Amount and Date of Payment, Revised Guidelines on the Implementation of the 13th Month Pay Law

Basic Wage/Commissions

# 41

G.R. No. 92174 December 10, 1993

BOIE-TAKEDA Chemicals, Inc., vs.

Hon. Dionisio De La Serna, Acting Secretary of the Department of Labor and
Employment

G.R. No. L-102552 December 10, 1993

Philippine Fuji Xerox Corp., vs.

Cresenciano B. Trajano, Undersecretary of the Department of Labor and Employment,
and Philippine Fuji Xerox Employees Union

NATURE: Petition for review via certiorari and for issuance of writ of prohibition (consolidated).

FACTS: A routine inspection was conducted on May 2, 1989 in the premises of petitioner Boie-Takeda
Chemicals, Inc. by Labor and Development Officer Reynaldo B. Ramos under Inspection Authority No.
4-209-89. Finding that Boie-Takeda had not been including the commissions earned by its medical
representatives in the computation of their 13th month pay, Ramos served a Notice of Inspection
Results on Boie-Takeda through its president, Mr. Benito Araneta, requiring Boie-Takeda within 10
calendar days from notice to effect restitution or correction of "the underpayment of 13th month pay for
the years 1986, 1987 and 1988 of med rep (revised guidelines on the implementation of 13th month
pay # 5) in the total amount of Php558,810.89."

Boie-Takeda wrote the Labor Department contesting the Notice of Inspection Results, and expressing
the view "that the commission paid to our medical representatives are not to be included in the
computation of the 13th month pay . . . since the law and its implementing rules speak of regular or
basic salary and therefore exclude all other remunerations which are not part of the regular salary." it
pointed out that, "if no sales is made under the effort of a particular representative, there is no
commission during the period when no sale was transacted, so that commissions are not and cannot
be legally defined as regular in nature.

Regional Director Luna C. Piezas directed Boie-Takeda to appear before his office on June 9 and 16,
1989. On the appointed dates, however, and despite due notice, no one appeared for Boie-Takeda,
and the matter had perforce to be resolved on the basis of the evidence at hand. On July 24, 1989,
Director Piezas issued an order directing Boie-Takeda:

. . . to pay . . . its medical representatives and its managers the total amount of Php565,746.47
representing underpayment of 13th month pay for the years 1986, 1987, 1988, inclusive,
pursuant to the . . . revised guidelines within ten (10) days from receipt of this order.

A motion for reconsideration was seasonably filed by Boie-Takeda on August 3, 1989. Treated as an
appeal, it was resolved on January 17, 1990 by then acting Labor Secretary Dionisio deLa Serna, who
affirmed the July 24, 1989 order with modification that the sales commissions earned by Boie-Takeda's
medical representatives before August 13, 1989, the effectivity date of Memorandum Order No. 28 and
its implementing guidelines, shall be excluded in the computation of their 13th month pay. Hence, the
petition.

A similar routine inspection was conducted in the premises of Philippine Fuji Xerox Corp. on September
7, 1989 pursuant to Routine Inspection Authority No. NCR-lSED-RI-494-89. In his notice of inspection
results, addressed to the manager, Mr. Nicolas O. Katigbak, Senior Labor and Employment Officer
Nicanor M. Torres noted underpayment of 13th month pay of 62 employees, more or less — pursuant
to Revised Guidelines on the Implementation of the 13th Month Pay Law for the period covering 1986,
1987 and 1988.
Philippine Fuji Xerox was requested to effect rectification and/or restitution of the noted violation within
5 working days from notice. No action having been taken thereon by Philippine Fuji Xerox, Mr. Eduardo
G. Gonzales, president of the Philxerox Employee Union, wrote then Labor Secretary Franklin Drilon
requesting a follow-up of the inspection findings. Messrs. Nicolas and Gonzales were summoned to
appear before Labor Employment and Development Officer Mario F. Santos for a conciliation
conference. When no amicable settlement was reached, the parties were required to file their position
papers.

Subsequently, Regional Director Luna C. Piezas issued an order dated August 23, 1990, ordering
Philippine Fuji Xerox to restitute to its salesmen the portion of the 13th month pay which arose out of
the non-implementation of the said revised guidelines, 10 days from receipt hereof, otherwise, Mr.
Nicanor Torres, the senior labor employment officer is hereby ordered to proceed to the premises of the
respondent for the purpose of computing the said deficiency should respondent fail to heed his order.

Philippine Fuji Xerox appealed the aforequoted order to the office of the Secretary of Labor. In an order
dated October 120, 1991, Undersecretary Cresenciano B. Trajano denied the appeal for lack of merit.
Hence, the petition in GR. No. 102552, which was ordered consolidated with GR. No. 92174 as
involving the same issue.

In their almost identically-worded petition, petitioners, through common counsel, attribute grave abuse
of discretion to respondent labor officials in issuing the questioned orders of January 17, 1990 and
October 10, 1991, respectively. They maintain that under P.D. 851, the 13th month pay is based solely
on basic salary. as defined by the law itself and clarified by the implementing and supplementary rules
as well as by the Supreme Court in a long line of decisions, remunerations which do not form part of the
basic or regular salary of an employee, such as commissions, should not be considered in the
computation of the 13th month pay. This being the case, the Revised Guidelines on the Implementation
of the 13th month pay law issued by then Secretary Drilon providing for the inclusion of commissions in
the 13th month pay, were issued in excess of the statutory authority conferred by PD 851.

According to petitioners, this conclusion becomes even more evident when considered in light of the
opinion rendered by Labor Secretary Drilon himself in "In re: Labor dispute at the Philippine Long
Distance Telephone Company" which affirmed the contemporaneous interpretation by then Secretary
Ople that commissions are excluded from the basic salary. Petitioners further contend that assuming
that Secretary Drilon did not exceed the statutory authority conferred by PD 851, still the Revised
Guidelines are null and void as they violate the equal protection of the law clause.

ISSUE: Whether Or Not the Revised Guidelines on the Implementation of the 13th Month Pay Law
issued by Labor Sec. Drilon should be declared null and void as being violative of the law said
Guidelines were issued to implement wherein commissions should not be included in the computation
for basic salary as basis for 13th month pay.

HELD: YES. In including commissions in the computation of the 13th month pay, the second paragraph
of Section 5(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law unduly
expanded the concept of "basic salary" as defined in P.D. 851. It is a fundamental rule that
implementing rules cannot add to or detract from the provisions of the law it is designed to implement.
Administrative regulations adopted under legislative authority by a particular department must be in
harmony with the provisions of the law they are intended to carry into effect. They cannot widen its
scope. An administrative agency cannot amend an act of Congress.

