argues that there is no ambiguity in the CBA. It avers that Section 1, Article VI of the CBA should be read in its entirety.28 From the said provision, it is clear that the CBA contemplated only the implementation of a wage order issued within six months from the execution of the CBA, and not every wage order issued during its effectivity. Hence, petitioner complied with Wage Order No. NCR-07 which was issued 28 days from the execution of the CBA. Petitioner emphasizes that this was implemented not because it was a matter of practice but because it was agreed upon in the CBA.29 It alleges that respondent Union in fact realized that it could not invoke the provisions of the CBA to enforce Wage Order No. NCR-08, which is why it agreed to limit the issue for voluntary arbitration to whether respondent Union is entitled to the wage increase as a matter of practice. The fact that

the "Yambot proposals" were left out in the final document simply means that the parties never agreed to them.30 In any case, petitioner avers that respondent Union is not entitled to the wage increase provided under Wage Order No. NCR-08 as a matter of practice. There is no company practice of granting a wage-order-mandated increase in addition to the CBA-mandated wage increase. It points out that, as admitted by respondent Union, the previous wage orders were not automatically implemented and were made applicable only after negotiations. Petitioner argues that the previous wage orders were implemented because at that time, some employees were receiving salaries below the minimum wage and the resulting wage distortion had to be remedied. 31 For its part, respondent Union avers that the provision "[a]ny Wage Order to be implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the wage increase adverted to above" referred to a company practice of paying a wage increase whenever the government issues a wage order even if the employees salaries were above the minimum wage and there is no resulting wage distortion. According to respondent, the CBA contemplated all the salary increases that may be mandated by wage orders to be issued in the future. Since the wage order was only a device to determine exactly how much and when the increase would be given, these increases are, in effect, CBA-mandated and not wage order increases. 32 Respondent further avers that the ambiguity in the wage adjustment provision of the CBA can be clarified by resorting to parol evidence, that is, Atty. Yambots version of said provision.33 The petition is meritorious. We rule that petitioner is not obliged to grant the wage increase under Wage Order No. NCR-08 either by virtue of the CBA, or as a matter of company practice. On the procedural issue, well-settled is the rule, also applicable in labor cases, that issues not raised below cannot be raised for the first time on appeal.34 Points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by the reviewing court, as they cannot be raised for the first time at that late stage. Basic considerations of due process impel this rule.35 We agree with petitioners contention that the issue on the ambiguity of the CBA and its failure to express the true intention of the parties has not been expressly raised before the voluntary arbitration proceedings. The parties specifically confined the issue for resolution by the VA to whether or not the

petitioner is obliged to grant an increase to its employees as a matter of practice. Respondent did not anchor its claim for an across-the-board wage increase under Wage Order No. NCR-08 on the CBA. However, we note that it raised before the CA two issues, namely: x x x whether or not the wage increase of P26.50 under Wage Order No. NCR-08 must be paid to the union members as a matter of practice and whether or not parol evidence can be resorted to in proving or explaining or elucidating the existence of a collateral agreement/company practice for the payment of the wage increase under the wage order despite that the employees were already receiving wages way above the minimum wage of P250.00/day as prescribed by Wage Order No. NCR-08 and irrespective of whether wage distortion exists.36 Petitioner, in its Comment on the petition, delved into these issues and elaborated on its contentions. By so doing, it thereby agreed for the CA to take cognizance of such issues as defined by respondent (petitioner therein). Moreover, a perusal of the records shows that the issue of whether or not the CBA is ambiguous and does not reflect the true agreement of the parties was, in fact, raised before the voluntary arbitration proceedings. Despite the submission agreement confining the issue to whether petitioner was obliged to grant an increase pursuant to Wage Order No. NCR-08 as a matter of practice, respondent Union nevertheless raised the same issues in its pleadings. In its Position Paper, it asserted that the CBA consistently contained a collateral agreement to pay the equivalent of the wage orders across-the-board; in its Reply, it claimed that such provision clearly provided that petitioner would pay the additional increases apart from the CBA and that the wage order serves only as a measure of said increase. These assertions indicate that respondent Union also relied on the CBA to support its claim for the wage increase. Central to the substantial issue is Article VI, Section I, of the CBA of the parties, dated September 23, 1999, viz: SALARIES AND WAGE Section 1. WAGE ADJUSTMENT The COMPANY agrees to grant to all workers who are already regular and covered by this AGREEMENT at the effectivity of this AGREEMENT a general wage increase as follows: July 1, 1999 . P15.00 per day per employee

July 1, 2000 . P25.00 per day per employee July 1, 2001 . P 30.00 per day per employee The aforesaid wage increase shall be implemented across the board. Any Wage Order to be implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the wage increase adverted to above. However, if no wage increase is given by the Wage Board within six (6) months from the signing of this AGREEMENT, the Management is willing to give the following increases, to wit: July 1, 1999 . P 20.00 per day per employee July 1, 2000 . P 25.00 per day per employee July 1, 2001 P 30.00 per day per employee The difference of the first year adjustment to retroact to July 1, 1999. The across-the-board wage increase for the 4th and 5th year of this AGREEMENT shall be subject for a reopening or renegotiation as provided for by Republic Act No. 6715.37 On the other hand, Wage Order No. NCR-08 specifically provides that only those in the private sector in the NCR receiving the prescribed daily minimum wage rate of P223.00 per day would receive an increase of P26.50 a day, thereby setting the new minimum wage rate in said region to P250.00 per day. There is no dispute that, when the order was issued, the lowest paid employee of petitioner was receiving a wage higher than P250.00 a day. As such, its employees had no right to demand for an increase under said order. As correctly ruled by the VA: We now come to the core of this case. Is [petitioner] under an obligation to grant wage increase to its workers under W.O. No. NCR-08 as a matter of practice? It is submitted that employers (unless exempt) in Metro Manila (including the [petitioner]) are mandated to implement the said wage order but limited to those entitled thereto. There is no legal basis to implement the same across-the-board. A perusal of the record shows that the lowest paid employee before the implementation of Wage Order #8 is P250.00/day and none was receiving below P223.50 minimum. This could only mean that the union can no longer demand for any wage distortion adjustment. Neither

could they insist for an adjustment of P26.50 increase under Wage Order #8. The provision of wage order #8 and its implementing rules are very clear as to who are entitled to the P26.50/day increase, i.e., "private sector workers and employees in the National Capital Region receiving the prescribed daily minimum wage rate of P223.50 shall receive an increase of Twenty-Six Pesos and Fifty Centavos (P26.50) per day," and since the lowest paid is P250.00/day the company is not obliged to adjust the wages of the workers. With the above narration of facts and with the union not having effectively controverted the same, we find no merit to the complainants assertion of such a company practice in the grant of wage order increase applied acrossthe-board. The fact that it was shown the increases granted under the Wage Orders were obtained thru request and negotiations because of the existence of wage distortion and not as company practice as what the union would want. Neither do we find merit in the argument that under the CBA, such increase should be implemented across-the-board. The provision in the CBA that "Any Wage Order to be implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the wage increase adverted above" cannot be interpreted in support of an across-the-board increase. If such were the intentions of this provision, then the company could have simply accepted the original demand of the union for such across-the-board implementation, as set forth in their original proposal (Annex "2" union[]s counsel proposal). The fact that the company rejected this proposal can only mean that it was never its intention to agree, to such across-the-board implementation. Thus, the union will have to be contented with the increase of P30.00 under the CBA which is due on July 31, 2001 barely a month from now.38 The error of the CA lies in its considering only the CBA in interpreting the wage adjustment provision, without taking into account Wage Order No. NCR-08, and the fact that the members of respondent Union were already receiving salaries higher than P250.00 a day when it was issued. The CBA cannot be considered independently of the wage order which respondent Union relied on for its claim. Wage Order No. NCR-08 clearly states that only those employees receiving salaries below the prescribed minimum wage are entitled to the wage increase provided therein, and not all employees across-the-board as respondent Union would want petitioner to do. Considering therefore that none of the members of respondent Union are receiving salaries below the

P250.00 minimum wage, petitioner is not obliged to grant the wage increase to them. The ruling of the Court in Capitol Wireless, Inc. v. Bate39 is instructive on how to construe a CBA vis--vis a wage order. In that case, the company and the Union signed a CBA with a similar provision: "[s]hould there be any government mandated wage increases and/or allowances, the same shall be over and above the benefits herein granted."40 Thereafter, the Wage Board of the NCR issued several wage orders providing for an across-the-board increase in the minimum wage of all employees in the private sector. The company implemented the wage increases only to those employees covered by the wage orders - those receiving not more than the minimum wage. The Union protested, contending that, pursuant to said provision, any and all government-mandated increases in salaries and allowance should be granted to all employees across-the-board. The Court held as follows: x x x The wage orders did not grant across-the-board increases to all employees in the National Capital Region but limited such increases only to those already receiving wage rates not more than P125.00 per day under Wage Order Nos. NCR-01 and NCR-01-A and P142.00 per day under Wage Order No. NCR-02. Since the wage orders specified who among the employees are entitled to the statutory wage increases, then the increases applied only to those mentioned therein. The provisions of the CBA should be read in harmony with the wage orders, whose benefits should be given only to those employees covered thereby. (Emphasis added)41 In this case, as gleaned from the pleadings of the parties, respondent Union relied on a collateral agreement between it and petitioner, an agreement extrinsic of the CBA based on an alleged established practice of the latter as employer. The VA rejected this claim: Complainant Pag-Asa Steel Workers Union additionally advances the arguments that "there exist a collateral agreement to pay the equivalent of wage orders across the board or at least to negotiate how much will be paid" and that "parol evidence is now applicable to show or explain what the unclean provisions of the CBA means regarding wage adjustment." The respondent cites Article XXVII of the CBA in effect, as follows: "The parties acknowledged that during the negotiation which resulted in this AGREEMENT, each had the unlimited right & opportunity to make demands, claims and proposals of every kind and nature with respect to any subject or matter not removed by law from the Collective Bargaining and the

understanding and agreements arrived at by the parties after the exercise of that right & opportunity are set forth in this AGREEMENT. Therefore, the COMPANY and the UNION, for the life of this AGREEMENT, agrees that neither party shall not be obligated to bargain collectively with respect to any subject matter not specifically referred to or covered in this AGREEMENT, and furthermore, that each party voluntarily & unqualifiedly waives such right even though such subject may not have been within the knowledge or contemplation of either or both of the parties at the time they signed this AGREEMENT." From the said CBA provision and upon an appreciation of the entire CBA, we find it to have more than amply covered all aspects of the collective bargaining. To allow alleged collateral agreements or parol/oral agreements would be violative of the CBA provision afore-quoted.42 We agree with petitioners contention that the rule excluding parol evidence to vary or contradict a written agreement, does not extend so far as to preclude the admission of extrinsic evidence, to show prior or contemporaneous collateral parol agreements between the parties. Such evidence may be received regardless of whether or not the written agreement contains reference to such collateral agreement.43 As the Court ruled in United Kimberly-Clark Employees Union, et al. v. Kimberly-Clark Philippines, Inc.:44 A CBA is more than a contract; it is a generalized code to govern a myriad of cases which the draftsmen cannot wholly anticipate. It covers the whole employment relationship and prescribes the rights and duties of the parties. It is a system of industrial self-government with the grievance machinery at the very heart of the system. The parties solve their problems by molding a system of private law for all the problems which may arise and to provide for their solution in a way which will generally accord with the variant needs and desires of the parties. If the terms of a CBA are clear and have no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall prevail. However, if, in a CBA, the parties stipulate that the hirees must be presumed of employment qualification standards but fail to state such qualification standards in said CBA, the VA may resort to evidence extrinsic of the CBA to determine the full agreement intended by the parties. When a CBA may be expected to speak on a matter, but does not, its sentence imports ambiguity on that subject. The VA is not merely to rely on the cold and cryptic words on the face of the CBA but is mandated to discover the intention of the

parties. Recognizing the inability of the parties to anticipate or address all future problems, gaps may be left to be filled in by reference to the practices of the industry, and the step which is equally a part of the CBA although not expressed in it. In order to ascertain the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. The VA may also consider and rely upon negotiating and contractual history of the parties, evidence of past practices interpreting ambiguous provisions. The VA has to examine such practices to determine the scope of their agreement, as where the provision of the CBA has been loosely formulated. Moreover, the CBA must be construed liberally rather than narrowly and technically and the Court must place a practical and realistic construction upon it.45 However, just like any other fact, habits, customs, usage or patterns of conduct must be proved. Thus was the ruling of the Court in Bank of Commerce v. Manalo, et al.:46 Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must contend with the caveat that, before they admit evidence of usage, of habit or pattern of conduct, the offering party must establish the degree of specificity and frequency of uniform response that ensures more than a mere tendency to act in a given manner but rather, conduct that is semi-automatic in nature. The offering party must allege and prove specific, repetitive conduct that might constitute evidence of habit. The examples offered in evidence to prove habit, or pattern of evidence must be numerous enough to base on inference of systematic conduct. Mere similarity of contracts does not present the kind of sufficiently similar circumstances to outweigh the danger of prejudice and confusion. In determining whether the examples are numerous enough, and sufficiently regular, the key criteria are adequacy of sampling and uniformity of response. After all, habit means a course of behavior of a person regularly represented in like circumstances. It is only when examples offered to establish pattern of conduct or habit are numerous enough to lose an inference of systematic conduct that examples are admissible. The key criteria are adequacy of sampling and uniformity of response or ratio of reaction to situations. We have reviewed the records meticulously and find no evidence to prove that the grant of a wage-order-mandated increase to all the employees regardless of their salary rates on an agreement collateral to the CBA had ripened into company practice before the effectivity of Wage Order No.

