Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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

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

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

Pedro B. Uy Calderon for petitioners.

Gaudioso C. Villagonzalo for respondent.

PAREDES, J.:

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

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

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

1. First assignment of error. — The respondent court erred in holding that

it had jurisdiction over case No. 740-V, notwithstanding the fact that those
who had dispute with the petitioners, were less than thirty (30) in number.

The CIR made a finding that at the time of the filing of the petition in
case No. 740-V, respondent Union had more than thirty members
actually working with the companies, and the court declared itself
with jurisdiction to take cognizance of the case. Against this order,
the herein petitioners did not file a motion for reconsideration or a
petition for certiorari. The finding of fact made by the CIR became
final and conclusive, which We are not now authorized to alter or
modify. It is axiomatic that once the CIR had acquired jurisdiction
over a case, it continues to have that jurisdiction, until the case is
terminated (Manila Hotel Emp. Association v. Manila Hotel
Company, et al., 40 O.G. No. 6, p. 3027). It was abundantly shown
that there were 56 members who signed Exhibits A, A-I to A-8, and
that 103 members of the Union are listed in Exhibits B, B-1 to B-35,
F, F-1 and K-2 to K-3. So that at the time of the filing of the petition,
the respondent union had a total membership of 159, working with
the herein petitioners, who were presumed interested in or would
be benefited by the outcome of the case (NAMARCO v. CIR, 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 crewsuch daily subsistence as shall be mutually
agreed daily upon between said master and crew; or, in lieu of such subsistence
the crew may reserve the right to demand at the time of execution of these
articles that 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 fortycentavos for any other
employees covered by this Act, and the furnishing of housing shall be
valued at not more than twenty centavos daily for agricultural workers and
not more than forty centavos daily for other employees covered by this
Act.

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

However, section 19, same law, states —

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

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

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

"Supplements", therefore, constitute extra remuneration or special

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

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

In the case of Cebu Autobus Company v. United Cebu Autobus Employees

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

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

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

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

8. Eighth assignment of error.— The CIR erred in ordering petitioners to reinstate

Capt. Carlos Asensi to his former position, considering the fact that said officer
had been employed since January 9, 1953, as captain of a vessel belonging to
another shipping firm in the City of Cebu.

The CIR held —

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

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

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

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

IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L.,

Barrera, Dizon, Regala and Makalintal, JJ., concur.

State Marine Corporation vs. Cebu Seamen’s Association [G.R. No. L-12444
February 28, 1963]
Post under case digests, labor law at Monday, April 09, 2012 Posted
by Schizophrenic Mind
Facts: The petitioners were engaged in the business of marine coastwise
transportation. They had a CBA with the Cebu Seamen’s Association. On
September 12, 1952, the respondent union filed a complaint against the
petitioners alleging 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 then to accept the 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
P0.40 for every meal, while the masters and officers were required to pay their
meals and that because the captain had refused to yield to the general reduction
of salaries, the petitioners dismissed the captain. The petitioner, on their defense,
stated that they have suffered a financial losses in the operation of their vessels
and there is no law which provides for the payment of sick leave or vacation
leave to employees of private firms; that with regards to their overtime pay, they
have always observed the Eight-hour labor Law and that overtime does not apply
to those who provide means of transportation. The decision ruled in favor of the
respondent union. Hence, this petition.

Issue: Whether or not the required meals which the petitioner company deducted
from the salary of the employees is considered as facilities, and not
supplements.

Held: Supplements 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
provisions of law, 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 them just the same. It is argued that the food or meal 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 Section 19 of the Minimum Wage Law, should not be
deducted from such wages. It was found out that the meals were freely given to
crew members prior to the effectivity of the Minimum Wage Law 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 members 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 should
continue giving the benefits. Wherefore, the petition is dismissed, finding out that
the meals or food in question are not facilities but supplements.

