[G.R. No. 94825. September 4, 1992.] debtor by the one who paid [See Article 1217, Civil Code].
by the one who paid [See Article 1217, Civil Code]. It is with respect to
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY, Petitioner, v.
NATIONAL LABOR RELATIONS COMMISSION, and ODIN SECURITY
AGENCY, as representative of its Security Guards, Respondents.
Franklin J. Andrada for Petitioner.
Ramon Encarnacion and Reynato V. Siozon for Private Respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATIONS; PRINCIPAL AND CONTRACTOR;
JOINTLY AND SEVERALLY LIABLE FOR PAYMENT OF UNPAID WAGES;
TERM ‘EMPLOYER’ CONSTRUED. — Notwithstanding that the petitioner is
a government agency, its liabilities, which are joint and solidary with that of
the contractor, are provided in Articles 106, 107 and 109 of the Labor Code.
This places the petitioner’s liabilities under the scope of the NLRC. Moreover,
Book Three, Title II on Wages specifically provides that the term "employer"
includes any person acting directly or indirectly in the interest of an employer
in relation to an employee and shall include the Government and all its
branches, subdivisions and instrumentalities, all government-owned or
controlled corporation and institutions as well as non-profit private
institutions, or organizations (Art. 97 [b], Labor Code; Eagle Security Agency,
Inc. v. NLRC, 173 SCRA 479 [1989]; Rabago v. NLRC, 200 SCRA 158
[1991]). Settled is the rule that in job contracting, the petitioner as principal is
jointly and severally liable with the contractor for the payment of unpaid
wages. The statutory basis for the joint and several liability is set forth in
Articles 107, and 109 in relation to Article 106 of the Labor Code.
2. ID.; ID.; ID.; WAGE ORDERS, MANDATORY AND CANNOT BE WAIVED.
— In the case at bar, the action instituted by the private respondent was for
the payment of unpaid wage differentials under Wage Order No. 6. The
liabilities of the parties were very well explained in the case of Eagle Security
v. NLRC, supra where the court held: . . . "The solidary liability of PTSI and
EAGLE, however, does not preclude the right of reimbursement from his co-
LABOR LAW (20 October 2018 Cases)
this right of reimbursement that petitioners can find support in the aforecited
contractual stipulation and Wage Order provision. "That Wage Orders are
explicit that payment of the increases are `to be borne’ by the principal or
client.’To be borne’, however, does not mean that the principal, PTSI in this
case, would directly pay the security guards the wage and allowance
increases because there is no privity of contract between them. The security
guards’ contractual relationship is with their immediate employer, EAGLE. As
an employer, EAGLE is tasked, among others, with the payment of their
wages [See Article VII Sec. 3 of the Contract for Security Services, supra and
Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 556]. . . .
The Wage Orders are statutory and mandatory and can not be waived. The
petitioner can not escape liability since the law provides the joint and solidary
liability of the principal and the contractor for the protection of the laborers.
3. ID.; ID.; ID.; DUE PROCESS OBSERVED IN CASE AT BAR. — The
contention that it was deprived due process because no hearing was
conducted does not deserve merit. A decision on the merits is proper where
the issues raised by the parties did not involve intricate questions of law.
(See Blue Bar Coconut Phils. Inc. v. Minister of Labor, 174 SCRA 25 [1989])
There can be no question that the security guards are entitled to wage
adjustments. The computation of the amount due to each individual guard
can be made during the execution of the decision where hearings can be
held. (See Section 3, Rule VIII of the New Rules of Procedure of the NLRC).
4. ID.; INDIRECT EMPLOYER; ESTOPPED FROM ASSAILING
CONTRACT. — Petitioner assail the contract for security services for being
void ab initio on the ground that it did not comply with the bidding
requirements set by law. Undeniably, services were rendered already and
the petitioner benefitted from said contract for two (2) years now. The
petitioner is therefore estopped from assailing the contract.
5. ID.; PHIL. ASSOCIATION OF DETECTIVE AND PROTECTIVE AGENCY
OPERATORS (PADPAO); PURPOSE FOR ITS CREATION. — In the
complaint filed, the private respondent alleged that it requested the Regional
Director, NCR Region of the Department of Labor and Employment for their
intercession in connection with the illegal bidding and award made by the
petitioner in favor of Triad Security Agency which was below the minimum
Page 1
wage law. Undeniably, the private respondent is equally guilty when it
entered into the contract with the petitioner without considering Wage Order
No. 6. The private respondent tries to explain that the Philippine Association
of Detective and Protective Agency Operators (PADPAO) which fixes the
contract rate of the security agencies was unable to fix the new contract rate
until May 12, 1986. We, however, agree with the posture that the setting of
wages under PADPAO is of no moment. The PADPAO memorandum was
not necessary to make Wage Order No. 6 effective. The PADPAO memo
was merely an internal agreement among the operators to set the ceiling of
the contract rates. It was aimed to curb the practice of security agencies
which were in cutthroat competition to request for wage adjustments after
proposals were accepted in good faith to the prejudice of the parties.
hold the petitioner and the private respondent jointly and severally liable to
the security guards for the unpaid wage differentials under Wage Order No.
6. As held in the Eagle case, the security guards’ immediate recourse is with
their direct employer, private respondent Odin Security Agency. The solidary
liability is, however, without prejudice to a claim for reimbursement by the
private respondent against the petitioner for only one-half of the amount due
considering that the private respondent is also at fault for entering into the
contract without taking into consideration the minimum wage rates under
Wage Order No. 6.
DECISION

6. ID.; SECURITY AGENCY; CANNOT ESCAPE LIABILITY FOR PAYMENT

OF UNPAID WAGES; PAYMENT OF WAGES TO EMPLOYEES GUTIERREZ, JR., J.:
GUARANTEED UNDER THE CONSTITUTION. — it bears emphasis that it
was the private respondent which first deprived the security personnel of
their rightful wage under Wage Order No. 6. The private respondent is the The petitioner questions the resolution of the National Labor Relations
employer of the security guards and as the employer, it is charged with Commission (NLRC) dated January 17, 1983 setting aside the order of
knowledge of labor laws and the adequacy of the compensation that it dismissal issued by the Labor Arbiter and the resolution dated June 25, 1990
demands for contractual services is its principal concern and not any other’s denying petitioner’s motion for reconsideration.
(Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, 136 SCRA 669
[1985]). Given this peculiar circumstance, the private respondent should also The facts are as follows:chanrob1es virtual 1aw library
be faulted for the unpaid wage differentials of the security guards. By filing
the complaint in its own behalf and in behalf of the security guards, the The petitioner is a government-owned or controlled corporation created by
private respondent wishes to exculpate itself from liability on the strength of P.D. No. 977.
the ruling in the Eagle case that the ultimate liability rests with the principal.
Nonetheless, the inescapable fact is that the employees must be guaranteed On November 11, 1985, it entered into a contract with the Odin Security
payment of the wages due them for the performance of any work, task, job or Agency for security services of its Iloilo Fishing Port Complex in Iloilo City.
project. They must be given ample protection as mandated by the The pertinent provision of the contract provides:chanrobles.com : virtual law
Constitution (See Article II, Section 18 and Article XIII, Section 3). Thus, to library
assure compliance with the provisions of the Labor Code including the
statutory minimum wage, the joint and several liability of the contractor and OBLIGATION OF THE FISHING PORT COMPLEX:chanrob1es virtual 1aw
the principal is mandated. library

7. ID.; SOLIDARY LIABILITY OF PRINCIPAL AND CONTRACTOR; 1. For and in consideration of the services to be rendered by the AGENCY to
WITHOUT PREJUDICE TO THE RIGHT OF REIMBURSEMENT TO the FISHING PORT COMPLEX, the latter shall pay to the former per month
EITHER PRINCIPAL OR DIRECT EMPLOYER AS WARRANTED. — We for eight (8) hours work daily as follows:chanrob1es virtual 1aw library

LABOR LAW (20 October 2018 Cases) Page 2

 1aw library
OUTSIDE METRO MANILA
9. This agreement shall take effect upon approval for a period of one (1) year
Security Guard P1,990.00 unless sooner terminated upon notice of one party to the other provided, that
should there be no notice of renewal within thirty (30) days before the expiry
Security Supervisor 2,090.00 date, the same shall be deemed renewed, and provided further, that the
party desiring to terminate the contract before the expiry date shall give thirty
Det. Commander 2,190.00. (30) days written advance notice to the other party. (Rollo, p. 198)

The Security Group of the AGENCY will be headed by a detachment On October 24, 1987, and during the effectivity of the said Security
commander whose main function shall consist of the administration and Agreement, the private respondent requested the petitioner to adjust the
supervision control of the AGENCY’s personnel in the FISHING PORT contract rate in view of the implementation of Wage Order No. 6 which took
COMPLEX. There shall be one supervisor per shift who shall supervise the effect on November 1, 1984.chanroblesvirtualawlibrary
guards on duty during a particular shift.
The private respondent’s request for adjustment was anchored on the
The above schedule of compensation includes among others, the provision of Wage Order No. 6 which states:chanrob1es virtual 1aw library
following:chanrob1es virtual 1aw library
SECTION 9. In the case of contracts for construction projects and for
(a) Minimum wage (Wage Order No. 5) security, janitorial and similar services, the increases in the minimum wage
and allowance rates of the workers shall be borne by the principal or client of
(b) Rest Day Pay the construction/service contractor and the contracts shall be deemed
amended accordingly, subject to the provisions of Section 3(c) of this Order.
(c) Night Differential Pay (Rollo, p. 49)

(d) Incentive Leave Pay Section 7, par. c of the Security Services Contract which calls for an
automatic escalation of the rate per guard in case of wage increase also
(e) 13th Month Pay reads:chanrob1es virtual 1aw library

(f) Emergency Cost of Living Allowance (up to Wage Order No. 5) The terms and conditions herein set forth shall be modified by the applicable
provisions of subsequent laws or decrees, especially as they pertain to
(g) 4% Contractor’s Tax increases in the minimum wage and occupational benefits to workers. (Rollo,
p. 46)
(h) Operational Expenses
Requests for adjustment of the contract price were reiterated on January 14,
(i) Overhead (Rollo, pp. 197-198) 1988 and February 19, 1988 but were ignored by the petitioner.

The contract for security services also provided for a one year renewable Thus on June 7, 1988, the private respondent filed with the Office of the Sub-
period unless terminated by either of the parties. It reads:chanrob1es virtual Regional Arbitrator in Region VI, Iloilo City a complaint for unpaid amount of

LABOR LAW (20 October 2018 Cases) Page 3

re-adjustment rate under Wage Order No. 6 together with wage salary On June 25, 1990, the motion for reconsideration was denied.
differentials arising from the integration of the cost of living allowance under
Wage Order No. 1, 2, 3 and 5 pursuant to Executive Order No. 178 plus the The petitioner now comes to this Court reiterating substantially the same
amount of P25,000.00 as attorney’s fees and cost of litigation. grounds it raised in its motion for reconsideration, to wit:chanrob1es virtual
1aw library
On July 29, 1988, the petitioner filed a Motion to Dismiss on the following
grounds:chanrob1es virtual 1aw library (1) The National Labor Relations Commission failed to observe due process.

(1) The Commission has no jurisdiction to hear and try the case; (2) Granting the award of the National Labor Relations Commission is valid,
reliefs granted are not legal.
(2) Assuming it has jurisdiction, the security guards of Odin Security Agency
have no legal personality to sue or be sued; and (3) Assuming the award complies with the requirements of due process, the
National Labor Relations Commission erred when it failed to declare the
(3) Assuming the individual guards have legal personality the action involves contract for security services void. (Rollo, pp. 201-202)
interpretation of contract over which it has no authority. (Rollo, p. 75)
The petitioner is a government-owned or controlled corporation with a special
On August 19, 1988, the Labor Arbiter issued an Order dismissing the charter. This places it under the scope of the civil service (Art. XI [B] [1] and
complaint stating that the petitioner’s being a government-owned or [2], 1987 Constitution); Boy Scouts of the Philippines v. NLRC, 196 SCRA
controlled corporation would place it under the scope and jurisdiction of the 176 [1991]; PNOC-Energy Development Corp. v. NLRC, 201 SCRA 487
Civil Service Commission and not within the ambit of the NLRC. [1991]). However, the guards are not employees of the petitioner. The
contract of services explicitly states that the security guards are not
This Order of dismissal was raised on Appeal to the NLRC and on January considered employees of the petitioner (Rollo, p. 45). There being no
17, 1989 the NLRC issued the questioned resolution setting aside the order employer-employee relationship between the petitioner and the security
and entered a decision granting reliefs to the private Respondent. guards, the jurisdiction of the Civil Service Commission may not be invoked
in this case.
A motion for reconsideration was subsequently filed raising among others
that the resolution is:chanroblesvirtualawlibrary The contract entered into by the petitioner which is merely job contracting
makes the petitioner an indirect employer. The issue, therefore, is whether or
(1) In violation of the right of the respondent to due process under the not an indirect employer is bound by the rulings of the NLRC.
Constitution;
Notwithstanding that the petitioner is a government agency, its liabilities,
(2) Granting arguendo that the due process clause was observed, the which are joint and solidary with that of the contractor, are provided in
resolution granting relief is without any legal basis; and Articles 106, 107 and 109 of the Labor Code. This places the petitioner’s
liabilities under the scope of the NLRC. Moreover, Book Three, Title II on
(3) Granting arguendo that there is legal basis for the award, the stipulation Wages specifically provides that the term "employer" includes any person
under the contract allowing an increase of wage rate is void ab initio. (Rollo, acting directly or indirectly in the interest of an employer in relation to an
p. 86) employee and shall include the Government and all its branches,
subdivisions and instrumentalities, all government-owned or controlled

LABOR LAW (20 October 2018 Cases) Page 4

corporation and institutions as well as non-profit private institutions, or
organizations (Art. 97 [b], Labor Code; Eagle Security Agency, Inc. v. NLRC,
173 SCRA 479 [1989]; Rabago v. NLRC, 200 SCRA 158 [1991]). The NLRC,
therefore, did not commit grave abuse of discretion in assuming jurisdiction
to set aside the Order of dismissal by the Labor Arbiter.chanrobles virtual
lawlibrary
The underlying issue in this case is who should carry the burden of the wage
increases.
Settled is the rule that in job contracting, the petitioner as principal is jointly
and severally liable with the contractor for the payment of unpaid wages. The
statutory basis for the joint and several liability is set forth in Articles 107, and
109 in relation to Article 106 of the Labor Code. (Del Rosario and Sons
Logging Enterprises, Inc. v. NLRC, 136 SCRA 669 [1985]; Baguio v. NLRC,
202 SCRA 465 [1991]; Ecal v. NLRC, 195 SCRA 224 [1991]). In the case at
bar, the action instituted by the private respondent was for the payment of
unpaid wage differentials under Wage Order No. 6. The liabilities of the
parties were very well explained in the case of Eagle Security v. NLRC,
supra where the court held:chanrob1es virtual 1aw library
x x x adjustments. The computation of the amount due to each individual guard
"The solidary liability of PTSI and EAGLE, however, does not preclude the
right of reimbursement from his co-debtor by the one who paid [See Article
1217, Civil Code]. It is with respect to this right of reimbursement that
petitioners can find support in the aforecited contractual stipulation and Wage
Order provision.
"The Wage Orders are explicit that payment of the increases are `to be
borne’ by the principal or client.’To be borne’, however, does not mean that
the principal, PTSI in this case, would directly pay the security guards the
wage and allowance increases because there is no privity of contract
between them. The security guards’ contractual relationship is with their
immediate employer, EAGLE. As an employer, EAGLE is tasked, among
others, with the payment of their wages [See Article VII Sec. 3 of the
Contract for Security Services, supra and Bautista v. Inciong, G.R. No.
LABOR LAW (20 October 2018 Cases)
52824, March 16, 1988, 158 SCRA 556].
"Premises considered, the security guards’ immediate recourse for the
payment of the increases is with their direct employer, EAGLE. However, in
order for the security agency to comply with the new wage and allowance
rates it has to pay the security guards, the Wage Order made specific
provision to amend existing contracts for security services by allowing the
adjustment of the consideration paid by the principal to the security agency
concerned. What the Wage Orders require, therefore, is the amendment of
the contract as to the consideration to cover the service contractor’s payment
of the increases mandated. In the end, therefore, ultimate liability for the
payment of the increases rests with the principal."cralaw virtua1aw library
The Wage Orders are statutory and mandatory and can not be waived. The
petitioner can not escape liability since the law provides the joint and solidary
liability of the principal and the contractor for the protection of the laborers.
The contention that it was deprived due process because no hearing was
conducted does not deserve merit. A decision on the merits is proper where
the issues raised by the parties did not involve intricate questions of law.
(See Blue Bar Coconut Phils. Inc. v. Minister of Labor, 174 SCRA 25 [1989])
There can be no question that the security guards are entitled to wage
can be made during the execution of the decision where hearings can be
held. (See Section 3, Rule VIII of the New Rules of Procedure of the NLRC)
Neither can the petitioner assail the contract for security services for being
void ab initio on the ground that it did not comply with the bidding
requirements set by law. Undeniably, services were rendered already and
the petitioner benefitted from said contract for two (2) years now. The
petitioner is therefore estopped from assailing the contract.chanrobles law
library : red
Quite noteworthy is the fact that the private respondent entered into the
contract when Wage Order No. 6 had already been in force. The contract
was entered into in November 11, 1985 one year after the effectivity of Wage
Order No. 6 which was on November 1, 1984. The rates of the security
guards as stipulated in the contract did not consider the increases in the
minimum wage mandated by Wage Order No. 6. Two years after, the private
respondent is now asking for an adjustment in the contract price pursuant to
Page 5
the wage order provision.
Such action of the private respondent is rather disturbing and must not
remain unchecked. In the complaint filed, the private respondent alleged that
it requested the Regional Director, NCR Region of the Department of Labor
and Employment for their intercession in connection with the illegal bidding
and award made by the petitioner in favor of Triad Security Agency which
was below the minimum wage law. Undeniably, the private respondent is
equally guilty when it entered into the contract with the petitioner without
considering Wage Order No. 6.
The private respondent tries to explain that the Philippine Association of
Detective and Protective Agency Operators (PADPAO) which fixes the
contract rate of the security agencies was unable to fix the new contract rate
until May 12, 1986.
We, however, agree with the posture that the setting of wages under
PADPAO is of no moment. The PADPAO memorandum was not necessary
to make Wage Order No. 6 effective. The PADPAO memo was merely an
internal agreement among the operators to set the ceiling of the contract
rates. It was aimed to curb the practice of security agencies which were in
cutthroat competition to request for wage adjustments after proposals were
accepted in good faith to the prejudice of the parties.chanrobles.com.ph :
virtual law library
While it is true that security personnel should not be deprived of what is
lawfully due them, it bears emphasis that it was the private respondent which
first deprived the security personnel of their rightful wage under Wage Order
No. 6. The private respondent is the employer of the security guards and as
the employer, it is charged with knowledge of labor laws and the adequacy of
the compensation that it demands for contractual services is its principal
concern and not any other’s (Del Rosario & Sons Logging Enterprises, Inc. v.
NLRC, 136 SCRA 669 [1985]).
Given this peculiar circumstance, the private respondent should also be
faulted for the unpaid wage differentials of the security guards. By filing the
complaint in its own behalf and in behalf of the security guards, the private
respondent wishes to exculpate itself from liability on the strength of the
ruling in the Eagle case that the ultimate liability rests with the principal.
Nonetheless, the inescapable fact is that the employees must be guaranteed
payment of the wages due them for the performance of any work, task, job or
project. They must be given ample protection as mandated by the
Constitution (See Article II, Section 18 and Article XIII, Section 3). Thus, to
assure compliance with the provisions of the Labor Code including the
statutory minimum wage, the joint and several liability of the contractor and
the principal is mandated.
We, therefore, hold the petitioner and the private respondent jointly and
severally liable to the security guards for the unpaid wage differentials under
Wage Order No. 6. As held in the Eagle case, the security guards’ immediate
recourse is with their direct employer, private respondent Odin Security
Agency. The solidary liability is, however, without prejudice to a claim for
reimbursement by the private respondent against the petitioner for only one-
half of the amount due considering that the private respondent is also at fault
for entering into the contract without taking into consideration the minimum
wage rates under Wage Order No. 6.chanrobles lawlibrary : rednad
WHEREFORE, the questioned resolutions of the National Labor Relations
Commission are hereby AFFIRMED with the modification that both the
petitioner and the private respondent are ORDERED to pay jointly and
severally the unpaid wage differentials under Wage Order No. 6 without
prejudice to the right of reimbursement for one-half of the amount which
either the petitioner or the private respondent may have to pay to the security
guards. Costs against the petitioner.
SO ORDERED.
[G.R. No. 121439. January 25, 2000]
AKLAN ELECTRIC COOPERATIVE INCORPORATED
(AKELCO), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION
(Fourth Division), RODOLFO M. RETISO and 165
OTHERS,[1] respondents.

