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SECOND DIVISION

G.R. No. 114698 July 3, 1995

WELLINGTON INVESTMENT AND MANUFACTURING CORPORATION, petitioner,


vs.
CRESENCIANO B. TRAJANO, Under-Secretary of Labor and Employment, ELMER ABADILLA, and 34
others, respondents.

NARVASA, C.J.:

The basic issue raised by petitioner in this case is, as its counsel puts it, "whether or not a monthly-paid employee,
receiving a fixed monthly compensation, is entitled to an additional pay aside from his usual holiday pay, whenever a
regular holiday falls on a Sunday."

The case arose from a routine inspection conducted by a Labor Enforcement Officer on August 6, 1991 of the Wellington
Flour Mills, an establishment owned and operated by petitioner Wellington Investment and Manufacturing Corporation
(hereafter, simply Wellington). The officer thereafter drew up a report, a copy of which was "explained to and received
by" Wellington's personnel manager, in which he set forth his finding of "(n)on-payment of regular holidays falling on a
Sunday for monthly-paid employees."1

Wellington sought reconsideration of the Labor Inspector's report, by letter dated August 10, 1991. It argued that "the
monthly salary of the company's monthly-salaried employees already includes holiday pay for all regular holidays . . .
(and hence) there is no legal basis for the finding of alleged non-payment of regular holidays falling on a Sunday."2 It
expounded on this thesis in a position paper subsequently submitted to the Regional Director, asserting that it pays its
monthly-paid employees a fixed monthly compensation "using the 314 factor which undeniably covers and already
includes payment for all the working days in a month as well as all the 10 unworked regular holidays within a year."3

Wellington's arguments failed to persuade the Regional Director who, in an Order issued on July 28, 1992, ruled that
"when a regular holiday falls on a Sunday, an extra or additional working day is created and the employer has the
obligation to pay the employees for the extra day except the last Sunday of August since the payment for the said holiday
is already included in the 314 factor," and accordingly directed Wellington to pay its employees compensation
corresponding to four (4) extra working days.4

Wellington timely filed a motion for reconsideration of this Order of August 10, 1992, pointing out that it was in effect
being compelled to "shell out an additional pay for an alleged extra working day" despite its complete payment of all
compensation lawfully due its workers, using the 314 factor.5 Its motion was treated as an appeal and was acted on by
respondent Undersecretary. By Order dated September 22, the latter affirmed the challenged order of the Regional
Director, holding that "the divisor being used by the respondent (Wellington) does not reliably reflect the actual working
days in a year, " and consequently commanded Wellington to pay its employees the "six additional working days resulting
from regular holidays falling on Sundays in 1988, 1989 and 1990."6 Again, Wellington moved for reconsideration,7 and
again was rebuffed.8

Wellington then instituted the special civil action of certiorari at bar in an attempt to nullify the orders above mentioned.
By Resolution dated July 4, 1994, this Court authorized the issuance of a temporary restraining order enjoining the
respondents from enforcing the questioned orders.9

Every worker should, according to the Labor Code, 10 "be paid his regular daily wage during regular holidays, except in
retail and service establishments regularly employing less than ten (10) workers;" this, of course, even if the worker does
no work on these holidays. The regular holidays include: "New Year's Day, Maundy Thursday, Good Friday, the ninth of
April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth of December, and
the day designated by law for holding a general election (or national referendum or plebiscite).11

Particularly as regards employees "who are uniformly paid by the month, "the monthly minimum wage shall not be less
than the statutory minimum wage multiplied by 365 days divided by twelve." 12 This monthly salary shall serve as
compensation "for all days in the month whether worked or not," and "irrespective of the number of working days
therein."13 In other words, whether the month is of thirty (30) or thirty-one (31) days' duration, or twenty-eight (28) or
twenty-nine (29) (as in February), the employee is entitled to receive the entire monthly salary. So, too, in the event of the
declaration of any special holiday, or any fortuitous cause precluding work on any particular day or days (such as
transportation strikes, riots, or typhoons or other natural calamities), the employee is entitled to the salary for the entire
month and the employer has no right to deduct the proportionate amount corresponding to the days when no work was
done. The monthly compensation is evidently intended precisely to avoid computations and adjustments resulting from
the contingencies just mentioned which are routinely made in the case of workers paid on daily basis.

In Wellington's case, there seems to be no question that at the time of the inspection conducted by the Labor Enforcement
Officer on August 6, 1991, it was and had been paying its employees "a salary of not less than the statutory or established
minimum wage," and that the monthly salary thus paid was "not . . . less than the statutory minimum wage multiplied by
365 days divided by twelve," supra. There is, in other words, no issue that to this extent, Wellington complied with the
minimum norm laid down by law.

Apparently the monthly salary was fixed by Wellington to provide for compensation for every working day of the year
including the holidays specified by law — and excluding only Sundays. In fixing the salary, Wellington used what it calls
the "314 factor;" that is to say, it simply deducted 51 Sundays from the 365 days normally comprising a year and used the
difference, 314, as basis for determining the monthly salary. The monthly salary thus fixed actually covers payment for
314 days of the year, including regular and special holidays, as well as days when no work is done by reason of fortuitous
cause, as above specified, or causes not attributable to the employees.

The Labor Officer who conducted the routine inspection of Wellington discovered that in certain years, two or three
regular holidays had fallen on Sundays. He reasoned that this had precluded the enjoyment by the employees of a non-
working day, and the employees had consequently had to work an additional day for that month. This ratiocination
received the approval of his Regional Director who opined 14 that "when a regular holiday falls on a Sunday, an extra or
additional working day is created and the employer has the obligation to pay its employees for the extra day except the
last Sunday of August since the payment for the said holiday is already included in the 314 factor." 15

This ingenuous theory was adopted and further explained by respondent Labor Undersecretary, to whom the matter was
appealed, as follows: 16

. . . By using said (314) factor, the respondent (Wellington) assumes that all the regular holidays fell on
ordinary days and never on a Sunday. Thus, the respondent failed to consider the circumstance that
whenever a regular holiday coincides with a Sunday, an additional working day is created and left unpaid.
In other words, while the said divisor may be utilized as proof evidencing payment of 302 working days,
2 special days and the ten regular holidays in a calendar year, the same does not cover or include payment
of additional working days created as a result of some regular holidays falling on Sundays.

He pointed out that in 1988 there was "an increase of three (3) working days resulting from regular holidays falling on
Sundays;" hence Wellington "should pay for 317 days, instead of 314 days." By the same process of ratiocination,
respondent Undersecretary theorized that there should be additional payment by Wellington to its monthly-paid
employees for "an increment of three (3) working days" for 1989 and again, for 1990. What he is saying is that in those
years, Wellington should have used the "317 factor," not the "314 factor."

The theory loses sight of the fact that the monthly salary in Wellington — which is based on the so-called "314 factor" —
accounts for all 365 days of a year; i.e., Wellington's "314 factor" leaves no day unaccounted for; it is paying for all the
days of a year with the exception only of 51 Sundays.
The respondents' theory would make each of the years in question (1988, 1989, 1990), a year of 368 days. Pursuant to this
theory, no employer opting to pay his employees by the month would have any definite basis to determine the number of
days in a year for which compensation should be given to his work force. He would have to ascertain the number of times
legal holidays would fall on Sundays in all the years of the expected or extrapolated lifetime of his business. Alternatively,
he would be compelled to make adjustments in his employees' monthly salaries every year, depending on the number of
times that a legal holiday fell on a Sunday.

There is no provision of law requiring any employer to make such adjustments in the monthly salary rate set by him to
take account of legal holidays falling on Sundays in a given year, or, contrary to the legal provisions bearing on the point,
otherwise to reckon a year at more than 365 days. As earlier mentioned, what the law requires of employers opting to pay
by the month is to assure that "the monthly minimum wage shall not be less than the statutory minimum wage multiplied
by 365 days divided by twelve," 17 and to pay that salary "for all days in the month whether worked or not," and
"irrespective of the number of working days therein."18 That salary is due and payable regardless of the declaration of any
special holiday in the entire country or a particular place therein, or any fortuitous cause precluding work on any
particular day or days (such as transportation strikes, riots, or typhoons or other natural calamities), or cause not imputable
to the worker. And as also earlier pointed out, the legal provisions governing monthly compensation are evidently
intended precisely to avoid re-computations and alterations in salary on account of the contingencies just mentioned,
which, by the way, are routinely made between employer and employees when the wages are paid on daily basis.

The public respondents argue that their challenged conclusions and dispositions may be justified by Section 2, Rule X,
Book III of the Implementing Rules, giving the Regional Director power — 19

. . . to order and administer (in cases where employer-employee relations still exist), after due notice and
hearing, compliance with the labor standards provisions of the Code and the other labor legislations based
on the findings of their Regulations Officers or Industrial Safety Engineers (Labor Standard and Welfare
Officers) and made in the course of inspection, and to issue writs of execution to the appropriate authority
for the enforcement of his order, in line with the provisions of Article 128 in relation to Articles 289 and
290 of the Labor Code, as amended. . . .

The respondents beg the question. Their argument assumes that there are some "labor standards provisions of the Code
and the other labor legislations" imposing on employers the obligation to give additional compensation to their monthly-
paid employees in the event that a legal holiday should fall on a Sunday in a particular month — with which compliance
may be commanded by the Regional Director — when the existence of said provisions is precisely the matter to be
established.

In promulgating the orders complained of the public respondents have attempted to legislate, or interpret legal provisions
in such a manner as to create obligations where none are intended. They have acted without authority, or at the very least,
with grave abuse of their discretion. Their acts must be nullified and set aside.

WHEREFORE, the orders complained of, namely: that of the respondent Undersecretary dated September 22, 1993, and
that of the Regional Director dated July 30, 1992, are NULLIFIED AND SET ASIDE, and the proceeding against
petitioner DISMISSED.

SO ORDERED.
FIRST DIVISION

G.R. No. L-65482 December 1, 1987

JOSE RIZAL COLLEGE, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION AND NATIONAL ALLIANCE OF TEACHERS/OFFICE
WORKERS, respondents.

PARAS, J.:

This is a petition for certiorari with prayer for the issuance of a writ of preliminary injunction, seeking the annulment of
the decision of the National Labor Relations Commission * in NLRC Case No. RB-IV 23037-78 (Case No. R4-1-1081-
71) entitled "National Alliance of Teachers and Office Workers and Juan E. Estacio, Jaime Medina, et al. vs. Jose Rizal
College" modifying the decision of the Labor Arbiter as follows:

WHEREFORE, in view of the foregoing considerations, the decision appealed from is MODIFIED, in the
sense that teaching personnel paid by the hour are hereby declared to be entitled to holiday pay.

SO ORDERED.

The factual background of this case which is undisputed is as follows:

Petitioner is a non-stock, non-profit educational institution duly organized and existing under the laws of the Philippines.
It has three groups of employees categorized as follows: (a) personnel on monthly basis, who receive their monthly salary
uniformly throughout the year, irrespective of the actual number of working days in a month without deduction for
holidays; (b) personnel on daily basis who are paid on actual days worked and they receive unworked holiday pay and (c)
collegiate faculty who are paid on the basis of student contract hour. Before the start of the semester they sign contracts
with the college undertaking to meet their classes as per schedule.

Unable to receive their corresponding holiday pay, as claimed, from 1975 to 1977, private respondent National Alliance
of Teachers and Office Workers (NATOW) in behalf of the faculty and personnel of Jose Rizal College filed with the
Ministry of Labor a complaint against the college for said alleged non-payment of holiday pay, docketed as Case No.
R04-10-81-72. Due to the failure of the parties to settle their differences on conciliation, the case was certified for
compulsory arbitration where it was docketed as RB-IV-23037-78 (Rollo, pp. 155-156).

After the parties had submitted their respective position papers, the Labor Arbiter ** rendered a decision on February 5,
1979, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1. The faculty and personnel of the respondent Jose Rizal College who are paid their salary by the month
uniformly in a school year, irrespective of the number of working days in a month, without deduction for
holidays, are presumed to be already paid the 10 paid legal holidays and are no longer entitled to separate
payment for the said regular holidays;

2. The personnel of the respondent Jose Rizal College who are paid their wages daily are entitled to be
paid the 10 unworked regular holidays according to the pertinent provisions of the Rules and Regulations
Implementing the Labor Code;

3. Collegiate faculty of the respondent Jose Rizal College who by contract are paid compensation per
student contract hour are not entitled to unworked regular holiday pay considering that these regular
holidays have been excluded in the programming of the student contact hours. (Rollo. pp. 26-27)
On appeal, respondent National Labor Relations Commission in a decision promulgated on June 2, 1982, modified the
decision appealed from, in the sense that teaching personnel paid by the hour are declared to be entitled to holiday pay
(Rollo. p. 33).

Hence, this petition.

The sole issue in this case is whether or not the school faculty who according to their contracts are paid per lecture hour
are entitled to unworked holiday pay.

Labor Arbiter Julio Andres, Jr. found that faculty and personnel employed by petitioner who are paid their salaries
monthly, are uniformly paid throughout the school year regardless of working days, hence their holiday pay are included
therein while the daily paid employees are renumerated for work performed during holidays per affidavit of petitioner's
treasurer (Rollo, pp. 72-73).

There appears to be no problem therefore as to the first two classes or categories of petitioner's workers.

The problem, however, lies with its faculty members, who are paid on an hourly basis, for while the Labor Arbiter
sustains the view that said instructors and professors are not entitled to holiday pay, his decision was modified by the
National Labor Relations Commission holding the contrary. Otherwise stated, on appeal the NLRC ruled that teaching
personnel paid by the hour are declared to be entitled to holiday pay.

Petitioner maintains the position among others, that it is not covered by Book V of the Labor Code on Labor Relations
considering that it is a non- profit institution and that its hourly paid faculty members are paid on a "contract" basis
because they are required to hold classes for a particular number of hours. In the programming of these student contract
hours, legal holidays are excluded and labelled in the schedule as "no class day. " On the other hand, if a regular week day
is declared a holiday, the school calendar is extended to compensate for that day. Thus petitioner argues that the advent of
any of the legal holidays within the semester will not affect the faculty's salary because this day is not included in their
schedule while the calendar is extended to compensate for special holidays. Thus the programmed number of lecture
hours is not diminished (Rollo, pp. 157- 158).

The Solicitor General on the other hand, argues that under Article 94 of the Labor Code (P.D. No. 442 as amended),
holiday pay applies to all employees except those in retail and service establishments. To deprive therefore employees
paid at an hourly rate of unworked holiday pay is contrary to the policy considerations underlying such presidential
enactment, and its precursor, the Blue Sunday Law (Republic Act No. 946) apart from the constitutional mandate to grant
greater rights to labor (Constitution, Article II, Section 9). (Reno, pp. 76-77).

In addition, respondent National Labor Relations Commission in its decision promulgated on June 2, 1982, ruled that the
purpose of a holiday pay is obvious; that is to prevent diminution of the monthly income of the workers on account of
work interruptions. In other words, although the worker is forced to take a rest, he earns what he should earn. That is his
holiday pay. It is no excuse therefore that the school calendar is extended whenever holidays occur, because such happens
only in cases of special holidays (Rollo, p. 32).

Subject holiday pay is provided for in the Labor Code (Presidential Decree No. 442, as amended), which reads:

Art. 94. Right to holiday pay — (a) Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly employing less than ten (10) workers;

(b) The employer may require an employee to work on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate; ... "

and in the Implementing Rules and Regulations, Rule IV, Book III, which reads:

SEC. 8. Holiday pay of certain employees. — (a) Private school teachers, including faculty members of
colleges and universities, may not be paid for the regular holidays during semestral vacations. They shall,
however, be paid for the regular holidays during Christmas vacations. ...
Under the foregoing provisions, apparently, the petitioner, although a non-profit institution is under obligation to give pay
even on unworked regular holidays to hourly paid faculty members subject to the terms and conditions provided for
therein.

We believe that the aforementioned implementing rule is not justified by the provisions of the law which after all is silent
with respect to faculty members paid by the hour who because of their teaching contracts are obliged to work and consent
to be paid only for work actually done (except when an emergency or a fortuitous event or a national need calls for the
declaration of special holidays). Regular holidays specified as such by law are known to both school and faculty members
as no class days;" certainly the latter do not expect payment for said unworked days, and this was clearly in their minds
when they entered into the teaching contracts.

On the other hand, both the law and the Implementing Rules governing holiday pay are silent as to payment on Special
Public Holidays.

It is readily apparent that the declared purpose of the holiday pay which is the prevention of diminution of the monthly
income of the employees on account of work interruptions is defeated when a regular class day is cancelled on account of
a special public holiday and class hours are held on another working day to make up for time lost in the school calendar.
Otherwise stated, the faculty member, although forced to take a rest, does not earn what he should earn on that day. Be it
noted that when a special public holiday is declared, the faculty member paid by the hour is deprived of expected income,
and it does not matter that the school calendar is extended in view of the days or hours lost, for their income that could be
earned from other sources is lost during the extended days. Similarly, when classes are called off or shortened on account
of typhoons, floods, rallies, and the like, these faculty members must likewise be paid, whether or not extensions are
ordered.

Petitioner alleges that it was deprived of due process as it was not notified of the appeal made to the NLRC against the
decision of the labor arbiter.

The Court has already set forth what is now known as the "cardinal primary" requirements of due process in
administrative proceedings, to wit: "(1) the right to a hearing which includes the right to present one's case and submit
evidence in support thereof; (2) the tribunal must consider the evidence presented; (3) the decision must have something
to support itself; (4) the evidence must be substantial, and substantial evidence means such evidence as a reasonable mind
might accept as adequate to support a conclusion; (5) the decision must be based on the evidence presented at the hearing,
or at least contained in the record and disclosed to the parties affected; (6) the tribunal or body of any of its judges must
act on its or his own independent consideration of the law and facts of the controversy, and not simply accept the views of
a subordinate; (7) the board or body should in all controversial questions, render its decisions in such manner that the
parties to the proceeding can know the various issues involved, and the reason for the decision rendered. " (Doruelo vs.
Commission on Elections, 133 SCRA 382 [1984]).

The records show petitioner JRC was amply heard and represented in the instant proceedings. It submitted its position
paper before the Labor Arbiter and the NLRC and even filed a motion for reconsideration of the decision of the latter, as
well as an "Urgent Motion for Hearing En Banc" (Rollo, p. 175). Thus, petitioner's claim of lack of due process is
unfounded.

PREMISES CONSIDERED, the decision of respondent National Labor Relations Commission is hereby set aside, and a
new one is hereby RENDERED:

(a) exempting petitioner from paying hourly paid faculty members their pay for regular holidays, whether the same be
during the regular semesters of the school year or during semestral, Christmas, or Holy Week vacations;

(b) but ordering petitioner to pay said faculty members their regular hourly rate on days declared as special holidays or for
some reason classes are called off or shortened for the hours they are supposed to have taught, whether extensions of class
days be ordered or not; in case of extensions said faculty members shall likewise be paid their hourly rates should they
teach during said extensions.

SO ORDERED.
EN BANC

G.R. No. 79255 January 20, 1992

UNION OF FILIPRO EMPLOYEES (UFE), petitioner,


vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTLÉ PHILIPPINES, INC.
(formerly FILIPRO, INC.), respondents.

Jose C. Espinas for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

GUTIERREZ, JR., J.:

This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the change of the divisor in
the computation of benefits from 251 to 261 days.

On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor Relations
Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights and obligations respecting claims of its
monthly paid employees for holiday pay in the light of the Court's decision in Chartered Bank Employees Association
v. Ople (138 SCRA 273 [1985]).

Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary arbitration and appointed
respondent Benigno Vivar, Jr. as voluntary arbitrator.

On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:

pay its monthly paid employees holiday pay pursuant to Article 94 of the Code, subject only to the
exclusions and limitations specified in Article 82 and such other legal restrictions as are provided for in
the Code. (Rollo,
p. 31)

Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion of salesmen,
sales representatives, truck drivers, merchandisers and medical representatives (hereinafter referred to as sales personnel)
from the award of the holiday pay, and (3) deduction from the holiday pay award of overpayment for overtime, night
differential, vacation and sick leave benefits due to the use of 251 divisor. (Rollo, pp. 138-145)

Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor Code, that their
sales personnel are not field personnel and are therefore entitled to holiday pay, and that the use of 251 as divisor is an
established employee benefit which cannot be diminished.

On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday pay award shall
retroact to November 1, 1974, the date of effectivity of the Labor Code. He adjudged, however, that the company's sales
personnel are field personnel and, as such, are not entitled to holiday pay. He likewise ruled that with the grant of 10 days'
holiday pay, the divisor should be changed from 251 to 261 and ordered the reimbursement of overpayment for overtime,
night differential, vacation and sick leave pay due to the use of 251 days as divisor.

Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator treated the two
motions as appeals and forwarded the case to the NLRC which issued a resolution dated May 25, 1987 remanding the case
to the respondent arbitrator on the ground that it has no jurisdiction to review decisions in voluntary arbitration cases
pursuant to Article 263 of the Labor Code as amended by Section 10, Batas Pambansa Blg. 130 and as implemented by
Section 5 of the rules implementing B.P. Blg. 130.

However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the case reasoning that he
had no more jurisdiction to continue as arbitrator because he had resigned from service effective May 1, 1986.

Hence, this petition.

The petitioner union raises the following issues:

1) Whether or not Nestle's sales personnel are entitled to holiday pay; and

2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days and
whether or not the previous use of 251 as divisor resulted in overpayment for overtime, night differential, vacation and
sick leave pay.

The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the Labor Code. The
respondent company controverts this assertion.

Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as "non-agritultural
employees who regularly perform their duties away from the principal place of business or branch office of the employer
and whose actual hours of work in the field cannot be determined with reasonable certainty."

The controversy centers on the interpretation of the clause "whose actual hours of work in the field cannot be determined
with reasonable certainty."

It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to the office and come
back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.

The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales personnel's working
hours which can be determined with reasonable certainty.

The Court does not agree. The law requires that the actual hours of work in the field be reasonably ascertained. The
company has no way of determining whether or not these sales personnel, even if they report to the office before 8:00 a.m.
prior to field work and come back at 4:30 p.m, really spend the hours in between in actual field work.

We concur with the following disquisition by the respondent arbitrator:

The requirement for the salesmen and other similarly situated employees to report for work at the office at
8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the realm of work in the field as defined in the
Code but an exercise of purely management prerogative of providing administrative control over such
personnel. This does not in any manner provide a reasonable level of determination on the actual field
work of the employees which can be reasonably ascertained. The theoretical analysis that salesmen and
other similarly-situated workers regularly report for work at 8:00 a.m. and return to their home station at
4:00 or 4:30 p.m., creating the assumption that their field work is supervised, is surface projection. Actual
field work begins after 8:00 a.m., when the sales personnel follow their field itinerary, and ends
immediately before 4:00 or 4:30 p.m. when they report back to their office. The period between 8:00 a.m.
and 4:00 or 4:30 p.m. comprises their hours of work in the field, the extent or scope and result of which
are subject to their individual capacity and industry and which "cannot be determined with reasonable
certainty." This is the reason why effective supervision over field work of salesmen and medical
representatives, truck drivers and merchandisers is practically a physical impossibility. Consequently,
they are excluded from the ten holidays with pay award. (Rollo, pp. 36-37)

Moreover, the requirement that "actual hours of work in the field cannot be determined with reasonable certainty" must be
read in conjunction with Rule IV, Book III of the Implementing Rules which provides:
Rule IV Holidays with Pay

Sec. 1. Coverage — This rule shall apply to all employees except:

xxx xxx xxx

(e) Field personnel and other employees whose time and performance is unsupervised by the employer . . .
(Emphasis supplied)

While contending that such rule added another element not found in the law (Rollo, p. 13), the petitioner nevertheless
attempted to show that its affected members are not covered by the abovementioned rule. The petitioner asserts that the
company's sales personnel are strictly supervised as shown by the SOD (Supervisor of the Day) schedule and the company
circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55).

Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another element to
the Labor Code definition of field personnel. The clause "whose time and performance is unsupervised by the employer"
did not amplify but merely interpreted and expounded the clause "whose actual hours of work in the field cannot be
determined with reasonable certainty." The former clause is still within the scope and purview of Article 82 which defines
field personnel. Hence, in deciding whether or not an employee's actual working hours in the field can be determined with
reasonable certainty, query must be made as to whether or not such employee's time and performance is constantly
supervised by the employer.

The SOD schedule adverted to by the petitioner does not in the least signify that these sales personnel's time and
performance are supervised. The purpose of this schedule is merely to ensure that the sales personnel are out of the office
not later than 8:00 a.m. and are back in the office not earlier than 4:00 p.m.

Likewise, the Court fails to see how the company can monitor the number of actual hours spent in field work by an
employee through the imposition of sanctions on absenteeism contained in the company circular of March 15, 1984.

The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter based on their
performance is proof that their actual hours of work in the field can be determined with reasonable certainty.

The Court thinks otherwise.

The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales target; (2) good
collection performance; (3) proper compliance with good market hygiene; (4) good merchandising work; (5) minimal
market returns; and (6) proper truck maintenance. (Rollo, p. 190).

The above criteria indicate that these sales personnel are given incentive bonuses precisely because of the difficulty in
measuring their actual hours of field work. These employees are evaluated by the result of their work and not by the actual
hours of field work which are hardly susceptible to determination.

In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had occasion to discuss
the nature of the job of a salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court
stated:

The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to a greater extent,
works individually. There are no restrictions respecting the time he shall work and he can earn as much or
as little, within the range of his ability, as his ambition dictates. In lieu of overtime he ordinarily receives
commissions as extra compensation. He works away from his employer's place of business, is not subject
to the personal supervision of his employer, and his employer has no way of knowing the number of
hours he works per day.

While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale for their
exclusion as field personnel from holiday pay benefits also applies.
The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of holiday pay, the
divisor should be changed from 251 to 261 days to include the additional 10 holidays and the employees should reimburse
the amounts overpaid by Filipro due to the use of 251 days' divisor.

Arbitrator Vivar's rationale for his decision is as follows:

. . . The new doctrinal policy established which ordered payment of ten holidays certainly adds to or
accelerates the basis of conversion and computation by ten days. With the inclusion of ten holidays as
paid days, the divisor is no longer 251 but 261 or 262 if election day is counted. This is indeed an
extremely difficult legal question of interpretation which accounts for what is claimed as falling within
the concept of "solutio indebti."

When the claim of the Union for payment of ten holidays was granted, there was a consequent need to
abandon that 251 divisor. To maintain it would create an impossible situation where the employees would
benefit with additional ten days with pay but would simultaneously enjoy higher benefits by discarding
the same ten days for purposes of computing overtime and night time services and considering sick and
vacation leave credits. Therefore, reimbursement of such overpayment with the use of 251 as divisor
arises concomitant with the award of ten holidays with pay. (Rollo, p. 34)

The divisor assumes an important role in determining whether or not holiday pay is already included in the monthly paid
employee's salary and in the computation of his daily rate. This is the thrust of our pronouncement in Chartered Bank
Employees Association v. Ople (supra). In that case, We held:

It is argued that even without the presumption found in the rules and in the policy instruction, the
company practice indicates that the monthly salaries of the employees are so computed as to include the
holiday pay provided by law. The petitioner contends otherwise.

One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing
overtime compensation for its employees, employs a "divisor" of 251 days. The 251 working days divisor
is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of
calendar days in a year. If the employees are already paid for all non-working days, the divisor should be
365 and not 251.

In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows:

monthly rate x 12 months

———————————

251 days

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

It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for the
purpose of computing overtime and night differential pay and commutation of sick and vacation leave credits.
Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.

The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily rate which is
violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To maintain the same
daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the employee's annual salary, should
correspondingly be increased to incorporate the holiday pay. To illustrate, if prior to the grant of holiday pay, the
employee's annual salary is P25,100, then dividing such figure by 251 days, his daily rate is P100.00 After the payment of
10 days' holiday pay, his annual salary already includes holiday pay and totals P26,100 (P25,100 + 1,000). Dividing this
by 261 days, the daily rate is still P100.00. There is thus no merit in respondent Nestle's claim of overpayment of overtime
and night differential pay and sick and vacation leave benefits, the computation of which are all based on the daily rate,
since the daily rate is still the same before and after the grant of holiday pay.

Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days as divisor must fail
in light of the Labor Code mandate that "all doubts in the implementation and interpretation of this Code, including its
implementing rules and regulations, shall be resolved in favor of labor." (Article 4). Moreover, prior to September 1,
1980, when the company was on a 6-day working schedule, the divisor used by the company was 303, indicating that the
10 holidays were likewise not paid. When Filipro shifted to a 5-day working schebule on September 1, 1980, it had the
chance to rectify its error, if ever there was one but did not do so. It is now too late to allege payment by mistake.

Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from November 1, 1974. This
ruling was not questioned by the petitioner union as obviously said decision was favorable to it. Technically, therefore,
respondent Nestle should have filed a separate petition raising the issue of effectivity of the holiday pay award. This Court
has ruled that an appellee who is not an appellant may assign errors in his brief where his purpose is to maintain the
judgment on other grounds, but he cannot seek modification or reversal of the judgment or affirmative relief unless he has
also appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989], citing La Campana Food Products, Inc. v.
Philippine Commercial and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in order to fully settle the issues so
that the execution of the Court's decision in this case may not be needlessly delayed by another petition, the Court
resolved to take up the matter of effectivity of the holiday pay award raised by Nestle.

Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when the Chartered
Bank decision, promulgated on August 28, 1985, became final and executory, and not from the date of effectivity of the
Labor Code. Although the Court does not entirely agree with Nestle, we find its claim meritorious.

In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984], hereinafter referred
to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the implementing rules and Policy Instruction
No. 9, issued by the then Secretary of Labor on February 16, 1976 and April 23, 1976, respectively, and which excluded
monthly paid employees from holiday pay benefits, are null and void. The Court therein reasoned that, in the guise of
clarifying the Labor Code's provisions on holiday pay, the aforementioned implementing rule and policy instruction
amended them by enlarging the scope of their exclusion. The Chartered Bank case reiterated the above ruling and added
the "divisor" test.

However, prior to their being declared null and void, the implementing rule and policy instruction enjoyed the
presumption of validity and hence, Nestle's non-payment of the holiday benefit up to the promulgation of the IBAA case
on October 23, 1984 was in compliance with these presumably valid rule and policy instruction.

In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the effect to be given
to a legislative or executive act subsequently declared invalid:

xxx xxx xxx

. . . It does not admit of doubt that prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied with. This is so as until after the judiciary,
in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have
acted under it and may have changed their positions. What could be more fitting than that in a subsequent
litigation regard be had to what has been done while such legislative or executive act was in operation and
presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its
existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the
judiciary is the government organ which has the final say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed before it can exercise the power of judicial review
that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice
then, if there be no recognition of what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a
determination of [unconstitutionality], is an operative fact and may have consequences which cannot
justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various aspects, — with respect to
particular relations, individual and corporate, and particular conduct, private and official." (Chicot County
Drainage Dist. v. Baxter States Bank, 308 US 371, 374 [1940]). This language has been quoted with
approval in a resolution in Araneta v. Hill (93 Phil. 1002 [1952]) and the decision in Manila Motor Co.,
Inc. v. Flores (99 Phil. 738 [1956]). An even more recent instance is the opinion of Justice Zaldivar
speaking for the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435)

The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness and resulting
unfairness must be avoided. It is now almost the end of 1991. To require various companies to reach back to
1975 now and nullify acts done in good faith is unduly harsh. 1984 is a fairer reckoning period under the facts of this case.

Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on the implicit validity of
the implementing rule and policy instruction before this Court nullified them, and thinking that it was not obliged to give
holiday pay benefits to its monthly paid employees, may have been moved to grant other concessions to its employees,
especially in the collective bargaining agreement. This possibility is bolstered by the fact that respondent Nestle's
employees are among the highest paid in the industry. With this consideration, it would be unfair to impose additional
burdens on Nestle when the non-payment of the holiday benefits up to 1984 was not in any way attributed to Nestle's
fault.

The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the Chartered
Bank case nor from the date of effectivity of the Labor Code, but from October 23, 1984, the date of promulgation of
the IBAA case.

WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in computing holiday
pay shall be 251 days. The holiday pay as above directed shall be computed from October 23, 1984. In all other respects,
the order of the respondent arbitrator is hereby AFFIRMED.

SO ORDERED.
FIRST DIVISION

G.R. No. L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,


vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO AGUAS,
and F.E. ZUELLIG (M), INC., respondents.

Raul E. Espinosa for petitioners.

Lucas Emmanuel B. Canilao for petitioner A. Manuel.

Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari seeking to modify the decision of the National Labor Relations Commission in NLRC
Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres, Complainants-Appellants, v. F.E. Zuellig (M),
Inc., Respondent-Appellee" and NLRC Case No. RN- IV-20855-78-T entitled, "Amancio Manuel, Complainant-Appellant,
v. F.E. Zuellig (M), Inc., Respondent-Appellee," which dismissed the appeal of petitioners herein and in effect affirmed
the decision of the Labor Arbiter ordering private respondent to pay petitioners separation pay equivalent to their one
month salary (exclusive of commissions, allowances, etc.) for every year of service.

The antecedent facts are as follows:

Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department of Labor (Regional
Office No. 4) an application seeking clearance to terminate the services of petitioners Jose Songco, Romeo Cipres, and
Amancio Manuel (hereinafter referred to as petitioners) allegedly on the ground of retrenchment due to financial losses.
This application was seasonably opposed by petitioners alleging that the company is not suffering from any losses. They
alleged further that they are being dismissed because of their membership in the union. At the last hearing of the case,
however, petitioners manifested that they are no longer contesting their dismissal. The parties then agreed that the sole
issue to be resolved is the basis of the separation pay due to petitioners. Petitioners, who were in the sales force of Zuellig
received monthly salaries of at least P40,000. In addition, they received commissions for every sale they made.

The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees Association, of which
petitioners are members, contains the following provision (p. 71, Rollo):

ARTICLE XIV — Retirement Gratuity

Section l(a)-Any employee, who is separated from employment due to old age, sickness, death or
permanent lay-off not due to the fault of said employee shall receive from the company a retirement
gratuity in an amount equivalent to one (1) month's salary per year of service. One month of salary as
used in this paragraph shall be deemed equivalent to the salary at date of retirement; years of service shall
be deemed equivalent to total service credits, a fraction of at least six months being considered one year,
including probationary employment. (Emphasis supplied)

On the other hand, Article 284 of the Labor Code then prevailing provides:

Art. 284. Reduction of personnel. — The termination of employment of any employee due to the
installation of labor saving-devices, redundancy, retrenchment to prevent losses, and other similar causes,
shall entitle the employee affected thereby to separation pay. In case of termination due to the installation
of labor-saving devices or redundancy, the separation pay shall be equivalent to one (1) month pay or to
at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and other similar causes, the separation pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year. (Emphasis supplied)

In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code provide:

xxx

Sec. 9(b). Where the termination of employment is due to retrechment initiated by the employer to
prevent losses or other similar causes, or where the employee suffers from a disease and his continued
employment is prohibited by law or is prejudicial to his health or to the health of his co-employees, the
employee shall be entitled to termination pay equivalent at least to his one month salary, or to one-half
month pay for every year of service, whichever is higher, a fraction of at least six (6) months being
considered as one whole year.

xxx

Sec. 10. Basis of termination pay. — The computation of the termination pay of an employee as provided
herein shall be based on his latest salary rate, unless the same was reduced by the employer to defeat the
intention of the Code, in which case the basis of computation shall be the rate before its deduction.
(Emphasis supplied)

On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads (p. 78, Rollo):

RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered to pay the


complainants separation pay equivalent to their one month salary (exclusive of commissions, allowances,
etc.) for every year of service that they have worked with the company.

SO ORDERED.

The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of merit.

Hence, the present petition.

On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and Withdrawal of Petition dated
April 7, 1980 filed by petitioner Romeo Cipres, based on the ground that he wants "to abide by the decision appealed
from" since he had "received, to his full and complete satisfaction, his separation pay," resolved to dismiss the petition as
to him.

The issue is whether or not earned sales commissions and allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation pay.

The petition is impressed with merit.

Petitioners' position was that in arriving at the correct and legal amount of separation pay due them, whether under the
Labor Code or the CBA, their basic salary, earned sales commissions and allowances should be added together. They
cited Article 97(f) of the Labor Code which includes commission as part on one's salary, to wit;

(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services rendered or to be
rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the employee. 'Fair reasonable value'
shall not include any profit to the employer or to any person affiliated with the employer.

Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules to include
commission in the computation of separation pay, it could have explicitly said so in clear and unequivocal terms.
Furthermore, in the definition of the term "wage", "commission" is used only as one of the features or designations
attached to the word remuneration or earnings.

Insofar as the issue of whether or not allowances should be included in the monthly salary of petitioners for the purpose of
computation of their separation pay is concerned, this has been settled in the case of Santos v. NLRC, et al., G.R. No.
76721, September 21, 1987, 154 SCRA 166, where We ruled that "in the computation of backwages and separation pay,
account must be taken not only of the basic salary of petitioner but also of her transportation and emergency living
allowances." This ruling was reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987, 155 SCRA 124 and
recently, in Planters Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989.

We shall concern ourselves now with the issue of whether or not earned sales commission should be included in the
monthly salary of petitioner for the purpose of computation of their separation pay.

Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has been repeatedly
declared by the courts that where the law speaks in clear and categorical language, there is no room for interpretation or
construction; there is only room for application (Cebu Portland Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17,
August 22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain
and unambiguous statute speaks for itself, and any attempt to make it clearer is vain labor and tends only to obscurity.
How ever, it may be argued that if We correlate Article 97(f) with Article XIV of the Collective Bargaining Agreement,
Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing Rules, there appears to be an ambiguity. In
this regard, the Labor Arbiter rationalized his decision in this manner (pp. 74-76, Rollo):

The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be (sic) stated as a
general definition. It is 'wage ' in its generic sense. A careful perusal of the same does not show any
indication that commission is part of salary. We can say that commission by itself may be considered a
wage. This is not something novel for it cannot be gainsaid that certain types of employees like agents,
field personnel and salesmen do not earn any regular daily, weekly or monthly salaries, but rely mainly on
commission earned.

Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the implementing rules in
conjunction with Articles 273 and 274 (sic) of the Code specifically states that the basis of the termination
pay due to one who is sought to be legally separated from the service is 'his latest salary rates.

x x x.

Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.

The above terms found in those Articles and the particular Rules were intentionally used to express the
intent of the framers of the law that for purposes of separation pay they mean to be specifically referring
to salary only.

.... Each particular benefit provided in the Code and other Decrees on Labor has its own pecularities and
nuances and should be interpreted in that light. Thus, for a specific provision, a specific meaning is
attached to simplify matters that may arise there from. The general guidelines in (sic) the formation of
specific rules for particular purpose. Thus, that what should be controlling in matters concerning
termination pay should be the specific provisions of both Book VI of the Code and the Rules. At any rate,
settled is the rule that in matters of conflict between the general provision of law and that of a particular-
or specific provision, the latter should prevail.

On its part, the NLRC ruled (p. 110, Rollo):


From the aforequoted provisions of the law and the implementing rules, it could be deduced that wage is
used in its generic sense and obviously refers to the basic wage rate to be ascertained on a time, task,
piece or commission basis or other method of calculating the same. It does not, however, mean that
commission, allowances or analogous income necessarily forms part of the employee's salary because to
do so would lead to anomalies (sic), if not absurd, construction of the word "salary." For what will
prevent the employee from insisting that emergency living allowance, 13th month pay, overtime, and
premium pay, and other fringe benefits should be added to the computation of their separation pay. This
situation, to our mind, is not the real intent of the Code and its rules.

We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article XIV of the Collective
Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing Rules, which
mention the terms "pay" and "salary", is more apparent than real. Broadly, the word "salary" means a recompense or
consideration made to a person for his pains or industry in another man's business. Whether it be derived from "salarium,"
or more fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for
services rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary" are in essence
synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89
App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is the Latin word "salarium," is often used
interchangeably with "wage", the etymology of which is the Middle English word "wagen". Both words generally refer to
one and the same meaning, that is, a reward or recompense for services performed. Likewise, "pay" is the synonym of
"wages" and "salary" (Black's Law Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary" have the
same meaning, and commission is included in the definition of "wage", the logical conclusion, therefore, is, in the
computation of the separation pay of petitioners, their salary base should include also their earned sales commissions.

The aforequoted provisions are not the only consideration for deciding the petition in favor of the petitioners.

We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in the form of
incentives or encouragement, so that the petitioners would be inspired to put a little more industry on the jobs particularly
assigned to them, still these commissions are direct remuneration services rendered which contributed to the increase of
income of Zuellig . Commission is the recompense, compensation or reward of an agent, salesman, executor, trustees,
receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the
profit to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750). The
nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate clearly
that commission are part of petitioners' wage or salary. We take judicial notice of the fact that some salesmen do not
receive any basic salary but depend on commissions and allowances or commissions alone, are part of petitioners' wage or
salary. We take judicial notice of the fact that some salesman do not received any basic salary but depend on commissions
and allowances or commissions alone, although an employer-employee relationship exists. Bearing in mind the
preceeding dicussions, if we adopt the opposite view that commissions, do not form part of wage or salary, then, in effect,
We will be saying that this kind of salesmen do not receive any salary and therefore, not entitled to separation pay in the
event of discharge from employment. Will this not be absurd? This narrow interpretation is not in accord with the liberal
spirit of our labor laws and considering the purpose of separation pay which is, to alleviate the difficulties which confront
a dismissed employee thrown the the streets to face the harsh necessities of life.

Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should be used in computing
the separation pay, We held that:

The commissions also claimed by petitioner ('override commission' plus 'net deposit incentive') are not
properly includible in such base figure since such commissions must be earned by actual market
transactions attributable to petitioner.

Applying this by analogy, since the commissions in the present case were earned by actual market transactions
attributable to petitioners, these should be included in their separation pay. In the computation thereof, what should be
taken into account is the average commissions earned during their last year of employment.

The final consideration is, in carrying out and interpreting the Labor Code's provisions and its implementing regulations,
the workingman's welfare should be the primordial and paramount consideration. This kind of interpretation gives
meaning and substance to the liberal and compassionate spirit of the law as provided for in Article 4 of the Labor Code
which states that "all doubts in the implementation and interpretation of the provisions of the Labor Code including its
implementing rules and regulations shall be resolved in favor of labor" (Abella v. NLRC, G.R. No. 71812, July
30,1987,152 SCRA 140; Manila Electric Company v. NLRC, et al., G.R. No. 78763, July 12,1989), and Article 1702 of
the Civil Code which provides that "in case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer.

ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National Labor Relations
Commission is MODIFIED by including allowances and commissions in the separation pay of petitioners Jose Songco
and Amancio Manuel. The case is remanded to the Labor Arbiter for the proper computation of said separation pay.

SO ORDERED.
EN BANC

G.R. No. L-12444 February 28, 1963

STATES MARINE CORPORATION and ROYAL LINE, INC., petitioners,


vs.
CEBU SEAMEN'S ASSOCIATION, INC., respondent.

Pedro B. Uy Calderon for petitioners.


Gaudioso C. Villagonzalo for respondent.

PAREDES, J.:

Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the business of marine coastwise
transportation, employing therein several steamships of Philippine registry. They had a collective bargaining contract with
the respondent Cebu Seamen's Association, Inc. On September 12, 1952, the respondent union filed with the Court of
Industrial Relations (CIR), a petition (Case No. 740-V) against the States Marine Corporation, later amended on May 4,
1953, by including as party respondent, the petitioner Royal Line, Inc. The Union alleged that the officers and men
working on board the petitioners' vessels have not been paid their sick leave, vacation leave and overtime pay; that the
petitioners threatened or coerced them to accept a reduction of salaries, observed by other shipowners; that after the
Minimum Wage Law had taken effect, the petitioners required their employees on board their vessels, to pay the sum of
P.40 for every meal, while the masters and officers were not required to pay their meals and that because Captain Carlos
Asensi had refused to yield to the general reduction of salaries, the petitioners dismissed said captain who now claims for
reinstatement and the payment of back wages from December 25, 1952, at the rate of P540.00, monthly.

The petitioners' shipping companies, answering, averred that very much below 30 of the men and officers in their employ
were members of the respondent union; that the work on board a vessel is one of comparative ease; that petitioners have
suffered financial losses in the operation of their vessels and that there is no law which provides for the payment of sick
leave or vacation leave to employees or workers of private firms; that as regards the claim for overtime pay, the
petitioners have always observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law), notwithstanding the
fact that it does not apply to those who provide means of transportation; that the shipowners and operators in Cebu were
paying the salaries of their officers and men, depending upon the margin of profits they could realize and other factors or
circumstances of the business; that in enacting Rep. Act No. 602 (Minimum Wage Law), the Congress had in mind that
the amount of P.40 per meal, furnished the employees should be deducted from the daily wages; that Captain Asensi was
not dismissed for alleged union activities, but with the expiration of the terms of the contract between said officer and the
petitioners, his services were terminated.

A decision was rendered on February 21, 1957 in favor of the respondent union. The motion for reconsideration thereof,
having been denied, the companies filed the present writ of certiorari, to resolve legal question involved. Always bearing
in mind the deep-rooted principle that the factual findings of the Court of Industrial Relations should not be disturbed, if
supported by substantial evidence, the different issues are taken up, in the order they are raised in the brief for the
petitioners.

1. First assignment of error. — The respondent court erred in holding that it had jurisdiction over case No. 740-V,
notwithstanding the fact that those who had dispute with the petitioners, were less than thirty (30) in number.

The CIR made a finding that at the time of the filing of the petition in case No. 740-V, respondent Union
had more than thirty members actually working with the companies, and the court declared itself with
jurisdiction to take cognizance of the case. Against this order, the herein petitioners did not file a motion
for reconsideration or a petition for certiorari. The finding of fact made by the CIR became final and
conclusive, which We are not now authorized to alter or modify. It is axiomatic that once the CIR had
acquired jurisdiction over a case, it continues to have that jurisdiction, until the case is terminated (Manila
Hotel Emp. Association v. Manila Hotel Company, et al., 40 O.G. No. 6, p. 3027). It was abundantly
shown that there were 56 members who signed Exhibits A, A-I to A-8, and that 103 members of the
Union are listed in Exhibits B, B-1 to B-35, F, F-1 and K-2 to K-3. So that at the time of the filing of the
petition, the respondent union had a total membership of 159, working with the herein petitioners, who
were presumed interested in or would be benefited by the outcome of the case (NAMARCO v. CIR, L-
17804, Jan. 1963). Annex D, (Order of the CIR, dated March 8, 1954), likewise belies the contention of
herein petitioner in this regard. The fact that only 7 claimed for overtime pay and only 7 witnesses
testified, does not warrant the conclusion that the employees who had some dispute with the present
petitioners were less than 30. The ruling of the CIR, with respect to the question of jurisdiction is,
therefore, correct.

2. Second assignment of error. — The CIR erred in holding, that inasmuch as in the shipping articles, the herein
petitioners have bound themselves to supply the crew with provisions and with such "daily subsistence as shall be
mutually agreed upon" between the master and the crew, no deductions for meals could be made by the aforesaid
petitioners from their wages or salaries.

3. Third assignment of error. — The CIR erred in holding that inasmuch as with regard to meals furnished to
crew members of a vessel, section 3(f) of Act No. 602 is the general rule, which section 19 thereof is the
exception, the cost of said meals may not be legally deducted from the wages or salaries of the aforesaid crew
members by the herein petitioners.

4. Fourth assignment of error. — The CIR erred in declaring that the deduction for costs of meals from the wages
or salaries after August 4, 1951, is illegal and same should be reimbursed to the employee concerned, in spite of
said section 3, par. (f) of Act No. 602.

It was shown by substantial evidence, that since the beginning of the operation of the petitioner's business, all the crew of
their vessels have been signing "shipping articles" in which are stated opposite their names, the salaries or wages they
would receive. All seamen, whether members of the crew or deck officers or engineers, have been furnished free meals by
the ship owners or operators. All the shipping articles signed by the master and the crew members, contained, among
others, a stipulation, that "in consideration of which services to be duly performed, the said master hereby agrees to pay to
the said crew, as wages, the sums against their names respectively expressed in the contract; and to supply them with
provisions as provided herein ..." (Sec. 8, par. [b], shipping articles), and during the duration of the contract "the master of
the vessel will provide each member of the crew such daily subsistence as shall be mutually agreed daily upon between
said master and crew; or, in lieu of such subsistence the crew may reserve the right to demand at the time of execution of
these articles that adequate daily rations be furnished each member of the crew." (Sec. 8, par. [e], shipping articles). It is,
therefore, apparent that, aside from the payment of the respective salaries or wages, set opposite the names of the crew
members, the petitioners bound themselves to supply the crew with ship's provisions, daily subsistence or daily rations,
which include food.

This was the situation before August 4, 1951, when the Minimum Wage Law became effective. After this date, however,
the companies began deducting the cost of meals from the wages or salaries of crew members; but no such deductions
were made from the salaries of the deck officers and engineers in all the boats of the petitioners. Under the existing laws,
therefore, the query converges on the legality of such deductions. While the petitioners herein contend that the deductions
are legal and should not be reimbursed to the respondent union, the latter, however, claims that same are illegal and
reimbursement should be made.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable
Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of
facts. 1äwphï1.ñët

We hold that such deductions are not authorized. In the coastwise business of transportation of passengers and freight, the
men who compose the complement of a vessel are provided with free meals by the shipowners, operators or agents,
because they hold on to their work and duties, regardless of "the stress and strain concomitant of a bad weather, unmindful
of the dangers that lurk ahead in the midst of the high seas."

Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows —
(f) Until and unless investigations by the Secretary of Labor on his initiative or on petition of any interested party
result in a different determination of the fair and reasonable value, the furnishing of meals shall be valued at not
more than thirty centavos per meal for agricultural employees and not more than forty centavos for any other
employees covered by this Act, and the furnishing of housing shall be valued at not more than twenty centavos
daily for agricultural workers and not more than forty centavos daily for other employees covered by this Act.

Petitioners maintain, in view of the above provisions, that in fixing the minimum wage of employees, Congress took into
account the meals furnished by employers and that in fixing the rate of forty centavos per meal, the lawmakers had in
mind that the latter amount should be deducted from the daily wage, otherwise, no rate for meals should have been
provided.

However, section 19, same law, states —

SEC. 19. Relations to other labor laws and practices.— Nothing in this Act shall deprive an employee of the right
to seek fair wages, shorter working hours and better working conditions nor justify an employer in violating any
other labor law applicable to his employees, in reducing the wage now paid to any of his employees in excess of
the minimum wage established under this Act, or in reducing supplements furnished on the date of enactment.

At first blush, it would appear that there exists a contradiction between the provisions of section 3(f) and section 19 of
Rep. Act No. 602; but from a careful examination of the same, it is evident that Section 3(f) constitutes the general rule,
while section 19 is the exception. In other words, if there are no supplements given, within the meaning and
contemplation of section 19, but merely facilities, section 3(f) governs. There is no conflict; the two provisions could, as
they should be harmonized. And even if there is such a conflict, the respondent CIR should resolve the same in favor of
the safety and decent living laborers (Art. 1702, new Civil Code)..

It is argued that the food or meals given to the deck officers, marine engineers and unlicensed crew members in question,
were mere "facilities" which should be deducted from wages, and not "supplements" which, according to said section 19,
should not be deducted from such wages, because it is provided therein: "Nothing in this Act shall deprive an employee of
the right to such fair wage ... or in reducing supplements furnished on the date of enactment." In the case of Atok-Big
Wedge Assn. v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms are defined as follows —

"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or received by
the laborers over and above their ordinary earnings or wages. "Facilities", on the other hand, are items of expense
necessary for the laborer's and his family's existence and subsistence so that by express provision of law (Sec.
2[g]), they form part of the wage and when furnished by the employer are deductible therefrom, since if they are
not so furnished, the laborer would spend and pay for them just the same.

In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic
or ordinary earning or wage, is supplement; and when said benefit or privilege is part of the laborers' basic wages, it is a
facility. The criterion is not so much with the kind of the benefit or item (food, lodging, bonus or sick leave) given, but its
purpose. Considering, therefore, as definitely found by the respondent court that the meals were freely given to crew
members prior to August 4, 1951, while they were on the high seas "not as part of their wages but as a necessary matter in
the maintenance of the health and efficiency of the crew personnel during the voyage", the deductions therein made for
the meals given after August 4, 1951, should be returned to them, and the operator of the coastwise vessels affected
should continue giving the same benefit..

In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L-9742, Oct. 27, 1955, the company
used to pay to its drivers and conductors, who were assigned outside of the City limits, aside from their regular salary, a
certain percentage of their daily wage, as allowance for food. Upon the effectivity of the Minimum Wage Law, however,
that privilege was stopped by the company. The order CIR to the company to continue granting this privilege, was upheld
by this Court.

The shipping companies argue that the furnishing of meals to the crew before the effectivity of Rep. Act No. 602, is of no
moment, because such circumstance was already taken into consideration by Congress, when it stated that "wage"
includes the fair and reasonable value of boards customarily furnished by the employer to the employees. If We are to
follow the theory of the herein petitioners, then a crew member, who used to receive a monthly wage of P100.00, before
August 4, 1951, with no deduction for meals, after said date, would receive only P86.00 monthly (after deducting the cost
of his meals at P.40 per meal), which would be very much less than the P122.00 monthly minimum wage, fixed in
accordance with the Minimum Wage Law. Instead of benefiting him, the law will adversely affect said crew member.
Such interpretation does not conform with the avowed intention of Congress in enacting the said law.

One should not overlook a fact fully established, that only unlicensed crew members were made to pay for their meals or
food, while the deck officers and marine engineers receiving higher pay and provided with better victuals, were not. This
pictures in no uncertain terms, a great and unjust discrimination obtaining in the present case (Pambujan Sur United Mine
Workers v. CIR, et al., L-7177, May 31, 1955).

Fifth, Sixth and Seventh assignments of error.— The CIR erred in holding that Severino Pepito, a boatsman, had rendered
overtime work, notwithstanding the provisions of section 1, of C.A. No. 444; in basing its finding ofthe alleged overtime,
on the uncorroborated testimony of said Severino Pepito; and in ordering the herein petitioners to pay him. Severino
Pepito was found by the CIR to have worked overtime and had not been paid for such services. Severino Pepito
categorically stated that he worked during the late hours of the evening and during the early hours of the day when the
boat docks and unloads. Aside from the above, he did other jobs such as removing rusts and cleaning the vessel, which
overtime work totalled to 6 hours a day, and of which he has not been paid as yet. This statement was not rebutted by the
petitioners. Nobody working with him on the same boat "M/V Adriana" contrawise. The testimonies of boatswains of
other vessels(M/V Iruna and M/V Princesa), are incompetent and unreliable. And considering the established fact that the
work of Severino Pepito was continuous, and during the time he was not working, he could not leave and could not
completely rest, because of the place and nature of his work, the provisions of sec. 1, of Comm. Act No. 444, which states
"When the work is not continuous, the time during which the laborer is not working and can leave his working place and
can rest completely shall not be counted", find no application in his case.

8. Eighth assignment of error.— The CIR erred in ordering petitioners to reinstate Capt. Carlos Asensi to his former
position, considering the fact that said officer had been employed since January 9, 1953, as captain of a vessel belonging
to another shipping firm in the City of Cebu.

The CIR held —

Finding that the claims of Captain Carlos Asensi for back salaries from the time of his alleged lay-off on March
20, 1952, is not supported by the evidence on record, the same is hereby dismissed. Considering, however, that
Captain Asensi had been laid-off for a long time and that his failure to report for work is not sufficient cause for
his absolute dismissal, respondents are hereby ordered to reinstate him to his former job without back salary but
under the same terms and conditions of employment existing prior to his lay-off, without loss of seniority and
other benefits already acquired by him prior to March 20, 1952. This Court is empowered to reduce the
punishment meted out to an erring employee (Standard Vacuum Oil Co., Inc. v. Katipunan Labor Union, G.R. No.
L-9666, Jan. 30, 1957). This step taken is in consonance with section 12 of Comm. Act 103, as amended." (p. 16,
Decision, Annex 'G').

The ruling is in conformity with the evidence, law and equity.

Ninth and Tenth assignments of error. — The CIR erred in denying a duly verified motion for new trial, and in overruling
petitioner's motion for reconsideration.

The motion for new trial, supported by an affidavit, states that the movants have a good and valid defense and the same is
based on three orders of the WAS (Wage Administration Service), dated November 6, 1956. It is alleged that they would
inevitably affect the defense of the petitioners. The motion for new trial is without merit. Having the said wage Orders in
their possession, while the case was pending decision, it was not explained why the proper move was not taken to
introduce them before the decision was promulgated. The said wage orders, dealing as they do, with the evaluation of
meals and facilities, are irrelevant to the present issue, it having been found and held that the meals or food in question are
not facilities but supplements. The original petition in the CIR having been filed on Sept. 12, 1952, the WAS could have
intervened in the manner provided by law to express its views on the matter. At any rate, the admission of the three wage
orders have not altered the decision reached in this case.
IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.
FIRST DIVISION

[G.R. No. 128845. June 1, 2000]

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON. LEONARDO A.


QUISUMBING in his capacity as the Secretary of Labor and Employment; HON. CRESENCIANO B. TRAJANO
in his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his capacity as
the Superintendent of International School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.

DECISION

KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School, mostly Filipinos,
cry discrimination. We agree. That the local-hires are paid more than their colleagues in other schools is, of course, beside
the point. The point is that employees should be given equal pay for work of equal value. That is a principle long honored
in this jurisdiction. That is a principle that rests on fundamental notions of justice. That is the principle we uphold today.

Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a domestic
educational institution established primarily for dependents of foreign diplomatic personnel and other temporary
residents.[1] To enable the School to continue carrying out its educational program and improve its standard of instruction,
Section 2(c) of the same decree authorizes the School to

employ its own teaching and management personnel selected by it either locally or abroad, from
Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for the protection
of employees.

Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the same into two: (1)
foreign-hires and (2) local-hires. The School employs four tests to determine whether a faculty member should be
classified as a foreign-hire or a local hire:

a.....What is one's domicile?

b.....Where is one's home economy?

c.....To which country does one owe economic allegiance?

d.....Was the individual hired abroad specifically to work in the School and was the School responsible for
bringing that individual to the Philippines?[2]

Should the answer to any of these queries point to the Philippines, the faculty member is classified as a local hire;
otherwise, he or she is deemed a foreign-hire.

The School grants foreign-hires certain benefits not accorded local-hires. These include housing, transportation, shipping
costs, taxes, and home leave travel allowance. Foreign-hires are also paid a salary rate twenty-five percent (25%) more
than local-hires. The School justifies the difference on two "significant economic disadvantages" foreign-hires have to
endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School explains:

A foreign-hire would necessarily have to uproot himself from his home country, leave his family and
friends, and take the risk of deviating from a promising career path-all for the purpose of pursuing his
profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic
realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance for
the education of one's children, adequate insurance against illness and death, and of course the primary
benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his
term: that he will eventually and inevitably return to his home country where he will have to confront the
uncertainty of obtaining suitable employment after a long period in a foreign land.

The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international education. [3]

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner International School
Alliance of Educators, "a legitimate labor union and the collective bargaining representative of all faculty members"[4] of
the School, contested the difference in salary rates between foreign and local-hires. This issue, as well as the question of
whether foreign-hires should be included in the appropriate bargaining unit, eventually caused a deadlock between the
parties.

On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and Mediation Board to
bring the parties to a compromise prompted the Department of Labor and Employment (DOLE) to assume jurisdiction
over the dispute. On June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano, issued an Order resolving the
parity and representation issues in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently
denied petitioner's motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.

Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos and that the
grant of higher salaries to foreign-hires constitutes racial discrimination.

The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with nationalities
other than Filipino, who have been hired locally and classified as local hires. [5]The Acting Secretary of Labor found that
these non-Filipino local-hires received the same benefits as the Filipino local-hires:

The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth to tell, there are
foreigners who have been hired locally and who are paid equally as Filipino local hires.[6]

The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:

The principle "equal pay for equal work" does not find application in the present case. The international
character of the School requires the hiring of foreign personnel to deal with different nationalities and
different cultures, among the student population.

We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired
personnel which system is universally recognized. We agree that certain amenities have to be provided to
these people in order to entice them to render their services in the Philippines and in the process remain
competitive in the international market.

Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the
local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits would also
require parity in other terms and conditions of employment which include the employment contract.

A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:

All members of the bargaining unit shall be compensated only in accordance with
Appendix C hereof provided that the Superintendent of the School has the discretion to
recruit and hire expatriate teachers from abroad, under terms and conditions that are
consistent with accepted international practice.

Appendix C of said CBA further provides:


The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS)
salary schedule. The 25% differential is reflective of the agreed value of system
displacement and contracted status of the OSRS as differentiated from the tenured status
of Locally Recruited Staff (LRS).

To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two
types of employees, hence, the difference in their salaries.

The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established
principle of constitutional law that the guarantee of equal protection of the laws is not violated by
legislation or private covenants based on reasonable classification. A classification is reasonable if it is
based on substantial distinctions and apply to all members of the same class. Verily, there is a substantial
distinction between foreign hires and local hires, the former enjoying only a limited tenure, having no
amenities of their own in the Philippines and have to be given a good compensation package in order to
attract them to join the teaching faculty of the School.[7]

We cannot agree.

That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the policy
against these evils. The Constitution[8] in the Article on Social Justice and Human Rights exhorts Congress to "give
highest priority to the enactment of measures that protect and enhance the right of all people to human dignity, reduce
social, economic, and political inequalities." The very broad Article 19 of the Civil Code requires every person, "in the
exercise of his rights and in the performance of his duties, [to] act with justice, give everyone his due, and observe
honesty and good faith."

International law, which springs from general principles of law,[9] likewise proscribes discrimination. General principles
of law include principles of equity,[10] i.e., the general principles of fairness and justice, based on the test of what is
reasonable.[11] The Universal Declaration of Human Rights,[12]the International Covenant on Economic, Social, and
Cultural Rights,[13] the International Convention on the Elimination of All Forms of Racial Discrimination,[14] the
Convention against Discrimination in Education,[15] the Convention (No. 111) Concerning Discrimination in Respect of
Employment and Occupation[16] - all embody the general principle against discrimination, the very antithesis of fairness
and justice. The Philippines, through its Constitution, has incorporated this principle as part of its national laws.

In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality and
discrimination by the employer are all the more reprehensible.

The Constitution[17] specifically provides that labor is entitled to "humane conditions of work." These conditions are not
restricted to the physical workplace - the factory, the office or the field - but include as well the manner by which
employers treat their employees.

The Constitution[18] also directs the State to promote "equality of employment opportunities for all." Similarly, the Labor
Code[19] provides that the State shall "ensure equal work opportunities regardless of sex, race or creed." It would be an
affront to both the spirit and letter of these provisions if the State, in spite of its primordial obligation to promote and
ensure equal employment opportunities, closes its eyes to unequal and discriminatory terms and conditions of
employment.[20]

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for example, prohibits
and penalizes[21] the payment of lesser compensation to a female employee as against a male employee for work of equal
value. Article 248 declares it an unfair labor practice for an employer to discriminate in regard to wages in order to
encourage or discourage membership in any labor organization.

Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof, provides:

The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and
favourable conditions of work, which ensure, in particular:
a.....Remuneration which provides all workers, as a minimum, with:

i.....Fair wages and equal remuneration for work of equal value without distinction of any
kind, in particular women being guaranteed conditions of work not inferior to those
enjoyed by men, with equal pay for equal work;

x x x.

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay for
equal work." Persons who work with substantially equal qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries.[22] This rule applies to the School, its "international character" notwithstanding.

The School contends that petitioner has not adduced evidence that local-hires perform work equal to that of foreign-
hires.[23] The Court finds this argument a little cavalier. If an employer accords employees the same position and rank, the
presumption is that these employees perform equal work. This presumption is borne by logic and human experience. If the
employer pays one employee less than the rest, it is not for that employee to explain why he receives less or why the
others receive more. That would be adding insult to injury. The employer has discriminated against that employee; it is for
the employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that foreign-hires perform 25%
more efficiently or effectively than the local-hires. Both groups have similar functions and responsibilities, which they
perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the distinction in salary
rates without violating the principle of equal work for equal pay.

"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services performed." Similarly,
the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid at regular intervals for the rendering of
services." In Songco v. National Labor Relations Commission,[24] we said that:

"salary" means a recompense or consideration made to a person for his pains or industry in another man's
business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman
soldier, it carries with it the fundamental idea of compensation for services rendered. (Emphasis
supplied.)

While we recognize the need of the School to attract foreign-hires, salaries should not be used as an enticement to the
prejudice of local-hires. The local-hires perform the same services as foreign-hires and they ought to be paid the same
salaries as the latter. For the same reason, the "dislocation factor" and the foreign-hires' limited tenure also cannot serve as
valid bases for the distinction in salary rates. The dislocation factor and limited tenure affecting foreign-hires are
adequately compensated by certain benefits accorded them which are not enjoyed by local-hires, such as housing,
transportation, shipping costs, taxes and home leave travel allowances.

The Constitution enjoins the State to "protect the rights of workers and promote their welfare," [25] "to afford labor full
protection."[26] The State, therefore, has the right and duty to regulate the relations between labor and capital.[27] These
relations are not merely contractual but are so impressed with public interest that labor contracts, collective bargaining
agreements included, must yield to the common good.[28] Should such contracts contain stipulations that are contrary to
public policy, courts will not hesitate to strike down these stipulations.

In this case, we find the point-of-hire classification employed by respondent School to justify the distinction in the salary
rates of foreign-hires and local hires to be an invalid classification. There is no reasonable distinction between the services
rendered by foreign-hires and local-hires. The practice of the School of according higher salaries to foreign-hires
contravenes public policy and, certainly, does not deserve the sympathy of this Court.

We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the entire body of
employees, consistent with equity to the employer indicate to be the best suited to serve the reciprocal rights and duties of
the parties under the collective bargaining provisions of the law." [29] The factors in determining the appropriate collective
bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the employees' interest, such
as substantial similarity of work and duties, or similarity of compensation and working conditions (Substantial Mutual
Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status. [30] The basic test of an
asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which will best assure to all
employees the exercise of their collective bargaining rights.[31]

It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires for purposes of
collective bargaining. The collective bargaining history in the School also shows that these groups were always treated
separately. Foreign-hires have limited tenure; local-hires enjoy security of tenure. Although foreign-hires perform similar
functions under the same working conditions as the local-hires, foreign-hires are accorded certain benefits not granted to
local-hires. These benefits, such as housing, transportation, shipping costs, taxes, and home leave travel allowance, are
reasonably related to their status as foreign-hires, and justify the exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires would not assure either group the exercise of their respective collective
bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders of the
Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby REVERSED and SET ASIDE
insofar as they uphold the practice of respondent School of according foreign-hires higher salaries than local-hires.

SO ORDERED.
FIRST DIVISION

G.R. No. 91231 February 4, 1991

NESTLÉ PHILIPPINES, INC., petitioner,


vs.
THE NATIONAL LABOR RELATIONS COMMISSION and UNION OF FILIPRO EMPLOYEES, respondents.

Siguion Reyna, Montecillo & Ongsiako for petitioner.


Banzuela, Flores, Miralles, Raneses, Sy, Taquio & Associates for private respondent.

GRIÑO-AQUINO, J.:

Nestlé Philippines, Inc., by this petition for certiorari, seeks to annul, on the ground of grave abuse of discretion, the
decision dated August 8, 1989 of the National Labor Relations Commission (NLRC), Second Division, in Cert. Case No.
0522 entitled, "In Re: Labor Dispute of Nestlé Philippines, Inc." insofar as it modified the petitioner's existing non-
contributory Retirement Plan.

Four (4) collective bargaining agreements separately covering the petitioner's employees in its:

1. Alabang/Cabuyao factories;

2. Makati Administration Office. (Both Alabang/Cabuyao factories and Makati office were represented by the
respondent, Union of Filipro Employees [UFE]);

3. Cagayan de Oro Factory represented by WATU; and

4. Cebu/Davao Sales Offices represented by the Trade Union of the Philippines and Allied Services (TUPAS),

all expired on June 30, 1987.

Thereafter, UFE was certified as the sole and exclusive bargaining agent for all regular rank-and-file employees at the
petitioner's Cagayan de Oro factory, as well as its Cebu/Davao Sales Office.

In August, 1987, while the parties, were negotiating, the employees at Cabuyao resorted to a "slowdown" and walk-outs
prompting the petitioner to shut down the factory. Marathon collective bargaining negotiations between the parties
ensued.

On September 2, 1987, the UFE declared a bargaining deadlock. On September 8, 1987, the Secretary of Labor assumed
jurisdiction and issued a return to work order. In spite of that order, the union struck, without notice, at the
Alabang/Cabuyao factory, the Makati office and Cagayan de Oro factory on September 11, 1987 up to December 8, 1987.
The company retaliated by dismissing the union officers and members of the negotiating panel who participated in the
illegal strike. The NLRC affirmed the dismissals on November 2, 1988.

On January 26, 1988, UFE filed a notice of strike on the same ground of CBA deadlock and unfair labor practices.
However, on March 30, 1988, the company was able to conclude a CBA with the union at the Cebu/Davao Sales Office,
and on August 5, 1988, with the Cagayan de Oro factory workers. The union assailed the validity of those agreements and
filed a case of unfair labor practice against the company on November 16, 1988.

After conciliation efforts of the National Conciliation and Mediation Board (NCMB) yielded negative results, the dispute
was certified to the NLRC by the Secretary of Labor on October 28, 1988.
After the parties had filed their pleadings, the NLRC issued a resolution on June 5, 1989, whose pertinent disposition
regarding the union's demand for liberalization of the company's retirement plan for its workers, provides as follows:

xxx xxx xxx

7. Retirement Plan

The company shall continue implementing its retirement plan modified as follows:

a) for fifteen years of service or less — an amount equal to 100% of the employee's monthly salary for every year
of service;

b) more than 15 but less than 20 years — 125% of the employee's monthly salary for every year of service;

c) 20 years or more — 150% of the employee's monthly salary for every year of service. (pp. 58-59, Rollo.)

Both parties separately moved for reconsideration of the decision.

On August 8, 1989, the NLRC issued a resolution denying the motions for reconsideration. With regard to the Retirement
Plan, the NLRC held:

Anent management's objection to the modification of its Retirement Plan, We find no cogent reason to alter our
previous decision on this matter.

While it is not disputed that the plan is non-contributory on the part of the workers, tills does not automatically
remove it from the ambit of collective bargaining negotiations. On the contrary, the plan is specifically mentioned
in the previous bargaining agreements (Exhibits "R-1" and "R-4"), thereby integrating or incorporating the
provisions thereof to the agreement. By reason of its incorporation, the plan assumes a consensual character
which cannot be terminated or modified at will by either party. Consequently, it becomes part and parcel of CBA
negotiations.

However, We need to clarify Our resolution on this issue. When we increased the emoluments in the plan, the
conditions for the availment of the benefits set forth therein remain the same. (p. 32, Rollo.)

On December 14, 1989, the petitioner filed this petition for certiorari, alleging that since its retirement plan is non-
contributory, it (Nestlé) has the sole and exclusive prerogative to define the terms of the plan "because the workers have
no vested and demandable rights thereunder, the grant thereof being not a contractual obligation but merely gratuitous. At
most the company can only be directed to maintain the same but not to change its terms. It should be left to the discretion
of the company on how to improve or mollify the same" (p. 10, Rollo).

The Court agrees with the NLRC's finding that the Retirement Plan was "a collective bargaining issue right from the start"
(p. 109, Rollo) for the improvement of the existing Retirement Plan was one of the original CBA proposals submitted by
the UFE on May 8, 1987 to Arthur Gilmour, president of Nestlé Philippines. The union's original proposal was to modify
the existing plan by including a provision for early retirement. The company did not question the validity of that proposal
as a collective bargaining issue but merely offered to maintain the existing non-contributory retirement plan which it
believed to be still adequate for the needs of its employees, and competitive with those existing in the industry. The union
thereafter modified its proposal, but the company was adamant. Consequently, the impassé on the retirement plan become
one of the issues certified to the NLRC for compulsory arbitration.

The company's contention that its retirement plan is non-negotiable, is not well-taken.1âwphi1 The NLRC correctly
observed that the inclusion of the retirement plan in the collective bargaining agreement as part of the package of
economic benefits extended by the company to its employees to provide them a measure of financial security after they
shall have ceased to be employed in the company, reward their loyalty, boost their morale and efficiency and promote
industrial peace, gives "a consensual character" to the plan so that it may not be terminated or modified at will by either
party (p. 32, Rollo).
The fact that the retirement plan is non-contributory, i.e., that the employees contribute nothing to the operation of the
plan, does not make it a non-issue in the CBA negotiations. As a matter of fact, almost all of the benefits that the
petitioner has granted to its employees under the CBA — salary increases, rice allowances, mid-year bonuses, 13th and
14th month pay, seniority pay, medical and hospitalization plans, health and dental services, vacation, sick & other leaves
with pay — are non-contributory benefits. Since the retirement plan has been an integral part of the CBA since 1972, the
Union's demand to increase the benefits due the employees under said plan, is a valid CBA issue. The deadlock between
the company and the union on this issue was resolvable by the Secretary of Labor, or the NLRC, after the Secretary had
assumed jurisdiction over the labor dispute (Art. 263, subparagraph [i] of the Labor Code).

The petitioner's contention, that employees have no vested or demandable right to a non-contributory retirement plan, has
no merit for employees do have a vested and demandable right over existing benefits voluntarily granted to them by their
employer. The latter may not unilaterally withdraw, eliminate or diminish such benefits (Art. 100, Labor Code; Tiangco,
et al. vs. Hon. Leogardo, et al., 122 SCRA 267).

This Court ruled similarly in Republic Cement Corporation vs. Honorable Panel of Arbitrators, G.R. No. 89766, Feb. 19,
1990:

. . . Petitioner's claim that retirement benefits, being noncontributory in nature, are not proper subjects for
voluntary arbitration is devoid of merit. The expired CBA previously entered into by the parties included
provisions for the implementation of a "Retirement and Separation Plan." it is only to be expected that the parties
would seek a renewal or an improvement of said item in the new CBA. In fact, the parties themselves expressly
included retirement benefits among the economic issues to be resolved by voluntary arbitration. Petitioner is
estopped from now contesting the validity of the increased award granted by the arbitrators. (p. 145, Rollo.)

The NLRC's resolution of the bargaining deadlock between Nestlé and its employees is neither arbitrary, capricious, nor
whimsical. The benefits and concessions given to the employees were based on the NLRC's evaluation of the union's
demands, the evidence adduced by the parties, the financial capacity of the Company to grant the demands, its longterm
viability, the economic conditions prevailing in the country as they affect the purchasing power of the employees as well
as its concommitant effect on the other factors of production, and the recent trends in the industry to which the Company
belongs (p. 57, Rollo). Its decision is not vitiated by abuse of discretion.

WHEREFORE, the petition for certiorari is dismissed, with costs against the petitioner.

SO ORDERED.
SECOND DIVISION

G.R. No. L-57636 May 16, 1983

REYNALDO TIANGCO and VICTORIA TIANGCO, petitioners,


vs.
HON. VICENTE LEOGARDO, JR., as Deputy Minister of the Ministry of Labor and Employment, AURELIO
ILUSTRISIMO, ABRAHAM GILBUENA, ROGELIO CARABIO, JESUS GILBUENA, PEPITO GILBUENA,
DOMINADOR LASERNA, CLEMENTE VILLARUEL, RUSTOM OFQUERIA, ERNESTO DIONG,
GRACIANO DURANA, AGUEDO MARABE, SOLOMON CLARIN, ALCAFONE ESGANA, JUAN CASTRO,
ANTONIO GILBUENA, GREGORIO LAYLAY, DANIEL CABRERA, ROBERTO BAYON-ON, ELIAS
ESCARAN, ERNESTO BATOY, EDDIE BATOBALANOS, TOMAS CAPALAR, JUAN GIHAPON, JOSE
OFQUERIA, FRUTO GIHAPON, PEPITO BATOY, and SERAFIO YADAWON, respondents.