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Labor Law 1
A2010 - 142 -
Disini
NATIONAL MINES AND ALLIED WORKERS UNION VSAN ILDEFEONSO COLLEGE, ETC.
299 SCRA 24DAVIDE JR; November 20, 1998
NATURE
Petition for certiorari seeking to set aside an NLRC decision andresolution denying a
motion for reconsideration
FACTS
- National Mines and Allied Workers’ Union is the certifie dbargaining
agent of the rank and file employees of respondentCollege. Petitioner Juliet
Arroyo was the president of the SanIlde fonso
College Association of Faculty and Personnel, anaffiliate of NAMAWU.
Private respondent Lloren is the directressof the College.- In February, 1991,
ARROYO, a “tenured teacher” who later became a part-time teacher, asked that
she be allowed to teachon a full-time basis. The COLLEGE denied her request for
herfailure to “make use of the privilege” of her study leave in thetwo years she
was allowed to do so. The next month, the
otherindividual petitioners, who were issued yearly appointment,were
informed of the non-renewal of their respective contracts.- In April, 1991, the SICAFP
was formalized into a labor union affiliated with NAMAWU.- The petitioners
and NAMAWU filed a complaint for illegaldismissal, unfair labor practice,
forced resignation, harassment,underpayment of wages, non-
payment of service incentive l e a v e p a y , a n d v i o l a t i o n o f W
a e g O r d e r N o . I V - 1 . T h e y demanded reinstatement and payment of back
wages.- The Labor Arbiter held private respondents guilty of
illegal dismissal, unfair labor practice interfering with
the organizationo f t h e l a b o r u n i o n . T h e c o n t r a c t s o f e m p l o y m e
n t w e r e n o t bilateral agreements, but letters of appointment. When
theCollege opted not to renew the appointments it merely invokedthe expiration
of the period fixed in the appointments withoutgiving any other reason or granting
the teachers concerned anopportunity to explaint heir side. The probationary
employeeswere not even informed of their performance rating when theywere
denied renewal of their appointment. The non-renewalw a s t i m e l y
m a d e w h i l e i n d i v i d u a l p e t i t i o n e r s w e r e i n t h e process of
organizing themselves into a union. These acts of the College amounted to
union busting.- The Office of the Solicitor General moves for the dismissal of the
petition except as to ARROYO; that all petitioners except ARROYO
were legally dismissed. The reason why she failed tocomplete her master’s
degree could not be solely attributed
toh e r . S h e i n i t i a l l y r e q u e s t e d a l e a v e o f a b s e n c e , b u t t h e C
OLLEGE suggested that she teach on a part-time
basisbecause it was in need of teachers at that time. Also
, h e r dismissal was without due process.
ISSUE
1. WON ARROYO was legally dismissed2. WON the other petitioners were permanent employees
HELD
1. NO
Reasoning
- it is undisputed that Arroyo had been teaching in the COLLEGEsince 1965 and
had obtained a permanent status; she becamea part-time teacher, however, from June
1988 to March 1991.- She did not lose her permanent status when she requested
toteach on a part-time basis. The reason for the request was
thats h e w a n t e d t o p u r s u e a m a s t e r ' s d e g r e e . T h e C O
L L E G E approved the request, and the study leave was extended
foranother year. It would have been unjust and unreasonable toallow ARROYO
to pursue her master's degree, from which theCOLLEGE would have
also benefited in terms of her higherlearning and experience, and
at the same time penal ize herwith the loss of permanent status. It
would as well be absurd and illogical to maintain that by teaching on a part-
time basisafter obtaining the permission to take up a master's
degree,ARROYO relinquished her permanent status.- When ARROYO
subsequently requested that she continueteaching on a full-time basis,
private respondents in its letter of 27 March 1991 refused, citing as reason her
failure "to
makeu s e o f t h e p r i v i l e g e g r a n t e d [ h e r ] b y t h e a d m i n i s t r a t i o
n regarding [her] study leave in the past four semesters."
Thisl e t t e r s e r v e d a s n o t i c e o f A R R O Y O ' s t e r m i n a t i o n
fromemployment. No further notice was served. It
m u s t b e emphasized that the letter did not indicate that
a master'sdegree was necessary for ARROYO to continue her service, asn o w
claimed by the COLLEGE. In fact, apart from its
m e r e allegation, the COLLEGE failed to prove that a master's degreewas a pre-
requisite for ARROYO's teaching position. ARROYO, apermanent teacher, could
only be dismissed for just cause andonly after being afforded due process, in
light of paragraph (b),Article 277 of the Labor Code.- Arroyo’s dismissal was
substantively and procedurally flawed.It was effected without just cause and due
process. Thus, hertermination was void. She is therefore entitled to
reinstatementto her former position without loss of seniority rights and
otherprivileges, full backwages inclusive of allowances, and otherben
efits computed from the date of her actual dismissal to thedate of reinstatement2. NO
Reasoning
- On the issue of whether the individual petitioners werep
e r m a n e n t e m p l o y e e s , i t i s t h e M a n u a l o f R e g u l a t i o n s f o r Pri
vate Schools, and not the Labor Code, which is applicable. This was settled in
University of Sto. Tomas v. NLRC
, where weexplicitly ruled that for a private school
teacher to acquirepermanent status in employment and, therefore, be entitled
tosecurity of tenure, the following requisites must concur: (1)
thet e a c h e r i s a f u l l - t i m e t e a c h e r ; ( 2 ) t h e t e a c h e r m u s t
h a v e rendered three (3) consecutive years of service; and (3) suchservice must
have been satisfactory.- Eleven of the individual petitioners were full-
time teachersduring the school year 1990-1991, but only two, namely,
Odisteand Buan had rendere d three consecutive
years of service. There is no showing, however, that the two were on a full-
timebasis during those three years and that their services
weresatisfactory. Evidently, not one of the said teachers
can beconsidered to have acquired a permanent status.
Disposition