NCR-08. Respondent Union failed to adduce proof on the salaries of the employees prior to the issuance of each wage order to establish its allegation that, even if the employees were receiving salaries above the minimum wage and there was no wage distortion, they were still granted salary increase. Only the following lists of salaries of respondent Unions members were presented in evidence: (1) before Wage Order No. NCR-06 was issued; (2) after Wage Order No. NCR-06 was implemented; (3) after the grant of the first year increase under the CBA; (4) after Wage Order No. NCR-07 was implemented; and (5) after the second year increase in the CBA was implemented. The list of the employees salaries before Wage Order No. NCR-06 was implemented belie respondent Unions claim that the wage-order-mandated increases were given to employees despite the fact that they were receiving salaries above the minimum wage. This list proves that some employees were in fact receiving salaries below the P198.00 minimum wage rate prescribed by the wage order two rank-and-file employees in particular. As petitioner explains, a wage distortion occurred as a result of granting the increase to those employees who were receiving salaries below the prescribed minimum wage. The wage distortion necessitated the upward adjustment of the salaries of the other employees and not because it was a matter of company practice or usage. The situation of the employees before Wage Order No. NCR-08, however, was different. Not one of the members of respondent Union was then receiving less than P250.00 per day, the minimum wage requirement in said wage order. The only instance when petitioner admittedly implemented a wage order despite the fact that the employees were not receiving salaries below the minimum wage was under Wage Order No. NCR-07. Petitioner, however, explains that it did so because it was agreed upon in the CBA that should a wage increase be ordered within six months from its signing, petitioner would give the increase to the employees in addition to the CBA-mandated increases. Respondents isolated act could hardly be classified as a "company practice" or company usage that may be considered an enforceable obligation. Moreover, to ripen into a company practice that is demandable as a matter of right, the giving of the increase should not be by reason of a strict legal or contractual obligation, but by reason of an act of liberality on the part of the employer. Hence, even if the company continuously grants a wage increase as mandated by a wage order or pursuant to a CBA, the same would not automatically ripen into a company practice. In this case, petitioner granted

the increase under Wage Order No. NCR-07 on its belief that it was obliged to do so under the CBA. WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 65171 and Resolution dated January 11, 2005 are REVERSED and SET ASIDE. The Decision of the Voluntary Arbitrator is REINSTATED. No costs. SO ORDERED.

considered as having been abandoned or reversed by the Boie-Takeda decision, considering that the latter went "directly opposite and contrary to" the conclusion reached in the former. Petitioner prays that the decision rendered in Duplicators be set aside and another be entered directing the dismissal of the money claims of private respondent Philippine Duplicators' Employees' Union. In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's Second Motion for Reconsideration, and its Motion for Leave to Admit the Second Motion for Reconsideration, to the Court en banc en consulta. The Court en banc, after preliminary deliberation, and inorder to settle the condition of the relevant case law, accepted G.R. No. 110068 as a banc case. Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as well as its Motion for Leave to Admit the Second Motion for Reconsideration, and after review of the doctrines embodied, respectively, in Duplicators and Boie-Takeda, we consider that these Motions must fail. The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare decisis. The Boie-Takeda decision was promulgated a month after this Court, (through its Third Division), had rendered the decision in the instant case. Also, the petitioner's (first) Motion for Reconsideration of the decision dated 10 November 1993 had already been denied, with finality, on 15 December 1993, i.e.; before the Boie-Takeda decision became final on 5 January 1994. Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised Guidelines on the Implementary on of the 13th Month Pay Law, issued on November 16, 1987, by then Labor Secretary Franklin M. Drilon, either in its Petition for Certiorari or in its (First) Motion for Reconsideration. In fact, petitioner's counsel relied upon these Guidelines and asserted their validity in opposing the decision rendered by public respondent NLRC. Any attempted change in petitioner's theory, at this late stage of the proceedings, cannot be allowed. More importantly, we do not agree with petitioner that the decision in BoieTakeda is "directly opposite or contrary to" the decision in the present (Philippine Duplicators). To the contrary, the doctrines enunciated in these two (2) cases in fact co-exist one with the other. The two (2) cases present

PHILIPPINE DUPLICATORS, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES UNION-TUPAS, respondents. RESOLUTION FELICIANO, J.: On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the Petition for Certiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No. 110068. The Court upheld the decision of public respondent National Labor Relations Commission (NLRC), which affirmed the order of Labor Arbiter Felipe T. Garduque II directing petitioner to pay 13th month pay to private respondent employees computed on the basis of their fixed wages plus sales commissions. The Third Division also denied with finality on 15 December 1993 the Motion for Reconsideration filed (on 12 December 1993) by petitioner. On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for Reconsideration and (b) a Second Motion for Reconsideration. This time, petitioner invoked the decision handed down by this Court, through its Second Division, on 10 December 1993 in the two (2) consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B. Trajano, in G.R. Nos. 92174 and 102552, respectively. In its decision, the Second Division inter alia declared null and void the second paragraph of Section 5 (a) 1 of the Revised Guidelines issued by then Secretary of Labor Drilon. Petitioner submits that the decision in the Duplicators case should now be

quite different factual situations (although the same word "commissions" was used or invoked) the legal characterizations of which must accordingly differ. The Third Division in Durplicators found that: In the instant case, there is no question that the sales commission earned by the salesmen who make or close a sale of duplicating machines distributed by petitioner corporation, constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the "wage" or salary of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being composed of the sales or incentive commissions earned on actual sales closed by them. No doubt this particular galary structure was intended for the benefit of the petitioner corporation, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each of its salesmen for rendering services to petitioner corporation. In other words, the sales commissions received for every duplicating machine sold constituted part of the basic compensation or remuneration of the salesmen of Philippine Duplicators for doing their job. The portion of the salary structure representing commissions simply comprised an automatic increment to the monetary value initially assigned to each unit of work rendered by a salesman. Especially significant here also is the fact that the fixed or guaranteed portion of the wages paid to the Philippine Duplicators' salesmen represented only 15%-30% of an employee's total earnings in a year. We note the following facts on record: Salesmen's Total Earnings and 13th Month Pay For the Year 1986 2 Name of Total Amount Paid Montly Fixed Salesman Earnings as 13th Month Pay Wages x 12 3 Baylon, P76,610.30 P1,350.00 P16,200.00 Benedicto

Bautista 90,780.85 1,182.00 14,184.00 Salvador Brito, 64,382.75 1,238.00 14,856.00 Tomas Bunagan, 89,287.75 1,266.00 15,192.00 Jorge Canilan, 74,678.17 1,350.00 16,200.00 Rogelio Dasig, 54,625.16 1,378,00 16,536.00 Jeordan Centeno, 51,854.15 1,266.04 15,192.00 Melecio, Jr. De los Santos 73,551.39 1,322.00 15,864.00 Ricardo del Mundo, 108,230.35 1,406.00 16,872.00 Wilfredo Garcia, 93,753.75 1,294.00 15,528.00 Delfin Navarro, 98,618.71 1,266.00 15,192.00 Ma. Teresa Ochosa, 66,275.65 1,406.00 16,872.00 Rolano Quisumbing, 101,065.75 1,406.00 16,872.00 Teofilo Rubina, 42,209.73 1,266.00 15,192.00 Emma Salazar, 64,643.65 1,238.00 14,856.00 Celso

Sopelario, 52,622.27 1,350.00 16,200.00 Ludivico Tan, 30,127.50 1,238.00 14,856.00 Leynard Talampas, 146,510.25 1,434.00 17,208.00 Pedro Villarin, 41,888.10 1,434.00 17,208.00 Constancio Carrasco, 50,201.20 403.75* Cicero Punzalan, 24,351.89 1,266.00 15,192.00 Reynaldo Poblador, 25,516.75 323.00* Alberto Cruz, 32,950.45 323.00* Danilo Baltazar, 15,681.35 323.00* Carlito Considering the above circumstances, the Third Division held, correctly, that the sales commissions were an integral part of the basic salary structure of Philippine Duplicators' employees salesmen. These commissions are not overtime payments, nor profit-sharing payments nor any other fringe benefit. Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price of the goods sold by each salesman, were properly included in the term "basic salary" for purposes of computing their 13th month pay. In Boie-Takeda the so-called commissions "paid to or received by medical representatives of Boie-Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.," were excluded from the term "basic salary" because these were paid to the medical representatives and rank-and-file employees as "productivity bonuses." 4 The Second Division characterized these payments as additional monetary benefits not properly included in the

term "basic salary" in computing their 13th month pay. We note that productivity bonuses are generally tied to the productivity, or capacity for revenue production, of a corporation; such bonuses closely resemble profitsharing payments and have no clear director necessary relation to the amount of work actually done by each individual employee. More generally, a bonus is an amount granted and paid ex gratia to the employee; its payment constitutes an act of enlightened generosity and self-interest on the part of the employer, rather than as a demandable or enforceable obligation. In Philippine Education Co. Inc. (PECO) v. Court of Industrial Relations, 5 the Court explained the nature of a bonus in the following general terms: As a rule a bonus is an amount granted and paid to an employee for his industry loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act of generosity of the employer for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. . . . . From the legal point of view a bonus is not and mandable and enforceable obligation. It is so when It is made part of the wage or salary or compensation. In such a case the latter would be a fixed amount and the former would be a contingent one dependent upon the realization of profits. . . . 6 (Emphasis supplied) In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association, 7 the Court amplified: . . . . Whether or not [a] bonus forms part of waqes depends upon the circumstances or conditions for its payment. If it is an additional compensation which the employer promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or a certain amount of productivity achieved, it cannot be considered part of wages. . . . It is also paid on the basis of actual or actual work accomplished. If the desired goal of production is not obtained, or the amount of actual work accomplished, the bonus does not accrue. . . . 8 (Emphasis supplied)