Florencio Pineda for petitioners.

The Solicitor General for respondents.

CONCEPCION, JR., J.:

Petition for certiorari and prohibition, with preliminary injunction and/or restraining order, to annul and set aside the order
of the respondent Deputy Minister of Labor which modified and affirmed the order of Director of the National Capitol
Region of the Ministry of Labor directing the petitioners to pay the private respondents their legal holiday pay, service
incentive pay, and differentials in their emergency cost of living allowances.

The petitioner, Reynaldo Tiangco, is a fishing operator who owns the Reynaldo Tiangco Fishing Company and a fleet of
fishing vessels engaged in deep-sea fishing which operates from Navotas, Rizal. His business is capitalized at
P2,000,000.00, 1 while the petitioner, Victoria Tiangco, is a fish broker whose business is capitalized at P100,000.00.2

The private respondents, Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham Gilbuena, Rustom Ofqueria,
Ernesto Diong, Jesus Gilbuena, Clemente (Emerenciano) Villaruel, Dominador Lacerna, and Graciano Durana,
are batillos engaged by the petitioner Reynaldo Tiangco to unload the fish catch from the vessels and take them to the
Fish Stall of the petitioner Victoria Tiangco. The private respondents, Eddie Batobalanos, Aguedo Marabe, Gregorio
Laylay, Fruto Gihapon, Solomon Clarin, Pepito Batoy, Jose Ofqueria, Daniel Cabrera, Juan Castro, Alcafone Esgana,
Tomas Capalar, Antonio Gilbuena, Ernesto Batoy, Serafio Yadawon, Juan Gihapon, Elias Escaran and Roberto Bayon-on,
were batillos engaged by Victoria Tiangco. 3 The work of these batillos were limited to days of arrival of the fishing
vessels and their working days in a month are comparatively few. Their working hours average four (4) hours a day.

On April 8, 1980, the private respondents filed a complaint against the petitioners with the Ministry of Labor and
Employment for non-payment of their legal holiday pay and service incentive leave pay, as well as underpayment of their
emergency cost of living allowances which used to be paid in full irrespective of their working days, but which were
reduced effective February, 1980, in contravention of Article 100 of the new Labor Code which prohibits the elimination
or diminution of existing benefits. 4

The petitioners denied the laborers' contention, claiming that the laborers were all given, in addition to their regular daily
wage, a daily extra pay in amounts ranging from 30 centavos to 10 pesos which are sufficient to offset the laborers' claim
for service incentive leave and legal holiday pay. As regards the claim for emergency allowance differentials, the
petitioners admitted that they discontinued their practice of paying their employees a fixed monthly allowance, and
effective February, 1980, they no longer paid allowances for non-working days. They argued, however, that no law was
violated as their refusal to pay allowances for non-working days is in consonance with the principle of "no work, no
allowance"; and that they could not pay private respondents a fixed monthly allowance without risking the viability of
their business. 5
Resolving the case, the Director of the National Capitol Region of the Ministry of Labor and Employment ruled that the
daily extra pay given to private respondents was a ,'production incentive benefit", separate and distinct from the service
incentive leave pay and legal holiday pay, payment of which cannot be used to offset a benefit provided by law, and
ordered the petitioners to pay the private respondents their service incentive leave pay and legal holiday pay. However, he
denied the laborers' claim for differentials in the emergency cost of living allowance for the reason that the emergency
cost of living allowance accrues only when the laborers actually work following the principle of "no work, no pay," and
private respondents are not entitled to a fixed monthly allowance since they work on a part time basis which average only
four (4) days a week. The private respondents should not be paid their allowances during non-working days. 6

From this order, both parties appealed.

On May 22, 1981, the respondent Deputy Minister of Labor and Employment modified the order and directed the
petitioners to restore and pay the individual respondents their fixed monthly allowance from March, 1980 and to pay them
the amount of P58,860.00, as underpayment of their living allowance from May, 1977 to February 21, 1980. 7

When their motion for the reconsideration of the above order was denied, the petitioners interposed the present recourse.

The petitioners claim that the respondent Deputy Minister of Labor and Employment acted in excess of jurisdiction, or
with grave abuse of discretion in ordering them to pay the private respondents a fixed monthly allowance from March,
1980, despite the "no work, no pay," law; the private respondents' consent to receive an allowance for days worked for, as
stated in their appeal; and the findings of the Director of the National Capitol Region that private respondents work for
other employers and are part-time employees of the petitioners.

Indeed, the record shows that the private respondents work for the petitioners on a part-time basis and their work average
only four (4) days a week. It is not also disputed that the private respondents work for more than one employer so that the
private respondents should be paid their living allowance only for the days they actually worked in a week or month and
all the employers of the employee shall share proportionately in the payment of the allowance of the employee. Section 12
of the Rules and Regulations implementing P.D. 525 which made mandatory the payment of emergency cost of living
allowances to workers in the private section, provides, as follows:

Section 12. Allowance on Daily Paid & Part — Time employees. — Employees who are paid on a daily
basis shall be paid their allowances for the number of days they actually worked in a week or month, on
the basis of the scales provided in Section 7 hereof.

In case of part-time employment, the allowances shall be paid in the amount proportionate to the time
worked by the employee, or higher. If employed by more than one employer, all employers of such
employee shall share proportionately in the payment of the allowance of the employee.

Section 11 of the Rules implementing P.D. 1123, increasing the emergency allowance under P.D. 525,
also provides, as follows:

Section 11. Allowances of full-time and part-time employees. — Employees shall be paid in full the
monthly allowances on the basis of the scales provided in Section 3 hereof, regardless of the number of
their regular working days, if they incur no absence during the month. If they incur absences, the amounts
corresponding to their absences may be deducted from the monthly allowance.

In case of part-time employment, the allowance to be paid shall be proportionate to the time worked by
the employee. This requirement shall apply to any employee with more than one employer.

However, the respondent Deputy Minister of Labor and Employment correctly ruled that since the petitioners had been
paying the private respondents a fixed monthly emergency allowance since November, 1976 up to February, 1980, as a
matter of practice and/or verbal agreement between the petitioners and the private respondents, the discontinuance of the
practice and/or agreement unilaterally by the petitioners contravened the provisions of the Labor Code, particularly
Article 100 thereof which prohibits the elimination or diminution of existing benefits.
Section 15 of the Rules on P.D. 525 and Section 16 of the Rules on P. D. 1123 also prohibits the diminution of any benefit
granted to the employees under existing laws, agreements, and voluntary employer practice. Section 15 of the Rules on
P.D. 525 provides, as follows:

Section 15. Relation to Agreement. — Nothing herein shall prevent the employer and his employees from
entering into any agreement with terms more favorable to the employees than those provided therein, or
be construed to sanction the diminution of any benefit granted to the employees under existing laws,
agreements, and voluntary employer practice.

Section 16 of the Rules on P.D. 1123 similarly prohibits diminution of benefits. It provides, as follows:

Section 16. Relation to other agreements. — Nothing herein shall prevent employers from granting
allowances to their employees in excess of those provided under the Decree and the Rules nor shall it be
construed to countenance any reduction of benefits already being enjoyed.

The petitioners further claim that the respondent Deputy Minister of Labor and Employment erred in ordering them to pay
the amount of P58,860.00 to the private respondents as underpayment of respondents' allowances from May, 1977 to
February 20, 1980. The petitioners contend that the emergency cost of living allowances of the private respondents had
been paid in full.

We find no merit in the contention. However, a revision of the amount due the private respondents is in order for the
reason that the respondent Deputy Minister of Labor and Employment failed to take into consideration, in computing the
amount due each worker, the fact that the private respondents are employed by two different individuals whose businesses
are divergent and capitalized at various amounts, contrary to the provisions of P.D. 525 and subsequent amendatory
decrees, wherein the amount of the emergency cost of living allowance to be paid to a worker is made to depend upon the
capitalization of the business of his employer or its total assets, whichever is higher. Thus, Section 7 of the Rules and
Regulations implementing P.D. 525 reads, as follows:

Section 7. Amount of Allowances. — Every covered employer shall give to each of his employees who is
receiving less than P600.00 a month not less than the following allowances;

(a) P50.00 where the authorized capital stock or total assets, whichever is applicable and higher, is 71
million or more;

(b) P30.00 where the authorized capital stock or total assets, whichever is applicable and higher is at least
P100,000.00 but less than P 1miilion and

(c) P15.00 where the authorized capital stock or total assets, whichever is applicable and higher, is less
than P100,000.00.

Nothing herein shall prevent employers from granting allowances to their employees who will receive
more than P600.00 a month, including the allowances. An employer, however, may grant his employees
an allowance which if added to their monthly salary, will not yield to them more than P600.00 a month.

In this case, the private respondents admit that only ten (10) of them, namely: Aurelio Ilustrisimo, Pepito Gilbuena,
Rogelio Carabio, Abraham Gilbuena, Rustom Ofquiera, Ernesto Diong, Jesus Gilbuena, Emerenciano Villaruel,
Dominador Lacerna, and Graciano Durana, were employees of the petitioner Reynaldo Tiangco, while the remaining
seventeen (17) were employed by the petitioner Victoria Tiangco. 8 Accordingly, the workers of the petitioner Victoria
Tiangco, whose business as fish broker is capitalized at P100,000.00, 9 should receive a lesser amount of allowance
(P30.00) than those workers employed by the petitioner Reynaldo Tiangco whose business, as a fishing operator with a
fleet of fishing vessels, is capitalized at more than P2,000,000.00, and are entitled to receive a fixed monthly allowance of
P50.00 a month, each.

After P.D. 525, the following amendatory decrees, directing the payment of additional allowances to employees, were
promulgated:
1. P.D. 1123. providing for an across-the-board increase of P60.00 a month effective May 1, 1977;

2. P.D. 1614, which directed the payment of P60.00 monthly allowance effective April 1, 1979;

3. P.D. 1634, which provided for the payment of an additional P60.00 a month effective September 1,
1979, and another P30.00 a month beginning January 1, 1980; and

4. P.D. 1678,which directed the payment of an additional P2.00 a day from February 21, 1980.

Hence, for the period from November, 1976 to April 30, 1977, the petitioner Victoria Tiangco should pay her workers a
fixed monthly allowance of P 30.00, while the workers of the petitioner Reynaldo Tiangco were entitled to a fixed
monthly allowance of P50.00, each. The record shows that during this period, the petitioner Victoria Tiangco was paying
her workers a monthly allowance of P30.00 each. 10 Accordingly, there was no underpayment for this period insofar as
her batillos are concerned. The petitioner Reynaldo Tiangco, however, paid his employees P30.00, instead of P50.00, as
mandated by law. 11 Therefore, there was an underpayment of P20.00 a month for each batillounder his employ. For the 6-
month period, he should pay his workers differentials in the amount of P120.00 each.

For the period from May, 1977 to March 1979, the workers of the petitioner Victoria Tiangco were entitled to a fixed
monthly allowance of P90.00 in view of the promulgation of P.D. 1123 which granted an across-the-board increase of
P60.00 a month in their allowances. For this period, however, the said petitioner paid her workers only P60.00 a month, or
a difference of P30.00 a month. 12 There was, therefore, an underpayment of P690.00 for every batillounder her employ
for the 23-month period.

With the addition of P60.00 across-the-board increase in their allowances, the workers of the petitioner Reynaldo Tiangco
were entitled to receive a fixed monthly allowance of P110.00. However, the record shows that his workers were only
paid P60.00 a month, 13 or a difference of P50.00 a month. Consequently, each batillo hired by him should be paid a
differential of P1,150.00 for the 23-month period.

For the period from April, 1979 to August, 1979, the employees of the petitioner Victoria Tiangco were entitled to a fixed
monthly allowance of P150.00 while the workers employed by the petitioner Reynaldo Tiangco were entitled to an
allowance of P170.00, pursuant to P.D. 1614. The record shows, however, that both petitioners paid their workers only
P120.00 a month. 14 There was a difference of P30.00 a month in the case of the petitioner Victoria Tiangco, and P50.00, a
month, in the case of the petitioner Reynaldo Tiangco. Hence, for this period, the petitioner Victoria Tiangco should pay
the amount of P150.00 to each batillo in her employ, while the petitioner Reynaldo Tiangco should pay the amount of
P250.00, as differentials in the cost of living allowances of the workers under his employ.

Upon the promulgation of P.D. 1634, directing the payment of an additional P60.00 a month effective September, 1979
and another P30.00 effective January 1, 1980, the workers of the petitioner Victoria Tiangco were entitled to receive a
fixed monthly allowance of P210.00 a month from September, 1979, and P340.00, a month beginning January, 1980. The
workers of the petitioner Reynaldo Tiangco, upon the other hand, were entitled to a monthly allowance of P230.00,
effective September, 1979, and P260.00, a month beginning January, 1980. The record shows, however, that both
petitioners paid their workers the amounts of P180.00 a month for the months of September to December, 1979, 15 and
P210.00 a month for the months of January and February, 1980. 16 There was underpayment, therefore, in the allowances
of the workers of the petitioner Victoria Tiangco in the amount of P30.00, a month, for the months of September, 1979 to
February, 1980, or P180.00 for each batillo in her employ. The private respondents hired by the petitioner Reynaldo
Tiangco, upon the other hand, are entitled to differentials in the amount of P50.00 a month for the same period, or
P300.00 each.

Then, beginning February, 21, 1980, the workers should be paid an additional P2.00, a day, pursuant to P.D. 1678. The
record shows that the petitioners had complied with this requirement. 17 The petitioners, however, failed to pay the fixed
monthly allowance of their workers which was P240.00, in the case of the workers employed by the petitioner Victoria
Tiangco, and P260.00, in the case of the workers of the petitioner Reynaldo Tiangco. Thus, for the month of March, 1980,
the petitioner Victoria Tiangco paid her workers varying amounts, the lowest of which was P30.00, paid to Eddie
Batobalanos and Fruto Gihapon, and the highest of which was P210.00, paid to Juan Gihapon and Roberto
Bayonon. 18 Hence, there was underpayment in their emergency cost of living allowances. But, since, the respondents
employed by Victoria Tiangco are wining to accept P50.00 a month as differentials for the months of March, 1980 to
May, 1980, 19 the workers employed by her should be paid P50.00, each, for the month of March, 1980, except Juan
Gihapon and Roberto Bayon-on who should be paid P30.00, each, for the said month, having received the amount of
P210.00, each as allowance for that month.

For the month of April, 1980, the workers of the petitioner, Victoria Tiangco, were paid varying amounts ranging from
P120.00 to P210.00. 20 Hence, there was also underpayment in their allowances. Accordingly, they should be paid the
amount of P50.00, each, except for Juan Gihapon, Antonio Gilbuena, Juan Castro, and Aguedo Marabe, who should be
paid P40.00, each, and Solomon Clarin, Daniel Cabrera, and Gregorio Laylay who should be paid P30.00 each.

For the month of May, 1980, the petitioner Victoria Tiangco, paid her workers varying amounts less that what was
provided for by law. 21 Hence, they should be paid the amount of P50.00, each, for this month.

The petitioner, Reynaldo Tiangco, also paid the employees varying amounts, ranging from P210.00 to P250.00, as
emergency cost of living allowance, for the month of March, 22, 1980. 22 Since they were entitled to a fixed monthly
allowance of P260.00, each, there was underpayment in their cost of living allowances. Accordingly, the petitioner should
pay the respondent Pepito Gilbuena the amount of P50.00; the respondents Dominador Lacerna and Graciano Durano, the
amount of P40.00, each; the respondent Ernesto Diong, the amount of P30.00; the respondents Rustom Ofqueria and
Aurelio Ilustrisimo, the amount of P20.00, each; and the respondents Abraham Gilbuena, Jesus Gilbuena, Rogelio
Carabio, and Emerenciano Villaruel, the amount of P10.00 each.

For the month of April, 1980, the workers of the petitioner Reynaldo Tiangco, were not also paid their emergency cost of
living allowance in full. 23 Hence, the said petitioner should pay his workers the amount of P30.00 each, except for Pepito
Gilbuena, who should be paid the amount of P50.00, and Rustom Ofqueria, Jesus Gilbuena, and Graciano Durano, who
are entitled to only P40.00 each.

The petitioner, Reynaldo Tiangco did not also pay his workers their full cost of living allowance for the month of May,
1980. The workers were paid varying amounts of P130.00 to P150.00, instead of P260.00, as required by law. 24Hence,
they should be paid the amunt of P50.00 each for the month of May, 1980.

WHEREFORE, the petitioners Victoria Tiangco and Reynaldo Tiangco should be, as they are hereby, ordered to PAY the
private respondents the following amounts as differentials in their emergency cost of living allowance:

Petitioner Victoria Tiangco:

1
. Eddie Pl,170.00
Batobalanos.............
2. Aguedo 1,160.00
Morabe.................
3. Gregorio 1,150.00
Laylay..................
4. Fruto 1,170.00
Gihapon.....................
5. Solomon Clarin 1,150.00
...................
6. Pepito 1,170.00
Batoy........................
7. Jose 1,170.00
Ofqueria.......................
8. Daniel 1,150.00
Cabrera.....................
9. Juan 1,160.00
Castro..........................
10. Alcafone 1,170.00
Esgana.................
11. Tomas Capalar 1,170.00
....................
12. Antonio 1,160.00
Gilbuena................
13. Ernesto 1,170.00
Batoy......................
14. Serapio 1,150.00
Yadawon................
15. Juan 1,140.00
Gihapon.......................
16. Elias Escaran 1,150.00
......................
17. Roberto Bayon- 1,130.00
on..............

Petitioner Reynaldo Tiangco:

1
. Aurelio P
Ilustrisimo............ l,920.00
2. Pepito 1,970.00
Gilbuena.................
3. Rogelio 1,910.00
Carabio.................
4. Abraham 1,910.00
Gilbuena.............
5. Rustom 1,930.00
Ofqueria................
6. Ernesto 1,930.00
Diong....................
7. Jesus 1,920.00
Gilbuena...................
8. Emerenciano 1,910.00
Villaruel........
9. Dominador 1,940.00
Lacerna............
10. Graciano 1,950.00
Durano.................
With this modification, the judgment appealed from is AFFIRMED in all other respects. With costs against the
petitioners.

SO ORDERED.
SECOND DIVISION

ARCO METAL PRODUCTS, CO., G.R. No. 170734


INC., and MRS. SALVADOR UY,
Petitioners, Present:

QUISUMBING, J.,
Chairperson,
- versus - TINGA,
VELASCO, and
BRION, JJ.

SAMAHAN NG MGA MANGGAGAWA


SA ARCO METAL-NAFLU (SAMARM-
NAFLU), Promulgated:
Respondent.
May 14, 2008

x---------------------------------------------------------------------------x

DECISION

TINGA, J.:

This treats of the Petition for Review[1] of the Resolution[2] and


Decision[3] of the Court of Appeals dated 9 December 2005 and 29 September 2005, respectively in CA-G.R. SP
No. 85089 entitled

Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU) v. Arco Metal Products Co., Inc. and/or Mr.
Salvador Uy/Accredited Voluntary Arbitrator Apron M. Mangabat,[4] which ruled that the 13th month pay, vacation leave
and sick leave conversion to cash shall be paid in full to the employees of petitioner regardless of the actual service they
rendered within a year.

Petitioner is a company engaged in the manufacture of metal products, whereas respondent is the labor union of
petitioner’s rank and file employees. Sometime in December 2003, petitioner paid the 13th month pay, bonus, and leave
encashment of three union members in amounts proportional to the service they actually rendered in a year, which is less
than a full twelve (12) months. The employees were:

1. Rante Lamadrid Sickness 27 August 2003 to 27 February 2004


2. Alberto Gamban Suspension 10 June 2003 to 1 July 2003
3. Rodelio Collantes Sickness August 2003 to February 2004
Respondent protested the prorated scheme, claiming that on several occasions petitioner did not prorate the
payment of the same benefits to seven (7) employees who had not served for the full 12 months. The payments were
made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004. According to respondent, the prorated payment violates the rule
against diminution of benefits under Article 100 of the Labor Code. Thus, they filed a complaint before the National
Conciliation and Mediation Board (NCMB). The parties submitted the case for voluntary arbitration.

The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that the giving of the
contested benefits in full, irrespective of the actual service rendered within one year has not ripened into a practice. He
noted the affidavit of Joselito Baingan, manufacturing group head of petitioner, which states that the giving in full of the
benefit was a mere error. He also interpreted the phrase “for each year of service” found in the pertinent CBA provisions
to mean that an employee must have rendered one year of service in order to be entitled to the full benefits provided in
the CBA.[5]

Unsatisfied, respondent filed a Petition for Review[6] under Rule 43 before the Court of Appeals, imputing serious
error to Mangabat’s conclusion. The Court of Appeals ruled that the CBA did not intend to foreclose the application of
prorated payments of leave benefits to covered employees. The appellate court found that petitioner, however, had an
existing voluntary practice of paying the aforesaid benefits in full to its employees, thereby rejecting the claim
that petitioner erred in paying full benefits to its seven

employees. The appellate court noted that aside from the affidavit of petitioner’s officer, it has not presented any
evidence in support of its position that it has no voluntary practice of granting the contested benefits in full and without
regard to the service actually rendered within the year. It also questioned why it took petitioner eleven (11) years before it
was able to discover the alleged error. The dispositive portion of the court’s decision reads:

WHEREFORE, premises considered, the instant petition is hereby GRANTED and the Decision
of Accredited Voluntary Arbiter Apron M. Mangabat in NCMB-NCR Case No. PM-12-345-03, dated June
18, 2004 is hereby AFFIRMED WITH MODIFICATION in that the 13th month pay, bonus, vacation
leave and sick leave conversions to cash shall be paid to the employees in full, irrespective of the actual
service rendered within a year.[7]

Petitioner moved for the reconsideration of the decision but its motion was denied, hence this petition.

Petitioner submits that the Court of Appeals erred when it ruled that the grant of 13th month pay, bonus, and leave
encashment in full regardless of actual service rendered constitutes voluntary employer practice and, consequently, the
prorated payment of the said benefits does not constitute diminution of benefits under Article 100 of the Labor Code.[8]

The petition ultimately fails.


First, we determine whether the intent of the CBA provisions is to grant full benefits regardless of service actually
rendered by an employee to the company. According to petitioner, there is a one-year cutoff in the entitlement to the
benefits provided in the CBA which is evident from the wording of its pertinent provisions as well as of the existing law.

We agree with petitioner on the first issue. The applicable CBA provisions read:

ARTICLE XIV-VACATION LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year
of service shall be entitled to sixteen (16) days vacation leave with pay for each year of service. Unused
leaves shall not be cumulative but shall be converted into its cash equivalent and shall become due and
payable every 1st Saturday of December of each year.

However, if the 1st Saturday of December falls in December 1, November 30 (Friday) being a
holiday, the management will give the cash conversion of leaves in November 29.

Section 2. In case of resignation or retirement of an employee, his vacation leave shall be paid
proportionately to his days of service rendered during the year.

ARTICLE XV-SICK LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year
of service shall be entitled to sixteen (16) days of sick leave with pay for each year of
service. Unused sick leave shall not be cumulative but shall be converted into its cash equivalent and
shall become due and payable every 1st Saturday of December of each year.

Section 2. Sick Leave will only be granted to actual sickness duly certified by the Company
physician or by a licensed physician.

Section 3. All commutable earned leaves will be paid proportionately upon retirement or
separation.

ARTICLE XVI – EMERGENCY LEAVE, ETC.

Section 1. The Company shall grant six (6) days emergency leave to employees covered by this
agreement and if unused shall be converted into cash and become due and payable on the 1st Saturday of
December each year.

Section 2. Employees/workers covered by this agreement who have rendered at least one (1) year
of service shall be entitled to seven (7) days of Paternity Leave with pay in case the married employee’s
legitimate spouse gave birth. Said benefit shall be non-cumulative and non-commutative and shall be
deemed in compliance with the law on the same.

Section 3. Maternity leaves for married female employees shall be in accordance with the SSS
Law plus a cash grant of P1,500.00 per month.

xxx
ARTICLE XVIII- 13TH MONTH PAY & BONUS

Section 1. The Company shall grant 13th Month Pay to all employees covered by this agreement.
The basis of computing such pay shall be the basic salary per day of the employee multiplied by 30 and
shall become due and payable every 1st Saturday of December.

Section 2. The Company shall grant a bonus to all employees as practiced which shall be
distributed on the 2nd Saturday of December.

Section 3. That the Company further grants the amount of Two Thousand Five Hundred Pesos
(P2,500.00) as signing bonus plus a free CBA Booklet.[9] (Underscoring ours)

There is no doubt that in order to be entitled to the full monetization of sixteen (16) days of vacation and sick
leave, one must have rendered at least one year of service. The clear wording of the provisions does not allow any other
interpretation. Anent the 13th month pay and bonus, we agree with the findings of Mangabat that the CBA provisions did
not give any meaning different from that given by the law, thus it should be computed at 1/12 of the total compensation
which an employee receives for the whole calendar year. The bonus is also equivalent to the amount of the 13th month
pay given, or in proportion to the actual service rendered by an employee within the year.

On the second issue, however, petitioner founders.

As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not normally
embark on a re-examination of the evidence presented by the contending parties during the trial of the case considering
that the findings of facts of the Court of Appeals are conclusive and binding on the Court. [10] The rule, however, admits of
several exceptions, one of which is when the findings of the Court of Appeals are contrary to that of the lower
tribunals. Such is the case here, as the factual conclusions of the Court of Appeals differ from that of the voluntary
arbitrator.

Petitioner granted, in several instances, full benefits to employees who have not served a full year, thus:

Name Reason Duration


1. Percival Bernas Sickness July 1992 to November 1992
2. Cezar Montero Sickness 21 Dec. 1992 to February 1993
3. Wilson Sayod Sickness May 1994 to July 1994
4. Nomer Becina Suspension 1 Sept. 1996 to 5 Oct. 1996
5. Ronnie Licuan Sickness 8 Nov. 1999 to 9 Dec. 1999
6. Guilbert Villaruel Sickness 23 Aug. 2002 to 4 Feb. 2003
7. Melandro Moque Sickness 29 Aug. 2003 to 30 Sept. 2003[11]

Petitioner claims that its full payment of benefits regardless of the length of service to the company does not
constitute voluntary employer practice. It points out that the payments had been erroneously made and they occurred in
isolated cases in the years 1992, 1993, 1994, 1999, 2002 and 2003. According to petitioner, it was only in 2003 that the
accounting department discovered the error “when there were already three (3) employees involved with prolonged
absences and the error was corrected by implementing the pro-rata payment of benefits pursuant to law and their existing
CBA.”[12] It adds that the seven earlier cases of full payment of benefits went unnoticed considering the proportion of
one employee

concerned (per year) vis à vis the 170 employees of the company. Petitioner describes the situation as a “clear oversight”
which should not be taken against it.[13] To further bolster its case, petitioner argues that for a grant of a benefit to be
considered a practice, it should have been practiced over a long period of time and must be shown to be consistent,
deliberate and intentional, which is not what happened in this case. Petitioner tries to make a case out of the fact that the
CBA has not been modified to incorporate the giving of full benefits regardless of the length of service, proof that the
grant has not ripened into company practice.

We disagree.

Any benefit and supplement being enjoyed by employees cannot be reduced, diminished, discontinued or
eliminated by the employer.[14] The principle of non-diminution of benefits is founded on the Constitutional mandate to
"protect the rights of workers and promote their welfare,”[15] and “to afford labor full protection.”[16] Said mandate in turn
is the basis of Article 4 of the Labor Code which states that “all doubts in the implementation and interpretation of this
Code, including its implementing rules and regulations shall be rendered in favor of labor.” Jurisprudence is replete with
cases which recognize the right of employees to benefits which were voluntarily given by the employer and which
ripened into company practice. Thus in Davao Fruits Corporation v. Associated Labor Unions, et al.[17] where an
employer had freely and continuously included in the computation of the 13th month pay those items that were expressly
excluded by the law, we held that the act which was favorable to the employees though not conforming to law had thus
ripened into a practice and could not be withdrawn, reduced, diminished, discontinued or eliminated. In Sevilla Trading
Company v. Semana,[18] we ruled that the employer’s act of including non-basic benefits in the computation of the
13th month pay was a voluntary act and had ripened into a company practice which cannot be peremptorily
withdrawn. Meanwhile in Davao Integrated Port Stevedoring Services v. Abarquez,[19] the Court ordered the payment of
the cash equivalent of the unenjoyed sick leave benefits to its intermittent workers after finding that said workers had
received these benefits for almost four years until the grant was stopped due to a different interpretation of the CBA
provisions. We held that the employer cannot unilaterally withdraw the existing privilege of commutation or
conversion to cash given to said workers, and as also noted that the employer had in fact granted and paid said cash
equivalent of the unenjoyed portion of the sick leave benefits to some intermittent workers.

In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely, voluntarily and
consistently granting full benefits to its employees regardless of the length of service rendered. True, there were only a
total of seven employees who benefited from such a practice, but it was an established practice nonetheless. Jurisprudence
has not laid down any rule specifying a minimum number of years within which a company practice must be exercised in
order to constitute voluntary company practice.[20] Thus, it can be six (6) years,[21] three (3) years,[22] or even as short as
two (2) years.[23] Petitioner cannot shirk away from its responsibility by merely claiming that it was a mistake or an
error, supported only by an affidavit of its manufacturing group head portions of which read:

5. 13th month pay, bonus, and cash conversion of unused/earned vacation leave, sick leave and
emergency leave are computed and paid in full to employees who rendered services to the company for
the entire year and proportionately to those employees who rendered service to the company for a period
less than one (1) year or twelve (12) months in accordance with the CBA provision relative thereto.

6. It was never the intention much less the policy of the management to grant the aforesaid
benefits to the employees in full regardless of whether or not the employee has rendered services to the
company for the entire year, otherwise, it would be unjust and inequitable not only to the company but to
other employees as well.[24]

In cases involving money claims of employees, the employer has the


burden of proving that the employees did receive the wages and benefits and that the same were paid in
accordance with law.[25]

Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have easily presented other proofs,
such as the names of other employees who did not fully serve for one year and thus were given prorated
benefits. Experientially, a perfect attendance in the workplace is always the goal but it is seldom achieved. There must
have been other employees who had reported for work less than a full year and who, as a consequence received
only prorated benefits. This could have easily bolstered petitioner’s theory of mistake/error, but sadly, no evidence to
that effect was presented.

IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No.
85089 dated 29 September 2005 is and its Resolution dated 9 December 2005 are hereby AFFIRMED.

SO ORDERED.
THIRD DIVISION

G.R. No. 86200 February 25, 1992

APEX MINING COMPANY, INC., petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION and SANDIGAN NG MANGGAGAWANG PILIPINO,
represented by RANULFO PEDRERA, President, respondents.

Gerardo C. Olaguer for petitioner.

Antonio Billiones, Sr. and Antonio Jolejole for private respondent.

FELICIANO, J.:

Respondent Sandigan ng Manggagawang Pilipino ("Sandigan") filed before the Labor Arbiter a claim for Emergency
Cost of Living Allowance ("ECOLA") differential against petitioner Apex Mining Company, Inc. ("Apex") alleging that
Apex had paid its employees in its Maco, Davao del Norte operations, between 1 November 1954 until 28 March 1985, an
aggregate cumulative daily ECOLA of only P15.00 which was P2.00 below the cumulative minimum ECOLA of P17.00
(for non-agricultural workers) established under Wage Order No. 6; and that petitioner had belatedly granted the
additional P2.00 starting on 29 March 1985 only.

Apex denied having failed to comply with Wage Order No. 6, contending that it had, by previous agreement, incorporated
the alleged P2.00 deficiency into the basic salary of its employees. In turn, Sandigan denies that such an agreement had
been made, but conceded that a P2.00 increase in basic salary had been made by Apex, in compliance with a provision of
the Collective Bargaining Agreement ("CBA") then in force between Apex and Sandigan, and not in fulfillment of Apex's
obligation under Wage Order No. 6. Sandigan pointed out that Wage Order No. 6 had taken effect on 1 November 1984,
several months after the P2.00 had been integrated by Apex into the basic salary of its employees.

In a supplemental memorandum, Apex reiterated that the daily salary increase of P2.00 provided for in the then current
CBA, to take effect on 1 February 1984, had been subsequently credited as partial compliance with the P5.00 increment
mandated by Wage Order No. 5 (which took effect on 16 June 1984). Thus, Apex, in compliance with Wage Order No. 5,
accordingly increased the daily ECOLA of its workers by P3.00 only (from P9.00 to P12.00), or P2.00 less than the
legislated ECOLA increase of P5.00 (which would have increased the total daily ECOLA from P9.00 to P14.00).
Petitioner Apex added that the integration of P2.00 allowance into the basic salary provided for in the CBA had been
conformed to by Vicente Arniego, National President of Sandigan, and that in any event, Wage Order No. 5 had itself
authorized such integration. Since petitioner Apex had integrated P2.00 (out of the P5.00) ECOLA provided for in Wage
Order No. 5, when Apex complied with the additional ECOLA increase mandated by Wage Order No. 6, the resulting
figure for the total or cumulative ECOLA paid by Apex appeared to be only P15.00, until one took into account the P2.00
(out of the P5.00 ECOLA increase mandated by Wage Order No. 5) integrated into the employees' basic salary. Finally,
petitioner Apex explained, it had granted members of Sandigan an additional P2.00 effective 29 March 1985 not as an
admission that it had previously failed to pay something legally due, but only as a measure to diffuse the tense atmosphere
between management and the union created by the misunderstanding over the ostensible (as distinguished from the real)
total increase paid by petitioner Apex to its employees.

In a decision dated 19 May 1987, the Labor Arbiter held that the wage increase given in accordance with the CBA could
not be credited as compliance with increases mandated in the Wage Orders, and ordered petitioner Apex to pay
respondent Sandigan the claimed ECOLA differential of P2.00 for the period from 1 November 1984 until 28 March
1985.

On appeal, the National Labor Relations Commission ("NLRC") affirmed the Labor Arbiter's ruling.
There is no dispute that petitioner Apex, as the Labor Arbiter had found out, had paid a P2.00 wage increase effective on 1
February 1984. There is also no question that Apex raised the ECOLA of its workers by P3.00 starting on the effectivity
date of Wage Order No. 6 on November 1984. The question to be resolved is whether or not Apex complied with the
increases mandated by Wage Orders Nos. 5 and 6. Resolution of this issue in turn hinges on the question of whether or not
the P2.00 per day increase in basic salary effective starting on 1 February 1984 granted by petitioner Apex pursuant to the
CBA, was lawfully credited towards compliance with increases in ECOLA required under Wage Orders Nos. 5 and 6.

1. The P2.00 increase integrated in the basic salary of Apex's, employees, effective on and after 1 February 1984, was
concededly given under the provisions of the CBA. Section 4 of Article VI of the CBA provided as follows:

It is understood that the grant of these general increases shall be as part of any increase in basic pay
and/or allowance that may hereafter be decreed or imposed by law.

Both Wage Order No. 5 and Wage Order No. 6 expressly allowed the crediting of increases in wages or allowances
granted under collective bargaining agreements towards compliance with increases in ECOLA requirements prescribed by
those Wage Orders. Section 7 o f Wage Order No. 5 provided as follows:

All increases in wages and/or allowances granted by employers between February 1, 1984 and the
effectivity of this order [16 June 1984] shall be credited as compliance with the minimum wage and
allowance adjustments prescribed herein . . .

Such increases shall not include anniversary wage increases provided in collective bargaining agreements
unless the agreements expressly provide otherwise.

xxx xxx xxx

(Emphasis and brackets supplied)

Section 4 of Wage Order No. 6 had very similar language:

All increases in wages and/or allowances granted by employers between June 17, 1984 and the effectivity
of this order [November 1, 1984] shall be credited as compliance with the minimum wage and allowance
adjustments prescribed herein, provided that where the increases are less than the applicable amount
provided in this order, the employer shall pay the difference. Such increases shall not include anniversary
wage increases provided in collective bargaining agreements unless the agreements expressly provide
otherwise.

This Section shall not apply to merit wage increases and those resulting from the regularization or
promotion of employees. (Emphasis and brackets supplied)

It is important to note that the creditability provisions in Wage Orders Nos. 5 and 6 (as well as the parallel provisions in
Wage Orders Nos. 2, 3 and 4) are grounded in an important public policy. That public policy may be seen to be
the encouragement of employers to grant wage and allowance increases to their employees higher than the minimum rates
of increases prescribed by statute or administrative regulation. To obliterate the creditability provisions in the Wage
Orders through interpretation or otherwise, and to compel employers simply to add on legislated increases in salaries or
allowances without regard to what is already being paid, would be to penalize employers who grant their workers more
than the statutorily prescribed minimum rates of increases. Clearly, this would be counter-productive so far as securing the
interests of labor is concerned. The creditability provisions in the Wage Orders prevent the penalizing of employers who
are industry leaders and who do not wait for statutorily prescribed increases in salary or allowances and pay their workers
more than what the law or regulations require.