Contrary to respondents' contention, Memorandum Order No. 28 did not repeal, supersede or abrogate
PD 851. As may be gleaned from the language of the Memorandum Order No. 28, it merely "modified"
Section 1 of the decree by removing the p1,000.00 salary ceiling. The concept of 13th month pay as
envisioned, defined and implemented under PD 851 remained unaltered, and while entitlement to said
benefit was no longer limited to employees receiving a monthly basic salary of not more than
p1,000.00, said benefit was, and still is, to be computed on the basic salary of the employee-recipient
as provided under PD 851. Thus, the interpretation given to the term "basic salary" as defined in PD
851 applies equally to "basic salary" under Memorandum Order No. 28.

In the case of San Miguel Corp. vs. Inciong, 103 SCRA 139, the Supreme Court delineated the
coverage of the term "basic salary" as used in PD 851and its implementing rules, that the basic salary
of an employee is used as the basis in the determination of his 13th month pay. Any compensations or
remunerations which are deemed not part of the basic pay is excluded as basis in the computation of
the mandatory bonus.

Under the rules and regulations implementing presidential decree 851, the following compensations are
deemed not part of the basic salary:

(A) cost-of-living allowances granted pursuant to presidential decree 525 and letter of instructions
no. 174;

(B) profit-sharing payments;

(C) all allowances and monetary benefits which are not considered or integrated as part of the
regular basic salary of the employee at the time of the promulgation of the decree on december
16, 1975.

Under a later set of supplementary rules and regulations implementing Presidential Decree 851 issued
by then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are excluded as
part of the basic salary and in the computation of the 13th month pay.

The exclusion of the cost-of-living allowances and profit-sharing payments indicate the intention to strip
basic salary of other payments which are properly considered as "fringe" benefits. Likewise, the catch-
all exclusionary phrase "all allowances and monetary benefits which are not considered or integrated
as part of the basic salary" shows also the intention to strip basic salary of any and all additions which
may be in the form of allowances or "fringe" benefits.

Moreover, the supplementary rules and regulations implementing Presidential Decree 851 is even more
emphatic in declaring that earnings and other remunerations which are not part of the basic salary shall
not be included in the computation of the 13th-month pay.

A cursory perusal of the two sets of rules indicates that what has hitherto been the subject of a broad
inclusion is now a subject of broad exclusion. The supplementary rules and regulations cure the
seeming tendency of the former rules to include all remunerations and earnings within the definition of
basic salary.

The all embracing phrase "earnings and other remunerations" which are deemed not part of the basic
salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for works
performed on rest days and special holidays, pays for regular holidays and night differentials. As such
they are deemed not part of the basic salary and shall not be considered in the computation of the 13th-
month pay. If they were not excluded, it is hard to find any "earnings and other remunerations"
expressly excluded in the computation of the 13th month pay. Then the exclusionary provision would
prove to be idle and with no purpose.

This conclusion finds strong support under the labor code of the Philippines. To cite a few provisions:

Art. 87. Overtime Work. Work may be performed beyond eight (8) hours a day provided that the
employee is paid for the overtime work, additional compensation equivalent to his regular wage plus at
least twenty-five (25%) percent thereof.

It is clear that overtime pay is an additional compensation other than and added to the regular wage or
basic salary, for reason of which such is categorically excluded from the definition of basic salary under
the supplementary rules and regulations implementing Presidential Decree 851.

In Article 93 of the same code, paragraph

c) Work performed on any special holiday shall be paid an additional compensation of at least thirty
percent (30%) of the regular wage of the employee.

It is likewise clear the premiums for special holiday which is at least 30% of the regular wage is an
additional pay other than and added to the regular wage or basic salary. For similar reason, it shall not
be considered in the computation of the 13th month pay.
Quite obvious from the foregoing is that the term "basic salary" is to be understood in its common,
generally-accepted meaning, i.e., as a rate of pay for a standard work period exclusive of such
additional payments as bonuses and overtime.
In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or
guaranteed wage is patently the "basic salary" for this is what the employee receives for a standard
work period. Commissions are given for extra efforts exerted in consummating sales or other related
transactions. They are, as such, additional pay, which this court has made clear do not form part of the
"basic salary."

Disposition: The consolidated petitions are hereby GRANTED. The second paragraph of Section 5
(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law issued on November
126, 1987 by then Labor Secretary Franklin M. Drilon is declared null and void as being violative of the
law said Guidelines were issued to implement, hence issued with grave abuse of discretion correctible
by the writ of prohibition and certiorari. The assailed Orders of January 17, 1990 and October 10, 1991
based thereon are SET ASIDE. SO ORDERED.

#42

G.R. No. 121927. April 22, 1998

Antonio W. Iran (doing business under the name and style of Tones Iran Enterprises)
vs. National Labor Relations Commission (4th Division), Godofredo O. Petralba, Moreno
Cadalso, Pepito Tecson, Apolinario Gothong Gemina, Jesus Bandilao, Edwin Martin, Celso
Labiaga, Diosdado Gonzalgo, Fernando M. Colina

Petitioner Antonio Iran is engaged in softdrinks merchandising and distribution in Mandaue City, Cebu,
employing truck drivers who double as salesmen, truck helpers, and non-field personnel in pursuit
thereof. He hired private respondents Godofredo Petralba, Moreno Cadalso, Celso Labiaga and
Fernando Colina as drivers/salesmen while private respondents Pepito Tecson, Apolinario Gimena,
Jesus Bandilao, Edwin Martin and Diosdado Gonzalgo were hired as truck helpers. drivers/salesmen,
drove petitioners delivery trucks and promoted, sold and delivered softdrinks to various outlets in
mandaue city. the truck helpers assisted in the delivery of softdrinks to the different outlets covered by
the driver/salesmen. As part of their compensation, the driver/salesmen and truck helpers of petitioner
received commissions per case of softdrinks sold.

Sometime in June 1991, Iran, while conducting an audit of his operations, discovered cash shortages
and irregularities allegedly committed by private respondents. Pending the investigation of irregularities
and settlement of the cash shortages, petitioner required private respondents to report for work
everyday. They were not allowed, however, to go on their respective routes. A few days thereafter,
despite aforesaid order, private respondents stopped reporting for work, prompting petitioner to
conclude that the former had abandoned their employment. Consequently, petitioner terminated their
services. He also filed on November 7, 1991, a complaint for Estafa against private respondents.

On the other hand, private respondents, on December 5, 1991, filed complaints against petitioner for
illegal dismissal, illegal deduction, underpayment of wages, premium pay for holiday and rest day,
holiday pay, service incentive leave pay, 13th month pay, allowances, separation pay, recovery of cash
bond, damages and attorney’s fees. Said complaints were consolidated, docketed, and assigned to
labor arbiter Ernesto F. Carreon.

