FIRST DIVISION

[G.R. Nos. 50999-51000. March 23, 1990.]

JOSE SONGCO, ROMEO CIPRES, and AMANCIO
MANUEL, Petitioners, v. NATIONAL LABOR RELATIONS
COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO
AGUAS, and F.E. ZUELLIG (M), INC., Respondents.
Raul E. Espinosa, for Petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabara, Del Rosario & Castillo for Private
Respondent.
SYLLABUS
1. LABOR LAW; NATIONAL LABOR RELATIONS COMMISSION;
SEPARATION PAY; ALLOWANCES AND EARNED COMMISSIONS
INCLUDED IN THE MONTHLY SALARY IN THE COMPUTATION
THEREOF. Insofar as the issues of whether or not allowances
should be included in the monthly salary of petitioners for the
purpose of computation of their separation pay is concerned,
this has been settled in the case of Santos v. NLRC, Et Al., G.R.
No. 76721, September 21, 1987, 154 SCRA 166, where We ruled
that "in the computation of backwages and separation pay,
account must be taken not only of the basic salary of petitioner
but also of her transportation and emergency living
allowances." This ruling was reiterated in Soriano v. NLRC, Et
Al., G.R. No. 75510, October 27, 1987, 155 SCRA 124 and
recently, in Planters Products, Inc. v. NLRC, Et Al., G.R. No.
78524, January 20, 1989. Inasmuch as the words "wages", "pay"
and "salary" have the same meaning, and commission is
included in the definition of "wage", the logical conclusion,
therefore, is, in the computation of the separation pay of
petitioners, their salary base should include also their earned
sales commissions.
2. ID.; ID.; TERM "WAGES" INCLUDE COMMISSIONS. Article
97(f) by itself is explicit that commission is included in the
definition of the term "wage." It has been repeatedly declared
by the courts that where the law speaks in clear and categorical
language, there is no room for interpretation or construction;

there is only room for application (Cebu Portland Cement Co. v.

Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24
SCRA 708; Gonzaga v. Court of Appeals, G.R. No. L-27455, June
28, 1973, 51 SCRA 381). A plain and unambiguous statute
speaks for itself, and any attempt to make it clearer is vain
labor and tends only to obscurity.
3. ID.; ID.; SYNONYMOUS TO "SALARY" AND "PAY." The
ambiguity between Article 97(f), which defines the term wage
and Article XIV of the Collective Bargaining Agreement, Article
284 of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, which mention the terms "pay" and
"salary", is more apparent than real. Broadly, the word "salary"
means a recompense or consideration made to a person for his
pains or industry in another mans business. Whether it be
derived from "salarium," or more fancifully from "sal," the pay
of the Roman soldier, it carries with it the fundamental idea of
compensation for services rendered. Indeed, there is eminent
authority for holding that the words "wages" and "salary" are in
essence synonymous (Words and Phrases, Vol. 38 Permanent
Edition, p. 44 citing Hopkins v. Cromwell, 85 N.Y.S. 839, 841, 89
App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of
which is the Latin word "salarium," is often used
interchangeably with "wage", the etymology of which is the
Middle English word "wagen." Both words generally refer to one
and the same meaning, that is, a reward or recompense for
services performed. Likewise, "pay" is the synonym of "wages"
and "salary" (Blacks Law Dictionary, 5th Ed.).
4. ID.; ID.; ID.; COMMISSION; DEFINED. We agree with the
Solicitor General that granting, in gratia argumenti, that the
commissions were in the form of incentives or encouragement,
so that the petitioners would be inspired to put a little more
industry on the jobs particularly assigned to them, still these
commissions are direct remunerations for services rendered
which contributed to the increase of income of Zuellig.
Commission is the recompense, compensation or reward of an
agent, salesman, executor, trustees, receiver, factor, broker or
bailee, when the same is calculated as a percentage on the
amount of his transactions or on the profit to the principal
(Blacks Law Dictionary, 5th Ed., citing Weiner v. Swales, 217
Md. 123, 141 A. 2d 749, 750). The nature of the work of a
salesman and the reason for such type of remuneration for
services rendered demonstrate clearly that commissions are
part of petitioners wage or salary.

5. ID.; ID.; ID.; ID.; BASIS IN THE COMPUTATION THEREOF. In

Soriano v. NLRC, Et Al., supra, in resolving the issue of the
salary base that should be used in computing the separation
pay, We held that: "The commissions also claimed by petitioner
(override commission plus net deposit incentive) are not
properly includible in such base figure since such commissions
must be earned by actual market transactions attributable to
petitioner." Applying this by analogy, since the commissions in
the present case were earned by actual market transactions
attributable to petitioners, these should be included in their
separation pay. In the computation thereof, what should be
taken into account is the average commissions earned during
their last year of employment.
6. ID.; INTERPRETATION OF THE LABOR CODE AND ITS
IMPLEMENTING RULES AND REGULATIONS; SHALL BE RESOLVED
IN FAVOR OF THE WORKINGMEN. In carrying out and
interpreting the Labor Codes provisions and its implementing
regulations, the workingmans welfare should be the primordial
and paramount consideration. This kind of interpretation gives
meaning and substance to the liberal and compassionate spirit
of the law as provided for in Article 4 of the Labor Code which
states that "all doubts in the implementation and interpretation
of the provisions of the Labor Code including its implementing
rules and regulations shall be resolved in favor of labor" (Abella
v. NLRC, G.R. No. 71812, July 30, 1987, 152 SCRA 140; Manila
Electric Company v. NLRC, Et Al., G.R. No. 78763, July 12, 1989),
and Article 1702 of the Civil Code which provides that "in case
of doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living for the
laborer.
DECISION
MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of
the National Labor Relations Commission in NLRC Case No. RBIV-20840-78-T entitled, "Jose Songco and Romeo Cipres,
Complainants-Appellants, v. F.E. Zuellig (M), Inc., RespondentAppellee" and NLRC Case No. RN-IV-20855-78-T entitled,
"Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M),
Inc., Respondent-Appellee," which dismissed the appeal of

petitioners herein and in effect affirmed the decision of the

Labor Arbiter ordering private respondent to pay petitioners
separation pay equivalent to their one month salary (exclusive
of commissions, allowances, etc.) for every year of service.
The antecedent facts are as follows:chanrob1es virtual 1aw
library
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to
as Zuellig) filed with the Department of Labor (Regional Office
No. 4) an application seeking clearance to terminate the
services of petitioners Jose Songco, Romeo Cipres, and Amancio
Manuel (hereinafter referred to as petitioners) allegedly on the
ground of retrenchment due to financial losses. This application
was seasonably opposed by petitioners alleging that the
company is not suffering from any losses. They alleged further
that they are being dismissed because of their membership in
the union. At the last hearing of the case, however, petitioners
manifested that they are no longer contesting their dismissal.
The parties then agreed that the sole issue to be resolved is the
basis of the separation pay due to petitioners. Petitioners, who
were in the sales force of Zuellig received monthly salaries of at
least P400.00. In addition, they received commissions for every
sale they made.chanrobles.com:cralaw:red
The Collective Bargaining Agreement entered into between
Zuellig and F.E. Zuellig Employees Association, of which
petitioners are members, contains the following provision (p.
71, Rollo):jgc:chanrobles.com.ph
"ARTICLE XIV Retirement Gratuity.
"Section 1(a) Any employee, who is separated from
employment due to old age, sickness, death or permanent layoff not due to the fault of said employee shall receive from the
company a retirement gratuity in an amount equivalent to one
(1) months salary per year of service. One month of salary as
used in this paragraph shall be deemed equivalent to the salary
at date of retirement; years of service shall be deemed
equivalent to total service credits, a fraction of at least six
months being considered one year, including probationary
employment. (Emphasis supplied).
On the other hand, Article 284 of the Labor Code then prevailing
provides:jgc:chanrobles.com.ph

"Art. 284. Reduction of personnel. The termination of

employment of any employee due to the installation of labor
saving-devices, redundancy, retrenchment to prevent losses,
and other similar causes, shall entitle the employee affected
thereby to separation pay. In case of termination due to the
installation of labor-saving devices or redundancy, the
separation pay shall be equivalent to one (1) month pay or to at
least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and other
similar causes, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year." (Emphasis
supplied)chanrobles lawlibrary : rednad
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules
Implementing the Labor Code provide:chanrob1es virtual 1aw
library
x
x
x
"Sec. 9(b). Where the termination of employment is due to
retrenchment initiated by the employer to prevent losses or
other similar causes, or where the employee suffers from a
disease and his continued employment is prohibited by law or is
prejudicial to his health or to the health of his co-employees,
the employee shall be entitled to termination pay equivalent at
least to his one month salary, or to one-half month pay for
every year of service, whichever is higher, a fraction of at least
six (6) months being considered as one whole year.
x
x
x
"Sec. 10. Basis of termination pay. The computation of the
termination pay of an employee as provided herein shall be
based on his latest salary rate, unless the same was reduced by
the employer to defeat the intention of the Code, in which case
the basis of computation shall be the rate before its deduction."
(Emphasis supplied)
On June 26, 1978, the Labor Arbiter rendered a decision, the
dispositive portion of which reads (p. 78,
Rollo):jgc:chanrobles.com.ph
"RESPONSIVE TO THE FOREGOING, respondent should be as it is
hereby, ordered to pay the complainants separation pay

equivalent to their one month salary (exclusive of commissions,

allowances, etc.) for every year of service that they have
worked with the company.
"SO ORDERED."cralaw virtua1aw library
The appeal by petitioners to the National Labor Relations
Commission was dismissed for lack of merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of
Voluntary Abandonment and Withdrawal of Petition" dated April
7, 1980 filed by petitioner Romeo Cipres, based on the ground
that he wants "to abide by the decision appealed from" since he
had "received, to his full and complete satisfaction, his
separation pay," resolved to dismiss the petition as to him.
The issue is whether or not earned sales commissions and
allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation
pay.
The petition is impressed with merit.
Petitioners position was that in arriving at the correct and legal
amount of separation pay due them, whether under the Labor
Code or the CBA, their basic salary, earned sales commissions
and allowances should be added together. They cited Article
97(f) of the Labor Code which includes commission as part of
ones salary, to wit:chanrobles.com:cralaw:red
"(f) Wage paid to any employee shall mean the remuneration
or earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to
be done, or for services rendered or to be rendered, and
includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee.Fair
and reasonable value shall not include any profit to the
employer or to any person affiliated with the employer."cralaw
virtua1aw library