the decisio n of the National

Labor RelationsC o m m i s s i o n i n N L R C C a s e N o . R A B - I V -
4 - 3 7 1 0 - 9 1 - R I i s AFFIRMED, subject to the modification that private
respondentSan Ildefonso College is DIRECTED to (1) reinstate
petitioner J U L I E T A A R R O Y O t o h e r f o r m e r p o s i t i o n a t t h e
t i m e o f h e r dismissal, or to any equivalent position if reinstatement
to suchposition is no longer feasible, without of loss of seniority rightsand
benefits that may be due her; and (2) pay her back wagesfrom the date of her
actual dismissal to the date of her actualreinstatement.
CIELO V NLRC
193 SCRA 410CRUZ; January 28, 1991
NATURE
Petition for certiorari to review decision of NLRC setting asidedecision of Labor
Arbiter for the reinstatement with backwagesof Zosimo Cielo.
FACTS
Henry Lei Trucking hired Zosimo Cielo as a truck driver under 6-month Agreement with
stipulatio ns that the term is can beearlier terminated at the option of either
party. The
Agreementa l s o s t i p u l a t e d t h a t t h e r e w a s n o e m p l o y e r -
e m p l o y e e relationship between the parties and that
the nature of therelationship is merely contractual. Lei asked Cielo
to sign an affidavit of having received full payment of wages, which Cielorefused
to sign. A week before the Agreement was supposed
toe n d , L e i n o t i f i e d C i e l o o f t h e t e r m i n a t i o n o f h i s s e r v i c e s
Labor Law 1
A2010 - 143 -
Disini
Apparently in the Agreements with the drivers, Lei merely fillsin the blanks with
the corresponding data such as the driver’sname and address, etc.
ISSUE
WON the Agreement was valid
HELD
NO
Ratio

Where from the circumstances it is apparent that theperiods were

imposed in order to preclude the acquisition of tenurial security by the
employee, they should be struck downor disregarded for being contrary to public policy,
morals,etc.
Reasoning
- The Agreement is void ab initio for having a purpose contraryto public policy.
The agreement was a clear attempt to exploitthe employee and deprive him
of the protection of the Labor Code by making it appear that the stipulations
are governed bythe Civil Code as in ordinary private transactions. In reality
theagreement was a contract of employment into which were readthe provisions
of the Labor Code and the social justice policy of the Constitution. That Cielo
refused to sign the affidavit was nota just cause for his termination as he
was only protecting hisinte rest against unguarded waiver of the
benefits due himunder the Labor Code. Said affidavit which stipulated
paymentof wages even suggested that there was indeed an employer-employee
relationship.
Disposition
NLRC decision set aside. LA decision reinstated.
GENERAL MILLING CORPORATION V TORRES
196 SCRA 215FELICIANO; April 22, 1991
NATURE
Petition for certiorari review.
FACTS
- DOLE NCR issued
A l i e n E m p l o y m e n t P e r m i t i n f a v o r o f petitioner Earl Timothy Cone,
a United States citizen, as sportsconsultant and assistant coach for GMC.
GMC and Cone enteredinto a contract of employment whereby the latter
undertook tocoach GMC's basketball team. Board of Special Inquiry of
theC o m m i s s i o n o n I m m i g r a t i o n a n d D e p o r t a t i o n a p p r
o v e d petitioner Cone's application for a change of admission statusfrom
temporary visitor to prearranged employee.- On 9 February 1990, petitioner
GMC requested renewal of petitioner Cone's alien employment permit. GMC also
requestedthat it be allowed to employ Cone as full-fledged coach.
TheDOLE Regional Director, Luna Piezas, granted the request. AlienEmployment
Permit was
issued.- Private respondent Basketball Coaches Association of theP h i
l i p p i n e s ( " B C A P " ) a p p e a l e d t h e i s s u a n c e o f s a i d a l i e n emplo
yment permit to the respondent Secretary of Labor
whoissued a decision ordering cancellation of petitioner Cone'semplo
yment permit on the ground that there was no showingthat there is no person in the
Philippines who is competent, ableand willing to perform the services required nor that
the hiringof petitioner Cone would redound to the national interest.
ISSUES
1. WON Secretary of Labor gravely abused his discretion whenhe revoked petitioner
Cone's alien employment permit2. WON Section 6 (c), Rule XIV, Book I of the
Omnibus RulesImplementing the Labor Code is null and void as it is in
violationo f t h e e n a b l i n g l a w a s t h e
L a b o r C o d e d o e s n o t e m p o w e r respondent Secretary to determi