The labor arbiter found that petitioner had validly terminated private respondents, there being just
cause for the latters dismissal. Nevertheless, he also ruled that petitioner had not complied with
minimum wage requirements in compensating private respondents, and had failed to pay private
respondents their 13th month pay. The labor arbiter, thus, rendered a decision on February 18, 1993,
the dispositive portion of which reads:
Wherefore, premises considered, judgment is hereby rendered ordering the respondent Antonio
W. Iran to pay the complainants the following:

1. Celso Labiaga Php10,033.10

2. Godofredo Petralba 1,250.00
 3. Fernando Colina 11,753.10
4. Moreno Cadalso 11,753.10
5. Diosdado Gonzalgo 7,159.04
6. Apolinario Gimena 8,312.24
7. Jesus Bandilao 14,729.50
8. Pepito Tecson 9,126.55
---------------

74,116.63

Attorneys fees (10%)

of the gross award Php7,411.66
-------------

Grand Total Award Php81,528.29

========

The other claims are dismissed for lack of merit. So ordered.

Both parties seasonably appealed to the NLC, with petitioner contesting the labor arbiters refusal to
include the commissions he paid to private respondents in determining compliance with the minimum
wage requirement. He also presented, for the first time on appeal, vouchers denominated as 13th
month pay signed by private respondents, as proof that petitioner had already paid the latter their 13th
month pay.

Private respondents, on the other hand, contested the findings of the labor arbiter holding that they had
not been illegally dismissed, as well as mathematical errors in computing Jesus Bandilao’s wage
differentials. The NLRC, in its decision of December 21, 1994, affirmed the validity of private
respondents dismissal, but found that said dismissal did not comply with the procedural requirements
for dismissing employees. Furthermore, it corrected the labor arbiters award of wage differentials to
Jesus Bandila from Php154.00 to Php4,550.00. in addition to all the monetary claim originally awarded
by the labor arbiter a quo, Php1,000.00 is hereby granted to each complainants as indemnity fee for
failure of respondents to observe procedural due process.

Petitioners motion for reconsideration of said decision was denied on July 31, 1995, prompting him to
elevate this case to this court.

ISSUES:
1) Whether Or Not commissions are included in determining compliance with the minimum wage
requirement
2) Whether Or Not Iran is guilty of procedural lapses in terminating private respondents.
If yes, Whether Or Not Php1,000.00 indemnity fee to each of the private respondents is proper.
3) Whether Or Not the advance amount received by private respondents should be credited as
part of their 13th month pay.

HELD:
1. YES. The nature of the work of a salesman and the reason for such type of remuneration for services
rendered demonstrate clearly that commissions are part of a salesman’s wage or salary.

Article 97(f), LC explicitly includes commissions as part of wages. While commissions are, indeed,
incentives or forms of encouragement to inspire employees to put a little more industry on the jobs
particularly assigned to them, still these commissions are direct remunerations for services rendered.

Commissions have been defined as the recompense, compensation or reward of an agent, salesman,
executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the
amount of his transactions or on the profit to the principal.

SC has taken judicial notice of the fact that some salesmen do not receive any basic salary but depend
entirely on commissions and allowances or commissions alone, although an employer-employee
relationship exists. Undoubtedly, this salary structure is intended for the benefit of the corporation
establishing such, on the apparent assumption that thereby its salesmen would be moved to greater
enterprise and diligence and close more sales in the expectation of increasing their sales commissions.
This, however, does not detract from the character of such commissions as part of the salary or wage
paid to each of its salesmen for rendering services to the corporation.

There is no law mandating that commissions be paid only after the minimum wage has been paid to the
employee. Verily, the establishment of a minimum wage only sets a floor below which an employee’s
remuneration cannot fall, not that commissions are excluded from wages in determining compliance
with the minimum wage law.

In Philippine Agricultural Commercial and Industrial Workers Union vs. NLRC: drivers and conductors
who are compensated purely on a commission basis are automatically entitled to the basic minimum
pay mandated by law should said commissions be less than their basic minimum for eight hours work.
Were said commissions equal to or even exceed the minimum wage, the employer need not pay, in
addition, the basic minimum pay prescribed by law.

2. YES. In terminating employees, the employer must furnish the worker with two written notices before
the latter can be legally terminated: (a) a notice which apprises the employee of the particular acts or
omissions for which his dismissal is sought, and (b) the subsequent notice which informs the employee
of the employer’s decision to dismiss him.

First notice informing the employee that his dismissal is being sought is absent in the present case.
This makes the termination of private respondents defective, for which Iran must be sanctioned for his
non-compliance with the requirements of or for failure to observe due process.

Section 2 of Book V, Rule XIV of the Omnibus Rules Implementing the Labor Code requires that in
cases of abandonment of work, notice should be sent to the worker’s last known address. If indeed
private respondents had abandoned their jobs, it was incumbent upon Iran to comply with this
requirement. This, Iran failed to do, entitling respondents to nominal damages in the amount of
P5,000.00 each, in accord with recent jurisprudence, to vindicate or recognize their right to procedural
due process which was violated by Iran.

3. YES. Iran is entitled to credit only the amounts paid for the particular year covered by said vouchers.
While it is true that the vouchers evidencing payments of 13th month pay were submitted only on
appeal, it would have been more in keeping with the directive of Article 221 of the Labor Code for the
NLRC to have taken the same into account.

In labor cases, technical rules of evidence are not binding. Labor officials should use every and all
reasonable means to ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure.

The intent of P.D. No. 851 is the granting of additional income in the form of 13th month pay to
employees not as yet receiving the same and not that a double burden should be imposed on the
employer who is already paying his employees a 13th month pay or its equivalent. An employer who
pays less than 1/12th of the employees basic salary as their 13th month pay is only required to pay the
difference.

Disposition: The decision of the NLRC dated July 31, 1995, insofar as it excludes the commissions
received by private respondents in the determination of petitioners compliance with the minimum wage
law, as well as its exclusion of the particular amounts received by private respondents as part of their
13th month pay is reversed and set aside. This case is remanded to the labor arbiter for a re-
computation of the alleged deficiencies. For non-observance of procedural due process in effecting the
dismissal of private respondents, said decision is modified by increasing the award of nominal damages
to private respondents from Php1,000.00 to Php5,000.00 each. No costs.

#43.)
 G.R. No. 145561; 460 SCRA 186; June 15, 2005]
HONDA Phils. Inc., vs. Samahan ng Malayang Manggagawa sa Honda
YNARES-SANTIAGO

FACTS: A Collective Bargaining Agreement (CBA) was forged between petitioner Honda and
respondent union Samahan ng Malayang Manggagawa sa Honda (respondent union). Among others,
the CBA provides that the Company will maintain the present practice in the implementation of the 13th
month pay, shall grant a 14th Month Pay, computed on the same basis as computation of 13th Month
Pay and shall continue the practice of granting, in its discretion, financial assistance to covered
employees in December of each year, of not less than 100% of basic pay. This CBA is effective until
year 2000.

In 1998, the two parties started re-negotiations for the 4th and 5th years of their CBA (meaning for yr
1999 to 2000). However, the talks bogged down. The union filed a Notice of Strike on the ground of
bargaining deadlock. Thereafter, Honda filed a Notice of Lockout. DOLE intervened and ordered the
parties to cease and desist from committing acts that would aggravate the situation. Both parties
complied accordingly.