Zuellig argues that if it were really the intention of the Labor

Code as well as its implementing rules to include commission in
the computation of separation pay, it could have explicitly said
so in clear and unequivocal terms. Furthermore, in the definition
of the term "wage", "commission" is used only as one of the
features or designations attached to the word remuneration or
earnings.
Insofar as the issue of whether or not allowances should be
included in the monthly salary of petitioners for the purpose of
computation of their separation pay is concerned, this has been
settled in the case of Santos v. NLRC, Et Al., G.R. No. 76721,
September 21, 1987, 154 SCRA 166, where We ruled that "in
the computation of backwages and separation pay, account
must be taken not only of the basic salary of petitioner but also
of her transportation and emergency living allowances." This
ruling was reiterated in Soriano v. NLRC, Et Al., G.R. No. 75510,
October 27, 1987, 155 SCRA 124 and recently, in Planters
Products, Inc. v. NLRC, Et Al., G.R. No. 78524, January 20,
1989.chanrobles virtual lawlibrary
We shall concern ourselves now with the issue of whether or not
earned sales commissions should be included in the monthly
salary of petitioners for the purpose of computation of their
separation pay.
Article 97(f) by itself is explicit that commission is included in
the definition of the term "wage." It has been repeatedly
declared by the courts that where the law speaks in clear and
categorical language, there is no room for interpretation or
construction; there is only room for application (Cebu Portland
Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August
22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals, G.R. No. L27455, June 28, 1973, 51 SCRA 381). A plain and unambiguous
statute speaks for itself, and any attempt to make it clearer is
vain labor and tends only to obscurity. However, it may be
argued that if We correlate Article 97(f) with Article XIV of the
Collective Bargaining Agreement, Article 284 of the Labor Code
and Sections 9(b) and 10 of the Implementing Rules, there
appears to be an ambiguity. In this regard, the Labor Arbiter
rationalized his decision in this manner (pp. 74-76,
Rollo):chanrob1es virtual 1aw library
The definition of wage provided in Article 96 (sic) of the Code
can be correctly be (sic) stated as a general definition. It is
wage in its generic sense. A careful perusal of the same does

not show any indication that commission is part of salary. We

can say that commission by itself may be considered a wage.
This is not something novel for it cannot be gain said that
certain types of employees like agents, field personnel and
salesmen do not earn any regular daily, weekly or monthly
salaries, but rely mainly on commission
earned.chanrobles.com:cralaw:red
"Upon the other hand, the provisions of Section 10, Rule I, Book
VI of the implementing rules in conjunction with Articles 273
and 274 (sic) of the Code specifically states that the basis of the
termination pay due to one who is sought to be legally
separated from the service is his latest salary rates.
x
x
x
"Even Articles 273 and 274 (sic) invariably use monthly pay or
monthly salary.
"The above terms found in those Articles and the particular
Rules were intentionally used to express the intent of the
framers of the law that for purposes of separation pay they
mean to be specifically referring to salary only.
". . . . Each particular benefit provided in the Code and other
Decrees on Labor has its own pecularities and nuances and
should be interpreted in that light. Thus, for a specific provision,
a specific meaning is attached to simplify matters that may
arise therefrom. The general guidelines in (sic) the formation of
specific rules for particular purpose. Thus, that what should be
controlling in matters concerning termination pay should be the
specific provisions of both Book VI of the Code and the Rules. At
any rate, settled is the rule that in matters of conflict between
the general provision of law and that of a particular or specific
provision, the latter should prevail."cralaw virtua1aw library
On its part, the NLRC ruled (p. 110,
Rollo):jgc:chanrobles.com.ph
"From the aforequoted provisions of the law and the
implementing rules, it could be deduced that wage is used in its
generic sense and obviously refers to the basic wage rate to be
ascertained on a time, task, piece or commission basis or other
method of calculating the same. It does not, however, mean
that commission, allowances or analogous income necessarily
forms part of the employees salary because to do so would

lead to anomaleas (sic), if not absurd, construction of the word

"salary." For what will prevent the employee from insisting that
emergency living allowance, 13th month pay, overtime and
premium pay, and other fringe benefits should be added to the
computation of their separation pay. This situation, to our mind,
is not the real intent of the Code and its rules."cralaw virtua1aw
library
We rule otherwise. The ambiguity between Article 97(f), which
defines the term wage and Article XIV of the Collective
Bargaining Agreement, Article 284 of the Labor Code and
Sections 9(b) and 10 of the Implementing Rules, which mention
the terms "pay" and "salary", is more apparent than real.
Broadly, the word "salary" means a recompense or
consideration made to a person for his pains or industry in
another mans business. Whether it be derived from "salarium,"
or more fancifully from "sal," the pay of the Roman soldier, it
carries with it the fundamental idea of compensation for
services rendered. Indeed, there is eminent authority for
holding that the words "wages" and "salary" are in essence
synonymous (Words and Phrases, Vol. 38 Permanent Edition, p.
44 citing Hopkins v. Cromwell, 85 N.Y.S. 839, 841, 89 App. Div.
481; 38 Am. Jur. 496). "Salary," the etymology of which is the
Latin word "salarium," is often used interchangeably with
"wage", the etymology of which is the Middle English word
"wagen." Both words generally refer to one and the same
meaning, that is, a reward or recompense for services
performed. Likewise, "pay" is the synonym of "wages" and
"salary" (Blacks Law Dictionary, 5th Ed.). Inasmuch as the
words "wages", "pay" and "salary" have the same meaning, and
commission is included in the definition of "wage", the logical
conclusion, therefore, is, in the computation of the separation
pay of petitioners, their salary base should include also their
earned sales commissions.chanrobles.com:cralaw:red
The aforequoted provisions are not the only consideration for
deciding the petition in favor of the petitioners.
We agree with the Solicitor General that granting, in gratia
argumenti, that the commissions were in the form of incentives
or encouragement, so that the petitioners would be inspired to
put a little more industry on the jobs particularly assigned to
them, still these commissions are direct remunerations for
services rendered which contributed to the increase of income
of Zuellig. Commission is the recompense, compensation or
reward of an agent, salesman, executor, trustees, receiver,

factor, broker or bailee, when the same is calculated as a

percentage on the amount of his transactions or on the profit to
the principal (Blacks Law Dictionary, 5th Ed., citing Weiner v.
Swales, 217 Md. 123, 141 A.2d 749, 750). The nature of the
work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly that
commissions are part of petitioners wage or salary. We take
judicial notice of the fact that some salesmen do not receive
any basic salary but depend on commissions and allowances or
commissions alone, although an employer-employee
relationship exists. Bearing in mind the preceding discussions, if
We adopt the opposite view that commissions do not form part
of wage or salary, then, in effect, We will be saying that this
kind of salesmen do not receive any salary and therefore, not
entitled to separation pay in the event of discharge from
employment. Will this not be absurd? This narrow interpretation
is not in accord with the liberal spirit of our labor laws and
considering the purpose of separation pay which is, to alleviate
the difficulties which confront a dismissed employee thrown to
the streets to face the harsh necessities of life.cralawnad
Additionally, in Soriano v. NLRC, Et Al., supra, in resolving the
issue of the salary base that should be used in computing the
separation pay, We held that:red:chanrobles.com.ph
"The commissions also claimed by petitioner (override
commission plus net deposit incentive) are not properly
includible in such base figure since such commissions must be
earned by actual market transactions attributable to
petitioner."cralaw virtua1aw library
Applying this by analogy, since the commissions in the present
case were earned by actual market transactions attributable to
petitioners, these should be included in their separation pay. In
the computation thereof, what should be taken into account is
the average commissions earned during their last year of
employment.
The final consideration is, in carrying out and interpreting the
Labor Codes provisions and its implementing regulations, the
workingmans welfare should be the primordial and paramount
consideration. This kind of interpretation gives meaning and
substance to the liberal and compassionate spirit of the law as
provided for in Article 4 of the Labor Code which states that "all
doubts in the implementation and interpretation of the
provisions of the Labor Code including its implementing rules

and regulations shall be resolved in favor of labor" (Abella v.

NLRC, G.R. No. 71812, July 30, 1987, 152 SCRA 140; Manila
Electric Company v. NLRC, Et Al., G.R. No. 78763, July 12, 1989),
and Article 1702 of the Civil Code which provides that "in case
of doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living for the
laborer.chanrobles law library
ACCORDINGLY, the petition is hereby GRANTED. The decision of
the respondent National Labor Relations Commission is
MODIFIED by including allowances and commissions in the
separation pay of petitioners Jose Songco and Amancio Manuel.
The case is remanded to the Labor Arbiter for the proper
computation of said separation pay.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Grio-Aquino, JJ.,
concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-72654-61 January 22, 1990
ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON,
LAURENTE BAUTU, JAIME BARBIN, NICANOR FRANCISCO,
PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE
GUZMAN FISHING ENTERPRISES and/or ARSENIO DE
GUZMAN, respondents.
J.C. Espinas & Associates for petitioners.
Tomas A. Reyes for private respondent.
FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not
the fishermen-crew members of the trawl fishing vessel 7/B
Sandyman II are employees of its owner-operator, De Guzman

Fishing Enterprises, and if so, whether or not they were illegally

dismissed from their employment.
Records show that the petitioners were the fishermen-crew
members of 7/B Sandyman II, one of several fishing vessels
owned and operated by private respondent De Guzman Fishing
Enterprises which is primarily engaged in the fishing business
with port and office at Camaligan, Camarines Sur. Petitioners
rendered service aboard said fishing vessel in various
capacities, as follows: Alipio Ruga and Jose Parma patron/pilot;
Eladio Calderon, chief engineer; Laurente Bautu, second
engineer; Jaime Barbin, master fisherman; Nicanor Francisco,
second fisherman; Philip Cervantes and Eleuterio Barbin,
fishermen.
For services rendered in the conduct of private respondent's
regular business of "trawl" fishing, petitioners were paid on
percentage commission basis in cash by one Mrs. Pilar de
Guzman, cashier of private respondent. As agreed upon, they
received thirteen percent (13%) of the proceeds of the sale of
the fish-catch if the total proceeds exceeded the cost of crude
oil consumed during the fishing trip, otherwise, they received
ten percent (10%) of the total proceeds of the sale. The
patron/pilot, chief engineer and master fisherman received a
minimum income of P350.00 per week while the assistant
engineer, second fisherman, and fisherman-winchman received
a minimum income of P260.00 per week. 1
On September 11, 1983 upon arrival at the fishing port,
petitioners were told by Jorge de Guzman, president of private
respondent, to proceed to the police station at Camaligan,
Camarines Sur, for investigation on the report that they sold
some of their fish-catch at midsea to the prejudice of private
respondent. Petitioners denied the charge claiming that the
same was a countermove to their having formed a labor union
and becoming members of Defender of Industrial Agricultural
Labor Organizations and General Workers Union (DIALOGWU) on
September 3, 1983.
During the investigation, no witnesses were presented to prove
the charge against petitioners, and no criminal charges were
formally filed against them. Notwithstanding, private
respondent refused to allow petitioners to return to the fishing
vessel to resume their work on the same day, September 11,
1983.