ne if the employment of analien would redound to national interest
HELD
1. NO- Petitioners have failed to show any grave abuse of discretionor any act
without or in excess of jurisdiction on the part
of r e s p o n d e n t S e c r e t a r y o f L a b o r i n r e n d e r i n g h i s d e c i s i o n
, revoking petitioner Cone's Alien Employment Permit.- The alleged failure to notify
petitioners of the appeal filed byprivate respondent BCAP
was cured when
petitioners werea l l o w e d t o f i l e t h e i r M o t i o n f o r R e c o n s i
d e r a t i o n b e f o r e respondent Secretary of Labor.2.
NO- T h e L a b o r C o d e i t s e l f s p e c i f i c a l l y e m p o w e r s r e s p o n d e
n t Secretary to make a determination as to the availability of theservices of a
"person in the Philippines who is competent, ableand willing at the time of
application to perform the services forwhich an alien is desired." In short, the
Department of Labor isthe agency vested with jurisdiction to determine the
question of availability of local workers.- Under Article 40 of the Labor Code,
an employer seeki ngemployment of an alien must first obtain an employment permitfrom
the Department of Labor. Petitioner GMC's right to
choosew h o m t o e m p l o y i s , o f c o u r s e , l i m i t e d b y t h e s t
a t u t o r y requirement of an alien employment permit.- Petitioners will not find solace
in the equal protection clause of the Constitution. As pointed out by the
Solicitor-General, no comparison can be made
between petitioner Cone and Mr.N o r m a n B l a c k a s t h e l a t t e r
i s " a l o n g t i m e r e s i d e n t o f t h e country," and thus, not subject to the
provisions of Article 40 of the Labor Code which apply only to "non-resident aliens." In
anycase, the term "non-resident alien" and its obverse "resident alien,"
here must be given their technical connotation under ourlaw on immigration.- Neither can
petitioners validly claim that implementation
of r e s p o n d e n t S e c r e t a r y ' s d e c i s i o n w o u l d a m o u n t t o
a n impairment of the obligations of contracts. The provisions of
theL a b o r C o d e a n d i t s I m p l e m e n t i n g R u l e s a n d R e g u l a t i o n s
requiring alien employme nt permits were in existence longbefore
petitioners entered into their contract of employment. Itis firmly settled that
provisions of applicable laws, especially provisions relating to matters
affected with public policy,
ared e e m e d w r i t t e n i n t o c o n t r a c t s . P r i v a t e p a r t i e s c a
n n o t constitutionally contract away the otherwise applicabl
e provisions of law.- In short, the Department of Labor is the agency
vested with jurisdiction to determine the question
of availability of localworkers. The constitutional validity of legal provisions
grantingsuch jurisdi ction and authority and requiring proof of non-
availability of local nationals able to carry out the duties of theposition involved,
cannot be seriously questioned.- Petitioners apparently suggest that the Secretary of
Labor isnot authorized to take into account the question of whether ornot
employment of an alien applicant would "redound to the national
interest" because Article 40 does not explicitly refer tosuch
assessme nt. This argument (which seems impliedly toconcede that
the relationship of basketball coaching and the national interest is
tenuous and unreal) is not persuasive. In thefirst place, the second
paragraph of Article 40 says: "[t]heemployment permit may be issued to a
non-resident alien or
tot h e a p p l i c a n t e m p l o y e r a f t e r a d e t e r m i n a t i o n o f t h e n o n -
availability of a person in the Philippines who is competent, ableand willing at the time of
application to perform the services forwhich the alien is desired."-
The permissive language employed in the Labor
Codei n d i c a t e s t h a t t h e a u t h o r i t y g r a n t e d i n v
olves thee x e r c i s e o f d i s c r e t i o n o n t h e p
a r t o f t h e i s s u i n g authority
. In the second place, Article 12 of the Labor Code sets forth a
statement of objectives that the Secretary of Laborshould, and indeed must,
take into account in exercising his authority and jurisdiction granted by the Labor
Code.
Disposition
C o u r t R e s o l v e d t o D I S M I S S t h e P e t i t i o n f o r Certiorari for lack of merit.
MANILA TERMINAL COMPANY INC V CIR(MANILATERMINAL RELIEF AND MUTUAL AID
ASSN)
91 PHIL 625PARAS; July 16, 1952