LABOR LAW (20 October 2018 Cases) Page 6

DECISION
GONZAGA-REYES, J.:
In his petition for certiorari and prohibition with prayer for writ of preliminary
injunction and/or temporary restraining order, petitioner assails (a) the
decision dated April 20, 1995, of public respondent National Labor Relations
Commission (NLRC), Fourth (4th) Division, Cebu City, in NLRC Case No. V-
0143-94 reversing the February 25, 1994 decision of Labor Arbiter Dennis D.
Juanon and ordering petitioner to pay wages in the aggregate amount of
P6,485,767.90 to private respondents, and (b) the resolution dated July 28,
1995 denying petitioners motion for reconsideration, for having been issued
with grave abuse of discretion.
A temporary restraining order was issued by this Court on October 9, 1995
enjoining public respondent from executing the questioned decision upon a
surety bond posted by petitioner in the amount of P6,400,000.00.[2]
The facts as found by the Labor Arbiter are as follows:[3]
"These are consolidated cases/claims for non-payment of
salaries and wages, 13th month pay, ECOLA and other
fringe benefits as rice, medical and clothing allowances,
submitted by complainant Rodolfo M. Retiso and 163 others,
Lyn E. Banilla and Wilson B. Sallador against respondents
Aklan Electric Cooperative, Inc. (AKELCO), Atty. Leovigildo
Mationg in his capacity as General Manager; Manuel Calizo,
in his capacity as Acting Board President, Board of
Directors, AKELCO.
Complainants alleged that prior to the temporary transfer of
the office of AKELCO from Lezo Aklan to Amon Theater,
Kalibo, Aklan, complainants were continuously performing
their task and were duly paid of their salaries at their main
office located at Lezo, Aklan.
LABOR LAW (20 October 2018 Cases)
That on January 22, 1992, by way of resolution of the Board
of Directors of AKELCO allowed the temporary transfer
holding of office at Amon Theater, Kalibo, Aklan per
information by their Project Supervisor, Atty. Leovigildo
Mationg, that their head office is closed and that it is
dangerous to hold office thereat;
Nevertheless, majority of the employees including herein
complainants continued to report for work at Lezo Aklan and
were paid of their salaries.
That on February 6, 1992, the administrator of NEA, Rodrigo
Cabrera, wrote a letter addressed to the Board of AKELCO,
that he is not interposing any objections to the action taken
by respondent Mationg
That on February 11, 1992, unnumbered resolution was
passed by the Board of AKELCO withdrawing the temporary
designation of office at Kalibo, Aklan, and that the daily
operations must be held again at the main office of Lezo,
Aklan;[4]
That complainants who were then reporting at the Lezo
office from January 1992 up to May 1992 were duly paid of
their salaries, while in the meantime some of the employees
through the instigation of respondent Mationg continued to
remain and work at Kalibo, Aklan;
That from June 1992 up to March 18, 1993, complainants
who continuously reported for work at Lezo, Aklan in
compliance with the aforementioned resolution were not paid
their salaries;
That on March 19, 1993 up to the present, complainants
were again allowed to draw their salaries; with the exception
of a few complainants who were not paid their salaries for
the months of April and May 1993;
Page 7
 Per allegations of the respondents, the following are the
facts:
1. That these complainants voluntarily abandoned their
respective work/job assignments, without any justifiable
reason and without notifying the management of the Aklan
Electric Cooperative, Inc. (AKELCO), hence the cooperative
suffered damages and systems loss;
2. That the complainants herein defied the lawful orders and
other issuances by the General Manager and the Board of
Directors of the AKELCO. These complainants were
requested to report to work at the Kalibo office x x x but
despite these lawful orders of the General Manager, the
complainants did not follow and wilfully and maliciously
defied said orders and issuance of the General Manager;
that the Board of Directors passed a Resolution resisting and
denying the claims of these complainants, x x x under the
principle of "no work no pay" which is legally justified; That
these complainants have "mass leave" from their customary
work on June 1992 up to March 18, 1993 and had a "sit-
down" stance for these periods of time in their alleged
protest of the appointment of respondent Atty. Leovigildo
Mationg as the new General Manager of the Aklan Electric
Cooperative, Inc. (AKELCO) by the Board of Directors and
confirmed by the Administrator of the National Electrification
Administration (NEA), Quezon City; That they engaged in " .
. . slowdown mass leaves, sit downs, attempts to damage,
destroy or sabotage plant equipment and facilities of the
Aklan Electric Cooperative, Inc. (AKELCO)."
On February 25, 1994, a decision was rendered by Labor Arbiter Dennis D.
Juanon dismissing the complaints.[5]
Dissatisfied with the decision, private respondents appealed to the
respondent Commission.
LABOR LAW (20 October 2018 Cases)
On appeal, the NLRCs Fourth Division, Cebu City,[6] reversed and set aside
the Labor Arbiters decision and held that private respondents are entitled to
unpaid wages from June 16, 1992 to March 18, 1993, thus:[7]
"The evidence on records, more specifically the evidence
submitted by the complainants, which are: the letter dated
April 7, 1993 of Pedrito L. Leyson, Office Manager of
AKELCO (Annex "C"; complainants position paper; Rollo,
p.102) addressed to respondent Atty. Leovigildo T. Mationg;
respondent AKELCO General Manager; the memorandum of
said Atty. Mationg dated 14 April 1993, in answer to the
letter of Pedrito Leyson (Annex "D" complainants position
paper); as well as the computation of the unpaid wages due
to complainants (Annexes "E" to "E-3"; complainants position
paper, Rollo, pages 1024 to 1027) clearly show that
complainants had rendered services during the period - June
16, 1992 to March 18, 1993. The record is bereft of any
showing that the respondents had submitted any evidence,
documentary or otherwise, to controvert this asseveration of
the complainants that services were rendered during this
period. Subjecting these evidences submitted by the
complainants to the crucible of scrutiny, We find that
respondent Atty. Mationg responded to the request of the
Office Manager, Mr. Leyson, which We quote, to wit:
"Rest assured that We shall recommend
your aforesaid request to our Board of
Directors for their consideration and
appropriate action. This payment, however,
shall be subject, among others, to the
availability of funds."
This assurance is an admission that complainants are
entitled to payment for services rendered from June 16,
1992 to March 18, 1993, specially so that the
recommendation and request comes from the office
manager himself who has direct knowledge regarding the
services and performance of employees under him. For how
Page 8
 could one office manager recommend payment of wages, if
no services were rendered by employees under him. An
office manager is the most qualified person to know the
performance of personnel under him. And therefore, any
request coming from him for payment of wages addressed to
his superior as in the instant case shall be given weight.
Furthermore, the record is clear that complainants were paid
of their wages and other fringe benefits from January, 1992
to May, 1992 and from March 19, 1993 up to the time
complainants filed the instant cases. In the interegnum, from
June 16, 1992 to March 18, 1993, complainants were not
paid of their salaries, hence these claims. We could see no
rhyme nor reason in respondents refusal to pay
complainants salaries during this period when complainants
had worked and actually rendered service to AKELCO.
While the respondents maintain that complainants were not
paid during this interim period under the principle of "no
work, no pay", however, no proof was submitted by the
respondents to substantiate this allegation. The labor arbiter,
therefore, erred in dismissing the claims of the complainants,
when he adopted the "no work, no pay" principle advanced
by the respondents.
WHEREFORE, in view of the foregoing, the appealed
decision dated February 25, 1994 is hereby Reversed and
Set Aside and a new one entered ordering respondent
AKELCO to pay complainants their claims amounting to
P6,485,767.90 as shown in the computation (Annexes "E" to
"E-3")."
A motion for reconsideration was filed by petitioner but the same was denied
by public respondent in a resolution dated July 28, 1995. [8]
Petitioner brought the case to this Court alleging that respondent NLRC
committed grave abuse of discretion citing the following grounds: [9]
LABOR LAW (20 October 2018 Cases)
1. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE
OF DISCRETION IN REVERSING THE FACTUAL
FINDINGS AND CONCLUSIONS OF THE LABOR
ARBITER, AND DISREGARDING THE EXPRESS
ADMISSION OF PRIVATE RESPONDENTS THAT THEY
DEFIED PETITIONERS ORDER TRANSFERRING THE
PETITIONERS OFFICIAL BUSINESS OFFICE FROM LEZO
TO KALIBO AND FOR THEM TO REPORT THEREAT.
2. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE
OF DISCRETION IN CONCLUDING THAT PRIVATE
RESPONDENTS WERE REALLY WORKING OR
RENDERING SERVICE ON THE BASIS OF THE
COMPUTATION OF WAGES AND THE BIASED
RECOMMENDATION SUBMITTED BY LEYSON WHO IS
ONE OF THE PRIVATE RESPONDENTS WHO DEFIED
THE LAWFUL ORDERS OF PETITIONER.
3. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE
OF DISCRETION IN CONSIDERING THE ASSURANCE BY
PETITIONERS GENERAL MANAGER MATIONG TO
RECOMMEND THE PAYMENT OF THE CLAIMS OF
PRIVATE RESPONDENTS AS AN ADMISSION OF
LIABILITY OR A RECOGNITION THAT COMPENSABLE
SERVICES WERE ACTUALLY RENDERED.
4. GRANTING THAT PRIVATE RESPONDENTS
CONTINUED TO REPORT AT THE LEZO OFFICE, IT IS
STILL GRAVE ABUSE OF DISCRETION FOR PUBLIC
RESPONDENT TO CONSIDER THAT PETITIONER IS
LEGALLY OBLIGATED TO RECOGNIZE SAID
CIRCUMSTANCE AS COMPENSABLE SERVICE AND PAY
WAGES TO PRIVATE RESPONDENTS FOR DEFYING
THE ORDER FOR THEM TO REPORT FOR WORK AT
THE KALIBO OFFICE WHERE THE OFFICIAL BUSINESS
AND OPERATIONS WERE CONDUCTED.
Page 9
 5. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE
OF DISCRETION AND SERIOUS, PATENT AND
PALPABLE ERROR IN RULING THAT THE "NO WORK,
NO PAY" PRINCIPLE DOES NOT APPLY FOR LACK OF
EVIDENTIARY SUPPORT WHEN PRIVATE REPONDENTS
ALREADY ADMITTED THAT THEY DID NOT REPORT
FOR WORK AT THE KALIBO OFFICE.
6. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE
OF DISCRETION IN ACCORDING WEIGHT AND
CREDIBILITY TO THE SELF-SERVING AND BIASED
ALLEGATIONS OF PRIVATE RESPONDENTS, AND
ACCEPTING THEM AS PROOF, DESPITE THE
ESTABLISHED FACT AND ADMISSION THAT PRIVATE
RESPONDENTS DID NOT REPORT FOR WORK AT THE
KALIBO OFFICE, OR THAT THEY WERE NEVER PAID
FOR ANY WAGES FROM THE TIME THEY DEFIED
PETITIONERS ORDERS.
Petitioner contends that public respondent committed grave abuse of
discretion in finding that private respondents are entitled to their wages from
June 16, 1992 to March 18, 1993, thus disregarding the principle of "no work,
no pay". It alleges that private respondents stated in their pleadings that they
not only objected to the transfer of petitioners business office to Kalibo but
they also defied the directive to report thereat because they considered the
transfer illegal. It further claims that private respondents refused to recognize
the authority of petitioners lawful officers and agents resulting in the
disruption of petitioners business operations in its official business office in
Lezo, AKlan, forcing petitioner to transfer its office from Lezo to Kalibo
transferring all its equipments, records and facilities; that private respondents
cannot choose where to work, thus, when they defied the lawful orders of
petitioner to report at Kalibo, private respondents were considered dismissed
as far as petitioner was concerned. Petitioner also disputes private
respondents allegation that they were paid their salaries from January to May
1992 and again from March 19, 1993 up to the present but not for the period
from June 1992 to March 18, 1993 saying that private respondents illegally
collected fees and charges due petitioner and appropriated the collections
among themselves for which reason they are claiming salaries only for the
LABOR LAW (20 October 2018 Cases)
period from June 1992 to March 1993 and that private respondents were
paid their salaries starting only in April 1993 when petitioners Board agreed
to accept private respondents back to work at Kalibo office out of
compassion and not for the reason that they rendered service at the Lezo
office. Petitioner also adds that compensable service is best shown by
timecards, payslips and other similar documents and it was an error for
public respondent to consider the computation of the claims for wages and
benefits submitted merely by private respondents as substantial evidence.
The Solicitor General filed its Manifestation in lieu of Comment praying that
the decision of respondent NLRC be set aside and payment of wages
claimed by private respondents be denied for lack of merit alleging that
private respondents could not have worked for petitioner's office in Lezo
during the stated period since petitioner transferred its business operation in
Kalibo where all its records and equipments were brought; that computations
of the claims for wages and benefits submitted by private respondents to
petitioner is not proof of rendition of work. Filing its own Comment, public
respondent NLRC claims that the original and exclusive jurisdiction of this
Court to review decisions or resolutions of respondent NLRC does not
include a correction of its evaluation of evidence as factual issues are not fit
subject for certiorari.
Private respondents, in their Comment, allege that review of a decision of
NLRC in a petition for certiorari under Rule 65 does not include the
correctness of its evaluation of the evidence but is confined to issues of
jurisdiction or grave abuse of discretion and that factual findings of
administrative bodies are entitled to great weight, and accorded not only
respect but even finality when supported by substantial evidence. They claim
that petitioner's Board of Directors passed an unnumbered resolution on
February 11, 1992 returning back the office to Lezo from Kalibo Aklan with a
directive for all employees to immediately report at Lezo; that the letter-reply
of Atty. Mationg to the letter of office manager Leyson that he will
recommend the payment of the private respondents' salary from June 16,
1992 to March 18, 1993 to the Board of Directors was an admission that
private respondents are entitled to such payment for services rendered.
Private respondents state that in appreciating the evidence in their favor,
public respondent NLRC at most may be liable for errors of judgment which,
Page 10
as differentiated from errors of jurisdiction, are not within the province of the
special civil action of certiorari.
Petitioner filed its Reply alleging that review of the decision of public
respondent is proper if there is a conflict in the factual findings of the labor
arbiter and the NLRC and when the evidence is insufficient and insubstantial
to support NLRCs factual findings; that public respondents findings that
private respondents rendered compensable services were merely based on
private respondents computation of claims which is self-serving; that the
alleged unnumbered board resolution dated February 11, 1992, directing all
employees to report to Lezo Office was never implemented because it was
not a valid action of AKELCOs legitimate board.
The sole issue for determination is whether or not public respondent NLRC
committed grave abuse of discretion amounting to excess or want of
jurisdiction when it reversed the findings of the Labor Arbiter that private
respondents refused to work under the lawful orders of the petitioner
AKELCO management; hence they are covered by the "no work, no pay"
principle and are thus not entitled to the claim for unpaid wages from June
16, 1992 to March 18, 1993.
We find merit in the petition.
At the outset, we reiterate the rule that in certiorari proceedings under Rule
65, this Court does not assess and weigh the sufficiency of evidence upon
which the labor arbiter and public respondent NLRC based their resolutions.
Our query is limited to the determination of whether or not public respondent
NLRC acted without or in excess of its jurisdiction or with grave abuse of
discretion in rendering the assailed resolutions. [10] While administrative
findings of fact are accorded great respect, and even finality when supported
by substantial evidence, nevertheless, when it can be shown that
administrative bodies grossly misappreciated evidence of such nature as to
compel a contrary conclusion, this court had not hesitated to reverse their
factual findings.[11] Factual findings of administrative agencies are not
infallible and will be set aside when they fail the test of
arbitrariness.[12] Moreover, where the findings of NLRC contradict those of
the labor arbiter, this Court, in the exercise of its equity jurisdiction, may look
into the records of the case and reexamine the questioned findings.[13]
LABOR LAW (20 October 2018 Cases)
We find cogent reason, as shown by the petitioner and the Solicitor General,
not to affirm the factual findings of public respondent NLRC.
We do not agree with the finding that private respondents had rendered
services from June 16, 1992 to March 18, 1993 so as to entitle them to
payment of wages. Public respondent based its conclusion on the following:
(a) the letter dated April 7, 1993 of Pedrito L. Leyson, Office Manager of
AKELCO addressed to AKELCOs General Manager, Atty. Leovigildo T.
Mationg, requesting for the payment of private respondents unpaid wages
from June 16, 1992 to March 18, 1993; (b) the memorandum of said Atty.
Mationg dated 14 April 1993, in answer to the letter request of Pedrito
Leyson where Atty. Mationg made an assurance that he will recommend
such request; (c) the private respondents own computation of their unpaid
wages. We find that the foregoing does not constitute substantial evidence to
support the conclusion that private respondents are entitled to the payment
of wages from June 16, 1992 to March 18, 1993. Substantial evidence is that
amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.[14] These evidences relied upon by public
respondent did not establish the fact that private respondents actually
rendered services in the Kalibo office during the stated period.
The letter of Pedrito Leyson to Atty. Mationg was considered by public
respondent as evidence that services were rendered by private respondents
during the stated period, as the recommendation and request came from the
office manager who has direct knowledge regarding the services and
performance of employees under him. We are not convinced. Pedrito Leyson
is one of the herein private respondents who are claiming for unpaid wages
and we find his actuation of requesting in behalf of the other private
respondents for the payment of their backwages to be biased and self-
serving, thus not credible.
On the other hand, petitioner was able to show that private respondents did
not render services during the stated period. Petitioners evidences show that
on January 22, 1992, petitioners Board of Directors passed a resolution
temporarily transferring the Office from Lezo, Aklan to Amon Theater, Kalibo,
Aklan upon the recommendation of Atty. Leovigildo Mationg, then project
supervisor, on the ground that the office at Lezo was dangerous and unsafe.
Such transfer was approved by then NEA Administrator, Rodrigo E. Cabrera,
Page 11
in a letter dated February 6, 1992 addressed to petitioners Board of
Directors.[15] Thus, the NEA Administrator, in the exercise of supervision and
control over all electric cooperatives, including petitioner, wrote a letter dated
February 6, 1992 addressed to the Provincial Director PC/INP Kalibo Aklan
requesting for military assistance for the petitioners team in retrieving the
electric cooperatives equipments and other removable facilities and/or
fixtures consequential to the transfer of its principal business address from
Lezo to Kalibo and in maintaining peace and order in the cooperatives
coverage area.[16] The foregoing establishes the fact that the continuous
operation of the petitioners business office in Lezo Aklan would pose a
serious and imminent threat to petitioners officials and other employees,
hence the necessity of temporarily transferring the operation of its business
office from Lezo to Kalibo. Such transfer was done in the exercise of a
management prerogative and in the absence of contrary evidence is not
unjustified. With the transfer of petitioners business office from its former
office, Lezo, to Kalibo, Aklan, its equipments, records and facilities were also
removed from Lezo and brought to the Kalibo office where petitioners official
business was being conducted; thus private respondents allegations that
they continued to report for work at Lezo to support their claim for wages has
no basis.
Moreover, private respondents in their position paper admitted that they did
not report at the Kalibo office, as Lezo remained to be their office where they
continuously reported, to wit:[17]
"On January 22, 1991 by way of a resolution of the Board of
Directors of AKELCO it allowed the temporary holding of
office at Amon Theater, Kalibo, Aklan, per information by
their project supervisor, Atty. Leovigildo Mationg that their
head office is closed and that it is dangerous to hold office
thereat.
Nevertheless, majority of the employees including the herein
complainants, continued to report for work at Lezo, Aklan
and were paid of their salaries.
xxx
LABOR LAW (20 October 2018 Cases)
The transfer of office from Lezo, Aklan to Kalibo, Aklan being
illegal for failure to comply with the legal requirements under
P.D. 269, the complainants remained and continued to work
at the Lezo Office until they were illegally locked out
therefrom by the respondents. Despite the illegal lock out
however, complainants continued to report daily to the
location of the Lezo Office, prepared to continue in the
performance of their regular duties.
Complainants thus could not be considered to have
abandoned their work as Lezo remained to be their office
and not Kalibo despite the temporary transfer thereto.
Further the fact that they were allowed to draw their salaries
up to May, 1992 is an acknowledgment by the management
that they are working during the period.
xxx
It must be pointed out that complainants worked and
continuously reported at Lezo office despite the
management holding office at Kalibo. In fact, they were paid
their wages before it was withheld and then were allowed to
draw their salaries again on March 1993 while reporting at
Lezo up to the present.
Respondents acts and payment of complainants salaries
and again from March 1993 is an unequivocal recognition on
the part of respondents that the work of complainants is
continuing and uninterrupted and they are therefore entitled
to their unpaid wages for the period from June 1992 to
March 1993."
The admission is detrimental to private respondents cause. Their excuse is
that the transfer to Kalibo was illegal but we agree with the Labor Arbiter that
it was not for private respondents to declare the managements act of
temporarily transferring the AKELCO office to Kalibo as an illegal act. There
is no allegation nor proof that the transfer was made in bad faith or with
malice. The Labor Arbiter correctly rationalized in its decision as follows: [18]
Page 12
 "We do not subscribe to complainants theory and assertions.
They, by their own allegations, have unilaterally committed
acts in violation of managements/respondents directives
purely classified as management prerogative. They have
taken amongst themselves declaring managements acts
of temporarily transferring the holding of the AKELCO office
from Lezo to Kalibo, Aklan as illegal. It is never incumbent
upon themselves to declare the same as such. It is lodged in
another forum or body legally mantled to do the same. What
they should have done was first to follow managements
orders temporarilytransferring office for it has the first
presumption of legality. Further, the transfer was
only temporary. For:
"The employer as owner of the business,
also has inherent rights, among which are
the right to select the persons to be hired
and discharge them for just and valid cause;
to promulgate and enforce reasonable
employment rules and regulations and to
modify, amend or revoke the same; to
designate the work as well as the employee
or employees to perform it; to transfer or
promote employees; to schedule, direct,
curtail or control company operations; to
introduce or install new or improved labor or
money savings methods, facilities or
devices; to create, merge, divide, reclassify
and abolish departments or positions in the
company and to sell or close the business.
xxx
Even as the law is solicitous of the welfare
of the employees it must also protect the
right of an employer to exercise what are
clearly management prerogatives. The free
will of management to conduct its own
LABOR LAW (20 October 2018 Cases)
business affairs to achieve its purpose can
not be denied. The transfer of assignment of
a medical representative from Manila to the
province has therefore been held lawful
where this was demanded by the
requirements of the drug companys
marketing operations and the former had at
the time of his employment undertaken to
accept assignment anywhere in the
Philippines. (Abbot Laboratories (Phils.),
Inc., et al. vs. NLRC, et al., G.R. No. L-
76959, Oct. 12, 1987).
It is the employers prerogative to abolish a position which it
deems no longer necessary, and the courts, absent any
findings of malice on the part of the management, cannot
erase that initiative simply to protect the person holding
office (Great Pacific Life Assurance Corporation vs. NLRC,
et al., G.R. No. 88011, July 30, 1990)."
Private respondents claim that petitioners Board of Directors passed an
unnumbered resolution dated February 11, 1992 returning back the office
from its temporary office in Kalibo to Lezo. Thus, they did not defy any lawful
order of petitioner and were justified in continuing to remain at Lezo office.
This allegation was controverted by petitioner in its Reply saying that such
unnumbered resolution was never implemented as it was not a valid act of
petitioners Board. We are convinced by petitioners argument that such
unnumbered resolution was not a valid act of petitioners legitimate Board
considering the subsequent actions taken by the petitioners Board of
Directors decrying private respondents inimical act and defiance, to wit (1)
Resolution No. 411, s. of 1992 on September 9, 1992, dismissing all
AKELCO employees who were on illegal strike and who refused to return to
work effective January 31, 1992 despite the directive of the NEA project
supervisor and petitioners acting general manager;[19] (2) Resolution No. 477,
s. of 1993 dated March 10, 1993 accepting back private respondents who
staged illegal strike, defied legal orders and issuances, out of compassion,
reconciliation, Christian values and humanitarian reason subject to the
condition of "no work, no pay"[20] (3) Resolution No. 496, s. of 1993 dated
Page 13
June 4, 1993, rejecting the demands of private respondents for backwages
from June 16, 1992 to March 1993 adopting the policy of "no work, no pay"
as such demand has no basis, and directing the COOP Legal Counsel to file
criminal cases against employees who misappropriated collections and
officers who authorized disbursements of funds without legal authority from
the NEA and the AKELCO Board.[21] If indeed there was a valid board
resolution transferring back petitioners office to Lezo from its temporary office
in Kalibo, there was no need for the Board to pass the above-cited
resolutions.
We are also unable to agree with public respondent NLRC when it held that
the assurance made by Atty. Mationg to the letter-request of office manager
Leyson for the payment of private respondents wages from June 1992 to
March 1993 was an admission on the part of general manager Mationg that
private respondents are indeed entitled to the same. The letter reply of Atty.
Mationg to Leyson merely stated that he will recommend the request for
payment of backwages to the Board of Directors for their consideration and
appropriate action and nothing else, thus, the ultimate approval will come
from the Board of Directors. We find well-taken the argument advanced by
the Solicitor General as follows:[22]
The allegation of private respondents that petitioner had
already approved payment of their wages is without basis.
Mationgs offer to recommend the payment of private
respondents' wages is hardly approval of their claim for
wages. It is just an undertaking to recommend payment.
Moreover, the offer is conditional. It is subject to the
condition that petitioners Board of Directors will give its
approval and that funds were available. Mationgs reply to
Leysons letter for payment of wages did not constitute
approval or assurance of payment. The fact is that, the
Board of Directors of petitioner rejected private respondents
demand for payment (Board Resolution No. 496, s. 1993).
We are accordingly constrained to overturn public respondents findings that
petitioner is not justified in its refusal to pay private respondents wages and
other fringe benefits from June 16, 1992 to March 18, 1993; public
respondents stated that private respondents were paid their salaries from
LABOR LAW (20 October 2018 Cases)
January to May 1992 and again from March 19, 1993 up to the present. As
cited earlier, petitioners Board in a Resolution No. 411 dated September 9,
1992 dismissed private respondents who were on illegal strike and who
refused to report for work at Kalibo office effective January 31, 1992; since
no services were rendered by private respondents they were not paid their
salaries. Private respondents never questioned nor controverted the
Resolution dismissing them and nowhere in their Comment is it stated that
they questioned such dismissal. Private respondents also have not rebutted
petitioners claim that private respondents illegally collected fees and charges
due petitioner and appropriated the collections among themselves to satisfy
their salaries from January to May 1992, for which reason, private
respondents are merely claiming salaries only for the period from June 16,
1992 to March 1993.
Private respondents were dismissed by petitioner effective January 31, 1992
and were accepted back by petitioner, as an act of compassion, subject to
the condition of "no work, no pay" effective March 1993 which explains why
private respondents were allowed to draw their salaries again. Notably, the
letter-request of Mr. Leyson for the payment of backwages and other fringe
benefits in behalf of private respondents was made only in April 1993, after a
Board Resolution accepting them back to work out of compassion and
humanitarian reason. It took private respondents about ten months before
they requested for the payment of their backwages, and the long inaction of
private respondents to file their claim for unpaid wages cast doubts as to the
veracity of their claim.
The age-old rule governing the relation between labor and capital, or
management and employee of a "fair days wage for a fair days labor"
remains as the basic factor in determining employees wages. If there is no
work performed by the employee there can be no wage or pay unless, of
course, the laborer was able, willing and ready to work but was illegally
locked out, suspended or dismissed,[23] or otherwise illegally prevented from
working,[24] a situation which we find is not present in the instant case. It
would neither be fair nor just to allow private respondents to recover
something they have not earned and could not have earned because they
did not render services at the Kalibo office during the stated period.
Page 14
Finally, we hold that public respondent erred in merely relying on the
computations of compensable services submitted by private respondents.
There must be competent proof such as time cards or office records to show
that they actually rendered compensable service during the stated period to
entitle them to wages. It has been established that the petitioners business
office was transferred to Kalibo and all its equipments, records and facilities
were transferred thereat and that it conducted its official business in Kalibo
during the period in question. It was incumbent upon private respondents to
prove that they indeed rendered services for petitioner, which they failed to
do. It is a basic rule in evidence that each party must prove his affirmative
allegation. Since the burden of evidence lies with the party who asserts the
affirmative allegation, the plaintiff or complainant has to prove his affirmative
allegations in the complaint and the defendant or the respondent has to
prove the affirmative allegation in his affirmative defenses and
counterclaim.[25]
WHEREFORE, in view of the foregoing, the petition for CERTIORARI is
GRANTED. Consequently the decision of public respondent NLRC dated
April 20, 1995 and the Resolution dated July 28, 1995 in NLRC Case No. V-
0143-94 are hereby REVERSED and SET ASIDE for having been rendered
with grave abuse of discretion amounting to lack or excess of jurisdiction.
Private respondents complaint for payment of unpaid wages before the Labor
Arbiter is DISMISSED.
SO ORDERED.
[G.R. No. 140689. February 17, 2004]
BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE
UNIONS, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and BANKARD, INC., respondents.
LABOR LAW (20 October 2018 Cases)
DECISION
CARPIO MORALES, J.:
The present Petition for Review on Certiorari under Rule 45 of the Rules
of Court raises the issue of whether the unilateral adoption by an employer of
an upgraded salary scale that increased the hiring rates of new employees
without increasing the salary rates of old employees resulted in wage
distortion within the contemplation of Article 124 of the Labor Code.
Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level
I, Level II, Level III, Level IV, and Level V. On May 28, 1993, its Board of
Directors approved a New Salary Scale, made retroactive to April 1, 1993, for
the purpose of making its hiring rate competitive in the industrys labor
market. The New Salary Scale increased the hiring rates of new employees,
to wit: Levels I and V by one thousand pesos (P1,000.00), and Levels II, III
and IV by nine hundred pesos (P900.00). Accordingly, the salaries of
employees who fell below the new minimum rates were also adjusted to
reach such rates under their levels.
Bankards move drew the Bankard Employees Union-WATU (petitioner),
the duly certified exclusive bargaining agent of the regular rank and file
employees of Bankard, to press for the increase in the salary of its old,
regular employees.
Bankard took the position, however, that there was no obligation on the
part of the management to grant to all its employees the same increase in an
across-the-board manner.
As the continued request of petitioner for increase in the wages and
salaries of Bankards regular employees remained unheeded, it filed a Notice
of Strike on August 26, 1993 on the ground of discrimination and other acts
of Unfair Labor Practice (ULP).
A director of the National Conciliation and Mediation Board treated the
Notice of Strike as a Preventive Mediation Case based on a finding that the
issues therein were not strikeable.
Petitioner filed another Notice of Strike on October 8, 1993 on the
grounds of refusal to bargain, discrimination, and other acts of ULP - union
Page 15
busting. The strike was averted, however, when the dispute was certified by levels; and (4) The existence of the distortion in the same region of the
the Secretary of Labor and Employment for compulsory arbitration. country.