On September 22, 1983, petitioners individually filed their

complaints for illegal dismissal and non-payment of 13th month
pay, emergency cost of living allowance and service incentive
pay, with the then Ministry (now Department) of Labor and
Employment, Regional Arbitration Branch No. V, Legaspi City,
Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They
uniformly contended that they were arbitrarily dismissed
without being given ample time to look for a new job.
On October 24, 1983, private respondent, thru its operations
manager, Conrado S. de Guzman, submitted its position paper
denying the employer-employee relationship between private
respondent and petitioners on the theory that private
respondent and petitioners were engaged in a joint venture. 3
After the parties failed to reach an amicable settlement, the
Labor Arbiter scheduled the case for joint hearing furnishing the
parties with notice and summons. On December 27, 1983, after
two (2) previously scheduled joint hearings were postponed due
to the absence of private respondent, one of the petitioners
herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman II,
testified, among others, on the manner the fishing operations
were conducted, mode of payment of compensation for services
rendered by the fishermen-crew members, and the
circumstances leading to their dismissal. 4
On March 31, 1984, after the case was submitted for resolution,
Labor Arbiter Asisclo S. Coralde rendered a joint
decision 5 dismissing all the complaints of petitioners on a
finding that a "joint fishing venture" and not one of employeremployee relationship existed between private respondent and
petitioners.
From the adverse decision against them, petitioners appealed
to the National Labor Relations Commission.
On May 30, 1985, the National Labor Relations Commission
promulgated its resolution 6 affirming the decision of the labor
arbiter that a "joint fishing venture" relationship existed
between private respondent and petitioners.
Hence, the instant petition.
Petitioners assail the ruling of the public respondent NLRC that
what exists between private respondent and petitioners is a
joint venture arrangement and not an employer-employee
relationship. To stress that there is an employer-employee
relationship between them and private respondent, petitioners

invite attention to the following: that they were directly hired by

private respondent through its general manager, Arsenio de
Guzman, and its operations manager, Conrado de Guzman;
that, except for Laurente Bautu, they had been employed by
private respondent from 8 to 15 years in various capacities; that
private respondent, through its operations manager, supervised
and controlled the conduct of their fishing operations as to the
fixing of the schedule of the fishing trips, the direction of the
fishing vessel, the volume or number of tubes of the fish-catch
the time to return to the fishing port, which were communicated
to the patron/pilot by radio (single side band); that they were
not allowed to join other outfits even the other vessels owned
by private respondent without the permission of the operations
manager; that they were compensated on percentage
commission basis of the gross sales of the fish-catch which were
delivered to them in cash by private respondent's cashier, Mrs.
Pilar de Guzman; and that they have to follow company policies,
rules and regulations imposed on them by private respondent.
Disputing the finding of public respondent that a "joint fishing
venture" exists between private respondent and petitioners,
petitioners claim that public respondent exceeded its
jurisdiction and/or abused its discretion when it added facts not
contained in the records when it stated that the pilot-crew
members do not receive compensation from the boat-owners
except their share in the catch produced by their own efforts;
that public respondent ignored the evidence of petitioners that
private respondent controlled the fishing operations; that public
respondent did not take into account established jurisprudence
that the relationship between the fishing boat operators and
their crew is one of direct employer and employee.
Aside from seeking the dismissal of the petition on the ground
that the decision of the labor arbiter is now final and executory
for failure of petitioners to file their appeal with the NLRC within
10 calendar days from receipt of said decision pursuant to the
doctrine laid down in Vir-Jen Shipping and Marine
Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor
General claims that the ruling of public respondent that a "joint
fishing venture" exists between private respondent and
petitioners rests on the resolution of the Social Security System
(SSS) in a 1968 case, Case No. 708 (De Guzman Fishing

Enterprises vs. SSS), exempting De Guzman Fishing Enterprises,

private respondent herein, from compulsory coverage of the
SSS on the ground that there is no employer-employee relations
between the boat-owner and the fishermen-crew members
following the doctrine laid down inPajarillo vs. SSS, 17 SCRA
1014 (1966). In applying to the case at bar the doctrine
in Pajarillo vs. SSS, supra, that there is no employer-employee
relationship between the boat-owner and the pilot and crew
members when the boat-owner supplies the boat and
equipment while the pilot and crew members contribute the
corresponding labor and the parties get specific shares in the
catch for their respective contribution to the venture, the
Solicitor General pointed out that the boat-owners in
the Pajarillo case, as in the case at bar, did not control the
conduct of the fishing operations and the pilot and crew
members shared in the catch.
We rule in favor of petitioners.
Fundamental considerations of substantial justice persuade Us
to decide the instant case on the merits rather than to dismiss it
on a mere technicality. In so doing, we exercise the prerogative
accorded to this Court enunciated in Firestone Filipinas
Employees Association, et al. vs. Firestone Tire and Rubber
Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the wellsettled doctrine is that in labor cases before this Tribunal, no
undue sympathy is to be accorded to any claim of a procedural
misstep, the idea being that its power be exercised according to
justice and equity and substantial merits of the controversy."
Circumstances peculiar to some extent to fishermen-crew
members of a fishing vessel regularly engaged in trawl fishing,
as in the case of petitioners herein, who spend one (1) whole
week or more 7 in the open sea performing their job to earn a
living to support their families, convince Us to adopt a more
liberal attitude in applying to petitioners the 10-calendar day
rule in the filing of appeals with the NLRC from the decision of
the labor arbiter.
Records reveal that petitioners were informed of the labor
arbiter's decision of March 31, 1984 only on July 3,1984 by their
non-lawyer representative during the arbitration proceedings,
Jose Dialogo who received the decision eight (8) days earlier, or
on June 25, 1984. As adverted to earlier, the circumstances
peculiar to petitioners' occupation as fishermen-crew members,

who during the pendency of the case understandably have to

earn a living by seeking employment elsewhere, impress upon
Us that in the ordinary course of events, the information as to
the adverse decision against them would not reach them within
such time frame as would allow them to faithfully abide by the
10-calendar day appeal period. This peculiar circumstance and
the fact that their representative is a non-lawyer provide
equitable justification to conclude that there is substantial
compliance with the ten-calendar day rule of filing of appeals
with the NLRC when petitioners filed on July 10, 1984, or seven
(7) days after receipt of the decision, their appeal with the NLRC
through registered mail.
We have consistently ruled that in determining the existence of
an employer-employee relationship, the elements that are
generally considered are the following (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the
employee with respect to the means and methods by which the
work is to be accomplished. 8 The employment relation arises
from contract of hire, express or implied. 9 In the absence of
hiring, no actual employer-employee relation could exist.
From the four (4) elements mentioned, We have generally relied
on the so-called right-of-control test 10 where the person for
whom the services are performed reserves a right to control not
only the end to be achieved but also the means to be used in
reaching such end. The test calls merely for the existence of the
right to control the manner of doing the work, not the actual
exercise of the right. 11
The case of Pajarillo vs. SSS, supra, invoked by the public
respondent as authority for the ruling that a "joint fishing
venture" existed between private respondent and petitioners is
not applicable in the instant case. There is neither light of
control nor actual exercise of such right on the part of the boatowners in the Pajarillo case, where the Court found that the
pilots therein are not under the order of the boat-owners as
regards their employment; that they go out to sea not upon
directions of the boat-owners, but upon their own volition as to
when, how long and where to go fishing; that the boat-owners
do not in any way control the crew-members with whom the
former have no relationship whatsoever; that they simply join

every trip for which the pilots allow them, without any reference
to the owners of the vessel; and that they only share in their
own catch produced by their own efforts.
The aforementioned circumstances obtaining in Pajarillo case
do not exist in the instant case. The conduct of the fishing
operations was undisputably shown by the testimony of Alipio
Ruga, the patron/pilot of 7/B Sandyman II, to be under the
control and supervision of private respondent's operations
manager. Matters dealing on the fixing of the schedule of the
fishing trip and the time to return to the fishing port were shown
to be the prerogative of private respondent. 12 While performing
the fishing operations, petitioners received instructions via a
single-side band radio from private respondent's operations
manager who called the patron/pilot in the morning. They are
told to report their activities, their position, and the number of
tubes of fish-catch in one day. 13 Clearly thus, the conduct of the
fishing operations was monitored by private respondent thru
the patron/pilot of 7/B Sandyman II who is responsible for
disseminating the instructions to the crew members.
The conclusion of public respondent that there had been no
change in the situation of the parties since 1968 when De
Guzman Fishing Enterprises, private respondent herein,
obtained a favorable judgment in Case No. 708 exempting it
from compulsory coverage of the SSS law is not supported by
evidence on record. It was erroneous for public respondent to
apply the factual situation of the parties in the 1968 case to the
instant case in the light of the changes in the conditions of
employment agreed upon by the private respondent and
petitioners as discussed earlier.
Records show that in the instant case, as distinguished from
the Pajarillo case where the crew members are under no
obligation to remain in the outfit for any definite period as one
can be the crew member of an outfit for one day and be the
member of the crew of another vessel the next day, the herein
petitioners, on the other hand, were directly hired by private
respondent, through its general manager, Arsenio de Guzman,
and its operations manager, Conrado de Guzman and have
been under the employ of private respondent for a period of 815 years in various capacities, except for Laurente Bautu who
was hired on August 3, 1983 as assistant engineer. Petitioner