On May 11, 1999, however, respondent union filed a second Notice of Strike on the ground of unfair
labor practice alleging that Honda illegally contracted out work to the detriment of the workers. The
DOLE again intervened and the striking employees were ordered to return to work and the
management accepted them back under the same terms prior to the strike staged.

On November 22, 1999, the management of Honda issued a memorandum announcing its new
computation of the 13th and 14th month pay to be granted to all its employees whereby the thirty-one
(31)-day long strike shall be considered unworked days for purposes of computing said benefits. As
per the company’s new formula, the amount equivalent to 1/12 of the employees’ basic salary shall be
deducted from these bonuses, with a commitment however that in the event that the strike is declared
legal, Honda shall pay the amount deducted. In effect, this enabled them to devise a formula using
11/12 of the total annual salary as base amount for computation instead of the entire amount for a 12-
month period.

The union opposed the pro-rated computation of the bonuses.

ISSUE: Whether Or Not the pro-rated computation of the 13th month pay and the other bonuses in
question is valid and lawful.

HELD: NO. The said pro-rated computation is violative of the provisions of the CBA. A collective
bargaining agreement refers to the negotiated contract between a legitimate labor organization and the
employer concerning wages, hours of work and all other terms and conditions of employment in a
bargaining unit. As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms
and conditions as they may deem convenient provided these are not contrary to law, morals, good
customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes the
law between the parties and compliance therewith is mandated by the express policy of the law.

It is violative of the provision of P.D. No. 851 which, provided that the minimum 13th month pay required
by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a
calendar year.

The act has ripened into a practice and therefore can no longer be withdrawn, reduced, diminished,
discontinued or eliminated. Honda did not adduce evidence to show that the 13th month, 14th month and
financial assistance benefits were previously subject to deductions or pro-rating or that these were
dependent upon the company’s financial standing.

It is more in keeping with the underlying principle for the grant of this benefit. It is primarily given to
alleviate the plight of workers and to help them cope with the exorbitant increases in the cost of living.
To allow the pro-ration of the 13th month pay in this case is to undermine the wisdom behind the law
and the mandate that the workingman’s welfare should be the primordial and paramount consideration.

To rule otherwise inevitably results to dissuasion, if not a deterrent, for workers from the free exercise
of their constitutional rights to self-organization and to strike in accordance with law.
Disposition: The instant petition is Denied. The decision and the resolution of the Court of Appeals
affirming the decision rendered by the voluntary arbitrator on May 2, 2000 are hereby affirmed in toto.

Substitute Payment

#44

G.R. NO. 72616-17; 171 SCRA 87; MARCH 8, 1989

FRAMANLIS Farms Inc., Eloisa Sycip and Lincoln Sycip vs.
Hon. Minister of Labor, Manila, PAFLU September Convention, et. al
GRINO-AQUINO

NATURE: Petition for certiorari to reverse the denied Motion for Reconsideration denied by MOLE
order.

FACTS: Employees of the petitioners filed against their employer and the other petitioners two labor
standard cases in the RTC alleging that they were not paid emergency cost of living allowance
(ECOLA), minimum wage 13th month pay, holiday pay, and service incentive leave pay.

Petitioners, in an answer to the amended complaint, alleged that (1) the private respondents were not
regular workers, but were migratory (sacadas) or pakyaw workers who were hired seasonally, or only
during the milling season, to so piece-of work on the farms, hence they were not entitled to benefits
being claimed, (2) they applied for an exception to pay for the living allowance although the MOLE has
no ruling yet.

The claims for holiday pay, service incentive pay, social amelioration bonus and underpayment fo
minimum wage were not controverted. On the other claims, the petitioners submitted only random
payrolls which showed that the women workers were, although the male workers received P10 more or
less, per day.

In an Order, the Minister of Labor (MOLE), through Assistant Regional Director Dante Ardivilla,
adopting the recommendations of the Chief of the Labor Regulation Section, Bacolod District Office,
directed the respondents (now petitioners) to pay: (1) deficiency payments under PD 925,PD 1614 ,
under Ministry Order No. 5, under PD 1678, service incentive leave pay, holiday pay and social
amelioration bonus and 13th month pay and emergency living allowance under PD 1123

Upon the petitioners' appeal of that Order, the Deputy MOLE modified it ordering the employer to all
non-pakyaw workers their claim for holiday and incentive leave pay, their 13th month pay, pay
differentials and ECOLA excluding the pakyaw workers from holiday and service incentive leave pay

Framanlis filed for MFR, which was denied hence, this petition for certiorari

ISSUEs:
(1) Whether Or Not Minister erred in requiring the petitioners to pay wage differentials to their
pakyaw workers who worked for at least eight hours daily.

(2) Whether Or Not benefits in form of food and electricity are equivalent to the 13th month pay.

HELD:
1. NO. In 1976, PD No. 928 fixed a minimum wage for agricultural workers in any plantation or
agricultural enterprise irrespective of whether or not the worker was paid on a piece-rate basis.
However, effective July 1, 1978, the minimum wage was increased (Sec. 1, PD 1389). Subsequently,
PD 1614 provided for another increase in the daily wage of all workers effective April 1, 1979. The
petitioners admit that those were the minimum rates prevailing then. Therefore, the respondent Minister
did not err in requiring the petitioners to pay wage differentials to their pakyaw workers who worked for
at least eight hours daily and earned less than P8.00 per day in 1978 to 1979.
2. NO. With regard to the 13th month pay, petitioners admitted that they failed to pay their workers 13th
month pay. However, they argued that they substantially complied with the law by giving their workers a
yearly bonus and other non-monetary benefits amounting to not less than 1/12th of their basic salary in
weekly subsidy of choice pork meat, free choice pork meat and free light or electricity which were
allegedly "the equivalent" of the 13th month pay.

Under Section 3 of PD No. 8511, such benefits in the form of food or free electricity, assuming they
were given, were not a proper substitute for the 13th month pay required by law.

Neither may year-end rewards for loyalty and service be considered in lieu of 13th month pay according
to Section 10 of the Rules and Regulations Implementing Presidential Decree No.

The failure of the Minister's decision to identify the pakyaw and non-pakyaw workers does not render
said decision invalid. The workers may be identified or determined in the proceedings for execution of
the judgment.

Disposition: petition for certiorari is dismissed with costs against the petitioners.

14th Month Pay

#45

G.R. NO. 75289 AUGUST 31, 1989

KAMAYA Port Hotel vs. NLRC, Federation of Free Workers, and Memia Quiambao
FERNAN

NATURE: Petition for review on certiorari.

FACTS: Respondent Memia Quiambao with thirty others who are members of the Federation of Free
Workers (FFW) were employed by Kamaya as hotel crew. On the basis of the profitability of the
company's business operations, management granted a 14th month pay to its employees starting in
1979. In January 1982, the hotel converted into a training center for Libyan scholars. However, the
Libyans pre-terminated their program leaving Kamaya without any business, aside from the fact that it
was not paid for the use of the hotel premises. All in all Kamayan allegedly suffered losses amounting
to P2 million.