More recently, the non-demandable character of a bonus was stressed by the Court in Traders Royal Bank v. National Labor Relations Commission: 9 A bonus is a "gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right." (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). "It is something given in addition to what is ordinarily received by or strictly due the recipient." The granting of a bonus is basically a management prerogative which cannot be forced upon the employer "who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or wages . . ." (Kamaya Point Hotel v. NLRC, 177 SCRA 160 [1989]). 10 (Emphasis supplied) If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that such productivity bonus, when given, should not be deemed to fall within the "basic salary" of employees when the time comes to compute their 13th month pay. It is also important to note that the purported "commissions" paid by the Boie-Takeda Company to its medical representatives could not have been "sales commissions" in the same sense that Philippine Duplicators paid its salesmen Sales commissions. Medical representatives are not salesmen; they do not effect any sale of any article at all. In common commercial practice, in the Philippines and elsewhere, of which we take judicial notice, medical representatives are employees engaged in the promotion of pharmaceutical products or medical devices manufactured by their employer. They promote such products by visiting identified physicians and inform much physicians, orally and with the aid of printed brochures, of the existence and chemical composition and virtues of particular products of their company. They commonly leave medical samples with each physician visited; but those samples are not "sold" to the physician and the physician is, as a matter of professional ethics, prohibited from selling such samples to their patients. Thus, the additional payments made to Boie-Takeda's medical representatives were not in fact sales commissions but rather partook of the nature of profit-sharing bonuses. The doctrine set out in the decision of the Second Division is, accordingly, that additional payments made to employees, to the extent they partake of the nature of profit-sharing payments, are properly excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay due to

employees. Such additional payments are not "commissions" within the meaning of the second paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay. The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by former Labor Minister Ople sought to clarify the scope of items excluded in the computation of the 13th month pay; viz.: Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th month pay. We observe that the third item excluded from the term "basic salary" is cast in open ended and apparently circular terms: "other remunerations which are not part of the basic salary." However, what particular types of earnings and remuneration are or are not properly included or integrated in the basic salary are questions to be resolved on a case to case basis, in the light of the specific and detailed facts of each case. In principle, where these earnings and remuneration are closely akin to fringe benefits, overtime pay or profitsharing payments, they are properly excluded in computing the 13th month pay. However, sales commissions which are effectively an integral portion of the basic salary structure of an employee, shall be included in determining his 13th month pay. We recognize that both productivity bonuses and sales commissions may have an incentive effect. But there is reason to distinguish one from the other here. Productivity bonuses are generally tied to the productivity or profit generation of the employer corporation. Productivity bonuses are not directly dependent on the extent an individual employee exerts himself. A productivity bonus is something extra for which no specific additional services are rendered by any particular employee and hence not legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent or energy of an employee's endeavors. Commissions are paid upon the specific results achieved by a salesmanemployee. It is a percentage of the sales closed by a salesman and operates as an integral part of such salesman's basic pay. Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay issued by former Labor Secretary Drilon, is properly understood as holding that that second paragraph provides no

legal basis for including within the term "commission" there used additional payments to employees which are, as a matter of fact, in the nature of profitsharing payments or bonuses. If and to the extent that such second paragraph is so interpreted and applied, it must be regarded as invalid as having been issued in excess of the statutory authority of the Secretary of Labor. That same second paragraph however, correctly recognizes that commissions, like those paid in Duplicators, may constitute part of the basic salary structure of salesmen and hence should be included in determining the 13th month pay; to this extent, the second paragraph is and remains valid. ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and the (b) aforesaid Second Reconsideration are DENIED for lack of merit. No further pleadings will be entertained. AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION, Petitioner, vs. AMERICAN WIRE AND CABLE CO., INC. and THE COURT OF APPEALS, Respondents. DECISION CHICO-NAZARIO, J.: Before Us is a special civil action for certiorari, assailing the Decision[1] of the Special Eighth Division of the Court of Appeals dated 06 March 2002. Said Decision upheld the Decision[2] and Order[3] of Voluntary Arbitrator Angel A. Ancheta of the National Conciliation and Mediation Board (NCMB) dated 25 September 2001 and 05 November 2001, respectively, which declared the private respondent herein not guilty of violating Article 100 of the Labor Code, as amended. Assailed likewise, is the Resolution[4] of the Court of Appeals dated 12 July 2002, which denied the motion for reconsideration of the petitioner, for lack of merit. THE FACTS The facts of this case are quite simple and not in dispute. American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of wires and cables. There are two unions in this company, the American Wire and Cable Monthly-Rated Employees Union (Monthly-Rated Union) and the American Wire and Cable Daily-Rated Employees Union (Daily-Rated Union).

On 16 February 2001, an original action was filed before the NCMB of the Department of Labor and Employment (DOLE) by the two unions for voluntary arbitration. They alleged that the private respondent, without valid cause, suddenly and unilaterally withdrew and denied certain benefits and entitlements which they have long enjoyed. These are the following: a. Service Award; b. 35% premium pay of an employee's basic pay for the work rendered during Holy Monday, Holy Tuesday, Holy Wednesday, December 23, 26, 27, 28 and 29; c. Christmas Party; and d. Promotional Increase. A promotional increase was asked by the petitioner for fifteen (15) of its members who were given or assigned new job classifications. According to petitioner, the new job classifications were in the nature of a promotion, necessitating the grant of an increase in the salaries of the said 15 members. On 21 June 2001, a Submission Agreement was filed by the parties before the Office for Voluntary Arbitration. Assigned as Voluntary Arbitrator was Angel A. Ancheta. On 04 July 2001, the parties simultaneously filed their respective position papers with the Office of the Voluntary Arbitrator, NCMB, and DOLE. On 25 September 2001, a Decision[5] was rendered by Voluntary Arbitrator Angel A. Ancheta in favor of the private respondent. The dispositive portion of the said Decision is quoted hereunder: WHEREFORE, with all the foregoing considerations, it is hereby declared that the Company is not guilty of violating Article 100 of the Labor Code, as amended, or specifically for withdrawing the service award, Christmas party and 35% premium for work rendered during Holy Week and Christmas season and for not granting any promotional increase to the alleged fifteen (15) Daily-Rated Union Members in the absence of a promotion. The Company however, is directed to grant the service award to deserving employees in amounts and extent at its discretion, in consultation with the Unions on grounds of equity and fairness.[6]

A motion for reconsideration was filed by both unions[7] where they alleged that the Voluntary Arbitrator manifestly erred in finding that the company did not violate Article 100 of the Labor Code, as amended, when it unilaterally withdrew the subject benefits, and when no promotional increase was granted to the affected employees. On 05 November 2001, an Order[8] was issued by Voluntary Arbitrator Angel A. Ancheta. Part of the Order is quoted hereunder: Considering that the issues raised in the instant case were meticulously evaluated and length[i]ly discussed and explained based on the pleadings and documentary evidenc[e] adduced by the contending parties, we find no cogent reason to change, modify, or disturb said decision. WHEREFORE, let the instant MOTION[S] FOR RECONSIDERATION be, as they are hereby, denied for lack of merit. Our decision dated 25 September 2001 is affirmed 'en toto.[9] An appeal under Rule 43 of the 1997 Rules on Civil Procedure was made by the Daily-Rated Union before the Court of Appeals[10] and docketed as CAG.R. SP No. 68182. The petitioner averred that Voluntary Arbitrator Angel A. Ancheta erred in finding that the company did not violate Article 100 of the Labor Code, as amended, when the subject benefits were unilaterally withdrawn. Further, they assert, the Voluntary Arbitrator erred in adopting the company's unaudited Revenues and Profitability Analysis for the years 1996-2000 in justifying the latter's withdrawal of the questioned benefits.[11] On 06 March 2002, a Decision in favor of herein respondent company was promulgated by the Special Eighth Division of the Court of Appeals in CAG.R. SP No. 68182. The decretal portion of the decision reads: WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly DISMISSED, for lack of merit. The Decision of Voluntary Arbitrator Angel A. Ancheta dated September 25, 2001 and his Order dated November 5, 2001 in VA Case No. AAA-10-6-42001 are hereby AFFIRMED and UPHELD.[12] A motion for reconsideration[13] was filed by the petitioner, contending that the Court of Appeals misappreciated the facts of the case, and that it committed serious error when it ruled that the unaudited financial statement bears no importance in the instant case.

The Court of Appeals denied the motion in its Resolution dated 12 July 2002[14] because it did not present any new matter which had not been considered in arriving at the decision. The dispositive portion of the Resolution states: WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.[15] Dissatisfied with the court a quo's ruling, petitioner instituted the instant special civil action for certiorari, [16] citing grave abuse of discretion amounting to lack of jurisdiction. ASSIGNMENT OF ERRORS The petitioner assigns as errors the following: I THE COURT OF APPEALS ERRED IN HOLDING THAT THE COMPANY DID NOT VIOLATE ARTICLE 100 OF THE LABOR CODE, AS AMENDED, WHEN IT UNILATERALLY WITHDREW THE BENEFITS OF THE MEMBERS OF PETITIONER UNION, TO WIT: 1) 35% PREMIUM PAY; 2) CHRISTMAS PARTY AND ITS INCIDENTAL BENEFITS; AND 3) SERVICE AWARD, WHICH IN TRUTH AND IN FACT SAID BENEFITS/ENTITLEMENTS HAVE BEEN GIVEN THEM SINCE TIME IMMEMORIAL, AS A MATTER OF LONG ESTABLISHED COMPANY PRACTICE, WITH THE FURTHER FACT THAT THE SAME NOT BEING DEPENDENT ON PROFITS. II THE COURT OF APPEALS ERRED WHEN IT JUST ACCEPTED HOOK, LINE AND SINKER, THE RESPONDENT COMPANY'S SELF SERVING AND UNAUDITED REVENUES AND PROFITABILITY ANALYSIS FOR THE YEARS 1996-2000 WHICH THEY SUBMITTED TO FALSELY JUSTIFY THEIR UNLAWFUL ACT OF UNILATERALLY AND SUDDENLY WITHDRAWING OR DENYING FROM THE PETITIONER THE SUBJECT BENEFITS/ENTITLEMENTS. III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE YEARLY SERVICE AWARD IS NOT DEPENDENT ON PROFIT BUT ON SERVICE AND THUS, CANNOT BE UNILATERALLY WITHDRAWN BY RESPONDENT COMPANY. ISSUE Synthesized, the solitary issue that must be addressed by this Court is whether or not private respondent is guilty of violating Article 100 of the Labor Code, as amended, when the benefits/entitlements given to the members of petitioner union were withdrawn. THE COURT'S RULING Before we address the sole issue presented in the instant case, it is best to first discuss a matter which was raised by the private respondent in its Comment. The private respondent contends that this case should have been dismissed outright because of petitioner's error in the mode of appeal. According to it, the petitioner should have elevated the instant case to this Court through a petition for review on certiorari under Rule 45, and not through a special civil action for certiorari under Rule 65, of the 1997 Rules on Civil Procedure.[17] Assuming arguendo that the mode of appeal taken by the petitioner is improper, there is no question that the Supreme Court has the discretion to dismiss it if it is defective. However, sound policy dictates that it is far better to dispose the case on the merits, rather than on technicality.[18] The Supreme Court may brush aside the procedural barrier and take cognizance of the petition as it raises an issue of paramount importance. The Court shall resolve the solitary issue on the merits for future guidance of the bench and bar.[19] With that out of the way, we shall now resolve whether or not the respondent company is guilty of violating Article 100 of the Labor Code, as amended. Article 100 of the Labor Code provides: ART. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS. ' Nothing in this Book shall be construed

to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code. The petitioner submits that the withdrawal of the private respondent of the 35% premium pay for selected days during the Holy Week and Christmas season, the holding of the Christmas Party and its incidental benefits, and the giving of service awards violated Article 100 of the Labor Code. The grant of these benefits was a customary practice that can no longer be unilaterally withdrawn by private respondent without the tacit consent of the petitioner. The benefits in question were given by the respondent to the petitioner consistently, deliberately, and unconditionally since time immemorial. The benefits/entitlements were not given to petitioner due to an error in interpretation, or a construction of a difficult question of law, but simply, the grant has been a practice over a long period of time. As such, it cannot be withdrawn from the petitioner at respondent's whim and caprice, and without the consent of the former. The benefits given by the respondent cannot be considered as a 'bonus' as they are not founded on profit. Even assuming that it can be treated as a 'bonus, the grant of the same, by reason of its long and regular concession, may be regarded as part of regular compensation.[20] With respect to the fifteen (15) employees who are members of petitioner union that were given new job classifications, it asserts that a promotional increase in their salaries was in order. Salary adjustment is a must due to their promotion.[21] On respondent company's Revenues and Profitability Analysis for the years 1996-2000, the petitioner insists that since the former was unaudited, it should not have justified the company's sudden withdrawal of the benefits/entitlements. The normal and/or legal method for establishing profit and loss of a company is through a financial statement audited by an independent auditor.[22] The petitioner cites our ruling in the case of Saballa v. NLRC, [23] where we held that financial statements audited by independent auditors constitute the normal method of proof of the profit and loss performance of the company. Our ruling in the case of Bogo-Medellin Sugarcane Planters Association, Inc., et al. v. NLRC, et al .[24] was likewise invoked. In this case, we held: The Court has previously ruled that financial statements audited by independent external auditors constitute the normal method of proof of the profit and loss performance of a company.