Alipio Ruga was hired on September 29, 1974 as patron/captain

of the fishing vessel; Eladio Calderon started as a mechanic on
April 16, 1968 until he was promoted as chief engineer of the
fishing vessel; Jose Parma was employed on September 29,
1974 as assistant engineer; Jaime Barbin started as a pilot of
the motor boat until he was transferred as a master fisherman
to the fishing vessel 7/B Sandyman II; Philip Cervantes was
hired as winchman on August 1, 1972 while Eleuterio Barbin
was hired as winchman on April 15, 1976.
While tenure or length of employment is not considered as the
test of employment, nevertheless the hiring of petitioners to
perform work which is necessary or desirable in the usual
business or trade of private respondent for a period of 8-15
years since 1968 qualify them as regular employees within the
meaning of Article 281 of the Labor Code as they were indeed
engaged to perform activities usually necessary or desirable in
the usual fishing business or occupation of private
respondent. 14
Aside from performing activities usually necessary and
desirable in the business of private respondent, it must be
noted that petitioners received compensation on a percentage
commission based on the gross sale of the fish-catch i.e. 13% of
the proceeds of the sale if the total proceeds exceeded the cost
of the crude oil consumed during the fishing trip, otherwise only
10% of the proceeds of the sale. Such compensation falls within
the scope and meaning of the term "wage" as defined under
Article 97(f) of the Labor Code, thus:
(f) "Wage" paid to any employee shall mean the
remuneration or earnings, however designated,
capable of being expressed in terms of money,
whether fixed or ascertained on a time, task,
piece or commission basis, or other method of
calculating the same, which is payable by an
employer to an employee under a written or
unwritten contract of employment for work done
or to be done, or for services rendered or to be
rendered, and included the fair and reasonable
value, as determined by the Secretary of Labor,
of board, lodging, or other facilities customarily
furnished by the employer to the employee. . . .

The claim of private respondent, which was given credence by

public respondent, that petitioners get paid in the form of share
in the fish-catch which the patron/pilot as head of the team
distributes to his crew members in accordance with their own
understanding 15 is not supported by recorded evidence. Except
that such claim appears as an allegation in private respondent's
position paper, there is nothing in the records showing such a
sharing scheme as preferred by private respondent.
Furthermore, the fact that on mere suspicion based on the
reports that petitioners allegedly sold their fish-catch at midsea
without the knowledge and consent of private respondent,
petitioners were unjustifiably not allowed to board the fishing
vessel on September 11, 1983 to resume their activities without
giving them the opportunity to air their side on the accusation
against them unmistakably reveals the disciplinary power
exercised by private respondent over them and the
corresponding sanction imposed in case of violation of any of its
rules and regulations. The virtual dismissal of petitioners from
their employment was characterized by undue haste when less
extreme measures consistent with the requirements of due
process should have been first exhausted. In that sense, the
dismissal of petitioners was tainted with illegality.
Even on the assumption that petitioners indeed sold the fishcatch at midsea the act of private respondent virtually resulting
in their dismissal evidently contradicts private respondent's
theory of "joint fishing venture" between the parties herein. A
joint venture, including partnership, presupposes generally
a parity of standingbetween the joint co-venturers or partners,
in which each party has an equal proprietary interest in the
capital or property contributed 16 and where each party
exercises equal lights in the conduct of the business. 17 It would
be inconsistent with the principle of parity of standing between
the joint co-venturers as regards the conduct of business, if
private respondent would outrightly exclude petitioners from
the conduct of the business without first resorting to other
measures consistent with the nature of a joint venture
undertaking, Instead of arbitrary unilateral action, private
respondent should have discussed with an open mind the
advantages and disadvantages of petitioners' action with its
joint co-venturers if indeed there is a "joint fishing venture"

between the parties. But this was not done in the instant case.
Petitioners were arbitrarily dismissed notwithstanding that no
criminal complaints were filed against them. The lame excuse of
private respondent that the non-filing of the criminal complaints
against petitioners was for humanitarian reasons will not help
its cause either.
We have examined the jurisprudence on the matter and find the
same to be supportive of petitioners' stand. InNegre
vs. WCC 135 SCRA 653 (1985), we held that fishermen crew
members who were recruited by one master fisherman locally
known as "maestro" in charge of recruiting others to complete
the crew members are considered employees, not industrial
partners, of the boat-owners. In an earlier case of Abong
vs. WCC, 54 SCRA 379 (1973) where petitioner therein, Dr.
Agustin Abong, owner of the fishing boat, claimed that he was
not the employer of the fishermen crew members because of an
alleged partnership agreement between him, as financier, and
Simplicio Panganiban, as his team leader in charge of recruiting
said fishermen to work for him, we affirmed the finding of the
WCC that there existed an employer-employee relationship
between the boat-owner and the fishermen crew members not
only because they worked for and in the interest of the business
of the boat-owner but also because they were subject to the
control, supervision and dismissal of the boat-owner, thru its
agent, Simplicio Panganiban, the alleged "partner" of Dr. Abong;
that while these fishermen crew members were paid in kind, or
by "pakiao basis" still that fact did not alter the character of
their relationship with Dr. Abong as employees of the latter.
In Philippine Fishing Boat Officers and Engineers Union
vs. Court of Industrial Relations, 112 SCRA 159 (1982), we held
that the employer-employee relationship between the crew
members and the owners of the fishing vessels engaged in
deep sea fishing is merely suspended during the time the
vessels are drydocked or undergoing repairs or being loaded
with the necessary provisions for the next fishing trip. The said
ruling is premised on the principle that all these activities i.e.,
drydock, repairs, loading of necessary provisions, form part of
the regular operation of the company fishing business.
WHEREFORE, in view of the foregoing, the petition is GRANTED.
The questioned resolution of the National Labor Relations

Commission dated May 30,1985 is hereby REVERSED and SET

ASIDE. Private respondent is ordered to reinstate petitioners to
their former positions or any equivalent positions with 3-year
backwages and other monetary benefits under the law. No
pronouncement as to costs.
SO ORDERED.
Gutierrez, Jr., Bidin and Corts, JJ., concur.
Feliciano, J., concurs in the result.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-12444
February 28, 1963
STATES MARINE CORPORATION and ROYAL LINE,
INC., petitioners,
vs.
CEBU SEAMEN'S ASSOCIATION, INC., respondent.
Pedro B. Uy Calderon for petitioners.
Gaudioso C. Villagonzalo for respondent.
PAREDES, J.:
Petitioners States Marine Corporation and Royal Line, Inc. were
engaged in the business of marine coastwise transportation,
employing therein several steamships of Philippine registry.
They had a collective bargaining contract with the respondent
Cebu Seamen's Association, Inc. On September 12, 1952, the
respondent union filed with the Court of Industrial Relations
(CIR), a petition (Case No. 740-V) against the States Marine
Corporation, later amended on May 4, 1953, by including as
party respondent, the petitioner Royal Line, Inc. The Union
alleged that the officers and men working on board the
petitioners' vessels have not been paid their sick leave,
vacation leave and overtime pay; that the petitioners
threatened or coerced them to accept a reduction of salaries,
observed by other shipowners; that after the Minimum Wage
Law had taken effect, the petitioners required their employees
on board their vessels, to pay the sum of P.40 for every meal,
while the masters and officers were not required to pay their

meals and that because Captain Carlos Asensi had refused to

yield to the general reduction of salaries, the petitioners
dismissed said captain who now claims for reinstatement and
the payment of back wages from December 25, 1952, at the
rate of P540.00, monthly.
The petitioners' shipping companies, answering, averred that
very much below 30 of the men and officers in their employ
were members of the respondent union; that the work on board
a vessel is one of comparative ease; that petitioners have
suffered financial losses in the operation of their vessels and
that there is no law which provides for the payment of sick
leave or vacation leave to employees or workers of private
firms; that as regards the claim for overtime pay, the petitioners
have always observed the provisions of Comm. Act No. 444,
(Eight-Hour Labor Law), notwithstanding the fact that it does
not apply to those who provide means of transportation; that
the shipowners and operators in Cebu were paying the salaries
of their officers and men, depending upon the margin of profits
they could realize and other factors or circumstances of the
business; that in enacting Rep. Act No. 602 (Minimum Wage
Law), the Congress had in mind that the amount of P.40 per
meal, furnished the employees should be deducted from the
daily wages; that Captain Asensi was not dismissed for alleged
union activities, but with the expiration of the terms of the
contract between said officer and the petitioners, his services
were terminated.
A decision was rendered on February 21, 1957 in favor of the
respondent union. The motion for reconsideration thereof,
having been denied, the companies filed the present writ of
certiorari, to resolve legal question involved. Always bearing in
mind the deep-rooted principle that the factual findings of the
Court of Industrial Relations should not be disturbed, if
supported by substantial evidence, the different issues are
taken up, in the order they are raised in the brief for the
petitioners.
1. First assignment of error. The respondent court
erred in holding that it had jurisdiction over case No.
740-V, notwithstanding the fact that those who had
dispute with the petitioners, were less than thirty (30) in
number.

The CIR made a finding that at the time of the

filing of the petition in case No. 740-V, respondent
Union had more than thirty members actually
working with the companies, and the court
declared itself with jurisdiction to take cognizance
of the case. Against this order, the herein
petitioners did not file a motion for
reconsideration or a petition for certiorari. The
finding of fact made by the CIR became final and
conclusive, which We are not now authorized to
alter or modify. It is axiomatic that once the CIR
had acquired jurisdiction over a case, it continues
to have that jurisdiction, until the case is
terminated (Manila Hotel Emp. Association v.
Manila Hotel Company, et al., 40 O.G. No. 6, p.
3027). It was abundantly shown that there were
56 members who signed Exhibits A, A-I to A-8,
and that 103 members of the Union are listed in
Exhibits B, B-1 to B-35, F, F-1 and K-2 to K-3. So
that at the time of the filing of the petition, the
respondent union had a total membership of 159,
working with the herein petitioners, who were
presumed interested in or would be benefited by
the outcome of the case (NAMARCO v. CIR, L17804, Jan. 1963). Annex D, (Order of the CIR,
dated March 8, 1954), likewise belies the
contention of herein petitioner in this regard. The
fact that only 7 claimed for overtime pay and only
7 witnesses testified, does not warrant the
conclusion that the employees who had some
dispute with the present petitioners were less
than 30. The ruling of the CIR, with respect to the
question of jurisdiction is, therefore, correct.
2. Second assignment of error. The CIR erred in
holding, that inasmuch as in the shipping articles, the
herein petitioners have bound themselves to supply the
crew with provisions and with such "daily subsistence as
shall be mutually agreed upon" between the master and
the crew, no deductions for meals could be made by the
aforesaid petitioners from their wages or salaries.