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FACTS
- Manila Terminal Co undertook arrastre service in Port Area,under control of
US Army. It hired watchmen on 12 hr shifts.- Manila Terminal began post-war operation
of arrastre serviceunder control of Bureau of Customs. The watchmen
continuedin the service, with salary
raise.A m e m b e r o f t h e M a n i l a T e r m i n a l R e l i e f a n d M u t
u a l A i d Association wrote to Dept of Labor requesting that the matter
of overtime pay be investigated, but nothing happened.- Members of the Association filed
demand with Department of Labor, including overtime pay, but nothing happened.- Manila
Terminal Company instituted system of strict 8 hrshifts.- T h e
Association was organized for
t h e f i r s t t i m e , a n d a n amended petition was filed with CIR praying that
the petitionerbe ordered to pay its watchmen or police force overtime pay.- The petitioner’s
police force was consolidated with the ManilaHarbor Police of the Customs
Patrol Service, a govt agencyunder Commissioner of Customs and Secretary of
Finance.- CIR, while dismissing other demands, ordered the petitioner
top a y i t s p o l i c e f o r c e r e g u l a r o r b a s e p a y a n d o v e r t
i m e compensation. With reference to overtime pay
a f t e r t h e watchmen had been integrated into the Manila Harbor Police,the
judge ruled that court has no jurisdiction because it affectsthe Bureau of
Customs.- In a separate opinion, Judge Lanting
ruled:> d e c i s i o n s h o u l d b e a f f i r m e d i n s o f a r a s
i t g r a n t s compensation for overtime on regular days> as to compensation for work
on Sundays and legal
holidays,petitioner should pay compensa tion that corresponds to theo
vertime at the regular rate only> watchmen are not entitled to night differential
ISSUE
WON overtime pay should be granted to the workers
HELD
YES- P e t i t i o n e r s t r e s s e d t h a t t h e c o n t r a c t b e t w e e n i t a n d t
h e Association stipulates 12 hrs a day at certain rates
including overtime, but the record does not bear out these allegations.- In times of acute
employment, people go from office to officeto search for work, and
the workers here found themselves required to render 12 hrs a day. True,
there was an agreement,but did the workers have freedom to bargain much less
insist inthe observance of the Eight Hour Labor
Law?- W e n o t e t h a t a f t e r p e t i t i o n e r i n s t i t u t e d 8 h r s h
i f t s , n o reduction was made in salaries which its watchmen
received under the 12 hr agreement.- Petitioner’s allegation that the Association had
acquiesced inthe 12 hr shifts for more than 18 mos is not accurate. Only oneof
the members entered in September 1945. The rest followedduring the next few
months.- The Association can’t be said to have impliedly waived
theright to overtime pay, for the obvious reason that it could nothave expressly
waived it.- Estoppel and laches can’t also be invoked against
Association.F i r s t , i t i s c o n t r a r y t o s p i r i t o f t h e
E i g h t H o u r L a b o r L a w . Second, law obligates employer to observe
it. Third, employeeis at a disadvantage as to be reluctant in asserting any claim.- The
argument that the nullity of the employment
contractp r e c l u d e s r e c o v e r y b y t h e A s s o c i a t i o n o f o v e r t i m e
p a y i s untenable. The employer may not be heard to plead its
ownneglect as exemption or defense.- Also, Commonwealth Act 444 expressly
provides for paymentof extra compensation in cases where overtime
services arerequired.- The point that payment of overtime pay may
lead to ruin of the petitioner can’t be accepte d. It is significant that
not allwatchmen should receive back overtime pay for
the wholeperiod, since the members entered the firm in different times.- The
Eight-Hour Labor Law was designed not only to safeguardthe health and welfare
of the laborer or employee, but in a wayto minimize
unemployment by forcing employers, in casesw h e r e m o r e t h a n 8 -
h o u r o p e r a t i o n i s n e c e s s a r y, t o u t i l i z e different shifts of laborers or
employees working only for eighthours each.
AKLAN ELECTRIC COOPERATIVE INC V NLRC(RETISO)
323 SCRA 258GONZAGA-REYES; January 25, 2000
NATURE
Petition for certiorari and prohibition with prayer for writ of preliminary
injunction and/or temporary restraining order
FACTS-
January 22, 1991 by way of a resolution of the
B o a r d o f Directors of AKELCO it allowed the temporary holding of officeat
Amon Theater, Kalibo, Aklan upon the recommendation of Atty.
Leovigildo Mationg, then project supervisor, on the groundthat the office at Lezo was
dangerous and unsafe.- Majority of the employees including the herein
complainants,continued to report for work at Lezo, Aklan and were
paid of their salaries. The complainants claimed that transfer of officefrom Lezo,
Aklan to Kalibo, Aklan was illegal because it failed tocomply with the legal
requirements under P.D. 269, thus the they remained and continued to
work at the Lezo Office untilthey
were illegally locked out therefrom by the respondents.Despite the
illegal lock out however, complainants continued tor e p o r t d a i l y t o t h e
location of the Lezo Office, prepared toc o n t i n u e i
n t h e p e r f o r m a n c e o f t h e i r r e g u
l a r duties.Complainants who continuousl y reported for work atLez
o, Aklan were not paid their salaries from June 1992 up toMarch 18, 1993.- LA
dismissed the complaints- NLRC reversed and set aside the LA’s decision and held
thatprivate respondents are entitled to unpaid wages from June 16,1992 to March
18, 1993
- Petitioner claims
:> compensable service is best shown by timecards, payslipsand other
similar documents and it was an error for publicrespondent to consider
the computation of the claims for
wagesa n d b e n e f i t s s u b m i t t e d m e r e l y b y p r i v a t e r e s p o n d e n t s
a s substantial evidence.
ISSUE
WON private respondents are entitled to payment of wages forthe period of
June 1992 up to March 18,1993 (what is their proof)
HELD
NO- NLRC based its conclusion on the following: (a) the letter
of Leyson, Office Manager of AKELCO addressed to AKELCO'sGener
al Manager, Atty. Mationg, requesting for the payment of private respondents'
unpaid wages from June 16, 1992 to March18, 1993; (b) the memorandum of
said Atty. Mationg in answerto the letter request of Leyson where he
made an
assurance t h a t h e w i l l r e c o m m e n d s u c h r e q u e s t ; ( c ) t h
e p r i v a t e respondents' own computation of their unpaid wages.- We find that the
foregoing does not constitute substantial evidence to support
the conclusion that private respondents areentitled to the payment of wages from
June 16, 1992 to March18, 1993.
- Substantial evidence is that amount of rel
evantevidence which a reasonable mind mig
h t a c c e p t a s adequate to justify a conclusion
. These evidences reliedu p o n b y p u b l i c r e s p o n d e n t d i d n o t e s
tablish the fact that