On the matter of the withdrawal of the service award, the petitioner argues that it is the employee's length of service which is taken as a factor in the grant of this benefit, and not whether the company acquired profit or not.[25] In answer to all these, the respondent corporation avers that the grant of all subject benefits has not ripened into practice that the employees concerned can claim a demandable right over them. The grant of these benefits was conditional based upon the financial performance of the company and that conditions/circumstances that existed before have indeed substantially changed thereby justifying the discontinuance of said grants. The company's financial performance was affected by the recent political turmoil and instability that led the entire nation to a bleeding economy. Hence, it only necessarily follows that the company's financial situation at present is already very much different from where it was three or four years ago.[26] On the subject of the unaudited financial statement presented by the private respondent, the latter contends that the cases cited by the petitioner indeed uniformly ruled that financial statements audited by independent external auditors constitute the normal method of proof of the profit and loss performance of a company. However, these cases do not require that the only legal method to ascertain profit and loss is through an audited financial statement. 'The cases only provide that an audited financial statement is the normal method.[27] The respondent company likewise asseverates that the 15 members of petitioner union were not actually promoted. There was only a realignment of positions.[28] From the foregoing contentions, it appears that for the Court to resolve the issue presented, it is critical that a determination must be first made on whether the benefits/entitlements are in the nature of a bonus or not, and assuming they are so, whether they are demandable and enforceable obligations. In the case of Producers Bank of the Philippines v. NLRC [29] we have characterized what a bonus is, viz: A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act of generosity granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. The granting of a bonus is a

management prerogative, something given in addition to what is ordinarily received by or strictly due the recipient. Thus, a bonus is not a demandable and enforceable obligation, except when it is made part of the wage, salary or compensation of the employee. Based on the foregoing pronouncement, it is obvious that the benefits/entitlements subjects of the instant case are all bonuses which were given by the private respondent out of its generosity and munificence. The additional 35% premium pay for work done during selected days of the Holy Week and Christmas season, the holding of Christmas parties with raffle, and the cash incentives given together with the service awards are all in excess of what the law requires each employer to give its employees. Since they are above what is strictly due to the members of petitioner-union, the granting of the same was a management prerogative, which, whenever management sees necessary, may be withdrawn, unless they have been made a part of the wage or salary or compensation of the employees. The consequential question therefore that needs to be settled is if the subject benefits/entitlements, which are bonuses, are demandable or not. Stated another way, can these bonuses be considered part of the wage or salary or compensation making them enforceable obligations? The Court does not believe so. For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by the parties,[30] or it must have had a fixed amount[31] and had been a long and regular practice on the part of the employer.[32] The benefits/entitlements in question were never subjects of any express agreement between the parties. They were never incorporated in the Collective Bargaining Agreement (CBA). As observed by the Voluntary Arbitrator, the records reveal that these benefits/entitlements have not been subjects of any express agreement between the union and the company, and have not yet been incorporated in the CBA. In fact, the petitioner has not denied having made proposals with the private respondent for the service award and the additional 35% premium pay to be made part of the CBA.[33] The Christmas parties and its incidental benefits, and the giving of cash incentive together with the service award cannot be said to have fixed amounts. What is clear from the records is that over the years, there had been a downtrend in the amount given as service award.[34] There was also a

downtrend with respect to the holding of the Christmas parties in the sense that its location changed from paid venues to one which was free of charge,[35] evidently to cut costs. Also, the grant of these two aforementioned bonuses cannot be considered to have been the private respondent's long and regular practice. To be considered a 'regular practice, the giving of the bonus should have been done over a long period of time, and must be shown to have been consistent and deliberate.[36] The downtrend in the grant of these two bonuses over the years demonstrates that there is nothing consistent about it. Further, as held by the Court of Appeals: Anent the Christmas party and raffle of prizes, We agree with the Voluntary Arbitrator that the same was merely sponsored by the respondent corporation out of generosity and that the same is dependent on the financial performance of the company for a particular year[37] The additional 35% premium pay for work rendered during selected days of the Holy Week and Christmas season cannot be held to have ripened into a company practice that the petitioner herein have a right to demand. Aside from the general averment of the petitioner that this benefit had been granted by the private respondent since time immemorial, there had been no evidence adduced that it had been a regular practice. As propitiously observed by the Court of Appeals: . . . [N]otwithstanding that the subject 35% premium pay was deliberately given and the same was in excess of that provided by the law, the same however did not ripen into a company practice on account of the fact that it was only granted for two (2) years and with the express reservation from respondent corporation's owner that it cannot continue to rant the same in view of the company's current financial situation.[38] To hold that an employer should be forced to distribute bonuses which it granted out of kindness is to penalize him for his past generosity.[39] Having thus ruled that the additional 35% premium pay for work rendered during selected days of the Holy Week and Christmas season, the holding of Christmas parties with its incidental benefits, and the grant of cash incentive together with the service award are all bonuses which are neither demandable nor enforceable obligations of the private respondent, it is not necessary anymore to delve into the Revenues and Profitability Analysis for the years 1996-2000 submitted by the private respondent.

On the alleged promotion of 15 members of the petitioner union that should warrant an increase in their salaries, the factual finding of the Voluntary Arbitrator is revealing, viz: Considering that the Union was unable to adduce proof that a promotion indeed occur[ed] with respect to the 15 employees, the Daily Rated Union's claim for promotional increase likewise fall[s] there being no promotion established under the records at hand.[40] WHEREFORE, in view of all the foregoing, the assailed Decision and Resolution of the Court of Appeals dated 06 March 2002 and 12 July 2002, respectively, which affirmed and upheld the decision of the Voluntary Arbitrator, are hereby AFFIRMED. No pronouncement as to costs. SO ORDERED.

HONDA PHILS., INC., petitioner, vs. SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent. DECISION YNARES-SANTIAGO, J.: This petition for review under Rule 45 seeks the reversal of the Court of Appeals decision1 dated September 14, 20002 and its resolution3 dated October 18, 2000, in CA-G.R. SP No. 59052. The appellate court affirmed the decision dated May 2, 2000 rendered by the Voluntary Arbitrator who ruled that petitioner Honda Philippines, Inc.s (Honda) pro-rated payment of the 13th and 14th month pay and financial assistance to its employees was invalid. As found by the Court of Appeals, the case stems from the Collective Bargaining Agreement (CBA) forged between petitioner Honda and respondent union Samahan ng Malayang Manggagawa sa Honda (respondent union) which contained the following provisions: Section 3. 13th Month Pay

The COMPANY shall maintain the present practice in the implementation [of] the 13th month pay. Section 6. 14th Month Pay The COMPANY shall grant a 14th Month Pay, computed on the same basis as computation of 13th Month Pay. Section 7. The COMPANY agrees to continue the practice of granting, in its discretion, financial assistance to covered employees in December of each year, of not less than 100% of basic pay. This CBA is effective until year 2000. In the latter part of 1998, the parties started re-negotiations for the fourth and fifth years of their CBA. When the talks between the parties bogged down, respondent union filed a Notice of Strike on the ground of bargaining deadlock. Thereafter, Honda filed a Notice of Lockout. On March 31, 1999, then Department of Labor and Employment (DOLE) Secretary Laguesma assumed jurisdiction over the labor dispute and ordered the parties to cease and desist from committing acts that would aggravate the situation. Both parties complied accordingly. On May 11, 1999, however, respondent union filed a second Notice of Strike on the ground of unfair labor practice alleging that Honda illegally contracted out work to the detriment of the workers. Respondent union went on strike and picketed the premises of Honda on May 19, 1999. On June 16, 1999, DOLE Acting Secretary Felicisimo Joson, Jr. assumed jurisdiction over the case and certified the same to the National Labor Relations Commission (NLRC) for compulsory arbitration. The striking employees were ordered to return to work and the management accepted them back under the same terms prior to the strike staged. On November 22, 1999, the management of Honda issued a memorandum4 announcing its new computation of the 13th and 14th month pay to be granted to all its employees whereby the thirty-one (31)-day long strike shall be considered unworked days for purposes of computing said benefits. As per the companys new formula, the amount equivalent to 1/12 of the employees basic salary shall be deducted from these bonuses, with a commitment however that in the event that the strike is declared legal, Honda shall pay the amount deducted.

Respondent union opposed the 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 Hondas computation, to wit: WHEREFORE, in view of all foregoing premises being duly considered and evaluated, it is hereby ruled that the Companys implementation of pro-rated 13th Month pay, 14th Month pay and Financial Assistance [is] invalid. The Company is thus ordered to compute each provision in full month basic pay and pay the amounts in question within ten (10) days after this Decision shall have become final and executory. The three (3) days Suspension of the twenty one (21) employees is hereby affirmed. SO ORDERED.7 Hondas 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 prorated computation of the 13th month pay and the other bonuses in question is valid and lawful. The petition lacks merit. A collective bargaining agreement refers to the negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit.8 As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy.9 Thus, where the CBA is clear and unambiguous, it becomes the law between

the parties and compliance therewith is mandated by the express policy of the law.10 In some instances, however, the provisions of a CBA may become contentious, as in this case. Honda wanted to implement a pro-rated computation of the benefits based on the "no work, no pay" rule. According to the company, the phrase "present practice" as mentioned in the CBA refers to the manner and requisites with respect to the payment of the bonuses, i.e., 50% to be given in May and the other 50% in December of each year. Respondent union, however, insists that the CBA provisions relating to the implementation of the 13th month pay necessarily relate to the computation of the same. We agree with the findings of the arbitrator that the assailed CBA provisions are far from being unequivocal. A cursory reading of the provisions will show that they did not state categorically whether the computation of the 13th month pay, 14th month pay and the financial assistance would be based on one full months 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 arbitrators finding and added that the computation of the 13th month pay should be based on the length of service and not on the actual wage earned by the worker. We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings of labor officials, who are deemed to have acquired expertise in matters within their respective jurisdiction, are generally accorded not only respect but even finality, and bind us when supported by substantial evidence. It is not our function to assess and evaluate the evidence all over again, particularly where the findings of both the arbiter and the Court of Appeals coincide.12 Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, which required all employers to pay their employees a 13th month pay, was issued to protect the level of real wages from the ravages of worldwide inflation. It was enacted on December 16, 1975 after it was noted that there had been no increase in the minimum wage since 1970 and the Christmas season was an opportune time for society to show its concern for the plight of the working masses so that they may properly celebrate Christmas and New Year.13