3. Third assignment of error. The CIR erred in holding

that inasmuch as with regard to meals furnished to crew
members of a vessel, section 3(f) of Act No. 602 is the
general rule, which section 19 thereof is the exception,
the cost of said meals may not be legally deducted from
the wages or salaries of the aforesaid crew members by
the herein petitioners.
4. Fourth assignment of error. The CIR erred in
declaring that the deduction for costs of meals from the
wages or salaries after August 4, 1951, is illegal and
same should be reimbursed to the employee concerned,
in spite of said section 3, par. (f) of Act No. 602.
It was shown by substantial evidence, that since the beginning
of the operation of the petitioner's business, all the crew of their
vessels have been signing "shipping articles" in which are
stated opposite their names, the salaries or wages they would
receive. All seamen, whether members of the crew or deck
officers or engineers, have been furnished free meals by the
ship owners or operators. All the shipping articles signed by the
master and the crew members, contained, among others, a
stipulation, that "in consideration of which services to be duly
performed, the said master hereby agrees to pay to the said
crew, as wages, the sums against their names respectively
expressed in the contract; and to supply them with
provisions as provided herein ..." (Sec. 8, par. [b], shipping
articles), and during the duration of the contract "the master of
the vessel will provide each member of the crewsuch daily
subsistence as shall be mutually agreed daily upon between
said master and crew; or, in lieu of such subsistence the crew
may reserve the right to demand at the time of execution of
these articles that adequatedaily rations be furnished each
member of the crew." (Sec. 8, par. [e], shipping articles). It is,
therefore, apparent that, aside from the payment of the
respective salaries or wages, set opposite the names of the
crew members, the petitioners bound themselves to supply the
crew with ship's provisions, daily subsistence or daily rations,
which include food.
This was the situation before August 4, 1951, when the
Minimum Wage Law became effective. After this date, however,
the companies began deducting the cost of meals from the

wages or salaries of crew members; but no such deductions

were made from the salaries of the deck officers and engineers
in all the boats of the petitioners. Under the existing laws,
therefore, the query converges on the legality of such
deductions. While the petitioners herein contend that the
deductions are legal and should not be reimbursed to the
respondent union, the latter, however, claims that same are
illegal and reimbursement should be made.
Wherefore, the parties respectfully pray that the foregoing
stipulation of facts be admitted and approved by this Honorable
Court, without prejudice to the parties adducing other evidence
to prove their case not covered by this stipulation of
facts. 1wph1.t
We hold that such deductions are not authorized. In the
coastwise business of transportation of passengers and freight,
the men who compose the complement of a vessel are provided
with free meals by the shipowners, operators or agents,
because they hold on to their work and duties, regardless of
"the stress and strain concomitant of a bad weather, unmindful
of the dangers that lurk ahead in the midst of the high seas."
Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602),
provides as follows
(f) Until and unless investigations by the Secretary of
Labor on his initiative or on petition of any interested
party result in a different determination of the fair and
reasonable value, the furnishing of meals shall be valued
at not more than thirty centavos per meal for
agricultural employees and not more than fortycentavos
for any other employees covered by this Act, and the
furnishing of housing shall be valued at not more than
twenty centavos daily for agricultural workers and not
more than forty centavos daily for other employees
covered by this Act.
Petitioners maintain, in view of the above provisions, that in
fixing the minimum wage of employees, Congress took into
account the meals furnished by employers and that in fixing the
rate of forty centavos per meal, the lawmakers had in mind that
the latter amount should be deducted from the daily wage,
otherwise, no rate for meals should have been provided.
However, section 19, same law, states

SEC. 19. Relations to other labor laws and practices.

Nothing in this Act shall deprive an employee of the right
to seek fair wages, shorter working hours and better
working conditions nor justify an employer in violating
any other labor law applicable to his employees, in
reducing the wage now paid to any of his employees in
excess of the minimum wage established under this Act,
or in reducing supplements furnished on the date of
enactment.
At first blush, it would appear that there exists a contradiction
between the provisions of section 3(f) and section 19 of Rep.
Act No. 602; but from a careful examination of the same, it is
evident that Section 3(f) constitutes the general rule, while
section 19 is the exception. In other words, if there are no
supplements given, within the meaning and contemplation of
section 19, but merely facilities, section 3(f) governs. There is
no conflict; the two provisions could, as they should be
harmonized. And even if there is such a conflict, the respondent
CIR should resolve the same in favor of the safety and decent
living laborers (Art. 1702, new Civil Code)..
It is argued that the food or meals given to the deck officers,
marine engineers and unlicensed crew members in question,
were mere "facilities" which should be deducted from wages,
and not "supplements" which, according to said section 19,
should not be deducted from such wages, because it is provided
therein: "Nothing in this Act shall deprive an employee of the
right to such fair wage ... or in reducing supplements furnished
on the date of enactment." In the case of Atok-Big Wedge Assn.
v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the
two terms are defined as follows
"Supplements", therefore, constitute extra remuneration
or special privileges or benefits given to or received by
the laborers over and above their ordinary earnings or
wages. "Facilities", on the other hand, are items of
expense necessary for the laborer's and his family's
existence and subsistence so that by express provision
of law (Sec. 2[g]), they form part of the wage and when
furnished by the employer are deductible therefrom,
since if they are not so furnished, the laborer would
spend and pay for them just the same.

In short, the benefit or privilege given to the employee which

constitutes an extra remuneration above and over his basic or
ordinary earning or wage, is supplement; and when said benefit
or privilege is part of the laborers' basic wages, it is a facility.
The criterion is not so much with the kind of the benefit or item
(food, lodging, bonus or sick leave) given, but its purpose.
Considering, therefore, as definitely found by the respondent
court that the meals were freely given to crew members prior to
August 4, 1951, while they were on the high seas "not as part of
their wages but as a necessary matter in the maintenance of
the health and efficiency of the crew personnel during the
voyage", the deductions therein made for the meals given after
August 4, 1951, should be returned to them, and the operator
of the coastwise vessels affected should continue giving the
same benefit..
In the case of Cebu Autobus Company v. United Cebu Autobus
Employees Assn., L-9742, Oct. 27, 1955, the company used to
pay to its drivers and conductors, who were assigned outside of
the City limits, aside from their regular salary, a certain
percentage of their daily wage, as allowance for food. Upon the
effectivity of the Minimum Wage Law, however, that privilege
was stopped by the company. The order CIR to the company to
continue granting this privilege, was upheld by this Court.
The shipping companies argue that the furnishing of meals to
the crew before the effectivity of Rep. Act No. 602, is of no
moment, because such circumstance was already taken into
consideration by Congress, when it stated that "wage" includes
the fair and reasonable value of boards customarily furnished
by the employer to the employees. If We are to follow the
theory of the herein petitioners, then a crew member, who used
to receive a monthly wage of P100.00, before August 4, 1951,
with no deduction for meals, after said date, would receive only
P86.00 monthly (after deducting the cost of his meals at P.40
per meal), which would be very much less than the P122.00
monthly minimum wage, fixed in accordance with the Minimum
Wage Law. Instead of benefiting him, the law will adversely
affect said crew member. Such interpretation does not conform
with the avowed intention of Congress in enacting the said law.
One should not overlook a fact fully established, that only
unlicensed crew members were made to pay for their meals or

food, while the deck officers and marine engineers receiving

higher pay and provided with better victuals, were not. This
pictures in no uncertain terms, a great and unjust discrimination
obtaining in the present case (Pambujan Sur United Mine
Workers v. CIR, et al., L-7177, May 31, 1955).
Fifth, Sixth and Seventh assignments of error. The CIR erred
in holding that Severino Pepito, a boatsman, had rendered
overtime work, notwithstanding the provisions of section 1, of
C.A. No. 444; in basing its finding ofthe alleged overtime, on the
uncorroborated testimony of said Severino Pepito; and in
ordering the herein petitioners to pay him. Severino Pepito was
found by the CIR to have worked overtime and had not been
paid for such services. Severino Pepito categorically stated that
he worked during the late hours of the evening and during the
early hours of the day when the boat docks and unloads. Aside
from the above, he did other jobs such as removing rusts and
cleaning the vessel, which overtime work totalled to 6 hours a
day, and of which he has not been paid as yet. This statement
was not rebutted by the petitioners. Nobody working with him
on the same boat "M/V Adriana" contrawise. The testimonies of
boatswains of other vessels(M/V Iruna and M/V Princesa), are
incompetent and unreliable. And considering the established
fact that the work of Severino Pepito was continuous, and
during the time he was not working, he could not leave and
could not completely rest, because of the place and nature of
his work, the provisions of sec. 1, of Comm. Act No. 444, which
states "When the work is not continuous, the time during which
the laborer is not working and can leave his working place and
can rest completely shall not be counted", find no application in
his case.
8. Eighth assignment of error. The CIR erred in ordering
petitioners to reinstate Capt. Carlos Asensi to his former
position, considering the fact that said officer had been
employed since January 9, 1953, as captain of a vessel
belonging to another shipping firm in the City of Cebu.
The CIR held
Finding that the claims of Captain Carlos Asensi for back
salaries from the time of his alleged lay-off on March 20,
1952, is not supported by the evidence on record, the
same is hereby dismissed. Considering, however, that
Captain Asensi had been laid-off for a long time and that

