OFFSET OVERTIME

REST DAYS

HOLIDAY AND HOLIDAY PAYS

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-65482 December 1, 1987
JOSE RIZAL COLLEGE, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND
NATIONAL ALLIANCE OF TEACHERS/OFFICE
WORKERS, respondents.
PARAS, J.:
This is a petition for certiorari with prayer for the issuance of a
writ of preliminary injunction, seeking the annulment of the
decision of the National Labor Relations Commission * in NLRC
Case No. RB-IV 23037-78 (Case No. R4-1-1081-71) entitled
"National Alliance of Teachers and Office Workers and Juan E.
Estacio, Jaime Medina, et al. vs. Jose Rizal College" modifying
the decision of the Labor Arbiter as follows:
WHEREFORE, in view of the foregoing
considerations, the decision appealed from is
MODIFIED, in the sense that teaching personnel
paid by the hour are hereby declared to be
entitled to holiday pay.
SO ORDERED.
The factual background of this case which is undisputed is as
follows:
Petitioner is a non-stock, non-profit educational institution duly
organized and existing under the laws of the Philippines. It has
three groups of employees categorized as follows: (a) personnel
on monthly basis, who receive their monthly salary uniformly
throughout the year, irrespective of the actual number of
working days in a month without deduction for holidays; (b)

personnel on daily basis who are paid on actual days worked

and they receive unworked holiday pay and (c) collegiate
faculty who are paid on the basis of student contract hour.
Before the start of the semester they sign contracts with the
college undertaking to meet their classes as per schedule.
Unable to receive their corresponding holiday pay, as claimed,
from 1975 to 1977, private respondent National Alliance of
Teachers and Office Workers (NATOW) in behalf of the faculty
and personnel of Jose Rizal College filed with the Ministry of
Labor a complaint against the college for said alleged nonpayment of holiday pay, docketed as Case No. R04-10-81-72.
Due to the failure of the parties to settle their differences on
conciliation, the case was certified for compulsory arbitration
where it was docketed as RB-IV-23037-78 (Rollo, pp. 155-156).
After the parties had submitted their respective position papers,
the Labor Arbiter ** rendered a decision on February 5, 1979,
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered as
follows:
1. The faculty and personnel of the respondent
Jose Rizal College who are paid their salary by the
month uniformly in a school year, irrespective of
the number of working days in a month, without
deduction for holidays, are presumed to be
already paid the 10 paid legal holidays and are no
longer entitled to separate payment for the said
regular holidays;
2. The personnel of the respondent Jose Rizal
College who are paid their wages daily are
entitled to be paid the 10 unworked regular
holidays according to the pertinent provisions of
the Rules and Regulations Implementing the
Labor Code;
3. Collegiate faculty of the respondent Jose Rizal
College who by contract are paid compensation
per student contract hour are not entitled to
unworked regular holiday pay considering that
these regular holidays have been excluded in the
programming of the student contact hours. (Rollo.
pp. 26-27)

On appeal, respondent National Labor Relations Commission in

a decision promulgated on June 2, 1982, modified the decision
appealed from, in the sense that teaching personnel paid by the
hour are declared to be entitled to holiday pay (Rollo. p. 33).
Hence, this petition.
The sole issue in this case is whether or not the school faculty
who according to their contracts are paid per lecture hour are
entitled to unworked holiday pay.
Labor Arbiter Julio Andres, Jr. found that faculty and personnel
employed by petitioner who are paid their salaries monthly, are
uniformly paid throughout the school year regardless of working
days, hence their holiday pay are included therein while the
daily paid employees are renumerated for work performed
during holidays per affidavit of petitioner's treasurer (Rollo, pp.
72-73).
There appears to be no problem therefore as to the first two
classes or categories of petitioner's workers.
The problem, however, lies with its faculty members, who are
paid on an hourly basis, for while the Labor Arbiter sustains the
view that said instructors and professors are not entitled to
holiday pay, his decision was modified by the National Labor
Relations Commission holding the contrary. Otherwise stated,
on appeal the NLRC ruled that teaching personnel paid by the
hour are declared to be entitled to holiday pay.
Petitioner maintains the position among others, that it is not
covered by Book V of the Labor Code on Labor Relations
considering that it is a non- profit institution and that its hourly
paid faculty members are paid on a "contract" basis because
they are required to hold classes for a particular number of
hours. In the programming of these student contract hours,
legal holidays are excluded and labelled in the schedule as "no
class day. " On the other hand, if a regular week day is declared
a holiday, the school calendar is extended to compensate for
that day. Thus petitioner argues that the advent of any of the
legal holidays within the semester will not affect the faculty's
salary because this day is not included in their schedule while
the calendar is extended to compensate for special holidays.
Thus the programmed number of lecture hours is not
diminished (Rollo, pp. 157- 158).
The Solicitor General on the other hand, argues that under
Article 94 of the Labor Code (P.D. No. 442 as amended), holiday

pay applies to all employees except those in retail and service

establishments. To deprive therefore employees paid at an
hourly rate of unworked holiday pay is contrary to the policy
considerations underlying such presidential enactment, and its
precursor, the Blue Sunday Law (Republic Act No. 946) apart
from the constitutional mandate to grant greater rights to labor
(Constitution, Article II, Section 9). (Reno, pp. 76-77).
In addition, respondent National Labor Relations Commission in
its decision promulgated on June 2, 1982, ruled that the
purpose of a holiday pay is obvious; that is to prevent
diminution of the monthly income of the workers on account of
work interruptions. In other words, although the worker is forced
to take a rest, he earns what he should earn. That is his holiday
pay. It is no excuse therefore that the school calendar is
extended whenever holidays occur, because such happens only
in cases of special holidays (Rollo, p. 32).
Subject holiday pay is provided for in the Labor Code
(Presidential Decree No. 442, as amended), which reads:
Art. 94. Right to holiday pay (a) Every worker
shall be paid his regular daily wage during regular
holidays, except in retail and service
establishments regularly employing less than ten
(10) workers;
(b) The employer may require an employee to
work on any holiday but such employee shall be
paid a compensation equivalent to twice his
regular rate; ... "
and in the Implementing Rules and Regulations, Rule IV,
Book III, which reads:
SEC. 8. Holiday pay of certain employees. (a)
Private school teachers, including faculty
members of colleges and universities, may not be
paid for the regular holidays during semestral
vacations. They shall, however, be paid for the
regular holidays during Christmas vacations. ...
Under the foregoing provisions, apparently, the petitioner,
although a non-profit institution is under obligation to give pay
even on unworked regular holidays to hourly paid faculty
members subject to the terms and conditions provided for
therein.

We believe that the aforementioned implementing rule is not

justified by the provisions of the law which after all is silent with
respect to faculty members paid by the hour who because of
their teaching contracts are obliged to work and consent to be
paid only for work actually done (except when an emergency or
a fortuitous event or a national need calls for the declaration of
special holidays). Regular holidays specified as such by law are
known to both school and faculty members as no class days;"
certainly the latter do not expect payment for said unworked
days, and this was clearly in their minds when they entered into
the teaching contracts.
On the other hand, both the law and the Implementing Rules
governing holiday pay are silent as to payment on Special
Public Holidays.
It is readily apparent that the declared purpose of the holiday
pay which is the prevention of diminution of the monthly
income of the employees on account of work interruptions is
defeated when a regular class day is cancelled on account of a
special public holiday and class hours are held on another
working day to make up for time lost in the school calendar.
Otherwise stated, the faculty member, although forced to take a
rest, does not earn what he should earn on that day. Be it noted
that when a special public holiday is declared, the faculty
member paid by the hour is deprived of expected income, and it
does not matter that the school calendar is extended in view of
the days or hours lost, for their income that could be earned
from other sources is lost during the extended days. Similarly,
when classes are called off or shortened on account of
typhoons, floods, rallies, and the like, these faculty members
must likewise be paid, whether or not extensions are ordered.
Petitioner alleges that it was deprived of due process as it was
not notified of the appeal made to the NLRC against the
decision of the labor arbiter.
The Court has already set forth what is now known as the
"cardinal primary" requirements of due process in
administrative proceedings, to wit: "(1) the right to a hearing
which includes the right to present one's case and submit
evidence in support thereof; (2) the tribunal must consider the
evidence presented; (3) the decision must have something to
support itself; (4) the evidence must be substantial, and
substantial evidence means such evidence as a reasonable

mind might accept as adequate to support a conclusion; (5) the

decision must be based on the evidence presented at the
hearing, or at least contained in the record and disclosed to the
parties affected; (6) the tribunal or body of any of its judges
must act on its or his own independent consideration of the law
and facts of the controversy, and not simply accept the views of
a subordinate; (7) the board or body should in all controversial
questions, render its decisions in such manner that the parties
to the proceeding can know the various issues involved, and the
reason for the decision rendered. " (Doruelo vs. Commission on
Elections, 133 SCRA 382 [1984]).
The records show petitioner JRC was amply heard and
represented in the instant proceedings. It submitted its position
paper before the Labor Arbiter and the NLRC and even filed a
motion for reconsideration of the decision of the latter, as well
as an "Urgent Motion for Hearing En Banc" (Rollo, p. 175). Thus,
petitioner's claim of lack of due process is unfounded.
PREMISES CONSIDERED, the decision of respondent National
Labor Relations Commission is hereby set aside, and a new one
is hereby RENDERED:
(a) exempting petitioner from paying hourly paid faculty
members their pay for regular holidays, whether the same be
during the regular semesters of the school year or during
semestral, Christmas, or Holy Week vacations;
(b) but ordering petitioner to pay said faculty members their
regular hourly rate on days declared as special holidays or for
some reason classes are called off or shortened for the hours
they are supposed to have taught, whether extensions of class
days be ordered or not; in case of extensions said faculty
members shall likewise be paid their hourly rates should they
teach during said extensions.
SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.

FIRST DIVISION
[G.R. No. 146775. January 30, 2002]

SAN

MIGUEL
CORPORATION, petitioner,
vs. THE
HONORABLE
COURT
OF
APPEALS-FORMER
THIRTEENTH DIVISION, HON. UNDERSECRETARY
JOSE M. ESPAOL, JR., Hon. CRESENCIANO B.
TRAJANO, and HON. REGIONAL DIRECTOR ALLAN
M. MACARAYA, respondents.
DECISION

KAPUNAN, J.:
Assailed in the petition before us are the decision,
promulgated on 08 May 2000, and the resolution, promulgated
on 18 October 2000, of the Court of Appeals in CA G.R. SP53269.
The facts of the case are as follows:
On 17 October 1992, the Department of Labor and
Employment (DOLE), Iligan District Office, conducted a routine
inspection in the premises of San Miguel Corporation (SMC) in
Sta. Filomena, Iligan City. In the course of the inspection, it was
discovered that there was underpayment by SMC of regular
Muslim holiday pay to its employees. DOLE sent a copy of the
inspection result to SMC and it was received by and explained
to its personnel officer Elena dela Puerta. [1] SMC contested the
findings and DOLE conducted summary hearings on 19
November 1992, 28 May 1993 and 4 and 5 October 1993. Still,
SMC failed to submit proof that it was paying regular Muslim
holiday pay to its employees. Hence, Alan M. Macaraya, Director
IV of DOLE Iligan District Office issued a compliance order,
dated 17 December 1993, directing SMC to consider Muslim
holidays as regular holidays and to pay both its Muslim and nonMuslim employees holiday pay within thirty (30) days from the
receipt of the order.
SMC appealed to the DOLE main office in Manila but its
appeal was dismissed for having been filed late. The dismissal
of the appeal for late filing was later on reconsidered in the
order of 17 July 1998 after it was found that the appeal was filed
within the reglementary period.However, the appeal was still
dismissed for lack of merit and the order of Director Macaraya
was affirmed.

SMC went to this Court for relief via a petition for certiorari,
which this Court referred to the Court of Appeals pursuant to St.
Martin Funeral Homes vs. NLRC.[2]
The appellate court, in the now questioned decision,
promulgated on 08 May 2000, ruled, as follows:
WHEREFORE, the Order dated December 17, 1993 of Director
Macaraya and Order dated July 17, 1998 of Undersecretary
Espaol, Jr. is hereby MODIFIED with regards the payment of
Muslim holiday pay from 200% to 150% of the employee's basic
salary. Let this case be remanded to the Regional Director for
the proper computation of the said holiday pay.
SO ORDERED.[3]
Its motion for reconsideration having been denied for lack
of merit, SMC filed a petition for certiorari before this Court,
alleging that:
PUBLIC RESPONDENTS SERIOUSLY ERRED AND COMMITTED
GRAVE ABUSE OF DISCRETION WHEN THEY GRANTED MUSLIM
HOLIDAY PAY TO NON-MUSLIM EMPLOYEES OF SMC-ILICOCO
AND ORDERING SMC TO PAY THE SAME RETROACTIVE FOR ONE
(1) YEAR FROM THE DATE OF THE PROMULGATION OF THE
COMPLIANCE ORDER ISSUED ON DECEMBER 17, 1993, IT BEING
CONTRARY TO THE PROVISIONS, INTENT AND PURPOSE OF P.D.
1083 AND PREVAILING JURISPRUDENCE.
THE ISSUANCE OF THE COMPLIANCE ORDER WAS TAINTED WITH
GRAVE ABUSE OF DISCRETION IN THAT SAN MIGUEL
CORPORATION WAS NOT ACCORDED DUE PROCESS OF LAW;
HENCE, THE ASSAILED COMPLIANCE ORDER AND ALL
SUBSEQUENT ORDERS, DECISION AND RESOLUTION OF PUBLIC
RESPONDENTS WERE ALL ISSUED WITH GRAVE ABUSE OF
DISCRETION AND ARE VOID AB INITIO.
THE HON. COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION WHEN IT DECLARED THAT REGIONAL DIRECTOR
MACARAYA, UNDERSECRETARY TRAJANO AND UNDERSECRETARY
ESPAOL, JR., WHO ALL LIKEWISE ACTED WITH GRAVE ABUSE OF
DISCRETION AND WITHOUT OR IN EXCESS OF THEIR
JURISDICTION, HAVE JURISDICTION IN ISSUING THE ASSAILED
COMPLIANCE ORDER AND SUBSEQUENT ORDERS, WHEN IN

FACT THEY HAVE NO JURISDICTION OR HAS LOST JURISDICTION

OVER THE HEREIN LABOR STANDARD CASE.[4]
At the outset, petitioner came to this Court via a petition
for certiorari under Rule 65 instead of an appeal under Rule 45
of the 1997 Rules of Civil Procedure. In National Irrigation
Administration vs. Court of Appeals,[5] the Court declared:
x x x (S)ince the Court of Appeals had jurisdiction over the
petition under Rule 65, any alleged errors committed by it in the
exercise of its jurisdiction would be errors of judgment which
are reviewable by timely appeal and not by a special civil action
of certiorari. If the aggrieved party fails to do so within the
reglementary period, and the decision accordingly becomes
final and executory, he cannot avail himself of the writ
of certiorari, his predicament being the effect of his deliberate
inaction.
The appeal from a final disposition of the Court of Appeals is a
petition for review under Rule 45 and not a special civil action
under Rule 65 of the Rules of Court, now Rule 45 and Rule 65,
respectively, of the 1997 Rules of Civil Procedure. Rule 45 is
clear that decisions, final orders or resolutions of the Court of
Appeals in any case, i.e., regardless of the nature of the action
or proceeding involved, may be appealed to this Court by filing
a petition for review, which would be but a continuation of the
appellate process over the original case. Under Rule 45 the
reglementary period to appeal is fifteen (15) days from notice of
judgment or denial of motion for reconsideration.
xxx
For the writ of certiorari under Rule 65 of the Rules of Court to
issue, a petitioner must show that he has no plain, speedy and
adequate remedy in the ordinary course of law against its
perceived grievance. A remedy is considered "plain, speedy and
adequate" if it will promptly relieve the petitioner from the
injurious effects of the judgment and the acts of the lower court
or agency. In this case, appeal was not only available but also a
speedy and adequate remedy.[6]

Well-settled is the rule that certiorari cannot be availed of

as a substitute for a lost appeal.[7] For failure of petitioner to file
a timely appeal, the questioned decision of the Court of Appeals
had already become final and executory.
In any event, the Court finds no reason to reverse the
decision of the Court of Appeals.
Muslim holidays are provided under Articles 169 and 170,
Title I, Book V, of Presidential Decree No. 1083, [8] otherwise
known as the Code of Muslim Personal Laws, which states:
Art. 169. Official Muslim holidays. - The following are hereby
recognized as legal Muslim holidays:
(a) Amun Jadd (New Year), which falls on the first day
of the first lunar month of Muharram;
(b) Maulid-un-Nab (Birthday
of
the
Prophet
Muhammad), which falls on the twelfth day of the
third lunar month of Rabi-ul-Awwal;
(c) Lailatul Isr Wal Mirj (Nocturnal Journey and
Ascension of the Prophet Muhammad), which falls on
the twenty-seventh day of the seventh lunar month
of Rajab;
(d) d-ul-Fitr (Hari Raya Puasa), which falls on the first
day of the tenth lunar month of Shawwal,
commemorating the end of the fasting season; and
(e) d-l-Adh (Hari Raya Haji),which falls on the tenth
day of the twelfth lunar month of Dhl-Hijja.
Art. 170. Provinces and cities where officially observed. - (1)
Muslim holidays shall be officially observed in the Provinces of
Basilan, Lanao del Norte, Lanao del Sur, Maguindanao, North
Cotabato, Iligan, Marawi, Pagadian, and Zamboanga and in such
other Muslim provinces and cities as may hereafter be created;
(2) Upon proclamation by the President of the Philippines,
Muslim holidays may also be officially observed in other
provinces and cities.
The foregoing provisions should be read in conjunction with
Article 94 of the Labor Code, which provides:
Art. 94. Right to holiday pay. -

(a) Every worker shall be paid his regular daily

wage during regular holidays, except in
retail and service establishments regularly
employing less than ten (10) workers;
(b) The employer may require an employee to work
on any holiday but such employee shall be
paid a compensation equivalent to twice
his regular rate; x x x.
Petitioner asserts that Article 3(3) of Presidential Decree No.
1083 provides that (t)he provisions of this Code shall be
applicable only to Muslims x x x. However, there should be no
distinction between Muslims and non-Muslims as regards
payment of benefits for Muslim holidays. The Court of Appeals
did not err in sustaining Undersecretary Espaol who stated:
Assuming arguendo that the respondents position is correct,
then by the same token, Muslims throughout the Philippines are
also not entitled to holiday pays on Christian holidays declared
by law as regular holidays. We must remind the respondentappellant that wages and other emoluments granted by law to
the working man are determined on the basis of the criteria laid
down by laws and certainly not on the basis of the workers faith
or religion.
At any rate, Article 3(3) of Presidential Decree No. 1083 also
declares that x x x nothing herein shall be construed to operate
to the prejudice of a non-Muslim.
In addition, the 1999 Handbook on Workers Statutory
Benefits, approved by then DOLE Secretary Bienvenido E.
Laguesma on 14 December 1999 categorically stated:
Considering that all private corporations, offices, agencies, and
entities or establishments operating within the designated
Muslim provinces and cities are required to observe Muslim
holidays, both Muslim and Christians working within the
Muslim areas may not report for work on the days
designated by law as Muslim holidays.[9]