The Second Division of the NLRC, by Order of May 31, 1995, finding no
wage distortion, dismissed the case for lack of merit.
Petitioners motion for reconsideration of the dismissal of the case was,
by Resolution of July 28, 1995, denied.
Petitioner thereupon filed a petition for certiorari before this Court,
docketed as G.R. 121970. In accordance with its ruling in St. Martin Funeral
Homes v. NLRC,[1] the petition was referred to the Court of Appeals which, by
October 28, 1999, denied the same for lack of merit.
Hence, the present petition which faults the appellate court as follows:
(1) It misapprehended the basic issues when it concluded that
under Bankards new wage structure, the old salary gaps
between the different classification or level of employees were
still reflected by the adjusted salary rates[2]; and
(2) It erred in concluding that wage distortion does not appear to
exist, which conclusion is manifestly contrary to law and
jurisprudence.[3]
Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION
ACT, amending, among others, Article 124 of the Labor Code) on June 9,
1989, the term wage distortion was explicitly defined as:
Normally, a company has a wage structure or method of determining the
wages of its employees. In a problem dealing with wage distortion, the basic
assumption is that there exists a grouping or classification of employees that
establishes distinctions among them on some relevant or legitimate bases.[6]
Involved in the classification of employees are various factors such as
the degrees of responsibility, the skills and knowledge required, the
complexity of the job, or other logical basis of differentiation. The differing
wage rate for each of the existing classes of employees reflects this
classification.
Petitioner maintains that for purposes of wage distortion, the
classification is not one based on levels or ranks but on two groups of
employees, the newly hired and the old, in each and every level, and not
between and among the different levels or ranks in the salary structure.
Public respondent National Labor Relations Commission (NLRC) refutes
petitioners position, however. It, through the Office of the Solicitor General,
essays in its Comment of April 12, 2000 as follows:
To determine the existence of wage distortion, the historical classification of
the employees prior to the wage increase must be established. Likewise, it
must be shown that as between the different classification of employees,
there exists a historical gap or difference.

... a situation where an increase in prescribed wage rates results in the

xxx
elimination or severe contraction of intentional quantitative differences in
wage or salary rates between and among employee groups in an
The classification preferred by petitioner is belied by the wage structure of
establishment as to effectively obliterate the distinctions embodied in such
private respondent as shown in the new salary scale it adopted on May 28,
wage structure based on skills, length of service, or other logical bases of
1993, retroactive to April 1, 1993, which provides, thus:
differentiation.[4]

Hiring Minimum Maximum

Prubankers Association v. Prudential Bank and Trust Company [5] laid
Level From To From To From To
down the four elements of wage distortion, to wit: (1.) An existing hierarchy of
I 3,100 4,100 3,200 4,200 7,200 9,
positions with corresponding salary rates; (2) A significant change in the
salary rate of a lower pay class without a concomitant increase in the salary II 3,200 4,100 3,300 4,200 7,500 9,
rate of a higher one; (3) The elimination of the distinction between the two III 3,300 4,200 3,400 4,300 8,000 10

LABOR LAW (20 October 2018 Cases) Page 16

IV 3,500 4,400 3,600 4,500 8,500 matter of management judgment and discretion, and ultimately,
10,500
V 3,700 4,700 3,800 4,800 9,000 perhaps, a subject matter for bargaining negotiations between employer
11,000
and employees. It is assuredly something that falls outside the concept of
Thus the employees of private respondent have been historically classified wage distortion.[11] (Emphasis and underscoring supplied)
into levels, i.e. I to V, and not on the basis of their length of service. Put
differently, the entry of new employees to the company ipso facto place[s] As did the Court of Appeals, this Court finds that the third element
them under any of the levels mentioned in the new salary scale which private provided in Prubankers is also wanting. For, as the appellate court explained:
respondent adopted retroactive [to] April 1, 1993. Petitioner cannot make a
In trying to prove wage distortion, petitioner union presented a list of five
contrary classification of private respondents employees without encroaching
(5) employees allegedly affected by the said increase:
upon recognized management prerogative of formulating a wage structure,
in this case, one based on level.[7] (Emphasis and underscoring supplied) Pay of Old/ Pay of Newly Difference
Regular Employees Hired Employees
The issue of whether wage distortion exists being a question of fact that A. Prior to April 1, 1993
is within the jurisdiction of quasi-judicial tribunals,[8] and it being a basic rule Level I P4,518.75 P3,100 P1,418.
that findings of facts of quasi-judicial agencies, like the NLRC, are generally (Sammy Guce)
accorded not only respect but at times even finality Level II P6,242.00 P3,200 P3,042.
if they are supported by substantial evidence, as are the findings in the (Nazario Abello)
case at bar, they must be respected. For these agencies have acquired Level III P4,850.00 P3,300 P1,550.
expertise, their jurisdiction being confined to specific matters.[9] (Arthur Chavez)
It is thus clear that there is no hierarchy of positions between the newly Level IV P5,339.00 P3,500 P1,839.
hired and regular employees of Bankard, hence, the first element of wage Melissa Cordero)
distortion provided in Prubankers is wanting. Level V P7,090.69 P3,700 P3,390.
(Ma. Lourdes Dee)
While seniority may be a factor in determining the wages of employees, B. Effective April 1, 1993
it cannot be made the sole basis in cases where the nature of their work Level I P4,518.75 P4,100 P418.75
differs. Sammy Guce)
Moreover, for purposes of determining the existence of wage distortion, Level II P6,242.00 P4,100 P2,142.
employees cannot create their own independent classification and use it as a (Nazario Abello)
basis to demand an across-the-board increase in salary. Level III P4,850.00 P4,200 P650.00
(Arthur Chavez)
As National Federation of Labor v. NLRC, et al.[10] teaches, the Level IV P5,330.00 P4,400 P939.00
formulation of a wage structure through the classification of employees is a (Melissa Cordero)
matter of management judgment and discretion. Level V P7,090.69 P4,700 P2,390.
(Ma. Lourdes Dee)
[W]hether or not a new additional scheme of classification of employees for
compensation purposes should be established by the Company (and the Even assuming that there is a decrease in the wage gap between the pay of
legitimacy or viability of the bases of distinction there embodied) is properly a the old employees and the newly hired employees, to Our mind said

LABOR LAW (20 October 2018 Cases) Page 17

gap is not significant as to obliterate or result in severe contraction of the
intentional quantitative differences in the salary rates between the employee
group. As already stated, the classification under the wage structure is based
on the rank of an employee, not on seniority. For this reason, ,wage
distortion does not appear to exist.[12] (Emphasis and underscoring supplied)
Apart from the findings of fact of the NLRC and the Court of Appeals
that some of the elements of wage distortion are absent, petitioner cannot
legally obligate Bankard to correct the alleged wage distortion as the
increase in the wages and salaries of the newly-hired was not due to a
prescribed law or wage order.
The wordings of Article 124 are clear. If it was the intention of the
legislators to cover all kinds of wage adjustments, then the language of the
law should have been broad, not restrictive as it is currently phrased:
Article 124. Standards/Criteria for Minimum Wage Fixing.
xxx
Where the application of any prescribed wage increase by virtue of a law
or Wage Order issued by any Regional Board results in distortions of the
wage structure within an establishment, the employer and the union shall
negotiate to correct the distortions. Any dispute arising from the wage
distortions shall be resolved through the grievance procedure under their
collective bargaining agreement and, if it remains unresolved, through
voluntary arbitration.
x x x (Italics and emphasis supplied)
Article 124 is entitled Standards/Criteria for Minimum Wage Fixing. It
is found in CHAPTER V on WAGE STUDIES, WAGE AGREEMENTS AND
WAGE DETERMINATION which principally deals with the fixing of minimum
wage. Article 124 should thus be construed and correlated in relation to
minimum wage fixing, the intention of the law being that in the event of an
increase in minimum wage, the distinctions embodied in the wage structure
based on skills, length of service, or other logical bases of differentiation will
be preserved.
LABOR LAW (20 October 2018 Cases)
If the compulsory mandate under Article 124 to correct wage distortion
is applied to voluntary and unilateral increases by the employer in fixing
hiring rates which is inherently a business judgment prerogative, then the
hands of the employer would be completely tied even in cases where an
increase in wages of a particular group is justified due to a re-evaluation of
the high productivity of a particular group, or as in the present case, the need
to increase the competitiveness of Bankards hiring rate. An employer would
be discouraged from adjusting the salary rates of a particular group of
employees for fear that it would result to a demand by all employees for a
similar increase, especially if the financial conditions of the business cannot
address an across-the-board increase.
Petitioner cites Metro Transit Organization, Inc. v. NLRC[13] to support its
claim that the obligation to rectify wage distortion is not confined to wage
distortion resulting from government decreed law or wage order.
Reliance on Metro Transit is however misplaced, as the obligation
therein to rectify the wage distortion was not by virtue of Article 124 of the
Labor Code, but on account of a then existing company practice that
whenever rank-and-file employees were paid a statutorily mandated salary
increase, supervisory employees were, as a matter of practice, also paid the
same amount plus an added premium. Thus this Court held in said case:
We conclude that the supervisory employees, who then (i.e., on April 17,
1989) had, unlike the rank-and-file employees, no CBA governing the terms
and conditions of their employment, had the right to rely on the company
practice of unilaterally correcting the wage distortion effects of a salary
increase given to the rank-and-file employees, by giving the supervisory
employees a corresponding salary increase plus a premium. . . .[14](Emphasis
supplied)
Wage distortion is a factual and economic condition that may be brought
about by different causes. In Metro Transit, the reduction or elimination of the
normal differential between the wage rates of rank-and-file and those of
supervisory employees was due to the granting to the former of wage
increase which was, however, denied to the latter group of employees.
Page 18
 The mere factual existence of wage distortion does not, however, ipso
facto result to an obligation to rectify it, absent a law or other source of
obligation which requires its rectification.
Unlike in Metro Transit then where there existed a company practice, no
such management practice is herein alleged to obligate Bankard to provide
an across-the-board increase to all its regular employees.
Bankards right to increase its hiring rate, to establish minimum salaries
for specific jobs, and to adjust the rates of employees affected thereby is
embodied under Section 2, Article V (Salary and Cost of Living Allowance) of
the parties Collective Bargaining Agreement (CBA), to wit:
Section 2. Any salary increase granted under this Article shall be without
prejudice to the right of the Company to establish such minimum salaries as
it may hereafter find appropriate for specific jobs, and to adjust the rates of
the employees thereby affected to such minimum salaries thus
established.[15] (Italics and underscoring supplied)
This CBA provision, which is based on legitimate business-judgment
prerogatives of the employer, is a valid and legally enforceable source of
rights between the parties.
In fine, absent any indication that the voluntary increase of salary rates
by an employer was done arbitrarily and illegally for the purpose of
circumventing the laws or was devoid of any legitimate purpose other than to
discriminate against the regular employees, this Court will not step in to
interfere with this management prerogative. Employees are of course not
precluded from negotiating with its employer and lobby for wage increases
through appropriate channels, such as through a CBA.
This Court, time and again, has shown concern and compassion to the
plight of workers in adherence to the Constitutional provisions on social
justice and has always upheld the right of workers to press for better terms
and conditions of employment. It does not mean, however, that every dispute
should be decided in favor of labor, for employers correspondingly have
rights under the law which need to be respected.
WHEREFORE, the present petition is hereby DENIED.
LABOR LAW (20 October 2018 Cases)
SO ORDERED.
[G.R. No. 121927. April 22, 1998]
ANTONIO W. IRAN (doing business under the name and style of Tones
Iran Enterprises), petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION (Fourth Division), GODOFREDO O. PETRALBA,
MORENO CADALSO, PEPITO TECSON, APOLINARIO
GOTHONG GEMINA, JESUS BANDILAO, EDWIN MARTIN,
CELSO LABIAGA, DIOSDADO GONZALGO, FERNANDO M.
COLINA, respondents.
DECISION
ROMERO, J.:
Whether or not commissions are included in determining compliance
with the minimum wage requirement is the principal issue presented in this
petition.
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. Petitioner
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 at the following
rates:
Page 19
SALESMEN: 1. Celso Labiaga P10,033.10
2. Godofredo Petralba 1,250.00
Ten Centavos (P0.10) per case of Regular softdrinks. 3. Fernando Colina 11,753.10
Twelve Centavos (P0.12) per case of Family Size softdrinks. 4. Moreno Cadalso 11,753.10
5. Diosdado Gonzalgo 7,159.04
TRUCK HELPERS: 6. Apolinario Gimena 8,312.24
7. Jesus Bandilao 14,729.50
Eight Centavos (P0.08) per case of Regular softdrinks. 8. Pepito Tecson 9,126.55
Ten Centavos (P0.10) per case of Family Size softdrinks. ---------------

Sometime in June 1991, petitioner, while conducting an audit of his 74,116.63

operations, discovered cash shortages and irregularities allegedly committed
by private respondents. Pending the investigation of irregularities and Attorneys Fees (10%)
settlement of the cash shortages, petitioner required private respondents to of the gross award 7,411.66
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 GRAND TOTAL AWARD P81,528.29
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. The other claims are dismissed for lack of merit.