2. Sandigan, however, argues that to consider the P2.00 increase in basic salary effective 1 February 1984 provided by the
CBA as compliance with the requirements of Wage Orders Nos. 5 and 6, would be to violate Article 100 of the Labor
Code as well as Section 6 of the Rules Implementing Wage Order No. 6. These provisions read, respectively:
Art. 100. Prohibition against elimination or diminution of benefits — Nothing in (Book Three —
Conditions of Employment) shall be construed to eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of promulgation of this Code. (Emphasis supplied)

Sec. 6. Non-diminution of benefits. — The statutory minimum wage rates shall be exclusive of
whatever supplements and other benefits the workers are enjoying without cost at the time of the
effectivity of this Order. (Emphasis supplied)

Clearly, the prohibition against elimination or diminution of benefits set out in Article 100 of the Labor Code is
specifically concerned with benefits already enjoyed at the time of the promulgation of the Labor Code. Article 100 does
not, in other words, purport to apply to situations arising after the promulgation date of the Labor Code. Section 6 of the
Rules Implementing Wage Order No. 6 relates to "supplements and other benefits" which employees are already
"enjoying without cost at the time of the effectivity of [Wage] Order [No. 6]." Such benefits which employees are already
enjoying "without cost" could not, under Section 6, suddenly be ascribed monetary value so as to offset or diminish
increases in the minimum wage rates prescribed by statute. Clearly, once more, Section 6 does not relate to the problem at
hand.

3. Sandigan further contends that the 1 February 1984 P2.00 increase in basic salary was actually an "anniversary wage
increase," and therefore not creditable under Section 7 of Wage Order No. 5 and under Section 4 of Wage Order No. 6.

The P2.00 increase was given by petitioner Apex under Section 3, Rule VI of the CBA which reads as follows:

Sec. 3. The COMPANY agrees to grant general wage increases to all employees within bargaining unit
as follows:

a) Two Pesos (P2.00) general increase per day upon the effectivity of this Agreement (February 1, 1984);

b) One Peso and Fifty Centavos (P1.50) general increase per day effective on the first anniversary date of
this Agreement (February 1, 1985);

c) One Peso and Fifty Centavos (P1.50) general increase per day effective on the second anniversary date
of this Agreement (February 1, 1986). 1 (Emphasis supplied)

It appears clear to the Court from an inspection of the above-quoted Section 3 that the P2.00 increase effective on 1
February 1984 was distinguishable from the two (2) increases of P1.50 each, the first being effective on the first
anniversary date of the CBA (1 February 1985) and the second being effective on the second anniversary date (1 February
1986). In other words, the two (2) increases of 1.50 each, one being effective on 1 February 1985 and the second effective
on 1 February 1986, were precisely the non-creditable "anniversary wage increases." Even if it be assumed, however, that
the 1 February 1984 P2.00 increase were regarded (improperly) as an "anniversary wage increase" still that P2.00 increase
would be creditable towards the statutorily mandated increases. For Wage Orders Nos. 5 and 6 themselves allowed
crediting of "anniversary wage increases" stipulated in a CBA towards statutory increases, if the CBA itself (as here)
expressly allowed such crediting. Section 4, Article VI of the CBA, quoted earlier, authorized the crediting of "general
increases" towards statutorily mandated increases in basic pay or allowance. At the same time, Section 3 of Article VI of
the CBA, quoted above, described the two (2) anniversary wage increases of P1.50 each, and the one-time P2.00 increase,
as each constituting a "general increase."

4. What petitioner Apex did may perhaps be most economically presented in the following tabular form:

ECOLA Increases Statutorily Mandated


by Wage Orders Nos. 4, 5, and 6
(For non-agricultural workers outside
Metro Manila)

Wage Mandatory Cumulated Apparent Actual Actual


Order Increase Increase Cumulated Cumulated Differential
No. (P0.00) (0.00) Increase2 Increase3 (0.00)
(P0.00) (P0.00)

4 9 9 9 9 0
5 5 14 12 14 0
6 3 17 15 17 0

The respondent Sandigan did not question the fact that petitioner Apex was in compliance with the requirements of Wage
Order No. 4.

In respect of Wage Order No. 5, Apex credited the P2.00 increase in basic salary, effective 1 February 1984, towards
compliance with the statutorily prescribed ECOLA increase of P5.00. Thus, the apparent cumulated increase in ECOLA,
as shown in Apex's books, was only P12.00. However, the actual increases — the composite of basic salary and
ECOLA — aggregated P14.00. Since such crediting was expressly allowed under Wage Order No. 5, it follows that
petitioner Apex was in compliance with Wage Order No. 5. No differential was therefore due thereunder.

When Wage Order No. 6 was promulgated, it prescribed an increase of P3.00 in ECOLA. Apex paid this mandatory
increase and denominated all of it as ECOLA. Thus, the apparent cumulated increase was P15.00. Since, however, Apex
had previously increased the basic salary by P2.00 effective 1 February 1984, the aggregate actual increase (in basic
salary plus ECOLA) was P17.00, the same total or cumulated increase contemplated by Wage Orders Nos. 5 and 6. Thus,
again, Apex was actually in compliance with the requirements of Wage Order No. 6, with the result that no differential
was actually due from it.

It remains only to note that Section 7 of Wage Order No. 5 and section 4 of Wage Order No. 6 expressly authorized the
crediting of all the increases "in wages" or "allowances." Thus, the fact that Apex had denominated the P2.00 increase
effective 1 February 1984, as an increase in basic salary, rather than in ECOLA, made no legal difference so far as
concerns the creditability of such increase. Indeed, integration of the P2.00 into the basic salary of the employees was
more beneficial to them than granting the P2.00 as part of their ECOLA: the integration increased the base wage for
purposes of computation of such items as overtime and premium pay, fringe benefits and maternity pay. In fact, the
Implementing Rules of Wage Order No. 5, and Wage Order No. 6 itself, 4 expressly authorized increases in basic salary in
lieu of increases in ECOLA, provided the amounts thereof were not less than the amounts required by the Wage Orders.

5. Lastly, Sandigan invokes Filipino Pipe Workers Union (NLU) v. Batario, Jr., 5 where the Court, through its Third
Division, made the broad statement that statutory wage increases are to be considered separate from increases granted
through the medium of CBAs.

In Filipino Pipe Workers, the NLRC ordered the inclusion in its award in favor of the union of a wage increase of P3.00
per day mandated by Wage Order Nos. 2 and 3, which took effect after the finality of the Labor Arbiter's decision but
pending its execution. In sustaining the award of the NLRC, the Court, through former Chief Justice Fernan, said:

In his Comment on the petition, the Solicitor General stated that the said P3.00 a day increase was made
pursuant to Wage Orders Nos. 2 and 3, which took effect after the finality of the Labor Arbiter's decision
but pending its execution. A common section found in both Wage Orders Nos. 2 and 3, as well as in the
subsequent Wage Orders Nos. 5 and 6 uniformly provides that all increases and/or allowances granted by
employers within a specified period "shall be credited as compliance with the minimum wage and
allowance adjustments prescribed herein, provided that where the increases are less than the applicable
amount provided in this Order, the employer shall pay the difference. Such increases shall not include
anniversary wage increases provided in collective bargaining agreementsunless the agreement expressly
provide otherwise." (Emphasis in the original)

We interpret the above section to mean that every grant of daily increase in statutory minimum wage
rates and living allowance must be considered as independent, separate or apart from the wage increases
in the collective bargaining agreement and must be integrated into the salary scale of the employees to
the end that the desired rates decreed by the National Wages Council are attained. 6(Emphasis supplied)
It is apparent from the foregoing that the issue of creditability of an increase in basic salary or allowance given pursuant to
a CBA towards compliance with a statutorily prescribed increase in emergency cost of living allowances (ECOLA)
was not at all involved and that the Court was not striking down the creditability provisions in Wage Orders Nos. 2. 3, 5
and 6. All that the NLRC was saying was that a wage increase which had come into effect after the Labor Arbiter's
decision could be included in the award and execution for the aggregate amounts due obtained. In fact, the above
underscored paragraph was entirely obiter in character.

Petitioner Apex having lawfully credited the P2.00 increase in basic salary towards compliance of the increase in ECOLA
prescribed by Wage Orders Nos. 5 and 6, it follows that respondent Sandigan's ,claim to a differential in ECOLA lacks
basis in fact and in law.

ACCORDINGLY, the Court Resolved to GRANT the Petition for Certiorari. The Decision of the NLRC in Case No.
2915-MC-XI-86, dated 9 September 1988, and its Resolution dated 28 October 1988, denying petitioner's motion for
reconsideration, are hereby SET ASIDE and ANNULLED. No pronouncement as to costs.

SO ORDERED.
SECOND DIVISION

ARCO METAL PRODUCTS, CO., G.R. No. 170734


INC., and MRS. SALVADOR UY,
Petitioners, Present:

QUISUMBING, J.,
Chairperson,
- versus - TINGA,
VELASCO, and
BRION, JJ.

SAMAHAN NG MGA MANGGAGAWA


SA ARCO METAL-NAFLU (SAMARM-
NAFLU), Promulgated:
Respondent.
May 14, 2008

x---------------------------------------------------------------------------x

DECISION

TINGA, J.:

This treats of the Petition for Review[1] of the Resolution[2] and


Decision[3] of the Court of Appeals dated 9 December 2005 and 29 September 2005, respectively in CA-G.R. SP
No. 85089 entitled

Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU) v. Arco Metal Products Co., Inc. and/or Mr.
Salvador Uy/Accredited Voluntary Arbitrator Apron M. Mangabat,[4] which ruled that the 13th month pay, vacation leave
and sick leave conversion to cash shall be paid in full to the employees of petitioner regardless of the actual service they
rendered within a year.

Petitioner is a company engaged in the manufacture of metal products, whereas respondent is the labor union of
petitioner’s rank and file employees. Sometime in December 2003, petitioner paid the 13th month pay, bonus, and leave
encashment of three union members in amounts proportional to the service they actually rendered in a year, which is less
than a full twelve (12) months. The employees were:

1. Rante Lamadrid Sickness 27 August 2003 to 27 February 2004


2. Alberto Gamban Suspension 10 June 2003 to 1 July 2003
3. Rodelio Collantes Sickness August 2003 to February 2004
Respondent protested the prorated scheme, claiming that on several occasions petitioner did not prorate the
payment of the same benefits to seven (7) employees who had not served for the full 12 months. The payments were
made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004. According to respondent, the prorated payment violates the rule
against diminution of benefits under Article 100 of the Labor Code. Thus, they filed a complaint before the National
Conciliation and Mediation Board (NCMB). The parties submitted the case for voluntary arbitration.

The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that the giving of the
contested benefits in full, irrespective of the actual service rendered within one year has not ripened into a practice. He
noted the affidavit of Joselito Baingan, manufacturing group head of petitioner, which states that the giving in full of the
benefit was a mere error. He also interpreted the phrase “for each year of service” found in the pertinent CBA provisions
to mean that an employee must have rendered one year of service in order to be entitled to the full benefits provided in
the CBA.[5]

Unsatisfied, respondent filed a Petition for Review[6] under Rule 43 before the Court of Appeals, imputing serious
error to Mangabat’s conclusion. The Court of Appeals ruled that the CBA did not intend to foreclose the application of
prorated payments of leave benefits to covered employees. The appellate court found that petitioner, however, had an
existing voluntary practice of paying the aforesaid benefits in full to its employees, thereby rejecting the claim
that petitioner erred in paying full benefits to its seven

employees. The appellate court noted that aside from the affidavit of petitioner’s officer, it has not presented any
evidence in support of its position that it has no voluntary practice of granting the contested benefits in full and without
regard to the service actually rendered within the year. It also questioned why it took petitioner eleven (11) years before it
was able to discover the alleged error. The dispositive portion of the court’s decision reads:

WHEREFORE, premises considered, the instant petition is hereby GRANTED and the Decision
of Accredited Voluntary Arbiter Apron M. Mangabat in NCMB-NCR Case No. PM-12-345-03, dated June
18, 2004 is hereby AFFIRMED WITH MODIFICATION in that the 13th month pay, bonus, vacation
leave and sick leave conversions to cash shall be paid to the employees in full, irrespective of the actual
service rendered within a year.[7]

Petitioner moved for the reconsideration of the decision but its motion was denied, hence this petition.

Petitioner submits that the Court of Appeals erred when it ruled that the grant of 13th month pay, bonus, and leave
encashment in full regardless of actual service rendered constitutes voluntary employer practice and, consequently, the
prorated payment of the said benefits does not constitute diminution of benefits under Article 100 of the Labor Code. [8]

The petition ultimately fails.


First, we determine whether the intent of the CBA provisions is to grant full benefits regardless of service actually
rendered by an employee to the company. According to petitioner, there is a one-year cutoff in the entitlement to the
benefits provided in the CBA which is evident from the wording of its pertinent provisions as well as of the existing law.

We agree with petitioner on the first issue. The applicable CBA provisions read:

ARTICLE XIV-VACATION LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year
of service shall be entitled to sixteen (16) days vacation leave with pay for each year of service. Unused
leaves shall not be cumulative but shall be converted into its cash equivalent and shall become due and
payable every 1st Saturday of December of each year.

However, if the 1st Saturday of December falls in December 1, November 30 (Friday) being a
holiday, the management will give the cash conversion of leaves in November 29.

Section 2. In case of resignation or retirement of an employee, his vacation leave shall be paid
proportionately to his days of service rendered during the year.

ARTICLE XV-SICK LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year
of service shall be entitled to sixteen (16) days of sick leave with pay for each year of
service. Unused sick leave shall not be cumulative but shall be converted into its cash equivalent and
shall become due and payable every 1st Saturday of December of each year.

Section 2. Sick Leave will only be granted to actual sickness duly certified by the Company
physician or by a licensed physician.

Section 3. All commutable earned leaves will be paid proportionately upon retirement or
separation.

ARTICLE XVI – EMERGENCY LEAVE, ETC.

Section 1. The Company shall grant six (6) days emergency leave to employees covered by this
agreement and if unused shall be converted into cash and become due and payable on the 1 st Saturday of
December each year.

Section 2. Employees/workers covered by this agreement who have rendered at least one (1) year
of service shall be entitled to seven (7) days of Paternity Leave with pay in case the married employee’s
legitimate spouse gave birth. Said benefit shall be non-cumulative and non-commutative and shall be
deemed in compliance with the law on the same.

Section 3. Maternity leaves for married female employees shall be in accordance with the SSS
Law plus a cash grant of P1,500.00 per month.

xxx
ARTICLE XVIII- 13TH MONTH PAY & BONUS

Section 1. The Company shall grant 13th Month Pay to all employees covered by this agreement.
The basis of computing such pay shall be the basic salary per day of the employee multiplied by 30 and
shall become due and payable every 1st Saturday of December.

Section 2. The Company shall grant a bonus to all employees as practiced which shall be
distributed on the 2nd Saturday of December.

Section 3. That the Company further grants the amount of Two Thousand Five Hundred Pesos
(P2,500.00) as signing bonus plus a free CBA Booklet.[9] (Underscoring ours)

There is no doubt that in order to be entitled to the full monetization of sixteen (16) days of vacation and sick
leave, one must have rendered at least one year of service. The clear wording of the provisions does not allow any other
interpretation. Anent the 13th month pay and bonus, we agree with the findings of Mangabat that the CBA provisions did
not give any meaning different from that given by the law, thus it should be computed at 1/12 of the total compensation
which an employee receives for the whole calendar year. The bonus is also equivalent to the amount of the 13th month
pay given, or in proportion to the actual service rendered by an employee within the year.

On the second issue, however, petitioner founders.

As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not normally
embark on a re-examination of the evidence presented by the contending parties during the trial of the case considering
that the findings of facts of the Court of Appeals are conclusive and binding on the Court. [10] The rule, however, admits of
several exceptions, one of which is when the findings of the Court of Appeals are contrary to that of the lower
tribunals. Such is the case here, as the factual conclusions of the Court of Appeals differ from that of the voluntary
arbitrator.

Petitioner granted, in several instances, full benefits to employees who have not served a full year, thus:

Name Reason Duration


1. Percival Bernas Sickness July 1992 to November 1992
2. Cezar Montero Sickness 21 Dec. 1992 to February 1993
3. Wilson Sayod Sickness May 1994 to July 1994
4. Nomer Becina Suspension 1 Sept. 1996 to 5 Oct. 1996
5. Ronnie Licuan Sickness 8 Nov. 1999 to 9 Dec. 1999
6. Guilbert Villaruel Sickness 23 Aug. 2002 to 4 Feb. 2003
7. Melandro Moque Sickness 29 Aug. 2003 to 30 Sept. 2003[11]

Petitioner claims that its full payment of benefits regardless of the length of service to the company does not
constitute voluntary employer practice. It points out that the payments had been erroneously made and they occurred in
isolated cases in the years 1992, 1993, 1994, 1999, 2002 and 2003. According to petitioner, it was only in 2003 that the
accounting department discovered the error “when there were already three (3) employees involved with prolonged
absences and the error was corrected by implementing the pro-rata payment of benefits pursuant to law and their existing
CBA.”[12] It adds that the seven earlier cases of full payment of benefits went unnoticed considering the proportion of
one employee

concerned (per year) vis à vis the 170 employees of the company. Petitioner describes the situation as a “clear oversight”
which should not be taken against it.[13] To further bolster its case, petitioner argues that for a grant of a benefit to be
considered a practice, it should have been practiced over a long period of time and must be shown to be consistent,
deliberate and intentional, which is not what happened in this case. Petitioner tries to make a case out of the fact that the
CBA has not been modified to incorporate the giving of full benefits regardless of the length of service, proof that the
grant has not ripened into company practice.

We disagree.

Any benefit and supplement being enjoyed by employees cannot be reduced, diminished, discontinued or
eliminated by the employer.[14] The principle of non-diminution of benefits is founded on the Constitutional mandate to
"protect the rights of workers and promote their welfare,”[15] and “to afford labor full protection.”[16] Said mandate in turn
is the basis of Article 4 of the Labor Code which states that “all doubts in the implementation and interpretation of this
Code, including its implementing rules and regulations shall be rendered in favor of labor.” Jurisprudence is replete with
cases which recognize the right of employees to benefits which were voluntarily given by the employer and which
ripened into company practice. Thus in Davao Fruits Corporation v. Associated Labor Unions, et al.[17] where an
employer had freely and continuously included in the computation of the 13th month pay those items that were expressly
excluded by the law, we held that the act which was favorable to the employees though not conforming to law had thus
ripened into a practice and could not be withdrawn, reduced, diminished, discontinued or eliminated. In Sevilla Trading
Company v. Semana,[18] we ruled that the employer’s act of including non-basic benefits in the computation of the
13th month pay was a voluntary act and had ripened into a company practice which cannot be peremptorily
withdrawn. Meanwhile in Davao Integrated Port Stevedoring Services v. Abarquez,[19] the Court ordered the payment of
the cash equivalent of the unenjoyed sick leave benefits to its intermittent workers after finding that said workers had
received these benefits for almost four years until the grant was stopped due to a different interpretation of the CBA
provisions. We held that the employer cannot unilaterally withdraw the existing privilege of commutation or
conversion to cash given to said workers, and as also noted that the employer had in fact granted and paid said cash
equivalent of the unenjoyed portion of the sick leave benefits to some intermittent workers.

In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely, voluntarily and
consistently granting full benefits to its employees regardless of the length of service rendered. True, there were only a
total of seven employees who benefited from such a practice, but it was an established practice nonetheless. Jurisprudence
has not laid down any rule specifying a minimum number of years within which a company practice must be exercised in
order to constitute voluntary company practice.[20] Thus, it can be six (6) years,[21] three (3) years,[22] or even as short as
two (2) years.[23] Petitioner cannot shirk away from its responsibility by merely claiming that it was a mistake or an
error, supported only by an affidavit of its manufacturing group head portions of which read:

5. 13th month pay, bonus, and cash conversion of unused/earned vacation leave, sick leave and
emergency leave are computed and paid in full to employees who rendered services to the company for
the entire year and proportionately to those employees who rendered service to the company for a period
less than one (1) year or twelve (12) months in accordance with the CBA provision relative thereto.

6. It was never the intention much less the policy of the management to grant the aforesaid
benefits to the employees in full regardless of whether or not the employee has rendered services to the
company for the entire year, otherwise, it would be unjust and inequitable not only to the company but to
other employees as well.[24]

In cases involving money claims of employees, the employer has the


burden of proving that the employees did receive the wages and benefits and that the same were paid in
accordance with law.[25]

Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have easily presented other proofs,
such as the names of other employees who did not fully serve for one year and thus were given prorated
benefits. Experientially, a perfect attendance in the workplace is always the goal but it is seldom achieved. There must
have been other employees who had reported for work less than a full year and who, as a consequence received
only prorated benefits. This could have easily bolstered petitioner’s theory of mistake/error, but sadly, no evidence to
that effect was presented.

IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No.
85089 dated 29 September 2005 is and its Resolution dated 9 December 2005 are hereby AFFIRMED.

SO ORDERED.
SECOND DIVISION

G.R. No. 74156 June 29, 1988

GLOBE MACKAY CABLE AND RADIO CORPORATION, FREDERICK WHITE and JESUS
SANTIAGO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FFW-GLOBE MACKAY EMPLOYEES UNION and EDA
CONCEPCION, respondents.

Castillo, Laman, Tan & Pantaleon for petitioners.

Edwin D. Dellaban for private respondents.

MELENCIO-HERRERA, J.:

A special civil action for certiorari with a prayer for a Temporary Restraining Order to enjoin respondents from enforcing
the Decision of 10 March 1986 of the National Labor Relations Commission (NLRC), in NCR Case No. 1-168-85 entitled
"FFW-Globe Mackay Employees Union, et al., vs. Globe Mackay Cable & Radio Corporation, et al.," the dispositive
portion of which reads:

WHEREFORE, premises considered, the appealed Decision is as it is hereby SET ASIDE and another
one issued:

1. Declaring respondents-appellees (petitioners herein) guilty of illegal deductions of cost-of-living


allowance;

2. Ordering respondents-appellees to pay complainants-appellants their back allowances reckoned from


the time of illegal deduction; and

3. Ordering respondents-appellees from further illegally deducting the allowances of complainants-


appellants.

SO ORDERED.

Presiding Commissioner of the NLRC, Diego P. Atienza, concurred in the result, while Commissioner Cleto T. Villaltuya
dissented and voted to affirm in toto the Labor Arbiter's Decision.

On 19 May 1986, we issued the Temporary Restraining Order enjoining respondents from enforcing the assailed
Decision. On 2 September 1987, we gave due course to the petition and required the submittal of memoranda, by the
parties, which has been complied with.

The facts follow:

Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance of non-agricultural
workers in the private sector. Petitioner corporation complied with the said Wage Order by paying its monthly-paid
employees the mandated P3.00 per day COLA. However, in computing said COLA, Petitioner Corporation multiplied the
P 3.00 daily COLA by 22 days, which is the number of working days in the company.

Respondent Union disagreed with the computation of the monthly COLA claiming that the daily COLA rate of P3.00
should be multiplied by 30 days to arrive at the monthly COLA rate. The union alleged furthermore that prior to the
effectivity of Wage Order No. 6, Petitioner Corporation had been computing and paying the monthly COLA on the basis
of thirty (30) days per month and that this constituted an employer practice, which should not be unilaterally withdrawn.
After several grievance proceedings proved futile, the Union filed a complaint against Petitioner Corporation, its
President, F. White, and Vice-President, J. Santiago, for illegal deduction, underpayment, unpaid allowances, and
violation of Wage Order No. 6. Petitioners White and Santiago were sought to be held personally liable for the money
claims thus demanded.

Labor Arbiter Adelaido F. Martinez sustained the position of Petitioner Corporation by holding that since the individual
petitioners acted in their corporate capacity they should not have been impleaded; and that the monthly COLA should be
computed on the basis of twenty two (22) days, since the evidence showed that there are only 22 paid days in a month for
monthly-paid employees in the company. His reasoning, inter alia, was as follows:

To compel the respondent company to use 30 days in a month to compute the allowance and retain 22
days for vacation and sick leave, overtime pay and other benefits is inconsistent and palpably unjust. If 30
days is used as divisor, then it must be used for the computation of all benefits, not just the allowance. But
this is not fair to complainants, not to mention that it will contravene the provision of the parties' CBA.

On appeal, the NLRC reversed the Labor Arbiter, as heretofore stated, and held that Petitioner Corporation was guilty of
illegal deductions, upon the following considerations: (1) that the P3.00 daily COLA under Wage Order No. 6 should be
paid and computed on the basis of thirty (30) days instead of twenty-two (22) days since workers paid on a monthly basis
are entitled to COLA on Saturdays, Sundays and legal holidays "even if unworked;" (2) that the full allowance enjoyed by
Petitioner Corporation's monthly-paid employees before the CBA executed between the parties in 1982 constituted
voluntary employer practice, which cannot be unilaterally withdrawn; and (3) that petitioners White and Santiago were
properly impleaded as respondents in the case below.

Hence, this Petition, anchored on the charge of grave abuse of discretion by the NLRC.

We are constrained to reverse the reversal.

Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as follows:

Section 5. Allowance for Unworked Days.

All covered employees shall be entitled to their daily living allowance during the days that they are paid
their basic wage, even if unworked. (Emphasis supplied)

The primordial consideration, therefore, for entitlement to COLA is that basic wage is being paid. In other words, the
payment of COLA is mandated only for the days that the employees are paid their basic wage, even if said days are
unworked. So that, on the days that employees are not paid their basic wage, the payment of COLA is not mandated. As
held in University of Pangasinan Faculty Union vs. University of Pangasinan, L-63122, February 20, 1984, 127 SCRA
691):

... it is evident that the intention of the law is to grant ECOLA upon the payment of basic wages. Hence,
we have the principle of 'No Pay, No ECOLA.

Applied to monthly-paid employees if their monthly salary covers all the days in a month, they are deemed paid their
basic wages for all those days and they should be entitled to their COLA on those days "even if unworked," as the NLRC
had opined. Peculiar to this case, however, is the circumstance that pursuant to the Collective Bargaining Agreement
(CBA) between Petitioner Corporation and Respondent Union, the monthly basic pay is computed on the basis of five (5)
days a week, or twenty two (22) days a month. Thus, the pertinent provisions of that Agreement read:

Art. XV(a)—Eight net working hours shall constitute the regular work day for five days.

Art. XV(b)—Forty net hours of work, 5 working days, shall constitute the regular work week.

Art. XVI, Sec. 1(b)—All overtime worked in excess of eight net hours daily or in excess of 5 days weekly
shall be computed on hourly basis at the rate of time and one half.
The Labor Arbiter also found that in determining the hourly rate of monthly paid employees for purposes of computing
overtime pay, the monthly wage is divided by the number of actual work days in a month and then, by eight (8) working
hours. If a monthly-paid employee renders overtime work, he is paid his basic salary rate plus one-half thereof. For
example, after examining the specimen payroll of employee Jesus L. Santos, the Labor Arbiter found:

the employee Jesus L. Santos, who worked on Saturday and Sunday was paid base pay plus 50%
premium. This is over and above his monthly basic pay as supported by the fact that base pay was paid. If
the 6th and 7th days of the week are deemed paid even if unworked and included in the monthly salary,
Santos should not have been paid his base pay for Saturday and Sunday but should have received only the
50% overtime premium.

Similarly, the specimen payrolls of employees, Dennis Dungon and Rene Sanvictores, showed that in computing the
vacation and sick leaves of the employees, Petitioner Corporation consistently used twenty-two (22) days.

Under the peculiar circumstances obtaining, therefore, where the company observes a 5-day work week, it will have to be
held that the COLA should be computed on the basis of twenty two (22) days, which is the period during which the
monthly-paid employees of Petitioner Corporation receive their basic wage. The CBA is the law between the parties and,
if not acceptable, can be the subject of future re-negotiation.

2) Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in compliance
with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not be construed as constitutive of voluntary
employer practice, which cannot now be unilaterally withdrawn by petitioner. To be considered as such, it should have
been practiced over a long period of time, and must be shown to have been consistent and deliberate. Adequate proof is
wanting in this respect. The test of long practice has been enunciated thus:

... Respondent Company agreed to continue giving holiday pay knowing fully well that said employees are
not covered by the law requiring payment of holiday pay.' (Oceanic Pharmacal Employees Union [FFW]
vs. Inciong, L-50568, November 7, 1979, 94 SCRA 270). (Emphasis ours)

Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the implementation of the Wage
Orders. It was only when the Rules Implementing Wage Order No. 4 were issued on 21 May 1984 that a formula for the
conversion of the daily allowance to its monthly equivalent was laid down, thus:

Section 3. Application of Section 2--

xxx xxx xxx

(a) Monthly rates for non-agricultural workers covered Under PDs 1614, 1634, 1678 and 1713:

xxx xxx xxx

(3) For workers who do not work and are not considered paid on Saturdays and Sundays:

P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70 (Emphasis ours)

As the Labor Arbiter had analyzed said formula:

Under the aforecited formula/guideline, issued for the first time, when applied to a company like
respondent which observes a 5-day work week (or where 2 days in a week, not necessarily Saturday and
Sunday, are not considered paid), the monthly equivalent of a daily allowance is arrived at by multiplying
the daily allowance by 262 divided by 12. This formula results in the equivalent of 21.8 days in a month.

Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law.
Payment may be said to have been made by reason of a mistake in the construction or application of a "doubtful or
difficult question of law." (Article 2155, 1 in relation to Article 2154 2 of the Civil Code). Since it is a past error that is
being corrected, no vested right may be said to have arisen nor any diminution of benefit under Article 100 of the Labor
Code3 may be said to have resulted by virtue of the correction.

With the conclusions thus reached, there is no further need to discuss the liability of the officers of Petitioner Corporation.

WHEREFORE, certiorari is granted, the Decision of the National Labor Relations Commission, dated 10 March 1986, is
SET ASIDE, and the Decision of the Labor Arbiter, dated 9 May 1985, is hereby REINSTATED. The Temporary
Restraining Order heretofore issued is hereby made permanent.

SO ORDERED.
THIRD DIVISION

G.R. No. 113856 September 7, 1998

SAMAHANG MANGGAGAWA SA TOP FORM MANUFACTURING UNITED WORKERS OF THE


PHILIPPINES (SMTFM-UWP), its officers and members, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. JOSE G. DE VERA and TOP FORM
MANUFACTURING PHIL., INC., respondents.

ROMERO, J.:

The issue in this petition for certiorari is whether or not an employer committed an unfair labor practice by bargaining in
bad faith and discriminating against its employees. The charge arose from the employer's refusal to grant across-the-board
increases to its employees in implementing Wage Orders Nos. 01 and 02 of the Regional Tripartite Wages and
Productivity Board of the National Capital Region (RTWPB-NCR). Such refusal was aggravated by the fact that prior to
the issuance of said wage orders, the employer allegedly promised at the collective bargaining conferences to implement
any government-mandated wage increases on an across-the-board basis.

Petitioner Samahang Manggagawa sa Top Form Manufacturing — United Workers of the Philippines (SMTFM) was the
certified collective bargaining representative of all regular rank and file employees of private respondent Top Form
Manufacturing Philippines, Inc. At the collective bargaining negotiation held at the Milky Way Restaurant in Makati,
Metro Manila on February 27, 1990, the parties agreed to discuss unresolved economic issues. According to the minutes
of the meeting, Article VII of the collective bargaining agreement was discussed. The following appear in said Minutes:

Art. VII, Wages

Sect. 1. — Defer —

Sect. 2. Status quo

Sec. 3. Union proposed that any future wage increase given by the government should be implemented by
the company across-the-board or non-conditional.

Management requested the union to retain this provision since their sincerity was already proven when
the P25.00 wage increase was granted across-the-board. The union acknowledges management's sincerity
but they are worried that in case there is a new set of management, they can just show their CBA. The
union decided to defer this provision. 1

In their joint affidavit dated January 30, 1992, 2 union members Salve L. Barnes, Eulisa Mendoza, Lourdes Barbero and
Concesa Ibañez affirmed that at the subsequent collective bargaining negotiations, the union insisted on the incorporation
in the collective bargaining agreement (CBA) of the union proposal on "automatic across-the-board wage increase." They
added that:

11. On the strength of the representation of the negotiating panel of the company and the above
undertaking/promise made by its negotiating panel, our union agreed to drop said proposal relying on the
undertakings made by the officials of the company who negotiated with us, namely, Mr. William
Reynolds, Mr. Samuel Wong and Mrs. Remedios Felizardo. Also, in the past years, the company has
granted to us government mandated wage increases on across-the-board basis.
On October 15, 1990, the RTWPB-NCR issued Wage Order No. 01 granting an increase of P17.00 per day in the salary of
workers. This was followed by Wage Order No. 02 dated December 20, 1990 providing for a P12.00 daily increase in
salary.

As expected, the union requested the implementation of said wage orders. However, they demanded that the increase be
on an across-the-board basis. Private respondent refused to accede to that demand. Instead, it implemented a scheme of
increases purportedly to avoid wage distortion. Thus, private respondent granted the P17.00 increase under Wage Order
No. 01 to workers/employees receiving salary of P125.00 per day and below. The P12.00 increase mandated by Wage
Order No. 02 was granted to those receiving the salary of P140.00 per day and below. For employees receiving salary
higher than P125.00 or P140.00 per day, private respondent granted an escalated increase ranging from P6.99 to P14.30
and from P6.00 to P10.00, respectively. 3

On October 24, 1991, the union, through its legal counsel, wrote private respondent a letter demanding that it should
"fulfill its pledge of sincerity to the union by granting an across-the-board wage increases (sic) to all employees under the
wage orders." The union reiterated that it had agreed to "retain the old provision of CBA" on the strength of private
respondent's "promise and assurance" of an across-the-board salary increase should the government mandate salary
increases. 4 Several conferences between the parties notwithstanding, private respondent adamantly maintained its
position on the salary increases it had granted that were purportedly designed to avoid wage distortion.

Consequently, the union filed a complaint with the NCR NLRC alleging that private respondent's act of "reneging on its
undertaking/promise clearly constitutes act of unfair labor practice through bargaining in bad faith." It charged private
respondent with acts of unfair labor practices or violation of Article 247 of the Labor Code, as amended, specifically
"bargaining in bad faith," and prayed that it be awarded actual, moral and exemplary damages. 5 In its position paper, the
union added that it was charging private respondent with "violation of Article 100 of the Labor Code." 6

Private respondent, on the other hand, contended that in implementing Wage Orders Nos. 01 and 02, it had avoided "the
existence of a wage distortion" that would arise from such implementation. It emphasized that only "after a reasonable
length of time from the implementation" of the wage orders "that the union surprisingly raised the question that the
company should have implemented said wage orders on an across-the-board basis." It asserted that there was no
agreement to the effect that future wage increases mandated by the government should be implemented on an across-the-
board basis. Otherwise, that agreement would have been incorporated and expressly stipulated in the CBA. It quoted the
provision of the CBA that reflects the parties' intention to "fully set forth" therein all their agreements that had been
arrived at after negotiations that gave the parties "unlimited right and opportunity to make demands and proposals with
respect to any subject or matter not removed by law from the area of collective bargaining." The same CBA provided that
during its effectivity, the parties "each voluntarily and unqualifiedly waives the right, and each agrees that the other shall
not be obligated, to bargain collectively, with respect to any subject or matter not specifically referred to or covered by
this Agreement, even though such subject or matter may not have been within the knowledge or contemplation of either or
both of the parties at the time they negotiated or signed this Agreement." 7

On March 11, 1992, Labor Arbiter Jose G. de Vera rendered a decision dismissing the complaint for lack of merit. 8He
considered two main issues in the case: (a) whether or not respondents are guilty of unfair labor practice, and (b) whether
or not the respondents are liable to implement Wage Orders Nos. 01 and 02 on an across-the-board basis. Finding no basis
to rule in the affirmative on both issues, he explained as follows:

The charge of bargaining in bad faith that the complainant union attributes to the respondents is bereft of
any certitude inasmuch as based on the complainant union's own admission, the latter vacillated on its
own proposal to adopt an across-the-board stand or future wage increases. In fact, the union
acknowledges the management's sincerity when the latter allegedly implemented Republic Act 6727 on
an across-the-board basis. That such union proposal was not adopted in the existing CBA was due to the
fact that it was the union itself which decided for its deferment. It is, therefore, misleading to claim that
the management undertook/promised to implement future wage increases on an across-the-board basis
when as the evidence shows it was the union who asked for the deferment of its own proposal to that
effect.

The alleged discrimination in the implementation of the subject wage orders does not inspire belief at all
where the wage orders themselves do not allow the grant of wage increases on an across-the-board basis.
That there were employees who were granted the full extent of the increase authorized and some others
who received less and still others who did not receive any increase at all, would not ripen into what the
complainants termed as discrimination. That the implementation of the subject wage orders resulted into
an uneven implementation of wage increases is justified under the law to prevent any wage distortion.
What the respondents did under the circumstances in order to deter an eventual wage distortion without
any arbitral proceedings is certainly commendable.

The alleged violation of Article 100 of the Labor Code, as amended, as well as Article XVII, Section 7 of
the existing CBA as herein earlier quoted is likewise found by this Branch to have no basis in fact and in
law. No benefits or privileges previously enjoyed by the employees were withdrawn as a result of the
implementation of the subject orders. Likewise, the alleged company practice of implementing wage
increases declared by the government on an across-the-board basis has not been duly established by the
complainants' evidence. The complainants asserted that the company implemented Republic Act No.
6727 which granted a wage increase of P25.00 effective July 1, 1989 on an across-the-board basis.
Granting that the same is true, such isolated single act that respondents adopted would definitely not ripen
into a company practice. It has been said that "a sparrow or two returning to Capistrano does not a
summer make."

Finally, on the second issue of whether or not the employees of the respondents are entitled to an across-
the-board wage increase pursuant to Wage Orders Nos. 01 and 02, in the face of the above discussion as
well as our finding that the respondents correctly applied the law on wage increases, this Branch rules in
the negative.

Likewise, for want of factual basis and under the circumstances where our findings above are adverse to
the complainants, their prayer for moral and exemplary damages and attorney's fees may not be granted.

Not satisfied, petitioner appealed to the NLRC that, in turn, promulgated the assailed Resolution of April 29,
1993 9dismissing the appeal for lack of merit. Still dissatisfied, petitioner sought reconsideration which, however, was
denied by the NLRC in the Resolution dated January 17, 1994. Hence, the instant petition for certiorari contending that:

-A-

THE PUBLIC RESPONDENTS GROSSLY ERRED IN NOT DECLARING THE PRIVATE


RESPONDENTS GUILTY OF ACTS OF UNFAIR LABOR PRACTICES WHEN, OBVIOUSLY, THE
LATTER HAS BARGAINED IN BAD FAITH WITH THE UNION AND HAS VIOLATED THE CBA
WHICH IT EXECUTED WITH THE HEREIN PETITIONER UNION.