On the question regarding the jurisdiction of the Regional

Director Allan M. Macaraya, Article 128, Section B of the Labor
Code, as amended by Republic Act No. 7730, provides:
Article 128. Visitorial and enforcement power. xxx
(b) Notwithstanding the provisions of Article 129 and
217 of this Code to the contrary, and in cases where
the relationship of employer-employee still exists,
the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to
issue compliance orders to give effect to the labor
standards provisions of this Code and other labor
legislation based on the findings of labor
employment and enforcement officers or industrial
safety engineers made in the course of the
inspection. The Secretary or his duly authorized
representative shall issue writs of execution to the
appropriate authority for the enforcement of their
orders, except in cases where the employer contests
the findings of the labor employment and
enforcement officer and raises issues supported by
documentary proofs which were not considered in
the course of inspection.
xxx
In the case before us, Regional Director Macaraya acted as
the duly authorized representative of the Secretary of Labor and
Employment and it was within his power to issue the
compliance order to SMC. In addition, the Court agrees with the
Solicitor General that the petitioner did not deny that it was not
paying
Muslim
holiday
pay
to
its
non-Muslim
employees. Indeed, petitioner merely contends that its nonMuslim employees are not entitled to Muslim holiday
pay. Hence, the issue could be resolved even without
documentary proofs. In any case, there was no indication that

Regional Director Macaraya failed to consider any documentary

proof presented by SMC in the course of the inspection.
Anent the allegation that petitioner was not accorded due
process, we sustain the Court of Appeals in finding that SMC
was furnished a copy of the inspection order and it was received
by and explained to its Personnel Officer. Further, a series of
summary hearings were conducted by DOLE on 19 November
1992, 28 May 1993 and 4 and 5 October 1993. Thus, SMC could
not claim that it was not given an opportunity to defend itself.
Finally, as regards the allegation that the issue on Muslim
holiday pay was already resolved in NLRC CA No. M-000915-92
(Napoleon E. Fernan vs. San Miguel Corporation Beer Division
and Leopoldo Zaldarriaga),[10] the Court notes that the case was
primarily for illegal dismissal and the claim for benefits was only
incidental to the main case. In that case, the NLRC Cagayan de
Oro City declared, in passing:
We also deny the claims for Muslim holiday pay for lack of
factual and legal basis. Muslim holidays are legally observed
within the area of jurisdiction of the present Autonomous Region
for Muslim Mindanao (ARMM), particularly in the provinces of
Maguindanao, Lanao del Sur, Sulu and Tawi-Tawi. It is only upon
Presidential Proclamation that Muslim holidays may be officially
observed outside the Autonomous Region and generally
extends to Muslims to enable them the observe said holidays.[11]
The decision has no consequence to issues before us, and
as aptly declared by Undersecretary Espaol, it can never be a
benchmark nor a guideline to the present case x x x.[12]
WHEREFORE, in view of the foregoing, the petition is
DISMISSED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Pardo, and YnaresSantiago, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-52415 October 23, 1984
INSULAR BANK OF ASIA AND AMERICA EMPLOYEES'
UNION (IBAAEU), petitioner,
vs.
HON. AMADO G. INCIONG, Deputy Minister, Ministry of
Labor and INSULAR BANK OF ASIA AND
AMERICA, respondents.
Sisenando R. Villaluz, Jr. for petitioner.
Abdulmaid Kiram Muin colloborating counsel for petitioner.
The Solicitor General Caparas, Tabios, Ilagan Alcantara &
Gatmaytan Law Office and Sycip, Salazar, Feliciano &
Hernandez Law Office for respondents.
MAKASIAR, J.:+.wph!1
This is a petition for certiorari to set aside the order dated
November 10, 1979, of respondent Deputy Minister of Labor,
Amado G. Inciong, in NLRC case No. RB-IV-1561-76
entitled "Insular Bank of Asia and America Employees' Union
(complainant-appellee), vs. Insular Bank of Asia and America"
(respondent-appellant), the dispositive portion of which reads
as follows: t.hqw
xxx xxx xxx
ALL THE FOREGOING CONSIDERED, let the
appealed Resolution en banc of the National
Labor Relations Commission dated 20 June 1978
be, as it is hereby, set aside and a new judgment.
promulgated dismissing the instant case for lack
of merit (p. 109 rec.).
The antecedent facts culled from the records are as follows:
On June 20, 1975, petitioner filed a complaint against the
respondent bank for the payment of holiday pay before the then
Department of Labor, National Labor Relations Commission,
Regional Office No. IV in Manila. Conciliation having failed, and
upon the request of both parties, the case was certified for
arbitration on July 7, 1975 (p. 18, NLRC rec.
On August 25, 1975, Labor Arbiter Ricarte T. Soriano rendered a
decision in the above-entitled case, granting petitioner's

complaint for payment of holiday pay. Pertinent portions of the

decision read: t.hqw
xxx xxx xxx
The records disclosed that employees of
respondent bank were not paid their wages on
unworked regular holidays as mandated by the
Code, particularly Article 208, to wit: t.hqw
Art. 208. Right to holiday pay.
(a) Every worker shall be paid his
regular daily wage during regular
holidays, except in retail and
service establishments regularly
employing less than 10 workers.
(b) The term "holiday" as used in
this chapter, shall include: New
Year's Day, Maundy Thursday,
Good Friday, the ninth of April the
first of May, the twelfth of June, the
fourth of July, the thirtieth of
November, the twenty-fifth and the
thirtieth of December and the day
designated by law for holding a
general election.
xxx xxx xxx
This conclusion is deduced from the fact that the
daily rate of pay of the bank employees was
computed in the past with the unworked regular
holidays as excluded for purposes of determining
the deductible amount for absences
incurred Thus, if the employer uses the factor
303 days as a divisor in determining the daily
rate of monthly paid employee, this gives rise to
a presumption that the monthly rate does not
include payments for unworked regular holidays.
The use of the factor 303 indicates the number of
ordinary working days in a year (which normally
has 365 calendar days), excluding the 52
Sundays and the 10 regular holidays. The use of
251 as a factor (365 calendar days less 52
Saturdays, 52 Sundays, and 10 regular holidays)
gives rise likewise to the same presumption that

the unworked Saturdays, Sundays and regular

holidays are unpaid. This being the case, it is not
amiss to state with certainty that the instant
claim for wages on regular unworked holidays is
found to be tenable and meritorious.
WHEREFORE, judgment is hereby rendered:
(a) xxx xxxx xxx
(b) Ordering respondent to pay wages to all its
employees for all regular h(olidays since
November 1, 1974 (pp. 97-99, rec., underscoring
supplied).
Respondent bank did not appeal from the said decision. Instead,
it complied with the order of Arbiter Ricarte T. Soriano by paying
their holiday pay up to and including January, 1976.
On December 16, 1975, Presidential Decree No. 850 was
promulgated amending, among others, the provisions of the
Labor Code on the right to holiday pay to read as follows: t.
hqw
Art. 94. Right to holiday pay. (a) Every worker
shall be paid his regular daily wages during
regular holidays, except in retail and service
establishments regularly employing less than ten
(10) workers;
(b) The employer may require an employee to
work on any holiday but such employee shall be
paid a compensation equivalent to twice his
regular rate and
(c) As used in this Article, "holiday" includes New
Year's Day, Maundy Thursday, Good Friday, the
ninth of April, the first of May, the twelfth of June,
the fourth of July, the thirtieth of November, the
twenty-fifth and the thirtieth of December, and
the day designated by law for holding a general
election.
Accordingly, on February 16, 1976, by authority of Article 5 of
the same Code, the Department of Labor (now Ministry of
Labor) promulgated the rules and regulations for the
implementation of holidays with pay. The controversial section
thereof reads: t.hqw
Sec. 2. Status of employees paid by the month.
Employees who are uniformly paid by the

month, irrespective of the number of working

days therein, with a salary of not less than the
statutory or established minimum wage shall be
presumed to be paid for all days in the month
whether worked or not.
For this purpose, the monthly minimum wage
shall not be less than the statutory minimum
wage multiplied by 365 days divided by twelve"
(italics supplied).
On April 23, 1976, Policy Instruction No. 9 was issued by the
then Secretary of Labor (now Minister) interpreting the abovequoted rule, pertinent portions of which read: t.hqw
xxx xxx xxx
The ten (10) paid legal holidays law, to start with,
is intended to benefit principally daily employees.
In the case of monthly, only those whose monthly
salary did not yet include payment for the ten
(10) paid legal holidays are entitled to the
benefit.
Under the rules implementing P.D. 850, this policy
has been fully clarified to eliminate controversies
on the entitlement of monthly paid
employees, The new determining rule is this: If
the monthly paid employee is receiving not less
than P240, the maximum monthly minimum
wage, and his monthly pay is uniform from
January to December, he is presumed to be
already paid the ten (10) paid legal holidays.
However, if deductions are made from his
monthly salary on account of holidays in months
where they occur, then he is still entitled to the
ten (10) paid legal holidays. ..." (emphasis
supplied).
Respondent bank, by reason of the ruling laid down by the
aforecited rule implementing Article 94 of the Labor Code and
by Policy Instruction No. 9, stopped the payment of holiday pay
to an its employees.
On August 30, 1976, petitioner filed a motion for a writ of
execution to enforce the arbiter's decision of August 25, 1975,
whereby the respondent bank was ordered to pay its employees
their daily wage for the unworked regular holidays.

On September 10, 1975, respondent bank filed an opposition to

the motion for a writ of execution alleging, among others, that:
(a) its refusal to pay the corresponding unworked holiday pay in
accordance with the award of Labor Arbiter Ricarte T. Soriano
dated August 25, 1975, is based on and justified by Policy
Instruction No. 9 which interpreted the rules implementing P. D.
850; and (b) that the said award is already repealed by P.D. 850
which took effect on December 16, 1975, and by said Policy
Instruction No. 9 of the Department of Labor, considering that
its monthly paid employees are not receiving less than P240.00
and their monthly pay is uniform from January to December,
and that no deductions are made from the monthly salaries of
its employees on account of holidays in months where they
occur (pp. 64-65, NLRC rec.).
On October 18, 1976, Labor Arbiter Ricarte T. Soriano, instead
of issuing a writ of execution, issued an order enjoining the
respondent bank to continue paying its employees their regular
holiday pay on the following grounds: (a) that the judgment is
already final and the findings which is found in the body of the
decision as well as the dispositive portion thereof is res
judicata or is the law of the case between the parties; and (b)
that since the decision had been partially implemented by the
respondent bank, appeal from the said decision is no longer
available (pp. 100-103, rec.).
On November 17, 1976, respondent bank appealed from the
above-cited order of Labor Arbiter Soriano to the National Labor
Relations Commission, reiterating therein its contentions
averred in its opposition to the motion for writ of execution.
Respondent bank further alleged for the first time that the
questioned order is not supported by evidence insofar as it finds
that respondent bank discontinued payment of holiday pay
beginning January, 1976 (p. 84, NLRC rec.).
On June 20, 1978, the National Labor Relations Commission
promulgated its resolution en banc dismissing respondent
bank's appeal, the dispositive portion of which reads as
follows: t.hqw
In view of the foregoing, we hereby resolve to
dismiss, as we hereby dismiss, respondent's
appeal; to set aside Labor Arbiter Ricarte T.
Soriano's order of 18 October 1976 and, as
prayed for by complainant, to order the issuance

of the proper writ of execution (p. 244, NLRC

rec.).
Copies of the above resolution were served on the petitioner
only on February 9, 1979 or almost eight. (8) months after it
was promulgated, while copies were served on the respondent
bank on February 13, 1979.
On February 21, 1979, respondent bank filed with the Office of
the Minister of Labor a motion for reconsideration/appeal with
urgent prayer to stay execution, alleging therein the following:
(a) that there is prima facie evidence of grave abuse of
discretion, amounting to lack of jurisdiction on the part of the
National Labor Relations Commission, in dismissing the
respondent's appeal on pure technicalities without passing upon
the merits of the appeal and (b) that the resolution appealed
from is contrary to the law and jurisprudence (pp. 260-274,
NLRC rec.).
On March 19, 1979, petitioner filed its opposition to the
respondent bank's appeal and alleged the following grounds: (a)
that the office of the Minister of Labor has no jurisdiction to
entertain the instant appeal pursuant to the provisions of P. D.
1391; (b) that the labor arbiter's decision being final, executory
and unappealable, execution is a matter of right for the
petitioner; and (c) that the decision of the labor arbiter dated
August 25, 1975 is supported by the law and the evidence in
the case (p. 364, NLRC rec.).
On July 30, 1979, petitioner filed a second motion for execution
pending appeal, praying that a writ of execution be issued by
the National Labor Relations Commission pending appeal of the
case with the Office of the Minister of Labor. Respondent bank
filed its opposition thereto on August 8, 1979.
On August 13, 1979, the National Labor Relations Commission
issued an order which states: t.hqw
The Chief, Research and Information Division of
this Commission is hereby directed to designate a
Socio-Economic Analyst to compute the holiday
pay of the employees of the Insular Bank of Asia
and America from April 1976 to the present, in
accordance with the Decision of the Labor Arbiter
dated August 25, 1975" (p. 80, rec.).

On November 10, 1979, the Office of the Minister of Labor,

through Deputy Minister Amado G. Inciong, issued an order, the
dispositive portion of which states: t.hqw
ALL THE FOREGOING CONSIDERED, let the
appealed Resolution en banc of the National
Labor Relations Commission dated 20 June 1978
be, as it is hereby, set aside and a new judgment
promulgated dismissing the instant case for lack
of merit (p. 436, NLRC rec.).
Hence, this petition for certiorari charging public respondent
Amado G. Inciong with abuse of discretion amounting to lack or
excess of jurisdiction.
The issue in this case is: whether or not the decision of a Labor
Arbiter awarding payment of regular holiday pay can still be set
aside on appeal by the Deputy Minister of Labor even though it
has already become final and had been partially executed, the
finality of which was affirmed by the National Labor Relations
Commission sitting en banc, on the basis of an Implementing
Rule and Policy Instruction promulgated by the Ministry of Labor
long after the said decision had become final and executory.
WE find for the petitioner.
I
WE agree with the petitioner's contention that Section 2, Rule
IV, Book III of the implementing rules and Policy Instruction No.
9 issued by the then Secretary of Labor are null and void since
in the guise of clarifying the Labor Code's provisions on holiday
pay, they in effect amended them by enlarging the scope of
their exclusion (p. 1 1, rec.).
Article 94 of the Labor Code, as amended by P.D. 850,
provides: t.hqw
Art. 94. Right to holiday pay. (a) Every worker
shall be paid his regular daily wage during regular
holidays, except in retail and service
establishments regularly employing less than ten
(10) workers. ...
The coverage and scope of exclusion of the Labor Code's
holiday pay provisions is spelled out under Article 82 thereof
which reads: t.hqw
Art. 82. Coverage. The provision of this Title
shall apply to employees in all establishments
and undertakings, whether for profit or not, but

not to government employees, managerial

employees, field personnel members of the
family of the employer who are dependent on
him for support domestic helpers, persons in the
personal service of another, and workers who are
paid by results as determined by the Secretary of
Labor in appropriate regulations.
... (emphasis supplied).
From the above-cited provisions, it is clear that monthly paid
employees are not excluded from the benefits of holiday pay.
However, the implementing rules on holiday pay promulgated
by the then Secretary of Labor excludes monthly paid
employees from the said benefits by inserting, under Rule IV,
Book Ill of the implementing rules, Section 2, which provides
that: "employees who are uniformly paid by the month,
irrespective of the number of working days therein, with a
salary of not less than the statutory or established minimum
wage shall be presumed to be paid for all days in the month
whether worked or not. "
Public respondent maintains that "(T)he rules implementing P.
D. 850 and Policy Instruction No. 9 were issued to clarify the
policy in the implementation of the ten (10) paid legal holidays.
As interpreted, 'unworked' legal holidays are deemed paid
insofar as monthly paid employees are concerned if (a) they are
receiving not less than the statutory minimum wage, (b) their
monthly pay is uniform from January to December, and (c) no
deduction is made from their monthly salary on account of
holidays in months where they occur. As explained in Policy
Instruction No, 9, 'The ten (10) paid legal holidays law, to start
with, is intended to benefit principally daily paid employees. In
case of monthly, only those whose monthly salary did not yet
include payment for the ten (10) paid legal holidays are entitled
to the benefit' " (pp. 340-341, rec.). This contention is
untenable.
It is elementary in the rules of statutory construction that when
the language of the law is clear and unequivocal the law must
be taken to mean exactly what it says. In the case at bar, the
provisions of the Labor Code on the entitlement to the benefits
of holiday pay are clear and explicit - it provides for both the
coverage of and exclusion from the benefits. In Policy
Instruction No. 9, the then Secretary of Labor went as far as to

categorically state that the benefit is principally intended for

daily paid employees, when the law clearly states that every
worker shall be paid their regular holiday pay. This is a flagrant
violation of the mandatory directive of Article 4 of the Labor
Code, which states that "All doubts in the implementation and
interpretation of the provisions of this Code, including its
implementing rules and regulations, shall be resolved in favor of
labor." Moreover, it shall always be presumed that the
legislature intended to enact a valid and permanent statute
which would have the most beneficial effect that its language
permits (Orlosky vs. Haskell, 155 A. 112.)
Obviously, the Secretary (Minister) of Labor had exceeded his
statutory authority granted by Article 5 of the Labor Code
authorizing him to promulgate the necessary implementing
rules and regulations.
Public respondent vehemently argues that the intent and spirit
of the holiday pay law, as expressed by the Secretary of Labor
in the case of Chartered Bank Employees Association v. The
Chartered Bank (NLRC Case No. RB-1789-75, March 24, 1976),
is to correct the disadvantages inherent in the daily
compensation system of employment holiday pay is primarily
intended to benefit the daily paid workers whose employment
and income are circumscribed by the principle of "no work, no
pay." This argument may sound meritorious; but, until the
provisions of the Labor Code on holiday pay is amended by
another law, monthly paid employees are definitely included in
the benefits of regular holiday pay. As earlier stated, the
presumption is always in favor of law, negatively put, the Labor
Code is always strictly construed against management.
While it is true that the contemporaneous construction placed
upon a statute by executive officers whose duty is to enforce it
should be given great weight by the courts, still if such
construction is so erroneous, as in the instant case, the same
must be declared as null and void. It is the role of the Judiciary
to refine and, when necessary, correct constitutional (and/or
statutory) interpretation, in the context of the interactions of
the three branches of the government, almost always in
situations where some agency of the State has engaged in
action that stems ultimately from some legitimate area of

governmental power (The Supreme Court in Modern Role, C. B.

Swisher 1958, p. 36).
Thus. in the case of Philippine Apparel Workers Union vs.
National Labor Relations Commission (106 SCRA 444, July 31,
1981) where the Secretary of Labor enlarged the scope of
exemption from the coverage of a Presidential Decree granting
increase in emergency allowance, this Court ruled that: t.
hqw
... the Secretary of Labor has exceeded his
authority when he included paragraph (k) in
Section 1 of the Rules implementing P. D. 1 1 23.
xxx xxx xxx
Clearly, the inclusion of paragraph k contravenes
the statutory authority granted to the Secretary
of Labor, and the same is therefore void, as ruled
by this Court in a long line of cases . . . .. t.
hqw
The recognition of the power of
administrative officials to
promulgate rules in the
administration of the statute,
necessarily limited to what is
provided for in the legislative
enactment, may be found in the
early case of United States vs.
Barrios decided in 1908. Then
came in a 1914 decision, United
States vs. Tupasi Molina (29 Phil.
119) delineation of the scope of
such competence. Thus: "Of course
the regulations adopted under
legislative authority by a particular
department must be in harmony
with the provisions of the law, and
for the sole purpose of carrying into
effect its general provisions. By
such regulations, of course, the law
itself cannot be extended. So long,
however, as the regulations relate
solely to carrying into effect the
provisions of the law, they are

valid." In 1936, in People vs.