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 attorneys fees. Said complaints were
consolidated and docketed as Rab VII-12-1791-91, RAB VII-12-1825-91 and
RAB VII-12-1826-91, 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:
SO ORDERED.[1]
Both parties seasonably appealed to the NLRC, 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 Bandilaos 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 Bandilao. The dispositive
portion of said decision reads:

LABOR LAW (20 October 2018 Cases) Page 20

WHEREFORE, premises considered, the decision is hereby MODIFIED in
that complainant Jesus Bandilaos computation for wage differential is
corrected from P154.00 to P4,550.00. In addition to all the monetary
claim (sic) originally awarded by the Labor Arbiter a quo, P1,000.00 is hereby
granted to each complainants (sic)as indemnity fee for failure of respondents
to observe procedural due process.
SO ORDERED.[2]
Petitioners motion for reconsideration of said decision was denied on
July 31, 1995, prompting him to elevate this case to this Court, raising the
following issues:
1. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE
OF DISCRETION AND CONTRARY TO LAW AND
JURISPRUDENCE IN AFFIRMING THE DECISION OF THE LABOR
ARBITER A QUO EXCLUDING THE COMMISSIONS RECEIVED
BY THE PRIVATE RESPONDENTS IN COMPUTING THEIR
WAGES;
2. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE
OF DISCRETION IN FINDING PETITIONER GUILTY OF
PROCEDURAL LAPSES IN TERMINATING PRIVATE
RESPONDENTS AND IN AWARDING EACH OF THE LATTER
P1,000.00 AS INDEMNITY FEE;
3. THE HONORABLE COMMISSION GRAVELY ERRED IN NOT
CREDITING THE ADVANCE AMOUNT RECEIVED BY THE
PRIVATE RESPONDENTS AS PART OF THEIR 13TH MONTH PAY.
The petition is impressed with merit.
The NLRC, in denying petitioners claim that commissions be included in
determining compliance with the minimum wage ratiocinated thus:
Respondent (petitioner herein) insist assiduously that the commission should
be included in the computation of actual wages per agreement. We will not
fall prey to this fallacious argument. An employee should receive the
LABOR LAW (20 October 2018 Cases)
minimum wage as mandated by law and that the attainment of the minimum
wage should not be dependent on the commission earned by an employee.
A commission is an incentive for an employee to work harder for a better
production that will benefit both the employer and the employee. To include
the commission in the computation of wage in order to comply with labor
standard laws is to negate the practice that a commission is granted after an
employee has already earned the minimum wage or even beyond it.[3]
This holding is unsupported by law and jurisprudence. Article 97(f) of the
Labor Code defines wage as follows:
Art. 97(f) Wage paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be
rendered and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished
by the employer to the employee.
x x x x x x x x x. (Emphasis supplied)
This definition 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.
In fact, 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. 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 salesmans wage or
salary.[4]
Thus, the commissions earned by private respondents in selling
softdrinks constitute part of the compensation or remuneration paid to
Page 21
drivers/salesmen and truck helpers for serving as such, and hence, must be
considered part of the wages paid them.
The NLRC asserts that the inclusion of commissions in the computation
of wages would negate the practice of granting commissions only after an
employee has earned the minimum wage or over. While such a practice does
exist, the universality and prevalence of such a practice is questionable at
best. In truth, this Court 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.[5] 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.[6]
Likewise, 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 employees
remuneration cannot fall, not that commissions are excluded from wages in
determining compliance with the minimum wage law. This conclusion is
bolstered by Philippine Agricultural Commercial and Industrial Workers Union
vs. NLRC,[7] where this Court acknowledged that 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. It can, thus, be inferred that
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. It follows then that commissions are included in determining compliance
with minimum wage requirements.
With regard to the second issue, it is settled that 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
employers decision to dismiss him.[8](Italics ours) Petitioner asseverates that
LABOR LAW (20 October 2018 Cases)
no procedural lapses were committed by him in terminating private
respondents. In his own words:
when irregularities were discovered, that is, when the misappropriation of
several thousands of pesos was found out, the petitioner instructed private
respondents to report back for work and settle their accountabilities but the
latter never reported for work. This instruction by the petitioner to report back
for work and settle their accountabilities served as notices to private
respondents for the latter to explain or account for the missing funds held in
trust by them before they disappeared.[9]
Petitioner considers this return-to-work order as equivalent to the first
notice apprising the employee of the particular acts or omissions for which
his dismissal is sought. But by petitioners own admission, private
respondents were never told in said notice that their dismissal was being
sought, only that they should settle their accountabilities. In petitioners
incriminating words:
It should be emphasized here that at the time the misappropriation was
discovered and subsequently thereafter, the petitioners first concern was not
effecting the dismissal of private respondents but the recovery of the
misappropriated funds thus the latter were advised to report back to work.[10]
As above-stated, the first notice should inform the employee that his
dismissal is being sought. Its absence in the present case makes the
termination of private respondents defective, for which petitioner must be
sanctioned for his non-compliance with the requirements of or for failure to
observe due process.[11] The twin requirements of notice and hearing
constitute the essential elements of due process, and neither of these
elements can be disregarded without running afoul of the constitutional
guarantee. Not being mere technicalities but the very essence of due
process, to which every employee is entitled so as to ensure that the
employers prerogative to dismiss is not exercised arbitrarily, [12] these
requisites must be complied with strictly.
Petitioner makes much capital of private respondents failure to report to
work, construing the same as abandonment which thus authorized the latters
dismissal. As correctly pointed out by the NLRC, to which the Solicitor
Page 22
General agreed, 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 workers last known address. If indeed
private respondents had abandoned their jobs, it was incumbent upon
petitioner to comply with this requirement. This, petitioner failed to do,
entitling respondents to nominal damages in the amount of P5,000.00 each,
in accordance with recent jurisprudence,[13] to vindicate or recognize their
right to procedural due process which was violated by petitioner.
Lastly, petitioner argues that the NLRC gravely erred when it
disregarded the vouchers presented by the former as proof of his payment of
13th month pay to private respondents. While admitting that said vouchers
covered only a ten-day period, petitioner argues that the same should be
credited as amounts received by private respondents as part of their
13th month pay, Section 3(e) of the Rules and Regulations Implementing P.D.
No. 851 providing that the employer shall pay the difference when he pays
less than 1/12th of the employees basic salary.[14]
While it is true that the vouchers evidencing payments of 13 th month pay
were submitted only on appeal, it would have been more in keeping with the
directive of Article 221[15] of the Labor Code for the NLRC to have taken the
same into account.[16] Time and again, we have allowed evidence to be
submitted on appeal, emphasizing that, in labor cases, technical rules of
evidence are not binding.[17] 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. [18]
It must also be borne in mind that 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 13 th month pay or its
equivalent.[19] An employer who pays less than 1/12 th of the employees basic
salary as their 13thmonth pay is only required to pay the difference.[20]
The foregoing notwithstanding, the vouchers presented by petitioner
covers only a particular year. It does not cover amounts for other years
claimed by private respondents. It cannot be presumed that the same
amounts were given on said years. Hence, petitioner is entitled to credit only
the amounts paid for the particular year covered by said vouchers.
LABOR LAW (20 October 2018 Cases)
WHEREFORE, in view of the foregoing, 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 isREMANDED to the Labor Arbiter for a recomputation 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
P1,000.00 to P5,000.00 each. No costs.
SO ORDERED.
[G.R. No. 122827. March 29, 1999]
LIDUVINO M. MILLARES, et. al , petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION, (FIFTH DIVISION), and PAPER
INDUSTRIES CORPORATION OF THE PHILIPPINES
(PICOP), respondents.
DECISION
BELLOSILLO, J.:
Petitioners numbering one hundred sixteen (116)[1] occupied the
positions of Technical Staff, Unit Manager, Section Manager, Department
Manager, Division Manager and Vice President in the mill site of respondent
Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del
Sur. In 1992 PICOP suffered a major financial setback allegedly brought
about by the joint impact of restrictive government regulations on logging and
the economic crisis. To avert further losses, it undertook a retrenchment
program and terminated the services of petitioners. Accordingly, petitioners
received separation pay computed at the rate of one (1) month basic pay for
Page 23
every year of service. Believing however that the allowances they allegedly
regularly received on a monthly basis during their employment should have
been included in the computation thereof they lodged a complaint for
separation pay differentials.
The allowances in question pertained to the following -
1. Staff/Manager's Allowance -
Respondent PICOP provides free housing facilities to supervisory and
managerial employees assigned in Bislig. The privilege includes free water
and electric consumption. Owing however to shortage of such facilities, it
was constrained to grant Staff allowance instead to those who live in rented
houses outside but near the vicinity of the mill site. But the allowance ceases
whenever a vacancy occurs in the company's housing facilities. The former
grantee is then directed to fill the vacancy. For Unit, Section and Department
Managers, respondent PICOP gives an additional amount to meet the same
kind of expenses called Manager's allowance.
2. Transportation Allowance -
To relieve respondent PICOP's motor pool in Bislig from a barrage of
requests for company vehicles and to stabilize company vehicle
requirements it grants transportation allowance to key officers and Managers
assigned in the mill site who use their own vehicles in the performance of
their duties. It is a conditional grant such that when the conditions no longer
obtain, the privilege is discontinued. The recipients of this kind of allowance
are required to liquidate it by submitting a report with a detailed enumeration
of expenses incurred.
3. Bislig Allowance -
The Bislig Allowance is given to Division Managers and corporate officers
assigned in Bislig on account of the hostile environment prevailing
therein. But once the recipient is transferred elsewhere outside Bislig, the
allowance ceases.
LABOR LAW (20 October 2018 Cases)
Applying Art.,97, par. (f), of the Labor Code which defines if wage," the
Executive Labor Arbiter opined that the subject allowances, being
customarily furnished by respondent PICOP and regularly received by
petitioners, formed part of the latter's wages. Resolving the controversy from
another angle, on the strength of the ruling in Santos v. NLRC[2] and Soriano
v. NLRC[3] that in the computation of separation pay account should be taken
not just of the basic salary but also of the regular allowances that the
employee had been receiving, he concluded that the allowances should be
included in petitioners' base pay. Thus respondent PICOP was ordered on
28 April 1994 to pay petitioners Four Million Four Hundred Eighty-One
Thousand Pesos (P4,481,000.00) representing separation pay differentials
plus ten per cent (10%) thereof as attorney's fees.[4]
The National Labor Relations Commission (NLRC) did not share the
view of the Executive Labor Arbiter. On 7 October 1994 it set aside the
assailed decision by decreeing that the allowances did not form part of the
salary base used in computing separation pay.[5]
Its ruling was based on the finding that the cases relied upon by the
Executive Labor Arbiter were inapplicable since they involved illegal
dismissal where separation pay was granted in lieu of reinstatement which
was no longer feasible. Instead, what it considered in point was Estate of the
late Eugene J. Kneebone v. NLRC[6] where the Court held that representation
and transportation allowances were deemed not part of salary and should
therefore be excluded in the computation of separation benefits. Relating the
present case with Art. 97, par. (f), of the Labor Code, the NLRC likewise
found that petitioners' allowances were contingency-based and thus not
included in their salaries. On 26 September 1995 reconsideration was
denied.[7]
In this petition for certiorari, petitioners submit that their allowances are
included in the definition of "facilities" in Art. 97, par. (f), of the Labor Code,
being necessary and indispensable for their existence and
subsistence. Furthermore they claim that their availment of the monetary
equivalent of those "facilities" on a monthly basis was characterized by
permanency, regularity and customariness. And to fortify their arguments
they insist on the applicability of Santos,[8] Soriano,[9] The Insular Life
Assurance Company,[10] Planters Products, Inc.[11] and Songco[12] which are
Page 24
all against the NLRC holding that the salary base in computing separation
pay includes not just the basic salary but also the regular allowances.
There is no showing of grave abuse of discretion on the part of the
NLRC. In case of retrenchment to prevent losses, Art. 283 of the the Labor
Code imposes on the employer an obligation to grant to the affected
employees separation pay equivalent to one (1) month pay or at least one-
half (1/2) month pay for every year of service, whichever is higher. Since the
law speaks of "pay," the question arises, "What exactly does the term
connote?" We correlate Art. 283 with Art. 97 of the same Code on definition
of terms. "Pay" is not defined therein but "wage." In Songco the Court
explained that both words (as well as salary) generally refer to one and the
same meaning, i.e., a reward or recompense for services
performed. Specifically, "wage" is defined in letter (f) as the remuneration
or earnings, however designated, capable of being expressed in terms
of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable
by an employer to an employee under a written or unwritten contract
of employment for work done or to be done, or for services rendered or to
be rendered and includes the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee.
We invite attention to the above-underlined clause. Stated differently,
when an employer customarily furnishes his employee board, lodging or
other facilities, the fair and reasonable value thereof, as determined by the
Secretary of Labor and Employment, is included in "wage." In order to
ascertain whether the subject allowances form part of petitioner's "wages,"
we divide the discussion on the following - "customarily furnished;" "board,
lodging or other facilities;" and, "fair and reasonable value as determined by
the Secretary of Labor."
"Customary" is founded on long-established and constant
practice[13] connoting regularity.[14] The receipt of an allowance on a monthly
basis does not ipso facto characterize it as regular and forming part of
salary[15]because the nature of the grant is a factor worth considering. We
agree with the observation of the Office of the Solicitor General- that the
subject allowances were temporarily, not regularly, received by petitioners
because -
LABOR LAW (20 October 2018 Cases)
In the case of the housing allowance, once a vacancy occurs in the
company-provided housing accommodations, the employee concerned
transfers to the company premises and his housing allowance is
discontinued x x x x
On the other hand, the transportation allowance is in the form of advances
for actual transportation expenses subject to liquidation x x x given only to
employees who have personal cars.
The Bislig allowance is given to Division Managers and corporate officers
assigned in Bislig, Surigao del Norte. Once the officer is transferred outside
Bislig, the allowance stops.[16]
We add that in the availment of the transportation allowance,
respondent PICOP set another requirement that the personal cars be used
by the employees in the performance of their duties. When the conditions for
availment ceased to exist, the allowance reached the cutoff point. The finding
of the NLRC along the same line likewise merits concurrence, i.e.,
petitioners' continuous enjoyment of the disputed allowances was based on
contingencies the occurrence of which wrote finis to such enjoyment.
Although it is quite easy to comprehend "board" and "lodging," it is not
so with "facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing
the Labor Code gives meaning to the term as including articles or services
for the benefit of the employee or his family but excluding tools of the trade or
articles or service primarily for the benefit of the employer or necessary to the
conduct of the employer's business. The Staff /Manager's allowance may fall
under "lodging" but the transportation and Bislig allowances are not
embraced in "facilities" on the main consideration that they are granted as
well as the Staff/Manager's allowance for respondent PICOP's benefit and
convenience, i.e., to insure that petitioners render quality performance. In
determining whether a privilege is a facility, the criterion is not so much its
kind but its purpose.[17] That the assailed allowances were for the benefit and
convenience of respondent company was supported by the circumstance
that they were not subjected to withholding tax. Revenue Audit Memo Order
No. 1-87 pertinently provides -
Page 25
3.2 x x x x transportation, representation or entertainment expenses shall not
constitute taxable compensation if:
(a) It is for necessary travelling and representation or entertainment
expenses paid or incurred by the employee in the pursuit of the trade or
business of the employer, and
(b) The employee is required to, and does, make an accounting/liquidation
for such expense in accordance with the specific requirements of
substantiation for such category or expense.
Board and lodging allowances furnished to an employee not in excess of the
latter's needs and given free of charge, constitute income to the latter except
if such allowances or benefits are furnished to the employee for the
convenience of the employer and as necessary incident to proper
performance of his duties in which case such benefits or allowances do not
constitute taxable income.[18]
The Secretary of Labor and Employment under Sec. 6, Rule VII, Book
III, of the Rules Implementing the Labor Code may from time to time fix in
appropriate issuances the "fair and reasonable value of board, lodging and
other facilities customarily furnished by an employer to his employees."
Petitioners' allowances do not represent such fair and reasonable value as
determined by the proper authority simply because the Staff/Manager's
allowance and transportation allowance were amounts given by respondent
company in lieu of actual provisions for housing and transportation needs
whereas the Bislig allowance was given in consideration of being assigned to
the hostile environment then prevailing in Bislig.
The inevitable conclusion is that, as reached by the NLRC, subject
allowances did not form part of petitioners' wages.
In Santos[19] the Court decreed that in the computation of separation pay
awarded in lieu of reinstatement, account must be taken not only of the basic
salary but also of transportation and emergency living allowances.Later, the
Court in Soriano, citing Santos, was general in its holding that the salary
base properly used in computing separation pay where reinstatement was no
longer feasible should include not just the basic salary but also the regular
allowances that the employee had been receiving. Insular merely reiterated
LABOR LAW (20 October 2018 Cases)
the aforementioned rulings. The rationale is not difficult to discern. It is the
obligation of the employer to pay an illegally dismissed employee the whole
amount of his salaries plus all other benefits, bonuses and general increases
to which he would have been normally entitled had he not been dismissed
and had not stopped working.[20] The same holds true in case of retrenched
employees. And thus we applied Insular and Soriano in Planters in the
computation of separation pay of retrenched employees. Songco likewise
involved retrenchment and was relied upon in Planters, Soriano and
Santos in determining the proper amount of separation pay. As culled from
the foregoing jurisprudence, separation pay when awarded to an illegally
dismissed employee in lieu of reinstatement or to a retrenched employee
should be computed based not only on the basic salary but also on
the regular allowances that the employee had been receiving. But in view of
the previous discussion that the disputed allowances
were not regularly received by petitioners herein, there was no reason at all
for petitioners to resort to the above cases.
Neither is Kneebone applicable, contrary to the finding of the NLRC,
because of the difference in factual circumstances. In Kneebone, the Court
was tasked to resolve the issue whether the representation and
transportation allowances formed part of salary as to be considered in the
computation of retirement benefits. The ruling was in the negative on the
main ground that the retirement plan of the company expressly excluded
such allowances from salary.
WHEREFORE, the petition is DISMISSED. The resolution of public
respondent National Labor Relations Commission dated 7 October 1994
holding that the Staff /Manager's, transportation and Bislig allowances did not
form part of the salary base used in computing the separation pay of
petitioners, as well as its resolution dated 26 September 1995 denying
reconsideration, is AFFIRMED. No costs.
[G.R. No. 128296. September 8, 2003]
Page 26
NASIPIT LUMBER COMPANY, PHILIPPINE WALLBOARD compliance with the said Wage Order for a period of one (1) year or from
CORPORATION AND ANAKAN LUMBER December 8, 1993 to December 7, 1994.
COMPANY, petitioners, vs. NATIONAL WAGES AND
On December 8, 1994, petitioners, citing the continuous business
PRODUCTIVITY COMMISSION, UNITED LUMBER AND
decline in the wood processing industry, filed a consolidated petition for
GENERAL WORKERS OF THE PHILIPPINES and WESTERN
extension of their full exemption from compliance with Wage Order No. RX-
AGUSAN WORKERS UNION, respondents.
03 for another year or from December 8, 1994 to December 8, 1995.

DECISION However, in a Resolution No. 95-01 dated February 24, 1995, the
RTWPB denied petitioners consolidated application for extension of
SANDOVAL-GUTIERREZ, J.:
exemption. In justifying its denial, the RTWPB relied on Section 7 of the
NWPC Revised Guidelines No. 1, Series of 1992, thus:
Before us is a petition for certiorari with prayer for issuance of a
temporary restraining order and/or writ of preliminary injunction which seeks
Establishments shall be granted full exemption of one (1) year from effectivity
to set aside the Decision[1] dated July 3, 1996 and Resolution[2] dated
of the Order for all categories of exemption.
November 27, 1996 of the National Wages and Productivity Commission
(NWPC) in the consolidated NWPC Case Nos. E-95-099, E-95-100 and E-
From the said Resolution, petitioners interposed an appeal to the
95-101, entitled In Re: Application for Extension of Exemption from Wage
NWPC.
Order No. RX-03 of Applicants-Appellants Nasipit Lumber Company,
Philippine Wallboard Corporation and Anakan Lumber Company. On July 3, 1996, the NWPC rendered a Decision denying the appeal for
lack of merit. The NWPC ratiocinated as follows:
The undisputed facts of this case are as follows:

On November 19, 1993, the Regional Tripartite Wages and Productivity Thus, the principal issue to be resolved in this case is whether or not the
Board (RTWPB) of Region X, Northern Mindanao, Cagayan de Oro City, period of exemption under Wage Order RX-03 can be extended for more
issued Wage Order No. RX-03.[3] This Wage Order mandated a P7.00 than one (1) year.
increase in the minimum daily wage of all workers and employees in the
private sector in Region X receiving a daily wage of not more than P130.00 We rule in the negative.
per day and an additional P10.00 allowance per day.
Section 7 of the NWPC Revised Guidelines on Exemption, which is the
Subsequently or on March 17, 1994, Nasipit Lumber Company,
applicable rule on this matter, provides for the duration and extent of
Philippine Wallboard Corporation and Anakan Lumber Company (herein
exemption that can be granted to a qualified applicant establishment, to wit:
petitioners) filed their separate application for exemption from compliance
with Wage Order No. RX-03, claiming they are distressed establishments
whose paid-up capital has been impaired by at least twenty-five percent Establishments shall be granted full exemption of one (1) year from effectivity
of the Order for all categories of exemption.
(25%).

After finding that the petitioners indeed sustained financial losses which xxx
impaired their respective paid-up capital, the RTWPB, in a consolidated
Order dated December 3, 1994, granted petitioners a full exemption from As set forth by the aforecited rule, the maximum period of exemption that can
be accorded to a qualified applicant is only for one (1) year from the

LABOR LAW (20 October 2018 Cases) Page 27

effectivity of the Wage Order. This non-extendable one year period of
exemption, which had been consistently applied to all analogous cases in the
past involving companies seeking extension of the period of their exemption,
remains and continues to be the existing policy on the matter.Precisely, the
rationale behind this policy is to afford protection to workers who may be
unfairly affected by the deleterious effect of a prolonged exemption which is
not in accord with the very purpose of the issuance of a Wage Order.
WHEREFORE, premises considered, the instant appeal is hereby DENIED
for lack of merit. Board Resolution No. 95-01, Series of 1995 dated 24
February 1995 is AFFIRMED.
SO ORDERED.
Unswayed, petitioners filed on August 14, 1996, a consolidated motion
for reconsideration.
However, the NWPC remained steadfast with its earlier Decision and
denied petitioners motion in its Resolution dated November 27, 1996.
Hence, this petition for certiorari. Petitioners contend they are entitled to
an extension for another year of their full exemption as distressed
establishments on the basis of paragraph 4, Section 3 of Wage Order No.
RX-03 which expressly provides: (D)istressed establishments, as defined by
the Board upon due and proper application with the Board, may also be
exempted either partly or fully for a period of one year renewable for
another year provided the conditions still persist and warrant the exemption,
provided further that they qualify under the implementing guidelines issued
by the Board.
More specifically, petitioners claim that the NWPC exceeded its
jurisdiction (1) in deleting the phrase renewable for another year provided the
conditions still persist and warrant the exemption from paragraph 4, Section
3 of Wage Order No. RX-03 issued by the RTWPB; (2) in overriding the clear
intention of the RTWPB to extend the exemption of distressed
establishments; and (3) in applying Section 7 of the NWPC Guideline No. 01,
Series of 1992, limiting the duration of exemption to one (1) year, contrary to
Republic Act No. 6727.[4]
LABOR LAW (20 October 2018 Cases)
Article 121 of the Labor Code, as amended by Republic Act No. 6727,
partly provides:
ART. 121. Powers and Functions of the Commission. The Commission shall
have the following powers and functions:
xxx
(c) To prescribe rules and guidelines for the determination of appropriate
minimum wage and productivity measures at the regional, provincial or
industry levels;
(d) To review regional wage levels set by the Regional Tripartite Wages and
Productivity Boards to determine if these are in accordance with prescribed
guidelines and national development plans;
xxx
Interpreting the above provision, this Court through Justice Artemio V.
Panganiban, in Nasipit Lumber Company, Inc. vs. National Wages and
Productivity Commission,[5] held:
The foregoing clearly grants the NWPC, x x x, the power to prescribe the
rules and guidelines for the determination of minimum wage and productivity
measures. x x x, the NWPC has the power not only to prescribe guidelines to
govern wage orders, but also to issue exemptions therefrom, x x x. In short,
the NWPC lays down the guidelines which the RTWPB implements.
In affirming the RTWPBs Resolution denying petitioners application for
extension for another year of their full exemption from compliance with Wage
Order No. RX-03, the NWPC did not act with grave abuse of discretion. On
the contrary, it merely applied its own Guideline No. 01, Series of 1992
limiting the duration of exemption to only one (1) year.
It is noteworthy that the RTWPB, for its part, implemented to the letter
the said Guideline.
Page 28
 WHEREFORE, the petition is hereby DISMISSED. The assailed private sector in Region X receiving a daily wage of not more than P130.00
Decision dated July 3, 1996 and Resolution dated November 27, 1996 of the per day and an additional P10.00 allowance per day.
National Wages and Productivity Commission (NWPC) are
Subsequently or on March 17, 1994, Nasipit Lumber Company,
hereby AFFIRMED.
Philippine Wallboard Corporation and Anakan Lumber Company (herein
SO ORDERED. petitioners) filed their separate application for exemption from compliance
with Wage Order No. RX-03, claiming they are distressed establishments
whose paid-up capital has been impaired by at least twenty-five percent
(25%).