his failure to report for work is not sufficient cause for his
absolute dismissal, respondents are hereby ordered to
reinstate him to his former job without back salary but
under the same terms and conditions of employment
existing prior to his lay-off, without loss of seniority and
other benefits already acquired by him prior to March 20,
1952. This Court is empowered to reduce the
punishment meted out to an erring employee (Standard
Vacuum Oil Co., Inc. v. Katipunan Labor Union, G.R. No.
L-9666, Jan. 30, 1957). This step taken is in consonance
with section 12 of Comm. Act 103, as amended." (p. 16,
Decision, Annex 'G').
The ruling is in conformity with the evidence, law and equity.
Ninth and Tenth assignments of error. The CIR erred in
denying a duly verified motion for new trial, and in overruling
petitioner's motion for reconsideration.
The motion for new trial, supported by an affidavit, states that
the movants have a good and valid defense and the same is
based on three orders of the WAS (Wage Administration
Service), dated November 6, 1956. It is alleged that they would
inevitably affect the defense of the petitioners. The motion for
new trial is without merit. Having the said wage Orders in their
possession, while the case was pending decision, it was not
explained why the proper move was not taken to introduce
them before the decision was promulgated. The said wage
orders, dealing as they do, with the evaluation of meals and
facilities, are irrelevant to the present issue, it having been
found and held that the meals or food in question are not
facilities but supplements. The original petition in the CIR
having been filed on Sept. 12, 1952, the WAS could have
intervened in the manner provided by law to express its views
on the matter. At any rate, the admission of the three wage
orders have not altered the decision reached in this case.
IN VIEW HEREOF, the petition is dismissed, with costs against
the petitioners.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion,
Reyes, J.B.L., Barrera, Dizon, Regala and Makalintal, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 55159 December 22, 1989
PHILIPPINE AIRLINES, INC., petitioner
vs.
NATIONAL LABOR RELATIONS COMMISSION and
ARMANDO DOLINA, respondents.
Ermitano Manzano & Associates for petitioner.
Solon Garcia collaborating counsel for petitioner.
CORTES, J.:
Petitioner impugns in this petition for certiorari that part of the
public respondent National Labor Relations Commission's
(NLRC) decision in NLRC Case No. RB-IV-9319-77 which ordered
petitioner to restore private respondent Dolina to its payroll,
and to pay his salaries from 1 April 1979 "until this case is
finally resolved" [Rollo, p. 33]. Petitioner contends that public
respondent NLRC gravely abused its discretion considering that
in the same decision public respondent affirmed the decision of
the Labor Arbiter in toto granting respondent's application for
clearance to dismiss the private respondent.
The pertinent facts are as follows:
Private respondent Dolina was admitted to the Philippine
Airlines (PAL) Aviation School for training as a pilot beginning 16
January 1973. The training agreement bound PAL to provide
regular and permanent employment to Dolina upon completion
of the training course. On 25 January 1974, Dolina completed
the course, and undertook an equipment qualification course up
to 4 October 1974. On 9 October 1974, the Civil Aeronautics
Administration issued him a license as Commercial Pilot and PAL
then extended him a temporary appointment for six (6) months
as Limited First Officer. When his appointment was due to expire
on 30 April 1975, Dolina had only logged eighty four (84) hours
and fifty five (55) minutes flying time, short of the minimum
500 flying hours required for regularization as First Officer. To
enable him to complete the requirement, his employment was
extended for another six months which appointment was
described as "permanent." On 31 October 1975, when his
appointment was again due to expire, he was still short of the

minimum flying time requirement such that his appointment

was again extended up to 30 April 1976. During this third
extension of his appointment, Dolina completed the 500 flying
hours requirement, and thus on 31 March 1976 he applied for
regularization as First Officer. Pending his physical examination
by the chief Flight Surgeon, his appointment was again
extended to 31 October 1976. On 17 August 1976, Dolina took a
psychological examination wherein his "Adaptability Rating"
was found to be "unacceptable" [Annex "L" to the Petition. p. 8;
Rollo, p. 116]. On 23 September 1976, complainant was again
subjected to an examination and interview by the Pilot
Acceptance Qualifications Board as part of the regularization
process, which examination revealed the following:
xxx xxx xxx
b. Armando Dolina - After thorough evaluation of
the candidate's past records, his performance
and the result of his medical examination as
submitted by the Medical Sub-Department, the
Board finds Mr. A. Dolina not qualified for regular
employment in the Company.
xxx xxx xxx
[NLRC Decision, pp. 3-4; Rollo, pp. 25-26].
Conformably, the Board recommended the termination of the
complainant pursuant to which PAL filed a clearance application
[Rollo, p. 34] for Dolina's termination. In the meantime Dolina
was placed under preventive suspension effective 1 October
1976. Dolina countered with a complaint for illegal dismissal on
6 October 1976 [Rollo, 35]. On 26 January 1977 the Officer-inCharge of the Department of Labor Regional Office No. IV lifted
the preventive suspension, and ordered petitioner to reinstate
Dolina to his former position with full backwages from 1 October
1976 up to actual reinstatement. The issue of termination and
damages was referred to the Executive Labor Arbiter for
compulsory arbitration [Rollo, p. 71].
Petitioner appealed the order lifting Dolina's suspension to the
Secretary of Labor. However, on 2 March 1977, pending the
resolution of petitioner's appeal, the parties signed an
agreement before the Undersecretary of Labor, the terms of
which are as follows:
AGREEMENT

The undersigned parties hereby agree to the

following:
1 While pending final resolution of the complaint
of Mr. Armando Dolina against the Philippine
Airlines, he shall be considered in the payroll
effective 1 October 1976.
2 The order of Regional Director Vicente Leogardo
for the reinstatement with backwages of Mr.
Dolina is hereby rendered moot and academic.
3 The parties shall consider this arrangement
pending final resolution of the case by arbitration.
xxx xxx xxx
Subsequently, on 30 May 1977, the Acting Secretary of Labor
issued an order finding that the propriety of the suspension had
been rendered moot and academic by the above agreement
and referred the case for compulsory arbitration to the
Executive Labor Arbiter [Annex "J" to the Petition; Rollo, p. 85].
On 23 March 1979, the Labor Arbiter rendered its decision, the
dispositive portion of which reads as follows:
IN VIEW OF ALL THE FOREGOING, it is our
considered opinion that there is merit on the
application for clearance, and therefore, the same
should be as it is hereby GRANTED.
Consequently, the oppositor's TERMINATION IS IN
ORDER.
Since the termination is upheld, perforce the
claim for moral damages is denied. Besides
pursuant to P.D. No. 1367 dated May 1, 1978, this
office is devoid of jurisdiction to entertain said
claim.
SO ORDERED. [Decision of Labor Arbiter, p. 12;
Rollo, p. 97].
By virtue of the above decision, PAL removed Dolina from its
payroll effective 1 April 1979. Dolina then appealed the Labor
Arbiter's decision to the public respondent NLRC on 29 April
1979 and there filed a motion praying that PAL be ordered to
return him to PAL's payroll, contending that the Labor Arbiter's
decision was not yet final because of his timely appeal. PAL
opposed the motion claiming that it was no longer obliged to
return Dolina to its payroll since the decision of the Labor
Arbiter dated 23 March 1979 in its favor was a final resolution of

the case by arbitration [Annex "N" to the Petition, p. 1; Rollo, p.

137].
On 8 February 1980, public respondent NLRC rendered its
decision containing the assailed portion to wit:
xxx xxx xxx
In fine it is our considered view that the
respondent's application for clearance to dismiss
the complainant has sufficiently surmounted the
test of validity.
Be that as it may, we are not in accord with the
discontinuation of the payment of complainant's
salaries. The agreement of the parties stipulated
in no uncertain terms that the complainant
[Dolina] is to be carried in respondent's payroll
until this case is finally resolved. As things stand,
the main issue is still being litigated. The
complainant, therefore, must be restored to the
payroll and paid for his salaries from 1 April 1979,
the date he was dropped from the respondent's
payroll.
WHEREFORE, the Decision appealed from should
be as it is hereby affirmed in toto. However the
respondent is ordered to restore the complainant
to its payroll and to pay his salaries from 1 April
1979 until this case is finally resolved.
SO ORDERED. [NLRC Decision, pp. 10-11; Rollo,
pp. 32-33; Italics supplied]
Hence, this petition, with a prayer for a temporary restraining
order. The Court issued a temporary restraining order on 10
October 1980. Private respondent Dolina failed to file his
comment and the Solicitor General submitted his own Comment
supporting the stand of petitioner. Due to the adverse stand of
the Solicitor General, public respondent NLRC submitted its own
Comment.
The issue before the Court is whether or not the NLRC
committed grave abuse of discretion in holding that private
respondent Dolina was entitled to his salaries from 1 April 1979
"until this case is finally resolved."
PAL contends that inasmuch as the respondent Commission
acting en banc had affirmed in toto the decision of the Labor
Arbiter granting petitioner the clearance for the dismissal of

private respondent Dolina, it is an act of grave abuse of

discretion amounting to lack of jurisdiction on its part to order
petitioner to pay private respondent's salaries from 1 April 1979
until the case is finally terminated. PAL contends that said
stipulation refers only to the resolution of the case by
arbitration and said arbitration of the case was terminated
when the Labor Arbiter rendered its decision dated 23 March
1979. PAL argues that the arbitration of the case is limited to
and comprises merely the proceedings before the Labor Arbiter
such that when the latter renders a decision, arbitration of the
dispute is terminated .
Public respondent NLRC on the other hand contends that
arbitration is a continuing process from the time the case is
referred by the Secretary of Labor to the Arbitration Branch until
the final judgment is had on appeal. Since the Labor Arbiter's
decision in favor of petitioner did not finally resolve the case in
view of the timely appeal by private respondent from said
decision, the case was not yet finally terminated by arbitration
and Dolina is entitled to be placed in petitioner's payroll until
the complaint is finally resolved.
The above contentions call for the proper interpretation of the
agreement between the parties, specifically the third stipulation
containing the clause "pending final resolution of the case by
arbitration."
It is a basic rule in interpretation of contracts that the
circumstances under which an instrument was made, including
the situation of the subject thereof and the parties to it, may be
considered so that the intention of the contracting parties may
be judged correctly [Art. 1371, Civil Code of the Philippines;
Section 11, Rule 130, Rules of Court; Lim v. Court of Appeals,
G.R. No. L-40258, September 11, 1980, 99 SCRA 668.] In the
instant case, the stipulation in the 2 March 1977 agreement
that Dolina shag be included in the payroll of PAL until final
resolution of the case by arbitration was intended to supersede
the order of the Regional Director which, by stipulation of the
parties, was rendered moot and academic. In lieu of
reinstatement and the payment of his backwages, private
respondent was included in petitioner's payroll, effective from
the time he was preventively suspended until final resolution of
the case by arbitration, without having to perform any work for