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private respondents actually rendered services in the Kalibooffice
during the stated period.
a. Letter of Pedrito Leyson to Atty. Mationg>
Pedrito Leyson is one of the herein private respondents whoare claiming
for unpaid wages and we find his actuation of requesting in behalf
of the other private respondents for the payment of their backwages to
be biased and self-serving, thusnot credible.> On the other hand, petitioner was
able to show that privaterespondents did not render services during the stated
period.P e t i t i o n e r ' s e v i d e n c e s s h o w t h a t o n J a n u a r y 2 2
, 1 9 9 2 , petitioner's Board of Directors passed a resolution
temporarilyt r a n s f e r r i n g t h e O f f i c e f r o m L e z o , A k l a n t o A m o n
T h e a t e r , Kalibo, Aklan .With the transfer of petitioner's business officefrom its
former office, Lezo, to Kalibo, Aklan, its equipments, records and
facilities were also removed from Lezo and
broughtto the Kalibo office where petitioner's official
business wasbeing conducted; thus private respondents' allegations
thatthey continued to report for work at Lezo to support their claimfor wages has no
basis.
b. Response of Atty. Mationg to the letter-request
of office manager Leyson
> M a t i o n g ' s o f f e r t o r e c o m m e n d t h e p a y m e n t o f p r i v a t e resp
ondents' wages is hardly approval of their claim for wages.It is just an
undertaking to recommend payment. Moreover, theoffer is conditional. It
is subject to the condition that petitioner'sBoard of Directors will give its
approval and that funds
wereavailable. Mationg's reply to Leyson's letter for payment
of wages did not constitute approval or assurance of payment. Thefact is that, the Board of
Directors of petitioner rejected privaterespondents demand for payment (Board
Resolution No. 496, s.1993).
c. the private respondents' own computation of
theirunpaid wages
> We hold that public respondent erred in merely relying on
thecomputations of compensable services submitted by privater e s p
o n d e n t s . T h e r e m u s t b e c o m p e t e n t p r o o f s u c h a s t i m e cards
or office record s to show that they actually renderedcompensable
service during the stated period to entitle them towages. It has been
established that the petitioner's business office was transferred to Kalibo
and all its equipments, recordsand facilities were transferred thereat and that it
conducted itsofficial business in Kalibo during the period in question. It
wasincumbent upon private respondents to prove that they indeedrendered services
for petitioner, which they failed to do.
SSS V CA (AYALDE)
348 SCRA 1YNARES-SANTIAGO; December 14, 2000
NATURE
Petition for review on
certiorari
FACTS-
In a petition before the Social Security Commission, Margarita Tana, widow
of the late Ignacio Tana, Sr., alleged that her husband
was, before his demise, an employee of ConchitaAyalde as a farmhand
in the two (2) sugarcane plantations sheowned in Pontevedra, La Carlota City
(Hda. B-70) and leasedfrom the University of the Philippines (Hda. B-15-M). She
furtheralleged that Tana worked continuously six (6) days a week, four(4) weeks
a month, and for twelve (12) months every year b e t w e e n
J a n u a r y 1 9 6 1 t o A p r i l 1 9 7 9 . F o r h i s l a b o r , Ta n a allegedly
received a regular salary according to the minimumwage prevailing at the time.- She
further alleged that throughout the given period,
socialsecurity contributions, as well as medicare
and employeescompensation premiums were deducted from Tana's
wages. Itwas only after his death that Margarita discovered that
Tanaw a s n e v e r r e p o r t e d f o r c o v e r a g e
, n o r w e r e h i s contributions/premiums remitted to the
SSS. Consequently, shewas deprived of the burial grant and pension benefits
accruingto the heirs of Tana had he been reported for coverage.- She prayed for the
Commission to issue an order
directingr e s p o n d e n t s C o n c h i t a A y a l d e a n d A n t e r o M a g h a r i a