After finding that the petitioners indeed sustained financial losses which
[G.R. No. 128296. September 8, 2003] impaired their respective paid-up capital, the RTWPB, in a consolidated
Order dated December 3, 1994, granted petitioners a full exemption from
compliance with the said Wage Order for a period of one (1) year or from
December 8, 1993 to December 7, 1994.
NASIPIT LUMBER COMPANY, PHILIPPINE WALLBOARD
CORPORATION AND ANAKAN LUMBER On December 8, 1994, petitioners, citing the continuous business
COMPANY, petitioners, vs. NATIONAL WAGES AND decline in the wood processing industry, filed a consolidated petition for
PRODUCTIVITY COMMISSION, UNITED LUMBER AND extension of their full exemption from compliance with Wage Order No. RX-
GENERAL WORKERS OF THE PHILIPPINES and WESTERN 03 for another year or from December 8, 1994 to December 8, 1995.
AGUSAN WORKERS UNION, respondents.
However, in a Resolution No. 95-01 dated February 24, 1995, the
RTWPB denied petitioners consolidated application for extension of
DECISION
exemption. In justifying its denial, the RTWPB relied on Section 7 of the
SANDOVAL-GUTIERREZ, J.: NWPC Revised Guidelines No. 1, Series of 1992, thus:

Before us is a petition for certiorari with prayer for issuance of a
temporary restraining order and/or writ of preliminary injunction which seeks
to set aside the Decision[1] dated July 3, 1996 and Resolution[2] dated
November 27, 1996 of the National Wages and Productivity Commission
(NWPC) in the consolidated NWPC Case Nos. E-95-099, E-95-100 and E-
95-101, entitled In Re: Application for Extension of Exemption from Wage
Order No. RX-03 of Applicants-Appellants Nasipit Lumber Company,
Philippine Wallboard Corporation and Anakan Lumber Company.
Establishments shall be granted full exemption of one (1) year from effectivity
of the Order for all categories of exemption.
From the said Resolution, petitioners interposed an appeal to the
NWPC.
On July 3, 1996, the NWPC rendered a Decision denying the appeal for
lack of merit. The NWPC ratiocinated as follows:

The undisputed facts of this case are as follows: Thus, the principal issue to be resolved in this case is whether or not the
period of exemption under Wage Order RX-03 can be extended for more
On November 19, 1993, the Regional Tripartite Wages and Productivity
than one (1) year.
Board (RTWPB) of Region X, Northern Mindanao, Cagayan de Oro City,
issued Wage Order No. RX-03.[3] This Wage Order mandated a P7.00
We rule in the negative.
increase in the minimum daily wage of all workers and employees in the
LABOR LAW (20 October 2018 Cases) Page 29
Section 7 of the NWPC Revised Guidelines on Exemption, which is the
applicable rule on this matter, provides for the duration and extent of
exemption that can be granted to a qualified applicant establishment, to wit:
Establishments shall be granted full exemption of one (1) year from effectivity
of the Order for all categories of exemption.
xxx
As set forth by the aforecited rule, the maximum period of exemption that can
be accorded to a qualified applicant is only for one (1) year from the
effectivity of the Wage Order. This non-extendable one year period of
exemption, which had been consistently applied to all analogous cases in the
past involving companies seeking extension of the period of their exemption,
remains and continues to be the existing policy on the matter.Precisely, the
rationale behind this policy is to afford protection to workers who may be
unfairly affected by the deleterious effect of a prolonged exemption which is
not in accord with the very purpose of the issuance of a Wage Order.
WHEREFORE, premises considered, the instant appeal is hereby DENIED
for lack of merit. Board Resolution No. 95-01, Series of 1995 dated 24
February 1995 is AFFIRMED.
SO ORDERED.
Unswayed, petitioners filed on August 14, 1996, a consolidated motion
for reconsideration.
However, the NWPC remained steadfast with its earlier Decision and
denied petitioners motion in its Resolution dated November 27, 1996.
Hence, this petition for certiorari. Petitioners contend they are entitled to
an extension for another year of their full exemption as distressed
establishments on the basis of paragraph 4, Section 3 of Wage Order No.
RX-03 which expressly provides: (D)istressed establishments, as defined by
the Board upon due and proper application with the Board, may also be
exempted either partly or fully for a period of one year renewable for
another year provided the conditions still persist and warrant the exemption,
LABOR LAW (20 October 2018 Cases)
provided further that they qualify under the implementing guidelines issued
by the Board.
More specifically, petitioners claim that the NWPC exceeded its
jurisdiction (1) in deleting the phrase renewable for another year provided the
conditions still persist and warrant the exemption from paragraph 4, Section
3 of Wage Order No. RX-03 issued by the RTWPB; (2) in overriding the clear
intention of the RTWPB to extend the exemption of distressed
establishments; and (3) in applying Section 7 of the NWPC Guideline No. 01,
Series of 1992, limiting the duration of exemption to one (1) year, contrary to
Republic Act No. 6727.[4]
Article 121 of the Labor Code, as amended by Republic Act No. 6727,
partly provides:
ART. 121. Powers and Functions of the Commission. The Commission shall
have the following powers and functions:
xxx
(c) To prescribe rules and guidelines for the determination of appropriate
minimum wage and productivity measures at the regional, provincial or
industry levels;
(d) To review regional wage levels set by the Regional Tripartite Wages and
Productivity Boards to determine if these are in accordance with prescribed
guidelines and national development plans;
xxx
Interpreting the above provision, this Court through Justice Artemio V.
Panganiban, in Nasipit Lumber Company, Inc. vs. National Wages and
Productivity Commission,[5] held:
The foregoing clearly grants the NWPC, x x x, the power to prescribe the
rules and guidelines for the determination of minimum wage and productivity
measures. x x x, the NWPC has the power not only to prescribe guidelines to
Page 30
govern wage orders, but also to issue exemptions therefrom, x x x. In short,
the NWPC lays down the guidelines which the RTWPB implements.
In affirming the RTWPBs Resolution denying petitioners application for
extension for another year of their full exemption from compliance with Wage
Order No. RX-03, the NWPC did not act with grave abuse of discretion. On
the contrary, it merely applied its own Guideline No. 01, Series of 1992
limiting the duration of exemption to only one (1) year.
It is noteworthy that the RTWPB, for its part, implemented to the letter
the said Guideline.
WHEREFORE, the petition is hereby DISMISSED. The assailed
Decision dated July 3, 1996 and Resolution dated November 27, 1996 of the
National Wages and Productivity Commission (NWPC) are
hereby AFFIRMED.
SO ORDERED.
[G.R. No. 131247. January 25, 1999]
PRUBANKERS ASSOCIATION, petitioner, vs. PRUDENTIAL BANK &
TRUST COMPANY, respondent.
DECISION
PANGANIBAN, J.:
Wage distortion presupposes an increase in the compensation of the
lower ranks in an office hierarchy without a corresponding raise for higher-
tiered employees in the same region of the country, resulting in the
elimination or the severe diminution of the distinction between the two
groups. Such distortion does not arise when a wage order gives employees
LABOR LAW (20 October 2018 Cases)
in one branch of a bank higher compensation than that given to their
counterparts in other regions occupying the same pay scale, who are not
covered by said wage order. In short, the implementation of wage orders in
one region but not in others does not in itself necessarily result in wage
distortion.
The Case
Before us is a Petition for Review on Certiorari, challenging the
November 6, 1997 Decision[1] of the Court of Appeals in CA-GR SP No.
42525. The dispositive portion of the challenged Decision reads:
WHEREFORE, the petition is GRANTED. The assailed decision of the
Voluntary Arbitration Committee dated June 18, 1996 is hereby REVERSED
and SET ASIDE for having been issued with grave abuse of discretion
tantamount to lack of or excess of jurisdiction, and a new judgment is
rendered finding that no wage distortion resulted from the petitioners
separate and regional implementation of Wage Order No. VII-03 at its Cebu,
Mabolo and P. del Rosario branches.
The June 18, 1996 Decision of the Voluntary Arbitration
Committee,[2] which the Court of Appeals reversed and set aside, disposed
as follows:
WHEREFORE, it is hereby ruled that the Banks separate and regional
implementation of Wage Order No. VII-03 at its Cebu, Mabolo and P. del
Rosario branches created a wage distortion in the Bank nationwide which
should be resolved in accordance with Art. 124 of the Labor Code.[3]
The Facts
The facts of the case are summarized by the Court of Appeals thus:
Page 31
On November 18, 1993, the Regional Tripartite Wages and Productivity
Board of Region V issued Wage Order No. RB 05-03 which provided for a
Cost of Living Allowance (COLA) to workers in the private sector who ha[d]
rendered service for at least three (3) months before its effectivity, and for the
same period [t]hereafter, in the following categories: SEVENTEEN PESOS
AND FIFTY CENTAVOS (P17.50) in the cities of Naga and
Legaspi; FIFTEEN PESOS AND FIFTY CENTAVOS (P15.50) in the
municipalities of Tabaco, Daraga, Pili and the city of Iriga; and TEN
PESOS (P10.00) for all other areas in the Bicol Region.
Subsequently on November 23, 1993, the Regional Tripartite Wages and
Productivity Board of Region VII issued Wage Order No. RB VII-03, which
directed the integration of the COLA mandated pursuant to Wage Order No.
RO VII-02-A into the basic pay of all workers. It also established an increase
in the minimum wage rates for all workers and employees in the private
sector as follows: by Ten Pesos (P10.00) in the cities of Cebu, Mandaue and
Lapulapu; Five Pesos (P5.00) in the municipalities of Compostela, Liloan,
Consolacion, Cordova, Talisay, Minglanilla, Naga and the cities of Davao,
Toledo, Dumaguete, Bais, Canlaon, and Tagbilaran.
The petitioner then granted a COLA of P17.50 to its employees at its Naga
Branch, the only branch covered by Wage Order No. RB 5-03, and integrated
the P150.00 per month COLA into the basic pay of its rank-and-file
employees at its Cebu, Mabolo and P. del Rosario branches, the branches
covered by Wage Order No. RB VII-03.
On June 7, 1994, respondent Prubankers Association wrote the petitioner
requesting that the Labor Management Committee be immediately convened
to discuss and resolve the alleged wage distortion created in the salary
structure upon the implementation of the said wage orders. Respondent
Association then demanded in the Labor Management Committee meetings
that the petitioner extend the application of the wage orders to its employees
outside Regions V and VII, claiming that the regional implementation of the
said orders created a wage distortion in the wage rates of petitioners
employees nationwide. As the grievance could not be settled in the said
meetings, the parties agreed to submit the matter to voluntary
arbitration. The Arbitration Committee formed for that purpose was
composed of the following: public respondent Froilan M. Bacungan as
LABOR LAW (20 October 2018 Cases)
Chairman, with Attys. Domingo T. Anonuevo and Emerico O. de Guzman as
members. The issue presented before the Committee was whether or not the
banks separate and regional implementation of Wage Order No. 5-03 at its
Naga Branch and Wage Order No. VII-03 at its Cebu, Mabolo and P. del
Rosario branches, created a wage distortion in the bank nationwide.
The Arbitration Committee on June 18, 1996 rendered the questioned
decision.[4]
Ruling of the Court of Appeals
In ruling that there was no wage distortion, the Court of Appeals held
that the variance in the salary rates of employees in different regions of the
country was justified by RA 6727. It noted that the underlying considerations
in issuing the wage orders are diverse, based on the distinctive situations
and needs existing in each region. Hence, there is no basis to apply the
salary increases imposed by Wage Order No. VII-03 to employees outside of
Region VII. Furthermore, the Court of Appeals ruled that the distinctions
between each employee group in the region are maintained, as all
employees were granted an increase in minimum wage rate.[5]
The Issues
In its Memorandum, petitioner raises the following issues:[6]
I
Whether or not the Court of Appeals departed from the usual
course of judicial procedure when it disregarded the factual
findings of the Voluntary Arbitration Committee as to the existence
of wage distortion.
II
Page 32
 Whether or not the Court of Appeals committed grave error in law
when it ruled that wage distortion exists only within a region and
not nationwide.
III
Whether or not the Court of Appeals erred in implying that the term
establishment as used in Article 125 of the Labor Code refers to
the regional branches of the bank and not to the bank as a whole.
The main issue is whether or not a wage distortion resulted from
respondents implementation of the aforecited Wage Orders. As a preliminary
matter, we shall also take up the question of forum-shopping.
The Courts Ruling
The petition is devoid of merit.[7]
Preliminary Issue: Forum-Shopping
Respondent asks for the dismissal of the petition because petitioner
allegedly engaged in forum-shopping. It maintains that petitioner failed to
comply with Section 2 of Rule 42 of the Rules of Court, which requires that
parties must certify under oath that they have not commenced any other
action involving the same issues in the Supreme Court, the Court of Appeals,
or different divisions thereof, or any other tribunal or agency; if there is such
other action or proceeding, they must state the status of the same; and if
they should thereafter learn that a similar action or proceeding has been filed
or is pending before the said courts, they should promptly inform the
aforesaid courts or any other tribunal or agency within five days
therefrom. Specifically, petitioner accuses respondent of failing to inform this
Court of the pendency of NCMB-NCR-RVA-04-012-97 entitled In Re:
Voluntary Arbitration between Prudential Bank and Prubankers Association
(hereafter referred to as voluntary arbitration case), an action involving
issues allegedly similar to those raised in the present controversy.
LABOR LAW (20 October 2018 Cases)
In its Reply, petitioner effectively admits that the voluntary arbitration
case was already pending when it filed the present petition. However, it
claims no violation of the rule against forum-shopping, because there is no
identity of causes of action and issues between the two cases.
We sustain the respondent. The rule on forum-shopping was first
included in Section 17 of the Interim Rules and Guidelines issued by this
Court on January 11, 1983, which imposed a sanction in this wise: A violation
of the rule shall constitute contempt of court and shall be a cause for the
summary dismissal of both petitions, without prejudice to the taking of
appropriate action against the counsel or party concerned. Thereafter, the
Court restated the rule in Revised Circular No. 28-91 and Administrative
Circular No. 04-94. Ultimately, the rule was embodied in the 1997
amendments to the Rules of Court.
As explained by this Court in First Philippine International Bank v. Court
of Appeals,[8] forum-shopping exists where the elements of litis pendentia are
present, and where a final judgment in one case will amount to res judicata in
the other. Thus, there is forum-shopping when, between an action pending
before this Court and another one, there exist: a) identity of parties, or at
least such parties as represent the same interests in both actions, b) identity
of rights asserted and relief prayed for, the relief being founded on the same
facts, and c) the identity of the two preceding particulars is such that any
judgement rendered in the other action, will, regardless of which party is
successful amount to res judicata in the action under consideration; said
requisites also constitutive of the requisites for auter action pendant or lis
pendens.[9] Another case elucidates the consequence of forum-shopping:
[W]here a litigant sues the same party against whom another action or
actions for the alleged violation of the same right and the enforcement of the
same relief is/are still pending, the defense of litis pendentia in one case is a
bar to the others; and, a final judgment in one would constitute res
judicata and thus would cause the dismissal of the rest.[10]
The voluntary arbitration case involved the issue of whether the
adoption by the Bank of regionalized hiring rates was valid and binding.
On the other hand, the issue now on hand revolves around the existence of a
wage distortion arising from the Banks separate and regional implementation
of the two Wage Orders in the affected branches. A closer look would show
that, indeed, the requisites of forum-shopping are present.
Page 33
 First, there is identity of parties. Both cases are between the Bank and
the Association, acting on behalf of all its members. Second, although the
respective issues and reliefs prayed for in the two cases are stated
differently, both actions boil down to one single issue: the validity of the
Banks regionalization of its wage structure based on RA 6727. Even if the
voluntary arbitration case calls for striking down the Banks regionalized hiring
scheme while the instant petition calls for the correction of the alleged wage
distortion caused by the regional implementation of Wage Order No. VII-03,
the ultimate relief prayed for in both cases is the maintenance of the Banks
national wage structure. Hence, the final disposition of one would
constitute res judicata in the other. Thus, forum-shopping is deemed to exist
and, on this basis, the summary dismissal of both actions is indeed
warranted.
Nonetheless, we deem it appropriate to pass upon the main issue on its
merit in view of its importance.
Main Issue: Wage Distortion
The statutory definition of wage distortion is found in Article 124 of the
Labor Code, as amended by Republic Act No. 6727, which reads:
Article 124. Standards/Criteria for Minimum Wage Fixing - xxx
As used herein, a wage distortion shall mean a situation where an increase
in prescribed wage results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and
among employee groups in an establishment as to effectively obliterate the
distinctions embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation.
Elaborating on this statutory definition, this Court ruled: Wage distortion
presupposes a classification of positions and ranking of these positions at
various levels. One visualizes a hierarchy of positions with corresponding
ranks basically in terms of wages and other emoluments. Where a significant
change occurs at the lowest level of positions in terms of basic wage without
LABOR LAW (20 October 2018 Cases)
a corresponding change in the other level in the hierarchy of positions,
negating as a result thereof the distinction between one level of position from
the next higher level, and resulting in a parity between the lowest level and
the next higher level or rank, between new entrants and old hires, there
exists a wage distortion. xxx. The concept of wage distortion assumes an
existing grouping or classification of employees which establishes
distinctions among such employees on some relevant or legitimate
basis. This classification is reflected in a differing wage rate for each of the
existing classes of employees[11]
Wage distortion involves four elements:
1. An existing hierarchy of positions with corresponding salary rates
2. A significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher one
3. The elimination of the distinction between the two levels
4. The existence of the distortion in the same region of the country.
In the present case, it is clear that no wage distortion resulted when
respondent implemented the subject Wage Orders in the covered
branches. In the said branches, there was an increase in the salary rates
of all pay classes. Furthermore, the hierarchy of positions based on skills,
length of service and other logical bases of differentiation was preserved. In
other words, the quantitative difference in compensation between different
pay classes remained the same in all branches in the affected region. Put
differently, the distinction between Pay Class 1 and Pay Class 2, for
example, was not eliminated as a result of the implementation of the two
Wage Orders in the said region. Hence, it cannot be said that there was a
wage distortion.
Petitioner argues that a wage distortion exists because the
implementation of the two Wage Orders has resulted in the discrepancy in
the compensation of employees of similar pay classification
in different regions.Hence, petitioner maintains that, as a result of the two
Wage Orders, the employees in the affected regions have higher
compensation than their counterparts of the same level in other
regions. Several tables are presented by petitioner to illustrate that the
Page 34
employees in the regions covered by the Wage Orders are receiving more
than their counterparts in the same pay scale in other regions.
The Court is not persuaded. A wage parity between employees
in different rungs is not at issue here, but a wage disparity between
employees in the same rung but located in different regions of the country.
Contrary to petitioners postulation, a disparity in wages between
employees holding similar positions but in different regions does not
constitute wage distortion as contemplated by law. As previously enunciated,
it is the hierarchy of positions and the disparity of their corresponding wages
and other emoluments that are sought to be preserved by the concept of
wage distortion. Put differently, a wage distortion arises when a wage order
engenders wage parity between employees in different rungs of the
organizational ladder of the same establishment. It bears emphasis that
wage distortion involves a parity in the salary rates of different pay classes
which, as a result, eliminates the distinction between the different ranks in
the same region.
Different Regional Wages Mandated by RA 6727
Petitioners claim of wage distortion must also be denied for one other
reason. The difference in wages between employees in the same pay scale
in different regions is not the mischief sought to be banished by the law.In
fact, Republic Act No. 6727 (the Wage Rationalization Act), recognizes
existing regional disparities in the cost of living. Section 2 of said law
provides:
SEC 2. It is hereby declared the policy of the State to rationalize the fixing of
minimum wages and to promote productivity-improvement and gain-sharing
measures to ensure a decent standard of living for the workers and their
families; to guarantee the rights of labor to its just share in the fruits of
production; to enhance employment generation in the countryside through
industry dispersal; and to allow business and industry reasonable returns on
investment, expansion and growth.
LABOR LAW (20 October 2018 Cases)
The State shall promote collective bargaining as the primary mode of settling
wages and other terms and conditions of employment; and whenever
necessary, the minimum wage rates shall be adjusted in a fair and equitable
manner, considering existing regional disparities in the cost of living and
other socio-economic factors and the national economic and social
development plans.
RA 6727 also amended Article 124 of the Labor Code, thus:
Art. 124. Standards/Criteria for Minimum Wage Fixing. - The regional
minimum wages to be established by the Regional Board shall be as nearly
adequate as is economically feasible to maintain the minimum standards of
living necessary for the health, efficiency and general well-being of the
employees within the frame work of the national economic and social
development program. In the determination of such regional minimum
wages, the Regional Board shall, among other relevant factors, consider the
following:
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of
employers;
(I) Effects on employment generation and family income; and
(j) The equitable distribution of income and wealth along the
imperatives of social and economic development.
From the above-quoted rationale of the law, as well as the criteria
enumerated, a disparity in wages between employees with similar positions
in different regions is necessarily expected. In insisting that the employees of
the same pay class in different regions should receive the same
compensation, petitioner has apparently misunderstood both the meaning
of wage distortion and the intent of the law to regionalize wage rates.
Page 35