Although Kamayan reopened the hotel premises to the public, it was not able to pick-up its lost
patronage. In a couple of months it effected a retrenchment program until finally, it totally closed its
business.

FFW then filed with the Ministry of Labor and Employment a complaint against petitioner for illegal
suspension, violation of the CBA and non-payment of the 14th month pay. Records however show that
the case was submitted for decision on the sole issue of alleged non-payment of the 14th month pay for
the year 1982.

The Labor Arbiter rendered a decision ordering Kamaya to pay the 14th month pay. On appeal, the
NLRC affirmed the grant of the 14th month pay on the ground that the granting of this 14th month pay
has already ripened into a company practice which respondent company cannot withdraw unilaterally.
This 14th month pay is now an existing benefit which cannot be withdrawn without violating article 100
of the Labor Code. To allow its withdrawal now would certainly amount to a diminution of existing
benefits which complainants are presently enjoying.
ISSUE: Whether Or Not the latter tribunal committed grave abuse of discretion when it adopted the
Labor Arbiter's decision saying that the 14th month pay cannot be withdrawn without violating Article
100 of the Labor Code.

HELD: YES. Art. 100 of the Labor Code states: Prohibition against elimination or diminution of
benefits. - Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of promulgation of this Code.

It is patently obvious that Article 100 is clearly without applicability. The date of effectivity of the Labor
Code is May 1, 1974. In the case at bar, petitioner extended its 14th month pay beginning 1979 until
1981. What is demanded is payment of the 14th month pay for 1982. Indubitably from these facts
alone, Article 100 of the Labor Code cannot apply.

Moreover, there is no law that mandates the payment of the 14th month pay. This is emphasized in the
grant of exemption under Presidential Decree 851 (13th Month Pay Law) which states: "Employers
already paying their employees a 13th month pay or its equivalent are not covered by this Decree."
Necessarily then, only the 13th month pay is mandated. Having enjoyed the additional income in the
form of the 13th month pay, private respondents' insistence on the 14th month pay for 1982 is already
an unwarranted expansion of the liberality of the law.

Verily, a 14th month pay is a misnomer because it is basically a bonus and, therefore, gratuitous in
nature. The granting of the 14th month pay is a management prerogative which cannot be forced upon
the employer. It is something given in addition to what is ordinarily received by or strictly due the
recipient. It is a gratuity to which the recipient has no right to make a demand.

This Court is not prepared to compel petitioner to grant the 14th month pay solely because it has
allegedly ripened into a company practice" as the labor arbiter has put it. Having lost its catering
business derived from Libyan students, Kamaya Hotel should not be penalized for its previous liberality.

An employer may not be obliged to assume a "double burden" of paying the 13th month pay in addition
to bonuses or other benefits aside from the employee's basic salaries or wages. Restated differently,
we rule that an employer may not be obliged to assume the onerous burden of granting bonuses or
other benefits aside from the employee's basic salaries or wages in addition to the required 13th month
pay.

Disposition: Petition is hereby GRANTED. The portion of the decision of the National Labor Relations
Commission dated June 25, 1986 ordering the payment of 14th month pay to private respondents is set
aside.

Diminution

#46

G.R. No. 85073; August 24, 1993

Davao Fruits Corporation vs.
Associated Labor Unions (ALU) for and in behalf of all the rank-and-file
workers/employees of Davao Fruits Corporation and NLRC

QUIASON

NATURE: This is a petition for certiorari to set aside the resolution of the National Labor Relations
Commission (NLRC).

FACTS: On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the
rank-and-file workers and employees of petitioner, filed a complaint (NLRC Case No. 1791-MC-XI-82)
before the Ministry of Labor and Employment, Regional Arbitration Branch XI, Davao City, against
petitioner, for "Payment of the Thirteenth-Month Pay Differentials." Respondent ALU sought to recover
from petitioner the thirteenth month pay differential for 1982 of its rank-and-file employees, equivalent
to their sick, vacation and maternity leaves, premium for work done on rest days and special holidays,
and pay for regular holidays which petitioner, allegedly in disregard of company practice since 1975,
excluded from the computation of the thirteenth month pay for 1982.

In its answer, petitioner claimed that it erroneously included items subject of the complaint in the
computation of the thirteenth month pay for the years prior to 1982, upon a doubtful and difficult
question of law. According to petitioner, this mistake was discovered only in 1981 after the
promulgation of the Supreme Court decision in the case of San Miguel Corporation v. Inciong (103
SCRA 139).

A decision was rendered on March 7, 1984 favoring ALU. That ordered Davao Fruits Corporation to pay
the 1982 — 13th month pay differential to all its rank-and-file workers/employees herein represented by
complainant Union. Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed
the said decision accordingly dismissed the appeal for lack of merit. Petitioner elevated the matter to
the Supreme Court.

ISSUE: Whether Or Not the computation of the thirteenth month pay given by employers to their
employees under P.D. No. 851, payments for sick, vacation and maternity leaves, premiums for work
done on rest days and special holidays, and pay for regular holidays may be excluded in the
computation and payment thereof, regardless of long-standing company practice

HELD: The "Supplementary Rules and Regulations Implementing P.D. No. 851," which put to rest all
doubts in the computation of the thirteenth month pay, was issued by the Secretary of Labor as early as
January 16, 1976, barely one month after the effectivity of P.D. No. 851 and its Implementing Rules.
And yet, petitioner computed and paid the thirteenth month pay, without excluding the subject items
therein until 1981. Petitioner continued its practice in December 1981, after promulgation of the afore-
quoted San Miguel decision on February 24, 1981, when petitioner purportedly "discovered" its
mistake. From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the
computation of its employees' thirteenth month pay, the payments for sick, vacation and maternity
leaves, premiums for work done on rest days and special holidays, and pay for regular holidays. The
considerable length of time the questioned items had been included by petitioner indicates a unilateral
and voluntary act on its part, sufficient in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the payments made
pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer,
by virtue of Section 10 of the Rules and Regulations Implementing P.D. No. 851, and Article 100 of the
labor of the Philippines, which prohibit the diminution or elimination by the employer of the employees'
existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).

Petitioner cannot invoke the principle of solutio indebiti which is a civil law concept that is not applicable
in Labor Law. Besides, in solutio indebiti, the obligee is required to return to the obligor whatever he
received from the latter (Civil Code of the Philippines, Arts. 2154 and 2155). Petitioner in the instant
case, does not demand the return of what it paid respondent ALU from 1975 until 1981; it merely wants
to "rectify" the error it made over these years by excluding unilaterally from the thirteenth month pay in
1982 the items subject of litigation. Solutio indebiti, therefore, is not applicable to the instant case.