s h e r administrator to pay the premium contributions of the deceasedIgnacio
Tana, Sr. and report his name for SSS coverage; and forthe
SSS to grant petitioner Margarita Tana the funeral andpension benefits
due her.- The SSS revealed that neither Hda. B-70 nor
respondentsAyalde and Maghari were registered members-employers of
theSSS, and consequently, Ignacio Tana, Sr. was never registeredas a member-
employee. Likewise, SSS records reflected thatthere was no way
of verifying whether the alleged
premiumcontributions were remitted since the respondents were
notregistered members-employers.- Respondent Antero Maghari raised the defense
that he was amere employee who was hired as an overseer of Hda. B-
70sometime during crop years 1964-65 to 1971-72, and as such,his job was
limited to those defined for him by the employer which never involved matters
relating to the SSS.- For her part, respondent Ayalde belied the allega tion
thatIgnacio Tana, Sr. was her employee, admitting only that he
washired intermittently as an independent contractor to plow,harrow,
or burrow Hda. No. Audit B-15-M. Tana used his
ownc a r a b a o a n d o t h e r i m p l e m e n t s , a n d h e f o l l o w e d h i s o w n
schedule of work hours. Ayalde further alleged that she neverexercised control over
the manner by which Tana performed hiswork as an independent contractor. Moreover,
Ayalde averredthat way back in 1971, the University of the Philippines
hadalready terminated the lease over Hda. B-15-M and she had since
surrendered possession thereof to the University of
thePhilippines. Consequently, Ignacio Tana, Sr. was no longerhired to
work thereon starting in crop year 1971-72, while hewas never contracted to work in
Hda. B-70.- SSS ruled in favor of Tana. CA ruled in favor of Ayalde.
ISSUE
WON an agricultural laborer who was hired on "pakyaw"
basisc a n b e c o n s i d e r e d a n e m p l o y e e e n t i t l e d t o c o m p
u l s o r y coverage and corresponding benefits under the Social SecurityLaw
HELD
- The mandatory coverage under the SSS Law (Republic Act No.1161, as
amended by PD 1202 and PD 1636) is premised on theexistence of an
employer-employee relationship,
and Section8 ( d ) d e f i n e s a n " e m p l o y e e " a s " a n y p e r s o n w h o p
e r f o r m s services for an employer in which either or both mental
andphysical efforts are used and who receives compensation
fors u c h s e r v i c e s w h e r e t h e r e i s a n e m p l o y e r -
e m p l o y e e relationship." The essential elements of an employer-
employeerelationship are: (a) the selection and engagement
of thee m p l o y e e ; ( b ) t h e p a y m e n t o f w a g e s ; ( c ) t h e p
o w e r o f dismissal; and (d) the power of control with regard to the meansand methods by
which the work is to be accomplished, with thepower of control being the most
determinative factor.- There is no question that Tana was selected and his
servicesengaged by either Ayalde herself, or by Antero Maghari,
hero v e r s e e r . C o r o l l a r i l y , t h e y a l s o h e l d t h e p r e r o g a t i v e
o f dismissing or terminating Tana's employment. The dispute is inthe question of
payment of wages. Claimant Margarita Tanaand her corroborating witnesses
testified that her husband waspaid daily wages "per quincena" as well as on
"pakyaw" basis.Ayalde, on the other hand, insists that Tana was paid solely
on"pakyaw" basis. To support her claim, she presented payrollscovering the
period January of 1974 to January of 1976 and November of 1978 to May of
1979.- A careful perusal of the records readily show that the
exhibitso f f e r e d a r e n o t c o m p l e t e , a n d a r e
b u t a m e r e s a m p l i n g o f payrolls. While the names of the
supposed labo rers appeartherein, their signatures are nowhere to be
found. And whilethey cover the years 1975, 1976 and portions of 1978
and1979, they do not cover the 18-year period during which Tanawas supposed
to have worked in Ayalde's plantations. Also anadmitted fact is that these exhibits
only cover Hda. B70, Ayalde