-B-

THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT DECLARING THE PRIVATE


RESPONDENTS GUILTY OF ACTS OF DISCRIMINATION IN THE IMPLEMENTATION OF NCR
WAGE ORDER NOS. 01 AND 02.

-C-

THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT FINDING THE PRIVATE


RESPONDENTS GUILTY OF HAVING VIOLATED SECTION 4, ARTICLE XVII OF THE
EXISTING CBA.

-D-

THE PUBLIC RESPONDENTS GRAVELY ERRED IN NOT DECLARING THE PRIVATE


RESPONDENTS GUILTY OF HAVING VIOLATED ARTICLE 100 OF THE LABOR CODE OF THE
PHILIPPINES, AS AMENDED.
-E-

ASSUMING, WITHOUT ADMITTING THAT THE PUBLIC RESPONDENTS HAVE CORRECTLY


RULED THAT THE PRIVATE RESPONDENTS ARE GUILTY OF ACTS OF UNFAIR LABOR
PRACTICES, THEY COMMITTED SERIOUS ERROR IN NOT FINDING THAT THERE IS A
SIGNIFICANT DISTORTION IN THE WAGE STRUCTURE OF THE RESPONDENT COMPANY.

-F-

THE PUBLIC RESPONDENTS ERRED IN NOT AWARDING TO THE PETITIONERS HEREIN


ACTUAL, MORAL, AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES.

As the Court sees it, the pivotal issues in this petition can be reduced into two, to wit: (a) whether or not private
respondent committed an unfair labor practice in its refusal to grant across-the-board wage increases in implementing
Wage Orders Nos. 01 and 02, and (b) whether or not there was a significant wage distortion of the wage structure in
private respondent as a result of the manner by which said wage orders were implemented.

With respect to the first issue, petitioner union anchors its arguments on the alleged commitment of private respondent to
grant an automatic across-the-board wage increase in the event that a statutory or legislated wage increase is promulgated.
It cites as basis therefor, the aforequoted portion of the Minutes of the collective bargaining negotiation on February 27,
1990 regarding wages, arguing additionally that said Minutes forms part of the entire agreement between the parties.

The basic premise of this argument is definitely untenable. To start with, if there was indeed a promise or undertaking on
the part of private respondent to obligate itself to grant an automatic across-the-board wage increase, petitioner union
should have requested or demanded that such "promise or undertaking" be incorporated in the CBA. After all, petitioner
union has the means under the law to compel private respondent to incorporate this specific economic proposal in the
CBA. It could have invoked Article 252 of the Labor Code defining "duty to bargain," thus, the duty includes "executing a
contract incorporating such agreements if requested by either party." Petitioner union's assertion that it had insisted on the
incorporation of the same proposal may have a factual basis considering the allegations in the aforementioned joint
affidavit of its members. However, Article 252 also states that the duty to bargain "does not compel any party to agree to a
proposal or make any concession." Thus, petitioner union may not validly claim that the proposal embodied in the
Minutes of the negotiation forms part of the CBA that it finally entered into with private respondent.

The CBA is the law between the contracting parties 10 — the collective bargaining representative and the employer-
company. Compliance with a CBA is mandated by the expressed policy to give protection to labor. 11 In the same vein,
CBA provisions should be "construed liberally rather than narrowly and technically, and the courts must place a practical
and realistic construction upon it, giving due consideration to the context in which it is negotiated and purpose which it is
intended to serve." 12 This is founded on the dictum that a CBA is not an ordinary contract but one impressed with public
interest. 13 It goes without saying, however, that only provisions embodied in the CBA should be so interpreted and
complied with. Where a proposal raised by a contracting party does not find print in the CBA, 14 it is not a part thereof and
the proponent has no claim whatsoever to its implementation.

Hence, petitioner union's contention that the Minutes of the collective bargaining negotiation meeting forms part of the
entire agreement is pointless. The Minutes reflects the proceedings and discussions undertaken in the process of
bargaining for worker benefits in the same way that the minutes of court proceedings show what transpired therein. 15 At
the negotiations, it is but natural for both management and labor to adopt positions or make demands and offer proposals
and counter-proposals. However, nothing is considered final until the parties have reached an agreement. In fact, one of
management's usual negotiation strategies is to ". . . agree tentatively as you go along with the understanding that nothing
is binding until the entire agreement is reached." 16 If indeed private respondentpromised to continue with the practice of
granting across-the-board salary increases ordered by the government, such promise could only be demandable in law if
incorporated in the CBA.

Moreover, by making such promise, private respondent may not be considered in bad faith or at the very least, resorting to
the scheme of feigning to undertake the negotiation proceedings through empty promises. As earlier stated, petitioner
union had, under the law, the right and the opportunity to insist on the foreseeable fulfillment of the private respondent's
promise by demanding its incorporation in the CBA. Because the proposal was never embodied in the CBA, the promise
has remained just that, a promise, the implementation of which cannot be validly demanded under the law.

Petitioner's reliance on this Court's pronouncements 17 in Kiok Loy v. NLRC 18 is, therefore, misplaced. In that case, the
employer refused to bargain with the collective bargaining representative, ignoring all notices for negotiations and
requests for counter proposals that the union had to resort to conciliation proceedings. In that case, the Court opined that
"(a) Company's refusal to make counter-proposal, if considered in relation to the entire bargaining process, may indicate
bad faith and this is specially true where the Union's request for a counter-proposal is left unanswered." Considering the
facts of that case, the Court concluded that the company was "unwilling to negotiate and reach an agreement with the
Union." 19

In the case at bench, however, petitioner union does not deny that discussion on its proposal that all government-mandated
salary increases should be on an across-the-board basis was "deferred," purportedly because it relied upon the
"undertaking" of the negotiating panel of private respondent. 20 Neither does petitioner union deny the fact that "there is
no provision of the 1990 CBA containing a stipulation that the company will grant across-the-board to its employees the
mandated wage increase." They simply assert that private respondent committed "acts of unfair labor practices by virtue
of its contractual commitment made during the collective bargaining process." 21 The mere fact, however, that the
proposal in question was not included in the CBA indicates that no contractual commitmentthereon was ever made by
private respondent as no agreement had been arrived at by the parties. Thus:

Obviously the purpose of collective bargaining is the reaching of an agreement resulting in a contract
binding on the parties; but the failure to reach an agreement after negotiations continued for a reasonable
period does not establish a lack of good faith. The statutes invite and contemplate a collective bargaining
contract, but they do not compel one. The duty to bargain does not include the obligation to reach an
agreement. . . . 32

With the execution of the CBA, bad faith bargaining can no longer be imputed upon any of the parties thereto. All
provisions in the CBA are supposed to have been jointly and voluntarily incorporated therein by the parties. This is not a
case where private respondent exhibited an indifferent attitude towards collective bargaining because the negotiations
were not the unilateral activity of petitioner union. The CBA is proof enough that private respondent exerted "reasonable
effort at good faith bargaining." 23

Indeed, the adamant insistence on a bargaining position to the point where the negotiations reach an impasse does not
establish bad faith. Neither can bad faith be inferred from a party's insistence on the inclusion of a particular substantive
provision unless it concerns trivial matters or is obviously intolerable. 24

The question as to what are mandatory and what are merely permissive subjects of collective bargaining
is of significance on the right of a party to insist on his position to the point of stalemate. A party may
refuse to enter into a collective bargaining contract unless it includes a desired provision as to a matter
which is a mandatory subject of collective bargaining; but a refusal to contract unless the agreement
covers a matter which is not a mandatory subject is in substance a refusal to bargain about matters which
are mandatory subjects of collective bargaining, and it is no answer to the charge of refusal to bargain in
good faith that the insistence on the disputed clause was not the sole cause of the failure to agree or that
agreement was not reached with respect to other disputed clauses. 25

On account of the importance of the economic issue proposed by petitioner union, it could have refused to bargain and to
enter into a CBA with private respondent. On the other hand, private respondent's firm stand against the proposal did not
mean that it was bargaining in bad faith. It had the right "to insist on (its) position to the point of stalemate." On the part of
petitioner union, the importance of its proposal dawned on it only after the wage orders were issued after the CBA had
been entered into. Indeed, from the facts of this case, the charge of bad faith bargaining on the part of private respondent
was nothing but a belated reaction to the implementation of the wage orders that private respondent made in accordance
with law. In other words, petitioner union harbored the notion that its members and the other employees could have had a
better deal in terms of wage increases had it relentlessly pursued the incorporation in the CBA of its proposal. The
inevitable conclusion is that private respondent did not commit the unfair labor practices of bargaining in bad faith and
discriminating against its employees for implementing the wage orders pursuant to law.
The Court likewise finds unmeritorious petitioner union's contention that by its failure to grant across-the-board wage
increases, private respondent violated the provisions of Section 5, Article VII of the existing CBA 26 as well as Article 100
of the Labor Code. The CBA provision states:

Sec. 5. The COMPANY agrees to comply with all the applicable provisions of the Labor Code of the
Philippines, as amended, and all other laws, decrees, orders, instructions, jurisprudence, rules and
regulations affecting labor.

Art. 100 of the Labor Code on prohibition against elimination or diminution of benefits provides that "(n)othing in
this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code."

We agree with the Labor Arbiter and the NLRC that no benefits or privileges previously enjoyed by petitioner union and
the other employees were withdrawn as a result of the manner by which private respondent implemented the wage orders.
Granted that private respondent had granted an across-the-board increase pursuant to Republic Act No. 6727, that single
instance may not be considered an established company practice. Petitioner union's argument in this regard is actually tied
up with its claim that the implementation of Wage Orders Nos. 01 and 02 by private respondent resulted in wage
distortion.

The issue of whether or not a wage distortion exists is a question of


27
fact that is within the jurisdiction of the quasi-judicial tribunals below. Factual findings of administrative agencies are
accorded respect and even finality in this Court if they are supported by substantial evidence. 28 Thus, in Metropolitan
Bank and Trust Company, Inc. v. NLRC, the Court said:

The issue of whether or not a wage distortion exists as a consequence of the grant of a wage increase to
certain employees, we agree, is, by and large, a question of fact the determination of which is the statutory
function of the NLRC. Judicial review of labor cases, we may add, does not go beyond the evaluation of
the sufficiency of the evidence upon which the labor officials' findings rest. As such, the factual findings
of the NLRC are generally accorded not only respect but also finality provided that its decisions are
supported by substantial evidence and devoid of any taint of unfairness or arbitrariness. When, however,
the members of the same labor tribunal are not in accord on those aspects of a case, as in this case, this
Court is well cautioned not to be as so conscious in passing upon the sufficiency of the evidence, let alone
the conclusions derived
therefrom. 29

Unlike in above-cited case where the Decision of the NLRC was not unanimous, the NLRC Decision in this case which
was penned by the dissenter in that case, Presiding Commissioner Edna Bonto-Perez unanimously ruled that no wage
distortions marred private respondent's implementation of the wage orders. The NLRC said:

On the issue of wage distortion, we are satisfied that there was a meaningful implementation of Wage
Orders Nos. 01 and 02. This debunks the claim that there was wage distortion as could be shown by the
itemized wages implementation quoted above. It should be noted that this itemization has not been
successfully traversed by the appellants. . . . . 30

The NLRC then quoted the labor arbiter's ruling on wage distortion.

We find no reason to depart from the conclusions of both the labor arbiter and the NLRC. It is apropos to note, moreover,
that petitioner's contention on the issue of wage distortion and the resulting allegation of discrimination against the private
respondent's employees are anchored on its dubious position that private respondent's promise to grant an across-the-
board increase in government-mandated salary benefits reflected in the Minutes of the negotiation is an enforceable part
of the CBA.

In the resolution of labor cases, this Court has always been guided by the State policy enshrined in the Constitution that
the rights of workers and the promotion of their welfare shall be protected. 31 The Court is likewise guided by the goal of
attaining industrial peace by the proper application of the law. It cannot favor one party, be it labor or management, in
arriving at a just solution to a controversy if the party has no valid support to its claims. It is not within this Court's power
to rule beyond the ambit of the law.

WHEREFORE, the instant petition for certiorari is hereby DISMISSED and the questioned Resolutions of the NLRC
AFFIRMED. No costs.

SO ORDERED.
FIRST DIVISION

G.R. No. 166647 March 31, 2006

PAG-ASA STEEL WORKS, INC., Petitioner,


vs.
COURT OF APPEALS, FORMER SIXTH DIVISION and PAG-ASA STEEL WORKERS UNION
(PSWU), Respondent.

DECISION

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 65171
ordering Pag-Asa Steel Works, Inc. to pay the members of Pag-Asa Steel Workers Union (Union) the wage increase
prescribed under Wage Order No. NCR-08. Also assailed in this petition is the CA Resolution denying the corporation’s
motion for reconsideration.

Petitioner Pag-Asa Steel Works, Inc. is a corporation duly organized and existing under Philippine laws and is engaged in
the manufacture of steel bars and wire rods. Pag-Asa Steel Workers Union is the duly authorized bargaining agent of the
rank-and-file employees of petitioner.

On January 8, 1998, the Regional Tripartite Wages and Productivity Board (Wage Board) of the National Capital Region
(NCR) issued Wage Order No. NCR-06.2 It provided for an increase of P13.00 per day in the salaries of employees
receiving the minimum wage, and a consequent increase in the minimum wage rate to P198.00 per day. Petitioner and the
Union negotiated on how to go about the wage adjustments. Petitioner forwarded a letter 3 dated March 10, 1998 to the
Union with the list of the salary adjustments of the rank-and-file employees after the implementation of Wage Order No.
NCR-06, and the notation that said "adjustments [were] in accordance with the formula [they] have discussed and [were]
designed so as no distortion shall result from the implementation of Wage Order No. NCR-06."

NAME DATE PRESENT ADJUST NEW


REGULAR RATE EFF RATE
2/6/98
1. PEPINO EMMANUEL 08.01.97 191.00 13.00 204.00
2. SEVANDRA RODOLFO 01.17.98 192.00 13.00 205.00
3. BERNABE ALFREDO 10.24.97 200.00 13.00 213.00
4. UMBAL ADOLFO 08.18.97 215.00 12.00 227.00
5. AQUINO JONAS 08.25.97 215.00 12.00 227.00
6. AGCAOILI JAIME 01.08.98 220.00 11.00 231.00
7. BERMEJO JIMMY JR. 04.01.97 221.00 11.00 232.00
8. EDRADAN ELDEMAR P. 04.17.97 221.00 11.00 232.00
9. REBOTON RONILO 05.14.97 221.00 11.00 232.00
10. TABAOG ALBERT 04.10.97 221.00 11.00 232.00
11. SALEN EDILBERTO 02.10.97 221.00 11.00 232.00
13. PAEZ REYNALDO 02.27.97. 235.00 11.00 246.00
14. HERNANDEZ ALFREDO 03.23.96 246.00 10.00 256.00
15. BANIA LUIS JR. 12.08.95 246.00 10.00 256.00
16. MAGBOO VICTOR 05.25.96 246.00 10.00 256.00
17. NINORA BONIFACIO 03.22.96 246.00 10.00 256.00
18. ALANCADO RODERICK 11.10.95 246.00 10.00 256.00
19. PUTONG PASCUAL 06.23.96 246.00 10.00 256.00
20. PAR EULOGIO JR. 08.16.95 246.00 10.00 256.00
21. SALON FONDADOR 11.16.95 246.00 10.00 256.00
22. RODA GEORGE 10.11.95 246.00 10.00 256.00
23. RIOJA JOSEPH 12.28.95 246.00 10.00 256.00
24. RAYMUNDO ANTONIO 06.05.96 246.00 10.00 256.00
25. BUGTAI ROBERTO 04.10.96 246.00 10.00 256.00
26. RELATO RAMON 07.07.96 265.00 10.00 275.00
27. REGACHUELO DENNIS 11.30.95 265.00 10.00 275.00
28. ORNOPIA REYNALDO 08.09.94 268.00 10.00 278.00
29. PULPULAAN JAIME 01.18.96 275.00 10.00 285.00
30. PANLAAN FERDINAND 01.18.96 275.00 10.00 285.00
31.BAGASBAS EULOGIO JR. 01.18.96 275.00 10.00 285.00
32. ALEJANDRO OLIVER 12.03.95 275.00 10.00 285.00
33. PRIELA DANILO 11.30.95 280.00 10.00 290.00
34. NOBELJAS EDGAR 07.10.95 283.00 10.00 293.00
35. SAJOT RONNIE 10.02.93 288.00 10.00 298.00
36. WHITING JOEL 09.30.93 288.00 10.00 298.00
37. SURINGA FRANKLIN 12.19.93 288.00 10.00 298.00
38. SIBOL MICHAEL 12.11.93 288.00 10.00 298.00
39. SOLO JOSE 02.20.94 288.00 10.00 298.00
40. TIZON JOEL 12.23.93 288.00 10.00 298.00
41. SABATIN GILBERT 04.19.94 288.00 10.00 298.00
42. REYES RONALDO 04.14.94 288.00 10.00 298.00
43. AMANIA WILFREDO 01.06.94 288.00 10.00 298.00
44. QUIDATO ARISTON 12.12.93 288.00 10.00 298.00
45. LAROGA CLAUDIO JR. 10.13.93 288.00 10.00 298.00
46. MORALES LUIS 09.30.93 288.00 10.00 298.00
47. ANTOLO DANILO 12.26.93 288.00 10.00 298.00
48. EXMUNDO HERCULES 05.13.94 288.00 10.00 298.00
49. AMPER VALENTINO 08.02.93 288.00 10.00 298.00
50. BAYO-ANG ALDEN JR. 07.14.93 288.00 10.00 298.00
51. BASCONES NELSON 02.26.94 288.00 10.00 298.00
52. DECENA LAURO 09.18.93 288.00 10.00 298.00
53. CHUA MARLONITO 10.20.93 288.00 10.00 298.00
54. CATACUTAN JUNE 03.02.94 288.00 10.00 298.00
55.DE LOS SANTOS
12.23.93 288.00 10.00 298.00
REYNALDO
56. REYES EFREN 10.23.93 288.00 10.00 298.00
57. CAGOMOC DANILO 01.13.94 288.00 10.00 298.00
58. DOROL ERWIN 09.16.93 288.00 10.00 298.00
59. CURAMBAO TIRSO 09.23.93 288.00 10.00 298.00
60. VENTURA FERDINAND 09.20.94 292.00 10.00 302.00
61. ALBANO JESUS 01.06.94 297.00 10.00 307.00
62. CALLEJA JOSEPH 05.10.93 303.00 10.00 313.00
63. PEREZ DANILO 03.01.93 303.00 10.00 313.00
64. BATOY ERNIE 06.15.93 305.00 10.00 315.00
65. SAMPAGA EDGARDO 06.07.93 307.00 10.00 317.00
66. SOLON ROBINSON 05.10.94 315.00 10.00 325.00
67. ELEDA FULGENIO 06.07.93 322.00 10.00 332.00
68. CASCARA RODRIGO 06.07.93 322.00 10.00 332.00
69. ROMANOS ARNULFO 06.07.93 322.00 10.00 332.00
70. LUMANSOC MARIANO 06.07.93 322.00 10.00 332.00
71. RAMOS GRACIANO 06.07.93 322.00 10.00 332.00
72. MAZON NESTOR 07.24.90 330.00 10.00 340.00
73. BRIN LUCENIO 07.26.90 330.00 10.00 340.00
74. SE FREDIE 03.25.90 340.00 10.00 350.00
75. RONCALES DIOSDADO 04.30.90 340.00 10.00 350.00
76. DISCAYA EDILBERTO 09.06.89 340.00 10.00 350.00
77. SUAREZ LUISTO 06.10.92 347.00 10.00 357.00
78. CASTRO PEDRO 10.30.92 348.00 10.00 358.00
79. CLAVECILLA AMBROSIO 09.09.88 351.00 10.00 361.00
80. YSON ROMEO 09.11.88 351.00 10.00 361.00
81. JUMAWAN URBANO JR. 12.20.87 354.00 10.00 364.00
82. MARASIGAN GRACIANO 05.20.88 354.00 10.00 364.00
83. MAGLENTE ROLANDO 09.03.87 354.00 10.00 364.00
84. NEBRIA CALIX 02.25.88 354.00 10.00 364.00
85. BARBIN DANIEL 09.03.87 354.00 10.00 364.00
86. CAMAING CARLITO 12.22.87 354.00 10.00 364.00
87. BUBAN JONATHAN 10.22.87 354.00 10.00 364.00
88. GUEVARRA ARNOLD 10.04.87 354.00 10.00 364.00
89. MALAPO MARCOS JR. 08.04.87 354.00 10.00 364.00
90. ZUNIEGA CARLOS 02.19.88 354.00 10.00 364.00
91. SABORNIDO JULITO 12.20.87 354.00 10.00 364.00
92. DALUYO LOTERIO 04.02.88 354.00 10.00 364.00
93. AGUILLON GRACIANO 05.27.87 359.00 10.00 369.00
94. CRISTY EMETERIO 04.06.87 359.50 10.00 369.50
95. FULGUERAS DOMINGO 01.25.87 362.00 10.00 372.00
96. ZIPAGAN NELSON 02.07.84 370.00 10.00 380.00
97. LAURIO JESUS 06.01.82 371.00 10.00 381.00
98. ACASIO PEDRO 11.21.79 372.00 10.00 382.00
99. MACALISANG EPIFANIO 02.01.88 372.00 10.00 382.00
100. OFILAN ANTONIO 03.12.79 374.50 10.00 384.50
101. SEVANDRA ALFREDO 05.02.69 374.50 10.00 384.50
102. VILLAMER JOEY 11.04.81 374.50 10.00 384.50
103. GRIPON GIL 01.17.76 374.75 10.00 384.75
104. CARLON
04.17.87 375.00 10.00 385.00
HERMINIGILDO, JR.
105. MANLABAO HEROHITO 04.14.81 375.00 10.00 385.00
106. VILLANUEVA DOMINGO 12.01.77 375.50 10.00 385.50
107. APITAN NAZARIO 09.04.79 376.00 10.00 386.00
108. SALAMEDA EDUARDO 02.13.79 377.00 10.00 387.00
109. ARNALDO LOPE 05.02.69 378.50 10.00 388.50
110. SURIGAO HERNANDO 12.29.79 379.00 10.00 389.00
111. DE LA CRUZ CHARLIE 07.14.76 379.00 10.00 389.00
112. ROSAURO JUAN 07.15.76 379.50 10.00 389.50
113 HILOTIN ARLEN 10.10.77 383.00 10.00 393.004

On September 23, 1999, petitioner and the Union entered into a Collective Bargaining Agreement (CBA), effective July 1,
1999 until July 1, 2004. Section 1, Article VI (Salaries and Wage) of said CBA provides:

Section 1. WAGE ADJUSTMENT - The COMPANY agrees to grant all the workers, who are already regular and
covered by this AGREEMENT at the effectivity of this AGREEMENT, a general wage increase as follows:

July 1, 1999 . . . . . . . . . . . P15.00 per day per employee

July 1, 2000 . . . . . . . . . . . P25.00 per day per employee

July 1, 2001 . . . . . . . . . . . P30.00 per day per employee

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

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

July 1, 2000 . . . . . . . . . . . P25.00 per day per employee

July 1, 2001 . . . . . . . . . . . P30.00 per day per employee

The difference of the first year adjustment to retroact to July 1, 1999.

The across-the-board wage increase for the 4th and 5th year of this AGREEMENT shall be subject for a re-opening or
renegotiation as provided for by Republic Act No. 6715.5

For the first year of the CBA’s effectivity, the salaries of Union members were increased as follows:

NAME WAGE NAME WAGE


1. Pedro Acasio P427.00 53. Nestor Mazon P385.00
2. Roderick Alancado 301.00 54. Luis Morales 343.00
3. Jesus Albano 352.00 55. Calix Nebria 409.00
56. Bonifacio Ninora
4. Oliver Alejandro 330.00 301.00
Jr.
5. Welfredo Amania 343.00 57. Edgar Noblejas 338.00
6. Valentino Amper 343.00 58. Antonio Ofilan 429.50
7. Danilo Antolo 343.00 59. Reynaldo Ornopia 323.00
8. Nazario Apitan 431.00 60. Reynaldo Paez 291.00
9. Jonas Aquino 272.00 61. Ferdinand Panlaan 330.00
10. Eulogio Bagasbas, Jr. 330.00 62. Eulogio Par Jr. 301.00
11. Luis Bania, Jr. 301.00 63. Marvin Peco 223.00
12. Daniel Barbin 409.00 64. Emmanuel Pepino 249.00
13. Nelson Bascones 343.00 65. Danilo Perez 358.00
14. Alden Bayo-ang, Jr. 343.00 66. Jaime Pulpulaan 330.00
15. Jimmy Bermejo 277.00 67. Ariston Quidato 343.00
68. Graciano Ramos
16. Alfredo Bernabe 258.00 377.00
Jr.
69. Antonio
17. Lucenio Brin 385.00 301.00
Raymundo
18. Jonathan Buban 409.00 70. Ronilo Reboton 277.00
19. Roberto Bugtai 301.00 71. Ramon Relato 320.00
20. Danilo Cagomoc 343.00 72. Efren Reyes 343.00
21. Joseph Calleja 358.00 73. Ronaldo Reyes 343.00
22. Carlito Camaing 409.00 74. Joseph Rioja 301.00
23. Hermenigildo Carlon,
430.00 75. George Roda 301.00
Jr.
24. June Catacutan 343.00 76. Diosdado Roncales 395.00
25. Marlonito Chua 343.00 77. Gilbert Sabatin 343.00
26. Ambrocio Clavecilla 406.00 78. Julito Sabornido 409.00
27. Emeterio Cristy 414.50 79. Ronnie Sajot 343.00
28. Tirso Curambao 343.00 80. Eduardo Salameda 432.00
29. Loterio Daluyo 409.00 81. Edilberto Salen 277.00
30. Lauro Decena 343.00 82. Fundador Salon 301.00
31. Charlie dela Cruz 434.00 83. Edgar Sampaga 362.00
32. Raynaldo delos Santos 343.00 84. Fredie Se 395.00
33. Edilberto Discaya 395.00 85. Rodolfo Sevandra 250.00
34. Erwin Dorol 343.00 86. Jose Solo 343.00
35. Eldemar Edradan 277.00 87. Robinson Solon 370.00
36. Fulgencio Eleda 377.00 88. Luisito Suarez 402.00
37. Hercules Exmundo 343.00 89. Jeriel Suico 223.00
38. Domingo Fulgueras 417.00 90. Hernando Surigao 434.00
39. Federico Garcia 277.00 91. Franklin Suringa 343.00
40. Gil Gripon 429.75 92. Albert Tabaog 277.00
41. Arnold Guevarra 409.00 93. Joel Tizon 343.00
42. Arlen Hilotin 438.00 94. Alfredo Umbal 272.00
43. Urbano Jumawan, Jr. 409.00 95. Ferdinand Ventura 347.00
44. Ronilo Lacandoze 265.00 96. Joey Villamer 429.50
97.Domingo
45. Claudio Laroga, Jr. 343.00 430.50
Villanueva
46. Jesus Laurio 426.00 98. Joel Whiting 343.00
47. Mariano Lumansoc 377.00 99. Romeo Yson 406.00
48. Victor Magboo 301.00 100. Carlos Zuniega 409.00
49. Rolando Maglente 409.00 101. Nelson Zipagan 425.00
50. Marcos Malapo Jr. 409.00 102. Michael Sibol 343.00
51. Herohito Manlabao 430.00 103. Renante Tangian 223.00
52. Graciano Marasigan 409.00 104. Rodrigo Cascara 377.006

On October 14, 1999, Wage Order No. NCR-077 was issued, and on October 26, 1999, its Implementing Rules and
Regulations. It provided for a P25.50 per day increase in the salary of employees receiving the minimum wage and
increased the minimum wage to P223.50 per day. Petitioner paid the P25.50 per day increase to all of its rank-and-file
employees.

On July 1, 2000, the rank-and-file employees were granted the second year increase provided in the CBA in the amount
of P25.00 per day.8

On November 1, 2000, Wage Order No. NCR-089 took effect. Section 1 thereof provides:

Section 1. Upon the effectivity of this Wage Order, private sector workers and employees in the National Capital Region
receiving the prescribed daily minimum wage rate of P223.50 shall receive an increase of TWENTY SIX PESOS and
FIFTY CENTAVOS (P26.50) per day, thereby setting the new minimum wage rate in the National Capital Region at
TWO HUNDRED FIFTY PESOS (P250.00) per day.10

Then Union president Lucenio Brin requested petitioner to implement the increase under Wage Order No. NCR-08 in
favor of the company’s rank-and-file employees. Petitioner rejected the request, claiming that since none of the employees
were receiving a daily salary rate lower than P250.00 and there was no wage distortion, it was not obliged to grant the
wage increase.

The Union elevated the matter to the National Conciliation and Mediation Board. When the parties failed to settle, they
agreed to refer the case to voluntary arbitration. In the Submission Agreement, the parties agreed that the sole issue is
"[w]hether or not the management is obliged to grant wage increase under Wage Order No. NCR #8 as a matter of
practice,"11 and that the award of the Voluntary Arbitrator (VA) shall be final and binding.12

In its Position Paper, the Union alleged that it has been the company’s practice to grant a wage increase under a
government-issued wage order, aside from the yearly wage increases in the CBA. It averred that petitioner paid the salary
increases provided under the previous wage orders in full (aside from the yearly CBA increases), regardless of whether
there was a resulting wage distortion, or whether Union members’ salaries were above the minimum wage rate. Wage
Order No. NCR-06, where rank-and-file employees were given different wage increases ranging from P10.00 to P13.00,
was an exception since the adjustments were the result of the formula agreed upon by the Union and the employer after
negotiations. The Union averred that all of their CBAs with petitioner had a "collateral agreement" where petitioner was
mandated to pay the equivalent of the wage orders across-the-board, or at least to negotiate how much will be paid. It
pointed out that an established practice cannot be discontinued without running afoul of Article 100 of the Labor Code on
non-diminution of benefits.13

For its part, petitioner alleged that there is no such company practice and that it complied with the previous wage orders
(Wage Order Nos. NCR-01-05) because some of its employees were receiving wages below the minimum prescribed
under said orders. As for Wage Order No. NCR-07, petitioner alleged that its compliance was in accordance with its
verbal commitment to the Union during the CBA negotiations that it would implement any wage order issued in 1999.
Petitioner further averred that it applied the wage distortion formula prescribed under Wage Order Nos. NCR-06 and
NCR-07 because an actual distortion occurred as a result of their implementation. It asserted that at present, all its
employees enjoy regular status and that none receives a daily wage lower than the P250.00 minimum wage rate prescribed
under Wage Order No. NCR-08.14

In reply to the Union’s position paper, petitioner contended that the full implementation of the previous wage orders did
not give rise to a company practice as it was not given to the workers within the bargaining unit on a silver platter, but
only per request of the Union and after a series of negotiations. In fact, during CBA negotiations, it steadfastly rejected the
following proposal of the Union’s counsel, Atty. Florente Yambot, to include an across-the-board implementation of the
wage orders:15

x x x To supplement the above wage increases, the parties agree that additional wage increases equal to the wage orders
shall be paid across-the-board whenever the Regional Tripartite Wage and Productivity Board issues wage orders. It is
understood that these additional wage increases will be paid not as wage orders but as agreed additional salary increases
using the wage orders merely as a device to fix or determine how much the additional wage increases shall be paid. 16
The Union, however, insisted that there was such a company practice. It pointed out that despite the fact that all the
employees were already receiving salaries above the minimum wage, the CBA still provided for the payment of a wage
increase using wage orders as the yardstick. It claimed that the parties intended that petitioner-employer would pay the
additional increases apart from those in the CBA.17 The Union further asserted that the CBA did not include all the
agreements of the parties; hence, to determine the true intention of the parties, parol evidence should be resorted to. Thus,
Atty. Yambot’s version of the wage adjustment provision should be considered.18

On June 6, 2001, the VA rendered judgment in favor of the company and ordered the case dismissed. 19 It held that there
was no company practice of granting a wage order increase to employees across-the-board, and that there is no provision
in the CBA that would oblige petitioner to grant the wage increase under Wage Order No. NCR–08 across-the-board.20

The Union filed a petition for review with the CA under Rule 43 of the Rules of Court. It defined the issue for resolution
as follows:

The principal issue in the present petition is whether or not the wage increase of P26.50 under Wage Order No. NCR-08
must be paid to the union members as a matter of practice and whether or not parol evidence can be resorted to in proving
or explaining or elucidating the existence of a collateral agreement/company practice for the payment of the wage increase
under the wage order despite that the employees were already receiving wages way above the minimum wage
of P250.00/day as prescribed by Wage Order No. NCR-08 and irrespective of whether wage distortion exists.21

On September 23, 2004, the CA rendered judgment in favor of the Union and reversed that of the VA. The fallo of the
decision reads:

WHEREFORE, the assailed Decision dated June 6, 2001 of public respondent Voluntary Arbitrator is REVERSED and
SET ASIDE. Private respondent Pag-Asa Steel Works, Inc. is ordered to pay the members of the petitioner union
the P26.50 daily wage by applying the wage increase prescribed under Wage Order No. NCR-08. Costs against private
respondent.

SO ORDERED.22

The CA stressed that the CBA constitutes the law between the employer and the Union. It held that the CBA is plain and
clear, and leaves no doubt as to the intention of the parties, that is, to grant a wage increase that may be ordered by the
Wage Board in addition to the CBA-mandated salary increases regardless of whether the employees are already receiving
wages way above the minimum wage. The appellate court further held that the employer has no valid reason not to
implement the wage increase mandated by Wage Order No. NCR-08 because prior thereto, it had been paying the wage
increase provided for in the CBA even though the employees concerned were already receiving wages way above the
applicable minimum wage.23 Petitioner filed a motion for reconsideration which the CA denied for lack of merit on
January 11, 2005.24

Petitioner then filed the instant petition in which it raises the following issues:

I. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN NOT
FINDING THAT THE INCREASES PROVIDED FOR UNDER WAGE ORDER NO. 8 CANNOT BE DEMANDED
AS A MATTER OF RIGHT BY THE RESPONDENT UNDER THE 1999 CBA, in that:

a) Issue not averred in the complaint nor raised during the trial cannot be raised for the first time on
appeal; and

b) The Rules of Statutory Construction, in relation to Article 1370 and 1374 of the New Civil Code, as
well as Section 11 of the Rules of Court, requires that contract must be read in its entirety and the various
stipulations in a contract must be read together to give effect to all.

II. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN NOT
FINDING THAT THE INCREASES PROVIDED FOR UNDER WAGE ORDER NO. 8 CANNOT BE DEMANDED
BY THE RESPONDENT UNION AS A MATTER OF PRACTICE.25
Petitioner points out that the only issue agreed upon during the voluntary arbitration proceedings was whether or not the
company was obliged to grant the wage increase under Wage Order No. NCR-08 as a matter of practice. It posits that the
respondent did not anchor its claim for such wage increase on the CBA but on an alleged company practice of granting the
increase pursuant to a wage order. According to petitioner, respondent Union changed its theory on appeal when it
claimed before the CA that the CBA is ambiguous.26 Petitioner contends that respondent Union was precluded from
raising this issue as it was not raised during the voluntary arbitration. It insists that an issue cannot be raised for the first
time on appeal.27

Petitioner further argues that there is no ambiguity in the CBA. It avers that Section 1, Article VI of the CBA should be
read in its entirety.28 From the said provision, it is clear that the CBA contemplated only the implementation of a wage
order issued within six months from the execution of the CBA, and not every wage order issued during its effectivity.
Hence, petitioner complied with Wage Order No. NCR-07 which was issued 28 days from the execution of the CBA.
Petitioner emphasizes that this was implemented not because it was a matter of practice but because it was agreed upon in
the CBA.29 It alleges that respondent Union in fact realized that it could not invoke the provisions of the CBA to enforce
Wage Order No. NCR-08, which is why it agreed to limit the issue for voluntary arbitration to whether respondent Union
is entitled to the wage increase as a matter of practice. The fact that the "Yambot proposals" were left out in the final
document simply means that the parties never agreed to them.30

In any case, petitioner avers that respondent Union is not entitled to the wage increase provided under Wage Order No.
NCR-08 as a matter of practice. There is no company practice of granting a wage-order-mandated increase in addition to
the CBA-mandated wage increase. It points out that, as admitted by respondent Union, the previous wage orders were not
automatically implemented and were made applicable only after negotiations. Petitioner argues that the previous wage
orders were implemented because at that time, some employees were receiving salaries below the minimum wage and the
resulting wage distortion had to be remedied.31

For its part, respondent Union avers that the provision "[a]ny Wage Order to be implemented by the Regional Tripartite
Wage and Productivity Board shall be in addition to the wage increase adverted to above" referred to a company practice
of paying a wage increase whenever the government issues a wage order even if the employees’ salaries were above the
minimum wage and there is no resulting wage distortion. According to respondent, the CBA contemplated all the salary
increases that may be mandated by wage orders to be issued in the future. Since the wage order was only a device to
determine exactly how much and when the increase would be given, these increases are, in effect, CBA-mandated and not
wage order increases. 32 Respondent further avers that the ambiguity in the wage adjustment provision of the CBA can be
clarified by resorting to parol evidence, that is, Atty. Yambot’s version of said provision.33

The petition is meritorious. We rule that petitioner is not obliged to grant the wage increase under Wage Order No. NCR-
08 either by virtue of the CBA, or as a matter of company practice.