Disposition: Finding no grave abuse of discretion on the part of the NLRC, the petition is hereby
DISMISSED, and the questioned decision of respondent NLRC is AFFIRMED
Bonus; Nature

#47

G.R. No. 110068; 241 SCRA 380; February 15, 1995

Philippine Duplicators, Inc. vs.
NLRC and Philippine Duplicators Employees Union-Tupas
FELICIANO

FACTS: The Court rendered a decision dismissing a petition for certiorari by Phil. Duplicators, Inc
(PDI). The Court upheld the decision of public respondent NLRC ordering PDI to pay 13th month pay to
private respondent employees computed on the basis of their fixed wages plus sales commissions.

PDI filed a Motion for Reconsideration, invoking the decisions in the 2 consolidated cases of Boie-
Takeda Chem. vs Hon. Dionisio de la Serna and Phil. Fuji Xerox Corp. vs Hon. Cresenciano Trajano.
PDI alleged that the decision in the Duplicators case should be reversed since the Boie-Takeda
decision went “directly opposite and contrary to” the conclusion reached in the former further seeking to
dismiss the money claims of private respondent union. In view of the nature of the issues raised, the
Court considered the Motion for Reconsideration and accepted it as a banc case.

ISSUES:
1) Whether Or Not the Duplicators decision goes against the Boie -Takeda decision.
2) Whether Or Not the sales commission earned by the salesmen of PDI constitute a part of their
“wage” and should be included in the computation of 13th month pay.

HELD:

1. NO. The doctrines enunciated in the two cases present different factual situations. The so-called
commissions received by the Boie-Takeda medical representatives or by the rank and file employees of
Fuji were characterized as “productivity bonuses”. These are additional monetary benefits generally tied
to the capacity for revenue production of a corporation. As such, they more closely resemble profit-
sharing payments and are not directly related to the amount of work actually done by an employee.

The “commissions” paid to the medical reps were not “sales commissions” in the same sense as in the
Duplicators case. Medical representatives are not salesmen; they merely promote products and leave
samples with physicians. As such, no actual sales are made placing the commissions in the nature of a
profit-sharing bonus.

2. YES. The commissions received by every duplicating machine sold constitute part of the basic
compensation of PDI’s salesmen, apart from a small fixed wage. It is important to note that the fixed
portion of their salaries represent only 15-30% of an employee’s total earnings in a year. Considering
this, the sales commissions were an integral part of PDI’s basic salary structure and not mere profit-
sharing payments or fringe benefits.

The Supplementary Rules and Regulations Implementing P.D. 851(The 13th Month Pay Law) clarifies
the scope of items excluded in the computation of 13th month pay. Section 4 of the Law states that
“Overtime pay, earnings and other remunerations which are not part of the basic salary shall not be
included in the computation of the 13th month pay.” What constitutes “other remunerations not part of
basic salary” is a question to be resolved on a case-to-case basis. In the instant case, it is important to
distinguish the productivity bonuses granted in Boie-Takeda from the sales commissions of the
Duplicators case.

A productivity bonus is something extra given to an employee for which no specific additional services
are rendered. Since a bonus is a gratuity of the employer, the recipient cannot demand its payment as
a matter of right. If an employer cannot be compelled to pay a productivity bonus to his employees,
then it follows that the bonus should not fall under “basic salary” when computing 13th month pay.
Sales commissions, on the other hand, are directly proportional to the extent or energy of an
employee’s work. Such commissions are paid upon the specific results achieved by a salesman and
form an integral part of his basic pay and should thus be included in the computation of 13th month
pay.

Disposition: Motion for Reconsideration is denied for lack of merit

Definition; When Demandable

#48

G.R. No. 111744; 248 SCRA 146; September 8, 1995

Lourdes G. Marcos, Alejandro T. Andrada, Baltazara J. Lopez and Vilma l. Cruz
vs. NLRC and Insular Life Assurance Co., Ltd.
REGALADO

NATURE: Petition for certiorari.

FACTS: Petitioners were regular employees of private respondent Insular Life Assurance Co:,
Ltd., but they were dismissed on november 1, 1990 when their positions were declared
redundant. a special redundancy benefit was paid to them, which included payment of accrued
vacation leave and fifty percent (50%) of unused current sick leave, special redundancy
benefit, equivalent to three (3) months salary for every year of service; and additional cash
benefits, in lieu of other benefits provided by the company or required by law.

Before the termination of their services, petitioner Marcos had been in the employ of private
respondent for more than twenty years, from August 26, 1970; petitioner Andrada, more than
twenty-five years, from July 26, 1965; petitioner Lopez, exactly thirty years, from October 31,
1960; and petitioner Cruz, more than twenty years, from March 1, 1970.

Petitioners, particularly Baltazara J. Lopez, sent a letter dated October 23, 1990 to respondent
company questioning the redundancy package, she claimed that they should receive their
respective service awards and other prorated bonuses which they had earned at the time they
were dismissed. In addition, Lopez argued that "the cash service awards have already been
budgeted in a fund distinct and apart from redundancy fund.

Thereafter, private respondent required petitioners to execute a "release and quitclaim," and
petitioners complied but with a written protest reiterating their previous demand that they were
nonetheless entitled to receive their service awards.

On March 21, 1991, petitioners inquired from the legal service of the department of labor and
employment whether respondent corporation could legally refuse the payment of their service
awards as mandated in their employee's manual.

About three months later the labor department issued its opinion, with pertinent authorities,
responding to petitioners' query as follows:

xxx xxx xxx

The department deems the service award to be part of the benefits of the employees of insular
life. company policies and practices are fertile sources of employee's rights. These must be
applied uniformly as interpretation cannot vary from one employee to another. . . .
xxx xxx xxx

While it may be argued that the above-cited case applies only to retirement benefits, we find
solace in the cases of Liberation Steamship Co., Inc. vs. CIR and National Development
Company vs. Unlicensed Crew Members of Three Dons vessels (23 scra 1105) where the
supreme court held that a gratuity or bonus, by reason of its long and regular concession
indicating company practice, may become regarded as part of regular compensation and thus
demandable.

xxx xxx xxx

The award is earned at the pertinent anniversary date. At this time, entitlement to the award
becomes vested. the anniversary date is the only crucial determining factor. Since the award
accrues on that date, it is of no moment that the entitled employee is separated from service
for whatever cause before the awards are physically handed out.

xxx xxx xxx

Even if the award has not accrued — as when an employee is separated from service because
of redundancy before the applicable 5th year anniversary, the material benefits of the award
must be given, prorated, by insular life. This is especially true in redundancy, wherein he/she
had no control.

xxx xxx xxx

The fact that you were required to sign "release and quitclaim" does not affect your right to the
material benefits of the service award. . . .