Santos, this Court expressed its
disapproval of an administrative
order that would amount to an
excess of the regulatory power
vested in an administrative official
We reaffirmed such a doctrine in a
1951 decision, where we again
made clear that where an
administrative order betrays
inconsistency or repugnancy to the
provisions of the Act, 'the mandate
of the Act must prevail and must
be followed. Justice Barrera,
speaking for the Court in Victorias
Milling inc. vs. Social Security
Commission, citing Parker as well
as Davis did tersely sum up the
matter thus: "A rule is binding on
the Courts so long as the procedure
fixed for its promulgation is
followed and its scope is within the
statutory authority granted by the
legislature, even if the courts are
not in agreement with the policy
stated therein or its innate wisdom.
... On the other hand,
administrative interpretation of the
law is at best merely advisory, for
it is the courts that finally
determine chat the law means."
"It cannot be otherwise as the
Constitution limits the authority of
the President, in whom all
executive power resides, to take
care that the laws be faithfully
executed. No lesser administrative
executive office or agency then
can, contrary to the express
language of the Constitution assert

for itself a more extensive

prerogative. Necessarily, it is
bound to observe the constitutional
mandate. There must be strict
compliance with the legislative
enactment. Its terms must be
followed the statute requires
adherence to, not departure from
its provisions. No deviation is
allowable. In the terse language of
the present Chief Justice, an
administrative agency "cannot
amend an act of Congress."
Respondents can be sustained,
therefore, only if it could be shown
that the rules and regulations
promulgated by them were in
accordance with what the Veterans
Bill of Rights provides" (Phil.
Apparel Workers Union vs. National
Labor Relations
Commission, supra, 463, 464,
citing Teozon vs. Members of the
Board of Administrators, PVA 33
SCRA 585; see also Santos vs. Hon.
Estenzo, et al, 109 Phil. 419; Hilado
vs. Collector of Internal Revenue,
100 Phil. 295; Sy Man vs. Jacinto &
Fabros, 93 Phil. 1093; Olsen & Co.,
Inc. vs. Aldanese and Trinidad, 43
Phil. 259).
This ruling of the Court was recently reiterated in the case
of American Wire & Cable Workers Union (TUPAS) vs. The
National Labor Relations Commission and American Wire &
Cable Co., Inc., G.R. No. 53337, promulgated on June 29, 1984.
In view of the foregoing, Section 2, Rule IV, Book III of the Rules
to implement the Labor Code and Policy instruction No. 9 issued
by the then Secretary of Labor must be declared null and void.
Accordingly, public respondent Deputy Minister of Labor Amado

G. Inciong had no basis at all to deny the members of petitioner

union their regular holiday pay as directed by the Labor Code.
II
It is not disputed that the decision of Labor Arbiter Ricarte T.
Soriano dated August 25, 1975, had already become final, and
was, in fact, partially executed by the respondent bank.
However, public respondent maintains that on the authority of
De Luna vs. Kayanan, 61 SCRA 49, November 13, 1974, he can
annul the final decision of Labor Arbiter Soriano since the
ensuing promulgation of the integrated implementing rules of
the Labor Code pursuant to P.D. 850 on February 16, 1976, and
the issuance of Policy Instruction No. 9 on April 23, 1976 by the
then Secretary of Labor are facts and circumstances that
transpired subsequent to the promulgation of the decision of
the labor arbiter, which renders the execution of the said
decision impossible and unjust on the part of herein respondent
bank (pp. 342-343, rec.).
This contention is untenable.
To start with, unlike the instant case, the case of De Luna relied
upon by the public respondent is not a labor case wherein the
express mandate of the Constitution on the protection to labor
is applied. Thus Article 4 of the Labor Code provides that, "All
doubts in the implementation and interpretation of the
provisions of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor and Article 1702
of the Civil Code 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.
Consequently, contrary to public respondent's allegations, it is
patently unjust to deprive the members of petitioner union of
their vested right acquired by virtue of a final judgment on the
basis of a labor statute promulgated following the acquisition of
the "right".
On the question of whether or not a law or statute can annul or
modify a judicial order issued prior to its promulgation, this
Court, through Associate Justice Claro M. Recto, said: t.
hqw
xxx xxx xxx
We are decidedly of the opinion that they did not.
Said order, being unappealable, became final on
the date of its issuance and the parties who

acquired rights thereunder cannot be deprived

thereof by a constitutional provision enacted or
promulgated subsequent thereto. Neither the
Constitution nor the statutes, except penal laws
favorable to the accused, have retroactive effect
in the sense of annulling or modifying vested
rights, or altering contractual obligations" (China
Ins. & Surety Co. vs. Judge of First Instance of
Manila, 63 Phil. 324, emphasis supplied).
In the case of In re: Cunanan, et al., 19 Phil. 585, March 18,
1954, this Court said: "... when a court renders a decision or
promulgates a resolution or order on the basis of and in
accordance with a certain law or rule then in force, the
subsequent amendment or even repeal of said law or rule may
not affect the final decision, order, or resolution already
promulgated, in the sense of revoking or rendering it void and
of no effect." Thus, the amendatory rule (Rule IV, Book III of the
Rules to Implement the Labor Code) cannot be given retroactive
effect as to modify final judgments. Not even a law can validly
annul final decisions (In re: Cunanan, et al., Ibid).
Furthermore, the facts of the case relied upon by the public
respondent are not analogous to that of the case at bar. The
case of De Luna speaks of final and executory judgment, while
iii the instant case, the final judgment is partially executed. just
as the court is ousted of its jurisdiction to annul or modify a
judgment the moment it becomes final, the court also loses its
jurisdiction to annul or modify a writ of execution upon its
service or execution; for, otherwise, we will have a situation
wherein a final and executed judgment can still be annulled or
modified by the court upon mere motion of a panty This would
certainly result in endless litigations thereby rendering inutile
the rule of law.
Respondent bank counters with the argument that its partial
compliance was involuntary because it did so under pain of levy
and execution of its assets (p. 138, rec.). WE find no merit in
this argument. Respondent bank clearly manifested its
voluntariness in complying with the decision of the labor arbiter
by not appealing to the National Labor Relations Commission as
provided for under the Labor Code under Article 223. A party
who waives his right to appeal is deemed to have accepted the

judgment, adverse or not, as correct, especially if such party

readily acquiesced in the judgment by starting to execute said
judgment even before a writ of execution was issued, as in this
case. Under these circumstances, to permit a party to appeal
from the said partially executed final judgment would make a
mockery of the doctrine of finality of judgments long enshrined
in this jurisdiction.
Section I of Rule 39 of the Revised Rules of Court provides that
"... execution shall issue as a matter of right upon the expiration
of the period to appeal ... or if no appeal has been duly
perfected." This rule applies to decisions or orders of labor
arbiters who are exercising quasi-judicial functions since "... the
rule of execution of judgments under the rules should govern all
kinds of execution of judgment, unless it is otherwise provided
in other laws" Sagucio vs. Bulos 5 SCRA 803) and Article 223 of
the Labor Code provides that "... decisions, awards, or orders of
the Labor Arbiter or compulsory arbitrators are final and
executory unless appealed to the Commission by any or both of
the parties within ten (10) days from receipt of such awards,
orders, or decisions. ..."
Thus, under the aforecited rule, the lapse of the appeal period
deprives the courts of jurisdiction to alter the final judgment
and the judgment becomes final ipso jure (Vega vs. WCC, 89
SCRA 143, citing Cruz vs. WCC, 2 PHILAJUR 436, 440, January
31, 1978; see also Soliven vs. WCC, 77 SCRA 621; Carrero vs.
WCC and Regala vs. WCC, decided jointly, 77 SCRA 297; Vitug
vs. Republic, 75 SCRA 436; Ramos vs. Republic, 69 SCRA 576).
In Galvez vs. Philippine Long Distance Telephone Co., 3 SCRA
422, 423, October 31, 1961, where the lower court modified a
final order, this Court ruled thus: t.hqw
xxx xxx xxx
The lower court was thus aware of the fact that it
was thereby altering or modifying its order of
January 8, 1959. Regardless of the excellence of
the motive for acting as it did, we are constrained
to hold however, that the lower court had no
authorities to make said alteration or
modification. ...
xxx xxx xxx
The equitable considerations that led the lower
court to take the action complained of cannot

offset the dem ands of public policy and public

interest which are also responsive to the tenets
of equity requiring that an issues passed upon
in decisions or final orders that have become
executory, be deemed conclusively disposed of
and definitely closed for, otherwise, there would
be no end to litigations, thus setting at naught
the main role of courts of justice, which is to
assist in the enforcement of the rule of law and
the maintenance of peace and order, by settling
justiciable controversies with finality.
xxx xxx xxx
In the recent case of Gabaya vs. Mendoza, 113 SCRA 405, 406,
March 30, 1982, this Court said: t.hqw
xxx xxx xxx
In Marasigan vs. Ronquillo (94 Phil. 237), it was
categorically stated that the rule is absolute that
after a judgment becomes final by the expiration
of the period provided by the rules within which it
so becomes, no further amendment or correction
can be made by the court except for clerical
errors or mistakes. And such final judgment is
conclusive not only as to every matter which was
offered and received to sustain or defeat the
claim or demand but as to any other admissible
matter which must have been offered for that
purpose (L-7044, 96 Phil. 526). In the earlier case
of Contreras and Ginco vs. Felix and China
Banking Corp., Inc. (44 O.G. 4306), it was stated
that the rule must be adhered to regardless of
any possible injustice in a particular case for (W)e
have to subordinate the equity of a particular
situation to the over-mastering need of certainty
and immutability of judicial pronouncements
xxx xxx xxx
III
The despotic manner by which public respondent Amado G.
Inciong divested the members of the petitioner union of their
rights acquired by virtue of a final judgment is tantamount to a
deprivation of property without due process of law Public
respondent completely ignored the rights of the petitioner

union's members in dismissing their complaint since he knew

for a fact that the judgment of the labor arbiter had long
become final and was even partially executed by the
respondent bank.
A final judgment vests in the prevailing party a right recognized
and protected by law under the due process clause of the
Constitution (China Ins. & Surety Co. vs. Judge of First Instance
of Manila, 63 Phil. 324). A final judgment is "a vested interest
which it is right and equitable that the government should
recognize and protect, and of which the individual could no. be
deprived arbitrarily without injustice" (Rookledge v. Garwood,
65 N.W. 2d 785, 791).
lt is by this guiding principle that the due process clause is
interpreted. Thus, in the pithy language of then Justice, later
Chief Justice, Concepcion "... acts of Congress, as well as those
of the Executive, can deny due process only under pain of
nullity, and judicial proceedings suffering from the same flaw
are subject to the same sanction, any statutory provision to the
contrary notwithstanding (Vda. de Cuaycong vs. Vda. de
Sengbengco 110 Phil. 118, emphasis supplied), And "(I)t has
been likewise established that a violation of a constitutional
right divested the court of jurisdiction; and as a consequence its
judgment is null and void and confers no rights" (Phil. Blooming
Mills Employees Organization vs. Phil. Blooming Mills Co., Inc.,
51 SCRA 211, June 5, 1973).
Tested by and pitted against this broad concept of the
constitutional guarantee of due process, the action of public
respondent Amado G. Inciong is a clear example of deprivation
of property without due process of law and constituted grave
abuse of discretion, amounting to lack or excess of jurisdiction
in issuing the order dated November 10, 1979.
WHEREFORE, THE PETITION IS HEREBY GRANTED, THE ORDER
OF PUBLIC RESPONDENT IS SET ASIDE, AND THE DECISION OF
LABOR ARBITER RICARTE T. SORIANO DATED AUGUST 25, 1975,
IS HEREBY REINSTATED.
COSTS AGAINST PRIVATE RESPONDENT INSULAR BANK OF ASIA
AND AMERICA
SO ORDERED.1wph1.t
Guerrero, Escolin and Cuevas, JJ., concur.
Aquino and Abad Santos, JJ., concur in the result.
Concepcion Jr., J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-44717 August 28, 1985
THE CHARTERED BANK EMPLOYEES
ASSOCIATION, petitioner,
vs.
HON. BLAS F. OPLE, in his capacity as the Incumbent
Secretary of Labor, and THE CHARTERED
BANK,respondents.
GUTIERREZ, JR., J.:
This is a petition for certiorari seeking to annul the decision of
the respondent Secretary, now Minister of Labor which denied
the petitioner's claim for holiday pay and its claim for premium
and overtime pay differentials. The petitioner claims that the
respondent Minister of Labor acted contrary to law and
jurisprudence and with grave abuse of discretion in
promulgating Sec. 2, Rule IV, Book III of the Integrated Rules
and in issuing Policy Instruction No. 9, both referring to holidays
with pay.
On May 20, 1975, the Chartered Bank Employees Association, in
representation of its monthly paid employees/members,
instituted a complaint with the Regional Office No. IV,
Department of Labor, now Ministry of Labor and Employment
(MOLE) against private respondent Chartered Bank, for the
payment of ten (10) unworked legal holidays, as well as for
premium and overtime differentials for worked legal holidays
from November 1, 1974.
The memorandum for the respondents summarizes the
admitted and/or undisputed facts as follows:
l. The work force of respondent bank consists of
149 regular employees, all of whom are paid by
the month;
2. Under their existing collective bargaining
agreement, (Art. VII thereof) said monthly paid
employees are paid for overtime work as follows:
Section l. The basic work week for all employees
excepting security guards who by virtue of the

nature of their work are required to be at their

posts for 365 days per year, shall be forty (40)
hours based on five (5) eight (8) hours days,
Monday to Friday.
Section 2. Time and a quarter hourly rate shall be
paid for authorized work performed in excess of
eight (8) hours from Monday through Friday and
for any hour of work performed on Saturdays
subject to Section 5 hereof.
Section 3. Time and a half hourly rate shall be
paid for authorized work performed on Sundays,
legal and special holidays.
xxx xxx xxx
xxx xxx xxx
Section 5. The provisions of Section I above
notwithstanding the BANK may revert to the six
(6) days work week, to include Saturday for a four
(4) hour day, in the event the Central Bank
should require commercial banks to open for
business on Saturday.
3. In computing overtime pay and premium pay
for work done during regular holidays, the divisor
used in arriving at the daily rate of pay is 251
days although formerly the divisor used was 303
days and this was when the respondent bank was
still operating on a 6-day work week basis.
However, for purposes of computing deductions
corresponding to absences without pay the
divisor used is 365 days.
4. All regular monthly paid employees of
respondent bank are receiving salaries way
beyond the statutory or minimum rates and are
among the highest paid employees in the
banking industry.
5. The salaries of respondent bank's monthly paid
employees suffer no deduction for holidays
occurring within the month.
On the bases of the foregoing facts, both the arbitrator and the
National Labor Relations Commission (NLRC) ruled in favor of
the petitioners ordering the respondent bank to pay its monthly
paid employees, holiday pay for the ten (10) legal holidays

effective November 1, 1974 and to pay premium or overtime

pay differentials to all employees who rendered work during
said legal holidays. On appeal, the Minister of Labor set aside
the decision of the NLRC and dismissed the petitioner's claim
for lack of merit basing its decision on Section 2, Rule IV, Book
Ill of the Integrated Rules and Policy Instruction No. 9, which
respectively provide:
Sec. 2. Status of employees paid by the month.
Employees who are uniformly paid by the month,
irrespective of the number of working days
therein, with a salary of not less than the
statutory or established minimum wage shall be
presumed to be paid for all days in the month
whether worked or not.
POLICY INSTRUCTION NO. 9
TO: All Regional Directors
SUBJECT: PAID LEGAL HOLIDAYS
The rules implementing PD 850 have clarified the
policy in the implementation of the ten (10) paid
legal holidays. Before PD 850, the number of
working days a year in a firm was considered
important in determining entitlement to the
benefit. Thus, where an employee was working
for at least 313 days, he was considered
definitely already paid. If he was working for less
than 313, there was no certainty whether the ten
(10) paid legal holidays were already paid to him
or not.
The ten (10) paid legal holidays law, to start with,
is intended to benefit principally daily employees.
In the case of monthly, only those whose monthly
salary did not yet include payment for the ten
(10) paid legal holidays are entitled to the
benefit.
Under the rules implementing PD 850, this policy
has been fully clarified to eliminate controversies
on the entitlement of monthly paid employees.
The new determining rule is this: 'If the monthly
paid employee is receiving not less than P240,
the maximum monthly minimum wage, and his
monthly pay is uniform from January to

December, he is presumed to be already paid the

ten (10) paid legal holidays. However, if
deductions are made from his monthly salary on
account of holidays in months where they occur,
then he is still entitled to the ten (10) paid legal
holidays.
These new interpretations must be uniformly and
consistently upheld.
This issuance shall take effect immediately.
The issues are presented in the form of the following
assignments of errors:
First Error
Whether or not the Secretary of
Labor erred and acted contrary to
law in promulgating Sec. 2, Rule IV,
Book III of the Integrated Rules and
Policy Instruction No. 9.
Second Error
Whether or not the respondent
Secretary of Labor abused his
discretion and acted contrary to
law in applying Sec. 2, Rule IV of
the Integrated Rules and Policy
Instruction No. 9 abovestated to
private respondent's monthly-paid
employees.
Third Error
Whether or not the respondent
Secretary of Labor, in not giving
due credence to the respondent
bank's practice of paying its
employees base pay of 100% and
premium pay of 50% for work done
during legal holidays, acted
contrary to law and abused his
discretion in denying the claim of
petitioners for unworked holidays
and premium and overtime pay
differentials for worked holidays.
The petitioner contends that the respondent Minister of Labor
gravely abused his discretion in promulgating Section 2, Rule IV,

Book III of the Integrated Rules and Policy Instruction No. 9 as

guidelines for the implementation of Articles 82 and 94 of the
Labor Code and in applying said guidelines to this case. It
maintains that while it is true that the respondent Minister has
the authority in the performance of his duty to promulgate rules
and regulations to implement, construe and clarify the Labor
Code, such power is limited by provisions of the statute sought
to be implemented, construed or clarified. According to the
petitioner, the so-called "guidelines" promulgated by the
respondent Minister totally contravened and violated the Code
by excluding the employees/members of the petitioner from the
benefits of the holiday pay, when the Code itself did not provide
for their expanding the Code's clear and concise conclusion and
notwithstanding the Code's clear and concise phraseology
defining those employees who are covered and those who are
excluded from the benefits of holiday pay.
On the other hand, the private respondent contends that the
questioned guidelines did not deprive the petitioner's members
of the benefits of holiday pay but merely classified those
monthly paid employees whose monthly salary already includes
holiday pay and those whose do not, and that the guidelines did
not deprive the employees of holiday pay. It states that the
question to be clarified is whether or not the monthly salaries of
the petitioner's members already includes holiday pay. Thus,
the guidelines were promulgated to avoid confusion or
misconstruction in the application of Articles 82 and 94 of the
Labor Code but not to violate them. Respondent explains that
the rationale behind the promulgation of the questioned
guidelines is to benefit the daily paid workers who, unlike
monthly-paid employees, suffer deductions in their salaries for
not working on holidays. Hence, the Holiday Pay Law was
enacted precisely to countervail the disparity between daily
paid workers and monthly-paid employees.
The decision in Insular Bank of Asia and America Employees'
Union (IBAAEU) v. Inciong (132 SCRA 663) resolved a similar
issue. Significantly, the petitioner in that case was also a union
of bank employees. We ruled that Section 2, Rule IV, Book III of
the Integrated Rules and Policy Instruction No. 9, are contrary to
the provisions of the Labor Code and, therefore, invalid This
Court stated:

It is elementary in the rules of statutory

construction that when the language of the law is
clear and unequivocal the law must be taken to
mean exactly what it says. In the case at bar, the
provisions of the Labor Code on the entitlement
to the benefits of holiday pay are clear and
explicit it provides for both the coverage of and
exclusion from the benefit. In Policy Instruction
No. 9, the then Secretary of Labor went as far as
to categorically state that the benefit is
principally intended for daily paid employees,
when the law clearly states that every worker
shall be paid their regular holiday pay. This is
flagrant violation of the mandatory directive of
Article 4 of the Labor Code, which states that 'All
doubts in the implementation and interpretation
of the provisions of this Code, including its
implementing rules and regulations, shall be
resolved in favor of labor.' Moreover, it shall
always be presumed that the legislature intended
to enact a valid and permanent statute which
would have the most beneficial effect that its
language permits (Orlosky v. Hasken, 155 A. 112)
Obviously, the Secretary (Minister) of Labor had
exceeded his statutory authority granted by
Article 5 of the Labor Code authorizing him to
promulgate the necessary implementing rules
and regulations.
We further ruled:
While it is true that the contemporaneous
construction placed upon a statute by executive
officers whose duty is to enforce it should be
given great weight by the courts, still if such
construction is so erroneous, as in the instant
case, the same must be declared as null and
void. It is the role of the Judiciary to refine and,
when necessary correct constitutional (and/or
statutory) interpretation, in the context of the
interactions of the three branches of the
government, almost always in situations where

some agency of the State has engaged in action

that stems ultimately from some legitimate area
of governmental power (The Supreme Court in
Modern Role, C.B. Swisher 1958, p. 36).
xxx xxx xxx
In view of the foregoing, Section 2, Rule IV, Book
III of the Rules to implement the Labor Code and
Policy Instruction No. 9 issued by the then
Secretary of Labor must be declared null and
void. Accordinglyl public respondent Deputy
Minister of Labor Amado G. Inciong had no basis
at all to deny the members of petitioner union
their regular holiday pay as directed by the Labor
Code.
Since the private respondent premises its action on the
invalidated rule and policy instruction, it is clear that the
employees belonging to the petitioner association are entitled
to the payment of ten (10) legal holidays under Articles 82 and
94 of the Labor Code, aside from their monthly salary. They are
not among those excluded by law from the benefits of such
holiday pay.
Presidential Decree No. 850 states who are excluded from the
holiday provisions of that law. It states:
ART. 82. Coverage. The provision of this Title shall
apply to employees in all establishments and
undertakings, whether for profit or not, but not to
government employees, managerial employees,
field personnel members of the family of the
employer who are dependent on him for support,
domestic helpers, persons in the personal service
of another, and workers who are paid by results
as determined by the Secretary of Labor in
appropriate regulations. (Emphasis supplied).
The questioned Section 2, Rule IV, Book III of the Integrated
Rules and the Secretary's Policy Instruction No. 9 add another
excluded group, namely, "employees who are uniformly paid by
the month." While the additional exclusion is only in the form of
a presumption that all monthly paid employees have already
been paid holiday pay, it constitutes a taking away or a
deprivation which must be in the law if it is to be valid. An
administrative interpretation which diminishes the benefits of

labor more than what the statute delimits or withholds is

obviously ultra vires.
It is argued that even without the presumption found in the
rules and in the policy instruction, the company practice
indicates that the monthly salaries of the employees are so
computed as to include the holiday pay provided by law. The
petitioner contends otherwise.
One strong argument in favor of the petitioner's stand is the
fact that the Chartered Bank, in computing overtime
compensation for its employees, employs a "divisor" of 251
days. The 251 working days divisor is the result of subtracting
all Saturdays, Sundays and the ten (10) legal holidays from the
total number of calendar days in a year. If the employees are
already paid for all non-working days, the divisor should be 365
and not 251.
The situation is muddled somewhat by the fact that, in
computing the employees' absences from work, the respondent
bank uses 365 as divisor. Any slight doubts, however, must be
resolved in favor of the workers. This is in keeping with the
constitutional mandate of promoting social justice and affording
protection to labor (Sections 6 and 9, Article II, Constitution).
The Labor Code, as amended, itself provides:
ART. 4. Construction in favor of labor. All doubts in
the implementation and interpretation of the
provisions of this Code, including its
implementing rules and regulations, shall be
resolved in favor of labor.
Any remaining doubts which may arise from the conflicting or
different divisors used in the computation of overtime pay and
employees' absences are resolved by the manner in which work
actually rendered on holidays is paid. Thus, whenever monthly
paid employees work on a holiday, they are given an additional
100% base pay on top of a premium pay of 50%. If the
employees' monthly pay already includes their salaries for
holidays, they should be paid only premium pay but not both
base pay and premium pay.
The contention of the respondent that 100% base pay and 50%
premium pay for work actually rendered on holidays is given in
addition to monthly salaries only because the collective
bargaining agreement so provides is itself an argument in favor
of the petitioner stand. It shows that the Collective Bargaining

Agreement already contemplated a divisor of 251 days for

holiday pay computations before the questioned presumption in
the Integrated Rules and the Policy Instruction was formulated.
There is furthermore a similarity between overtime pay, which
is computed on the basis of 251 working days a year, and
holiday pay, which should be similarly treated notwithstanding
the public respondents' issuances. In both cases overtime work
and holiday work- the employee works when he is supposed to
be resting. In the absence of an express provision of the CBA or
the law to the contrary, the computation should be similarly
handled.
We are not unmindful of the fact that the respondent's
employees are among the highest paid in the industry. It is not
the intent of this Court to impose any undue burdens on an
employer which is already doing its best for its personnel. we
have to resolve the labor dispute in the light of the parties' own
collective bargaining agreement and the benefits given by law
to all workers. When the law provides benefits for "employees in
all establishments and undertakings, whether for profit or not"
and lists specifically the employees not entitled to those
benefits, the administrative agency implementing that law
cannot exclude certain employees from its coverage simply
because they are paid by the month or because they are
already highly paid. The remedy lies in a clear redrafting of the
collective bargaining agreement with a statement that monthly
pay already includes holiday pay or an amendment of the law to
that effect but not an administrative rule or a policy instruction.
WHEREFORE, the September 7, 1976 order of the public
respondent is hereby REVERSED and SET ASIDE. The March 24,
1976 decision of the National Labor Relations Commission
which affirmed the October 30, 1975 resolution of the Labor
Arbiter but deleted interest payments is REINSTATED.
SO ORDERED.
Makasiar, C.J., Concepcion, Jr., Melencio-Herrera, Plana, Escolin,
Relova, De la Fuente, Cuevas, Alampay and Patajo, JJ., concur.
Teehankee, J., in the result.
Aquino, J., took no part.

FIRST DIVISION

[G.R. No. 147420. June 10, 2004]

CEZAR ODANGO in his behalf and in behalf of 32
complainants, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and ANTIQUE ELECTRIC
COOPERATIVE, INC., respondents.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review[1] assailing the
Court of Appeals Resolutions of 27 September 2000[2] and 7
February 2001 in CA-G.R. SP No. 51519. The Court of Appeals
upheld the Decision[3] dated 27 November 1997 and the
Resolution dated 30 April 1998 of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-0048-97. The NLRC
reversed the Labor Arbiters Decision of 29 November 1996,
which found respondent Antique Electric Cooperative (ANTECO)
liable
for
petitioners
wage
differentials
amounting
toP1,017,507.73 plus attorneys fees of 10%.
Antecedent Facts
Petitioners are monthly-paid employees of ANTECO whose
workdays are from Monday to Friday and half of Saturday. After
a routine inspection, the Regional Branch of the Department of
Labor and Employment (DOLE) found ANTECO liable for
underpayment of the monthly salaries of its employees. On 10
September 1989, the DOLE directed ANTECO to pay its
employees wage differentials amounting to P1,427,412.75.
ANTECO failed to pay.
Thus, on various dates in 1995, thirty-three (33) monthlypaid employees filed complaints with the NLRC Sub-Regional
Branch VI, IloiloCity, praying for payment of wage differentials,
damages and attorneys fees. Labor Arbiter Rodolfo G. Lagoc
(Labor Arbiter) heard the consolidated complaints.

On 29 November 1996, the Labor Arbiter rendered a

Decision in favor of petitioners granting them wage differentials
amounting
toP1,017,507.73 and
attorneys
fees
of
10%. Florentino Tongson, whose case the Labor Arbiter
dismissed, was the sole exception.
ANTECO appealed the Decision to the NLRC on 24
December 1996. On 27 November 1997, the NLRC reversed the
Labor Arbiters Decision. The NLRC denied petitioners motion for
reconsideration in its Resolution dated 30 April 1998. Petitioners
then elevated the case to this Court through a petition for
certiorari, which the Court dismissed for petitioners failure to
comply with Section 11, Rule 13 of the Rules of Court. On
petitioners motion for reconsideration, the Court on 13 January
1999 set aside the dismissal. Following the doctrine in St.
Martin Funeral Home v. NLRC,[4] the Court referred the case
to the Court of Appeals.
On 27 September 2000, the Court of Appeals issued a
Resolution dismissing the petition for failure to comply with
Section 3, Rule 46 of the Rules of Court. The Court of Appeals
explained that petitioners failed to allege the specific instances
where the NLRC abused its discretion. The appellate court
denied petitioners motion for reconsideration on 7 February
2001.
Hence, this petition.
The Labor Arbiters Ruling
The Labor Arbiter reasoned that ANTECO failed to refute
petitioners argument that monthly-paid employees are
considered paid for all the days in a month under Section 2,
Rule IV of Book 3 of the Implementing Rules of the Labor Code
(Section 2).[5] Petitioners claim that this includes not only the 10
legal holidays, but also their un-worked half of Saturdays and all
of Sundays.
The Labor Arbiter gave credence to petitioners arguments
on the computation of their wages based on the 304 divisor
used by ANTECO in converting the leave credits of its
employees. The Labor Arbiter agreed with petitioners that
ANTECOs use of 304 as divisor is an admission that it is paying
its employees for only 304 days a year instead of the 365 days

as specified in Section 2. The Labor Arbiter concluded that

ANTECO owed its employees the wages for 61 days, the
difference between 365 and 304, for every year.
The NLRCs Ruling
On appeal, the NLRC reversed the Labor Arbiters ruling that
ANTECO underpaid its employees. The NLRC pointed out that
the Labor Arbiters own computation showed that the daily wage
rates of ANTECOs employees were above the minimum daily
wage of P124. The lowest paid employee of ANTECO was then
receiving a monthly wage of P3,788. The NLRC applied the
formula in Section 2 [(Daily Wage Rate = (Wage x 12)/365)] to
the monthly wage of P3,788 to arrive at a daily wage rate
of P124.54, an amount clearly above the minimum wage.
The NLRC noted that while the reasoning in the body of the
Labor Arbiters decision supported the view that ANTECO did not
underpay, the conclusion arrived at was the opposite. Finally,
the NLRC ruled that the use of 304 as a divisor in converting
leave credits is more favorable to the employees since a lower
divisor yields a higher rate of pay.
The Ruling of the Court of Appeals
The Court of Appeals held that the petition was insufficient
in form and substance since it does not allege the essential
requirements of the extra-ordinary special action of certiorari.
The Court of Appeals faulted petitioners for failing to recite
where and in what specific instance public respondent abused
its discretion. The appellate court characterized the allegations
in the petition as sweeping and clearly falling short of the
requirement of Section 3, Rule 46 of the Rules of Court.
The Issues
Petitioners raise the following issues:
I

WHETHER THE COURT OF APPEALS IS CORRECT IN

DISMISSING THE CASE.
II
WHETHER PETITIONERS ARE ENTITLED TO THEIR
MONEY CLAIM.[6]
The Ruling of the Court
The petition has no merit.
On the sufficiency of the petition
Petitioners argue that the Court of Appeals erred in
dismissing their petition because this Court had already ruled
that their petition is sufficient in form and substance. They
argue that this precludes any judgment to the contrary by the
Court of Appeals. Petitioners cite this Courts Resolution
dated 13 January 1999 as their basis. This Resolution granted
petitioners motion for reconsideration and set aside the
dismissal of their petition for review.
Petitioners reliance on our 16 September 1998 Resolution is
misplaced. In our Resolution, we dismissed petitioners case for
failure to comply with Section 11, Rule 13 of the Rules of Court.
[7]
The petition lacked a written explanation on why service was
made through registered mail and not personally.
The error petitioners committed before the Court of Appeals
is different. The appellate court dismissed their petition for
failure to comply with the first paragraph of Section 3 of Rule
46[8] in relation to Rule 65 of the Rules of Court, outlining the
necessary contents of a petition for certiorari. This is an entirely
different ground. The previous dismissal was due to petitioners
failure to explain why they resorted to service by registered
mail. This time the content of the petition itself is deficient.
Petitioners failed to allege in their petition the specific instances
where the actions of the NLRC amounted to grave abuse of
discretion.
There is nothing in this Courts Resolution dated 13 January
1999 that remotely supports petitioners argument. What we

resolved then was to reconsider the dismissal of the petition

due to a procedural defect and to refer the case to the Court of
Appeals for its proper disposition. We did not in any way rule
that the petition is sufficient in form and substance.
Petitioners also argue that their petition is clear and specific
in its allegation of grave abuse of discretion. They maintain that
they have sufficiently complied with the requirement in Section
3, Rule 46 of the Rules of Court.
Again, petitioners are mistaken.
We quote the relevant part of their petition:
REASONS RELIED UPON FOR ALLOWANCE OF PETITION
12. This Honorable court can readily see from the facts and
circumstances of this case, the petitioners were denied of their
rights to be paid of 4 hours of each Saturday, 51 rest days and
10 legal holidays of every year since they started working with
respondent ANTECO.
13. The respondent NLRC while with open eyes knew that the
petitioners are entitled to salary differentials consisting of 4
hours pay on Saturdays, 51 rest days and 10 legal holidays plus
10% attorneys fees as awarded by the Labor Arbiter in the
above-mentioned decision, still contrary to law, contrary to
existing jurisprudence issued arbitrary, without jurisdiction and
in excess of jurisdiction the decision vacating and setting aside
the said decision of the Labor Arbiter, to the irreparable damage
and prejudice of the petitioners.
14. That the respondent NLRC in grave abuse of discretion in
the exercise of its function, by way of evasion of positive duty in
accordance with existing labor laws, illegally refused to
reconsider its decision dismissing the petitioners complaints.
15. That there is no appeal, nor plain, speedy and adequate
remedy in law from the above-mentioned decision and
resolution of respondent NLRC except this petition for certiorari.
[9]

These four paragraphs comprise the petitioners entire

argument. In these four paragraphs petitioners ask that a writ
of certiorari be issued in their favor. We find that the Court of
Appeals did not err in dismissing the petition outright. Section 3,
Rule 46 of the Rules of Court requires that a petition for
certiorari must state the grounds relied on for the relief sought.

A simple perusal of the petition readily shows that petitioners

failed to meet this requirement.
The appellate courts jurisdiction to review a decision of the
NLRC in a petition for certiorari is confined to issues of
jurisdiction or grave abuse of discretion.[10] An extraordinary
remedy, a petition for certiorari is available only and
restrictively in truly exceptional cases. The sole office of the writ
of certiorari is the correction of errors of jurisdiction including
the commission of grave abuse of discretion amounting to lack
or excess of jurisdiction.[11] It does not include correction of the
NLRCs evaluation of the evidence or of its factual findings. Such
findings are generally accorded not only respect but also
finality.[12] A party assailing such findings bears the burden of
showing that the tribunal acted capriciously and whimsically or
in total disregard of evidence material to the controversy, in
order that the extraordinary writ of certiorari will lie.[13]
We agree with the Court of Appeals that nowhere in the
petition is there any acceptable demonstration that the NLRC
acted either with grave abuse of discretion or without or in
excess
of
its
jurisdiction. Petitioners
merely
stated
generalizations and conclusions of law. Rather than discussing
how the NLRC acted capriciously, petitioners resorted to a litany
of generalizations.
Petitions that fail to comply with procedural requisites, or
are unintelligible or clearly without legal basis, deserve scant
consideration. Section 6, Rule 65 of the Rules of Court requires
that every petition be sufficient in form and substance before a
court may take further action. Lacking such sufficiency, the
court may dismiss the petition outright.
The insufficiency in substance of this petition provides
enough reason to end our discussion here. However, we shall
discuss the issues raised not so much to address the merit of
the petition, for there is none, but to illustrate the extent by
which petitioners have haphazardly pursued their claim.
On the right of the petitioners to wage differentials
Petitioners claim that the Court of Appeals gravely erred in
denying their claim for wage differentials. Petitioners base their
claim on Section 2, Rule IV of Book III of the Omnibus Rules

Implementing the Labor Code. Petitioners argue that under this

provision monthly-paid employees are considered paid for all
days of the month including un-worked days. Petitioners assert
that they should be paid for all the 365 days in a year. They
argue that since in the computation of leave credits, ANTECO
uses a divisor of 304, ANTECO is not paying them 61 days every
year.
Petitioners claim is without basis
We have long ago declared void Section 2, Rule IV of Book
III of the Omnibus Rules Implementing the Labor
Code. In Insular Bank of Asia v. Inciong,[14] we ruled as
follows:
Section 2, Rule IV, Book III of the Implementing Rules and Policy
Instructions No. 9 issued by the Secretary (then Minister) of
Labor are null and void since in the guise of clarifying the Labor
Codes provisions on holiday pay, they in effect amended them
by enlarging the scope of their exclusion.
The Labor Code is clear that monthly-paid employees are not
excluded from the benefits of holiday pay. However, the
implementing rules on holiday pay promulgated by the then
Secretary of Labor excludes monthly-paid employees from the
said benefits by inserting, under Rule IV, Book III of the
implementing rules, Section 2 which provides that monthly-paid
employees are presumed to be paid for all days in the month
whether worked or not.
Thus, Section 2 cannot serve as basis of any right or claim.
Absent any other legal basis, petitioners claim for wage
differentials must fail.
Even assuming that Section 2, Rule IV of Book III is valid,
petitioners claim will still fail. The basic rule in this jurisdiction is
no work, no pay. The right to be paid for un-worked days is
generally limited to the ten legal holidays in a year.
[15]
Petitioners claim is based on a mistaken notion that Section
2, Rule IV of Book III gave rise to a right to be paid for unworked days beyond the ten legal holidays. In effect, petitioners
demand that ANTECO should pay them on Sundays, the un-

worked half of Saturdays and other days that they do not work
at all.Petitioners line of reasoning is not only a violation of the
no work, no pay principle, it also gives rise to an invidious
classification,
a
violation
of
the
equal
protection
clause. Sustaining petitioners argument will make monthly-paid
employees a privileged class who are paid even if they do not
work.
The use of a divisor less than 365 days cannot make
ANTECO automatically liable for underpayment. The facts show
that petitioners are required to work only from Monday to Friday
and half of Saturday. Thus, the minimum allowable divisor is
287, which is the result of 365 days, less 52 Sundays and less
26 Saturdays (or 52 half Saturdays). Any divisor below 287 days
means that ANTECOs workers are deprived of their holiday pay
for some or all of the ten legal holidays. The 304 days divisor
used by ANTECO is clearly above the minimum of 287 days.
Finally, petitioners cite Chartered Bank Employees
Association v. Ople[16] as an analogous situation. Petitioners
have misread this case.
In Chartered Bank, the workers sought payment for unworked legal holidays as a right guaranteed by a valid law. In
this case, petitioners seek payment of wages for unworked non-legal holidays citing as basis a void implementing
rule. The
circumstances
are
also
markedly
different.
In Chartered Bank, there was a collective bargaining
agreement that prescribed the divisor. No CBA exists in this
case. In Chartered Bank, the employer was liable for
underpayment because the divisor it used was 251 days, a
figure that clearly fails to account for the ten legal holidays the
law requires to be paid. Here, the divisor ANTECO uses is 304
days. This figure does not deprive petitioners of their right to be
paid on legal holidays.
A final note. ANTECOs defense is likewise based on Section
2, Rule IV of Book III of the Omnibus Rules Implementing the
Labor Code although ANTECOs interpretation of this provision is
opposite that of petitioners. It is deplorable that both parties
premised their arguments on an implementing rule that the
Court had declared void twenty years ago in Insular Bank. This
case is cited prominently in basic commentaries. [17] And yet,
counsel for both parties failed to consider this. This does not
speak well of the quality of representation they rendered to

their clients. This controversy should have ended long ago had
either counsel first checked the validity of the implementing
rule on which they based their contentions.
WHEREFORE, the petition is DENIED. The Resoution of the
Court
of
Appeals DISMISSING CA-G.R.
SP
No.
51519
is AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman),
Santiago, and Azcuna, JJ., concur.