Under the Revised Guidelines on the Implementation of the 13th month pay issued on November 16, 1987, the salary ceiling of P1,000.00 under P.D. No. 851 was removed. It further provided that the minimum 13th month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year. The guidelines pertinently provides: The "basic salary" of an employee for the purpose of computing the 13th month pay shall include all remunerations or earnings paid by his employer for services rendered but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime premium, night differential and holiday pay, and cost-of-living allowances.14 (Emphasis supplied) For employees receiving regular wage, we have interpreted "basic salary" to mean, not the amount actually received by an employee, but 1/12 of their standard monthly wage multiplied by their length of service within a given calendar year. Thus, we exclude from the computation of "basic salary" payments for sick, vacation and maternity leaves, night differentials, regular holiday pay and premiums for work done on rest days and special holidays.15 In Hagonoy Rural Bank v. NLRC,16 St. Michael Academy v. NLRC,17 Consolidated Food Corporation v. NLRC,18 and similar cases, the 13th month pay due an employee was computed based on the employees basic monthly wage multiplied by the number of months worked in a calendar year prior to separation from employment. The revised guidelines also provided for a pro-ration of this benefit only in cases of resignation or separation from work. As the rules state, under these circumstances, an employee is entitled to a pay in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year.19 The Court of Appeals thus held that: Considering the foregoing, the computation of the 13th month pay should be based on the length of service and not on the actual wage earned by the worker. In the present case, there being no gap in the service of the workers during the calendar year in question, the computation of the 13th month pay should not be pro-rated but should be given in full.20 (Emphasis supplied) More importantly, it has not been refuted that Honda has not implemented any pro-rating of the 13th month pay before the instant case. Honda did not adduce evidence to show that the 13th month, 14th month and financial

assistance benefits were previously subject to deductions or pro-rating or that these were dependent upon the companys financial standing. As held by the Voluntary Arbitrator: The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to adopt a pro-rata computation, aside [from] being in [a] state of rehabilitation due to 227M substantial losses in 1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This is an implicit acceptance that prior to the strike, a full month basic pay computation was the "present practice" intended to be maintained in the CBA.21 The memorandum dated November 22, 1999 which Honda issued shows that it was the first time a pro-rating scheme was to be implemented in the company. It was a convenient coincidence for the company that the work stoppage held by the employees lasted for thirty-one (31) days or exactly one month. This enabled them to devise a formula using 11/12 of the total annual salary as base amount for computation instead of the entire amount for a 12month period. That a full month payment of the 13th month pay is the established practice at Honda is further bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada. Both attested that when they were absent from work due to motorcycle accidents, and after they have exhausted all their leave credits and were no longer receiving their monthly salary from Honda, they still received the full amount of their 13th month, 14th month and financial assistance pay.22 The case of Davao Fruits Corporation v. Associated Labor Unions, et al.23 presented an example of a voluntary act of the employer that has ripened into a company practice. In that case, the employer, from 1975 to 1981, freely and continuously included in the computation of the 13th month pay those items that were expressly excluded by the law. We have held that this act, which was favorable to the employees though not conforming to law, has ripened into a practice and therefore can no longer be withdrawn, reduced, diminished, discontinued or eliminated. Furthermore, in Sevilla Trading Company v. Semana,24 we stated: With regard to the length of time the company practice should have been exercised to constitute voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold that jurisprudence has not laid down any rule requiring a specific minimum number of years. In the above quoted case of Davao Fruits Corporation vs. Associated Labor

Unions, the company practice lasted for six (6) years. In another case, Davao Integrated Port Stevedoring Services vs. Abarquez, the employer, for three (3) years and nine (9) months, approved the commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its intermittent workers. While in Tiangco vs. Leogardo, Jr. the employer carried on the practice of giving a fixed monthly emergency allowance from November 1976 to February 1980, or three (3) years and four (4) months. In all these cases, this Court held that the grant of these benefits has ripened into company practice or policy which cannot be peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of including nonbasic 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 workingmans welfare should be the primordial and paramount consideration.26 What is more, the factual milieu of this case is such that to rule otherwise inevitably results to dissuasion, if not a deterrent, for workers from the free exercise of their constitutional rights to selforganization and to strike in accordance with law.27 WHEREFORE, the instant petition is DENIED. The decision and the resolution of the Court of Appeals dated September 14, 2000 and October 18, 2000, respectively, in CA-G.R. SP No. 59052, affirming the decision rendered by the Voluntary Arbitrator on May 2, 2000, are hereby AFFIRMED in toto. SO ORDERED.

ROLANDO Y. TAN, Petitioner, v. LEOVIGILDO LAGRAMA and THE HONORABLE COURT OF APPEALS, Respondents. DECISION MENDOZA, J.: This is a petition for review on certiorari of the decision,[1 dated May 31, 2001, and the resolution,[2 dated November 27, 2001, of the Court of Appeals in C.A.-G.R. SP. No. 63160, annulling the resolutions of the National Labor Relations Commission (NLRC) and reinstating the ruling of the Labor Arbiter which found petitioner Rolando Tan guilty of illegally dismissing private respondent Leovigildo Lagrama and ordering him to pay the latter the amount of P136,849.99 by way of separation pay, backwages, and damages. The following are the facts. Petitioner Rolando Tan is the president of Supreme Theater Corporation and the general manager of Crown and Empire Theaters in Butuan City. Private respondent Leovigildo Lagrama is a painter, making ad billboards and murals for the motion pictures shown at the Empress, Supreme, and Crown Theaters for more than 10 years, from September 1, 1988 to October 17, 1998. On October 17, 1998, private respondent Lagrama was summoned by Tan and upbraided: Nangihi na naman ka sulod sa imong drawinganan. (You again urinated inside your work area.) When Lagrama asked what Tan was saying, Tan told him, Ayaw daghang estorya. Dili ko gusto nga mo-drawing ka pa. Guikan karon, wala nay drawing. Gawas. (Dont say anything further. I dont want you to draw anymore. From now on, no more drawing. Get out.) Lagrama denied the charge against him. He claimed that he was not the only one who entered the drawing area and that, even if the charge was true, it was a minor infraction to warrant his dismissal. However, everytime he spoke, Tan shouted Gawas (Get out), leaving him with no other choice but to leave the premises. Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the National Labor Relations Commission (NLRC) in Butuan City. He alleged that he had been illegally dismissed and sought reinvestigation and

payment of 13th month pay, service incentive leave pay, salary differential, and damages. Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama was an independent contractor who did his work according to his methods, while he (petitioner) was only interested in the result thereof. He cited the admission of Lagrama during the conferences before the Labor Arbiter that he was paid on a fixed piece-work basis, i.e., that he was paid for every painting turned out as ad billboard or mural for the pictures shown in the three theaters, on the basis of a no mural/billboard drawn, no pay policy. He submitted the affidavits of other cinema owners, an amusement park owner, and those supervising the construction of a church to prove that the services of Lagrama were contracted by them. He denied having dismissed Lagrama and alleged that it was the latter who refused to paint for him after he was scolded for his habits. As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi directed the parties to file their position papers. On June 17, 1999, he rendered a decision, the dispositive portion of which reads: WHEREFORE, premises considered judgment is hereby ordered: 1. Declaring complainants [Lagramas] dismissal illegal and 2. Ordering respondents [Tan] to pay complainant the following: A. Separation Pay - P 59,000.00 B. Backwages - 47,200.00 (from 17 October 1998 to 17 June 1999) C. 13th month pay (3 years) - 17,700.00 D. Service Incentive Leave Pay (3 years) - 2, 949.99 E. Damages - 10,000.00 TOTAL [P136,849.99]

Complainants other claims are dismissed for lack of merit.[3 Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro City, which, on June 30, 2000, rendered a decision[4 finding Lagrama to be an independent contractor, and for this reason reversing the decision of the Labor Arbiter. Respondent Lagrama filed a motion for reconsideration, but it was denied for lack of merit by the NLRC in a resolution of September 29, 2000. He then filed a petition for certiorari under Rule 65 before the Court of Appeals. The Court of Appeals found that petitioner exercised control over Lagramas work by dictating the time when Lagrama should submit his billboards and murals and setting rules on the use of the work area and rest room. Although it found that Lagrama did work for other cinema owners, the appeals court held it to be a mere sideline insufficient to prove that he was not an employee of Tan. The appeals court also found no evidence of any intention on the part of Lagrama to leave his job or sever his employment relationship with Tan. Accordingly, on May 31, 2001, the Court of Appeals rendered a decision, the dispositive portion of which reads: IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby GRANTED. The Resolutions of the Public Respondent issued on June 30, 2000 and September 29, 2000 are ANNULLED. The Decision of the Honorable Labor Arbiter Rogelio P. Legaspi on June 17, 1999 is hereby REINSTATED. Petitioner moved for a reconsideration, but the Court of Appeals found no reason to reverse its decision and so denied his motion for lack of merit.[5 Hence, this petition for review on certiorari based on the following assignments of errors: I. With all due respect, the decision of respondent Court of Appeals in CAG.R. SP NO. 63160 is bereft of any finding that Public Respondent NLRC, 5th Division, had no jurisdiction or exceeded it or otherwise gravely abused its discretion in its Resolution of 30 June 2000 in NLRC CA-NO. M-00495099. II. With all due respect, respondent Court of Appeals, absent any positive finding on its part that the Resolution of 30 June 2000 of the NLRC is not

supported by substantial evidence, is without authority to substitute its conclusion for that of said NLRC. III. With all due respect, respondent Court of Appeals discourse on freelance artists and painters in the decision in question is misplaced or has no factual or legal basis in the record. IV. With all due respect, respondent Court of Appeals opening statement in its decision as to employment, monthly salary of P1,475.00 and work schedule from Monday to Saturday, from 8:00 oclock in the morning up to 5:00 oclock in the afternoon as facts is not supported by the evidence on record. V. With all due respect, the case of Lambo, et al., v. NLRC, et al., 317 SCRA 420 [G.R. No. 111042 October 26, 1999] relied upon by respondent Court of Appeals is not applicable to the peculiar circumstances of this case.[6 The issues raised boil down to whether or not an employer-employee relationship existed between petitioner and private respondent, and whether petitioner is guilty of illegally dismissing private respondent. We find the answers to these issues to be in the affirmative. I. In determining whether there is an employer-employee relationship, we have applied a four-fold test, to wit: (1) whether the alleged employer has the power of selection and engagement of employees; (2) whether he has control of the employee with respect to the means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages.[7 These elements of the employer-employee relationship are present in this case. First. The existence in this case of the first element is undisputed. It was petitioner who engaged the services of Lagrama without the intervention of a third party. It is the existence of the second element, the power of control, that requires discussion here. 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.[8 Hence, while an independent contractor enjoys independence and freedom from the control and supervision of his principal, an employee is subject to the employers power to control the means and methods by which the employees work is to be performed and accomplished. In the case at bar, albeit petitioner Tan claims that private respondent Lagrama was an independent contractor and never his employee, the evidence shows that the latter performed his work as painter under the supervision and control of petitioner. Lagrama worked in a designated work area inside the Crown Theater of petitioner, for the use of which petitioner prescribed rules. The rules included the observance of cleanliness and hygiene and a prohibition against urinating in the work area and any place other than the toilet or the rest rooms.[9 Petitioners control over Lagramas work extended not only to the use of the work area, but also to the result of Lagramas work, and the manner and means by which the work was to be accomplished. Moreover, it would appear that petitioner not only provided the workplace, but supplied as well the materials used for the paintings, because he admitted that he paid Lagrama only for the latters services.[10 Private respondent Lagrama claimed that he worked daily, from 8 oclock in the morning to 5 oclock in the afternoon. Petitioner disputed this allegation and maintained that he paid Lagrama P1,475.00 per week for the murals for the three theaters which the latter usually finished in 3 to 4 days in one week.[11 Even assuming this to be true, the fact that Lagrama worked for at least 3 to 4 days a week proves regularity in his employment by petitioner. Second. That petitioner had the right to hire and fire was admitted by him in his position paper submitted to the NLRC, the pertinent portions of which stated: Complainant did not know how to use the available comfort rooms or toilets in and about his work premises. He was urinating right at the place where he was working when it was so easy for him, as everybody else did and had he only wanted to, to go to the comfort rooms. But no, the complainant had to make a virtual urinal out of his work place! The place then stunk to high heavens, naturally, to the consternation of respondents and everyone who could smell the malodor.