It must be understood that varying in each region of the country are
controlling factors such as the cost of living; supply and demand of basic
goods, services and necessities; and the purchasing power of the peso.Other
considerations underscore the necessity of the law. Wages in some areas
may be increased in order to prevent migration to the National Capital
Region and, hence, to decongest the metropolis. Therefore, what the
petitioner herein bewails is precisely what the law provides in order to
achieve its purpose.
Petitioner claims that it does not insist that the Regional Wage Boards
created pursuant to RA 6727 do not have the authority to issue wage orders
based on the distinctive situations and needs existing in each region. So
also, xxx it does not insist that the [B]ank should not implement regional
wage orders. Neither does it seek to penalize the Bank for following Wage
Order VII-03. xxx What it simply argues is that it is wrong for the Bank to
peremptorily abandon a national wage structure and replace the same with a
regionalized structure in violation of the principle of equal pay for equal
work. And, it is wrong to say that its act of abandoning its national wage
structure is mandated by law.
As already discussed above, we cannot sustain this
argument. Petitioner contradicts itself in not objecting, on the one hand, to
the right of the regional wage boards to impose a regionalized wage scheme;
while insisting, on the other hand, on a national wage structure for the whole
Bank. To reiterate, a uniform national wage structure is antithetical to the
purpose of RA 6727.
The objective of the law also explains the wage disparity in the example
cited by petitioner: Armae Librero, though only in Pay Class 4 in Mabolo,
was, as a result of the Wage Order, receiving more than Bella Cristobal, who
was already in Pay Class 5 in Subic.[12] RA 6727 recognizes that there are
different needs for the different situations in different regions of the
country. The fact that a person is receiving more in one region does not
necessarily mean that he or she is better off than a person receiving less in
another region. We must consider, among others, such factors as cost of
living, fulfillment of national economic goals, and standard of living. In any
event, this Court, in its decisions, merely enforces the law. It has no power to
pass upon its wisdom or propriety.
LABOR LAW (20 October 2018 Cases)
Equal Pay for Equal Work
Petitioner also avers that the implementation of the Wage Order in only
one region violates the equal-pay-for-equal-work principle. This is not
correct. At the risk of being repetitive, we stress that RA 6727 mandates that
wages in every region must be set by the particular wage board of that
region, based on the prevailing situation therein. Necessarily, the wages in
different regions will not be uniform. Thus, under RA 6727, the minimum
wage in Region 1 may be different from that in Region 13, because the
socioeconomic conditions in the two regions are different.
Meaning of Establishment
Petitioner further contends that the Court of Appeals erred in interpreting
the meaning of establishment in relation to wage distortion. It quotes the RA
6727 Implementing Rules, specifically Section 13 thereof which speaks of
workers working in branches or agencies of establishments in or outside the
National Capital Region. Petitioner infers from this that the regional offices of
the Bank do not themselves constitute, but are simply branches of, the
establishment which is the whole bank. In effect, petitioner argues that wage
distortion covers the pay scales even of employees in different regions, and
not only those of employees in the same region or branch. We disagree.
Section 13 provides that the minimum wage rates of workers working in
branches or agencies of establishments in or outside the National Capital
Region shall be those applicable in the place where they are sanctioned. The
last part of the sentence was omitted by petitioner in its argument. Given the
entire phrase, it is clear that the statutory provision does not support
petitioners view that establishment includes all branches and offices in
different regions.
Further negating petitioners theory is NWPC Guideline No. 1 (S. 1992)
entitled Revised Guidelines on Exemption From Compliance With the
Prescribed Wage/Cost of Living Allowance Increases Granted by the
Regional Tripartite Wages and Productivity Board, which states that
Page 36
establishment refers to an economic unit which engages in one or
predominantly one kind of economic activity with a single fixed location.
Management Practice
Petitioner also insists that the Bank has adopted a uniform wage policy,
which has attained the status of an established management practice; thus, it
is estopped from implementing a wage order for a specific region only. We
are not persuaded. Said nationwide uniform wage policy of the Bank had
been adopted prior to the enactment of RA 6727. After the passage of said
law, the Bank was mandated to regionalize its wage structure.Although the
Bank implemented Wage Order Nos. NCR-01 and NCR-02 nationwide
instead of regionally even after the effectivity of RA 6727, the Bank at the
time was still uncertain about how to follow the new law. In any event, that
single instance cannot be constitutive of management practice.
WHEREFORE, the petition is DENIED and the assailed Decision
is AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 80039 April 18, 1989
ERNESTO M. APODACA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, JOSE M. MIRASOL and
INTRANS PHILS., INC., respondents.
Diego O. Untalan for petitioner.
The Solicitor General for public respondent.
Barcelona, Perlas, Joven & Academia Law Offices for private respondents.
LABOR LAW (20 October 2018 Cases)
GANCAYCO, J.:
Does the National Labor Relations Commission (NLRC) have jurisdiction to
resolve a claim for non-payment of stock subscriptions to a corporation?
Assuming that it has, can an obligation arising therefrom be offset against a
money claim of an employee against the employer? These are the issues
brought to this court through this petition for review of a decision of the NLRC
dated September 18, 1987.
The only remedy provided for by law from such a decision is a special civil
action for certiorari under Rule 65 of the Rules of Court based on
jurisdictional grounds or on alleged grave abuse of discretion amounting to
lack or excess of jurisdiction, not by way of an appeal by certiorari.
Nevertheless, in the interest of justice, this petition is treated as a special civil
action for certiorari.
Petitioner was employed in respondent corporation. On August 28, 1985,
respondent Jose M. Mirasol persuaded petitioner to subscribe to 1,500
shares of respondent corporation at P100.00 per share or a total of
P150,000.00. He made an initial payment of P37,500.00. On September 1,
1975, petitioner was appointed President and General Manager of the
respondent corporation. However, on January 2, 1986, he resigned.
On December 19, 1986, petitioner instituted with the NLRC a complaint
against private respondents for the payment of his unpaid wages, his cost of
living allowance, the balance of his gasoline and representation expenses
and his bonus compensation for 1986. Petitioner and private respondents
submitted their position papers to the labor arbiter. Private respondents
admitted that there is due to petitioner the amount of P17,060.07 but this was
applied to the unpaid balance of his subscription in the amount of
P95,439.93. Petitioner questioned the set-off alleging that there was no call
or notice for the payment of the unpaid subscription and that, accordingly, the
alleged obligation is not enforceable.
In a decision dated April 28, 1987, the labor arbiter sustained the claim of
petitioner for P17,060.07 on the ground that the employer has no right to
withhold payment of wages already earned under Article 103 of the Labor
Code. Upon the appeal of the private respondents to public respondent
Page 37
NLRC, the decision of the labor arbiter was reversed in a decision dated
September 18, 1987. The NLRC held that a stockholder who fails to pay his
unpaid subscription on call becomes a debtor of the corporation and that the
set-off of said obligation against the wages and others due to petitioner is not
contrary to law, morals and public policy.
Hence, the instant petition.
The petition is impressed with merit.
Firstly, the NLRC has no jurisdiction to determine such intra-corporate
dispute between the stockholder and the corporation as in the matter of
unpaid subscriptions. This controversy is within the exclusive jurisdiction of
the Securities and Exchange Commission. 1
Secondly, assuming arguendo that the NLRC may exercise jurisdiction over
the said subject matter under the circumstances of this case, the unpaid
subscriptions are not due and payable until a call is made by the corporation
for payment. 2 Private respondents have not presented a resolution of the
board of directors of respondent corporation calling for the payment of the
unpaid subscriptions. It does not even appear that a notice of such call has
been sent to petitioner by the respondent corporation.
ART. 113. Wage Deduction. — No employer, in his own
behalf or in behalf of any person, shall make any deduction
from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by
the employer, and the deduction is to recompense the
employer for the amount paid by him as premium on the
insurance;
(b) For union dues, in cases where the right of the worker or
his union to checkoff has been recognized by the employer
or authorized in writing by the individual worker concerned;
and
(c) In cases where the employer is authorized by law or
regulations issued by the Secretary of Labor. 4
WHEREFORE, the petition is GRANTED and the questioned decision of the
NLRC dated September 18, 1987 is hereby set aside and another judgment
is hereby rendered ordering private respondents to pay petitioner the amount
of P17,060.07 plus legal interest computed from the time of the filing of the
complaint on December 19, 1986, with costs against private respondents.

What the records show is that the respondent corporation deducted the SO ORDERED.
amount due to petitioner from the amount receivable from him for the unpaid
subscriptions. 3 No doubt such set-off was without lawful basis, if not
premature. As there was no notice or call for the payment of unpaid
subscriptions, the same is not yet due and payable.

Lastly, assuming further that there was a call for payment of the unpaid G.R. No. 87449 January 23, 1990
subscription, the NLRC cannot validly set it off against the wages and other
benefits due petitioner. Article 113 of the Labor Code allows such a SOUTH MOTORISTS ENTERPRISES, petitioner,
deduction from the wages of the employees by the employer, only in three vs.
instances, to wit: ROQUE TOSOC, ET AL., and HON. SECRETARY OF LABOR AND
EMPLOYMENT, respondents.

Manuel M. Parades for petitioner.

Henry V. Briguera for private respondents.

LABOR LAW (20 October 2018 Cases) Page 38


MELENCIO-HERRERA, J.:
At issue in this special civil action for Certiorari is the jurisdiction of the
Regional Directors of the Department of Labor and Employment to act on
money claims. Petitioner South Motorists Enterprises (SOUTH MOTORISTS)
maintains that said officials are bereft of authority to act on such claims as
this falls under the original and exclusive jurisdiction of Labor Arbiters.
Respondents maintain otherwise.
The facts are as follows:
Sometime in January of 1983, complaints for non-payment of emergency
cost of living allowances were filed by 46 workers, Tosoc, et als., against
SOUTH MOTORISTS before the Naga City District Office of Regional Office
No. 5 of the then Ministry of Labor. On 10 January 1983 a Special Order was
issued by the District Labor Officer directing its Labor Regulation Officers to
conduct an inspection and verification of SOUTH MOTORISTS' employment
records.
On the date of the inspection and verification, SOUTH MOTORISTS was
unable to present its employment records on the allegation that they had
been sent to the main office in Manila. The case was then set for conference
on 25 January 1983 but had to be reset to 8 February 1983 upon the request
of SOUTH MOTORISTS to enable it to present all the employment records
on such date. However, on 7 February 1983 SOUTH MOTORISTS asked for
another deferment to 16 February 1983 due to its lawyer's tight schedule. On
16 February 1983, SOUTH MOTORISTS again requested for a resetting to 3
March 1983 because of the alleged voluminous records it had to locate and
its desire to submit a memorandum regarding complainants' claims. On 2
March 1983, SOUTH MOTORISTS once again requested an extension of 30
days on the ground that the documents were still being prepared and collated
and that a formal manifestation or motion would follow. Nothing did.
On 7 March 1983, the assigned Labor Regulation Officers submitted an
Inspection Report on the basis of which an Order dated 14 April 1983 was
LABOR LAW (20 October 2018 Cases)
issued by Labor Officer Domingo Reyes directing SOUTH MOTORISTS to
pay Tosoc, et als., the total amount of One Hundred Eighty Four Thousand
Six Hundred Eighty Nine and 12/100 Pesos (P184,689.12) representing the
latter's corresponding emergency cost of living allowances.
SOUTH MOTORISTS moved for reconsideration of the Order, which was
denied. On 11 July 1988, the Secretary of Labor and Employment affirmed
the appealed Order. On 28 July 1988, SOUTH MOTORISTS moved for
reconsideration but this proved unsuccessful. A Second Motion for
Reconsideration was filed, which was likewise denied in an Order dated 7
March 1989.
Hence, this certiorari Petition questioning the monetary award by the
Regional Director and, in general, his jurisdiction to validly award money
claims.
The Court resolved to give due course to the Petition and to decide the case.
SOUTH MOTORISTS contends that only the Labor Arbiter, who is a trier of
facts, may determine after hearing such questions as whether or not an
employer-employee relationship exists; whether or not the workers were
project workers; whether or not the employees worked continuously or
whether or not they should receive emergency cost of living allowances and
if entitled, how much each should receive. Thus, SOUTH MOTORISTS
submits that this case should be referred to the Labor Arbiter for proper
proceedings.
Two provisions of law are crucial to the issue—Article 129 and Article 217 of
the Labor Code, as recently amended by Republic Act No. 6715, approved
on 2 March 1989. Said amendments, being curative in nature, have
retroactive effect and, thus, should apply in this case (BRIAD AGRO vs. DE
LA CERNA, G.R. No. 82805, and CAMUS ENGINEERING vs. DE LA
CERNA, G.R. No. 83225, 9 November 1989). At this juncture, it should be
pointed out in the light of these Briad-Agro cases, including the modificatory
Resolution thereon of 9 November 1989, petitioner's invocations of the
rulings in Zambales Base Metals, L-73184-88, 26 November 1986, and
kindred cases, is now out-dated.
Page 39
The aforesaid Articles, as amended, respectively read as follows: Clearly, Regional Directors are empowered to hear and decide, in a
summary proceeding, claims for recovery of wages and other monetary
Art. 129. Recovery of wages, simple money claims and other claims and benefits, including legal interest, subject to the concurrence of the
benefits.— Upon complaint of any interested party, the Regional following requisites:
Director of the Department of Labor and Employment or any of the
duly authorized hearing officers of the Department is empowered, 1) the claim is presented by an employee or person employed in
through summary proceeding and after due notice, to hear and domestic or household service, or househelper under the Code;
decide cases involving the recovery of wages and other monetary
claims and benefits, including legal interest, owing to an employee or 2) the claim arises from employer-employee relations;
person employed in domestic or household service and househelper
under this Code, arising from employer-employee 3) the claimant no longer being employed, does not seek
relations: Provided, That such complaint does not include a claim for reinstatement; and
reinstatement: Provided, further, That the aggregate claim of each
employee or househelper does not exceed five thousand pesos 4) the aggregate money claim of each employee or househelper
(P5,000.00). . . . does not exceed P5,000.00 (Art. 129, Labor Code, as amended by
R.A. 6715).
and
But where these requisites do not concur, the Labor Arbiters shall have
Art. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) exclusive original jurisdiction over claims arising from employer-employee
Except as otherwise provided under this Code, the Labor Arbiters relationship except claims for employees' compensation, social security,
shall have original and exclusive jurisdiction to hear and decide, medicare and maternity benefits (parag. 6, Art. 217, Labor Code as amended
within thirty (30) calendar days after the submission of the case by by R.A. 6715).
the parties for decision without extension, even in the absence of
stenographic notes, the following cases involving all workers, The records of this case show that the award of One Hundred Eighty Four
whether agricultural or non-agricultural: Thousand Six Hundred Eighty Nine and 12/100 Pesos (P l84,689.12) given
by the District Labor Officer on 14 April 1983 is itemized as follows:
xxx xxx xxx
1. Anatalio Cado P 3,203.20
(6) Except claims for employees compensation, social 2. Macario Gavino 6,332.48
security, medicare and maternity benefits, all other claims 3. Vito T. Euste 6,073.76
arising from employer-employee relations, including those of 4. Domingo Ricafort 3,843.84
persons in domestic or household service, involving an 5. Roger Paulo 4,176.48
amount exceeding five thousand pesos (P5,000), whether or 6. Elias Clarianes 4,201.12
not accompanied with a claim for reinstatement. 7. Ernesto Brequillo 4,176.48
8. Santiago Asares 4,114.88
xxx xxx xxx 9. Marcelito Verdadero 4,127.20
10. Elias Pascua 4,348.96

LABOR LAW (20 October 2018 Cases) Page 40

 11. Francisco Herrera 3,991.68 TOTAL P 184,689.12
12. Efren San Joaquin 3,979.36
13. Dominador Payo 4,201.12 In accordance with Articles 129 and 217 of the Labor Code, as
14. Jesus Militante 4,201.12 amended, supra, those awards in excess of P5,000.00, particularly those
15. Ubaldo Osoc, Jr. 2,156.00 given to Macario Gavino, Vito T. Euste, Jose Brequillo, Domingo Cis, Alberto
16. Salvador Clarianes 3,843.84 Agreda, Amancio Galona, Roque Tosoc, Hilarion P. Guinoo, Felipe Cea,
17. Vicente Lovendino 1,416.80 Roberto Guinoo, and Ernesto Osoc, each of which exceeds P5,000.00,
18. Jose Brequillo 6,049.12 should be ventilated in a proceeding before the Labor Arbiters. The other
19. Domingo Cis 7,884.80 awards, or those not in excess of P5,000.00 and having no issue of
20. Alberto Agreda 5,396.16 reinstatement set forth, should be affirmed.
21. Amancio Galona 6,418.72
22. Eduardo Brequillo 2,858.24 As to the matter that the respondent Secretary of Labor and Employment
23. Luis Clarianes 4,127.20 erred in affirming the award based on a mere Inspection Report, we see no
24. Roque Tosoc 6,418.72 reason for SOUTH MOTORISTS to complain as it was afforded ample
25. Hilarion P. Guinoo 6,086.08 opportunity to present its side. It failed to present employment records giving
26. Carlos Plegino 1,478.40 as an excuse that they were sent to the main office in Manila, in violation of
27. Felipe Cea 6,024.48 Section 11 of Rule X, Book II of the Omnibus Rules Implementing the Labor
28. Salvador Calamba 4,040.96 Code providing that:
29. Ramon Marco 4,669.28
30. Eddie del Castillo 4,201.12 All employment records of the employees of the employer shall be
31. Lope Guinoo 3,868.48 kept and maintained in or about the premises of the workplace. The
32. Marcelino Habla 1,096.48 premises of a workplace shall be understood to mean the main or
33. Roberto Guinoo 5,938.24 branch office or establishment, if any, depending., upon where the
34. Efren Andalis 4,114.88 employees are regularly assigned. The keeping of the employee's
35. Solomon Tosoc 2,722.72 records in another place is prohibited.
36. Cornelio Ballares 3,006.08
37. Ernesto Osoc 6,024.48 SOUTH MOTORISTS also caused the resettings of all subsequent
38. Bernardo Gabrillo 1,490.72 hearings—from 25 January 1983 to 8 February 1983, then to 16 February
39. Romeo Abarro 2,722.72 1983, then to 3 March and finally, again requested for another 30-day-
40. Rogelio Usinar 2,722.72 extension on the ground that the documents, were still being prepared and
41. Fortunate Sola 1,453.76 collated. Having been given the opportunity to put forth its case, SOUTH
42. Romeo Calpi 2,821.28 MOTORISTS has only itself to blame for having failed to avail of the same
43. Rogelio Villamor 2,772.00 (Adamson and Adamson, Inc. vs. Judge Amores, G.R. No. 58292, 23 July
44. Jose Banday 4,817.12 1987,152 SCRA 237). What is more, its repeated failure to attend the
45. Alberto Cornelio 2,882.88 hearings, and to submit any motion as manifested may be construed as a
46. Pablo Olarte 2,192.96 waiver of its right to adduce evidence to controvert the worker's claims.
—————