Panganiban,

Ynares-

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 79255 January 20, 1992
UNION OF FILIPRO EMPLOYEES (UFE), petitioner,
vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS
COMMISSION and NESTL PHILIPPINES, INC. (formerly
FILIPRO, INC.), respondents.
Jose C. Espinas for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private respondent.
GUTIERREZ, JR., J.:
This labor dispute stems from the exclusion of sales personnel
from the holiday pay award and the change of the divisor in the
computation of benefits from 251 to 261 days.
On November 8, 1985, respondent Filipro, Inc. (now Nestle
Philippines, Inc.) filed with the National Labor Relations
Commission (NLRC) a petition for declaratory relief seeking a
ruling on its rights and obligations respecting claims of its
monthly paid employees for holiday pay in the light of the
Court's decision in Chartered Bank Employees Association
v. Ople (138 SCRA 273 [1985]).
Both Filipro and the Union of Filipino Employees (UFE) agreed to
submit the case for voluntary arbitration and appointed
respondent Benigno Vivar, Jr. as voluntary arbitrator.

On January 2, 1980, Arbitrator Vivar rendered a decision

directing Filipro to:
pay its monthly paid employees holiday pay
pursuant to Article 94 of the Code, subject only to
the exclusions and limitations specified in Article
82 and such other legal restrictions as are
provided for in the Code. (Rollo,
p. 31)
Filipro filed a motion for clarification seeking (1) the limitation of
the award to three years, (2) the exclusion of salesmen, sales
representatives, truck drivers, merchandisers and medical
representatives (hereinafter referred to as sales personnel) from
the award of the holiday pay, and (3) deduction from
the holiday pay award of overpayment for overtime, night
differential, vacation and sick leave benefits due to the use of
251 divisor. (Rollo, pp. 138-145)
Petitioner UFE answered that the award should be made
effective from the date of effectivity of the Labor Code, that
their sales personnel are not field personnel and are therefore
entitled to holiday pay, and that the use of 251 as divisor is an
established employee benefit which cannot be diminished.
On January 14, 1986, the respondent arbitrator issued an order
declaring that the effectivity of the holiday pay award shall
retroact to November 1, 1974, the date of effectivity of the
Labor Code. He adjudged, however, that the company's sales
personnel are field personnel and, as such, are not entitled to
holiday pay. He likewise ruled that with the grant of 10 days'
holiday pay, the divisor should be changed from 251 to 261 and
ordered the reimbursement of overpayment for overtime, night
differential, vacation and sick leave pay due to the use of 251
days as divisor.
Both Nestle and UFE filed their respective motions for partial
reconsideration. Respondent Arbitrator treated the two motions
as appeals and forwarded the case to the NLRC which issued a
resolution dated May 25, 1987 remanding the case to the
respondent arbitrator on the ground that it has no jurisdiction to
review decisions in voluntary arbitration cases pursuant to
Article 263 of the Labor Code as amended by Section 10, Batas
Pambansa Blg. 130 and as implemented by Section 5 of the
rules implementing B.P. Blg. 130.

However, in a letter dated July 6, 1987, the respondent

arbitrator refused to take cognizance of the case reasoning that
he had no more jurisdiction to continue as arbitrator because he
had resigned from service effective May 1, 1986.
Hence, this petition.
The petitioner union raises the following issues:
1) Whether or not Nestle's sales personnel are entitled to
holiday pay; and
2) Whether or not, concomitant with the award of holiday pay,
the divisor should be changed from 251 to 261 days and
whether or not the previous use of 251 as divisor resulted in
overpayment for overtime, night differential, vacation and sick
leave pay.
The petitioner insists that respondent's sales personnel are not
field personnel under Article 82 of the Labor Code. The
respondent company controverts this assertion.
Under Article 82, field personnel are not entitled to holiday pay.
Said article defines field personnel as "non-agritultural
employees who regularly perform their duties away from the
principal place of business or branch office of the employer and
whose actual hours of work in the field cannot be determined
with reasonable certainty."
The controversy centers on the interpretation of the clause
"whose actual hours of work in the field cannot be determined
with reasonable certainty."
It is undisputed that these sales personnel start their field work
at 8:00 a.m. after having reported to the office and come back
to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.
The petitioner maintains that the period between 8:00 a.m. to
4:00 or 4:30 p.m. comprises the sales personnel's working
hours which can be determined with reasonable certainty.
The Court does not agree. The law requires that the actual
hours of work in the field be reasonably ascertained. The
company has no way of determining whether or not these sales
personnel, even if they report to the office before 8:00 a.m.
prior to field work and come back at 4:30 p.m, really spend the
hours in between in actual field work.
We concur with the following disquisition by the respondent
arbitrator:
The requirement for the salesmen and other
similarly situated employees to report for work at
the office at 8:00 a.m. and return at 4:00 or 4:30

p.m. is not within the realm of work in the field as

defined in the Code but an exercise of purely
management prerogative of providing
administrative control over such personnel. This
does not in any manner provide a reasonable
level of determination on the actual field work of
the employees which can be reasonably
ascertained. The theoretical analysis that
salesmen and other similarly-situated workers
regularly report for work at 8:00 a.m. and return
to their home station at 4:00 or 4:30 p.m.,
creating the assumption that their field work is
supervised, is surface projection. Actual field work
begins after 8:00 a.m., when the sales personnel
follow their field itinerary, and ends immediately
before 4:00 or 4:30 p.m. when they report back to
their office. The period between 8:00 a.m. and
4:00 or 4:30 p.m. comprises their hours of work in
the field, the extent or scope and result of which
are subject to their individual capacity and
industry and which "cannot be determined with
reasonable certainty." This is the reason why
effective supervision over field work of salesmen
and medical representatives, truck drivers and
merchandisers is practically a physical
impossibility. Consequently, they are excluded
from the ten holidays with pay award. (Rollo, pp.
36-37)
Moreover, the requirement that "actual hours of work in the
field cannot be determined with reasonable certainty" must be
read in conjunction with Rule IV, Book III of the Implementing
Rules which provides:
Rule IV Holidays with Pay
Sec. 1. Coverage This rule shall apply to all
employees except:
xxx xxx xxx
(e) Field personnel and other employees whose
time and performance is unsupervised by the
employer . . . (Emphasis supplied)
While contending that such rule added another element not
found in the law (Rollo, p. 13), the petitioner nevertheless

attempted to show that its affected members are not covered

by the abovementioned rule. The petitioner asserts that the
company's sales personnel are strictly supervised as shown by
the SOD (Supervisor of the Day) schedule and the company
circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 5355).
Contrary to the contention of the petitioner, the Court finds that
the aforementioned rule did not add another element to the
Labor Code definition of field personnel. The clause "whose time
and performance is unsupervised by the employer" did not
amplify but merely interpreted and expounded the clause
"whose actual hours of work in the field cannot be determined
with reasonable certainty." The former clause is still within the
scope and purview of Article 82 which defines field personnel.
Hence, in deciding whether or not an employee's actual working
hours in the field can be determined with reasonable certainty,
query must be made as to whether or not such employee's time
and performance is constantly supervised by the employer.
The SOD schedule adverted to by the petitioner does not in the
least signify that these sales personnel's time and performance
are supervised. The purpose of this schedule is merely to
ensure that the sales personnel are out of the office not later
than 8:00 a.m. and are back in the office not earlier than 4:00
p.m.
Likewise, the Court fails to see how the company can monitor
the number of actual hours spent in field work by an employee
through the imposition of sanctions on absenteeism contained
in the company circular of March 15, 1984.
The petitioner claims that the fact that these sales personnel
are given incentive bonus every quarter based on their
performance is proof that their actual hours of work in the field
can be determined with reasonable certainty.
The Court thinks otherwise.
The criteria for granting incentive bonus are: (1) attaining or
exceeding sales volume based on sales target; (2) good
collection performance; (3) proper compliance with good market
hygiene; (4) good merchandising work; (5) minimal market
returns; and (6) proper truck maintenance. (Rollo, p. 190).
The above criteria indicate that these sales personnel are given
incentive bonuses precisely because of the difficulty in
measuring their actual hours of field work. These employees are

evaluated by the result of their work and not by the actual

hours of field work which are hardly susceptible to
determination.
In San Miguel Brewery, Inc. v. Democratic Labor Organization (8
SCRA 613 [1963]), the Court had occasion to discuss the nature
of the job of a salesman. Citing the case of Jewel Tea
Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court stated:
The reasons for excluding an outside salesman
are fairly apparent. Such a salesman, to a greater
extent, works individually. There are no
restrictions respecting the time he shall work and
he can earn as much or as little, within the range
of his ability, as his ambition dictates. In lieu of
overtime he ordinarily receives commissions as
extra compensation. He works away from his
employer's place of business, is not subject to the
personal supervision of his employer, and his
employer has no way of knowing the number of
hours he works per day.
While in that case the issue was whether or not salesmen were
entitled to overtime pay, the same rationale for their exclusion
as field personnel from holiday pay benefits also applies.
The petitioner union also assails the respondent arbitrator's
ruling that, concomitant with the award of holiday pay, the
divisor should be changed from 251 to 261 days to include the
additional 10 holidays and the employees should reimburse the
amounts overpaid by Filipro due to the use of 251 days' divisor.
Arbitrator Vivar's rationale for his decision is as follows:
. . . The new doctrinal policy established which
ordered payment of ten holidays certainly adds to
or accelerates the basis of conversion and
computation by ten days. With the inclusion of
ten holidays as paid days, the divisor is no longer
251 but 261 or 262 if election day is counted.
This is indeed an extremely difficult legal
question of interpretation which accounts for
what is claimed as falling within the concept of
"solutio indebti."
When the claim of the Union for payment of ten
holidays was granted, there was a consequent
need to abandon that 251 divisor. To maintain it

would create an impossible situation where the

employees would benefit with additional ten days
with pay but would simultaneously enjoy higher
benefits by discarding the same ten days for
purposes of computing overtime and night time
services and considering sick and vacation leave
credits. Therefore, reimbursement of such
overpayment with the use of 251 as divisor arises
concomitant with the award of ten holidays with
pay. (Rollo, p. 34)
The divisor assumes an important role in determining whether
or not holiday pay is already included in the monthly paid
employee's salary and in the computation of his daily rate. This
is the thrust of our pronouncement in Chartered Bank
Employees Association v. Ople (supra). In that case, We held:
It is argued that even without the presumption
found in the rules and in the policy instruction,
the company practice indicates that the monthly
salaries of the employees are so computed as to
include the holiday pay provided by law. The
petitioner contends otherwise.
One strong argument in favor of the petitioner's
stand is the fact that the Chartered Bank, in
computing overtime compensation for its
employees, employs a "divisor" of 251 days. The
251 working days divisor is the result of
subtracting all Saturdays, Sundays and the ten
(10) legal holidays from the total number of
calendar days in a year. If the employees are
already paid for all non-working days, the divisor
should be 365 and not 251.
In the petitioner's case, its computation of daily ratio since
September 1, 1980, is as follows:
monthly rate x 12 months

251 days
Following the criterion laid down in the Chartered Bank case,
the use of 251 days' divisor by respondent Filipro indicates that
holiday pay is not yet included in the employee's salary,
otherwise the divisor should have been 261.

It must be stressed that the daily rate, assuming there are no

intervening salary increases, is a constant figure for the purpose
of computing overtime and night differential pay and
commutation of sick and vacation leave credits. Necessarily, the
daily rate should also be the same basis for computing the 10
unpaid holidays.
The respondent arbitrator's order to change the divisor from
251 to 261 days would result in a lower daily rate which is
violative of the prohibition on non-diminution of benefits found
in Article 100 of the Labor Code. To maintain the same daily
rate if the divisor is adjusted to 261 days, then the dividend,
which represents the employee's annual salary, should
correspondingly be increased to incorporate the holiday pay. To
illustrate, if prior to the grant of holiday pay, the employee's
annual salary is P25,100, then dividing such figure by 251 days,
his daily rate is P100.00 After the payment of 10 days' holiday
pay, his annual salary already includes holiday pay and totals
P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily
rate is still P100.00. There is thus no merit in respondent
Nestle's claim of overpayment of overtime and night differential
pay and sick and vacation leave benefits, the computation of
which are all based on the daily rate, since the daily rate is still
the same before and after the grant of holiday pay.
Respondent Nestle's invocation of solutio indebiti, or payment
by mistake, due to its use of 251 days as divisor must fail in
light of the Labor Code mandate that "all doubts in the
implementation and interpretation of this Code, including its
implementing rules and regulations, shall be resolved in favor of
labor." (Article 4). Moreover, prior to September 1, 1980, when
the company was on a 6-day working schedule, the divisor used
by the company was 303, indicating that the 10 holidays were
likewise not paid. When Filipro shifted to a 5-day working
schebule on September 1, 1980, it had the chance to rectify its
error, if ever there was one but did not do so. It is now too late
to allege payment by mistake.
Nestle also questions the voluntary arbitrator's ruling that
holiday pay should be computed from November 1, 1974. This
ruling was not questioned by the petitioner union as obviously
said decision was favorable to it. Technically, therefore,
respondent Nestle should have filed a separate petition raising

the issue of effectivity of the holiday pay award. This Court has
ruled that an appellee who is not an appellant may assign errors
in his brief where his purpose is to maintain the judgment on
other grounds, but he cannot seek modification or reversal of
the judgment or affirmative relief unless he has also appealed.
(Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989],
citing La Campana Food Products, Inc. v. Philippine Commercial
and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in
order to fully settle the issues so that the execution of the
Court's decision in this case may not be needlessly delayed by
another petition, the Court resolved to take up the matter of
effectivity of the holiday pay award raised by Nestle.
Nestle insists that the reckoning period for the application of the
holiday pay award is 1985 when the Chartered Bank decision,
promulgated on August 28, 1985, became final and executory,
and not from the date of effectivity of the Labor Code. Although
the Court does not entirely agree with Nestle, we find its claim
meritorious.
In Insular Bank of Asia and America Employees' Union (IBAAEU)
v. Inciong, 132 SCRA 663 [1984], hereinafter referred to as the
IBAA case, the Court declared that Section 2, Rule IV, Book III of
the implementing rules and Policy Instruction No. 9, issued by
the then Secretary of Labor on February 16, 1976 and April 23,
1976, respectively, and which excluded monthly paid
employees from holiday pay benefits, are null and void. The
Court therein reasoned that, in the guise of clarifying the Labor
Code's provisions on holiday pay, the aforementioned
implementing rule and policy instruction amended them by
enlarging the scope of their exclusion. The Chartered Bank case
reiterated the above ruling and added the "divisor" test.
However, prior to their being declared null and void, the
implementing rule and policy instruction enjoyed the
presumption of validity and hence, Nestle's non-payment of the
holiday benefit up to the promulgation of the IBAA case on
October 23, 1984 was in compliance with these presumably
valid rule and policy instruction.
In the case of De Agbayani v. Philippine National Bank, 38 SCRA
429 [1971], the Court discussed the effect to be given to a
legislative or executive act subsequently declared invalid:
xxx xxx xxx

. . . It does not admit of doubt that prior to the

declaration of nullity such challenged legislative
or executive act must have been in force and had
to be complied with. This is so as until after the
judiciary, in an appropriate case, declares its
invalidity, it is entitled to obedience and respect.
Parties may have acted under it and may have
changed their positions. What could be more
fitting than that in a subsequent litigation regard
be had to what has been done while such
legislative or executive act was in operation and
presumed to be valid in all respects. It is now
accepted as a doctrine that prior to its being
nullified, its existence as a fact must be reckoned
with. This is merely to reflect awareness that
precisely because the judiciary is the government
organ which has the final say on whether or not a
legislative or executive measure is valid, a period
of time may have elapsed before it can exercise
the power of judicial review that may lead to a
declaration of nullity. It would be to deprive the
law of its quality of fairness and justice then, if
there be no recognition of what had transpired
prior to such adjudication.
In the language of an American Supreme Court
decision: "The actual existence of a statute, prior
to such a determination of [unconstitutionality], is
an operative fact and may have consequences
which cannot justly be ignored. The past cannot
always be erased by a new judicial declaration.
The effect of the subsequent ruling as to
invalidity may have to be considered in various
aspects, with respect to particular relations,
individual and corporate, and particular conduct,
private and official." (Chicot County Drainage
Dist. v. Baxter States Bank, 308 US 371, 374
[1940]). This language has been quoted with
approval in a resolution in Araneta v. Hill (93 Phil.
1002 [1952]) and the decision inManila Motor
Co., Inc. v. Flores (99 Phil. 738 [1956]). An even

more recent instance is the opinion of Justice

Zaldivar speaking for the Court in Fernandez
v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp.
434-435)
The "operative fact" doctrine realizes that in declaring a law or
rule null and void, undue harshness and resulting unfairness
must be avoided. It is now almost the end of 1991. To require
various companies to reach back to 1975 now and nullify acts
done in good faith is unduly harsh. 1984 is a fairer reckoning
period under the facts of this case.
Applying the aforementioned doctrine to the case at bar, it is
not far-fetched that Nestle, relying on the implicit validity of the
implementing rule and policy instruction before this Court
nullified them, and thinking that it was not obliged to give
holiday pay benefits to its monthly paid employees, may have
been moved to grant other concessions to its employees,
especially in the collective bargaining agreement. This
possibility is bolstered by the fact that respondent Nestle's
employees are among the highest paid in the industry. With this
consideration, it would be unfair to impose additional burdens
on Nestle when the non-payment of the holiday benefits up to
1984 was not in any way attributed to Nestle's fault.
The Court thereby resolves that the grant of holiday pay be
effective, not from the date of promulgation of the Chartered
Bank case nor from the date of effectivity of the Labor Code,
but from October 23, 1984, the date of promulgation of
the IBAA case.
WHEREFORE, the order of the voluntary arbitrator in hereby
MODIFIED. The divisor to be used in computing holiday pay shall
be 251 days. The holiday pay as above directed shall be
computed from October 23, 1984. In all other respects, the
order of the respondent arbitrator is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Melencio-Herrera, Paras, Feliciano, Padilla, Bidin,
Medialdea, Grio-Aquino, Regalado, Davide, Jr. and Romero, JJ.,
concur.
Cruz and Nocon, JJ., took no part.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 114698 July 3, 1995
WELLINGTON INVESTMENT AND MANUFACTURING
CORPORATION, petitioner,
vs.
CRESENCIANO B. TRAJANO, Under-Secretary of Labor and
Employment, ELMER ABADILLA, and 34
others, respondents.
NARVASA, C.J.:
The basic issue raised by petitioner in this case is, as its counsel
puts it, "whether or not a monthly-paid employee, receiving a
fixed monthly compensation, is entitled to an additional pay
aside from his usual holiday pay, whenever a regular holiday
falls on a Sunday."
The case arose from a routine inspection conducted by a Labor
Enforcement Officer on August 6, 1991 of the Wellington Flour
Mills, an establishment owned and operated by petitioner
Wellington Investment and Manufacturing Corporation
(hereafter, simply Wellington). The officer thereafter drew up a
report, a copy of which was "explained to and received by"
Wellington's personnel manager, in which he set forth his
finding of "(n)on-payment of regular holidays falling on a
Sunday for monthly-paid employees." 1
Wellington sought reconsideration of the Labor Inspector's
report, by letter dated August 10, 1991. It argued that "the
monthly salary of the company's monthly-salaried employees
already includes holiday pay for all regular holidays . . . (and
hence) there is no legal basis for the finding of alleged nonpayment of regular holidays falling on a Sunday." 2 It expounded
on this thesis in a position paper subsequently submitted to the
Regional Director, asserting that it pays its monthly-paid
employees a fixed monthly compensation "using the 314 factor
which undeniably covers and already includes payment for all
the working days in a month as well as all the 10 unworked
regular holidays within a year." 3