the petitioner. In entering into the agreement, the parties could

not have intended to include in the clause "final resolution of
the case by arbitration" the whole adjudicatory process,
including appeal. For if it were so, even proceedings on
certiorari before this Court would be embraced by the term
"arbitration" and private respondent will continue to receive
monthly salary without rendering any service to the petitioner
regardless of the outcome of the proceedings before the Labor
Arbiter, for as long as one of the parties appeal to the NLRC and
until the case is finally resolved by this Court. This is clearly an
absurdity which could not have been contemplated by the
parties.
Neither can proceedings on appeal before the NLRC en banc be
considered as part of the arbitration proceeding. In its broad
sense, arbitration is the reference of a dispute to an impartial
third person, chosen by the parties or appointed by statutory
authority to hear and decide the case in controversy [Chan
Linte v. Law Union and Rock, Ins. Co., 42 Phil. 548 (1921)].
When the consent of one of the parties is enforced by statutory
provisions, the proceeding is referred to as compulsory
arbitration. In labor cases, compulsory arbitration is the process
of settlement of labor disputes by a government agency which
has the authority to investigate and to make an award which is
binding on all the parties [See Wood v. Seattle, 23 Wash. 1, 62 P
135, 52 LRA 369 (1920); Amalgamated Association v. Wisconsin
Employees' Relations Board, 340 U.S. 383-410,95 L. Ed. 381
(1951)]. Under the Labor Code, it is the Labor Arbiter who is
clothed with the authority to conduct compulsory arbitration on
cases involving termination disputes [Article 217, Pres. Decree
No. 442, as amended]. When the Labor Arbiter renders his
decision, compulsory arbitration is deemed terminated because
by then the hearing and determination of the controversy has
ended. Any appeal raised by an aggrieved party from the Labor
Arbiter's decision is already beyond the scope of arbitration
since in the appeal stage, the NLRC en banc merely reviews the
Labor Arbiter's decision for errors of fact or law and no longer
duplicates the proceedings before the Labor Arbiter. Thus, the
clause "pending final resolution of the case by arbitration"
should be understood to be limited only to the proceedings

before the Labor Arbiter, such that when the latter rendered his
decision, the case was finally resolved by arbitration.
More important, however, is the fact that the NLRC's order for
the continued payment of Dolina's salaries is inconsistent with
its affirmance of the Labor Arbiter's decision upholding the
validity of Dolina's dismissal. In affirming the Labor Arbiter's
decision granting the termination clearance, the NLRC held that:
With respect to the issue of whether or not the
complainant's [Dolina] dismissal was sufficiently
grounded, we are not persuaded that the
respondent [herein petitioner PAL] is under
obligation to employ him as regular employee
simply because he was certified physically fit and
technically to proficient by the CAA.
This is understandable for it concerns the safety
of its properties, and above all, the safety of the
lives and properties of its passengers, which by
law it is committed to transport safely. In the
absence, therefore, of any showing that its
standards are unreasonable and discriminatory,
which we do not find here, We cannot disturb
them. We can only say that for exercising
extraordinary diligence in the selection of its
pilots, We join the public in commending it.
xxx xxx xxx
In fine, it is Our considered view that the
respondent's application for clearance to dismiss
the complainant has sufficiently surmounted the
test of validity.
In view of the above finding of valid dismissal, the NLRC had no
authority to order the continued payment of Dolina's salaries
from 1 April 1979 until the case is finally resolved. The NLRC's
order would result in compensating Dolina for services no
longer rendered and when he is no longer in PAL's employ. This
is contrary to the age-old rule of "a fair day's wage for a fair
day's labor" which continues to govern the relation between
labor and capital and remains a basic factor in determining
employees' wages [Durabilt Recapping Plant & Co. v. National
Labor Relations Commission, G.R. No. 76746, July 27, 1987, 152
SCRA 328]. So that, if there is no work performed by the
employee there can be no wage or pay unless the laborer was

able, willing and ready to work but was prevented by

management or was illegally locked out, suspended or
dismissed. Where the employee's dismissal was for a just cause,
it would neither be fair nor just to allow the employee to recover
something he has not earned and could not have earned
[Santos v. National Labor Relations Commission, G.R. No. 76721,
September 21, 1987, 154 SCRA 166].
Moreover, in ordering the continued payment of Dolina's
salaries from 1 April 1979 until the case is finally resolved, the
NLRC in effect ordered the payment of backwages to Dolina
notwithstanding its finding of a valid dismissal.
This is clearly untenable.
In the first place, backwages in general are granted on grounds
of equity for earnings which a worker or employee has lost due
to his illegal dismissal [New Manila Candy Workers Union
(NACONWA-PAFLU) v. Court of Industrial Relations, G.R. No. L29728, October 30, 1978, 86 SCRA 37; Durabilt Recapping Plant
& Co. v. National Labor Relations Commission, supra; Chong
Guan Trading v. National Labor Relations Commission, G. R. No.
81471, April 26, 1989; Santos v. National Labor Relations
Commission, supra]. Where, as in this case, the dismissal was
for a just cause, there is no factual or legal basis for ordering
the payment of backwages. The order of the NLRC for the
continued payment of Dolina's salaries would allow the latter to
unjustly enrich himself at the expense of the petitioner. This
Court has reiterated time and again that the law, in protecting
the rights of the laborer, authorizes neither oppression nor selfdestruction of the employer [Colgate Palmolive Philippines, Inc.
v. Ople, G.R. No. 73681, June 30,1988,163 SCRA 323]. In this
case, the NLRC chose not to adhere with fidelity to this doctrine.
Secondly, NLRC's order for continued payment of Dolina's salary
from 1 April 1979 up to the final resolution of the case would
place Dolina in a better position than those workers who were
found to have been illegally dismissed by their employer. For in
the latter case, the backwages that can be recovered by the
worker is limited to three years [Mercury Drug Co., Inc. v. Court
of Industrial Relations, G.R. No. L-23357, April 30, 1974, 56
SCRA 694; Philippine Airlines, Inc. v. National Labor Relations
Commission, G.R. No. 64809, November 29, 1983, 126 SCRA
223; Madrigal & Co., Inc. v. Zamora, G.R. No. L-48237, Madrigal
& Co., Inc. v. Minister of Labor, G.R. No. L-49023, June 30,1987]

while Dolina, whose dismissal was found to be valid, can

recover approximately ten years backwages, which corresponds
to the period from 1 April 1979 until "final resolution" of the
instant case.
Considering the foregoing, the Court holds that respondent
NLRC's order for the continued payment of Dolina's salaries
from "l April 1979 until the case is finally resolved" is contrary
to law and established jurisprudence and the NLRC acted in
excess of its jurisdiction in issuing the assailed order. In the
recent case of Llora Motors, Inc. v. Drilon, G.R. No. 82895,
November 7, 1989 the Court held as an act without or in excess
of jurisdiction the portion of the Labor Arbiter's award, which
required the employer to pay to its employee an amount
equivalent to a half month's pay for every year of service as
retirement benefits, for being without basis either in law or
contract. Similarly, there is in this case an excess of jurisdiction
on the part of the NLRC in ordering the continued payment of
Dolina's salaries "from 1 April 1979 until the case is finally
resolved."
WHEREFORE, that part of the dispositive portion of the decision
of the National Labor Relations Commission in NLRC CASE NO.
RB-IV-9319-77 requiring petitioner to restore private respondent
to its payroll and ordering the payment of his salaries from 1
April 1979 until the case is finally resolved is hereby declared
NULL and VOID and SET ASIDE. The temporary Restraining
Order issued by the Court on 10 October 1980 is made
PERMANENT.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 128845
June 1, 2000
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS
(ISAE), petitioner,
vs.

HON. LEONARDO A. QUISUMBING in his capacity as the

Secretary of Labor and Employment; HON. CRESENCIANO
B. TRAJANO in his capacity as the Acting Secretary of
Labor and Employment; DR. BRIAN MACCAULEY in his
capacity as the Superintendent of International SchoolManila; and INTERNATIONAL SCHOOL, INC., respondents.
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the
local-hires of private respondent School, mostly Filipinos, cry
discrimination. We agree. That the local-hires are paid more
than their colleagues in other schools is, of course, beside the
point. The point is that employees should be given equal pay for
work of equal value. That is a principle long honored in this
jurisdiction. That is a principle that rests on fundamental
notions of justice. That is the principle we uphold
today.1wphi1.nt
Private respondent International School, Inc. (the School, for
short), pursuant to Presidential Decree 732, is a domestic
educational institution established primarily for dependents of
foreign diplomatic personnel and other temporary residents. 1 To
enable the School to continue carrying out its educational
program and improve its standard of instruction, Section 2(c) of
the same decree authorizes the School to employ its own
teaching and management personnel selected by it either
locally or abroad, from Philippine or other nationalities, such
personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have
been or will be enacted for the protection of employees.
Accordingly, the School hires both foreign and local teachers as
members of its faculty, classifying the same into two: (1)
foreign-hires and (2) local-hires. The School employs four tests
to determine whether a faculty member should be classified as
a foreign-hire or a local hire:
a. What is one's domicile?
b. Where is one's home economy?
c. To which country does one owe economic allegiance?
d. Was the individual hired abroad specifically to work in
the School and was the School responsible for bringing
that individual to the Philippines?2

Should the answer to any of these queries point to the

Philippines, the faculty member is classified as a local hire;
otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded
local-hires.1avvphi1 These include housing, transportation,
shipping costs, taxes, and home leave travel allowance.
Foreign-hires are also paid a salary rate twenty-five percent
(25%) more than local-hires. The School justifies the difference
on two "significant economic disadvantages" foreign-hires have
to endure, namely: (a) the "dislocation factor" and (b) limited
tenure. The School explains:
A foreign-hire would necessarily have to uproot himself
from his home country, leave his family and friends, and
take the risk of deviating from a promising career path
all for the purpose of pursuing his profession as an
educator, but this time in a foreign land. The new foreign
hire is faced with economic realities: decent abode for
oneself and/or for one's family, effective means of
transportation, allowance for the education of one's
children, adequate insurance against illness and death,
and of course the primary benefit of a basic
salary/retirement compensation.
Because of a limited tenure, the foreign hire is
confronted again with the same economic reality after
his term: that he will eventually and inevitably return to
his home country where he will have to confront the
uncertainty of obtaining suitable employment after along
period in a foreign land.
The compensation scheme is simply the School's
adaptive measure to remain competitive on an
international level in terms of attracting competent
professionals in the field of international education.3
When negotiations for a new collective bargaining agreement
were held on June 1995, petitioner International School Alliance
of Educators, "a legitimate labor union and the collective
bargaining representative of all faculty members" 4 of the
School, contested the difference in salary rates between foreign
and local-hires. This issue, as well as the question of whether
foreign-hires should be included in the appropriate bargaining
unit, eventually caused a deadlock between the parties.