LABOR LAW (20 October 2018 Cases) Page 41

WHEREFORE, the award of One Hundred Eighty Four Thousand Six
Hundred Eighty Nine and 12/100 (P l84,689.12) is hereby MODIFIED. The
individual claims of Macario Gavino, Vito T. Euste Jose, Brequillo, Domingo
Cis, Alberto Agreda, Amancio Galona, Roque Tosoc, Hilarion P. Guinoo,
Felipe Cea, Roberto Guinoo, and Ernesto Osoc, each of which exceeds
P5,000.00, are hereby remanded to the Labor Arbiter for proper disposition.
All other individual awards not in excess of P5,000.00 are hereby
AFFIRMED. Costs against petitioner.
SO ORDERED.
[G.R. No. 143304. July 8, 2004]
SPECIAL STEEL PRODUCTS, INC., petitioner, vs. LUTGARDO
VILLAREAL AND FREDERICK SO, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
May an employer withhold its employees wages and benefits as lien to
protect its interest as a surety in the latters car loan and for expenses
incurred in a training abroad? This is the basic issue for our resolution in the
instant case.
At bar is a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, as amended, assailing the Decision [1] dated
October 29, 1999 and Resolution[2] dated May 8, 2000 of the Court of
Appeals in CA-G.R. SP No. 50957, entitled Special Steel Products, Inc. vs.
National Labor Relations Commission, Lutgardo Villareal and Frederick So.
The factual antecedents as borne by the records are:
LABOR LAW (20 October 2018 Cases)
Special Steel Products, Inc., petitioner, is a domestic corporation
engaged in the principal business of importation, sale, and marketing of
BOHLER steel products. Lutgardo C. Villareal and Frederick G. So,
respondents, worked for petitioner as assistant sales manager and
salesman, respectively.
Sometime in May 1993, respondent Villareal obtained a car loan from
the Bank of Commerce, with petitioner as surety, as shown by a continuing
suretyship agreement and promissory note wherein they jointly and severally
agreed to pay the bank P786,611.60 in 72 monthly installments. On January
15, 1997, respondent Villareal resigned and thereafter joined Hi-Grade
Industrial and Technical Products, Inc. as executive vice-president.
Sometime in August 1994, petitioner sponsored
respondent Frederick So to attend a training course
in Kapfenberg, Austria conducted by BOHLER, petitioners principal
company. This training was a reward for respondent Sos outstanding sales
performance. When respondent returned nine months thereafter, petitioner
directed him to sign a memorandum providing that BOHLER requires
trainees from Kapfenberg to continue working with petitioner for a period of
three (3) years after the training. Otherwise, each trainee shall refund to
BOHLER $6,000.00 (US dollars) by way of set-off or
compensation. On January 16, 1997 or 2 years and 4 months after attending
the training, respondent resigned from petitioner.
Immediately, petitioner ordered respondents to render an accounting of
its various Christmas giveaways[3] they received. These were intended for
distribution to petitioners customers.
In protest, respondents demanded from petitioner payment of their
separation benefits, commissions, vacation and sick leave benefits, and
proportionate 13th month pay. But petitioner refused and instead, withheld
their 13th month pay and other benefits.
On April 16, 1997, respondents filed with the Labor Arbiter a complaint
for payment of their monetary benefits against petitioner and its president,
Augusto Pardo, docketed as NLRC NCR Case No. 04-02820-97.
In due course, the Labor Arbiter rendered a Decision dated February 18,
1998, the dispositive portion of which reads:
Page 42
WHEREFORE, decision is hereby rendered ordering the respondents,
Special Steel Products, Inc. and Mr. Augusto Pardo to pay, jointly and
severally, complainants Frederick G. So and Lutgardo C. Villareal the
amounts of Seventy One Thousand Two Hundred Seventy Nine Pesos and
Fifty Eight Centavos (P71,279.58) and One Hundred Sixty Four Thousand
Eight Hundred Seventy Three Pesos (P164,873.00), respectively,
representing their commissions, retirement benefit (for Villareal),
proportionate 13th month, earned vacation and sick leave benefits, and
attorneys fees.
xxx
SO ORDERED.
On appeal, the National Labor Relations Commission (NLRC), in a
Decision dated June 29, 1998, affirmed with modification the Arbiters
Decision in the sense that Pardo, petitioners president, was exempted from
any liability.
On September 11, 1998, petitioner filed a motion for reconsideration but
was denied.
Hence, petitioner filed with the Court of Appeals a petition for certiorari.
On October 29, 1999, the Court of Appeals rendered a Decision
dismissing the petition and affirming the assailed NLRC Decision, thus:
At the outset, the Court notes that despite its Seventh Assignment of Error,
petitioner does not question the NLRCs decision affirming the labor arbiters
award to private respondents of commissions, proportionate 13thmonth pay,
earned vacation and sick leave benefits and retirement benefit (for
Villareal). It merely asserts that it was withholding private respondents claims
by reason of their pending obligations.
Petitioner justifies its withholding of Villareals monetary benefits as a lien for
the protection of its right as surety in the car loan. It asserts that it would
release Villareals monetary benefits if he would cause its substitution as
surety by Hi-Grade. It further asserts that since Villareals debt to the Bank is
now due and demandable, it may, pursuant to Art. 2071 of the New Civil
LABOR LAW (20 October 2018 Cases)
Code, demand a security that shall protect him from any proceeding by the
creditor and from the danger of insolvency of the debtor.
Petitioners posture is not sanctioned by law. It may only protect its right as
surety by instituting an action x x x to demand a security (Kuenzle and Streiff
vs. Tan Sunco, 16 Phil 670). It may not take the law into its own hands.
Indeed, it is unlawful for any person, directly or indirectly, to withhold any
amount from the wages of a worker or induce him to give up any part of his
wages by force, stealth, intimidation, threat or by any other means
whatsoever without the workers consent (Art. 116, Labor Code).
Moreover, petitioner has made no payment on the car loan. Consequently,
Villareal is not indebted to petitioner. On the other hand, petitioner owes
Villareal for the decreed monetary benefits. The withholding of Villareals
monetary benefits had effectively prevented him from settling his arrearages
with the Bank.
With regard to Sos money claims. We find no cogent reason to disturb the
findings of the NLRC. x x x.
Sos all-expense paid trip to Austria was a bonus for his outstanding sales
performance. Before his sojourn to Austria, petitioner issued him a
memorandum (or memo) stating that Bohler is now imposing that trainees
coming to Kapfenberg to stay with the local representative for at least three
(3) years after training, otherwise, a lump sum compensation of not less than
US $6,000.00 will have to be refunded to them by the trainee. So did not affix
his signature on the memo. However, nine (9) months after coming back
from his training, he was made to sign the memo. In his letter to Augusto
Pardo dated July 18, 1997, So stated that his signature was needed only as
a formality and that he was left with no choice but to accommodate Augusto
Pardos request. The labor arbiter gave credence to such explanation.
Assuming arguendo that the memo is binding on So, his more than two years
post-training stay with petitioner is a substantial compliance with the
condition. Besides, So tendered his resignation effective February 16,
1997. Instead of asking So to defer his resignation until the expiration of the
three-year period, petitioner advanced its effectivity by one month - as
of January 16, 1997. This means that petitioner no longer needed Sos
Page 43
services, particularly the skill and expertise acquired by him from the
training. More importantly, the party entitled to claim the US $6,000.00
liquidated damages is BOHLER and not petitioner. Consequently, petitioner
has no right to insist on payment of the liquidated damages, much less to
withhold Sos monetary benefits in order to exact payment thereof.
With regard to the Christmas giveaways. We agree with the findings of the
labor arbiter (affirmed by the NLRC) that there is no existing memorandum
requiring the accounting of such giveaways and that no actual accounting
has ever been required before, as in the case of then Sales Manager Benito
Sayo whose resignation took effect on December 31, 1996 but was not
required to account for the Christmas giveaways. To make So account now
for said items would amount to discrimination. In any event, the matter of
accounting of the giveaways may be ventilated in the proper forum.
Finally, petitioner may not offset its claims against private respondents
monetary benefits. With respect to its being the surety of Villareal, two
requisites of compensation are lacking, to wit: that each one of the obligors
be bound principally, and that he be at the same time a principal creditor of
the other and that (the two debts) be liquidated and demandable (Art. 1279
(1) and (4), New Civil Code). And in respect to its claim for liquidated
damages against So, there can be no compensation because his creditor is
not petitioner but BOHLER (Art. 1278, New Civil Code).
Consequently, the NLRC committed no grave abuse of discretion.
WHEREFORE, the petition is DISMISSED while the assailed decision of the
NLRC is AFFIRMED.
SO ORDERED.
On December 15, 1999, petitioner filed a motion for reconsideration but
was denied by the Appellate Court in a Resolution dated May 8, 2000.
Hence, this petition for review on certiorari. Petitioner contends that as a
guarantor, it could legally withhold respondent Villareals monetary benefits
as a preliminary remedy pursuant to Article 2071 of the Civil Code, as
amended.[4] As to respondent So, petitioner, citing Article 113 of the Labor
LABOR LAW (20 October 2018 Cases)
Code, as amended,[5] in relation to Article 1706 of the Civil Code, as
amended,[6] maintains that it could withhold his monetary benefits being
authorized by the memorandum he signed.
Article 116 of the Labor Code, as amended, provides:
ART. 116. Withholding of wages and kickbacks prohibited. It shall be
unlawful for any person, directly or indirectly, to withhold any amount
from the wages (and benefits) of a worker or induce him to give up any
part of his wages by force, stealth, intimidation, threat or by any other means
whatsoever without the workers consent.
The above provision is clear and needs no further elucidation. Indeed,
petitioner has no legal authority to withhold respondents 13 th month pay and
other benefits. What an employee has worked for, his employer must
pay.[7] Thus, an employer cannot simply refuse to pay the wages or benefits
of its employee because he has either defaulted in paying a loan guaranteed
by his employer; or violated their memorandum of agreement; or failed to
render an accounting of his employers property. [8]
Nonetheless, petitioner, relying on Article 2071 (earlier cited), contends
that the right to demand security and obtain release from the guaranty it
executed in favor of respondent Villareal may be exercised even without
initiating a separate and distinct action.
There is no guaranty involved herein and, therefore, the provision of
Article 2071 does not apply.
A guaranty is distinguished from a surety in that a guarantor is the
insurer of the solvency of the debtor and thus binds himself to pay if the
principal is unable to pay, while a surety is the insurer of the debt, and he
obligates himself to pay if the principal does not pay.[9]
Based on the above distinction, it appears that the contract executed by
petitioner and respondent Villareal (in favor of the Bank of Commerce) is
a contract of surety. In fact, it is denominated as a continuing suretyship
agreement. Hence, petitioner could not just unilaterally withhold respondents
wages or benefits as a preliminary remedy under Article 2071. It must file an
action against respondent Villareal. Thus, the Appellate Court aptly ruled that
Page 44
petitioner may only protect its right as surety by instituting an action to as security for respondent Villareals car loan; and for the expenses incurred
demand a security. by respondent So in his training abroad.

As to respondent So, petitioner maintains that there can be a set-off or WHEREFORE, the petition is DENIED. The Decision dated October 29,
legal compensation between them. Consequently, it can withhold his 1999 and Resolution dated May 8, 2000 of the Court of Appeals in CA-G.R.
13th month pay and other benefits. SP No. 50957 are hereby AFFIRMED.

For legal compensation to take place, the requirements set forth in SO ORDERED.
Articles 1278 and 1279 of the Civil Code, quoted below, must be present.

"ARTICLE 1278. Compensation shall take place when two persons, in their
own right, are creditors and debtors of each other.

"ARTICLE 1279. In order that compensation may be proper, it is necessary:

[G.R. No. 107487. September 29, 1997]
(1) That each one of the obligors be bound principally, and that he be at the
same time a principal creditor of the other;

THE MANILA BANKING CORPORATION (Manilabank) and ARNULFO B.

(2) That both debts consist in a sum of money, or if the things due are
AURELLANO in his capacity as Statutory Receiver of
consumable, they be of the same kind, and also of the same quality if the
Manilabank, petitioners, vs. THE NATIONAL LABOR
latter has been stated;
RELATIONS COMMISSION, VICTOR L. MENDOZA, RODOLFO
VE. TIMBOL, RUBEN G. ASEDILLO, FLORINDA S. DAYRIT, and
(3) That the two debts be due;
19 other Senior Officers similarly situated; HORACE REYES and
14 other Senior Managers similarly situated; AURORA
(4) That they be liquidated and demandable; VILLACERAN and 34 other Assistant Managers similarly
situated; CONSUELO RIZARRI, EMERENCIANA SAMSON,
(5) That over neither of them there be any retention or controversy, BRENDA C. BERMUDEZ, FLORYPEE ABRIGO, EMMA
commenced by third persons and communicated in due time to the debtor." BALDERAMA, and 211 other Junior Officers similarly
situated, respondents.
In the present case, set-off or legal compensation cannot take place
between petitioner and respondent So because they are not mutually creditor
and debtor of each other.
[G.R. No. 107902. September 29, 1997]
A careful reading of the Memorandum [10] dated August 22, 1994 reveals
that the lump sum compensation of not less than US $6,000.00 will have to
be refunded by each trainee to BOHLER, not to petitioner.
THE MANILA BANKING CORPORATION (Manilabank) and ARNULFO B.
In fine, we rule that petitioner has no legal right to withhold respondents
AURELLANO in his capacity as Statutory Receiver of
13th month pay and other benefits to recompense for whatever amount it paid
Manilabank, petitioners, vs. THE NATIONAL LABOR

LABOR LAW (20 October 2018 Cases) Page 45

 RELATIONS COMMISSION-NCR, LABOR ARBITER FELIPE PATI
and VICTOR L. MENDOZA, RODOLFO VE. TIMBOL, RUBEN G.
ASEDILLO, FLORINDA S. DAYRIT, and 19 other Senior Officers
similarly situated; HORACE REYES, JOSE BELMONTE and 14
other Senior Managers and 53 Managers similarly situated;
AURORA VILLACERAN and 34 other Assistant Managers
similarly situated; CONSUELO RIZARRI, EMERENCIANA
SAMSON, BRENDA C. BERMUDEZ, FLORYPEE ABRIGO, EMMA
BALDERAMA, and 211 other Junior Officers similarly
situated, respondents.
DECISION
KAPUNAN, J.:
The principal issue presented for resolution in these petitions
for certiorari[1] under Rule 65 of the Rules of Court is whether or not public
respondent National Labor Relations Commission (NLRC) committed grave
abuse of discretion in affirming with slight modifications Labor Arbiter Felipe
Patis decision awarding herein private respondents claim
of P193,338,212.33 consisting of:
1. Wage increase of 25% of gross monthly wage from January 1985
to December 1988;
2. Christmas Bonus of one and one-half (1-1/2) months pay from
December 1985 to December 1987;
3. Mid-year Bonus of one (1) month pay from 1985 to 1988,
inclusive;
4. Profit Sharing of 5% of net profit for 1985 and 1986;
5. Differentials on accrued leaves, retirement benefits and Christmas
and Mid-year bonuses;
6. Longevity pay, Loyalty Bonus and Medical, Dental and Optical
Benefits;
7. Uniform allowance of P600.00 per year from January 1985 to
January 1988, inclusive;
LABOR LAW (20 October 2018 Cases)
8. One-half (1/2) month pay 1987 Christmas Bonus which was
deducted from the retirement benefit of each complainant;
9. Travel Plan and Car Plan with respect to the 23 complainants
Senior Officers; and
10. Car Plan and Gasoline Allowance benefits with respect to the 15
complainants, Senior Managers and 54 Assistant Managers.
annual interest thereon of 12% and attorneys fees amounting to 10% of the
said amount.
The antecedents show that on June 5, 1984, petitioner Manila Banking
Corporation (Manilabank) was placed under comptrollership by then Central
Bank Governor Jose B. Fernandez in view of the banks financial distress.[2]
The decision of the Monetary Board of the Central Bank was based on
the findings that the bank was experiencing liquidity problems and had
incurred chronic reserve deficiencies against deposit liabilities. In fact on May
23, 1984, a month before it was placed under comptrollership, Manilabank
was prohibited by the Monetary Board from granting new loans and making
new investments except investments in government securities with Central
Bank support, and from declaring cash or stock dividends.[3]
A February 19, 1986 Central Bank report on Manilabanks financial
condition as of December 31, 1985 disclosed, among other things, that the
banks operations for the preceding year resulted in a net loss of P362.4
million. It likewise revealed that the banks financial condition continued to
deteriorate.[4]
Consequently, on May 22, 1987, the Monetary Board issued Resolution
No. 505 prohibiting Manilabank from doing business in the Philippines. The
said resolution reads:
Finding to be true the statements of the Assistant to the Governor
and Officer-in-Charge, Supervision and Examination Sector (SES)
Department I, in his memorandum dated April 28, 1987 submitting
a report on the financial condition of the Manila Banking
Corporation (TMBC) as of March 31, 1987, that the financial
condition of TMBC is one of insolvency and its continuance in
business would involve probable loss to its depositors and creditors
and considering, among other things, that:
Page 46
 1. During the 3-month period January 1 to March 31,
1987, TMBC incurred losses of 62.3 million , before
interest on Central Bank overdraft and penalties on
reserve deficiencies (242.9 million for the three months);
2. Prior notices had been made to TMBC of a condition
which may be considered as one indicating insolvency as
defined under Sec. 29 of R.A. No. 265, as amended, in
various letters of Mr. Antonio T. Castro, Jr., Special
Assistant to the Governor and Head, SES Department I,
dated December 9, 1985, December 13, 1985 and
October 16, 1986 and in a letter of the Governor, dated
February 27, 1987;
3. Mr. Vicente G. Puyat, in response to his request
conveyed by Mrs. Reyes to the Monetary Board, for a
chance to appear before the Monetary Board in
representation of the majority stockholders of TMBC, in
connection with the rehabilitation plan for TMBC, had
been invited three times to appear before the Board: first,
on May 13, 1987, then on May 18, 1987 upon his request,
and on May 22, 1987, which invitations he did not respond
to himself and neither did he attend the Board meetings
held on May 18, 1987 and May 22, 1987;
4. TMBC has not submitted a rehabilitation plan accepted
to the Central Bank; and
5. The said Assistant to the Governor, who was present
during the Monetary Board meeting held on May 22, 1987,
had categorically confirmed that, after considering all the
adjustments, TMBC would still be insolvent even with an
additional capital infusion of P500 million.
the Board decided as follows:
1. To prohibit TMBC to do business in the Philippines and place its
assets and affairs under receivership in accordance with the
provisions of Section 29 of R.A. No. 265, as amended; and
LABOR LAW (20 October 2018 Cases)
2. To designate the Assistant to the Governor and Officer-in-
Charge, SES Department I, as Receiver of TMBC, to immediately
take charge of its assets and liabilities, as expeditiously as possible
collect and gather all the assets and administer the same for the
benefit of its creditors exercising all the powers necessary for these
purposes including, but not limited to, bringing suits and foreclosing
mortgages in its name.[5]
Thereafter, Feliciano Miranda, Jr. was designated as receiver. He
immediately took charge of the banks assets and liabilities. He likewise
terminated the employment of about 343 officers and top managers of the
bank. All these officers and top managers, who are private respondents
herein, were paid whatever separation and/or retirement benefits were due
them.
On November 11, 1988, the Monetary Board issued Resolution No.
1003 ordering the liquidation of Manilabank on account of insolvency. The
resolution reads as follows:
Having determined and confirmed on the basis of the memorandum
of the Special Assistant to the Governor and Head, Supervision
and Examination Sector (SES) Department I, and Receiver, The
Manila Banking Corporation (TMBC), dated November 4, 1988,
submitting a report on the financial condition of TMBC as of July 31,
1988, that the financial condition of the bank continues to be one of
insolvency and it can no longer resume business with safety to its
depositors, creditors and the general public, considering the
opinion of the Central Bank legal counsel that, with the Supreme
Courts decision dated March 10, 1988 (a) setting aside the decision
of the Court of Appeals sustaining the decision of the Regional Trial
Court to issue a writ of preliminary injunction dated July 14, 1987
against the enforcement of Monetary Board Resolution No. 505
dated May 22, 1987, (b) dissolving the said writ of preliminary
injunction, and (c) making permanent the temporary restraining
order issued by the Supreme Court on February 16, 1988, the
liquidation of TMBC may now be ordered by the Monetary Board
and that its authority to order such liquidation is not affected by the
pendency of Civil Case No. 87-40659 nor of the Supreme Courts
resolution of March 10, 1988 (enjoining the Court of Appeals from
Page 47
 interfering in the receivership of TMBC), the Board decided as
follows:
1. To order the liquidation of TMBC in accordance with
Section 29 of R.A. No. 265, as amended; and
2. To designate Mr. Renan V. Santos, Special Assistant to the Governor, and
Head, Supervision and Examination Sector Department V, as Liquidator of
TMBC.[6]
Of even date, private respondents filed a complaint against ManilaBank
and its statutory receiver with the arbitration branch of the National Labor
Relations Commission (NLRC) claiming entitlement to the following
additional benefits alleged to have accrued from 1984 to their effective dates
of termination, viz: (a) Wage increases; (b) Christmas bonuses; (c) Mid-year
bonuses; (d) Profit sharing; (e) Car and travel plans; (f) Gasoline allowances;
(g) Differentials on accrued leaves, retirement and other bonuses; (h)
Longevity pay and loyalty pay; (i) Medical, dental and optical benefits; and (j)
Uniform allowances.[7] Such claims to entitlement of the foregoing benefits
was based on Manilabanks alleged practice, policy and tradition of awarding
said benefits. They contended that the policy has ripened into vested
property rights in their favor.
Manila bank, on its part, alleged that the additional benefits sought are
without basis in fact and in law. It argued that the same are conferred by
management only when it deems necessary to do so. The award of the said
benefits is in the nature of a management prerogative which, it contended,
can be withheld by management upon a clear showing that the company is
not in a position to grant them either because of financial difficulties or
circumstances which do not warrant conferment of such benefits. And since it
was experiencing financial distress, it claimed that it was in no position to
give the benefits sought. Additionally, it asseverated that it was deprived of
its right to present evidence in a full-blown trial by the labor arbiter.
On November 14, 1989, Labor Arbiter Felipe Pati rendered his decision
ordering Manilabank and its statutory receiver to pay in full all the claims of
private respondents amounting to P193,338,212.33, plus 12% interest
annually and 10% of the total award as attorneys fees. The dispositive
portion of the decision reads:
LABOR LAW (20 October 2018 Cases)
WHEREFORE, judgment is hereby rendered in favor of the
complainants and against the respondents, ordering and
authorizing the Receiver RENAN V. SANTOS to pay, pursuant to
the provisions of Article 110 of the Labor Code, as amended:
1.The complainants the net amount of claims due
appearing opposite the name of each complainant listed
in the Computation of Net Claim consisting of six (6)
pages hereto attached and made part of this Decision;
2.The complainants counsel the amount equal to 10% of
the total amount awarded to complainants in this action
as attorneys fees.
SO ORDERED.[8]
On November 25, 1989, petitioners Manilabank and the CB statutory
receiver appealed to the NLRC and posted an appeal bond in the form of a
certification from the Central Bank to the effect that the portion of
Manilabanks funds in an amount equal to that of the total award of the labor
arbiter, has been reserved and set aside by the Central Bank to answer for
the private respondents claims should they finally be adjudged to be entitled
thereto.
On December 8, 1989, private respondents opposed the appeal and
filed a motion for the issuance of a writ of execution of the labor arbiters
judgment on the ground that the Central Bank certification cannot be
considered as an appeal bond.
On June 21, 1991, the NLRC issued an order requiring petitioners to
deposit with the Cashier of the NLRC a cash bond or its equivalent in
treasury bills, warrants and/or other government securities in the amount
of P193,000,000.00, plus ten percent (10%) thereof as attorneys fees within
ten (10) days from receipt thereof.
On July 5, 1991, petitioners moved to reconsider said order. However,
pending resolution of said motion for reconsideration, petitioners submitted to
the NLRC a Certificate of Time Deposit issued by the Philippine National
Bank (PNB) in the amount of P212,700,000.00, payable to the receiver of
Manilabank.
Page 48
 On January 16, 1992, the NLRC held a hearing where the parties
agreed that the certificate of time deposit submitted by Manilabank to the
NLRC be considered substantial compliance of the requirement of an appeal
bond, on the condition that it will be periodically renewed and re-deposited
with the NLRC Cashier upon its maturity, and that the securities deposited
should be free from any other claims or liens.
On September 9, 1992, the NLRC issued a resolution on the merits of
the case and, as above-stated, affirmed with slight modifications, the
decision of the labor arbiter. The decretal portion of the same reads:
WHEREFORE, except for the modification we provided on the
manner medical, dental and optical benefits should be
claimed/paid, and our awarding annual interest of 12% to whatever
has been awarded below, the appealed decision is hereby affirmed
and respondents appeal is hereby dismissed.
SO ORDERED.[9]
Petitioners filed a motion for reconsideration from the aforequoted
resolution.
On October 14, 1992, private respondents filed an ex parte motion for
the issuance of a writ of execution. Petitioners opposed the same, reasoning
that the assets of Manilabank are exempt from execution and that the NLRC
resolution had not become final and executory.
On October 22, 1992, the NLRC issued an order directing petitioners,
under pain of contempt, to renew the certificate of time deposit and to have
the same issued in the name of , and deposited with, the cashier of the
NLRC.
In response, petitioners Manilabank and Arnulfo Aurellano filed petition
for certiorari before this Court, docketed as G.R. No. 107487, to set aside
said order alleging that the same was issued with grave abuse of discretion
because it (as re-phrased):
a. violated an existing statute.[10]
b. arbitrary compelled the Receiver to violate his statutory duty to
preserve Manilabanks assets for the benefit of all creditors.[11]
LABOR LAW (20 October 2018 Cases)
c. whimsically deprived petitioners of their right to file a motion for
reconsideration of the Order.[12]
d. was not anchored upon any cogent reason other than to preempt
petitioners from invoking the corrective powers of this Honorable
Court of last resort.[13]
On November 26, 1992, petitioners earlier motion for reconsideration of
the NLRC Decision dated September 9, 1992 was denied for lack of merit in
an order which dispositively reads as follows:
Wherefore, premises considered, order is hereby issued:
1. denying respondents motion for reconsideration;
2. directing the NLRC Cashier to hold in her custody re-
submitted Certificate of Time Deposit No. 890530-D
dated October 27, 1992 with maturity date on December
28, 1992;
3. directing the respondents to post an additional bond,
either in cash, surety, or certificate of time deposit drawn
in the name of the Cashier, NLRC, in the amount
of P76,572,000.00 to cover, the additional award detailed
in our September 9, 1992 resolution;
4. directing, accordingly, the Executive Clerk to cause the
personal service of this Order upon the parties,
particularly the respondents and their counsel; and
5. holding in abeyance the execution of our September 9,
1992 resolution (despite its finality now) for a period of
ten (10) calendar days from respondents receipt of this
Order, with the warning, however, that should this
Commission not receive a restraining order from the
Supreme Court within said period of ten (10) calendar
days, then a writ of execution will be issued to enforce
our now final judgment.
SO ORDERED.[14]
Page 49
 Consequently, petitioners filed another petition for certiorari before this 1986, are contrary to the evidence on record and are based on
Court, this time docketed as G.R. No. 107902, contending that: pure unsubstantiated guesswork. [19]