In the same year, private respondent celebrated its 80th anniversary wherein the management
approved the grant of an anniversary bonus equivalent to one (1) month salary only to
permanent and probationary employees as of november 15, 1990.9

On March 26, 1991, respondent company announced the grant of performance bonus to both
rank and file employees and supervisory specialist grade and managerial staff equivalent to
two (2) months salary and 2.75 basic salary, respectively, as of December 30, 1990. the
performance bonus, however, would be given only to permanent employees as of March 30,
1991.

Despite the aforequoted opinion of the DOLE, private respondent refused to pay petitioners
service awards. This prompted the latter to file a consolidated complaint, which was assigned
to NLRC Labor Arbiter Lopez, for payment of their service awards, including performance and
anniversary bonuses.

Petitioners contended that they are likewise entitled to the performance and anniversary
bonuses because, at the time the performance bonus was announced to be given, they were
only short of two (2) months service to be entitled to the full amount thereof as they had
already served the company for ten (10) months prior to the declaration of the grant of said
benefit. Also, they lacked only fifteen (15) days to be entitled to the full amount of the
anniversary bonus when it was announced to be given to employees as of November 15,
1990.

In a decision dated October 8, 1992, the labor arbiter ordered respondent company to pay
petitioners their service awards, anniversary bonuses and prorated performance bonuses,
including ten percent (10%) thereof as attorney's fees.

Respondent company appealed to public respondent NLRC claiming grave abuse of discretion
committed by the labor arbiter in holding it liable to pay said service award, performance and
anniversary bonuses, and in not finding that petitioners were estopped from claiming the same
as said benefits had already been given to them.

Setting aside the decision of the labor arbiter, respondent NLRC upheld the validity of the
quitclaim document executed by petitioners. It rationalized that "Certainly, before complainants
signed the quitclaim and release, they are aware of the nature of such document. In fact, they
never assailed the genuineness and due execution of the same. Hence, we can safely say that
they were not placed under duress or were compelled by means of force to sign the
document." Furthermore, the NLRC held that "neither was there any unwritten agreement
between complainants and respondent upon separation, which entitled the former to other
renumerations or benefits. On the contrary, they voluntarily accepted the redundancy benefit
package, otherwise, they would not have been separated from employment."

Hence, this petition

ISSUE: Whether Or Not respondent NLRC committed reversible error or grave abuse of discretion in
affirming the validity of the "Release and Quitclaim" and, consequently, that petitioners are not entitled
to payment of service awards and other bonuses.

HELD: YES. On “Release and Quitclaim” - The fact that an employee has signed a satisfaction
receipt for his claims does not necessarily result in the waiver thereof. The law does not consider as
valid any agreement whereby a worker agrees to receive less compensation than what he is entitled to
recover. A deed of release or quitclaim cannot bar an employee from demanding benefits to which he is
legally entitled. Renuntiatio non praesumitur. While there may be possible exceptions to this holding,
we do not perceive any in the case at bar.

The element of total voluntariness in executing that instrument is negated by the fact that they
expressly stated therein their claim for the service awards, a manifestation equivalent to a protest and a
disavowal of any waiver thereof.

Petitioners even sought the opinion of the Department of Labor and Employment to determine where
and how they stood in the controversy. This act only shows their adamant desire to obtain their service
awards and to underscore their disagreement with the "Release and Quitclaim" they were virtually
forced to sign in order to receive their separation pay.

While rights may be waived, the same must not be contrary to law, public order, public policy, morals or
good customs or prejudicial to a third person with a right recognized by law.

Article 6 of the Civil Code renders a quitclaim agreement void ab initio where the quitclaim obligates the
workers concerned to forego their benefits while at the same time exempting the employer from any
liability that it may choose to reject. This runs counter to Art. 22 of the Civil Code which provides that no
one shall be unjustly enriched at the expense of another.

On Service Awards and other Bonuses - The petitioners are entitled to receive service awards and
other bonuses. The contention of the respondent that service award is a bonus and therefore is an act
of gratuity which the complainants have no right to demand and service awards are governed by
respondent's employee's manual and (are) therefore contractual in nature is not impressive.

Anniversary and performance bonuses have ripened into a company practice therefore become
demandable. It is not disputed that it is respondent's practice to give an anniversary bonus every five
years from its incorporation. The prerogative of the employer to determine who among its employees
shall be entitled to receive bonuses which are, as a matter of practice, given periodically cannot be
exercised arbitrarily.

Pursuant to their policies on the matter, the service award differential is given at the end of the year to
an employee who has completed years of service divisible by 5.

A bonus is not a gift or gratuity, but is paid for some services or consideration and is in addition to what
would ordinarily be given. The term "bonus" as used in employment contracts, also conveys an idea of
something which is gratuitous, or which may be claimed to be gratuitous, over and above the
prescribed wage which the employer agrees to pay.

If one enters into a contract of employment under an agreement that he shall be paid a certain salary
by the week or some other stated period and, in addition, a bonus, in case he serves for a specified
length of time, there is no reason for refusing to enforce the promise to pay the bonus, if the employee
has served during the stipulated time, on the ground that it was a promise of a mere gratuity.

Disposition: The assailed decision and resolution of respondent National Labor Relations
Commissions are hereby SET ASIDE and the decision of Labor Arbiter Alex Arcadio Lopez is
REINSTATED.

#49

G.R. No. 103575; 221 SCRA 9; April 5, 1993.

Businessday Information Systems and Services, Inc., and Raul Locsin
vs. NLRC, Nemesio Moya, et, al.

NATURE: PETITION for certiorari of the decision of the National Labor Relations Commission.

FACTS: Businessday Information Sysytems and Services, Inc. (BSSI) was engaged in the
manufacture and sale of computer forms. Due to financial reverses, its creditors, the Development
Bank of the Philippines (DBP) and the Asset Privatization Trust (APT), took possession of its assets,
including a manufacturing plant in Marilao, Bulacan.

As a retrenchment measure, some plant employees, including the private respondents, were laid off on
May 16, 1988, after prior notice, and were paid separation pay equivalent to one-half (1/2) month pay
for every year of service. Upon receipt on her separation may, the private respondents signed individual
releases and quitclaims in favor of BSSI.

BSSI retained some employees in an attempt to rehabilitate its business as a trading company.
However, barely two and a half months later, these remaining employees were likewise discharged
because the company decided to cease business operations altogether. Unlike the private
respondents, that batch of employees received separation pay equivalent to a full month's salary for
every year of service plus mid-year bonus.

Protesting against the discrimination in the payment of their separation benefits, the twenty-seven (27)
private respondents filed complaints against the BSSI and Raul Locsin.

ISSUES:
(1) Whether Or Not there was unlawful discrimination in the payment of separation benefits to the
employees.
(2) Whether Or Not the company is obliged to pay mid-year bonus.
(3) Whether Or Not Locsin should be held liable.

HELD:
1. YES. Petitioners' right to terminate employees on account of retrenchment to prevent losses or
closure of business operations, is recognized by law, but it may not pay separation benefits unequally
for such discrimination breeds resentment and ill-will among those who have been treated less
generously than others.