Wellington's arguments failed to persuade the Regional Director

who, in an Order issued on July 28, 1992, ruled that "when a
regular holiday falls on a Sunday, an extra or additional working
day is created and the employer has the obligation to pay the
employees for the extra day except the last Sunday of August
since the payment for the said holiday is already included in the
314 factor," and accordingly directed Wellington to pay its
employees compensation corresponding to four (4) extra
working days. 4
Wellington timely filed a motion for reconsideration of this Order
of August 10, 1992, pointing out that it was in effect being
compelled to "shell out an additional pay for an alleged extra
working day" despite its complete payment of all compensation
lawfully due its workers, using the 314 factor. 5 Its motion was
treated as an appeal and was acted on by respondent
Undersecretary. By Order dated September 22, the latter
affirmed the challenged order of the Regional Director, holding
that "the divisor being used by the respondent (Wellington)
does not reliably reflect the actual working days in a year, " and
consequently commanded Wellington to pay its employees the
"six additional working days resulting from regular holidays
falling on Sundays in 1988, 1989 and 1990." 6 Again, Wellington
moved for reconsideration, 7and again was rebuffed. 8
Wellington then instituted the special civil action of certiorari at
bar in an attempt to nullify the orders above mentioned. By
Resolution dated July 4, 1994, this Court authorized the
issuance of a temporary restraining order enjoining the
respondents from enforcing the questioned orders. 9
Every worker should, according to the Labor Code, 10 "be paid
his regular daily wage during regular holidays, except in retail
and service establishments regularly employing less than ten
(10) workers;" this, of course, even if the worker does no work
on these holidays. The regular holidays include: "New Year's
Day, Maundy Thursday, Good Friday, the ninth of April, the first
of May, the twelfth of June, the fourth of July, the thirtieth of
November, the twenty-fifth of December, and the day
designated by law for holding a general election (or national
referendum or plebiscite). 11
Particularly as regards employees "who are uniformly paid by
the month, "the monthly minimum wage shall not be less than
the statutory minimum wage multiplied by 365 days divided by

twelve." 12 This monthly salary shall serve as compensation "for

all days in the month whether worked or not," and "irrespective
of the number of working days therein."13 In other words,
whether the month is of thirty (30) or thirty-one (31) days'
duration, or twenty-eight (28) or twenty-nine (29) (as in
February), the employee is entitled to receive the entire
monthly salary. So, too, in the event of the declaration of any
special holiday, or any fortuitous cause precluding work on any
particular day or days (such as transportation strikes, riots, or
typhoons or other natural calamities), the employee is entitled
to the salary for the entire month and the employer has no right
to deduct the proportionate amount corresponding to the days
when no work was done. The monthly compensation is
evidently intended precisely to avoid computations and
adjustments resulting from the contingencies just mentioned
which are routinely made in the case of workers paid on daily
basis.
In Wellington's case, there seems to be no question that at the
time of the inspection conducted by the Labor Enforcement
Officer on August 6, 1991, it was and had been paying its
employees "a salary of not less than the statutory or
established minimum wage," and that the monthly salary thus
paid was "not . . . less than the statutory minimum wage
multiplied by 365 days divided by twelve," supra. There is, in
other words, no issue that to this extent, Wellington complied
with the minimum norm laid down by law.
Apparently the monthly salary was fixed by Wellington to
provide for compensation for every working day of the year
including the holidays specified by law and excluding only
Sundays. In fixing the salary, Wellington used what it calls the
"314 factor;" that is to say, it simply deducted 51 Sundays from
the 365 days normally comprising a year and used the
difference, 314, as basis for determining the monthly salary. The
monthly salary thus fixed actually covers payment for 314 days
of the year, including regular and special holidays, as well as
days when no work is done by reason of fortuitous cause, as
above specified, or causes not attributable to the employees.
The Labor Officer who conducted the routine inspection of
Wellington discovered that in certain years, two or three regular
holidays had fallen on Sundays. He reasoned that this had

precluded the enjoyment by the employees of a non-working

day, and the employees had consequently had to work an
additional day for that month. This ratiocination received the
approval of his Regional Director who opined 14 that "when a
regular holiday falls on a Sunday, an extra or additional working
day is created and the employer has the obligation to pay its
employees for the extra day except the last Sunday of August
since the payment for the said holiday is already included in the
314 factor."15
This ingenuous theory was adopted and further explained by
respondent Labor Undersecretary, to whom the matter was
appealed, as follows: 16
. . . By using said (314) factor, the respondent
(Wellington) assumes that all the regular holidays
fell on ordinary days and never on a Sunday.
Thus, the respondent failed to consider the
circumstance that whenever a regular holiday
coincides with a Sunday, an additional working
day is created and left unpaid. In other words,
while the said divisor may be utilized as proof
evidencing payment of 302 working days, 2
special days and the ten regular holidays in a
calendar year, the same does not cover or
include payment of additional working days
created as a result of some regular holidays
falling on Sundays.
He pointed out that in 1988 there was "an increase of three (3)
working days resulting from regular holidays falling on
Sundays;" hence Wellington "should pay for 317 days, instead
of 314 days." By the same process of ratiocination, respondent
Undersecretary theorized that there should be additional
payment by Wellington to its monthly-paid employees for "an
increment of three (3) working days" for 1989 and again, for
1990. What he is saying is that in those years, Wellington
should have used the "317 factor," not the "314 factor."
The theory loses sight of the fact that the monthly salary in
Wellington which is based on the so-called "314 factor"
accounts for all 365 days of a year; i.e., Wellington's "314
factor" leaves no day unaccounted for; it is paying for all the
days of a year with the exception only of 51 Sundays.

The respondents' theory would make each of the years in

question (1988, 1989, 1990), a year of 368 days. Pursuant to
this theory, no employer opting to pay his employees by the
month would have any definite basis to determine the number
of days in a year for which compensation should be given to his
work force. He would have to ascertain the number of times
legal holidays would fall on Sundays in all the years of the
expected or extrapolated lifetime of his business. Alternatively,
he would be compelled to make adjustments in his employees'
monthly salaries every year, depending on the number of times
that a legal holiday fell on a Sunday.
There is no provision of law requiring any employer to make
such adjustments in the monthly salary rate set by him to take
account of legal holidays falling on Sundays in a given year, or,
contrary to the legal provisions bearing on the point, otherwise
to reckon a year at more than 365 days. As earlier mentioned,
what the law requires of employers opting to pay by the month
is to assure that "the monthly minimum wage shall not be less
than the statutory minimum wage multiplied by 365 days
divided by twelve," 17 and to pay that salary "for all days in the
month whether worked or not," and "irrespective of the number
of working days therein." 18 That salary is due and payable
regardless of the declaration of any special holiday in the entire
country or a particular place therein, or any fortuitous cause
precluding work on any particular day or days (such as
transportation strikes, riots, or typhoons or other natural
calamities), or cause not imputable to the worker. And as also
earlier pointed out, the legal provisions governing monthly
compensation are evidently intended precisely to avoid recomputations and alterations in salary on account of the
contingencies just mentioned, which, by the way, are routinely
made between employer and employees when the wages are
paid on daily basis.
The public respondents argue that their challenged conclusions
and dispositions may be justified by Section 2, Rule X, Book III
of the Implementing Rules, giving the Regional Director power
19
. . . to order and administer (in cases where
employer-employee relations still exist), after due
notice and hearing, compliance with the labor

standards provisions of the Code and the other

labor legislations based on the findings of their
Regulations Officers or Industrial Safety Engineers
(Labor Standard and Welfare Officers) and made
in the course of inspection, and to issue writs of
execution to the appropriate authority for the
enforcement of his order, in line with the
provisions of Article 128 in relation to Articles 289
and 290 of the Labor Code, as amended. . . .
The respondents beg the question. Their argument assumes
that there are some "labor standards provisions of the Code and
the other labor legislations" imposing on employers the
obligation to give additional compensation to their monthly-paid
employees in the event that a legal holiday should fall on a
Sunday in a particular month with which compliance may be
commanded by the Regional Director when the existence of
said provisions is precisely the matter to be established.
In promulgating the orders complained of the public
respondents have attempted to legislate, or interpret legal
provisions in such a manner as to create obligations where none
are intended. They have acted without authority, or at the very
least, with grave abuse of their discretion. Their acts must be
nullified and set aside.
WHEREFORE, the orders complained of, namely: that of the
respondent Undersecretary dated September 22, 1993, and
that of the Regional Director dated July 30, 1992, are NULLIFIED
AND SET ASIDE, and the proceeding against petitioner
DISMISSED.
SO ORDERED.
Regalado, Puno and Mendoza, JJ., concur.

SICK LEAVE
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-23076
February 27, 1969

NICANOR M. BALTAZAR, plaintiff-appellee,

vs.
SAN MIGUEL BREWERY, INC., defendant-appellant.
Jose P. Osorio for plaintiff-appellee.
Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendantappellant.
DIZON, J.:
Appeal taken by San Miguel Brewery, Inc. to reverse the
decision of the Court of First Instance of Manila in Civil Case No.
32478 ordering it to pay appellee Nicanor M. Baltazar the total
amount of P1,680.00 representing his separation pay of one (1)
month and the money value at the rate of P240.00 monthly
of six months accumulated sick leave he was entitled to.
It appears that Baltazar was appointed salesman-in-charge of
appellant's Dagupan warehouse on October 1, 1955 with a
basic monthly pay of P240.00, P5.00 per diem and a
commission of P.075 per case sold.
On October 9, 1956 sixteen regular workers at appellant's
Dagupan warehouse went on a strike. For the purpose of
relieving the tension prevailing at the place because it was
alleged that the unfair treatment dispensed to the employees
by Baltazar was the cause of the strike Baltazar was recalled
to appellant's Manila office on October 13 of the same year
upon recommendation of its sales supervisor and industrial
relations officer, who found out, after a personal investigation,
that the employees' grievance was well founded. The day
following Baltazar's recall to Manila the strikers returned to work
voluntarily.
When Baltazar reported at appellant's main office in Manila on
October 15, 1956, the latter's sales supervisor informed him
that he was not to return to Dagupan anymore. Thereafter, he
reported for work at the main office aforesaid from October 16,
1956 until November 2 of the same year, apparently without
being given any specific work or assignment. From November 3,
1956 up to December 19 of the same year, or a period of more
than one and one-half months, he absented himself from work
without prior authority from his superiors and without advising
them or anybody else of the reason for his prolonged absence.
For this reason, pursuant firstly, to existing rules and
regulations considering ten unexcused or unauthorized
absences within a calendar year as sufficient ground for an

outright dismissal from employment, and secondly, the

provisions of appellant's health, welfare and retirement plan
requiring that sick leave, to be considered authorized or
excusable, must be certified to by the company physician,
appellant, by a letter dated December 31, 1956, informed
Baltazar that he was dismissed for cause effective November 30
of the same year.
Four months later, or more specifically on May 2, 1957, Baltazar
commenced the present action. After trial upon the issues
arising from the parties' pleadings, the trial court ruled that
Baltazar's dismissal was justified, and, as a consequence,
dismissed his complaint. For insufficiency of evidence, the court
also dismissed appellant's counterclaim. But despite the
dismissal of Baltazar's complaint and the finding that his
dismissal from employment was for cause, the trial court
ordered appellant to pay him one month separation pay, plus
the cash value of six months accumulated sick leave. So We are
now urged to reverse this portion of the decision upon the
following grounds:
I. The trial court erred in requiring the defendant
appellant to pay separation pay after having found and
declared as an established fact that the dismissal of
plaintiff-appellee was fully justified.
II. The trial court erred in awarding plaintiff-appellee the
money equivalent of an "accumulated sick leave of six
(6) months as terminal leave" despite its express
findings to the effect that (1) sick leave benefits under
defendant-appellant's health, welfare and retirement
plan may be enjoyed only if and when the sickness is
certified to by the company physician a requirement
which was admittedly not complied with, and (2) said
benefits are "non-commutative and may not therefore be
commuted to cash".lawphi1.nt
The trial court found that appellee's absence for forty-eight
successive days was without permission or authority of his
superiors and, as a result, ruled that it was sufficient cause for
his dismissal in accordance with the rules and regulations of his
employer. This must be deemed final, because Baltazar did not
appeal.
It is settled in this jurisdiction that one not employed for a
definite period is not entitled to one-month notice or to one-

month salary in lieu thereof if his dismissal was for cause

(Republic Act No. 1052; Marcaida vs. Philippine Education
Company, 53 O.G. No. 23, p. 8559). In the Marcaida case this
Court, speaking through the now Chief Justice Roberto
Concepcion, said the following:
Republic Act No. 1052 makes reference to termination of
employment, instead of dismissal, precisely to exclude
employees separated from the service for causes
attributable to their own fault.
Again, Republic Act No. 1052 is limited in its operation,
to cases of employment without definite period. When
the employment is for a fixed duration, the employer
may terminate it even before the expiration of the
stipulated period, should there be a substantial breach of
his obligations by the employee; (Articles 1169, 1191
and 1198, Civil Code of the Philippines; Pabalan vs.
Velez, 22 Phil. 29; Gonzales vs. Haberer 47 Phil. 380;
Hodges vs. Granada, 59 Phil. 429; De la Cruz vs. Legaspi,
51 Off. Gaz. 6212) in which event the latter is not
entitled to advance notice or separation pay. It would,
patently, be absurd to grant a right thereto to an
employee guilty of the same breach of obligation, when
the employment is without a definite period, as if he
were entitled to greater protection than employees
engaged for a fixed duration, .... It is doubtful whether
Congress could validly require the employer to give the
separation pay in question if the employment were
terminated due to the fault of the employee. Indeed, the
imposition of said obligation, under such conditions,
would expose Republic Act No. 1052 to the charge that it
would constitute an unreasonable restraint upon the
liberty of the employer, and a deprivation of his property
without due process of law.
We rule therefore that appellee is not entitled to one month
separation pay.
In connection with the question of whether or not appellee is
entitled to the cash value of six months accumulated sick leave,
it appears that while under the last paragraph of Article 5 of
appellant's Rules and Regulations of the Health, Welfare and
Retirement Plan (Exhibit, 3), unused sick leave may be

accumulated up to a maximum of six months, the same is not

commutable or payable in cash upon the employee's option.
In our view, the only meaning and import of said rule and
regulation is that if an employee does not choose to enjoy his
yearly sick leave of thirty days, he may accumulate such sick
leave up to a maximum of six months and enjoy this six months
sick leave at the end of the sixth year but may not commute it
to cash.
WHEREFORE, the appealed decision is hereby reversed, without
special pronouncement as to costs. It is so ordered.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro,
Teehankee and Barredo, JJ., concur.
Sanchez and Fernando, JJ., reserve their votes.
Capistrano, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 102132. March 19, 1993.