On September 7, 1995, petitioner filed a notice of strike. The

failure of the National Conciliation and Mediation Board to bring
the parties to a compromise prompted the Department of Labor
and Employment (DOLE) to assume jurisdiction over the
dispute. On June 10, 1996, the DOLE Acting Secretary,
Crescenciano B. Trajano, issued an Order resolving the parity
and representation issues in favor of the School. Then DOLE
Secretary Leonardo A. Quisumbing subsequently denied
petitioner's motion for reconsideration in an Order dated March
19, 1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed
by the School is discriminatory to Filipinos and that the grant of
higher salaries to foreign-hires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its
faculty members, numbering 38 in all, with nationalities other
than Filipino, who have been hired locally and classified as local
hires.5 The Acting Secretary of Labor found that these nonFilipino local-hires received the same benefits as the Filipino
local-hires.
The compensation package given to local-hires has been
shown to apply to all, regardless of race. Truth to tell,
there are foreigners who have been hired locally and
who are paid equally as Filipino local hires.6
The Acting secretary upheld the point-of-hire classification for
the distinction in salary rates:
The Principle "equal pay for equal work" does not find
applications in the present case. The international
character of the School requires the hiring of foreign
personnel to deal with different nationalities and
different cultures, among the student population.
We also take cognizance of the existence of a system of
salaries and benefits accorded to foreign hired personnel
which system is universally recognized. We agree that
certain amenities have to be provided to these people in
order to entice them to render their services in the
Philippines and in the process remain competitive in the
international market.
Furthermore, we took note of the fact that foreign hires
have limited contract of employment unlike the local
hires who enjoy security of tenure. To apply parity
therefore, in wages and other benefits would also require

parity in other terms and conditions of employment

which include the employment which include the
employment contract.
A perusal of the parties' 1992-1995 CBA points us to the
conditions and provisions for salary and professional
compensation wherein the parties agree as follows:
All members of the bargaining unit shall be
compensated only in accordance with Appendix C
hereof provided that the Superintendent of the
School has the discretion to recruit and hire
expatriate teachers from abroad, under terms
and conditions that are consistent with accepted
international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with
the Overseas Recruited Staff (OSRS) salary
schedule. The 25% differential is reflective of the
agreed value of system displacement and
contracted status of the OSRS as differentiated
from the tenured status of Locally Recruited Staff
(LRS).
To our mind, these provisions demonstrate the parties'
recognition of the difference in the status of two types of
employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection clause
to justify its claim of parity. It is an established principle
of constitutional law that the guarantee of equal
protection of the laws is not violated by legislation or
private covenants based on reasonable classification. A
classification is reasonable if it is based on substantial
distinctions and apply to all members of the same class.
Verily, there is a substantial distinction between foreign
hires and local hires, the former enjoying only a limited
tenure, having no amenities of their own in the
Philippines and have to be given a good compensation
package in order to attract them to join the teaching
faculty of the School.7
We cannot agree.
That public policy abhors inequality and discrimination is
beyond contention. Our Constitution and laws reflect the policy
against these evils. The Constitution8 in the Article on Social

Justice and Human Rights exhorts Congress to "give highest

priority to the enactment of measures that protect and enhance
the right of all people to human dignity, reduce social,
economic, and political inequalities." The very broad Article 19
of the Civil Code requires every person, "in the exercise of his
rights and in the performance of his duties, [to] act with justice,
give everyone his due, and observe honesty and good faith.
International law, which springs from general principles of
law,9 likewise proscribes discrimination. General principles of
law include principles of equity, 10 i.e., the general principles of
fairness and justice, based on the test of what is
reasonable. 11 The Universal Declaration of Human Rights, 12 the
International Covenant on Economic, Social, and Cultural
Rights, 13 the International Convention on the Elimination of All
Forms of Racial Discrimination, 14 the Convention against
Discrimination in Education, 15 the Convention (No. 111)
Concerning Discrimination in Respect of Employment and
Occupation 16 all embody the general principle against
discrimination, the very antithesis of fairness and justice. The
Philippines, through its Constitution, has incorporated this
principle as part of its national laws.
In the workplace, where the relations between capital and labor
are often skewed in favor of capital, inequality and
discrimination by the employer are all the more reprehensible.
The Constitution 17 specifically provides that labor is entitled to
"humane conditions of work." These conditions are not
restricted to the physical workplace the factory, the office or
the field but include as well the manner by which employers
treat their employees.
The Constitution 18 also directs the State to promote "equality of
employment opportunities for all." Similarly, the Labor
Code 19 provides that the State shall "ensure equal work
opportunities regardless of sex, race or creed." It would be an
affront to both the spirit and letter of these provisions if the
State, in spite of its primordial obligation to promote and ensure
equal employment opportunities, closes its eyes to unequal and
discriminatory terms and conditions of employment. 20
Discrimination, particularly in terms of wages, is frowned upon
by the Labor Code. Article 135, for example, prohibits and
penalizes 21 the payment of lesser compensation to a female
employee as against a male employee for work of equal value.

Article 248 declares it an unfair labor practice for an employer

to discriminate in regard to wages in order to encourage or
discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and
Cultural Rights, supra, in Article 7 thereof, provides:
The States Parties to the present Covenant recognize the
right of everyone to the enjoyment of just and
favourable conditions of work, which ensure, in
particular:
a. Remuneration which provides all workers, as a
minimum, with:
(i) Fair wages and equal remuneration for
work of equal value without distinction of
any kind, in particular women being
guaranteed conditions of work not inferior
to those enjoyed by men, with equal pay
for equal work;
xxx
xxx
xxx
The foregoing provisions impregnably institutionalize in this
jurisdiction the long honored legal truism of "equal pay for
equal work." Persons who work with substantially equal
qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries. 22 This rule applies to
the School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence
that local-hires perform work equal to that of foreignhires. 23 The Court finds this argument a little cavalier. If an
employer accords employees the same position and rank, the
presumption is that these employees perform equal work. This
presumption is borne by logic and human experience. If the
employer pays one employee less than the rest, it is not for that
employee to explain why he receives less or why the others
receive more. That would be adding insult to injury. The
employer has discriminated against that employee; it is for the
employer to explain why the employee is treated unfairly.
The employer in this case has failed to discharge this burden.
There is no evidence here that foreign-hires perform 25% more
efficiently or effectively than the local-hires. Both groups have
similar functions and responsibilities, which they perform under
similar working conditions.

The School cannot invoke the need to entice foreign-hires to

leave their domicile to rationalize the distinction in salary rates
without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a
reward or recompense for services performed." Similarly, the
Philippine Legal Encyclopedia states that "salary" is the
"[c]onsideration paid at regular intervals for the rendering of
services." In Songco v. National Labor Relations
Commission, 24 we said that:
"salary" means a recompense or consideration made to
a person for his pains or industry in another man's
business. Whether it be derived from "salarium," or more
fancifully from "sal," the pay of the Roman soldier, it
carries with it the fundamental idea of compensation for
services rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreignhires, salaries should not be used as an enticement to the
prejudice of local-hires. The local-hires perform the same
services as foreign-hires and they ought to be paid the same
salaries as the latter. For the same reason, the "dislocation
factor" and the foreign-hires' limited tenure also cannot serve
as valid bases for the distinction in salary rates. The dislocation
factor and limited tenure affecting foreign-hires are adequately
compensated by certain benefits accorded them which are not
enjoyed by local-hires, such as housing, transportation, shipping
costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of
workers and promote their welfare," 25 "to afford labor full
protection." 26 The State, therefore, has the right and duty to
regulate the relations between labor and capital.27 These
relations are not merely contractual but are so impressed with
public interest that labor contracts, collective bargaining
agreements included, must yield to the common good. 28 Should
such contracts contain stipulations that are contrary to public
policy, courts will not hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification employed by
respondent School to justify the distinction in the salary rates of
foreign-hires and local hires to be an invalid classification. There
is no reasonable distinction between the services rendered by
foreign-hires and local-hires. The practice of the School of
according higher salaries to foreign-hires contravenes public

policy and, certainly, does not deserve the sympathy of this

Court.1avvphi1
We agree, however, that foreign-hires do not belong to the
same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given employer,
comprised of all or less than all of the entire body of employees,
consistent with equity to the employer, indicate to be the best
suited to serve the reciprocal rights and duties of the parties
under the collective bargaining provisions of the law." 29 The
factors in determining the appropriate collective bargaining unit
are (1) the will of the employees (Globe Doctrine); (2) affinity
and unity of the employees' interest, such as substantial
similarity of work and duties, or similarity of compensation and
working conditions (Substantial Mutual Interests Rule); (3) prior
collective bargaining history; and (4) similarity of employment
status. 30 The basic test of an asserted bargaining unit's
acceptability is whether or not it is fundamentally the
combination which will best assure to all employees the
exercise of their collective bargaining rights. 31
It does not appear that foreign-hires have indicated their
intention to be grouped together with local-hires for purposes of
collective bargaining. The collective bargaining history in the
School also shows that these groups were always treated
separately. Foreign-hires have limited tenure; local-hires enjoy
security of tenure. Although foreign-hires perform similar
functions under the same working conditions as the local-hires,
foreign-hires are accorded certain benefits not granted to localhires. These benefits, such as housing, transportation, shipping
costs, taxes, and home leave travel allowance, are reasonably
related to their status as foreign-hires, and justify the exclusion
of the former from the latter. To include foreign-hires in a
bargaining unit with local-hires would not assure either group
the exercise of their respective collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is
hereby GRANTED IN PART. The Orders of the Secretary of Labor
and Employment dated June 10, 1996 and March 19, 1997, are
hereby REVERSED and SET ASIDE insofar as they uphold the
practice of respondent School of according foreign-hires higher
salaries than local-hires.
SO ORDERED.

Puno and Pardo, JJ., concur.

Davide, Jr., C.J., on official leave.
Ynares-Santiago, J., is on leave.