a. Public respondents, in grave abuse of discretion, effectively f. The award of attorneys fees is unconscionable, especially in light
violated petitioners right due process because- of its dissipative effect of the remaining assets of the insolvent
Manilabank and its prejudicial consequences on Manilabanks
(1) The monstrous award totaling about P212 million was
stockholders and creditors.[20]
decided based purely on private respondents worthless
papers which were never identified nor supported by any g. The NLRCs award of legal interest on the amount awarded by
single affidavit. the labor arbiter and its order to deposit an additional bond to cover
such interest have no legal basis and give an undue advantage to
(2) The Labor Arbiter proceeded to decide the case
other creditors of the insolvent Manilabank.[21]
solely on the bases of the pleadings filed, despite the
enormity of the claims and the reapeted demands for a h. The NLRCs threat to execute the judgment would be unlawful if
full-dress trial (which, ironically, were initially granted by carried out, because Manilabanks assets are legally exempt from
the Office of the Labor Arbiter), made necessary by the execution.[22]
conflicting factual allegations of the parties and the
On December 9, 1992, this Court ordered that G.R. No. 107902 be
worthless papers passed off by private respondents as
consolidated with G.R. No. 107487.[23]
their evidence.[15]
On December 16, 1992, this Court issued a Resolution temporarily
b. Public respondents unlawfully arrogated unto themselves the
enjoining public respondent NLRC from enforcing and/or carrying out the
jurisdiction to pass upon the question of Manilabanks insolvency,
decision of the labor arbiter dated November 14, 1989 and its resolution
despite the pleaded pendency of that prejudicial question before
dated September 9, 1992 and order dated November 26, 1992, all issued in
the RTC of Manila which had aquired exclusive jurisdiction to rule
NLRC NCR Case No. 00-11-04624-88.[24]
on the issue to the exclusion of all others.[16]
G.R. No. 107902 is impressed with merit.
c. The money award adjudged against the insolvent Manilabank
violates all notions of justice and equity, considering that the Both the Labor Arbiter and the NLRC opted to award all the additional
beneficiaries thereof are former officers and top managers of benefits claimed by the 343 private respondents who had already been duly
Manilabank who, being part of management, were partly to blame paid separation pay and/or retirement benefits upon termination of their
for the banks financial decline.[17] employment. The NLRC erroneously adopted the findings of the labor arbiter,
misapplying the time-honored rule that factual findings of quasi-judicial
d. A statutory receiver has the power to adopt and implement
agencies are accorded not only respect but even finality if supported by
prudent policies aimed at preserving the assets of an insolvent
substantial evidence. It declared that the additional benefits sought are in the
bank including regulating, according to his own discretion and
nature of bonuses which when made part of the wage or salary or
judgment, all aspects of employment.[18]
compensation of an employee become demandable and enforceable.[25]
e. Public respondents arbitrary findings that salary increases,
Both the Labor Arbiters and the NLRCs findings and conclusions are
Christmas and mid-year bonuses and other benefits have been
flawed.
regularly and unconditionally paid by Manilabank to private
respondents, and that Manilabank earned profits in 1984, 1985 and

LABOR LAW (20 October 2018 Cases) Page 50

 By definition, a bonus is a gratuity or act of liberality of the giver which
the recipient has no right to demand as a matter of right. [26] It is something
given in addition to what is ordinarily received by or strictly due the
recipient. The granting of a bonus is basically a management prerogative
which cannot be forced upon the employer who may not be obliged to
assume the onerous burden of granting bonuses or other benefits aside from
the employees basic salaries or wages,[27] especially so if it is incapable of
doing so.
In Philippine Education Co., Inc. v. Court of Industrial Relations,[28] cited
in Philippine duplicators, Inc. v. NLRC,[29] the Court expounded on the nature
of a bonus, thus:
As a rule, a bonus is an amount granted and paid to an employee
for his industry and loyalty which contributed to the success of the
employers business and made possible the realization of profits. It
is an act of generosity of the employer for which the employee
ought to be thankful and grateful. It is also granted by an
enlightened employer to spur the employee to greater efforts for the
success of the business and realization of bigger profits. xxx From
the legal point of view, a bonus is not a demandable and
enforceable obligation. It is so when it is made part of the wage or
salary or compensation. In such a case the latter would be fixed
amount and the former would be a contingent one dependent upon
the realization of profits. xxx . (Italics supplied).[30]
Clearly then, a bonus is an amount given ex gratia to an employee by
an employer on account of success in business or realization of profits. How
then can an employer be made liable to pay additional benefits in the nature
of bonuses to its employees when it has been operating on considerable net
losses for a given period of time?
Records bear out that petitioner Manilabank was already in dire financial
straits in the mid-80s. As early as 1984, the Central Bank found that
Manilabank had been suffering financial losses. Presumably, the problems
commenced even before their discovery in 1984. As earlier chronicled, the
Central Bank placed petitioner bank under comptrollership in 1984 because
of liquidity problems and excessive interbank borrowings. In 1987, it was
placed under receivership and was ordered to close operation. In 1988, it
was ordered liquidated.
LABOR LAW (20 October 2018 Cases)
It is evident, therefore, that petitioner bank was operating on net losses
from the years 1984, 1985 and 1986, thus, resulting to its eventual closure in
1987 and liquidation in 1988. Clearly, there was no success in business or
realization of profits to speak of that would warrant the conferment of
additional benefits sought by private respondents. No company should be
compelled to act liberally and confer upon its employees additional benefits
over and above those mandated by law when it is plagued by economic
difficulties and financial losses. No act of enlightened generosity and self-
interest can be exacted from near empty, if not empty, coffers.
Consequently, on the ten (10) items awarded to herein private
respondents (enumerated at page 3) which represent additional benefits,
they having already been paid separation and retirement benefits, we rule as
follows:
First. The award of 5% profit sharing of petitioner banks net profits for
the years 1985 and 1986 is deleted as there were clearly no profits to share
during that period given the banks financial status in 1985 and 1986 when it
was operating on net losses.
Second. The award of wage increases and Christmas and mid-year
bonuses from 1985 to 1988, being in the nature of gratuities and dependent
as they on the petitioners liberality and capability to give, is likewise deleted
for same reasons above stated.
Third. The award of differentials on accrued leaves, retirement benefits
and Christmas and mid-year bonuses is also deleted as a necessary and
logical consequence of the denial of the wage increases and Christmas and
mid-year bonuses.
Fourth. The award of medical, dental and optical benefits is well-taken
and, therefore, affirmed.
Fifth. The claim for travel plans for 23 senior officers, and car plans and
gasoline allowances for 23 senior officers, 15 senior managers and 54
assistant managers may only be granted to those officers who have not yet
availed of the said benefit subject to the proper determination by the labor
arbiter.
Sixth and last. Claims for longevity pay, loyalty bonuses and uniform
allowance of P600.00 for 1985 may be granted given the apparent loyalty
Page 51
and allegiance shown by herein private respondents to petitioner bank
despite rough sailing during the said period of time.
That disposes of G.R. No. 107902.
With respect to G.R. No. 107487, the same is dismissed, the issues
raised therein having been rendered moot and academic by the foregoing
disquisitions and disposition. Besides, it is beyond dispute that employees
indeed enjoy first preference in the event of bankruptcy or liquidation of an
employers business.[31]
WHEREFORE, premises considered, G.R. No. 107902 is GRANTED
and is hereby REMANDED to the Labor Arbiter for the proper computation of
the monetary awards in accordance with the foregoing disquisition and with
reasonable dispatch. G.R. No. 107487 is hereby DISMISSED.
SO ORDERED.
[G.R. No. 131750. November 16, 1998]
FRANCISCO GUICO, JR., doing business under the name and style of
COPYLANDIA SERVICES & TRADING, petitioner, vs. THE HON.
SECRETARY OF LABOR & EMPLOYMENT LEONARDO A.
QUISUMBING, THE OFFICE OF REGIONAL DIRECTOR OF
REGION I, DEP'T OF LABOR & EMPLOYMENT, ROSALINA
CARRERA, ET. AL., respondents.
DECISION
PUNO, J.:
This is a petition for certiorari seeking review of two (2) Orders [1] issued
by the respondent Secretary of Labor and Employment dismissing
petitioner's appeal.
LABOR LAW (20 October 2018 Cases)
The case started when the Office of the Regional Director, Department
of Labor and Employment (DOLE), Region I, San Fernando, La Union,
received a letter-complaint dated April 25, 1995, requesting for an
investigation of petitioner's establishment, Copylandia Services & Trading,
for violation of labor standards laws. Pursuant to the visitorial and
enforcement powers of the Secretary of Labor and Employment or his duly
authorized representative under Article 128 of the Labor Code, as amended,
inspections were conducted at Copylandia's outlets on April 27 and May 2,
1995. The inspections yielded the following violations involving twenty-one
(21) employees who are copier operators: (1) underpayment of wages; (2)
underpayment of 13th month pay; and (3) no service incentive leave with
pay.[2]
The first hearing of the case was held on June 14, 1995, where
petitioner was represented by Joseph Botea, Officer-in-Charge of the
Dagupan City outlets, while the 21 employees were represented by Leilani
Barrozo, Gemma Gales, Majestina Raymundo and Laureta Clauna. It was
established that a copier operator was receiving a daily salary ranging
from P35.00 to P60.00 plus commission of P20.00 per P500.00 worth of
photocopying. There was also incentive pay of P20.00 per P250.00 worth of
photocopying in excess of the first P500.00.[3]
On July 13, 1995, petitioner's representative submitted a Joint Affidavit
signed and executed by the 21 employees expressing their disinterest in
prosecuting the case and their waiver and release of petitioner from his
liabilities arising from non-payment and underpayment of their salaries and
other benefits. Individually signed documents dated December 21, 1994,
purporting to be the employees' Receipt, Waiver and Quitclaim were also
submitted.[4]
In the investigation conducted by Hearing Officer Adonis Peralta on July
21, 1995, the 21 employees claimed that they signed the Joint Affidavit for
fear of losing their jobs. They added that their daily salary was increased
to P92.00 effective July 1, 1995, but the incentive and commission schemes
were discontinued. They alleged that they did not waive the unpaid benefits
due to them.[5]
On October 30, 1995, Regional Director Guerrero N. Cirilo issued an
Order[6] favorable to the 21 employees. First, he ruled that the purported
Receipt, Waiver and Quitclaim dated December 21 and 22, 1994, could not
Page 52
cause the dismissal of the labor standards case against the petitioner since 20. Maryann Galinato - 68,010.91
the same were executed before the filing of the said case. Moreover, the 21. Desiree Cabasag - 27,808.33
employees repudiated said waiver and quitclaim. Second, he held that
despite the salary increase granted by the petitioner, the daily salary of the Total P1,081,756.70
employees was still below the minimum daily wage rate of P119.00 under
Wage Order No. RB-I-03. Thirdly, he held that the removal of the commission and to submit proof of payment to this Office within seven (7) days
and incentive schemes during the pendency of the case violated the from receipt hereof. Otherwise, a Writ of Execution will be issued to
prohibition against elimination or diminution of benefits under Article 100 of enforce this Order.
the Labor Code, as amended. The dispositive portion of the Order states:
"SO ORDERED."[7]
"WHEREFORE, premises considered and pursuant to the Rules on the
Disposition of Labor Standards Cases in the Regional Offices issued by the Petitioner received a copy of the Order on November 10, 1995. On
Secretary of Labor and Employment on 16 September 1987, respondent November 15, 1995, petitioner filed a Notice of Appeal.[8] The next day, he
Copylandia Services and Trading thru its owner/manager Mr. Francisco filed a Memorandum of Appeal accompanied by a Motion to Reduce Amount
Guico, is hereby ORDERED to pay the employees the amount of ONE of Appeal Bond and a Manifestation of an Appeal Bond.
MILLION EIGHTY ONE THOUSAND SEVEN HUNDRED FIFTY SIX PESOS
AND SEVENTY CENTAVOS (P1,081,756.70) representing their backwages, In his appeal memorandum,[9] petitioner questioned the jurisdiction of
distributed as follows: the Regional Director citing Article 129 of the Labor Code, as
amended,[10] and Section 1, Rule IX of the Implementing Rules of Republic
1. Rosalina Carrera - P68,010.91 Act No. 6715.[11] He argued that the Regional Director has no jurisdiction
2. Joanna Ventura - 28,568.10 over the complaint of the 21 employees since their individual monetary
3. Mercelita Paredes - 68,010.91 claims exceed the P5,000.00 limit. He alleged that the Regional Director
4. Aida Licuanan - 68,010.91 should have indorsed the case to the Labor Arbiter for proper adjudication
5. Gemma Gales - 68,010.91 and for a more formal proceeding where there is ample opportunity for him to
6. Clotilda Zarata - 27,808.33 present evidence to contest the claims of the employees. He further alleged
7. Consolacion Miguel - 65,708.28 that the Regional Director erred in computing the monetary award since it
8. Gemma Macalalay - 68,010.91 was done without regard to the actual number of days and time worked by
9. Wandy Aquino - 19,559.58 the employees. He also faulted the Regional Director for not giving credence
10. Laureta Clauna - 68,010.91 to the Receipt, Waiver and Quitclaim of the employees.
11. Josephine Valdez - 27,808.33 In the Motion to Reduce Amount of Appeal Bond,[12] petitioner claimed
12. Leilani Berrozo - 27,808.33 he was having difficulty in raising the monetary award which he denounced
13. Majestina Raymundo - 68,010.91 as exorbitant. Pending resolution of the motion, he posted an appeal bond in
14. Theresa Rosario - 68,010.91 the amount of P105,000.00 insisting that the jurisdiction of the Regional
15. Edelyn Maramba - 68,010.91 Director is limited to claims of P5,000.00 per employee and there were 21
16. Yolly Dimabayao - 40,380.60 employees involved in the case.
17. Vilma Calaguin - 68,010.91
18. Maila Balolong - 40,380.60
19. Clarissa Villena - 27,808.33

LABOR LAW (20 October 2018 Cases) Page 53

 On November 22, 1995, petitioner also filed a request to hold in
abeyance any action relative to the case for a possible amicable settlement
with the employees.[13]
On January 10, 1996, District Labor Officer Adonis Peralta forwarded a
Report showing that the petitioner and most of the 21 employees had
reached a compromise agreement. The Release, Waiver and Quitclaim was
signed by the following employees and show the following amounts they
received, viz:
1. Aida Licuanan - P3,000.00
2. Clarissa Villena - 3,000.00
3. Gemma Gales - 3,000.00
4. Desiree Cabansag - 3,000.00
5. Clotilda Zarata - 3,000.00
6. Consolacion Miguel - 5,000.00
7. Josephine Valdez - 3,000.00
8. Maryann Galinato - 5,000.00
9. Theresa Rosario - 3,000.00
10.Yolly Dimabayao - 3,000.00
11.Vilma Calaguin - 3,000.00
12.Gemma Macalalay - 3,000.00
13.Edelyn Maramba - 5,000.00
14.Charito Gonzales - 3,000.00
15.Joanna Ventura - 3,000.00
Four (4) employees did not sign in the compromise agreement. They insisted
that they be paid what is due to them according to the Order of the Regional
Director in the total amount of P231,841.06. They were Laureta Clauna,
Majestina Raymundo, Leilani Barrozo and Rosalina Carrera.[14]
In a letter[15] dated February 23, 1996, the Regional Director informed
petitioner that he could not give due course to his appeal since the appeal
bond of P105,000.00 fell short of the amount due to the 4 employees who did
not participate in the settlement of the case. In the same letter, he directed
petitioner to post, within ten (10) days from receipt of the letter, the amount
of P126,841.06 or the difference between the monetary award due to the 4
employees and the appeal bond previously posted.
On March 13, 1996, petitioner filed a Motion for Reconsideration to
Reduce Amount of Appeal Bond.[16] He manifested that he has closed down
his business operations due to severe financial losses and implored the
Regional Director to accept the appeal bond already filed for reasons of
justice and equity.
In an Order dated December 3, 1996, the respondent Secretary denied
the foregoing Motion for Reconsideration on the ground that the directive
from the Regional Director to post an additional surety bond is contained in a
"mere letter" which cannot be the proper subject for a Motion for
Reconsideration and/or Appeal before his office. He added that for failure of
the petitioner to post the correct amount of surety or cash bond, his appeal
was not perfected following Article 128 (b) of the Labor Code, as
amended. Despite the non-perfection of the appeal, respondent Secretary
looked into the Receipt, Waiver and Quitclaim signed by the employees and
rejected it on the ground that the consideration was unconscionably
inadequate. He ruled, nonetheless, that the amount received by the said
employees should be deducted from the judgment award and the difference
should be paid by the petitioner.
On December 26, 1996, petitioner filed a Motion for
Reconsideration. On February 13, 1997, he filed a Motion to Admit Additional
Bond and posted the amount of P126,841.06 in compliance with the order of
the Regional Director in his letter dated February 13, 1996.[17]
On October 24, 1997, the respondent Secretary denied the Motion for
Reconsideration. He ruled that the Regional Director has jurisdiction over the
case citing Article 128 (b) of the Labor Code, as amended. He pointed out
that Republic Act No. 7730 repealed the jurisdictional limitations imposed by
Article 129 on the visitorial and enforcement powers of the Secretary of
Labor and Employment or his duly authorized representatives. In addition, he
held that petitioner is now estopped from questioning the computation made
by the Regional Director as a result of the compromise agreement he
entered into with the employees. Lastly, he reiterated his ruling that the
Receipt, Waiver and Quitclaim signed by the employees was not valid.
Petitioner is now before this Court raising the following issues:
I

LABOR LAW (20 October 2018 Cases) Page 54

Whether or not Public Respondent acted with grave abuse of discretion
amounting to lack or in excess of jurisdiction when he set aside the Release
and Quitclaim executed by the seventeen (sic) complainants before the
Office of the Regional Director when Public Respondent himself ruled that
the Appeal of the Petitioner was not perfected and, therefore, Public
Respondent did not acquire jurisdiction over the case.
II
Whether or not Public Respondent acted with grave abuse of discretion
amounting to lack or in excess of jurisdiction when in complete disregard of
Article 227 of the Labor Code, Public Respondent set aside and nullified the
Release and Quitclaim executed by the seventeen (sic) complainants.
III
Whether or not Public Respondent acted with grave abuse of discretion
amounting to lack or in excess of jurisdiction when he affirmed the Order of
the Regional Director who, in complete disregard of the due process
requirements of law, computed the monetary award given to the private
respondents without notice to petitioner and without benefit of hearing.
IV
Whether or not petitioner is deemed estopped from appealing the decision of
the Regional Director when it (sic) entered into a compromise settlement with
complainants/private respondents.
The threshold issues that need to be settled in this case are: (1) whether
or not the Regional Director has jurisdiction over the instant labor standards
case, and (2) whether or not petitioner perfected his appeal.
With regard to the issue of jurisdiction, petitioner alleged that the
Regional Director has no jurisdiction over the instant case since the
individual monetary claims of the 21 employees exceed P5,000.00. He
further argued that following Article 129 of the Labor Code, as amended, and
Section 1, Rule IX of the Implementing Rules of Republic Act No. 6715, the
jurisdiction over this case belongs to the Labor Arbiter, and the Regional
LABOR LAW (20 October 2018 Cases)
Director should have indorsed it to the appropriate regional branch of the
National Labor Relations Commission (NLRC). On the other hand, the
respondent Secretary held that the jurisdictional limitation imposed by Article
129 on his visitorial and enforcement power under Article 128 (b) of the
Labor Code, as amended, has been repealed by Republic Act No.
7730.[18] He pointed out that the amendment "[n]otwithstanding the provisions
of Article 129 and 217 of the Labor Code to the contrary" erased all doubts
as to the amendatory nature of the new law, and in effect, overturned this
Court's ruling in the case of Servando's Inc. v. Secretary of Labor and
Employment.[19]
We sustain the jurisdiction of the respondent Secretary. As the
respondent correctly pointed out, this Court's ruling in Servando --- that the
visitorial power of the Secretary of Labor to order and enforce compliance
with labor standard laws cannot be exercised where the individual claim
exceeds P5,000.00, can no longer be applied in view of the enactment of
R.A. No. 7730 amending Article 128 (b) of the Labor Code, viz:
Article 128 (b) - Notwithstanding the provisions of Articles 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 the Code and other labor
legislation based on the findings of the labor employment and enforcement
officers or industrial safety engineers made in the course of inspection. The
Secretary or his duly authorized representatives 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.
An order issued by the duly authorized representative of the Secretary of
Labor and Employment under this article may be appealed to the latter. In
case said order involves a monetary award, an appeal by the employer may
be perfected only upon the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the Secretary of Labor and
Employment in the amount equivalent to the monetary award in order
appealed from. (Italics supplied.)
Page 55
The records of the House of Representatives [20] show that Congressmen
Alberto S. Veloso and Eriberto V. Loreto sponsored the law. In his
sponsorship speech, Congressman Veloso categorically declared that "this
bill seeks to do away with the jurisdictional limitations imposed through said
ruling (referring to Servando) and to finally settle any lingering doubts on the
visitorial and enforcement powers of the Secretary of Labor and
Employment."[21] Petitioner's reliance on Servando is thus untenable.

The next issue is whether petitioner was able to perfect his appeal to the
Secretary of Labor and Employment. Article 128 (b) of the Labor Code
clearly provides that the appeal bond must be "in the amount equivalent to
the monetary award in the order appealed from." The records show that
petitioner failed to post the required amount of the appeal bond. His appeal
was therefore not perfected.

IN VIEW WHEREOF, the petition for certiorari is dismissed. No

pronouncement as to costs.

SO ORDERED.

LABOR LAW (20 October 2018 Cases) Page 56