On the procedural issue, well-settled is the rule, also applicable in labor cases, that issues not raised below cannot be
raised for the first time on appeal.34 Points of law, theories, issues and arguments not brought to the attention of the lower
court need not be, and ordinarily will not be, considered by the reviewing court, as they cannot be raised for the first time
at that late stage. Basic considerations of due process impel this rule.35

We agree with petitioner’s contention that the issue on the ambiguity of the CBA and its failure to express the true
intention of the parties has not been expressly raised before the voluntary arbitration proceedings. The parties specifically
confined the issue for resolution by the VA to whether or not the petitioner is obliged to grant an increase to its employees
as a matter of practice. Respondent did not anchor its claim for an across-the-board wage increase under Wage Order No.
NCR-08 on the CBA. However, we note that it raised before the CA two issues, namely:

x x x whether or not the wage increase of P26.50 under Wage Order No. NCR-08 must be paid to the union members as a
matter of practice and whether or not parol evidence can be resorted to in proving or explaining or elucidating the
existence of a collateral agreement/company practice for the payment of the wage increase under the wage order despite
that the employees were already receiving wages way above the minimum wage of P250.00/day as prescribed by Wage
Order No. NCR-08 and irrespective of whether wage distortion exists.36

Petitioner, in its Comment on the petition, delved into these issues and elaborated on its contentions. By so doing, it
thereby agreed for the CA to take cognizance of such issues as defined by respondent (petitioner therein). Moreover, a
perusal of the records shows that the issue of whether or not the CBA is ambiguous and does not reflect the true
agreement of the parties was, in fact, raised before the voluntary arbitration proceedings. Despite the submission
agreement confining the issue to whether petitioner was obliged to grant an increase pursuant to Wage Order No. NCR-08
as a matter of practice, respondent Union nevertheless raised the same issues in its pleadings. In its Position Paper, it
asserted that the CBA consistently contained a collateral agreement to pay the equivalent of the wage orders across-the-
board; in its Reply, it claimed that such provision clearly provided that petitioner would pay the additional increases apart
from the CBA and that the wage order serves only as a measure of said increase. These assertions indicate that respondent
Union also relied on the CBA to support its claim for the wage increase.

Central to the substantial issue is Article VI, Section I, of the CBA of the parties, dated September 23, 1999, viz:

SALARIES AND WAGE

Section 1. WAGE ADJUSTMENT – The COMPANY agrees to grant to all workers who are already regular and covered
by this AGREEMENT at the effectivity of this AGREEMENT a general wage increase as follows:

July 1, 1999 ……. P15.00 per day per employee

July 1, 2000 ……. P25.00 per day per employee

July 1, 2001 ……. P 30.00 per day per employee

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

July 1, 1999 ……. P 20.00 per day per employee

July 1, 2000 ……. P 25.00 per day per employee

July 1, 2001 …… P 30.00 per day per employee

The difference of the first year adjustment to retroact to July 1, 1999.

The across-the-board wage increase for the 4th and 5th year of this AGREEMENT shall be subject for a reopening or
renegotiation as provided for by Republic Act No. 6715.37

On the other hand, Wage Order No. NCR-08 specifically provides that only those in the private sector in the NCR
receiving the prescribed daily minimum wage rate of P223.00 per day would receive an increase of P26.50 a day, thereby
setting the new minimum wage rate in said region to P250.00 per day. There is no dispute that, when the order was issued,
the lowest paid employee of petitioner was receiving a wage higher than P250.00 a day. As such, its employees had no
right to demand for an increase under said order. As correctly ruled by the VA:

We now come to the core of this case. Is [petitioner] under an obligation to grant wage increase to its workers under W.O.
No. NCR-08 as a matter of practice? It is submitted that employers (unless exempt) in Metro Manila (including the
[petitioner]) are mandated to implement the said wage order but limited to those entitled thereto. There is no legal basis to
implement the same across-the-board. A perusal of the record shows that the lowest paid employee before the
implementation of Wage Order #8 is P250.00/day and none was receiving below P223.50 minimum. This could only
mean that the union can no longer demand for any wage distortion adjustment. Neither could they insist for an adjustment
of P26.50 increase under Wage Order #8. The provision of wage order #8 and its implementing rules are very clear as to
who are entitled to the P26.50/day increase, i.e., "private sector workers and employees in the National Capital Region
receiving the prescribed daily minimum wage rate of P223.50 shall receive an increase of Twenty-Six Pesos and Fifty
Centavos (P26.50) per day," and since the lowest paid is P250.00/day the company is not obliged to adjust the wages of
the workers.
With the above narration of facts and with the union not having effectively controverted the same, we find no merit to the
complainant’s assertion of such a company practice in the grant of wage order increase applied across-the-board. The fact
that it was shown the increases granted under the Wage Orders were obtained thru request and negotiations because of the
existence of wage distortion and not as company practice as what the union would want.

Neither do we find merit in the argument that under the CBA, such increase should be implemented across-the-board. The
provision in the CBA that "Any Wage Order to be implemented by the Regional Tripartite Wage and Productivity Board
shall be in addition to the wage increase adverted above" cannot be interpreted in support of an across-the-board increase.
If such were the intentions of this provision, then the company could have simply accepted the original demand of the
union for such across-the-board implementation, as set forth in their original proposal (Annex "2" union[‘]s counsel
proposal). The fact that the company rejected this proposal can only mean that it was never its intention to agree, to such
across-the-board implementation. Thus, the union will have to be contented with the increase of P30.00 under the CBA
which is due on July 31, 2001 barely a month from now.38

The error of the CA lies in its considering only the CBA in interpreting the wage adjustment provision, without taking into
account Wage Order No. NCR-08, and the fact that the members of respondent Union were already receiving salaries
higher than P250.00 a day when it was issued. The CBA cannot be considered independently of the wage order which
respondent Union relied on for its claim.

Wage Order No. NCR-08 clearly states that only those employees receiving salaries below the prescribed minimum wage
are entitled to the wage increase provided therein, and not all employees across-the-board as respondent Union would
want petitioner to do. Considering therefore that none of the members of respondent Union are receiving salaries below
the P250.00 minimum wage, petitioner is not obliged to grant the wage increase to them.

The ruling of the Court in Capitol Wireless, Inc. v. Bate39 is instructive on how to construe a CBA vis-à-vis a wage order.
In that case, the company and the Union signed a CBA with a similar provision: "[s]hould there be any government
mandated wage increases and/or allowances, the same shall be over and above the benefits herein granted." 40 Thereafter,
the Wage Board of the NCR issued several wage orders providing for an across-the-board increase in the minimum wage
of all employees in the private sector. The company implemented the wage increases only to those employees covered by
the wage orders - those receiving not more than the minimum wage. The Union protested, contending that, pursuant to
said provision, any and all government-mandated increases in salaries and allowance should be granted to all employees
across-the-board. The Court held as follows:

x x x The wage orders did not grant across-the-board increases to all employees in the National Capital Region but limited
such increases only to those already receiving wage rates not more than P125.00 per day under Wage Order Nos. NCR-01
and NCR-01-A and P142.00 per day under Wage Order No. NCR-02. Since the wage orders specified who among the
employees are entitled to the statutory wage increases, then the increases applied only to those mentioned therein. The
provisions of the CBA should be read in harmony with the wage orders, whose benefits should be given only to those
employees covered thereby. (Emphasis added)41

In this case, as gleaned from the pleadings of the parties, respondent Union relied on a collateral agreement between it and
petitioner, an agreement extrinsic of the CBA based on an alleged established practice of the latter as employer. The VA
rejected this claim:

Complainant Pag-Asa Steel Workers Union additionally advances the arguments that "there exist a collateral agreement to
pay the equivalent of wage orders across the board or at least to negotiate how much will be paid" and that "parol
evidence is now applicable to show or explain what the unclean provisions of the CBA means regarding wage
adjustment." The respondent cites Article XXVII of the CBA in effect, as follows:

"The parties acknowledged that during the negotiation which resulted in this AGREEMENT, each had the unlimited right
& opportunity to make demands, claims and proposals of every kind and nature with respect to any subject or matter not
removed by law from the Collective Bargaining and the understanding and agreements arrived at by the parties after the
exercise of that right & opportunity are set forth in this AGREEMENT. Therefore, the COMPANY and the UNION, for
the life of this AGREEMENT, agrees that neither party shall not be obligated to bargain collectively with respect to any
subject matter not specifically referred to or covered in this AGREEMENT, and furthermore, that each party voluntarily
& unqualifiedly waives such right even though such subject may not have been within the knowledge or contemplation of
either or both of the parties at the time they signed this AGREEMENT."

From the said CBA provision and upon an appreciation of the entire CBA, we find it to have more than amply covered all
aspects of the collective bargaining. To allow alleged collateral agreements or parol/oral agreements would be violative of
the CBA provision afore-quoted.42

We agree with petitioner’s contention that the rule excluding parol evidence to vary or contradict a written agreement,
does not extend so far as to preclude the admission of extrinsic evidence, to show prior or contemporaneous collateral
parol agreements between the parties. Such evidence may be received regardless of whether or not the written agreement
contains reference to such collateral agreement.43 As the Court ruled in United Kimberly-Clark Employees Union, et al. v.
Kimberly-Clark Philippines, Inc.:44

A CBA is more than a contract; it is a generalized code to govern a myriad of cases which the draftsmen cannot wholly
anticipate. It covers the whole employment relationship and prescribes the rights and duties of the parties. It is a system of
industrial self-government with the grievance machinery at the very heart of the system. The parties solve their problems
by molding a system of private law for all the problems which may arise and to provide for their solution in a way which
will generally accord with the variant needs and desires of the parties.

If the terms of a CBA are clear and have no doubt upon the intention of the contracting parties, the literal meaning of its
stipulation shall prevail. However, if, in a CBA, the parties stipulate that the hirees must be presumed of employment
qualification standards but fail to state such qualification standards in said CBA, the VA may resort to evidence extrinsic
of the CBA to determine the full agreement intended by the parties. When a CBA may be expected to speak on a matter,
but does not, its sentence imports ambiguity on that subject. The VA is not merely to rely on the cold and cryptic words
on the face of the CBA but is mandated to discover the intention of the parties. Recognizing the inability of the parties to
anticipate or address all future problems, gaps may be left to be filled in by reference to the practices of the industry, and
the step which is equally a part of the CBA although not expressed in it. In order to ascertain the intention of the
contracting parties, their contemporaneous and subsequent acts shall be principally considered. The VA may also consider
and rely upon negotiating and contractual history of the parties, evidence of past practices interpreting ambiguous
provisions. The VA has to examine such practices to determine the scope of their agreement, as where the provision of the
CBA has been loosely formulated. Moreover, the CBA must be construed liberally rather than narrowly and technically
and the Court must place a practical and realistic construction upon it.45

However, just like any other fact, habits, customs, usage or patterns of conduct must be proved. Thus was the ruling of the
Court in Bank of Commerce v. Manalo, et al.:46

Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must contend with the caveat that,
before they admit evidence of usage, of habit or pattern of conduct, the offering party must establish the degree of
specificity and frequency of uniform response that ensures more than a mere tendency to act in a given manner but rather,
conduct that is semi-automatic in nature. The offering party must allege and prove specific, repetitive conduct that might
constitute evidence of habit. The examples offered in evidence to prove habit, or pattern of evidence must be numerous
enough to base on inference of systematic conduct. Mere similarity of contracts does not present the kind of sufficiently
similar circumstances to outweigh the danger of prejudice and confusion.

In determining whether the examples are numerous enough, and sufficiently regular, the key criteria are adequacy of
sampling and uniformity of response. After all, habit means a course of behavior of a person regularly represented in like
circumstances. It is only when examples offered to establish pattern of conduct or habit are numerous enough to lose an
inference of systematic conduct that examples are admissible. The key criteria are adequacy of sampling and uniformity
of response or ratio of reaction to situations.

We have reviewed the records meticulously and find no evidence to prove that the grant of a wage-order-mandated
increase to all the employees regardless of their salary rates on an agreement collateral to the CBA had ripened into
company practice before the effectivity of Wage Order No. NCR-08. Respondent Union failed to adduce proof on the
salaries of the employees prior to the issuance of each wage order to establish its allegation that, even if the employees
were receiving salaries above the minimum wage and there was no wage distortion, they were still granted salary increase.
Only the following lists of salaries of respondent Union’s members were presented in evidence: (1) before Wage Order
No. NCR-06 was issued; (2) after Wage Order No. NCR-06 was implemented; (3) after the grant of the first year increase
under the CBA; (4) after Wage Order No. NCR-07 was implemented; and (5) after the second year increase in the CBA
was implemented.

The list of the employees’ salaries before Wage Order No. NCR-06 was implemented belie respondent Union’s claim that
the wage-order-mandated increases were given to employees despite the fact that they were receiving salaries above the
minimum wage. This list proves that some employees were in fact receiving salaries below the P198.00 minimum wage
rate prescribed by the wage order — two rank-and-file employees in particular. As petitioner explains, a wage distortion
occurred as a result of granting the increase to those employees who were receiving salaries below the prescribed
minimum wage. The wage distortion necessitated the upward adjustment of the salaries of the other employees and not
because it was a matter of company practice or usage. The situation of the employees before Wage Order No. NCR-08,
however, was different. Not one of the members of respondent Union was then receiving less than P250.00 per day, the
minimum wage requirement in said wage order.

The only instance when petitioner admittedly implemented a wage order despite the fact that the employees were not
receiving salaries below the minimum wage was under Wage Order No. NCR-07. Petitioner, however, explains that it did
so because it was agreed upon in the CBA that should a wage increase be ordered within six months from its signing,
petitioner would give the increase to the employees in addition to the CBA-mandated increases. Respondent’s isolated act
could hardly be classified as a "company practice" or company usage that may be considered an enforceable obligation.

Moreover, to ripen into a company practice that is demandable as a matter of right, the giving of the increase should not
be by reason of a strict legal or contractual obligation, but by reason of an act of liberality on the part of the employer.
Hence, even if the company continuously grants a wage increase as mandated by a wage order or pursuant to a CBA, the
same would not automatically ripen into a company practice. In this case, petitioner granted the increase under Wage
Order No. NCR-07 on its belief that it was obliged to do so under the CBA.

WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP
No. 65171 and Resolution dated January 11, 2005 are REVERSED and SET ASIDE. The Decision of the Voluntary
Arbitrator is REINSTATED. No costs.

SO ORDERED.
SECOND DIVISION

G.R. No. 101761. March 24, 1993.

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS


COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.

Jose Mario C. Bunag for petitioner.

The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.

Zoilo V. de la Cruz for private respondent.

DECISION

REGALADO, J p:

The main issue presented for resolution in this original petition for certiorari is whether supervisory employees, as defined
in Article 212 (m), Book V of the Labor Code, should be considered as officers or members of the managerial staff under
Article 82, Book III of the same Code, and hence are not entitled to overtime rest day and holiday pay.

Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned and controlled by
the Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and Batangas. The Batangas refinery was
privatized on April 11, 1992 pursuant to Proclamation No. 50. 1 Private respondent union represents the former
supervisors of the NASUREFCO Batangas Sugar Refinery, namely, the Technical Assistant to the Refinery Operations
Manager, Shift Sugar Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant,
Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift Operations Chemist, Shift Electrical
Supervisor, General Services Supervisor, Instrumentation Supervisor, Community Development Officer, Employment and
Training Supervisor, Assistant Safety and Security Officer, Head and Personnel Services, Head Nurse, Property
Warehouse Supervisor, Head of Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor and
Motorpool Supervisor.

On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees, from rank-and-file to
department heads. The JE Program was designed to rationalized the duties and functions of all positions, reestablish levels
of responsibility, and recognize both wage and operational structures. Jobs were ranked according to effort, responsibility,
training and working conditions and relative worth of the job. As a result, all positions were re-evaluated, and all
employees including the members of respondent union were granted salary adjustments and increases in benefits
commensurate to their actual duties and functions.

We glean from the records that for about ten years prior to the JE Program, the members of respondent union were treated
in the same manner as rank-and file employees. As such, they used to be paid overtime, rest day and holiday pay pursuant
to the provisions of Articles 87, 93 and 94 of the Labor Code as amended. With the implementation of the JE Program, the
following adjustments were made: (1) the members of respondent union were re-classified under levels S-5 to S-8 which
are considered managerial staff for purposes of compensation and benefits; (2) there was an increase in basic pay of the
average of 50% of their basic pay prior to the JE Program, with the union members now enjoying a wide gap (P1,269.00
per month) in basic pay compared to the highest paid rank-and-file employee; (3) longevity pay was increased on top of
alignment adjustments; (4) they were entitled to increased company COLA of P225.00 per month; (5) there was a grant of
P100.00 allowance for rest day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was organized pursuant to
Republic Act NO. 6715 allowing supervisory employees to form their own unions, as the bargaining representative of all
the supervisory employees at the NASUREFCO Batangas Sugar Refinery.

Two years after the implementation of the JE Program, specifically on June 20, 1990, the members of herein respondent
union filed a complainant with the executive labor arbiter for non-payment of overtime, rest day and holiday pay allegedly
in violation of Article 100 of the Labor Code.

On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as follows:

"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is hereby directed to —

1. pay the individual members of complainant union the usual overtime pay, rest day pay and holiday pay enjoyed by
them instead of the P100.00 special allowance which was implemented on June 11, 1988; and

2. pay the individual members of complainant union the difference in money value between the P100.00 special allowance
and the overtime pay, rest day pay and holiday pay that they ought to have received from June 1, 1988.

All other claims are hereby dismissed for lack of merit.

SO ORDERED."

In finding for the members therein respondent union, the labor ruled that the along span of time during which the benefits
were being paid to the supervisors has accused the payment thereof to ripen into contractual obligation; at the
complainants cannot be estopped from questioning the validity of the new compensation package despite the fact that they
have been receiving the benefits therefrom, considering that respondent union was formed only a year after the
implementation of the Job Evaluation Program, hence there was no way for the individual supervisors to express their
collective response thereto prior to the formation of the union; and the comparative computations presented by the private
respondent union showed that the P100.00 special allowance given NASUREFCO fell short of what the supervisors ought
to receive had the overtime pay rest day pay and holiday pay not been discontinued, which arrangement, therefore,
amounted to a diminution of benefits.

On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National Labor Relations
Commission (NLRC) affirmed the decision of the labor arbiter on the ground that the members of respondent union are
not managerial employees, as defined under Article 212 (m) of the Labor Code and, therefore, they are entitled to
overtime, rest day and holiday pay. Respondent NLRC declared that these supervisory employees are merely exercising
recommendatory powers subject to the evaluation, review and final action by their department heads; their responsibilities
do not require the exercise of discretion and independent judgment; they do not participate in the formulation of
management policies nor in the hiring or firing of employees; and their main function is to carry out the ready policies and
plans of the corporation. 3 Reconsideration of said decision was denied in a resolution of public respondent dated August
30, 1991. 4

Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent commission
committed a grave abuse of discretion in refusing to recognized the fact that the members of respondent union are
members of the managerial staff who are not entitled to overtime, rest day and holiday pay; and in making petitioner
assume the "double burden" of giving the benefits due to rank-and-file employees together with those due to supervisors
under the JE Program.

We find creditable merit in the petition and that the extraordinary writ of certiorari shall accordingly issue.

The primordial issue to be resolved herein is whether the members of respondent union are entitled to overtime, rest day
and holiday pay. Before this can be resolved, however it must of necessity be ascertained first whether or not the union
members, as supervisory employees, are to be considered as officers or members of the managerial staff who are exempt
from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are supervisory employees, as defined employees, as defined
under Article 212(m), Book V of the Labor Code on Labor Relations, which reads:

"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay-off, recall, discharged, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer effectively recommend such managerial actions if the exercise of
such authority is not merely routinary or clerical in nature but requires the use of independent judgment. All employees
not falling within any of those above definitions are considered rank-and-file employees of this Book."

Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday pay, and in ruling that
the latter are not managerial employees, adopted the definition stated in the aforequoted statutory provision.

Petitioner, however, avers that for purposes of determining whether or not the members of respondent union are entitled to
overtime, rest day and holiday pay, said employees should be considered as "officers or members of the managerial staff"
as defined under Article 82, Book III of the Labor Code on "Working Conditions and Rest Periods" and amplified in
Section 2, Rule I, Book III of the Rules to Implement the Labor Code, to wit:

"Art. 82 Coverage. — The provisions of this title shall apply to employees in all establishments and undertakings whether
for profit or not, but not to government employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the personal service of another, and workers
who are paid by results as determined by the Secretary of Labor in Appropriate regulations.

"As used herein, 'managerial employees' refer to those whose primary duty consists of the management of the
establishment in which they are employed or of a department or subdivision thereof, and to other officers or members of
the managerial staff." (Emphasis supplied.)

xxx xxx xxx

'Sec. 2. Exemption. — The provisions of this rule shall not apply to the following persons if they qualify for exemption
under the condition set forth herein:

xxx xxx xxx

(b) Managerial employees, if they meet all of the following conditions, namely:

(1) Their primary duty consists of the management of the establishment in which they are employed or of a department or
subdivision thereof:

(2) They customarily and regularly direct the work of two or more employees therein:

(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and recommendations as to
the hiring and firing and as to the promotion or any other change of status of other employees are given particular weight.

(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:

(1) The primary duty consists of the performance of work directly related to management policies of their employer;

(2) Customarily and regularly exercise discretion and independent judgment;

(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of the
management of the establishment in which he is employed or subdivision thereof; or (ii) execute under general
supervision work along specialized or technical lines requiring special training, experience, or knowledge; or (iii) execute
under general supervision special assignments and tasks; and
(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are not directly and
closely related to the performance of the work described in paragraphs (1), (2), and above."

It is the submission of petitioner that while the members of respondent union, as supervisors, may not be occupying
managerial positions, they are clearly officers or members of the managerial staff because they meet all the conditions
prescribed by law and, hence, they are not entitled to overtime, rest day and supervisory employees under Article 212 (m)
should be made to apply only to the provisions on Labor Relations, while the right of said employees to the questioned
benefits should be considered in the light of the meaning of a managerial employee and of the officers or members of the
managerial staff, as contemplated under Article 82 of the Code and Section 2, Rule I Book III of the implementing rules.
In other words, for purposes of forming and joining unions, certification elections, collective bargaining, and so forth, the
union members are supervisory employees. In terms of working conditions and rest periods and entitlement to the
questioned benefits, however, they are officers or members of the managerial staff, hence they are not entitled thereto.

While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be
supposed that every labor dispute will be automatically decided in favor of labor. Management also has its own rights
which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those with
less privileges in life, this Court has inclined more often than not toward the worker and upheld his cause in his conflicts
with the employer. Such favoritism, however, has not blinded us to the rule that justice is in every case for the deserving,
to be dispensed in the light of the established facts and the applicable law and doctrine. 5

This is one such case where we are inclined to tip the scales of justice in favor of the employer.

The question whether a given employee is exempt from the benefits of the law is a factual one dependent on the
circumstances of the particular case, In determining whether an employee is within the terms of the statutes, the criterion
is the character of the work performed, rather than the title of the employee's position. 6

Consequently, while generally this Court is not supposed to review the factual findings of respondent commission,
substantial justice and the peculiar circumstances obtaining herein mandate a deviation from the rule.

A cursory perusal of the Job Value Contribution Statements 7 of the union members will readily show that these
supervisory employees are under the direct supervision of their respective department superintendents and that generally
they assist the latter in planning, organizing, staffing, directing, controlling communicating and in making decisions in
attaining the company's set goals and objectives. These supervisory employees are likewise responsible for the effective
and efficient operation of their respective departments. More specifically, their duties and functions include, among
others, the following operations whereby the employee:

1) assists the department superintendent in the following:

a) planning of systems and procedures relative to department activities;

b) organizing and scheduling of work activities of the department, which includes employee shifting scheduled and
manning complement;

c) decision making by providing relevant information data and other inputs;

d) attaining the company's set goals and objectives by giving his full support;

e) selecting the appropriate man to handle the job in the department; and

f) preparing annual departmental budget;

2) observes, follows and implements company policies at all times and recommends disciplinary action on erring
subordinates;

3) trains and guides subordinates on how to assume responsibilities and become more productive;
4) conducts semi-annual performance evaluation of his subordinates and recommends necessary action for their
development/advancement;

5) represents the superintendent or the department when appointed and authorized by the former;

6) coordinates and communicates with other inter and intra department supervisors when necessary;

7) recommends disciplinary actions/promotions;

8) recommends measures to improve work methods, equipment performance, quality of service and working conditions;

9) sees to it that safety rules and regulations and procedure and are implemented and followed by all NASUREFCO
employees, recommends revisions or modifications to said rules when deemed necessary, and initiates and prepares
reports for any observed abnormality within the refinery;

10) supervises the activities of all personnel under him and goes to it that instructions to subordinates are properly
implemented; and

11) performs other related tasks as may be assigned by his immediate superior.

From the foregoing, it is apparent that the members of respondent union discharge duties and responsibilities which
ineluctably qualify them as officers or members of the managerial staff, as defined in Section 2, Rule I Book III of the
aforestated Rules to Implement the Labor Code, viz.: (1) their primary duty consists of the performance of work directly
related to management policies of their employer; (2) they customarily and regularly exercise discretion and independent
judgment; (3) they regularly and directly assist the managerial employee whose primary duty consist of the management
of a department of the establishment in which they are employed (4) they execute, under general supervision, work along
specialized or technical lines requiring special training, experience, or knowledge; (5) they execute, under general
supervision, special assignments and tasks; and (6) they do not devote more than 20% of their hours worked in a work-
week to activities which are not directly and clearly related to the performance of their work hereinbefore described.

Under the facts obtaining in this case, we are constrained to agree with petitioner that the union members should be
considered as officers and members of the managerial staff and are, therefore, exempt from the coverage of Article 82.
Perforce, they are not entitled to overtime, rest day and holiday.

The distinction made by respondent NLRC on the basis of whether or not the union members are managerial employees,
to determine the latter's entitlement to the questioned benefits, is misplaced and inappropriate. It is admitted that these
union members are supervisory employees and this is one instance where the nomenclatures or titles of their jobs conform
with the nature of their functions. Hence, to distinguish them from a managerial employee, as defined either under
Articles 82 or 212 (m) of the Labor Code, is puerile and in efficacious. The controversy actually involved here seeks a
determination of whether or not these supervisory employees ought to be considered as officers or members of the
managerial staff. The distinction, therefore, should have been made along that line and its corresponding conceptual
criteria.

II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the questioned benefits to the union
members has ripened into a contractual obligation.

A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to the rank-and-file
employees such as overtime, rest day and holiday pay, simply because they were treated in the same manner as rank-and-
file employees, and their basic pay was nearly on the same level as those of the latter, aside from the fact that their
specific functions and duties then as supervisors had not been properly defined and delineated from those of the rank-and-
file. Such fact is apparent from the clarification made by petitioner in its motion for reconsideration 8 filed with
respondent commission in NLRC Case No. CA No. I-000058, dated August 16, 1991, wherein, it lucidly explained:
"But, complainants no longer occupy the same positions they held before the JE Program. Those positions formerly
classified as 'supervisory' and found after the JE Program to be rank-and-file were classified correctly and continue to
receive overtime, holiday and restday pay. As to them, the practice subsists.

"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-defined and in most
cases their organizational positions re-designated to confirm their superior rank and duties. Thus, after the JE program,
complainants cannot be said to occupy the same positions." 9

It bears mention that this positional submission was never refuted nor controverted by respondent union in any of its
pleadings filed before herein public respondent or with this Court. Hence, it can be safely concluded therefrom that the
members of respondent union were paid the questioned benefits for the reason that, at that time, they were rightfully
entitled thereto. Prior to the JE Program, they could not be categorically classified as members or officers of the
managerial staff considering that they were then treated merely on the same level as rank-and-file. Consequently, the
payment thereof could not be construed as constitutive of voluntary employer practice, which cannot be now be
unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced over a long period of time,
and must be shown to have been consistent and deliberate. 10

The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue
giving the benefits knowingly fully well that said employees are not covered by the law requiring payment thereof. 11 In
the case at bar, respondent union failed to sufficiently establish that petitioner has been motivated or is wont to give these
benefits out of pure generosity.

B. It remains undisputed that the implementation of the JE Program, the members of private respondent union were re-
classified under levels S-5 S-8 which were considered under the program as managerial staff purposes of compensation
and benefits, that they occupied re-evaluated positions, and that their basic pay was increased by an average of 50% of
their basic salary prior to the JE Program. In other words, after the JE Program there was an ascent in position, rank and
salary. This in essence is a promotion which is defined as the advancement from one position to another with an increase
in duties and responsibilities as authorized by law, and usually accompanied by an increase in salary. 12

Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits which attach and
pertain exclusively to their positions. Entitlement to the benefits provided for by law requires prior compliance with the
conditions set forth therein. With the promotion of the members of respondent union, they occupied positions which no
longer met the requirements imposed by law. Their assumption of these positions removed them from the coverage of the
law, ergo, their exemption therefrom.

As correctly pointed out by petitioner, if the union members really wanted to continue receiving the benefits which attach
to their former positions, there was nothing to prevent them from refusing to accept their promotions and their
corresponding benefits. As the sating goes by, they cannot have their cake and eat it too or, as petitioner suggests, they
could not, as a simple matter of law and fairness, get the best of both worlds at the expense of NASUREFCO.

Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of management, provided it
is done in good faith. In the case at bar, private respondent union has miserably failed to convince this Court that the
petitioner acted implementing the JE Program. There is no showing that the JE Program was intended to circumvent the
law and deprive the members of respondent union of the benefits they used to receive.

Not so long ago, on this particular score, we had the occasion to hold that:

". . . it is the prerogative of the management to regulate, according to its discretion and judgment, all aspects of
employment. This flows from the established rule that labor law does not authorize the substitution of the judgment of the
employer in the conduct of its business. Such management prerogative may be availed of without fear of any liability so
long as it is exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating on
circumventing the rights of employees under special laws or valid agreement and are not exercised in a malicious, harsh,
oppressive, vindictive or wanton manner or out of malice or spite." 13
WHEREFORE, the impugned decision and resolution of respondent National Labor Relations Commission promulgated
on July 19, 1991 and August 30, 1991, respectively, are hereby ANNULLED and SET ASIDE for having been rendered
and adopted with grave abuse of discretion, and the basic complaint of private respondent union is DISMISSED.
SECOND DIVISION

[G.R. No. 155059. April 29, 2005]

AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION, petitioner, vs. AMERICAN WIRE
AND CABLE CO., INC. and THE COURT OF APPEALS, respondents.

DECISION
CHICO-NAZARIO, J.:

Before Us is a special civil action for certiorari, assailing the Decision[1] of the Special Eighth Division of the Court
of Appeals dated 06 March 2002. Said Decision upheld the Decision [2] and Order[3] of Voluntary Arbitrator Angel A.
Ancheta of the National Conciliation and Mediation Board (NCMB) dated 25 September 2001 and 05 November 2001,
respectively, which declared the private respondent herein not guilty of violating Article 100 of the Labor Code, as
amended. Assailed likewise, is the Resolution[4] of the Court of Appeals dated 12 July 2002, which denied the motion for
reconsideration of the petitioner, for lack of merit.

THE FACTS

The facts of this case are quite simple and not in dispute.
American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of wires and cables. There are two
unions in this company, the American Wire and Cable Monthly-Rated Employees Union (Monthly-Rated Union) and the
American Wire and Cable Daily-Rated Employees Union (Daily-Rated Union).
On 16 February 2001, an original action was filed before the NCMB of the Department of Labor and Employment
(DOLE) by the two unions for voluntary arbitration. They alleged that the private respondent, without valid cause,
suddenly and unilaterally withdrew and denied certain benefits and entitlements which they have long enjoyed. These are
the following:

a. Service Award;

b. 35% premium pay of an employees basic pay for the work rendered during Holy Monday, Holy Tuesday,
Holy Wednesday, December 23, 26, 27, 28 and 29;

c. Christmas Party; and

d. Promotional Increase.

A promotional increase was asked by the petitioner for fifteen (15) of its members who were given or assigned new
job classifications. According to petitioner, the new job classifications were in the nature of a promotion, necessitating the
grant of an increase in the salaries of the said 15 members.
On 21 June 2001, a Submission Agreement was filed by the parties before the Office for Voluntary Arbitration.
Assigned as Voluntary Arbitrator was Angel A. Ancheta.
On 04 July 2001, the parties simultaneously filed their respective position papers with the Office of the Voluntary
Arbitrator, NCMB, and DOLE.
On 25 September 2001, a Decision[5] was rendered by Voluntary Arbitrator Angel A. Ancheta in favor of the private
respondent. The dispositive portion of the said Decision is quoted hereunder:
WHEREFORE, with all the foregoing considerations, it is hereby declared that the Company is not guilty of violating
Article 100 of the Labor Code, as amended, or specifically for withdrawing the service award, Christmas party and 35%
premium for work rendered during Holy Week and Christmas season and for not granting any promotional increase to the
alleged fifteen (15) Daily-Rated Union Members in the absence of a promotion. The Company however, is directed to
grant the service award to deserving employees in amounts and extent at its discretion, in consultation with the Unions on
grounds of equity and fairness.[6]

A motion for reconsideration was filed by both unions[7] where they alleged that the Voluntary Arbitrator manifestly
erred in finding that the company did not violate Article 100 of the Labor Code, as amended, when it unilaterally
withdrew the subject benefits, and when no promotional increase was granted to the affected employees.
On 05 November 2001, an Order[8] was issued by Voluntary Arbitrator Angel A. Ancheta. Part of the Order is quoted
hereunder:

Considering that the issues raised in the instant case were meticulously evaluated and length[i]ly discussed and explained
based on the pleadings and documentary evidenc[e] adduced by the contending parties, we find no cogent reason to
change, modify, or disturb said decision.

WHEREFORE, let the instant MOTION[S] FOR RECONSIDERATION be, as they are hereby, denied for lack of merit.
Our decision dated 25 September 2001 is affirmed en toto.[9]

An appeal under Rule 43 of the 1997 Rules on Civil Procedure was made by the Daily-Rated Union before the Court
of Appeals[10] and docketed as CA-G.R. SP No. 68182. The petitioner averred that Voluntary Arbitrator Angel A. Ancheta
erred in finding that the company did not violate Article 100 of the Labor Code, as amended, when the subject benefits
were unilaterally withdrawn. Further, they assert, the Voluntary Arbitrator erred in adopting the companys unaudited
Revenues and Profitability Analysis for the years 1996-2000 in justifying the latters withdrawal of the questioned
benefits.[11]
On 06 March 2002, a Decision in favor of herein respondent company was promulgated by the Special Eighth
Division of the Court of Appeals in CA-G.R. SP No. 68182. The decretal portion of the decision reads:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly
DISMISSED, for lack of merit. The Decision of Voluntary Arbitrator Angel A. Ancheta dated September 25, 2001 and
his Order dated November 5, 2001 in VA Case No. AAA-10-6-4-2001 are hereby AFFIRMED and UPHELD.[12]

A motion for reconsideration[13] was filed by the petitioner, contending that the Court of Appeals misappreciated the
facts of the case, and that it committed serious error when it ruled that the unaudited financial statement bears no
importance in the instant case.
The Court of Appeals denied the motion in its Resolution dated 12 July 2002[14] because it did not present any new
matter which had not been considered in arriving at the decision. The dispositive portion of the Resolution states:

WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.[15]

Dissatisfied with the court a quos ruling, petitioner instituted the instant special civil action for certiorari,[16] citing
grave abuse of discretion amounting to lack of jurisdiction.

ASSIGNMENT OF ERRORS

The petitioner assigns as errors the following:


I

THE COURT OF APPEALS ERRED IN HOLDING THAT THE COMPANY DID NOT VIOLATE ARTICLE 100 OF
THE LABOR CODE, AS AMENDED, WHEN IT UNILATERALLY WITHDREW THE BENEFITS OF THE
MEMBERS OF PETITIONER UNION, TO WIT: 1) 35% PREMIUM PAY; 2) CHRISTMAS PARTY AND ITS
INCIDENTAL BENEFITS; AND 3) SERVICE AWARD, WHICH IN TRUTH AND IN FACT SAID
BENEFITS/ENTITLEMENTS HAVE BEEN GIVEN THEM SINCE TIME IMMEMORIAL, AS A MATTER OF
LONG ESTABLISHED COMPANY PRACTICE, WITH THE FURTHER FACT THAT THE SAME NOT BEING
DEPENDENT ON PROFITS.

II

THE COURT OF APPEALS ERRED WHEN IT JUST ACCEPTED HOOK, LINE AND SINKER, THE RESPONDENT
COMPANYS SELF SERVING AND UNAUDITED REVENUES AND PROFITABILITY ANALYSIS FOR THE
YEARS 1996-2000 WHICH THEY SUBMITTED TO FALSELY JUSTIFY THEIR UNLAWFUL ACT OF
UNILATERALLY AND SUDDENLY WITHDRAWING OR DENYING FROM THE PETITIONER THE SUBJECT
BENEFITS/ENTITLEMENTS.

III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE YEARLY SERVICE AWARD IS NOT
DEPENDENT ON PROFIT BUT ON SERVICE AND THUS, CANNOT BE UNILATERALLY WITHDRAWN BY
RESPONDENT COMPANY.

ISSUE

Synthesized, the solitary issue that must be addressed by this Court is whether or not private respondent is guilty of
violating Article 100 of the Labor Code, as amended, when the benefits/entitlements given to the members of petitioner
union were withdrawn.

THE COURTS RULING

Before we address the sole issue presented in the instant case, it is best to first discuss a matter which was raised by
the private respondent in its Comment. The private respondent contends that this case should have been dismissed outright
because of petitioners error in the mode of appeal. According to it, the petitioner should have elevated the instant case to
this Court through a petition for review on certiorari under Rule 45, and not through a special civil action
for certiorari under Rule 65, of the 1997 Rules on Civil Procedure.[17]
Assuming arguendo that the mode of appeal taken by the petitioner is improper, there is no question that the
Supreme Court has the discretion to dismiss it if it is defective. However, sound policy dictates that it is far better to
dispose the case on the merits, rather than on technicality.[18]
The Supreme Court may brush aside the procedural barrier and take cognizance of the petition as it raises an issue of
paramount importance. The Court shall resolve the solitary issue on the merits for future guidance of the bench and bar.[19]
With that out of the way, we shall now resolve whether or not the respondent company is guilty of violating Article
100 of the Labor Code, as amended.
Article 100 of the Labor Code provides:

ART. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS. Nothing in this Book
shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time
of promulgation of this Code.