DAVAO INTEGRATED PORT STEVEDORING SERVICES, petitioner,
vs. RUBEN V. ABARQUEZ, in his capacity as an accredited
Voluntary Arbitrator and THE ASSOCIATION OF TRADE UNIONS
(ATU-TUCP), respondents.
Libron, Gaspar & Associates for petitioner.
Bansalan B. Metilla for Association of Trade Unions (ATUTUCP).
SYLLABUS
1. LABOR LAWS AND SOCIAL LEGISLATION; LABOR RELATIONS;
COLLECTIVE BARGAINING AGREEMENT; DEFINED; NATURE
THEREOF; CONSTRUCTION TO BE PLACED THEREON. A
collective bargaining agreement (CBA), as used in Article 252 of
the Labor Code, refers to a contract executed upon request of
either the employer or the exclusive bargaining representative
incorporating the agreement reached after negotiations with
respect to wages, hours of work and all other terms and
conditions of employment, including proposals for adjusting any
grievances or questions arising under such agreement. While
the terms and conditions of a CBA constitute the law between
the parties, it is not, however, an ordinary contract to which is

applied the principles of law governing ordinary contracts. A

CBA, as a labor contract within the contemplation of Article
1700 of the Civil Code of the Philippines which governs the
relations between labor and capital, is not merely contractual in
nature but impressed with public interest, thus, it must yield to
the common good. As such, it must be construed liberally rather
than narrowly and technically, and the courts must place a
practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and
purpose which it is intended to serve.
2. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. It is thus erroneous
for petitioner to isolate Section 1, Article VIII of the 1989 CBA
from the other related section on sick leave with pay benefits,
specifically Section 3 thereof, in its attempt to justify the
discontinuance or withdrawal of the privilege of commutation or
conversion to cash of the unenjoyed portion of the sick leave
benefit to regular intermittent workers. The manner they were
deprived of the privilege previously recognized and extended to
them by petitioner-company during the lifetime of the CBA of
October 16, 1985 until three (3) months from its renewal on
April 15, 1989, or a period of three (3) years and nine (9)
months, is not only tainted with arbitrariness but likewise
discriminatory in nature. It must be noted that the 1989 CBA
has two (2) sections on sick leave with pay benefits which apply
to two (2) distinct classes of workers in petitioner's company,
namely: (1) the regular non-intermittent workers or those
workers who render a daily eight-hour service to the company
and are governed by Section 1, Article VIII of the 1989 CBA; and
(2) intermittent field workers who are members of the regular
labor pool and the present regular extra labor pool as of the
signing of the agreement on April 15, 1989 or those workers
who have irregular working days and are governed by Section 3,
Article VIII of the 1989 CBA. It is not disputed that both classes
of workers are entitled to sick leave with pay benefits provided
they comply with the conditions set forth under Section 1 in
relation to the last paragraph of Section 3, to wit: (1) the
employee-applicant must be regular or must have rendered at
least one year of service with the company; and (2) the
application must be accompanied by a certification from a
company-designated physician. the phrase "herein sick leave
privilege," as used in the last sentence of Section 1, refers to
the privilege of having a fixed 15-day sick leave with pay which,
as mandated by Section 1, only the non-intermittent workers
are entitled to. This fixed 15-day sick leave with pay benefit
should be distinguished from the variable number of days of
sick leave, not to exceed 15 days, extended to intermittent

workers under Section 3 depending on the number of hours of

service rendered to the company, including overtime pursuant
to the schedule provided therein. It is only fair and reasonable
for petitioner-company not to stipulate a fixed 15-day sick leave
with pay for its regular intermittent workers since, as the term
"intermittent" implies, there is irregularity in their work-days.
Reasonable and practical interpretation must be placed on
contractual provisions. Interpetatio fienda est ut res magis
valeat quam pereat. Such interpretation is to be adopted, that
the thing may continue to have efficacy rather than fail.
3. ID.; ID.; ID.; SICK LEAVE BENEFITS; NATURE AND PURPOSE.
Sick leave benefits, like other economic benefits stipulated in
the CBA such as maternity leave and vacation leave benefits,
among others, are by their nature, intended to be replacements
for regular income which otherwise would not be earned
because an employee is not working during the period of said
leaves. They are non-contributory in nature, in the sense that
the employees contribute nothing to the operation of the
benefits. By their nature, upon agreement of the parties, they
are intended to alleviate the economic condition of the workers.
4. ID.; ID.; JURISDICTION OF VOLUNTARY ARBITRATOR; CASE AT
BAR. Petitioner-company's objection to the authority of the
Voluntary Arbitrator to direct the commutation of the unenjoyed
portion of the sick leave with pay benefits of intermittent
workers in his decision is misplaced. Article 261 of the Labor
Code is clear. The questioned directive of the herein public
respondent is the necessary consequence of the exercise of his
arbitral power as Voluntary Arbitrator under Article 261 of the
Labor Code "to hear and decide all unresolved grievances
arising from the interpretation or implementation of the
Collective Bargaining Agreement." We, therefore, find that no
grave abuse of discretion was committed by public respondent
in issuing the award (decision). Moreover, his interpretation of
Sections 1 and 3, Article VIII of the 1989 CBA cannot be faulted
with and is absolutely correct.
5. ID.; CONDITIONS OF EMPLOYMENT; PROHIBITION AGAINST
ELIMINATION OR DIMINUTION OF BENEFITS; BENEFITS GRANTED
PURSUANT TO COMPANY PRACTICE OR POLICY CANNOT BE
PEREMPTORILY WITHDRAWN. Whatever doubt there may
have been early on was clearly obliterated when petitionercompany recognized the said privilege and paid its intermittent
workers the cash equivalent of the unenjoyed portion of their
sick leave with pay benefits during the lifetime of the CBA of
October 16, 1985 until three (3) months from its renewal on
April 15, 1989. Well-settled is it that the said privilege of
commutation or conversion to cash, being an existing benefit,

the petitioner-company may not unilaterally withdraw, or

diminish such benefits. It is a fact that petitioner-company had,
on several instances in the past, granted and paid the cash
equivalent of the unenjoyed portion of the sick leave benefits of
some intermittent workers. Under the circumstances, these may
be deemed to have ripened into company practice or policy
which cannot be peremptorily withdrawn.
DECISION
ROMERO, J p:
In this petition for certiorari, petitioner Davao Integrated Port
Services Corporation seeks to reverse the Award 1 issued on
September 10, 1991 by respondent Ruben V. Abarquez, in his
capacity as Voluntary Arbitrator of the National Conciliation and
Mediation Board, Regional Arbitration Branch XI in Davao City in
Case No. AC-211-BX1-10-003-91 which directed petitioner to
grant and extend the privilege of commutation of the unenjoyed
portion of the sick leave with pay benefits to its intermittent
field workers who are members of the regular labor pool and the
present regular extra pool in accordance with the Collective
Bargaining Agreement (CBA) executed between petitioner and
private respondent Association of Trade Unions (ATU-TUCP),
from the time it was discontinued and henceforth.
The facts are as follows:
Petitioner Davao Integrated Port Stevedoring Services
(petitioner-company) and private respondent ATU-TUCP (Union),
the exclusive collective bargaining agent of the rank and file
workers of petitioner-company, entered into a collective
bargaining agreement (CBA) on October 16, 1985 which, under
Sections 1 and 3, Article VIII thereof, provide for sick leave with
pay benefits each year to its employees who have rendered at
least one (1) year of service with the company, thus:
"ARTICLE VIII
Section 1. Sick Leaves The Company agrees to grant 15 days
sick leave with pay each year to every regular non-intermittent
worker who already rendered at least one year of service with
the company. However, such sick leave can only be enjoyed
upon certification by a company designated physician, and if
the same is not enjoyed within one year period of the current
year, any unenjoyed portion thereof, shall be converted to cash
and shall be paid at the end of the said one year period. And
provided however, that only those regular workers of the
company whose work are not intermittent, are entitled to the
herein sick leave privilege.
xxx xxx xxx
Section 3. All intermittent field workers of the company who
are members of the Regular Labor Pool shall be entitled to

vacation and sick leaves per year of service with pay under the
following schedule based on the number of hours rendered
including overtime, to wit:
Hours of Service Per Vacation Sick Leave
Calendar Year Leave
Less than 750 NII NII
751 825 6 days 6 days
826 900 7 7
901 925 8 8
926 1,050 9 9
1,051 1,125 10 10
1,126 1,200 11 11
1,201 1,275 12 12
1,276 1,350 13 13
1,351 1,425 14 14
1,426 1,500 15 15
The conditions for the availment of the herein vacation and sick
leaves shall be in accordance with the above provided Sections
1 and 2 hereof, respectively."
Upon its renewal on April 15, 1989, the provisions for sick leave
with pay benefits were reproduced under Sections 1 and 3,
Article VIII of the new CBA, but the coverage of the said benefits
was expanded to include the "present Regular Extra Labor Pool
as of the signing of this Agreement." Section 3, Article VIII, as
revised, provides, thus:
"Section 3. All intermittent field workers of the company who
are members of the Regular Labor Pool and present Regular
Extra Labor Pool as of the signing of this agreement shall be
entitled to vacation and sick leaves per year of service with pay
under the following schedule based on the number of hours
rendered including overtime, to wit:
Hours of Service Per Vacation Sick Leave
Calendar Year Leave
Less than 750 NII NII
751 825 6 days 6 days
826 900 7 7
901 925 8 8
926 1,050 9 9
1,051 1,125 10 10
1,126 1,200 11 11
1,201 1,275 12 12
1,276 1,350 13 13
1,351 1,425 14 14
1,426 1,500 15 15

The conditions for the availment of the herein vacation and sick
leaves shall be in accordance with the above provided Sections
1 and 2 hereof, respectively."
During the effectivity of the CBA of October 16, 1985 until three
(3) months after its renewal on April 15, 1989, or until July 1989
(a total of three (3) years and nine (9) months), all the field
workers of petitioner who are members of the regular labor pool
and the present regular extra labor pool who had rendered at
least 750 hours up to 1,500 hours were extended sick leave
with pay benefits. Any unenjoyed portion thereof at the end of
the current year was converted to cash and paid at the end of
the said one-year period pursuant to Sections 1 and 3, Article
VIII of the CBA. The number of days of their sick leave per year
depends on the number of hours of service per calendar year in
accordance with the schedule provided in Section 3, Article VIII
of the CBA.
The commutation of the unenjoyed portion of the sick leave
with pay benefits of the intermittent workers or its conversion to
cash was, however, discontinued or withdrawn when petitionercompany under a new assistant manager, Mr. Benjamin Marzo
(who replaced Mr. Cecilio Beltran, Jr. upon the latter's
resignation in June 1989), stopped the payment of its cash
equivalent on the ground that they are not entitled to the said
benefits under Sections 1 and 3 of the 1989 CBA.
The Union objected to the said discontinuance of commutation
or conversion to cash of the unenjoyed sick leave with pay
benefits of petitioner's intermittent workers contending that it is
a deviation from the true intent of the parties that negotiated
the CBA; that it would violate the principle in labor laws that
benefits already extended shall not be taken away and that it
would result in discrimination between the non-intermittent and
the intermittent workers of the petitioner-company.
Upon failure of the parties to amicably settle the issue on the
interpretation of Sections 1 and 3, Article VIII of the 1989 CBA,
the Union brought the matter for voluntary arbitration before
the National Conciliation and Mediation Board, Regional
Arbitration Branch XI at Davao City by way of complaint for
enforcement of the CBA. The parties mutually designated public
respondent Ruben Abarquez, Jr. to act as voluntary arbitrator.
After the parties had filed their respective position papers, 2
public respondent Ruben Abarquez, Jr. issued on September 10,
1991 an Award in favor of the Union ruling that the regular
intermittent workers are entitled to commutation of their
unenjoyed sick leave with pay benefits under Sections 1 and 3
of the 1989 CBA, the dispositive portion of which reads:

"WHEREFORE, premises considered, the management of the

respondent Davao Integrated Port Stevedoring Services
Corporation is hereby directed to grant and extend the sick
leave privilege of the commutation of the unenjoyed portion of
the sick leave of all the intermittent field workers who are
members of the regular labor pool and the present extra pool in
accordance with the CBA from the time it was discontinued and
henceforth.
SO ORDERED."
Petitioner-company disagreed with the aforementioned ruling of
public respondent, hence, the instant petition.
Petitioner-company argued that it is clear from the language
and intent of the last sentence of Section 1, Article VIII of the
1989 CBA that only the regular workers whose work are not
intermittent are entitled to the benefit of conversion to cash of
the unenjoyed portion of sick leave, thus: ". . . And provided,
however, that only those regular workers of the Company
whose work are not intermittent are entitled to the herein sick
leave privilege."
Petitioner-company further argued that while the intermittent
workers were paid the cash equivalent of their unenjoyed sick
leave with pay benefits during the previous management of Mr.
Beltran who misinterpreted Sections 1 and 3 of Article VIII of the
1985 CBA, it was well within petitioner-company's rights to
rectify the error it had committed and stop the payment of the
said sick leave with pay benefits. An error in payment,
according to petitioner-company, can never ripen into a
practice.
We find the arguments unmeritorious.
A collective bargaining agreement (CBA), as used in Article 252
of the Labor Code, refers to a contract executed upon request of
either the employer or the exclusive bargaining representative
incorporating the agreement reached after negotiations with
respect to wages, hours of work and all other terms and
conditions of employment, including proposals for adjusting any
grievances or questions arising under such agreement.
While the terms and conditions of a CBA constitute the law
between the parties, 3 it is not, however, an ordinary contract
to which is applied the principles of law governing ordinary
contracts. 4 A CBA, as a labor contract within the contemplation
of Article 1700 of the Civil Code of the Philippines which
governs the relations between labor and capital, is not merely
contractual in nature but impressed with public interest, thus, it
must yield to the common good. As such, it must be construed
liberally rather than narrowly and technically, and the courts
must place a practical and realistic construction upon it, giving

due consideration to the context in which it is negotiated and

purpose which it is intended to serve. 5
It is thus erroneous for petitioner to isolate Section 1, Article VIII
of the 1989 CBA from the other related section on sick leave
with pay benefits, specifically Section 3 thereof, in its attempt
to justify the discontinuance or withdrawal of the privilege of
commutation or conversion to cash of the unenjoyed portion of
the sick leave benefit to regular intermittent workers. The
manner they were deprived of the privilege previously
recognized and extended to them by petitioner-company during
the lifetime of the CBA of October 16, 1985 until three (3)
months from its renewal on April 15, 1989, or a period of three
(3) years and nine (9) months, is not only tainted with
arbitrariness but likewise discriminatory in nature. Petitionercompany is of the mistaken notion that since the privilege of
commutation or conversion to cash of the unenjoyed portion of
the sick leave with pay benefits is found in Section 1, Article
VIII, only the regular non-intermittent workers and no other can
avail of the said privilege because of the proviso found in the
last sentence thereof.
It must be noted that the 1989 CBA has two (2) sections on sick
leave with pay benefits which apply to two (2) distinct classes of
workers in petitioner's company, namely: (1) the regular nonintermittent workers or those workers who render a daily eighthour service to the company and are governed by Section 1,
Article VIII of the 1989 CBA; and (2) intermittent field workers
who are members of the regular labor pool and the present
regular extra labor pool as of the signing of the agreement on
April 15, 1989 or those workers who have irregular working
days and are governed by Section 3, Article VIII of the 1989
CBA.
It is not disputed that both classes of workers are entitled to
sick leave with pay benefits provided they comply with the
conditions set forth under Section 1 in relation to the last
paragraph of Section 3, to wit: (1) the employee-applicant must
be regular or must have rendered at least one year of service
with the company; and (2) the application must be
accompanied by a certification from a company-designated
physician.
Sick leave benefits, like other economic benefits stipulated in
the CBA such as maternity leave and vacation leave benefits,
among others, are by their nature, intended to be replacements
for regular income which otherwise would not be earned
because an employee is not working during the period of said
leaves. 6 They are non-contributory in nature, in the sense that
the employees contribute nothing to the operation of the

benefits. 7 By their nature, upon agreement of the parties, they

are intended to alleviate the economic condition of the workers.
After a careful examination of Section 1 in relation to Section 3,
Article VIII of the 1989 CBA in light of the facts and
circumstances attendant in the instant case, we find and so
hold that the last sentence of Section 1, Article VIII of the 1989
CBA, invoked by petitioner-company does not bar the regular
intermittent workers from the privilege of commutation or
conversion to cash of the unenjoyed portion of their sick leave
with pay benefits, if qualified. For the phrase "herein sick leave
privilege," as used in the last sentence of Section 1, refers to
the privilege of having a fixed 15-day sick leave with pay which,
as mandated by Section 1, only the non-intermittent workers
are entitled to. This fixed 15-day sick leave with pay benefit
should be distinguished from the variable number of days of
sick leave, not to exceed 15 days, extended to intermittent
workers under Section 3 depending on the number of hours of
service rendered to the company, including overtime pursuant
to the schedule provided therein. It is only fair and reasonable
for petitioner-company not to stipulate a fixed 15-day sick leave
with pay for its regular intermittent workers since, as the term
"intermittent" implies, there is irregularity in their work-days.
Reasonable and practical interpretation must be placed on
contractual provisions. Interpetatio fienda est ut res magis
valeat quam pereat. Such interpretation is to be adopted, that
the thing may continue to have efficacy rather than fail. 8
We find the same to be a reasonable and practical distinction
readily discernible in Section 1, in relation to Section 3, Article
VIII of the 1989 CBA between the two classes of workers in the
company insofar as sick leave with pay benefits are concerned.
Any other distinction would cause discrimination on the part of
intermittent workers contrary to the intention of the parties that
mutually agreed in incorporating the questioned provisions in
the 1989 CBA.
Public respondent correctly observed that the parties to the CBA
clearly intended the same sick leave privilege to be accorded
the intermittent workers in the same way that they are both
given the same treatment with respect to vacation leaves - noncommutable and non-cumulative. If they are treated equally
with respect to vacation leave privilege, with more reason
should they be on par with each other with respect to sick leave
privileges. 9 Besides, if the intention were otherwise, during its
renegotiation, why did not the parties expressly stipulate in the
1989 CBA that regular intermittent workers are not entitled to
commutation of the unenjoyed portion of their sick leave with
pay benefits?

Whatever doubt there may have been early on was clearly

obliterated when petitioner-company recognized the said
privilege and paid its intermittent workers the cash equivalent
of the unenjoyed portion of their sick leave with pay benefits
during the lifetime of the CBA of October 16, 1985 until three
(3) months from its renewal on April 15, 1989. Well-settled is it
that the said privilege of commutation or conversion to cash,
being an existing benefit, the petitioner-company may not
unilaterally withdraw, or diminish such benefits. 10 It is a fact
that petitioner-company had, on several instances in the past,
granted and paid the cash equivalent of the unenjoyed portion
of the sick leave benefits of some intermittent workers. 11
Under the circumstances, these may be deemed to have
ripened into company practice or policy which cannot be
peremptorily withdrawn. 12
Moreover, petitioner-company's objection to the authority of the
Voluntary Arbitrator to direct the commutation of the unenjoyed
portion of the sick leave with pay benefits of intermittent
workers in his decision is misplaced. Article 261 of the Labor
Code is clear. The questioned directive of the herein public
respondent is the necessary consequence of the exercise of his
arbitral power as Voluntary Arbitrator under Article 261 of the
Labor Code "to hear and decide all unresolved grievances
arising from the interpretation or implementation of the
Collective Bargaining Agreement." We, therefore, find that no
grave abuse of discretion was committed by public respondent
in issuing the award (decision). Moreover, his interpretation of
Sections 1 and 3, Article VIII of the 1989 CBA cannot be faulted
with and is absolutely correct.
WHEREFORE, in view of the foregoing, the petition is
DISMISSED. The award (decision) of public respondent dated
September 10, 1991 is hereby AFFIRMED. No costs.
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Melo, JJ., concur.
Gutierrez, Jr., on terminal leave

SECOND DIVISION
[G.R. No. 149252. April 28, 2005]
DONALD
KWOK, petitioner,
vs. PHILIPPINE
CARPET
MANUFACTURING CORPORATION, respondent.

DECISION
CALLEJO, SR., J.:
This is a petition for review of the Decision [1] of the Court of
Appeals (CA) in CA-G.R. SP No. 60232 dismissing Donald Kwoks
petition for review on certiorari and affirming the majority
Decision of the National Labor Relations Commission (NLRC), as
well as its resolution in NLRC NCR Case No. 00-12-07454-96
dismissing the motion for reconsideration of the said decision.
The Antecedents
In 1965, petitioner Donald Kwok and his father-in-law
Patricio L. Lim, along with some other stockholders, established
a corporation, the respondent Philippine Carpet Manufacturing
Corporation (PCMC). The petitioner became its general
manager, executive vice-president and chief operations officer.
Lim, on the other hand, was its president and chairman of the
board of directors. When the petitioner retired 36 years later or
on October 31, 1996, he was receiving a monthly salary
of P160,000.00.[2] He demanded the cash equivalent of what he
believed to be his accumulated vacation and sick leave credits
during the entire length of his service with the respondent
corporation, i.e., from November 16, 1965 to October 31, 1996,
in the total amount of P7,080,546.00 plus interest.[3] However,
the respondent corporation refused to accede to the petitioners
demands, claiming that the latter was not entitled thereto. [4]
The petitioner filed a complaint against the respondent
corporation for the payment of his accumulated vacation and
sick leave credits before the NLRC. He claimed that Lim made a
verbal promise to give him unlimited sick leave and vacation
leave benefits and its cash conversion upon his retirement or
resignation without the need for any application therefor. In
addition, Lim also promised to grant him other benefits, such as
golf and country club membership; the privilege to charge the
respondent corporations account; 6% profit-sharing in the net
income of the respondent corporation (while Lim got 4%); and
other corporate perquisites. According to the petitioner, all of
these promises were complied with, except for the grant of the

cash equivalent of his accumulated vacation and sick leave

credits upon his retirement.[5]
The respondent corporation denied all these, claiming that
upon the petitioners retirement, he received the amount
of P6,902,387.19 representing all the benefits due him. Despite
this, the petitioner again demanded P7,080,546.00, which
demand was without factual and legal basis. The respondent
corporation asserted that the chairman of its board of directors
and its president/vice-president had unlimited discretion in the
use of their time, and had never been required to file
applications for vacation and sick leaves; as such, the said
officers were not entitled to vacation and sick leave benefits.
The respondent corporation, likewise, pointed out that even if
the petitioner was entitled to the said additional benefits, his
claim had already prescribed. It further averred that it had no
policy to grant vacation and sick leave credits to the petitioner.
[6]

In his Affidavit[7] dated May 19, 1998, Lim denied making

any such verbal promise to his son-in-law on the grant of
unlimited vacation and sick leave credits and the cash
conversion thereof. Lim averred that the petitioner had received
vacation and sick leave benefits from 1994 to 1996. Moreover,
assuming that he did make such promise to the petitioner, the
same had not been confirmed or approved via resolution of the
respondent corporations board of directors.
It was further pointed out that as per the Memorandum
dated November 6, 1981, only regular employees and
managerial and confidential employees falling under Category I
were entitled to vacation and sick leave credits. The petitioner,
whose position did not fall under Category I, was, thus, not
entitled to the benefits under the said memorandum. The
respondent corporation alleged that this was admitted by the
petitioner himself and affirmed by Raoul Rodrigo, its incumbent
executive vice-president and general manager.
In a Decision[8] dated November 27, 1998, the Labor Arbiter
ruled in favor of the petitioner. The fallo of the decision reads:
WHEREFORE, all the foregoing premises being considered,
judgment is hereby rendered ordering the respondent company
to pay complainant the sum of P7,080,546.00, plus ten percent
(10%) thereof as and for attorneys fees.