... Given such circumstances, the respondents had every right, nay all the compelling reason, to fire him from his painting job upon discovery and his admission of such acts. Nonetheless, though thoroughly scolded, he was not fired. It was he who stopped to paint for respondents.[12 By stating that he had the right to fire Lagrama, petitioner in effect acknowledged Lagrama to be his employee. For the right to hire and fire is another important element of the employer-employee relationship.[13 Indeed, the fact that, as petitioner himself said, he waited for Lagrama to report for work but the latter simply stopped reporting for work reinforces the conviction that Lagrama was indeed an employee of petitioner. For only an employee can nurture such an expectancy, the frustration of which, unless satisfactorily explained, can bring about some disciplinary action on the part of the employer. Third. Payment of wages is one of the four factors to be considered in determining the existence of employer-employee relation. 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 services rendered or to be rendered.[14 That Lagrama worked for Tan on a fixed piece-work basis is of no moment. Payment by result is a method of compensation and does not define the essence of the relation.[15 It is a method of computing compensation, 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.[16 The Rules Implementing the Labor Code require every employer to pay his employees by means of payroll.[17 The payroll should show among other things, the employees rate of pay, deductions made, and the amount actually paid to the employee. In the case at bar, petitioner did not present the payroll to support his claim that Lagrama was not his employee, raising speculations whether his failure to do so proves that its presentation would be adverse to his case.[18

The primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer.[19 In this case, there is such a connection between the job of Lagrama painting billboards and murals and the business of petitioner. To let the people know what movie was to be shown in a movie theater requires billboards. Petitioner in fact admits that the billboards are important to his business.[20 The fact that Lagrama was not reported as an employee to the SSS is not conclusive on the question of whether he was an employee of petitioner.[21 Otherwise, an employer would be rewarded for his failure or even neglect to perform his obligation.[22 Neither does the fact that Lagrama painted for other persons affect or alter his employment relationship with petitioner. That he did so only during weekends has not been denied by petitioner. On the other hand, Samuel Villalba, for whom Lagrama had rendered service, admitted in a sworn statement that he was told by Lagrama that the latter worked for petitioner.[23 Lagrama had been employed by petitioner since 1988. Under the law, therefore, he is deemed a regular employee and is thus entitled to security of tenure, as provided in Art. 279 of Labor Code: ART. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. This Court has held that if the employee has been performing the job for at least one year, even if not continuously but intermittently, the repeated and continuing need for its performance is sufficient evidence of the necessity, if not indispensability, of that activity to the business of his employer. Hence, the employment is also considered regular, although with respect only to such activity, and while such activity exists.[24 It is claimed that Lagrama abandoned his work. There is no evidence to show this. Abandonment requires two elements: (1) the failure to report for work

or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship, with the second element as the more determinative factor and being manifested by some overt acts.[25 Mere absence is not sufficient. What is more, the burden is on the employer to show a deliberate and unjustified refusal on the part of the employee to resume his employment without any intention of returning.[26 In the case at bar, the Court of Appeals correctly ruled: Neither do we agree that Petitioner abandoned his job. In order for abandonment to be a just and valid ground for dismissal, the employer must show, by clear proof, the intention of the employee to abandon his job. . . . In the present recourse, the Private Respondent has not established clear proof of the intention of the Petitioner to abandon his job or to sever the employment relationship between him and the Private Respondent. On the contrary, it was Private Respondent who told Petitioner that he did not want the latter to draw for him and thereafter refused to give him work to do or any mural or billboard to paint or draw on. More, after the repeated refusal of the Private Respondent to give Petitioner murals or billboards to work on, the Petitioner filed, with the Sub-Regional Arbitration Branch No. X of the National Labor Relations Commission, a Complaint for Illegal Dismissal and Money Claims. Such act has, as the Supreme Court declared, negate any intention to sever employment relationship. . . .[27 II. The second issue is whether private respondent Lagrama was illegally dismissed. To begin, the employer has the burden of proving the lawfulness of his employees dismissal.[28 The validity of the charge must be clearly established in a manner consistent with due process. The Implementing Rules of the Labor Code[29 provide that no worker shall be dismissed except for a just or authorized cause provided by law and after due process. This provision has two aspects: (1) the legality of the act of dismissal, that is, dismissal under the grounds provided for under Article 282 of the Labor Code and (2) the legality in the manner of dismissal. The illegality of the act of dismissal constitutes discharge without just cause, while illegality in the manner of dismissal is dismissal without due process.[30 In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get out of his sight as the latter tried to explain his side, petitioner made it

plain that Lagrama was dismissed. Urinating in a work place other than the one designated for the purpose by the employer constitutes violation of reasonable regulations intended to promote a healthy environment under Art. 282(1) of the Labor Code for purposes of terminating employment, but the same must be shown by evidence. Here there is no evidence that Lagrama did urinate in a place other than a rest room in the premises of his work. Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the Labor Arbiter found that the relationship between the employer and the employee has been so strained that the latters reinstatement would no longer serve any purpose. The parties do not dispute this finding. Hence, the grant of separation pay in lieu of reinstatement is appropriate. This is of course in addition to the payment of backwages which, in accordance with the ruling in Bustamante v. NLRC,[31 should be computed from the time of Lagramas dismissal up to the time of the finality of this decision, without any deduction or qualification. The Bureau of Working Conditions[32 classifies workers paid by results into two groups, namely; (1) those whose time and performance is supervised by the employer, and (2) those whose time and performance is unsupervised by the employer. The first involves an element of control and supervision over the manner the work is to be performed, while the second does not. If a piece worker is supervised, there is an employer-employee relationship, as in this case. However, such an employee is not entitled to service incentive leave pay since, as pointed out in Makati Haberdashery v. NLRC[33 and Mark Roche International v. NLRC,[34 he is paid a fixed amount for work done, regardless of the time he spent in accomplishing such work. WHEREFORE, based on the foregoing, the petition is DENIED for lack of showing that the Court of Appeals committed any reversible error. The decision of the Court of Appeals, reversing the decision of the National Labor Relations Commission and reinstating the decision of the Labor Arbiter, is AFFIRMED with the MODIFICATION that the backwages and other benefits awarded to private respondent Leovigildo Lagrama should be computed from the time of his dismissal up to the time of the finality of this decision, without any deduction and qualification. However, the service incentive leave pay awarded to him is DELETED. SO ORDERED.

LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in behalf of its members, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, EMPIRE FOOD PRODUCTS, its Proprietor/President & Manager, MR. GONZALO KEHYENG and MRS. EVELYN KEHYENG, respondents. DECISION DAVIDE, JR., J.: In this special civil action for certiorari under Rule 65, petitioners seek to reverse the 29 March 1995 resolution of the National Labor Relations Commission (NLRC) in NLRC RAB III Case No. 01-1964-91 which affirmed the Decision of Labor Arbiter Ariel C. Santos dismissing their complaint for utter lack of merit. The antecedents of this case as summarized by the Office of the Solicitor General in its Manifestation and Motion in Lieu of Comment, are as follows: The 99 persons named as petitioners in this proceeding were rank-and-file employees of respondent Empire Food Products, which hired them on various dates (Paragraph 1, Annex A of Petition, Annex B; Page 2, Annex F of Petition). Petitioners filed against private respondents a complaint for payment of money claim[s] and for violation of labor standard[s] laws (NLRC Case No. RAB-111-10-1817-90). They also filed a petition for direct certification of petitioner Labor Congress of the Philippines as their bargaining representative (Case No. R0300-9010-RU-005). On October 23, 1990, petitioners represented by LCP President Benigno B. Navarro, Sr. and private respondents Gonzalo Kehyeng and Evelyn Kehyeng in behalf of Empire Food Products, Inc. entered into a Memorandum of Agreement which provided, among others, the following: 1. That in connection with the pending Petition for Direct Certification filed by the Labor Congress with the DOLE, Management of the Empire Food Products has no objection [to] the direct certification of the LCP Labor Congress and is now recognizing the Labor Congress of the Philippines (LCP) and its Local Chapter as the SOLE and EXCLUSIVE Bargaining Agent and Representative for all rank and file employees of the Empire Food

Products regarding WAGES, HOURS OF WORK, AND OTHER TERMS AND CONDITIONS OF EMPLOYMENT; 2. That with regards [sic] to NLRC CASE NO. RAB-III-10-1817-90 pending with the NLRC parties jointly and mutually agreed that the issues thereof, shall be discussed by the parties and resolve[d] during the negotiation of the Collective Bargaining Agreement; 3. That Management of the Empire Food Products shall make the proper adjustment of the Employees Wages within fifteen (15) days from the signing of this Agreement and further agreed to register all the employees with the SSS; 4. That Employer, Empire Food Products thru its Management agreed to deduct thru payroll deduction UNION DUES and other Assessment[s] upon submission by the LCP Labor Congress individual Check-Off Authorization[s] signed by the Union Members indicating the amount to be deducted and further agreed all deduction[s] made representing Union Dues and Assessment[s] shall be remitted immediately to the LCP Labor Congress Treasurer or authorized representative within three (3) or five (5) days upon deductions [sic], Union dues not deducted during the period due, shall be refunded or reimbursed by the Employer/Management. Employer/Management further agreed to deduct Union dues from non-union members the same amount deducted from union members without need of individual Check-Off Authorizations [for] Agency Fee; 5. That in consideration [of] the foregoing covenant, parties jointly and mutually agreed that NLRC CASE NO. RAB-III-10-1817-90 shall be considered provisionally withdrawn from the Calendar of the National Labor Relations Commission(NLRC), while the Petition for direct certification of the LCP Labor Congress parties jointly move for the direct certification of the LCP Labor Congress; 6. That parties jointly and mutually agreed that upon signing of this Agreement, no Harassments [sic], Threats, Interferences [sic] of their respective rights under the law, no Vengeance or Revenge by each partner nor any act of ULP which might disrupt the operations of the business; 7. Parties jointly and mutually agreed that pending negotiations or formalization of the propose[d] CBA, this Memorandum of Agreement shall govern the parties in the exercise of their respective rights involving the Management of the business and the terms and condition[s] of employment,

and whatever problems and grievances may arise by and between the parties shall be resolved by them, thru the most cordial and good harmonious relationship by communicating the other party in writing indicating said grievances before taking any action to another forum or government agencies; 8. That parties [to] this Memorandum of Agreement jointly and mutually agreed to respect, abide and comply with all the terms and conditions hereof. Further agreed that violation by the parties of any provision herein shall constitute an act of ULP. (Annex A of Petition). In an Order dated October 24, 1990, Mediator Arbiter Antonio Cortez approved the memorandum of agreement and certified LCP as the sole and exclusive bargaining agent among the rank-and-file employees of Empire Food Products for purposes of collective bargaining with respect to wages, hours of work and other terms and conditions of employment (Annex B of Petition). On November 9, 1990, petitioners through LCP President Navarro submitted to private respondents a proposal for collective bargaining (Annex C of Petition). On January 23, 1991, petitioners filed a complaint docketed as NLRC Case No. RAB-III-01-1964-91 against private respondents for: a. Unfair Labor Practice by way of Illegal Lockout and/or Dismissal; b. Union busting thru Harassments [sic], threats, and interfering with the rights of employees to self-organization; c. Violation of the Memorandum of Agreement dated October 23, 1990; d. Underpayment of Wages in violation of R.A. No. 6640 and R.A. No. 6727, such as Wages promulgated by the Regional Wage Board; e. Actual, Moral and Exemplary Damages. (Annex D of Petition) After the submission by the parties of their respective position papers and presentation of testimonial evidence, Labor Arbiter Ariel C. Santos absolved private respondents of the charges of unfair labor practice, union busting, violation of the memorandum of agreement, underpayment of wages and

denied petitioners prayer for actual, moral and exemplary damages. Labor Arbiter Santos, however, directed the reinstatement of the individual complainants: The undersigned Labor Arbiter is not oblivious to the fact that respondents have violated a cardinal rule in every establishment that a payroll and other papers evidencing hours of work, payments, etc. shall always be maintained and subjected to inspection and visitation by personnel of the Department of Labor and Employment. As such penalty, respondents should not escape liability for this technicality, hence, it is proper that all individual complainants except those who resigned and executed quitclaim[s] and releases prior to the filing of this complaint should be reinstated to their former position[s] with the admonition to respondents that any harassment, intimidation, coercion or any form of threat as a result of this immediately executory reinstatement shall be dealt with accordingly. SO ORDERED. (Annex G of Petition) On appeal, the National Labor Relations Commission vacated the Decision dated April 14, 1972 [sic] and remanded the case to the Labor Arbiter for further proceedings for the following reasons: The Labor Arbiter, through his decision, noted that xxx complainant did not present any single witness while respondent presented four (4) witnesses in the persons of Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira Bulagan xxx (p. 183, Records), that xxx complainant before the National Labor Relations Commission must prove with definiteness and clarity the offense charged. xxx (Record, p. 183); that xxx complainant failed to specify under what provision of the Labor Code particularly Art. 248 did respondents violate so as to constitute unfair labor practice xxx (Record, p. 183); that complainants failed to present any witness who may describe in what manner respondents have committed unfair labor practice xxx (Record, p. 185); that xxx complainant LCP failed to present anyone of the so-called 99 complainants in order to testify who committed the threats and intimidation xxx (Record, p. 185). Upon review of the minutes of the proceedings on record, however, it appears that complainant presented witnesses, namely, BENIGNO NAVARRO, JR. (28 February 1991, RECORD, p. 91; 8 March 1991, RECORD, p. 92, who adopted its POSITION PAPER AND CONSOLIDATED AFFIDAVIT, as Exhibit A and the annexes thereto as Exhibit B, B-1 to B-9, inclusive. Minutes of the proceedings on