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

The Court has previously ruled that financial statements audited by independent external auditors constitute the normal
method of proof of the profit and loss performance of a company.

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

A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the
employers business and made possible the realization of profits. It is an act of generosity granted by an enlightened
employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. The
granting of a bonus is a management prerogative, something given in addition to what is ordinarily received by or strictly
due the recipient. Thus, a bonus is not a demandable and enforceable obligation, except when it is made part of the wage,
salary or compensation of the employee.

Based on the foregoing pronouncement, it is obvious that the benefits/entitlements subjects of the instant case are all
bonuses which were given by the private respondent out of its generosity and munificence. The additional 35% premium
pay for work done during selected days of the Holy Week and Christmas season, the holding of Christmas parties with
raffle, and the cash incentives given together with the service awards are all in excess of what the law requires each
employer to give its employees. Since they are above what is strictly due to the members of petitioner-union, the granting
of the same was a management prerogative, which, whenever management sees necessary, may be withdrawn, unless they
have been made a part of the wage or salary or compensation of the employees.
The consequential question therefore that needs to be settled is if the subject benefits/entitlements, which are
bonuses, are demandable or not. Stated another way, can these bonuses be considered part of the wage or salary or
compensation making them enforceable obligations?
The Court does not believe so.
For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by the
parties,[30] or it must have had a fixed amount[31] and had been a long and regular practice on the part of the employer.[32]
The benefits/entitlements in question were never subjects of any express agreement between the parties. They were
never incorporated in the Collective Bargaining Agreement (CBA). As observed by the Voluntary Arbitrator, the records
reveal that these benefits/entitlements have not been subjects of any express agreement between the union and the
company, and have not yet been incorporated in the CBA. In fact, the petitioner has not denied having made proposals
with the private respondent for the service award and the additional 35% premium pay to be made part of the CBA. [33]
The Christmas parties and its incidental benefits, and the giving of cash incentive together with the service award
cannot be said to have fixed amounts. What is clear from the records is that over the years, there had been a downtrend in
the amount given as service award.[34] There was also a downtrend with respect to the holding of the Christmas parties in
the sense that its location changed from paid venues to one which was free of charge,[35] evidently to cut costs. Also, the
grant of these two aforementioned bonuses cannot be considered to have been the private respondents long and regular
practice. To be considered a regular practice, the giving of the bonus should have been done over a long period of time,
and must be shown to have been consistent and deliberate.[36] The downtrend in the grant of these two bonuses over the
years demonstrates that there is nothing consistent about it. Further, as held by the Court of Appeals:

Anent the Christmas party and raffle of prizes, We agree with the Voluntary Arbitrator that the same was
merely sponsored by the respondent corporation out of generosity and that the same is dependent on the financial
performance of the company for a particular year[37]

The additional 35% premium pay for work rendered during selected days of the Holy Week and Christmas season
cannot be held to have ripened into a company practice that the petitioner herein have a right to demand. Aside from the
general averment of the petitioner that this benefit had been granted by the private respondent since time immemorial,
there had been no evidence adduced that it had been a regular practice. As propitiously observed by the Court of Appeals:

. . . [N]otwithstanding that the subject 35% premium pay was deliberately given and the same was in excess of that
provided by the law, the same however did not ripen into a company practice on account of the fact that it was only
granted for two (2) years and with the express reservation from respondent corporations owner that it cannot continue to
rant the same in view of the companys current financial situation.[38]

To hold that an employer should be forced to distribute bonuses which it granted out of kindness is to penalize him
for his past generosity.[39]
Having thus ruled that the additional 35% premium pay for work rendered during selected days of the Holy Week
and Christmas season, the holding of Christmas parties with its incidental benefits, and the grant of cash incentive
together with the service award are all bonuses which are neither demandable nor enforceable obligations of the private
respondent, it is not necessary anymore to delve into the Revenues and Profitability Analysis for the years 1996-2000
submitted by the private respondent.
On the alleged promotion of 15 members of the petitioner union that should warrant an increase in their salaries, the
factual finding of the Voluntary Arbitrator is revealing, viz:

Considering that the Union was unable to adduce proof that a promotion indeed occur[ed] with respect to the 15
employees, the Daily Rated Unions claim for promotional increase likewise fall[s] there being no promotion established
under the records at hand.[40]
WHEREFORE, in view of all the foregoing, the assailed Decision and Resolution of the Court of Appeals dated 06
March 2002 and 12 July 2002, respectively, which affirmed and upheld the decision of the Voluntary Arbitrator, are
hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.
THIRD DIVISION

EASTERN G.R. No. 185665


TELECOMMUNICATIONS
PHILIPPINES, INC.,
Petitioner, Present:

- versus - VELASCO, JR., J., Chairperson,

BERSAMIN,*
EASTERN TELECOMS
ABAD,
EMPLOYEES UNION,
Respondent.
MENDOZA, and

PERLAS-BERNABE, JJ.

Promulgated:

February 8, 2012
x ----------------------------------------------------------------------------------------x

DECISION

MENDOZA, J.:

Before the Court is a petition for review on certiorari seeking modification of the June 25, 2008 Decision[1] of the Court of
Appeals (CA) and its December 12, 2008 Resolution,[2] in CA-G.R. SP No. 91974, annulling the April 28, 2005
Resolution[3] of the National Labor Relations Commission (NLRC) in NLRC-NCR-CC-000273-04 entitled In the Matter
of the Labor Dispute in Eastern Telecommunications, Philippines, Inc.

The Facts

As synthesized by the NLRC, the facts of the case are as follows, viz:

Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business of


providing telecommunications facilities, particularly leasing international date lines or circuits, regular
landlines, internet and data services, employing approximately 400 employees.

Eastern Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent of the
companys rank and file employees with a strong following of 147 regular members. It has an existing
collecti[ve] bargaining agreement with the company to expire in the year 2004 with a Side Agreement
signed on September 3, 2001.

In essence, the labor dispute was a spin-off of the companys plan to defer payment of the 2003
14 , 15 and 16th month bonuses sometime in April 2004. The companys main ground in postponing the
th th

payment of bonuses is due to allege continuing deterioration of companys financial position which started
in the year 2000. However, ETPI while postponing payment of bonuses sometime in April 2004, such
payment would also be subject to availability of funds.

Invoking the Side Agreement of the existing Collective Bargaining Agreement for the period
2001-2004 between ETPI and ETEU which stated as follows:

4. Employment Related Bonuses. The Company confirms that the 14th, 15th and
16 month bonuses (other than 13th month pay) are granted.
th

The union strongly opposed the deferment in payment of the bonuses by filing a preventive mediation
complaint with the NCMB on July 3, 2003, the purpose of which complaint is to determine the date when
the bonus should be paid.

In the conference held at the NCMB, ETPI reiterated its stand that payment of the bonuses would
only be made in April 2004 to which date of payment, the union agreed. Thus, considering the agreement
forged between the parties, the said agreement was reduced to a Memorandum of Agreement. The union
requested that the President of the company should be made a signatory to the agreement, however, the
latter refused to sign. In addition to such a refusal, the company made a sudden turnaround in its position
by declaring that they will no longer pay the bonuses until the issue is resolved through compulsory
arbitration.

The companys change in position was contained in a letter dated April 14, 2004 written to the
union by Mr. Sonny Javier, Vice-President for Human Resources and Administration, stating that the
deferred release of bonuses had been superseded and voided due to the unions filing of the issue to the
NCMB on July 18, 2003. He declared that until the matter is resolved in a compulsory arbitration, the
company cannot and will not pay any bonuses to any and all union members.

Thus, on April 26, 2004, ETEU filed a Notice of Strike on the ground of unfair labor practice for
failure of ETPI to pay the bonuses in gross violation of the economic provision of the existing CBA.

On May 19, 2004, the Secretary of Labor and Employment, finding that the company is engaged
in an industry considered vital to the economy and any work disruption thereat will adversely affect not
only its operation but also that of the other business relying on its services, certified the labor dispute for
compulsory arbitration pursuant to Article 263 (q) of the Labor Code as amended.

Acting on the certified labor dispute, a hearing was called on July 16, 2004 wherein the parties
have submitted that the issues for resolution are (1) unfair labor practice and (2) the grant of 14th, 15th and
16th month bonuses for 2003, and 14th month bonus for 2004. Thereafter, they were directed to submit
their respective position papers and evidence in support thereof after which submission, they agreed to
have the case considered submitted for decision.[4]

In its position paper,[5] the Eastern Telecoms Employees Union (ETEU) claimed that Eastern Telecommunications
Philippines, Inc. (ETPI) had consistently and voluntarily been giving out 14th month bonus during the month of April, and
15th and 16th month bonuses every December of each year (subject bonuses) to its employees from 1975 to 2002, even
when it did not realize any net profits. ETEU posited that by reason of its long and regular concession, the payment of
these monetary benefits had ripened into a company practice which could no longer be unilaterally withdrawn by ETPI.
ETEU added that this long-standing company practice had been expressly confirmed in the Side Agreements of the 1998-
2001 and 2001-2004 Collective Bargaining Agreements (CBA) which provided for the continuous grant of these bonuses
in no uncertain terms. ETEU theorized that the grant of the subject bonuses is not only a company practice but also a
contractual obligation of ETPI to the union members.

ETEU contended that the unjustified and malicious refusal of the company to pay the subject bonuses was a clear
violation of the economic provision of the CBA and constitutes unfair labor practice (ULP). According to ETEU, such
refusal was nothing but a ploy to spite the union for bringing the matter of delay in the payment of the subject bonuses to
the National Conciliation and Mediation Board (NCMB). It prayed for the award of moral and exemplary damages as well
as attorneys fees for the unfair labor practice allegedly committed by the company.

On the other hand, ETPI in its position paper,[6] questioned the authority of the NLRC to take cognizance of the
case contending that it had no jurisdiction over the issue which merely involved the interpretation of the economic
provision of the 2001-2004 CBA Side Agreement. Nonetheless, it maintained that the complaint for nonpayment of 14 th,
15th and 16th month bonuses for 2003 and 14th month bonus for 2004 was bereft of any legal and factual basis. It averred
that the subject bonuses were not part of the legally demandable wage and the grant thereof to its employees was an act of
pure gratuity and generosity on its part, involving the exercise of management prerogative and always dependent on the
financial performance and realization of profits. It posited that it resorted to the discontinuance of payment of the bonuses
due to the unabated huge losses that the company had continuously experienced. It claimed that it had been suffering
serious business losses since 2000 and to require the company to pay the subject bonuses during its dire financial straits
would in effect penalize it for its past generosity. It alleged that the non-payment of the subject bonuses was neither
flagrant nor malicious and, hence, would not amount to unfair labor practice.

Further, ETPI argued that the bonus provision in the 2001-2004 CBA Side Agreement was a mere affirmation that
the distribution of bonuses was discretionary to the company, premised and conditioned on the success of the business and
availability of cash. It submitted that said bonus provision partook of the nature of a one-time grant which the employees
may demand only during the year when the Side Agreement was executed and was never intended to cover the entire term
of the CBA. Finally, ETPI emphasized that even if it had an unconditional obligation to grant bonuses to its employees,
the drastic decline in its financial condition had already legally released it therefrom pursuant to Article 1267 of the Civil
Code.

On April 28, 2005, the NLRC issued its Resolution dismissing ETEUs complaint and held that ETPI could not be
forced to pay the union members the 14th, 15th and 16th month bonuses for the year 2003 and the 14th month bonus for the
year 2004 inasmuch as the payment of these additional benefits was basically a management prerogative, being an act of
generosity and munificence on the part of the company and contingent upon the realization of profits. The NLRC
pronounced that ETPI may not be obliged to pay these extra compensations in view of the substantial decline in its
financial condition. Likewise, the NLRC found that ETPI was not guilty of the ULP charge elaborating that no sufficient
and substantial evidence was adduced to attribute malice to the company for its refusal to pay the subject bonuses. The
dispositive portion of the resolution reads:
WHEREFORE, premises considered, the instant complaint is hereby DISMISSED for lack of
merit.
SO ORDERED.[7]

Respondent ETEU moved for reconsideration but the motion was denied by the NLRC in its Resolution
dated August 31, 2005.

Aggrieved, ETEU filed a petition for certiorari[8] before the CA ascribing grave abuse of discretion on the NLRC
for disregarding its evidence which allegedly would prove that the subject bonuses were part of the union members wages,
salaries or compensations. In addition, ETEU asserted that the NLRC committed grave abuse of discretion when it ruled
that ETPI is not contractually bound to give said bonuses to the union members.

In its assailed June 25, 2008 Decision, the CA declared that the Side Agreements of the 1998 and 2001 CBA
created a contractual obligation on ETPI to confer the subject bonuses to its employees without qualification or condition.
It also found that the grant of said bonuses has already ripened into a company practice and their denial would amount to
diminution of the employees benefits. It held that ETPI could not seek refuge under Article 1267 of the Civil Code
because this provision would apply only when the difficulty in fulfilling the contractual obligation was manifestly beyond
the contemplation of the parties, which was not the case therein. The CA, however, sustained the NLRC finding that the
allegation of ULP was devoid of merit. The dispositive portion of the questioned decision reads:

WHEREFORE, premises considered, the instant petition is GRANTED and the resolution of the
National Labor Relations Commission dated April 28, 2005 is hereby ANNULLED and SET ASIDE.
Respondent Eastern Telecommunications Philippines, Inc. is ordered to pay the members of petitioner
their 14th, 15th and 16th month bonuses for the year 2003 and 14th month for the year 2004. The complaint
for unfair labor practice against said respondent is DISMISSED.
SO ORDERED.[9]

ISSUES

Dissatisfied, ETPI now comes to this Court via Rule 45, raising the following errors allegedly committed by the
CA, to wit:

I.
THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT ANNULLED
AND SET ASIDE THE RESOLUTIONS OF THE NLRC DISREGARDING THE WELL
SETTLED RULE THAT A WRIT OF CERTIORARI (UNDER RULE 65) ISSUES ONLY FOR
CORRECTION OF ERRORS OF JURISDICTION OR GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION.

II.

THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT


DISREGARDED THE RULE THAT FINDINGS OF FACTS OF QUASI-JUDICIAL BODIES
ARE ACCORDED FINALITY IF THEY ARE SUPPORTED BY SUBSTANTIAL EVIDENCE
CONSIDERING THAT THE CONCLUSIONS OF THE NLRC WERE BASED ON
SUBSTANTIAL AND OVERWHELMING EVIDENCE AND UNDISPUTED FACTS.

III.

IT WAS A GRAVE ERROR OF LAW FOR THE COURT OF APPEALS TO CONSIDER THAT
THE BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS EMPLOYEES IS NOT
DEPENDENT ON THE REALIZATION OF PROFITS.

IV.

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT


DISREGARDED THE UNDISPUTED FACT THAT EASTERN COMMUNICATIONS IS
SUFFERING FROM TREMENDOUS FINANCIAL LOSSES, AND ORDERED EASTERN
COMMUNICATIONS TO GRANT THE BONUSES REGARDLESS OF THE FINANCIAL
DISTRESS OF EASTERN COMMUNICATIONS.

V.

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT ARRIVED


AT THE CONCLUSION THAT THE GRANT OF BONUS GIVEN BY EASTERN
COMMUNICATIONS TO ITS EMPLOYEES HAS RIPENED INTO A COMPANY
PRACTICE.[10]

A careful perusal of the voluminous pleadings filed by the parties leads the Court to conclude that this case
revolves around the following core issues:
1. Whether or not petitioner ETPI is liable to pay 14th, 15th and 16th month bonuses for the year 2003 and
14th month bonus for the year 2004 to the members of respondent union; and

2. Whether or not the CA erred in not dismissing outright ETEUs petition for certiorari.

ETPI insists that it is under no legal compulsion to pay 14th, 15th and 16th month bonuses for the year 2003 and
14th month bonus for the year 2004 contending that they are not part of the demandable wage or salary and that their grant
is conditional based on successful business performance and the availability of company profits from which to source the
same. To thwart ETEUs monetary claims, it insists that the distribution of the subject bonuses falls well within the
companys prerogative, being an act of pure gratuity and generosity on its part. Thus, it can withhold the grant thereof
especially since it is currently plagued with economic difficulties and financial losses. It alleges that the companys fiscal
situation greatly declined due to tremendous and extraordinary losses it sustained beginning the year 2000. It claims that it
cannot be compelled to act liberally and confer upon its employees additional benefits over and above those mandated by
law when it cannot afford to do so. It posits that so long as the giving of bonuses will result in the financial ruin of an
already distressed company, the employer cannot be forced to grant the same.

ETPI further avers that the act of giving the subject bonuses did not ripen into a company practice arguing that it
has always been a contingent one dependent on the realization of profits and, hence, the workers are not entitled to
bonuses if the company does not make profits for a given year. It asseverates that the 1998 and 2001 CBA Side
Agreements did not contractually afford ETEU a vested property right to a perennial payment of the bonuses. It opines
that the bonus provision in the Side Agreement allows the giving of benefits only at the time of its execution. For this
reason, it cannot be said that the grant has ripened into a company practice. In addition, it argues that even if such
traditional company practice exists, the CA should have applied Article 1267 of the Civil Code which releases the obligor
from the performance of an obligation when it has become so difficult to fulfill the same.

It is the petitioners stance that the CA should have dismissed outright the respondent unions petition for certiorari
alleging that no question of jurisdiction whatsoever was raised therein but, instead, what was being sought was a judicial
re-evaluation of the adequacy or inadequacy of the evidence on record. It claims that the CA erred in disregarding the
findings of the NLRC which were based on substantial and overwhelming evidence as well as on undisputed facts. ETPI
added that the CA court should have refrained from tackling issues of fact and, instead, limited itself on issues of
jurisdiction and grave abuse of jurisdiction amounting to lack or excess of it.

The Courts Ruling


As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not normally
embark on a re-examination of the evidence presented by the contending parties during the trial of the case considering
that the findings of facts of the CA are conclusive and binding on the Court. The rule, however, admits of several
exceptions, one of which is when the findings of the appellate court are contrary to those of the trial court or the lower
administrative body, as the case may be.[11] Considering the incongruent factual conclusions of the CA and the NLRC, this
Court finds Itself obliged to resolve it.

The pivotal question determinative of this controversy is whether the members of ETEU are entitled to the
payment of 14th, 15th and 16th month bonuses for the year 2003 and 14th month bonus for year 2004.

After an assiduous assessment of the record, the Court finds no merit in the petition.

From a legal point of view, 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.[12] The grant 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.[13]

A bonus, however, becomes a demandable or enforceable obligation when it is made part of the wage or salary or
compensation of the employee.[14] Particularly instructive is the ruling of the Court in Metro Transit Organization, Inc. v.
National Labor Relations Commission,[15] where it was written:

Whether or not a bonus forms part of wages depends upon the circumstances and conditions for
its payment. If it is additional compensation which the employer promised and agreed to give without any
conditions imposed for its payment, such as success of business or greater production or output, then it is
part of the wage. But if it is paid only if profits are realized or if a certain level of productivity is
achieved, it cannot be considered part of the wage. Where it is not payable to all but only to some
employees and only when their labor becomes more efficient or more productive, it is only an inducement
for efficiency, a prize therefore, not a part of the wage.
The consequential question that needs to be settled, therefore, is whether the subject bonuses are demandable or
not. Stated differently, can these bonuses be considered part of the wage, salary or compensation making them
enforceable obligations?

The Court believes so.

In the case at bench, it is indubitable that ETPI and ETEU agreed on the inclusion of a provision for the grant of
14th, 15th and 16thmonth bonuses in the 1998-2001 CBA Side Agreement,[16] as well as in the 2001-2004 CBA Side
Agreement,[17] which was signed on September 3, 2001. The provision, which was similarly worded, states:

Employment-Related Bonuses
The Company confirms that the 14th, 15th and 16th month bonuses (other than the 13th month pay) are
granted.

A reading of the above provision reveals that the same provides for the giving of 14th, 15th and 16th month
bonuses without qualification. The wording of the provision does not allow any other interpretation. There were no
conditions specified in the CBA Side Agreements for the grant of the benefits contrary to the claim of ETPI that the same
is justified only when there are profits earned by the company. Terse and clear, the said provision does not state that the
subject bonuses shall be made to depend on the ETPIs financial standing or that their payment was contingent upon the
realization of profits. Neither does it state that if the company derives no profits, no bonuses are to be given to the
employees. In fine, the payment of these bonuses was not related to the profitability of business operations.

The records are also bereft of any showing that the ETPI made it clear before or during the execution of the Side
Agreements that the bonuses shall be subject to any condition. Indeed, if ETPI and ETEU intended that the subject
bonuses would be dependent on the company earnings, such intention should have been expressly declared in the Side
Agreements or the bonus provision should have been deleted altogether. In the absence of any proof that ETPIs consent
was vitiated by fraud, mistake or duress, it is presumed that it entered into the Side Agreements voluntarily, that it had full
knowledge of the contents thereof and that it was aware of its commitment under the contract. Verily, by virtue of its
incorporation in the CBA Side Agreements, the grant of 14th, 15th and 16th month bonuses has become more than just an
act of generosity on the part of ETPI but a contractual obligation it has undertaken. Moreover, the continuous conferment
of bonuses by ETPI to the union members from 1998 to 2002 by virtue of the Side Agreements evidently negates its
argument that the giving of the subject bonuses is a management prerogative.

From the foregoing, ETPI cannot insist on business losses as a basis for disregarding its undertaking. It is
manifestly clear that although it incurred business losses of ₱149,068,063.00 in the year 2000, it continued to
distribute 14th, 15th and 16th month bonuses for said year. Notwithstanding such huge losses, ETPI entered into the 2001-
2004 CBA Side Agreement on September 3, 2001 whereby it contracted to grant the subject bonuses to ETEU in no
uncertain terms. ETPI continued to sustain losses for the succeeding years of 2001 and 2002 in the amounts of
₱348,783,013.00 and ₱315,474,444.00, respectively. Still and all, this did not deter it from honoring the bonus provision
in the Side Agreement as it continued to give the subject bonuses to each of the union members in 2001 and 2002 despite
its alleged precarious financial condition. Parenthetically, it must be emphasized that ETPI even agreed to the payment of
the 14th, 15th and 16th month bonuses for 2003 although it opted to defer the actual grant in April 2004. All given, business
losses could not be cited as grounds for ETPI to repudiate its obligation under the 2001-2004 CBA Side Agreement.

The Court finds no merit in ETPIs contention that the bonus provision confirms the grant of the subject bonuses
only on a single instance because if this is so, the parties should have included such limitation in the agreement. Nowhere
in the Side Agreement does it say that the subject bonuses shall be conferred once during the year the Side Agreement was
signed. The Court quotes with approval the observation of the CA in this regard:

ETPI argues that assuming the bonus provision in the Side Agreement of the 2001-2004 CBA
entitles the union members to the subject bonuses, it is merely in the nature of a one-time grant and not
intended to cover the entire term of the CBA. The contention is untenable. The bonus provision in
question is exactly the same as that contained in the Side Agreement of the 1998-2001 CBA and there is
no denying that from 1998 to 2001, ETPI granted the subject bonuses for each of those years. Thus, ETPI
may not now claim that the bonus provision in the Side Agreement of the 2001-2004 CBA is only a one-
time grant.[18]

ETPI then argues that even if it is contractually bound to distribute the subject bonuses to ETEU members under
the Side Agreements, its current financial difficulties should have released it from the obligatory force of said contract
invoking Article 1267 of the Civil Code. Said provision declares:

Article 1267. When the service has become so difficult as to be manifestly beyond the
contemplation of the parties, the obligor may also be released therefrom, in whole or in part.

The Court is not persuaded.

The parties to the contract must be presumed to have assumed the risks of unfavorable developments. It is,
therefore, only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor.[19] In the
case at bench, the Court determines that ETPIs claimed depressed financial state will not release it from the binding effect
of the 2001-2004 CBA Side Agreement.

ETPI appears to be well aware of its deteriorating financial condition when it entered into the 2001-2004 CBA
Side Agreement with ETEU and obliged itself to pay bonuses to the members of ETEU. Considering that ETPI had been
continuously suffering huge losses from 2000 to 2002, its business losses in the year 2003 were not exactly unforeseen or
unexpected. Consequently, it cannot be said that the difficulty in complying with its obligation under the Side Agreement
was manifestly beyond the contemplation of the parties. Besides, as held in Central Bank of the Philippines v. Court of
Appeals,[20] mere pecuniary inability to fulfill an engagement does not discharge a contractual obligation. Contracts, once
perfected, are binding between the contracting parties. Obligations arising therefrom have the force of law and should be
complied with in good faith. ETPI cannot renege from the obligation it has freely assumed when it signed the 2001-2004
CBA Side Agreement.

Granting arguendo that the CBA Side Agreement does not contractually bind petitioner ETPI to give the subject
bonuses, nevertheless, the Court finds that its act of granting the same has become an established company practice such
that it has virtually become part of the employees salary or wage. A bonus may be granted on equitable consideration
when the giving of such bonus has been the companys long and regular practice. In Philippine Appliance Corporation v.
Court of Appeals,[21] it was pronounced:

To be considered a regular practice, however, the giving of the bonus should have been done over
a long period of time, and must be shown to have been consistent and deliberate. The test or rationale of
this rule on long practice requires an indubitable showing that the employer agreed to continue giving the
benefits knowing fully well that said employees are not covered by the law requiring payment thereof.

The records show that ETPI, aside from complying with the regular 13th month bonus, has been further giving its
employees 14thmonth bonus every April as well as 15th and 16th month bonuses every December of the year, without fail,
from 1975 to 2002 or for 27 years whether it earned profits or not. The considerable length of time ETPI has been giving
the special grants to its employees indicates a unilateral and voluntary act on its part to continue giving said
benefits knowing that such act was not required by law. Accordingly, a company practice in favor of the employees has
been established and the payments made by ETPI pursuant thereto ripened into benefits enjoyed by the employees.

The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating Article 100 of the
Labor Code:

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

The rule is settled that any benefit and supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded on the
constitutional mandate to protect the rights of workers and to promote their welfare and to afford labor full protection. [22]

Interestingly, ETPI never presented countervailing evidence to refute ETEUs claim that the company has been
continuously paying bonuses since 1975 up to 2002 regardless of its financial state. Its failure to controvert the allegation,
when it had the opportunity and resources to do so, works in favor of ETEU. Time and again, it has been held that should
doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in
favor of the latter.[23]

WHEREFORE, the petition is DENIED. The June 25, 2008 Decision of the Court of Appeals and its December
12, 2008 Resolution are AFFIRMED.
SO ORDERED.
EN BANC

G.R. No. L-5103 December 24, 1952

PHILIPPINE EDUCATION CO., INC., petitioner,


vs.
COURT OF INDUSTRIAL RELATIONS and UNION OF PHILIPPINE EDUCATION EMPLOYEES
(NLU),respondents.

Marcial Esposo for petitioner.


Eulogio R. Lerum and M.A. Ferrer for respondents.

PADILLA, J.:

On August 1950 the respondent Union of Philippine Education Employees (NLU) filed a petition in the Court of
Industrial Relations submitting a 17-point demand for arbitration and adjudication (Case No. 489-V). On 27 November,
the respondent union filed in the same case a motion. (No. 489-V[4]), pleading —

1. That it had been the established policy and practice of the respondent to consider its employees and laborers as
part-owners of its business and to grant them a share in the profits annually in the form of a bonus:

2. That for the fiscal year ending on March 31, 1950, the respondent made a net profit of P513,666.39 out of its
invested capital of P1,973,300.00;

3. That on September 20, 1950, a demand was made by the petitioner on the respondent for the payment of the
bonus corresponding to the share of the employees and laborers in the profits made by it, but by reason of the
union activities of the said employees and laborers, the respondent refused to pay the same;

4. That a profit of twelve percent of the capital invested had been considered by this court as a fair return on
investments.

The motion ends with a prayer that the petitioner "be ordered to pay its employees and laborers as their share in the profits
in the form of a bonus the amount of P513,666.39 less an amount corresponding the 12 per cent of P1,973,300 as the
profit of the company on its invested capital."

Petitioner's answer denied the allegations of the respondent union that it had considered its employees and laborers as part
owners of its business and that for that reason granted them a share in the profits annually in the form of bonuses, the truth
being that bonuses have been paid by the company in its discretion, merely as a gift to deserving employees as it saw fit;
admitted that it had realized profits amounting to P513,666.39 upon its invested capital of P1,973,300.00; that a demand
for payment of bonuses was made but they were not paid not because of union activities but of losses sustained by reason
of the strike and of the damaging effects of the import and exchange controls; alleged that the court did not have
jurisdiction over the matter of the motion and could not entertain it for the reason that the basic petition of the respondent
union contained no demand for payment of bonus, and that it would be taking property without due process of law and,
therefore, unconstitutional, if the court would compel the petitioner to pay its employees and laborers the profits it had
realized in excess of 12 per cent of its invested capital.

On 30 July 1951 the Court of Industrial Relations issued an order directing the petitioner to pay the amount of P90,706.36
set aside as bonus to its officers and employees who had been in the service during the fiscal year ending 31 March 1950
in proportion to their respective salaries and length of service. This order was followed by another in banc denying
unanimously a motion for reconsideration.

The case is now before us upon a petition for a writ of certiorari to review the order.
It is contented that in accordance with sections 2 and 4 of Rule 2, which discourage multiplicity of suits or splitting a
cause of action, the petition filed on 9 August 1950 which failed to include a demand for the payment of bonus may be
pleased in abatement of the motion praying for such payment. This is true in ordinary civil suits but not in proceedings in
the Court of Industrial Relations. However, the original 17-demand petition was filed on 9 August 1950, the demand for
the payment of bonus was made on 20 September and the motion to compel the petitioner to pay it was filed on 27
November after the latter's refusal to pay the same, so that the motion may be deemed to be a supplemental pleading of a
demand which arose subsequent to the filing of the original petition. The respondent union could not have included the
demand for the payment of bonus in its original 17-demand petition because on the date of its fling it did not know
whether its demand for the payment of bonus was to be granted.lawphil.net

Petitioner's admission of the facts pleaded in par. 2 of the motion of 27 November which reads thus —

That for the fiscal year ending on March 31, 1950, the respondent made a net profit of P513,666.39 out of its
invested capital of P1,973,300.00.

despite the objection to the hearing of the motion to compel it to pay bonus upon its erroneous belief that the Court had no
jurisdiction to hear the motion which led it not to present any evidence, dispenses with the presentation of evidence on the
amount of profit realized out of the capital invested in its business during the fiscal year ending 31 March 1950. Although
there is no express admission by the petitioners as to the sum of P90,706.36 set aside to pay bonus the evidence shows
that such amount has been set aside for the purpose (Exhibit F). The petitioner does not deny it.

Section 13 of Commonwealth Act No. 103 authorizes and empowers the Court of Industrial Relations to make awards not
only on the specific relief claimed or demand made by the parties to a dispute, but also on such as it may deem necessary
or expedient to settle or prevent further disputes. One reason for denying the payment of bonus is the strike by members
of the respondent union which caused losses to the petitioner. The order of the respondent court states that the strike
staged on 20 August 1950 was declared legal in its order of 27 October from which no appeal was taken. Another is the
anticipated adverse effect on its business by the import and exchange controls.

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 employer's business and made possible the realization of profits. It is an act of generosity of the employer
for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the
employee to greater efforts for the success of the business and realization of bigger profits. And the occasion for its grant
and payment is usually during the time of the year when people are more generous and inclined to give. This is the
Christmas holidays. If by the bookkeeping or accounting system the closing of the books is not made at the end of the
calendar year, bonus is granted at the close of the fiscal year when the net profits realized in the preceding year are
definitely known. From the legal point of view a bonus is not a demandable and enforceable obligation. It is so when it is
made a part of the wage or salary or compensation. In such a case the latter would be a fixed amount and the former
would be a contingent one dependent upon the realization of profits. If there be more, there would be no bonus. In the
matter of Sullivan Dry Dock and Repair Corporation and Local 13, Industrial Union of Marine and Shipbuilding Workers
of America, C.I.O. (Decisions and Orders of the National Labor Relations Board, Vol. 67, page 627), cited by the
respondent court and the respondent union, the Christmas bonus paid in previous years and paid in 1944 to other workers
was withheld from the timekeepers; the latter through their representative demanded its payment; the management refused
to pay it but proposed that the payment of bonus for the ensuing year (1945) be made the subject of bargaining for
contract. The company's attorney and labor relations officer stated that the bonus paid "has been in existence for such a
period of time that it has been, under the interpretation of the Wage Stabilization Act, an integral part of the wage
structure." (p. 632.) The bonus demanded was ordered paid. The case of Singer Mfg. Co. vs. National Labor Relations
Board, 119 F. 2d 131, invoked by the respondent union on the matter of bonus, has no application to the present case
because what the Circuit Court of Appeals, Seventh Circuit, ruled is that the petitioner refused to bargain in good faith
with its employees and their designated bargaining agent and among the matters to be threshed out was the payment of
bonus as part of the wage. What would support, though faintly, respondent union's position is the rule laid down by the
Supreme Court of Washington (state) in Powell, et al. vs. Republic Creosoting Co., 19P. 2d 919, where it was held (one
justice dissenting) that bonus payment made annually for over a period of years (from 1916 to 1929) by the employer to a
branch manager constituted, by implied agreement, part of the manager's salary.

As heretofore stated the payment of bonus is not from the legal point of view a contractual and enforceable obligation. But
the petitioner is not sued before a court of justice. It is before the Court of Industrial Relations. And according to the law
of its creation it may make an award for the purpose of settling and preventing further disputes. And taking into
consideration the facts and circumstances of the case — that bonuses had been given to the employees at least in three
previous years; that the amount of P90,706.36 has been set aside for payment as bonus to its employees and laborers and
the reason for withholding the payment thereof was the strike staged by the employees and laborers for more favorable
working conditions which was declared legal by the respondent court — justice and equity demand that bonus already set
aside for its employees and laborers be paid to them. The award would still be within the ambit of the respondent court's
power and function which is mainly to prevent further disputes and perhaps strikes which is so detrimental to both labor
and management and to the public weal. Whether this petition be deemed an appeal by certiorari under Rule 44 or one of
certiorari under Rule 67, it is clear that the respondent court had under and pursuant to the law of its creation the power
and authority to make the award complained of. The order appealed from is affirmed, without costs.
EN BANC

G.R. No. L-5577 July 31, 1954

H. E. HEACOCK CO., petitioner-appellant,


vs.
NATIONAL LABOR UNION, ET AL., respondents-appellees.

Perkins, Ponce Enrile and Contreras for petitioner.


H. A. Ferrer for respondent court.
Eulogio R. Lerum for respondent Union.

PARAS, C.J.:

The National Labor Union, hereinafter to be referred to as the Union, filed a petition under date of June 26, 1950 in the
Court of Industrial Relations against H. E. Heacock Co., hereinafter to be referred to as the Company, praying that the
latter be ordered to pay to all its low salaried employees their bonus for the years 1948 and 1949, in an amount equivalent
to one month salary for each year, it being alleged in substance that on the occasion of the distribution on April 17, 1948
of the same bonus for the year 1947, the Company promised that said benefit would be granted yearly to the employees,
provided sufficient profits were made; that in 1948 and 1949 the Company, notwithstanding available profits, distributed
bonus only to its high salaried employees; that upon the Company's failure to accede to the Union's demand for the
payment of the stipulated bonus for the years 1948 and 1949, and upon its refusal to submit the matter to the labor-
management committee in accordance with the collective bargaining agreement of April 1949, the employees declared a
strike on June 19, 1950.

In its answer, the Company in substance alleged that it had never bound itself to pay an annual bonus and that granted for
the year 1947 was purely an act of grace and liberality on the part of the Company; that while the Company made some
profits and paid to its executive and chiefs of departments bonuses for the years 1948 and 1949, the same was a voluntary
concession of said officials who had received no increases in pay and were not entitled to and did not actually collect
compensation for overtime work; that the compensation of the employees was never made to depend wholly or in part
upon profits, and all wages to which they are entitled were set out in the agreement of July 11, 1949, and any other
payment or gratuity was entirely within the Company's discretion; that the illegal strike staged by the Union led the
Company to suffer damages in the sum of P12,000.00.

After hearing, the Court of Industrial Relations, through Judge Jose S. Bautista, rendered a decision in favor of the
employees, ordering the Company to pay them one months salary as bonus for the year 1948 and another one months
salary for the year 1949. A subsequent motion for reconsideration filed by the Company was denied by the resolution of
the Court of Industrial Relations en banc dated July 16, 1951, by a vote of three to two. The instant petition
for certiorari was filed by the Company, assailing the decision of the Court of Industrial Relations.

The lower court found that on April 17, 1948, the Company distributed to all its employees a bonus equivalent to their
salaries for one month for the year 1947; that the Company realized profits in 1948 and 1949, and although it paid bonus
to its high officials and executives for said years, it did not extend the same privilege to any low salaried employee; that
the Union duly filed with the Company a protest against such omission, and demanded the payment of the same bonus to
all the low salaried employees; that in the protest of May 15, 1950, the Union gave notice that, upon failure of the
company to grant the demand, steps would be taken for the protection of the members of the Union; that upon denial of
the Company and its failure to submit the matter to the labor-management committee, as requested by the Union, the
employees' staged a peaceful strike on June 19, 1950, although they returned to work in obedience to a directive of the
court; that the Company in fact made a promise to all its low salaried employees on April 17, 1948, that a bonus of one
month salary would be distributed among them yearly, as for the year 1947, as long as the Company would realize
sufficient profits.

The Company, however, contends that it had never assumed the obligation of paying the bonus claimed by the Union, and
that there is no evidence whatsoever tending to prove such obligation.
It appears that the issues of The Manila Times and The Manila Chronicle of August 22, 1948 featured a "Heacock
Supplement" containing the following statements:

The steady growth and enviable reputation of the H. E. Heacock Co., as an institution well known in the
Philippines and in the entire Far East for its quality merchandise and courteous service exemplify a modern tenet
of progressive employer-employee relationship founded on mutual confidence and good-will.