SO ORDERED.[9]
Undaunted, the respondent corporation
decision to the NLRC, alleging that:

appealed

the

I. THE LABOR ARBITER ERRED IN CONCLUDING THAT

KWOK WAS COVERED BY THE NOVEMBER 6, 1981
MEMORANDUM ON VACATION AND SICK LEAVE
CREDITS.[10]
II. THE LABOR ARBITER ERRED IN CONCLUDING THAT IT
WAS DISCRIMINATORY NOT TO GRANT KWOK THESE
BENEFITS.[11]
III. KWOKS CLAIMS ARE BASELESS.[12]
IV. KWOKS CLAIMS FOR BENEFITS ACCRUING FROM
1966 ARE BARRED BY PRESCRIPTION.[13]
V.
THERE
IS
NO
BASIS
FOR
THE
AWARD
OF P7,080,546.00.[14]
The respondent corporation averred that based on the
petitioners memorandum, his admissions and the contract of
employment, the petitioner was not entitled to the cash
conversion of his sick and vacation leave credits. While the
respondent corporation conceded that the petitioner may have
been entitled to unlimited sick and vacation leave benefits
during his employment, it maintained that no such promise was
made by Lim to convert the same; even assuming that such
verbal promise was made, the respondent corporation was not
bound thereby since the petitioner failed to adduce the written
conformity of its board of directors. The respondent corporation
insisted that the claims of the petitioner were barred under
Article 291 of the Labor Code.
For his part, the petitioner made the following averments in
his memorandum:
The non-performance by PCMC of this particular promise to
convert in cash all of his unused cash (sic) and sick leave
credits was precipitated by the falling out of the marriage
between Mr. Kwok and his wife, the daughter of Mr. Lim. In fact,
even while Mr. Kwok was still the Executive Vice-President and
General Manager of PCMC, when the falling out of the said
marriage became apparent, the other benefits or perquisites

which Mr. Kwok used to enjoy were immediately curtailed by Mr.

Lim to the prejudice of Mr. Kwok.[15]
On November 29, 1999, the NLRC, by majority vote,
rendered judgment granting the appeal, reversing and setting
aside the decision of the Labor Arbiter. [16] The NLRC ordered the
dismissal of the complaint. Commissioner Angelita A. Gacutan
filed a dissenting opinion.[17]
Aggrieved, the petitioner filed a petition for review with the
CA, on the following grounds:
I
THE COMMISSION ACTED WITHOUT OR IN EXCESS OF ITS
JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
DECLARED THAT THE VERBAL PROMISE OF MR. LIM TO
PETITIONER WAS UNENFORCEABLE.
II
THE COMMISSION ACTED WITHOUT OR IN EXCESS OF ITS
JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
RULED THAT THE VERBAL PROMISE BY MR. LIM TO PETITIONER
WAS NOT BINDING AS IT WAS NOT APPROVED BY THE BOARD
OF DIRECTORS.
III
THE COMMISSION ACTED WITHOUT OR IN EXCESS OF ITS
JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
IGNORED STRONG EVIDENCE THAT PCMC CLOTHED MR. LIM
WITH AWESOME POWERS TO GRANT BENEFITS TO ITS
EMPLOYEES INCLUDING PETITIONER AND RATIFIED THE SAME BY
ITS SILENCE AND WHEN IT IGNORED TOO EXISTING
JURISPRUDENCE ON THE MATTER.
IV

THE COMMISSION ACTED WITHOUT OR IN EXCESS OF ITS

JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
IGNORED STRONG AND CLEAR EVIDENCE THAT IN PCMC THE
GIVING OF BENEFITS TO PETITIONER, THOUGH NOT IN WRITING,
WAS A PREVALENT PRACTICE.
V
THE COMMISSION ACTED WITHOUT OR IN EXCESS OF ITS
JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
RULED THAT THE MEMORANDUM DATED APRIL 26, 1997
APPLICABLE TO MR. RAOUL RODRIGO WAS ALSO APPLICABLE TO
PETITIONER.[18]
On February 28, 2001, the CA rendered judgment affirming
the decision of the NLRC and dismissing the petition. [19] The
petitioners motion for reconsideration thereof was denied by
the appellate court, per its Resolution[20] dated July 17, 2001.
The petitioner, thus, filed the instant petition for review on
certiorari with this Court, assailing the decision and resolution of
the CA on the following claims:
I
The Hon. Court of Appeals, contrary to law, gravely erred and
disregarded established jurisprudence in ruling that petitioner
has not adduced sufficient evidence to support his claim that he
was, indeed, promised the cash conversion of his unused
vacation and sick leave credits upon retirement. [21]
II
The Hon. Court of Appeals gravely erred in ruling that even if
private respondents (sic) Mr. Lim did make him such promise,
the same cannot be enforced.[22]
III

The Hon. Court of Appeals gravely erred and disregarded clear

jurisprudence on the matter when it ruled that there is no
showing that private respondent, thru its board of directors
either recognized, approved or ratified the promise made by Mr.
Lim to petitioner.[23]
As gleaned from his Memorandum, the petitioner posits
that he had adduced substantial evidence to prove that Lim, as
president and chairman of the respondent corporations board of
directors, made a verbal promise to give him the cash
conversion of his accumulated vacation and sick leave credits
upon his retirement (that is, benefits at par with the number of
days to which the officer next in rank to him was entitled).
According to the petitioner, his claim is fortified by the fact that
his successor, Raoul Rodrigo, has unlimited vacation and sick
leave credits. The petitioner further asserts that he would not
have accepted the positions in the respondent corporation
without such benefit, especially since his subordinates were
also enjoying the same. He posits that he was entitled to the
said privilege because of his rank. He, likewise, claims that, in
contrast to the evidence he has presented, the respondent
corporation failed to adduce proof of its affirmative allegations.
The petitioner further argues that his complaint was not
time-barred since he filed it on December 5, 1996. Even if this
were so, he is, nevertheless, entitled to the cash value of his
vacation and sick leave credits for three years before his
retirement. Moreover, the evidence on record shows that
officers belonging to Category I had been granted the cash
conversion of their earned leave credits after the lapse of three
years.
The respondent corporation, for its part, asserts that the
petitioner failed to adduce substantial evidence to the claims in
his complaint. Even if Lim had made such verbal promise to the
petitioner, the same is not binding on the respondent
corporation absent its conformity through board resolution.
Moreover, the petitioner is not covered by the Memorandum
dated November 6, 1981 because he had unlimited leave
credits; hence, it cannot be gainsaid that he still had unused
leave credits to be converted. According to the respondent
corporation, the petitioner himself admitted that he was not

included in the Memorandum dated November 6, 1981; and

even assuming that he was covered by the said memorandum,
the fact that his complaint was filed only in 1996 precludes him
from claiming the cash conversion of such leave credits for the
years 1966 to 1993.
The Courts Ruling
The petition has no merit.
The threshold issue in this case is factual whether or not
the petitioner is entitled, based on the documentary and
testimonial evidence on record, to the cash value of his
vacation and sick leave credits in the total amount
of P7,080,546.00. The resolution of the issue is riveted to our
resolution of whether the petitioners mainly testimonial
evidence of an alleged verbal promise made by a corporate
officer to grant him the privilege of converting accumulated
vacation and sick leave credits after retirement or separation
from employment is entitled to probative weight.
Under Rule 45 of the Rules of Court, only questions of law
may be raised under a petition for review on certiorari. The
Court, not being a trier of facts, is not wont to reexamine and
reevaluate the evidence of the parties, whether testimonial or
documentary. Moreover, the findings of facts of the CA on
appeal from the NLRC are, more often than not, given
conclusive effect by the Court. The Court may delve into and
resolve factual issues only in exceptional circumstances, such
as when the findings of facts of the Labor Arbiter, on one hand,
and those of the NLRC and the CA, on the other, are capricious
and arbitrary; or when the CA has reached an erroneous
conclusion based on arbitrary findings of fact; and when
substantial justice so requires. In this case, however, the
petitioner failed to convince the Court that the factual findings
of the CA which affirmed the findings of the NLRC on appeal, as
well as its conclusions based on the said findings, are capricious
and arbitrary.
While the petitioner was unequivocal in claiming that the
respondent corporation, through its president and chairman of
the board of directors, obliged itself, as a matter of policy, to
grant him the cash value of his vacation and sick leave credits

upon his retirement, he was burdened to prove his claim by

substantial evidence.[24] The petitioner failed to discharge this
burden.
We agree with the petitioners contention that for a contract
to be binding on the parties thereto, it need not be in writing
unless the law requires that such contract be in some form in
order that it may be valid or enforceable or that it be executed
in a certain way, in which case that requirement is absolute and
independent.[25] Indeed, corporate policies need not be in
writing. Contracts entered into by a corporate officer or
obligations or prestations assumed by such officer for and in
behalf of such corporation are binding on the said corporation
only if such officer acted within the scope of his authority or if
such officer exceeded the limits of his authority, the corporation
has ratified such contracts or obligations.
In the present case, the petitioner relied principally on his
testimony to prove that Lim made a verbal promise to give him
vacation and sick leave credits, as well as the privilege of
converting the same into cash upon retirement. The Court
agrees that those who belong to the upper corporate echelons
would have more privileges. However, the Court cannot
presume the existence of such privileges or benefits. The
petitioner was burdened to prove not only the existence of such
benefits but also that he is entitled to the same, especially
considering that such privileges are not inherent to the
positions occupied by the petitioner in the respondent
corporation, son-in-law of its president or not.
In dismissing the petition before it, the CA disbelieved the
petitioners testimony and gave credence and probative weight
to the collective testimonies of the respondent corporations
witnesses, who were its employees and officers, including Lim,
whom the petitioner presented as a hostile witness. We agree
with the appellate courts encompassing synthesis and analysis
of the evidence on record:
Except for his bare assertions, petitioner has not adduced
sufficient evidence to support his claim that he was, indeed,
promised the cash conversion of his unused vacation and sick
leaves upon retirement. Petitioner harps on what he calls the
prevalent practice in PCMC of giving him benefits, such as the

use of golf and country club facilities, salary increases, the use
of the company vehicle and driver, and sharing in PCMCs annual
net income, without either a written contract or a Board
resolution to back it up. Respondent PCMC denies all these,
however. According to respondent, petitioners share in the
income of the company is actually part of the consultancy fee
which PCMC pays DK Management Services, Inc., a firm owned
by petitioners company. PCMC adds that the yearly salary
increases of corporate officers were always with the prior
approval of the Board.
Nevertheless, assuming that petitioner was, indeed, given the
benefits which he so claimed, it does not necessarily follow that
among those is the cash conversion of his accumulated leaves.
It is a basic rule in evidence that each party must prove his
affirmative allegation. Since the burden of proof lies with the
party who asserts an affirmative allegation, the plaintiff or
complainant has to prove his affirmative allegations in the
complaint and the defendant or respondent has to prove the
affirmative allegations in his affirmative defenses and
counterclaim. Petitioner, in the case at bar, has failed to
discharge this burden.[26]
The CA made short shift of the claim of the petitioner that
per Memorandum dated November 6, 1981, he was not entitled
to the benefits of the company policy of commutation of leave
credits. Indeed, the company policy of conversion into
equivalent cash of unused vacation and sick leave credits
applied only to its regular employees. The petitioner failed to
offer evidence to rebut the testimony of Nel Gopez, Chief
Accountant of the respondent, that the petitioner was not
among the regular employees covered by the policy for the
simple reason that he had unlimited vacation leave benefits. As
stated by the CA, the petitioner no less corroborated the
testimony of Gopez, thus:
ATTY. PIMENTEL
And, so you mention[ed] earlier that the policy on
vacation leave benefits apply for category one
employee(s) and rank-and-file employee(s)?

WITNESS (Mr. Nel Gopez)

Yes.
ATTY. PIMENTEL
And who are considered category one employee(s)?
WITNESS
Category One employees are from the rank and of
Senior Vice-President and Assistant General
Manager and below, up to the level of department
managers.
ATTY. PIMENTEL
How about the complainant, Mr. Kwok, does he
falling (sic) to the category one?
WITNESS
As far as I can remember, he is (sic) not belong to
category one employee.
ATTY. PIMENTEL
Therefore, he is not entitled to the lump sum benefit?
WITNESS
Yes, Maam.
ATTY. PIMENTEL
And would you know, Mr. Witness, why he is (sic)
not given the conversion of the vacation leave
benefits at the time category one employees
sectors (sic) are given?

WITNESS
Because he has, as far as I can remember, he has
unlimited vacation leave.
This was corroborated by petitioner himself when he testified in
this wise:
ATTY. PIMENTEL
Mr. Witness, you occupied the position of Executive
Vice-President and General Manager. You agree
with me that this position or this office of
Executive Vice-President and General Manager are
not covered by this policy.
WITNESS (Donald Kwok)
Yes, it is not covered by this policy.
ATTY. PIMENTEL
So this policy applies to persons below you and
your father-in-law?
WITNESS
Yes, right.
ATTY. PIMENTEL
And this policy does not apply to you?
WITNESS
As far as Im concerned, it does not apply for (sic) me.
In all respects, therefore, petitioner, by virtue of his position as
Executive Vice-President, is not covered by the November 6,
1981 Memorandum granting PCMC employees the conversion of
their unused vacation and sick leaves into cash.[27]

We have reviewed the records and found no evidence to

controvert the following findings of the CA and its ratiocinations
on its resolution of the petitioners submissions:
Second, even assuming that petitioner is included among the
regular employees of PCMC referred to in said memorandum,
there is no evidence that he complied with the cut-off dates for
the filing of the cash conversion of vacation and sick leaves.
This being so, we find merit in respondents argument that
petitioners money claims have already been barred by the
three-year prescriptive period under Article 291 of the Labor
Code, as amended.
Third, and this is of primordial importance, there is no proof that
petitioner has filed vacation and sick leaves with PCMCs
personnel department. Without a record of petitioners
absences, there is no way to determine the actual number of
leave credits he is entitled to. The P7,080,546.00 figure arrived
at by petitioner supposedly representing the cash equivalent of
his earned sick and vacation leaves is thus totally baseless.
And, fourth, even assuming that PCMC President Patricio Lim did
promise petitioner the cash conversion of his leaves, we agree
with respondent that this cannot bind the company in the
absence of any Board resolution to that effect. We must stress
that the personal act of the company president cannot bind the
corporation. As explicitly stated by the Supreme Court
in Peoples Aircargo and Warehousing Co., Inc. v. Court of
Appeals:
The general rule is that, in the absence of authority from the
board of directors, no person, not even its officers, can validly
bind a corporation. A corporation is a juridical person, separate
and distinct from its stockholders and members, having xxx
powers, attributes and properties expressly authorized by law or
incident to its existence.
the power and the responsibility to decide whether the
corporation should enter into a contract that will bind the
corporation is lodged in the board, subject to the articles of
incorporation, by-laws, or relevant provisions of law.

Anent the third assigned error, petitioner maintains that the

PCMC Board of Directors has granted its President, Patricio Lim,
awesome powers to grant benefits to its employees, adding that
the Board has always given its consent to the way Lim ran the
affairs of the company especially on matters relating to the
benefits that its corporate officers enjoyed.
True, jurisprudence holds that the president of a corporation
possesses the power to enter into a contract for the corporation
when the conduct on the part of both the president and
corporation [shows] that he had been in the habit of acting in
similar matters on behalf of the company and that the company
had authorized him so to act and had recognized, approved and
ratified his former and similar actions.
In the case at bar, however, there is no showing that PCMC had
either recognized, approved or ratified the cash conversion of
petitioners leave credits as purportedly promised to him by Lim.
On the contrary, PCMC has steadfastly maintained that the
Company, through the Board, has long adopted the policy of
granting its earlier mentioned corporate officers unlimited leave
benefits denying them the privilege of converting their unused
vacation or sick leave benefits into their cash equivalent.
As to the last assigned error, petitioner faults the NLRC for
holding as applicable to petitioner, the April 26, 1997
Memorandum issued by PCMC to Raoul Rodrigo, Donald Kwoks
successor as company executive vice-president. The said memo
granted Rodrigo unlimited sick and vacation leave credits but
disallowed the cash conversion thereof. Before he became
executive vice-president, Rodrigo was senior vice-president and
enjoyed the commutation of his unused vacation and sick
leaves.
We note that the April 26, 1997 memo was issued to Rodrigo
when petitioner was already retired from PCMC. While said
memorandum was particularly directed to Rodrigo, however,
this does not necessarily mean that petitioner, as former
executive vice-president, was then not prohibited from
converting his earned vacation and sick leaves into cash since
he was not issued a similar memo. On the contrary, the memo
simply affirms the long-standing company practice of excluding
PCMCs top two positions, that of president and executive vicepresident, from the commutation of leaves. As heretofore
discussed, among the perks of those occupying these posts is

the privilege of having unlimited leaves, which is totally

incompatible with the concept of converting unused leave
credits into their cash equivalents.[28]
We are not convinced by the petitioners claim that Lim
capriciously deprived him of his entitlement to the cash
conversion of his accumulated vacation and sick leave credits
simply because of his estrangement from his wife, who happens
to be Lims daughter. The petitioner did not adduce any
evidence to show that he appealed to the respondent
corporations board of directors for the implementation of the
said privilege which was allegedly granted to him. Even if Lim
was the president and chairman of the respondent corporations
board of directors, the rest of the membership of the board
could have overruled him and granted to the petitioner his
claim if, indeed, the latter was entitled thereto. Indeed, even
the petitioner admitted that, after his retirement, the board of
directors granted to him salary increase for two years prior to
his retirement. If the claim of the petitioner had been approved
by the board of directors, for sure, it would have approved the
same despite his falling out with the daughter of Lim.
IN LIGHT OF ALL THE FOREGOING, the petition is
DENIED for lack of merit. Costs against the petitioner.
SO ORDERED.
Puno, (Chairman),
Nazario, JJ., concur.

Austria-Martinez,

Tinga, and Chico-