record show that complainant further presented other witnesses, namely: ERLINDA BASILIO (13 March 1991, RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENIE GARCIA (16 April 1991, Record, p. 96, see back portion thereof; 2 May 1991, Record, p. 102; 16 May 1991, Record, p. 103; 11 June 1991, Record, p. 105). Formal offer of Documentary and Testimonial Evidence was made by complainant on June 24, 1991 (Record, p. 106-109) The Labor Arbiter must have overlooked the testimonies of some of the individual complainants which are now on record. Other individual complainants should have been summoned with the end in view of receiving their testimonies. The complainants should be afforded the time and opportunity to fully substantiate their claims against the respondents. Judgment should be rendered only based on the conflicting positions of the parties. The Labor Arbiter is called upon to consider and pass upon the issues of fact and law raised by the parties. Toward this end, therefore, it is Our considered view [that] the case should be remanded to the Labor Arbiter of origin for further proceedings.(Annex H of Petition) In a Decision dated July 27, 1994, Labor Arbiter Santos made the following determination: Complainants failed to present with definiteness and clarity the particular act or acts constitutive of unfair labor practice. It is to be borne in mind that a declaration of unfair labor practice connotes a finding of prima facie evidence of probability that a criminal offense may have been committed so as to warrant the filing of a criminal information before the regular court. Hence, evidence which is more than a scintilla is required in order to declare respondents/employers guilty of unfair labor practice. Failing in this regard is fatal to the cause of complainants. Besides, even the charge of illegal lockout has no leg to stand on because of the testimony of respondents through their guard Orlando Cairo (TSN, July 31, 1991 hearing; p. 5-35) that on January 21, 1991, complainants refused and failed to report for work, hence guilty of abandoning their post without permission from respondents. As a result of complainants[] failure to report for work, the cheese curls ready for repacking were all spoiled to the prejudice of respondents. Under cross-examination, complainants failed to rebut the authenticity of respondents witness testimony.

As regards the issue of harassments [sic], threats and interference with the rights of employees to self-organization which is actually an ingredient of unfair labor practice, complainants failed to specify what type of threats or intimidation was committed and who committed the same. What are the acts or utterances constitutive of harassments [sic] being complained of? These are the specifics which should have been proven with definiteness and clarity by complainants who chose to rely heavily on its position paper through generalizations to prove their case. Insofar as violation of [the] Memorandum of Agreement dated October 23, 1990 is concerned, both parties agreed that: 2 - That with regards [sic] to the NLRC Case No. RAB III10-1817-90 pending with the NLRC, parties jointly and mutually agreed that the issues thereof shall be discussed by the parties and resolve[d] during the negotiation of the CBA. The aforequoted provision does not speak of [an] obligation on the part of respondents but on a resolutory condition that may occur or may not happen. This cannot be made the basis of an imposition of an obligation over which the National Labor Relations Commission has exclusive jurisdiction thereof. Anent the charge that there was underpayment of wages, the evidence points to the contrary. The enumeration of complainants wages in their consolidated Affidavits of merit and position paper which implies underpayment has no leg to stand on in the light of the fact that complainants admission that they are piece workers or paid on a pakiao [basis] i.e. a certain amount for every thousand pieces of cheese curls or other products repacked. The only limitation for piece workers or pakiao workers is that they should receive compensation no less than the minimum wage for an eight (8) hour work [sic]. And compliance therewith was satisfactorily explained by respondent Gonzalo Kehyeng in his testimony (TSN, p. 12-30) during the July 31, 1991 hearing. On cross-examination, complainants failed to rebut or deny Gonzalo Kehyengs testimony that complainants have been even receiving more than the minimum wage for an average workers [sic]. Certainly, a lazy worker earns less than the minimum wage but the same cannot be attributable to respondents but to the lazy workers.

Finally, the claim for moral and exemplary damages has no leg to stand on when no malice, bad faith or fraud was ever proven to have been perpetuated by respondents. WHEREFORE, premises considered, the complaint is hereby DISMISSED for utter lack of merit. (Annex I of Petition). On appeal, the NLRC, in its Resolution dated 29 March 1995, affirmed in toto the decision of Labor Arbiter Santos. In so doing, the NLRC sustained the Labor Arbiters findings that: (a) there was a dearth of evidence to prove the existence of unfair labor practice and union busting on the part of private respondents; (b) the agreement of 23 October 1990 could not be made the basis of an obligation within the ambit of the NLRCs jurisdiction, as the provisions thereof, particularly Section 2, spoke of a resolutory condition which could or could not happen; (c) the claims for underpayment of wages were without basis as complainants were admittedly pakiao workers and paid on the basis of their output subject to the lone limitation that the payment conformed to the minimum wage rate for an eight-hour workday; and (d) petitioners were not underpaid. Their motion for reconsideration having been denied by the NLRC in its Resolution of 31 October 1995, petitioners filed the instant special civil action for certiorari raising the following issues: I WHETHER OR NOT THE PUBLIC RESPONDENT NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION WHEN IT DISREGARDED OR IGNORED NOT ONLY THE EVIDENCE FAVORABLE TO HEREIN PETITIONERS, APPLICABLE JURISPRUDENCE BUT ALSO ITS OWN DECISIONS AND THAT OF THIS HONORABLE HIGHEST TRIBUNAL WHICH [WAS] TANTAMOUNT NOT ONLY TO THE DEPRIVATION OF PETITIONERS RIGHT TO DUE PROCESS BUT WOULD RESULT [IN] MANIFEST INJUSTICE. II WHETHER OR NOT THE PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION WHEN IT DEPRIVED THE PETITIONERS OF THEIR CONSTITUTIONAL RIGHT TO SELF-

ORGANIZATION, SECURITY OF TENURE, PROTECTION TO LABOR, JUST AND HUMANE CONDITIONS OF WORK AND DUE PROCESS. III WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY EASED OUT [OF] OR CONSTRUCTIVELY DISMISSED FROM THEIR ONLY MEANS OF LIVELIHOOD. IV WHETHER OR NOT PETITIONERS SHOULD BE REINSTATED FROM THE DATE OF THEIR DISMISSAL UP TO THE TIME OF THEIR REINSTATEMENT, WITH BACKWAGES, STATUTORY BENEFITS, DAMAGES AND ATTORNEYS FEES. We required respondents to file their respective Comments. In their Manifestation and Comment, private respondents asserted that the petition was filed out of time. As petitioners admitted in their Notice to File petition for Review on Certiorari that they received a copy of the resolution (denying their motion for reconsideration) on 13 December 1995, they had only until 29 December 1995 to file the petition. Having failed to do so, the NLRC thus already entered judgment in private respondents favor. In their Reply, petitioners averred that Mr. Navarro, a non-lawyer who filed the notice to file a petition for review on their behalf, mistook which reglementary period to apply. Instead of using the reasonable time criterion for certiorari under Rule 65, he used the 15-day period for petitions for review on certiorari under Rule 45. They hastened to add that such was a mere technicality which should not bar their petition from being decided on the merits in furtherance of substantial justice, especially considering that respondents neither denied nor contradicted the facts and issues raised in the petition. In its Manifestation and Motion in Lieu of Comment, the Office of the Solicitor General (OSG) sided with petitioners. It pointed out that the Labor Arbiter, in finding that petitioners abandoned their jobs, relied solely on the testimony of Security Guard Rolando Cairo that petitioners refused to work on 21 January 1991, resulting in the spoilage of cheese curls ready for

repacking. However, the OSG argued, this refusal to report for work for a single day did not constitute abandonment, which pertains to a clear, deliberate and unjustified refusal to resume employment, and not mere absence. In fact, the OSG stressed, two days after allegedly abandoning their work, petitioners filed a complaint for, inter alia, illegal lockout or illegal dismissal. Finally, the OSG questioned the lack of explanation on the part of Labor Arbiter Santos as to why he abandoned his original decision to reinstate petitioners. In view of the stand of the OSG, we resolved to require the NLRC to file its own Comment. In its Comment, the NLRC invokes the general rule that factual findings of an administrative agency bind a reviewing court and asserts that this case does not fall under the exceptions. The NLRC further argues that grave abuse of discretion may not be imputed to it, as it affirmed the factual findings and legal conclusions of the Labor Arbiter only after carefully reviewing, weighing and evaluating the evidence in support thereof, as well as the pertinent provisions of law and jurisprudence. In their Reply, petitioners claim that the decisions of the NLRC and the Labor Arbiter were not supported by substantial evidence; that abandonment was not proved; and that much credit was given to self-serving statements of Gonzalo Kehyeng, owner of Empire Foods, as to payment of just wages. On 7 July 1997, we gave due course to the petition and required the parties to file their respective memoranda. However, only petitioners and private respondents filed their memoranda, with the NLRC merely adopting its Comment as its Memorandum. We find for petitioners. Invocation of the general rule that factual findings of the NLRC bind this Court is unavailing under the circumstances. Initially, we are unable to discern any compelling reason justifying the Labor Arbiters volte face from his 14 April 1992 decision reinstating petitioners to his diametrically opposed 27 July 1994 decision, when in both instances, he had before him substantially the same evidence. Neither do we find the 29 March 1995 NLRC resolution to have sufficiently discussed the facts so as to comply with the standard of substantial evidence. For one thing, the NLRC confessed its reluctance to inquire into the veracity of the Labor Arbiters factual findings, staunchly declaring that it was not about to substitute [its]

judgment on matters that are within the province of the trier of facts. Yet, in the 21 July 1992 NLRC resolution, it chastised the Labor Arbiter for his errors both in judgment and procedure, for which reason it remanded the records of the case to the Labor Arbiter for compliance with the pronouncements therein. What cannot escape from our attention is that the Labor Arbiter did not heed the observations and pronouncements of the NLRC in its resolution of 21 July 1992, neither did he understand the purpose of the remand of the records to him. In said resolution, the NLRC summarized the grounds for the appeal to be: 1. that there is a prima facie evidence of abuse of discretion and acts of gross incompetence committed by the Labor Arbiter in rendering the decision. 2. that the Labor Arbiter in rendering the decision committed serious errors in the findings of facts. After which, the NLRC observed and found: Complainant alleged that the Labor Arbiter disregarded the testimonies of the 99 complainants who submitted their Consolidated Affidavit of Merit and Position Paper which was adopted as direct testimonies during the hearing and cross-examined by respondents counsel. The Labor Arbiter, through his decision, noted that x x x complainant did not present any single witness while respondent presented four (4) witnesses in the persons of Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira Bulagan x x x (Records, p. 183), that x x x complainant before the National Labor Relations Commission must prove with definiteness and clarity the offense charged. x x x (Record, p. 183; that x x x complainant failed to specify under what provision of the Labor Code particularly Art. 248 did respondents violate so as to constitute unfair labor practice x x x (Record, p. 183); that complainants failed to present any witness who may describe in what manner respondents have committed unfair labor practice x x x (Record, p. 185); that x x x complainant a [sic] LCP failed to present anyone of the so called 99 complainants in order to testify who committed the threats and intimidation x x x (Record, p. 185).