The Heacock employees are given all the benefits that can reasonably be expected from the management, Jose Y.
Orosa, the firm's first vice-president and assistant general manager, declared. "For this reason," he added, "we
have never had the unfortunate experience of seeing our employees go on strike since the company was organized
in 1905. And we don't expect to have any strikes."

That the sound relationship between the management and the employees redounds to the good of everybody
concerned was also pointed out by Mr. Orosa. The employer's goodwill is returned with a spontaneous
manifestation of loyalty, cooperation, efficiency and unstinted honesty on the part of the employees, it was further
explained.

The present mutual confidence and good-will of Heacock's personnel is maintained for the ultimate benefit of the
buying public, Mr. Orosa said. Employees who are treated right have sufficient reasons to give their employers
full cooperation so that in the final analysis, the customers are the recipients of the rewards of such cooperation.

Since the H. E. Heacock Co. resumed business after the war, 87 of its 200 employees have been given salary
increases, Mr. Orosa revealed. There are other meritorious cases which deserve similar consideration in due time,
it was pointed out.

One of the most helpful and progressive steps ever taken by a firm like Heacock's is the setting up of a special
fund for which the employees may draw a cash loan equivalent to a half-month salary and payable within 60 days.
This privilege, it was explained, is a boon to those employees who may be forced by circumstances beyond their
control to meet emergency needs.

Another benefit extended to Heacock employees is a 25 per cent over time pay in addition to their regular pay. In
other words, the employees are paid 25 per cent for all hours of work beyond eight-hour limit fixed by law, it was
also stressed. This makes it fair and profitable for the employees of this firm to render overtime service whenever
the need arises, and that generally is during special sales and the Christmas season.

At the end of every year, Mr. Orosa declared, the Heacock employees enjoy a profit-sharing privilege when they
are given bonuses by the management the amount depending on the profits realized during that year. This
progressive policy, he pointed out, makes for a genuine interest on the part of the employees to work honestly and
sincerely for the good of the company-a company which is theirs in a sense.

Every year the employees of Heacock's are given 15 days vacation leave and 15 days sick leave with pay. They
are also entitled to free medical and dental service rendered by the company physician and dentist.

The management of the H. E. Heacock Co. firmly believes that athletics fosters fraternity, cooperation and "a
sound mind in a sound body." With this end in view, the firm formed an athletic association whose membership is
open to all employees of the company. Followers of the basketball game in this country are familiar with the
reputation of the Heacock quintet which has time and again garnered laurels in the local sporting world.

Mr. Orosa revealed that the H. E. Heacock Co. is a bona fide member of the Manila Industrial and Commercial
Association (MICA). Such membership, he said assures both the management and the employees with a solid
foundation for profitable and sound business relationship. Problems affecting both parties which may arise are
met and solved with open minds on common grounds. Fortunately for Heacock's, 40 years of public service have
proved that the management and the employees have joined hands in mutual confidence and good-will.
"Heacock's has a splendid reputation," Mr. Orosa declared, "and this has been built up by the employees and the
management. We have live up to the expectation of the public. We continue to do so, and to better serve our
customers, we are opening our new air-conditioned store this week."

The same publication was carried in the issue of The Manila Daily Bulletin of August 23, 1948. The Union presented oral
evidence tending to show that the President and General Manager of the Company, Donal O. Gunn, was the one who
made the promise of April 17, 1948, to pay to all its employees yearly one-month salary as bonus, provided there were
profits. This testimony is controverted by Mr. Gunn; but the lower court considered, in addition to such oral evidence, the
publication of the "Heacock Supplement" on the occasion of the opening of the new store of the Company in Dasmariñas
Street, Manila, as conclusive proof of its commitment to pay the bonus in question.

The "Heacock Supplement", in the portion pertinent to the case at bar, contained the following paragraph: "At the end of
every year, Mr. Orosa declared, the Heacock employees enjoy a profit-sharing privilege when they are given bonuses by
the management, the amount depending on the profits realized during that year. This progressive policy, he pointed out,
makes for a genuine interest on the part of the employees to work honestly and sincerely for the good of the company — a
company which is theirs in a sense." These statements are denied by Mr. Orosa, Vice-President and Assistant General
Manager of the Company; and attorneys for the latter argue that Guztavo M. Torres, Assistant Manager of the Personnel
Service Advertising Bureau which was then handling the advertising account of the Company, prepared the "Heacock
Supplement", and, testifying on his interview with Mr. Orosa, declared that he was not certain as to the nature of the
bonus talked about, and that he thought that it referred to the Christmas bonus which the Company gives to its employees
at the end of every year, and that this was what he had in mind when he wrote the article in question. The Court of
Industrial Relations gave no weight to the denial of Mr. Orosa, and observed that the latter was aware, or should have read
and known the Supplement in question, and his failure to make any correction or denial of its contents shortly after its
publication, negatives the stand now taken by him.

The Company also points out that both Mr. Gunn and Mr. Orosa could not legally bind the Company which can only act
through its board of directors, and there is nothing in the record to show that the board promised to pay any yearly bonus
or ratified the alleged promise made by Mr. Gunn or Mr. Orosa. Counsel for the Union, however, observes that
notwithstanding the publication of the "Heacock Supplement" which undoubtedly must have been noticed by all the
officials of the Company, no correction or denial ever came from its board of directors which, by such silence, must be
deemed as having ratified the commitment of Mr. Gunn and the statement of policy featured in the "Heacock
Supplement".

The Court of Industrial Relations also invoked, as another circumstance confirming the promise made by Mr. Gunn to pay
an annual bonus to all the low salaried employees of the Company, the following passage contained in his letter of
February 19, 1949, addressed to the Union: "This company desires to call your attention to the fact that the salaries,
bonuses (en plural por referirse al bono de Navidad y al bono por razon de utilidades) paid vacation leaves, paid sick
leave, medical and dental services, and other privileges and facilities, accorded to its employees are the highest in the City
of Manila for comparable position and, as a consequence, we cannot consider any general increase in wages at the present
time without doing violence to the stability of the labor situation here, of which you are fully aware."

Attorneys for the Company have exerted great efforts in disputing the findings of the lower court, but we are not in a
position to pass upon, much less alter, said findings which are conclusive in this instance. Even so, the decision favorable
to the Union may further be predicated upon the case of Philippine Education Company, Inc. vs. Court of Industrial
Relations, et al., 48 Off. Gaz. (13) 5278; 92 Phil., 381, in which we held that, even if a bonus is not demandable for not
forming part of the wage, salary or compensation of the employee, the same may nevertheless be granted on equitable
considerations. It appears herein that for the year 1947 the Company paid a bonus of one-month salary to all its
employees, and for the years 1948 and 1949, realizing necessary profits, it also paid a bonus to its executives and heads of
departments, omitting only the low salaried employees. The payment of the bonus in 1947 already generated in the minds
of all the employees the fixed hope of receiving the same concession in subsequent years, and on the ground of equity
they deserved to be paid the bonus for the years 1948 and 1949, when the Company admittedly realized enough profits.
The Company insists that its high officials were given bonus for 1948 and 1949 because they had never been granted any
salary raise or paid for any overtime work. This is, however, answered by the Union which alleges that no salary increase
or overtime pay was necessary for the high officials of the Company, since they have already been receiving adequate
compensation.
The Company also maintains that no valid obligation to pay the bonus in question could arise, because there was no
consideration therefor. It is sufficient to state that any extra concession granted by the employer to his employee or laborer
is necessarily premised on the need of improving the latter's working conditions to the highest possible level, in return
only for the efficient service and loyalty expected from the employee or laborer.

Wherefore, the decision of the Court of Industrial Relations is hereby affirmed, and it is so ordered with costs against the
petitioner, H. E. Heacock Co.
SECOND DIVISION

G.R. No. 111744 September 8, 1995

LOURDES G. MARCOS, ALEJANDRO T. ANDRADA, BALTAZARA J. LOPEZ AND VILMA L.


CRUZ, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and INSULAR LIFE ASSURANCE CO., LTD., respondents.

REGALADO, J.:

This petition for certiorari seeks the nullification of the decision1 of the National Labor Relations Commission (NLRC)
promulgated on May 31, 1992 in NLRC NCR CA No. 004120-92, and its resolution dated August 27, 1993 denying
petitioner's motion for reconsideration thereof. The said decision set aside on appeal, the decision of Labor Arbiter Alex
Arcadio Lopez ordering private respondent to pay petitioners their service awards, anniversary bonus and prorated
performance bonus in the amount of P144,579.00 and 10% attorney's fees in the amount of P14,457.90.2

First, the undisputed facts.

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

Before the termination of their services, petitioner Marcos had been in the employ of private respondent for more than
twenty (20) years, from August 26, ]970; petitioner Andrada, more than twenty-five (25) years, from July 26, 1965;
petitioner Lopez, exactly thirty (30) years, from October 31, 1960; and petitioner Cruz, more than twenty (20) years, from
March 1, 1970.4

Petitioners, particularly Baltazara J. Lopez, sent a letter dated October 23, 1990 to respondent company questioning the
redundancy package, She claimed that they should receive their respective service awards and other prorated bonuses
which they had earned at the time they were dismissed. In addition, Lopez argued that "the cash service awards have
already been budgeted in a fund distinct and apart from redundancy fund.5

Thereafter, private respondent required petitioners to execute a "Release and Quitclaim," 6 and petitioners complied but
with a written protest reiterating their previous demand that they were nonetheless entitled to receive their service awards.

On March 21, 1991, petitioners inquired from the Legal Service of the Department of Labor and Employment7whether
respondent corporation could legally refuse the payment of their service awards as mandated in their Employee's Manual.

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

xxx xxx xxx

This Department believes that your query presents several issues. These shall be addressed point by point,
thus:

First, the Department deems the service award to be part of the benefits of the employees
of Insular Life. Company policies and practices are fertile sources of employee's rights.
These must be applied uniformly as interpretation cannot vary from one employee to
another. . . .

xxx xxx xxx

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

xxx xxx xxx

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

xxx xxx xxx

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

xxx xxx xxx

Fourth, the fact that you were required to sign "Release and Quitclaim" does not affect your right to the
material benefits of the service award. . . .8

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

On March 26, 1991, respondent company announced the grant of performance bonus to both rank and file employees and
supervisory specialist grade and managerial staff equivalent to two (2) months salary and 2.75 basic salary, respectively,
as of December 30, 1990. The performance bonus, however, would be given only to permanent employees as of March
30, 1991. 10

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

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

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

Respondent company appealed to public respondent NLRC claiming grave abuse of discretion committed by the labor
arbiter in holding it liable to pay said service award, performance and anniversary bonuses, and in not finding that
petitioners were estopped from claiming the same as said benefits had already been given to them.
In setting aside the decision of the labor arbiter, respondent NLRC upheld the validity of the quitclaim document executed
by petitioners. For this conclusion, it rationalized that "(c)ertainly, before complainants signed the quitclaim and release,
they are aware of the nature of such document. In fact, they never assailed the genuineness and due execution of the same.
Hence, we can safely say that they were not placed under duress or were compelled by means of force to sign the
document." 11

Furthermore, the NLRC held that "(n)either was there any unwritten agreement between complainants and respondent
upon separation, which entitled the former to other renumerations or benefits. On the contrary, they voluntarily accepted
the redundancy benefit package, otherwise, they would not have been separated from employment." 12

Hence, this petition wherein it is postulated that the basic issue is whether or not respondent NLRC committed reversible
error or grave abuse of discretion in affirming the validity of the "Release and Quitclaim" and, consequently, that
petitioners are not entitled to payment of service awards and other bonuses. 13 The Solicitor General public respondent
NLRC and private respondent company duly filed their respective comments. 14

In their petition, petitioners stress that they have actually devoted much, if not all, of their employable life with private
respondent; that given their length of service, their loyalty to the latter is easily demonstrable; and that the same length of
service had rendered slim, if not eliminated, their chances of getting employed somewhere else." 15

On the other hand, respondent company reiterates its basic contention that the consideration for the settlement of
petitioners' claim is credible and reasonable, more than satisfies the legal requirement therefor, and that petitioners, in
executing the release and quitclaim, did so voluntarily and with full knowledge of the consequences thereof. 16

The petition being meritorious, we find for petitioners.

Under prevailing jurisprudence, the fact that an employee has signed a satisfaction receipt for his claims does not
necessarily result in the waiver thereof. The law does not consider as valid any agreement whereby a worker agrees to
receive less compensation than what he is entitled to recover. A deed of release or quitclaim cannot bar an employee from
demanding benefits to which he is legally entitled. 17

We have heretofore explained that the reason why quitclaims commonly frowned upon as contrary to public policy, and
why they are held to be ineffective to bar claims for the full measure of the workers' legal rights, is the fact that the
employer and the employee obviously do not stand on the same footing. The employer drove the employee to the wall.
The latter must have harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is
a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent on their claim. They pressed
it. They are deemed not have waived any of their rights. Renuntiatio non praesumitur. 18

Along this line, we have more trenchantly declared that quitclaims and/or complete releases executed by the employees do
not estop them from pursuing their claims arising from unfair labor practices of the employer. The basic reason for this is
that such quitclaims and/or complete releases are against public policy and, therefore, null and void. The acceptance of
termination does not divest a laborer of the right to prosecute his employer for unfair labor practice acts. 19 While there
maybe possible exceptions to this holding, we do not perceive any in the case at bar.

Furthermore, in the instant case, it is an undisputed fact that when petitioners signed the instrument of release and
quitclaim, they made a written manifestation reserving their right to demand the payment of their service awards. 20The
element of total voluntariness in executing that instrument is negated by the fact that they expressly stated therein their
claim for the service awards, a manifestation equivalent to a protest and a disavowal of any waiver thereof.

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

We have pointed out in Veloso, et al., vs. Department of Labor and Employment, et al.,21 that:
While rights may be waived, the same must not be contrary to law, public order, public policy, morals or
good customs or prejudicial to a third person with a right recognized by law.

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

We agree with the further observations of the Solicitor General who, in recommending the setting aside of
the decision of respondent NLRC, called attention to the fact that "contrary to private respondent's
contention, the "additional" redundancy package does not and could not have covered the payment of the
service awards, performance and anniversary bonuses since the private respondent company has initially
maintained the position that petitioners are not legally entitled to the same. . . . Surprisingly, in a sudden
turnabout, private respondent now claims . . . that the subject awards and bonuses are integrated in the
redundancy package. It is evident, therefore, that private respondent has not truly consolidated the
payment of the subject awards and bonuses in the redundancy package paid to the petitioners. 22

We are likewise in accord with the findings of the labor arbiter that petitioners are indeed entitled to
receive service awards and other benefits, thus:

Since each of the complainants have rendered services to respondent in multiple(s) of five years prior to
their separation from employment, respondent should be paid their service awards for 1990.

We are not impressed with the contention of the respondent that service award is a bonus and therefore is
an act of gratuity which the complainants have no right to demand. Service awards are governed by
respondent's employee's manual and (are) therefore contractual in nature.

On the matter of anniversary and performance bonuses, it is not disputed that it is respondent's practice to
give an anniversary bonus every five years from its incorporation; that pursuant to this practice,
respondent declared an anniversary bonus for its 80th Anniversary in 1990; that per terms of this
declaration, only the employees of respondent as of 15 November 1990 will be given the bonus; and that
complainants were separated from respondent only 25 days before :the respondent's anniversary. On the
other hand, it is also (not) disputed that respondent regularly gives performance bonuses; that for its
commendable performance in 1990, respondent declared a performance bonus; that per terms of this
declaration, only permanent employees of respondent as of March 30, 1991 will be given this bonus; and
that complainants were employees of respondents for the first 10 months of 1990.

We cannot see any cogent reason why an anniversary bonus which respondent gives only once in every
five years were given to all employees of respondent as of 15 November 1990 (pro rata even to
probationary employees; Annex 9) and not to complainants who have rendered service to respondent for
most of the five year cycle. This is also true in the case of performance bonus which were given to
permanent employees of respondent as of 30 March 1991 and not to employees who have been connected
with respondent for most of 1990 but were separated prior to 30 March 1991.

We believe that the prerogative of the employer to determine who among its employee shall be entitled to
receive bonuses which are, as a matter of practice, given periodically cannot be exercised
arbitrarily. 23 (Emphasis and corrections in parentheses supplied.)

The grant of service awards in favor of petitioners is more importantly underscored in the precedent case of Insular Life
Assurance Co., Ltd., et al. vs. NLRC, et al., 24 where this Court ruled that "as to the service award differentials claimed by
some respondent union members, the company policy shall likewise prevail, the same being based on the employment
contracts or collective bargaining agreements between the parties. As the petitioners had explained, pursuant to their
policies on the matter, the service award differential is given at the end of the year to an employee who has completed
years of service divisible by 5.
A bonus is not a gift or gratuity, but is paid for some services or consideration and is in addition to what would ordinarily
be given. 25 The term "bonus" as used in employment contracts, also conveys an idea of something which is gratuitous, or
which may be claimed to be gratuitous, over and above the prescribed wage which the employer agrees to pay.

While there is a conflict of opinion as to the validity of an agreement to pay additional sums for the performance of that
which the promisee is already under obligation to perform, so as to give the latter the right to enforce such promise after
performance, the authorities hold that if one enters into a contract of employment under an agreement that he shall be paid
a certain salary by the week or some other stated period and, in addition, a bonus, in case he serves for a specified length
of time, there is no reason for refusing to enforce the promise to pay the bonus, if the employee has served during the
stipulated time, on the ground that it was a promise of a mere gratuity.

This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the bonus
is made at the time the contract is entered into. If no time is fixed for the duration of the contract of employment, but the
employee enters upon or continues in service under an offer of a bonus if he remains therein for a certain time, his service,
in case he remains for the required time, constitutes an acceptance of the offer of the employer to pay the bonus and, after
that acceptance, the offer cannot be withdrawn, but can be enforced by the employee. 26

The weight of authority in American jurisprudence, with which we are persuaded to agree, is that after the acceptance of a
promise by an employer to pay the bonus, the same cannot be withdrawn, but may be enforced by the
employee. 27 However, in the case at bar, equity demands that the performance and anniversary bonuses should be
prorated to the number of months that petitioners actually served respondent company in the year 1990. This observation
should be taken into account in the computation of the amounts to be awarded to petitioners.

WHEREFORE, the assailed decision and resolution of respondent National Labor Relations Commission are hereby SET
ASIDE and the decision of Labor Arbiter Alex Arcadio Lopez is REINSTATED.

SO ORDERED.
FIRST DIVISION

G.R. No. 87297 August 5, 1991

ALFREDO VELOSO and EDITO LIGUATON petitioners,


vs.
DEPARTMENT OF LABOR AND EMPLOYMENT, NOAH'S ARK SUGAR CARRIERS AND WILSON T.
GO,respondents.

CRUZ, J.:

The law looks with disfavor upon quitclaims and releases by employees who are inveigled or pressured into signing them
by unscrupulous employers seeking to evade their legal responsibilities. On the other hand, there are legitimate waivers
that represent a voluntary settlement of laborer's claims that should be respected by the courts as the law between the
parties.

In the case at bar, the petitioners claim that they were forced to sign their respective releases in favor of their employer,
the herein private respondent, by reason of their dire necessity. The latter, for its part, insists that the petitioner entered
into the compromise agreement freely and with open eyes and should not now be permitted to reject their solemn
commitments.

The controversy began when the petitioners, along with several co-employees, filed a complaint against the private
respondent for unfair labor practices, underpayment, and non-payment of overtime, holiday, and other benefits. This was
decided in favor of the complainants on October 6,1987. The motion for reconsideration, which was treated as an appeal,
was dismissed in a resolution dated February 17, 1988, the dispositive portion of which read as follows:

WHEREFORE, the instant appeal is hereby DISMISSED and the questioned Order affirmed with the
modification that the monetary awards to Jeric Dequito, Custodio Ganuhay Conrado Mori and Rogelio Veloso are
hereby deleted for being settled. Let execution push through with respect to the awards to Alfredo Veloso and
Edito Liguaton.

On February 23, 1988, the private respondent filed a motion for reconsideration and recomputation of the amount awarded
to the petitioners. On April 15, 1988, while the motion was pending, petitioner Alfredo Veloso, through his wife Connie,
signed a Quitclaim and Release for and in consideration of P25,000.00,1 and on the same day his counsel, Atty. Gaga
Mauna, manifested "Satisfaction of Judgment" by receipt of the said sum by Veloso. 2 For his part, petitioner Liguaton
filed a motion to dismiss dated July 16, 1988, based on a Release and Quitclaim dated July 19,1988 , 3 for and in
consideration of the sum of P20,000.00 he acknowledged to have received from the private respondent.4

These releases were later impugned by the petitioners on September 20, 1988, on the ground that they were constrained to
sign the documents because of their "extreme necessity." In an Order dated December 16, 1988, the Undersecretary of
Labor rejected their contention and ruled:

IN VIEW THEREOF, complainants Motion to Declare Quitclaim Null and Void is hereby denied for lack of
merit and the compromise agreements/settlements dated April 15, 1988 and July 19, 1988 are hereby approved.
Respondents' motion for reconsideration is hereby denied for being moot and academic.

Reconsideration of the order having been denied on March 7, 1989, the petitioners have come to this Court on certiorari.
They ask that the quitclaims they have signed be annulled and that writs of execution be issued for the sum of P21,267.92
in favor of Veloso and the sum of P26,267.92 in favor of Liguaton in settlement of their claims.

Their petition is based primarily on Pampanga Sugar Development Co., Inc. v. Court of Industrial Relations,5 where it
was held:
... while rights may be waived, the same must not be contrary to law, public order, public policy, morals or good
customs or prejudicial to a third person with a right recognized by law. (Art. 6, New Civil Code) ...

... The above-quoted provision renders the quitclaim agreements void ab initio in their entirety since they
obligated the workers concerned to forego their benefits, while at the same time, exempted the petitioner from any
liability that it may choose to reject. This runs counter to Art. 22 of the new Civil Code which provides that no
one shall be unjustly enriched at the expense of another.

The Court had deliberated on the issues and the arguments of the parties and finds that the petition must fail. The
exception and not the rule shall be applied in this case.

The case cited is not apropos because the quitclaims therein invoked were secured by the employer after it had already
lost in the lower court and were subsequently rejected by this Court when the employer invoked it in a petition
for certiorari. By contrast, the quitclaims in the case before us were signed by the petitioners while the motion for
reconsideration was still pending in the DOLE, which finally deemed it on March 7, 1989. Furthermore, the quitclaims in
the cited case were entered into without leave of the lower court whereas in the case at bar the quitclaims were made with
the knowledge and approval of the DOLE, which declared in its order of December 16, 1988, that "the compromise
agreement/settlements dated April 15, 1988 and July 19, 1988 are hereby approved."

It is also noteworthy that the quitclaims were voluntarily and knowingly made by both petitioners even if they may now
deny this. In the case of Veloso, the quitclaim he had signed carried the notation that the sum stated therein had been paid
to him in the presence of Atty. Gaga Mauna, his counsel, and the document was attested by Atty. Ferdinand Magabilin,
Chief of the Industrial Relations Division of the National Capitol Region of the DOLE. In the case of Liguaton, his
quitclaim was made with the assistance of his counsel, Atty. Leopoldo Balguma, who also notarized it and later confirmed
it with the filing of the motion to dismiss Liguaton's complaint.

The same Atty. Balguma is the petitioners' counsel in this proceeding. Curiously, he is now challenging the very same
quitclaim of Liguaton that he himself notarized and invoked as the basis of Liguaton's motion to dismiss, but this time for
a different reason. whereas he had earlier argued for Liguaton that the latter's signature was a forgery, he has abandoned
that contention and now claims that the quitclaim had been executed because of the petitioners' dire necessity.

"Dire necessity" is not an acceptable ground for annulling the releases, especially since it has not been shown that the
employees had been forced to execute them. It has not even been proven that the considerations for the quitclaims were
unconscionably low and that the petitioners had been tricked into accepting them. While it is true that the writ of
execution dated November 24, 1987, called for the collection of the amount of P46,267.92 each for the petitioners, that
amount was still subject to recomputation and modification as the private respondent's motion for reconsideration was still
pending before the DOLE. The fact that the petitioners accepted the lower amounts would suggest that the original award
was exorbitant and they were apprehensive that it would be adjusted and reduced. In any event, no deception has been
established on the part of the Private respondent that would justify the annulment of the Petitioners' quitclaims.

The applicable law is Article 227 of the Labor Code providing clearly as follows:

Art. 227. Compromise agreements. — Any compromise settlement, including those involving labor standard
laws, voluntarily agreed upon by the parties with the assistance of the Bureau or the regional office of the
Department of Labor, shall be final and binding upon the parties. The National Labor Relations Commission or
any court shall not assume jurisdiction over issues involved therein except in case of non-compliance thereof or if
there is prima facie evidence that the settlement was obtained through fraud, misrepresentation or coercion.

The petitioners cannot renege on their agreement simply because they may now feel they made a mistake in not awaiting
the resolution of the private respondent's motion for reconsideration and recomputation. The possibility that the original
award might have been affirmed does not justify the invalidation of the perfectly valid compromise agreements they had
entered into in good faith and with full voluntariness. In General Rubber and Footwear Corp. vs. Drilon,6 we "made clear
that the Court is not saying that accrued money claims can never be effectively waived by workers and employees." As we
later declared in Periquet v. NLRC:7
Not all waivers and quitclaims are invalid as against public policy.1âwphi1 If the agreement was voluntarily
entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned
simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in
to annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily,
with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable,
the transaction must be recognized as a valid and binding undertaking. As in this case.

We find that the questioned quitclaims were voluntarily and knowingly executed and that the petitioners should not be
relieved of their waivers on the ground that they now feel they were improvident in agreeing to the compromise. What
they call their "dire necessity" then is no warrant to nullify their solemn undertaking, which cannot be any less binding on
them simply because they are laborers and deserve the protection of the Constitution. The Constitution protects the just,
and it is not the petitioners in this case.

WHEREFORE, the petition is DISMISSED, with costs against the petitioners. It is so ordered.

Narvasa (Chairman), Gancayco, Griño-Aquino and Medialdea, JJ., concur.


FIRST DIVISION

G.R. No. 88168 August 30, 1990

TRADERS ROYAL BANK, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION & TRADERS ROYAL BANK EMPLOYEES
UNION, respondents.

San Juan, Gonzalez, San Agustin & Sinense for petitioner.

E.N.A. Cruz, Enfero & Associates for private respondent.

GRIÑO-AQUINO, J.:

This petition for certiorari seeks to nullify or set aside the decision dated September 2, 1988 of the National Labor
Relations Commission, which found the petitioner, Traders Royal Bank (or TRB), guilty of diminution of benefits due the
private respondents and ordered it to pay the said employees' claims for differentials in their holiday, mid-year, and year-
end bonuses.

On November 18, 1986, the Union, through its president, filed a letter-complaint against TRB with the Conciliation
Division of the Bureau of Labor Relations claiming that:

First, the management of TRB per memo dated October 10, 1986 paid the employees their HOLIDAY
PAY, but has withheld from the Union the basis of their computation.

Second, the computation in question, has allegedly decreased the daily salary rate of the employees. This
diminution of existing benefits has decreased our overtime rate and has affected the employees' take home
pay.

Third, the diminution of benefits being enjoyed by the employees since time immemorial, e.g. mid-year
bonus, from two (2) months gross pay to two (2) months basic and year-end bonus from three (3) months
gross to only two (2) months.

Fourth, the refusal by management to recall active union members from the branches which were being
transferred without prior notice, solely at the instance of the branch manager. (p. 26, Rollo.)

In its answer to the union's complaint, TRB pointed out that the NLRC, not the Bureau of Labor Relations, had
jurisdiction over the money claims of the employees.

On March 24, 1987, the Secretary of Labor certified the complaint to the NLRC for resolution of the following issues
raised by the complainants:

l) The Management of TRB per memo dated October 10, 1986 paid the employees their holiday pay but
has withheld from the union the basis of their computation.

2) The computation in question has allegedly decreased the daily salary rate of the employees. This
diminution of existing benefits has decreased our overtime rate and has affected the employees' take home
pay.
3) The diminution of benefits being enjoyed by the employees since the (sic) immemorial, e.g. mid-year
bonus, from two (2) months gross pay to two (2) months basic and year-end bonus from three (3) months
gross to only two (2) months.

4) The refusal by management to recall active union members from the branches which were being
transferred without prior notice, solely at the instance of the branch, manager. (p. 28, Rollo.)

In the meantime, the parties who had been negotiating for a collective bargaining agreement, agreed on the terms of the
CBA, to wit:

1. The whole of the bonuses given in previous years is not demandable, i.e., there is no diminution, as to
be liable for a differential, if the bonus given is less than that in previous years.

2. Since only two months bonus is guaranteed, only to that extent are bonuses deemed part of regular
compensation.

3. As regards the third and fourth bonuses, they are entirely dependent on the income of the bank, and not
demandable as part of compensation. (pp. 67-68, Rollo.)

Despite the terms of the CBA, however, the union insisted on pursuing the case, arguing that the CBA would apply
prospectively only to claims arising after its effectivity.

Petitioner, on the other hand, insisted that it had paid the employees holiday pay. The practice of giving them bonuses at
year's end, would depend on how profitable the operation of the bank had been. Generally, the bonus given was two (2)
months basic mid-year and two (2) months gross end-year.

On September 2, 1988, the NLRC rendered a decision in favor of the employees, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the petitioner and ordering respondent bank to
pay petitioner members-employees the following:

1. Holiday differential for the period covering l983-1986 as embodied in Resolution No. 4984-1986 of
respondent's Board of Directors but to start from November 11, 1983 and using the Divisor 251 days in
determining the daily rate of the employees;

2. Mid-year bonus differential representing the difference between two (2) months gross pay and two (2)
months basic pay and end-year bonus differential of one (1) month gross pay for 1986.

The claim for holiday differential for the period earlier than November 11, 1983 is hereby dismissed, the
same having prescribed.

Likewise, the charge of unfair labor practice against the respondent company is hereby dismissed for lack
of merit. (pp. 72-73, Rollo.)

A motion for reconsideration was filed by TRB but it was denied. Hence, this petition for certiorari.

There is merit in the petitioner's contention that the NLRC gravely abused its discretion in ordering it to pay mid-
year/year-end bonus differential for 1986 to its employees.

A bonus is "a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right"
(Aragon vs. Cebu Portland Cement Co., 61 O.G. 4597). "It is something given in addition to what is ordinarily received
by or strictly due the recipient." The granting of a bonus is basically a management prerogative which cannot be forced
upon the employer "who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside
from the employee's basic salaries or wages" . . . (Kamaya Point Hotel vs. National Labor Relations Commission,
Federation of Free Workers and Nemia Quiambao, G.R. No. 75289, August 31, 1989).
It is clear from the above-cited rulings that the petitioner may not be obliged to pay bonuses to its employees. The matter
of giving them bonuses over and above their lawful salaries and allowances is entirely dependent on the profits, if any,
realized by the Bank from its operations during the past year.

From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986, the income of the Bank
was only 20.2 million pesos, but the Bank still gave out the usual two (2) months basic mid-year and two months gross
year-end bonuses. The petitioner pointed out, however, that the Bank weakened considerably after 1986 on account of
political developments in the country. Suspected to be a Marcos-owned or controlled bank, it was placed under
sequestration by the present administration and is now managed by the Presidential Commission on Good Government
(PCGG).

In the light of these submissions of the petitioner, the contention of the Union that the granting of bonuses to the
employees had ripened into a company practice that may not be adjusted to the prevailing financial condition of the Bank
has no legal and moral bases. Its fiscal condition having declined, the Bank may not be forced to distribute bonuses which
it can no longer afford to pay and, in effect, be penalized for its past generosity to its employees.

Private respondent's contention, that the decrease in the midyear and year-end bonuses constituted a diminution of the
employees' salaries, is not correct, for bonuses are not part of labor standards in the same class as salaries, cost of living
allowances, holiday pay, and leave benefits, which are provided by the Labor Code.

WHEREFORE, the petition for certiorari is granted. The decision of the National Labor Relations Commission is
modified by deleting the award of bonus differentials to the employees for 1986. In other respects, the decision is
affirmed. Costs against the respondent union.

SO ORDERED.
EN BANC

G.R. No. 107487 September 29, 1997

THE MANILA BANKING CORPORATION ("Manilabank") and ARNULFO B. AURELLANO in his capacity as
Statutory Receiver of Manilabank, petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, VICTOR L. MENDOZA, RODOLFO VE. TIMBOL,
RUBEN G. ASEDILLO, FLORINDA S. DAYRIT, and 19 other Senior Officers similarly situated; HORACE
REYES and 14 other Senior Mangers similarly situated; AURORA VILLACERAN and 34 others Assistant
Managers similarly situated; CONSUELO RIZARRI, EMERENCIANA SAMSON, BRENDA C. BERMUDEZ,
FLORYPEE ABRIGO, EMMA BALDERAMA, and 211 other Junior Officers similarly situated, respondents.

G.R. No. 107902 September 29, 1997

THE MANILA BANKING CORPORATION ("Manilabank") and ARNULFO B. AURELIANO in his capacity as
Statutory Receiver of Manilabank, petitioners,
vs.
THE NATIONAL LABOR 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.

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 Pati's 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;

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 attorney's 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 bank's 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 Manilabank's financial condition as of December 31, 1985 disclosed, among
other things, that the bank's operations for the preceding year resulted in a net loss of P362.4 million. It likewise revealed
that the bank's 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 at 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:

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 (P242.9
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 acceptable 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

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 bank's 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, and considering the opinion of the Central Bank
legal counsel that, with the Supreme Court's 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 Court's resolution of March 10, 1988 (enjoining the Court of Appeals from
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 claim to entitlement of the foregoing benefits was based on Manilabank's alleged practice,
policy and tradition of awarding said benefits. They contended that the policy has ripened into vested property rights in
their favor.

Manilabank, 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 fill-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 attorney's fees. The dispositive portion of the decision reads:

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 attorney's 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 a portion of Manilabank's 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 arbiter's 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 attorney's 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.

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 a 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. arbitrarily compelled the Receiver to violate his statutory duty to preserve Manilabank's assets for the benefit of
all creditors.11

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

Consequently, petitioners filed another petition for certiorari before this Court, this time docketed as G.R. No.
107902, contending that:

a. Public respondents, in grave abuse of discretion, effectively violated petitioners' right to due process
because —

(1) The monstrous award totalling about P212 million was decided based purely on
private respondents' worthless papers which were never identified nor supported by any
single affidavit.

(2) The Labor Arbiter proceeded to decide the case solely on the bases of the pleadings
filed, despite the enormity of the claims and the repeated demands for a full-dress trial
(which, ironically, were initially granted by the Office of the Labor Arbiter), made
necessary by the conflicting factual allegations of the parties and the worthless papers
passed off by private respondents as their "evidence".15
b. Public respondents unlawfully arrogated unto themselves the jurisdiction to pass upon the question of
Manilabank's insolvency, despite the pleaded pendency of that prejudicial question before the RTC of
Manila which had acquired exclusive jurisdiction to rule on the issue to the exclusion of all others.16

c. The money award adjudged against the insolvent Manilabank violates all notions of justice and equity,
considering that the beneficiaries thereof are former officers and top managers of Manilabank who, being
part of management, were partly to blame for the bank's financial decline.17

d. A statutory receiver has the power to adopt and implement prudent policies aimed at preserving the
assets of an insolvent bank including regulating, according to his own discretion and judgment, all aspects
of employment.18

e. Public respondents' arbitrary findings that salary increases, Christmas and mid-year bonuses and other
benefits have been regularly and unconditionally paid by Manilabank to private respondents, and that
Manilabank earned profits in 1984, 1985 and 1986, are contrary to the evidence on record and are based
on pure unsubstantiated guesswork.19

f. The award of attorney's fees is unconscionable, especially in light of its dissipative effect on the
remaining assets of the insolvent Manilabank and its prejudicial consequences on Manilabank's
stockholders and creditors.20

g. The NLRC's award of legal interest on the amount awarded by 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 other
creditors of the insolvent Manilabank.21

h. The NLRC's threat to execute the judgment would be unlawful if carried out, because Manilabank's
assets are legally exempt from execution.22

On December 9, 1992, this Court ordered that G.R. No. 107902 be consolidated with G.R. No. 107487.23

On December 16, 1992, this Court issued a Resolution temporarily enjoining public respondent NLRC from
enforcing and/or carrying out the decision of the labor arbiter dated November 14, 1989 and its resolution dated
September 9, 1992 and order dated November 26, 1992, all issued in NLRC NCR Case No. 00-11-04624-88.24

G.R. No. 107902 is impressed with merit.

Both the Labor Arbiter and the NLRC opted to award all the additional benefits claimed by the 343 private
respondents who had already been duly paid separation pay and/or retirement benefits upon termination of their
employment. The NLRC erroneously adopted the findings of the labor arbiter, misapplying the time-honored rule
that factual findings of quasi-judicial agencies are accorded not only respect but even finality if supported by
substantial evidence. It declared that the additional benefits sought are in the nature of "bonuses" which when
made part of the wage or salary or compensation of an employee become demandable and enforceable.25

Both the Labor Arbiter's and the NLRC's findings and conclusions are flawed.

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 employee's
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


29
Duplicators, Inc. v. NLRC, 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 employer's business and made possible the rearization of profits. It is an
act of generosity of the employer for which the employee ought to be thankful and grateful. It is also
granted by an enlightened employer to spur the employee to greater efforts for the success of the business
and realization of bigger profits. . . . From the legal point of view, a bonus is not 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 a fixed amount and the former would be a contingent one dependent upon the
realization of profits. . . . (Emphasis 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-80's. 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.

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 bank's net profits for the years 1985 and 1986 is deleted as
there were clearly no profits to share during that period given the bank's 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 petitioner's 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 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 employer's 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.