The respondents cited financial business difficulties to justify their termination of the complainants'
employment. They were given one-half (1/2) month of their salary for every year of service. Due to
continuing looms, they closed operations where they dismissed the second batch of employees who
were given one (1) month pay for every year they served. The third batch of employees were
terminated and were likewise given one (1) monthly pay for every year of service. The business climate
when the complainants were terminated did not at all defer improvement-wise. The interval between the
dates of termination was so close to each other, so that, no improvement in business maybe likely
expected.
The law requires the granting of the same amount of separation benefits to the affected employees in
any of the cases. The respondent argued that the giving of more separation benefit to the second and
third batches of employees separated was their expression of gratitude and benevolence to the
remaining employees who have tried to save and make the company viable in the remaining lays of
operations. This justification is not plausible. There are workers in the first batch who have rendered
more years of service and more efficient than those separated subsequently, yet, they did not receive
the same recognition.

There was impermissible discrimination against the private respondents in the payment of their
separation benefits. The law requires an employer to extend equal treatment to its employees. It may
not, in the guise of exercising management prerogatives, grant greater benefits to some and less to
others. Management prerogatives are not absolute prerogatives but are subject to legal limits, collective
bargaining agreements, or general principles of fair play and justice

2. NO. The grant of a bonus is a prerogative, not an obligation, of the employer. The matter of giving a
bonus over and above the worker's lawful salaries and allowances is entirely dependent on the financial
capability of the employer to give it. The fact that the company's business was no longer profitable (it
was in fact moribund) plus the fact that the private respondents did not work up to the middle of the
year (they were discharged in May 1993) were valid reasons for not granting them a mid-year bonus.

3. NO. A corporate officer is not personally liable for the money claims of discharged corporate
employees unless he acted with evident malice and bad faith in terminating their employment. There is
no evidence in this case that Locsin acted in bad faith or with malice in carrying out the retrenchment
and eventual closure of the company, hence, he may not be held personally and solidarily liable with
the company for the satisfaction of the judgment in favor of the retrenched employees.

Disposition: The resolution of the NLRC ordering the petitioner company to pay separation pay
differentials to the private respondents is AFFIRMED. However, the award of mid-year bonus to them is
hereby deleted and set aside. Petitioner Raul Locsin is absolved from any personal liability to the
respondent employees. No costs.

#50

G.R. No. 149434; 430 SCRA 525; June 3, 2004

Philippine Appliance Corporation (Philacor)
vs. The Court of Appeals, The Honorable Secretary of Labor Bienvenido E. Laguesma
and United Philacor Workers Union-NAFLU,

NATURE: Appeal by Certiorari to set aside Court of Appeals decision denying petitioner’s partial
appeal as well as Court of Appeals resolution denying the Motion for Reconsideration.

FACTS: Petitioner is a domestic corporation engaged in manufacturing refrigerators, freezers, and

washing machines. Respondent United Philacor Workers Union – NAFLU is the duly elected collective
bargaining representative of the rank and file employees of petitioner.

During one collective bargaining negotiation, petitioner offered P4000 to each employee as an “early
conclusion bonus,” or a unilateral incentive for the speeding up of negotiations between the parties and
to encourage respondent union to exert their best efforts to conclude a CBA. Upon conclusion of the
CBA negotiations, petitioner accordingly gave this early signing bonus.

After this CBA expired in Aug.1999, the 2 parties began negotiations for a new CBA but after 11
meetings, respondent union declared a deadlock and a few days later filed a notice of strike. A
conciliation and mediation conference was held but it still left the ff. issues unresolved: wages, rice
subsidy, signing and retroactive bonus. Failure to come to an agreement led respondent union to go on
an 11-day strike which resulted in stoppage of manufacturing operations as well as losses for petitioner.
This constrained petitioner to file a petition before the DOLE and the Labor Secretary Laguesma
resolved the dispute by issuing an order which, among others, granted a signing bonus of P3,000 to the
union.
Petitioner Philacor filed a Motion for Reconsideration, stating that it accepted the decision but took
exception to the award of the signing bonus, claiming that it is not demandable or enforceable since it is
in the nature of an incentive. Labor Sec. denied this motion. PhilCOR then filed for Certiorari with the
Court of Appeals which was dealt with similarly. The Labor Secretary’s award of signing bonus was
affirmed since petitioner itself offered the same incentive to expedite the CBA negotiations, which they
did not withdraw and was still outstanding when the dispute reached the DOLE. Petitioner filed a Motion
for Reconsideration which was again denied, leading to this petition.

ISSUE: Whether Or Not the signing bonus awarded by the Labor Secretary and affirmed by respondent
Court of Appeals was proper.

HELD: NO. A signing bonus may not be demanded as a matter of right if it is not agreed upon by the
parties or unilaterally offered as an additional incentive. It is not a demandable and enforceable
obligation. The condition for awarding it must be duly satisfied.

Two things militate against the grant of the signing bonus: first, the non-fulfillment of the condition for
which it was offered, i.e., the speedy and amicable conclusion of the CBA negotiations; and second, the
failure of respondent union to prove that the grant of the said bonus is a long established tradition or a
“regular practice” on the part of petitioner. Petitioner admits, and respondent union does not dispute,
that it offered an “early conclusion bonus” or an incentive for a swift finish to the CBA negotiations.

A signing bonus is justified by and is the consideration paid for the goodwill that existed in the
negotiations that culminated in the signing of a CBA. In the case at bar, the CBA negotiation between
petitioner and respondent union failed. Respondent union went on strike for eleven days and blocked
the ingress to and egress from petitioner’s work plants. The labor dispute had to be referred to the
Secretary of Labor and Employment because neither of the parties was willing to compromise their
respective positions regarding the four remaining items which stood unresolved. While we do not fault
any one party for the failure of the negotiations, it is apparent that there was no more goodwill between
the parties and that the CBA was clearly not signed through their mutual efforts alone. Hence, the
payment of the signing bonus is no longer justified and to order such payment would be unfair and
unreasonable for petitioner.

We have consistently ruled that although a bonus is not a demandable and enforceable obligation, it
may nevertheless be granted on equitable considerations as when the giving of such bonus has been
the company’s long and regular practice. To be considered a “regular practice,” however, the giving of
the bonus should have been done over a long period of time, and must be shown to have been
consistent and deliberate. The test or rationale of this rule on long practice requires an indubitable
showing that the employer agreed to continue giving the benefits knowing fully well that said employees
are not covered by the law requiring payment thereof. Respondent does not contest the fact that
petitioner initially offered a signing bonus only during the previous CBA negotiation. Previous to that,
there is no evidence on record that petitioner ever offered the same or that the parties included a
signing bonus among the items to be resolved in the CBA negotiation. Hence, the giving of such bonus
cannot be deemed as an established practice considering that the same was given only once.

Disposition: petition is GRANTED. CA decision affirming the Order of the Secretary of Labor and
Employment is REVERSED and SET ASIDE.