Upon review of the minutes of the proceedings on record, however, it appears that complainant presented witnesses, namely BENIGNO NAVARRO, JR. (28 February 1991, RECORD, p. 91; 8 March 1991, RECORD, p. 92), who adopted its POSITION PAPER AND CONSOLIDATED AFFIDAVIT, as Exhibit A and the annexes thereto as Exhibit B, B-1 to B-9, inclusive. Minutes of the proceedings on record show that complainant further presented other witnesses, namely: ERLINDA BASILIO (13 March 1991, RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENI GARCIA (16 April 1991, Record, p. 96, see back portion thereof; 2 May 1991, Record, p. 102; 16 May 1991, Record, p. 103; 11 June 1991, Record, p. 105). Formal offer of Documentary and Testimonial Evidence was made by the complainant on June 24, 1991 (Record, p. 106-109). The Labor Arbiter must have overlooked the testimonies of some of the individual complainants which are now on record. Other individual complainants should have been summoned with the end in view of receiving their testimonies. The complainants should [have been] afforded the time and opportunity to fully substantiate their claims against the respondents. Judgment should [have been] rendered only based on the conflicting positions of the parties. The Labor Arbiter is called upon to consider and pass upon the issues of fact and law raised by the parties. Toward this end, therefore, it is Our considered view the case should be remanded to the Labor Arbiter of origin for further proceedings. Further, We take note that the decision does not contain a dispositive portion or fallo. Such being the case, it may be well said that the decision does not resolve the issues at hand. On another plane, there is no portion of the decision which could be carried out by way of execution. It may be argued that the last paragraph of the decision may be categorized as the dispositive portion thereof: x x x x x The undersigned Labor Arbiter is not oblivious [to] the fact that respondents have violated a cardinal rule in every establishment that a payroll and other papers evidencing hour[s] of work, payment, etc. shall always be maintained and subjected to inspection and visitation by personnel of the Department of Labor and Employment. As such penalty, respondents should not escape liability for this technicality, hence, it is proper that all the individual

complainants except those who resigned and executed quitclaim[s] and release[s] prior to the filing of this complaint should be reinstated to their former position with the admonition to respondents that any harassment, intimidation, coercion or any form of threat as a result of this immediately executory reinstatement shall be dealt with accordingly. SO ORDERED. It is Our considered view that even assuming arguendo that the respondents failed to maintain their payroll and other papers evidencing hours of work, payment etc., such circumstance, standing alone, does not warrant the directive to reinstate complainants to their former positions. It is [a] well settled rule that there must be a finding of illegal dismissal before reinstatement be mandated. In this regard, the LABOR ARBITER is hereby directed to include in his clarificatory decision, after receiving evidence, considering and resolving the same, the requisite dispositive portion. Apparently, the Labor Arbiter perceived that if not for petitioners, he would not have fallen victim to this stinging rebuke at the hands of the NLRC. Thus does it appear to us that the Labor Arbiter, in concluding in his 27 July 1994 Decision that petitioners abandoned their work, was moved by, at worst, spite, or at best, lackadaisically glossed over petitioners evidence. On this score, we find the following observations of the OSG most persuasive: In finding that petitioner employees abandoned their work, the Labor Arbiter and the NLRC relied on the testimony of Security Guard Rolando Cairo that on January 21, 1991, petitioners refused to work. As a result of their failure to work, the cheese curls ready for repacking on said date were spoiled. The failure to work for one day, which resulted in the spoilage of cheese curls does not amount to abandonment of work. In fact two (2) days after the reported abandonment of work or on January 23, 1991, petitioners filed a complaint for, among others, unfair labor practice, illegal lockout and/or illegal dismissal. In several cases, this Honorable Court held that one could not possibly abandon his work and shortly thereafter vigorously pursue his complaint for illegal dismissal (De Ysasi III v. NLRC, 231 SCRA 173; Ranara v. NLRC, 212 SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA 328; Atlas Consolidated Mining and Development Corp. v. NLRC, 190 SCRA 505; Hua Bee Shirt Factory v. NLRC, 186 SCRA 586; Mabaylan v.

NLRC, 203 SCRA 570 and Flexo Manufacturing v. NLRC, 135 SCRA 145). In Atlas Consolidated, supra, this Honorable Court explicitly stated: It would be illogical for Caballo, to abandon his work and then immediately file an action seeking for his reinstatement. We can not believe that Caballo, who had worked for Atlas for two years and ten months, would simply walk away from his job unmindful of the consequence of his act, i.e. the forfeiture of his accrued employment benefits. In opting to finally to [sic] contest the legality of his dismissal instead of just claiming his separation pay and other benefits, which he actually did but which proved to be futile after all, ably supports his sincere intention to return to work, thus negating Atlas stand that he had abandoned his job. In De Ysasi III v. NLRC (supra), this Honorable Court stressed that it is the clear, deliberate and unjustified refusal to resume employment and not mere absence that constitutes abandonment. The absence of petitioner employees for one day on January 21, 1991 as testified [to] by Security Guard Orlando Cairo did not constitute abandonment. In his first decision, Labor Arbiter Santos expressly directed the reinstatement of the petitioner employees and admonished the private respondents that any harassment, intimidation, coercion or any form of threat as a result of this immediately executory reinstatement shall be dealt with accordingly. In his second decision, Labor Arbiter Santos did not state why he was abandoning his previous decision directing the reinstatement of petitioner employees. By directing in his first decision the reinstatement of petitioner employees, the Labor Arbiter impliedly held that they did not abandon their work but were not allowed to work without just cause. That petitioner employees are pakyao or piece workers does not imply that they are not regular employees entitled to reinstatement. Private respondent Empire Food Products, Inc. is a food and fruit processing company. In Tabas v. California Manufacturing Co., Inc. (169 SCRA 497), this Honorable Court held that the work of merchandisers of processed food, who coordinate with grocery stores and other outlets for the sale of the processed food is necessary in the day-to-day operation[s] of the company. With more reason, the work of processed food repackers is necessary in the day-to-day operation[s] of respondent Empire Food Products.

It may likewise be stressed that the burden of proving the existence of just cause for dismissing an employee, such as abandonment, rests on the employer, a burden private respondents failed to discharge. Private respondents, moreover, in considering petitioners employment to have been terminated by abandonment, violated their rights to security of tenure and constitutional right to due process in not even serving them with a written notice of such termination. Section 2, Rule XIV, Book V of the Omnibus Rules Implementing the Labor Code provides: SEC. 2. Notice of Dismissal. - Any employer who seeks to dismiss a worker shall furnish him a written notice stating the particular acts or omission constituting the grounds for his dismissal. In cases of abandonment of work, the notice shall be served at the workers last known address. Petitioners are therefore entitled to reinstatement with full back wages pursuant to Article 279 of the Labor Code, as amended by R.A. No. 6715. Nevertheless, the records disclose that taking into account the number of employees involved, the length of time that has lapsed since their dismissal, and the perceptible resentment and enmity between petitioners and private respondents which necessarily strained their relationship, reinstatement would be impractical and hardly promotive of the best interests of the parties. In lieu of reinstatement then, separation pay at the rate of one month for every year of service, with a fraction of at least six (6) months of service considered as one (1) year, is in order. That being said, the amount of back wages to which each petitioner is entitled, however, cannot be fully settled at this time. Petitioners, as piecerate workers having been paid by the piece, there is need to determine the varying degrees of production and days worked by each worker. Clearly, this issue is best left to the National Labor Relations Commission. As to the other benefits, namely, holiday pay, premium pay, 13th month pay and service incentive leave which the labor arbiter failed to rule on but which petitioners prayed for in their complaint, we hold that petitioners are so entitled to these benefits. Three (3) factors lead us to conclude that petitioners, although piece-rate workers, were regular employees of private respondents. First, as to the nature of petitioners tasks, their job of repacking snack food was necessary or desirable in the usual business of private respondents, who were engaged in the manufacture and selling of such food products; second, petitioners worked for private respondents throughout the year, their employment not having been dependent on a

specific project or season; and third, the length of time that petitioners worked for private respondents. Thus, while petitioners mode of compensation was on a per piece basis, the status and nature of their employment was that of regular employees. The Rules Implementing the Labor Code exclude certain employees from receiving benefits such as nighttime pay, holiday pay, service incentive leave and 13th month pay, inter alia, field personnel and other employees whose time and performance is unsupervised by the employer, including those who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for performing work irrespective of the time consumed in the performance thereof. Plainly, petitioners as piece-rate workers do not fall within this group. As mentioned earlier, not only did petitioners labor under the control of private respondents as their employer, likewise did petitioners toil throughout the year with the fulfillment of their quota as supposed basis for compensation. Further, in Section 8 (b), Rule IV, Book III which we quote hereunder, piece workers are specifically mentioned as being entitled to holiday pay. SEC. 8. Holiday pay of certain employees.(b) Where a covered employee is paid by results or output, such as payment on piece work, his holiday pay shall not be less than his average daily earnings for the last seven (7) actual working days preceding the regular holiday: Provided, however, that in no case shall the holiday pay be less than the applicable statutory minimum wage rate. In addition, the Revised Guidelines on the Implementation of the 13th Month Pay Law, in view of the modifications to P.D. No. 851 by Memorandum Order No. 28, clearly exclude the employer of piece rate workers from those exempted from paying 13th month pay, to wit: 2. EXEMPTED EMPLOYERS The following employers are still not covered by P.D. No. 851: d. Employers of those who are paid on purely commission, boundary or task basis, and those who are paid a fixed amount for performing specific work, irrespective of the time consumed in the performance thereof, except where the

workers are paid on piece-rate basis in which case the employer shall grant the required 13th month pay to such workers. (italics supplied) The Revised Guidelines as well as the Rules and Regulations identify those workers who fall under the piece-rate category as those who are paid a standard amount for every piece or unit of work produced that is more or less regularly replicated, without regard to the time spent in producing the same. As to overtime pay, the rules, however, are different. According to Sec. 2(e), Rule I, Book III of the Implementing Rules, workers who are paid by results including those who are paid on piece-work, takay, pakiao, or task basis, if their output rates are in accordance with the standards prescribed under Sec. 8, Rule VII, Book III, of these regulations, or where such rates have been fixed by the Secretary of Labor in accordance with the aforesaid section, are not entitled to receive overtime pay. Here, private respondents did not allege adherence to the standards set forth in Sec. 8 nor with the rates prescribed by the Secretary of Labor. As such, petitioners are beyond the ambit of exempted persons and are therefore entitled to overtime pay. Once more, the National Labor Relations Commission would be in a better position to determine the exact amounts owed petitioners, if any. As to the claim that private respondents violated petitioners right to selforganization, the evidence on record does not support this claim. Petitioners relied almost entirely on documentary evidence which, per se, did not prove any wrongdoing on private respondents part. For example, petitioners presented their complaint to prove the violation of labor laws committed by private respondents. The complaint, however, is merely the pleading alleging the plaintiffs cause or causes of action. Its contents are merely allegations, the verity of which shall have to be proved during the trial. They likewise offered their Consolidated Affidavit of Merit and Position Paper which, like the offer of their Complaint, was a tautological exercise, and did not help nor prove their cause. In like manner, the petition for certification election and the subsequent order of certification merely proved that petitioners sought and acquired the status of bargaining agent for all rankand-file employees. Finally, the existence of the memorandum of agreement offered to substantiate private respondents non-compliance therewith, did not prove either compliance or non-compliance, absent evidence of concrete, overt acts in contravention of the provisions of the memorandum. IN VIEW WHEREOF, the instant petition is hereby GRANTED. The Resolution of the National Labor Relations Commission of 29 March 1995

and the Decision of the Labor Arbiter of 27 July 1994 in NLRC Case No. RAB-III-01-1964-91 are hereby SET ASIDE, and another is hereby rendered: 1. DECLARING petitioners to have been illegally dismissed by private respondents, thus entitled to full back wages and other privileges, and separation pay in lieu of reinstatement at the rate of one months salary for every year of service with a fraction of six months of service considered as one year; 2. REMANDING the records of this case to the National Labor Relations Commission for its determination of the back wages and other benefits and separation pay, taking into account the foregoing observations; and 3. DIRECTING the National Labor Relations Commission to resolve the referred issues within sixty (60) days from its receipt of a copy of this decision and of the records of the case and to submit to this Court a report of its compliance hereof within ten (10) days from the rendition of its resolution. Costs against private respondents. SO ORDERED.