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having averred that all her records and payrolls for the otherplantation (Hda. B-15-M)
were either destroyed or lost.- To our mind, these documents are not only sadly lacking,
theyare also unworthy of credence. The fact that Tana's name doesnot appear in the
payrolls for the years 1975, 1976 and part of 1978 and 1979, is no proof that he did not
work in Hda. B70 inthe years 1961 to 1974, and the rest of 1978 and 1979. Theveracity
of the alleged documents as payrolls are doubtfulconsidering that the laborers named
therein never affixed theirsignatures to show that they actually received the
amountsindicated corresponding to their names. Moreover, no recordwas shown
pertaining to Hda. B-15-M, where Tana wassupposed to have worked. Even Ayalde
admitted that she hired Tana as "arador" and sometimes as laborer during milling inHda.
B-15-M.[16] In light of her incomplete documentaryevidence, Ayalde's denial that Tana
was her employee in Hda.B-70 or Hda. B-15-M must fail. In contrast to Ayalde's
evidence,or lack thereof, is Margarita Tana's positive testimony,corroborated by two (2)
other witnesses.- The witnesses did not waver in their assertion that while Tanawas hired
by Ayalde as an "arador" on "pakyaw" basis, he wasalso paid a daily wage which Ayalde's
overseer disbursed everyfifteen (15) days. It is also undisputed that they were made
toacknowledge receipt of their wages by signing on sheets of ruled paper, which are
different from those presented by Ayaldeas documentary evidence. In fine, we find that
the testimoniesof Margarita Tana and the two other witnesses prevail over theincomplete
and inconsistent documentary evidence of Ayalde.- No particular form of evidence is
required to prove theexistence of an employer-employee relationship. Anycompetent and
relevant evidence to prove the relationship maybe admitted. For, if only documentary
evidence would berequired to show that relationship, no scheming employerwould ever
be brought before the bar of justice, as no employerwould wish to come out with any
trace of the illegality he hasauthored considering that it should take much weightier proof
to invalidate a written instrument.- The testimonial evidence of the claimant and her
witnessesconstitute positive and credible evidence of the existence of anemployer-
employee relationship between Tana and Ayalde. Asthe employer, the latter is duty-bound
to keep faithful andcomplete records of her business affairs, not the least of whichwould
be the salaries of the workers.- The assertion that Tana is an independent contractor
isspecious because (1) while Tana was sometimes hired as an"arador" or plower for
intermittent periods, he was hired to doother tasks in Ayalde's plantations. It is
indubitable, as testifiedby the witnesses, that Tana worked continuously for Ayalde,
notonly as "arador" on "pakyaw" basis, but as a regular farmhand,doing backbreaking
jobs for Ayalde's business. There is noshred of evidence to show that Tana was only a
seasonalworker, much less a migrant worker. All witnesses, includingAyalde herself,
testified that Tana and his family resided in theplantation. If he was a mere "pakyaw"
worker or independentcontractor, then there would be no reason for Ayalde to allowthem
to live inside her property for free. The only logicalexplanation is that he was working for
most part of the yearexclusively for Ayalde, in return for which the latter
gratuitouslyallowed Tana and his family to reside in her property; and, (2)Ayalde made
much ado of her claim that Tana could not be heremployee because she exercised no
control over his work hoursand method of performing his task as "arador." A closer
scrutinyof the records, however, reveals that while Ayalde herself maynot have directly
imposed on Tana the manner and methods tofollow in performing his tasks, she did
exercise control throughher overseer.- Under the circumstances, the relationship between
Ayalde and Tana has more of the attributes of employer-employee thanthat of an
independent contractor hired to perform a specificproject.- Lastly, as a farm laborer who
has worked exclusively forAyalde for eighteen (18) years, Tana should be entitled
tocompulsory coverage under the Social Security Law, whetherhis service was
continuous or broken.
Disposition
Decision of CA reversed. Decision of SSSreinstated.
MANTRADE/FMMC DIVISION EMPLOYEES ANDWORKERS UNION V
BACUNGAN
144 SCRA 510FERIA; September 30, 1986
NATURE
Petition for Certiorari and Mandamus
FACTS
- Petitioner employees question the validity of the pertinentsection of the Rules and
Regulations Implementing the LaborCode as amended on which respondent arbitrator
Froilan M.Bacungan based his decision ruling that Mantrade Devt Corp isnot under legal
obligation to pay holiday pay (as provided for inArticle 94 of the Labor Code) to its
monthly paid employees whoare uniformly paid by the month, irrespective of the number
of working days therein, with a salary of not less than thestatutory or established
minimum wage, and that this rule isapplicable not only as of March 2, 1976 but as of
November 1,1974.- Respondent corporation contends, among others thatpetitioner is
barred from pursuing the present action in view of (1) Article 263 of the Labor Code; (2)
the pertinent provision of the CBA between petitioner and respondent corporation; and(3)
Article 2044 of the Civil Code; that the special civil action of certiorari does not lie
because respondent arbitrator is not an"officer exercising judicial functions" within the
contemplationof Rule 65, Section 1, of the Rules of Court; that the instantpetition raises
an error of judgment on the part of respondentarbitrator and not an error of jurisdiction;
that it prays for theannulment of certain rules and regulations issued by the DOLE,not for
the annulment of the voluntary arbitration proceedings;and that appeal by certiorari under
Section 29 of the ArbitrationLaw, Republic Act No. 876, is not applicable to the case at
barbecause arbitration in labor disputes is expressly excluded bySection 3 of said law.
ISSUES
1. WON decisions of arbitrators are subject to judicial review2. WON Mantrade
employees are entitled to holiday pay3. WON mandamus lies in the case at bar
HELD
1. YES-
Oceanic Bic Division (FFW) vs. Romero
(July 16, 1984): Thedecisions of voluntary arbitrators must be given the highestrespect
and as a general rule must be accorded a certainmeasure of finality. It is not correct,
however, that this respectprecludes the exercise of judicial review over their
decisions.Article 262 of the Labor Code making voluntary arbitrationawards final,
inappealable and executory, except where themoney claims exceed P100,000.00 or 40%
of the paid-upcapital of the employer or where there is abuse of discretion orgross
incompetence refers to appeals to the National LaborRelations Commission and not to
judicial review. Judicial reviewstill lies where want of jurisdiction, grave abuse of
discretion,violation of due process, denial of substantial justice, orerroneous
interpretation of the Law are brought to SC’sattention.2. YES
Under Art. 94 of the Labor Code, monthly salaried employeesare not among
those excluded from receiving holiday pay. Butthey appear to be excluded under
Sec. 2, Rule IV, Book III of theRules and Regulations implementing said provision.-
Insular Bank of Asia and America Employees' Union (IBAAEU)vs. Inciong
(October 24, 1984): Section 2, Rule IV, Book III of theimplementing rules and
Policy Instruction No. 9, issued by thethen Secretary of Labor are null and void
since in the guise of clarifying the Labor Code's provisions on holiday pay, they
ineffect amended them by enlarging the scope of their exclusion.-
Chartered Bank Employees Association vs. Ople
(August 28,1985): An administrative interpretation which diminishes
theb e n e f i t s o f l a b o r m o r e t h a n w h a t t h e s t a t u t e d e l i m i t s o r
withholds is obviously ultra vires.3. YES- While it is true that mandamus is
not proper to enforce a contractual obligation, the remedy being an action for
specificperformance, in view of the above cited subsequent decisions of this Court clearly
defining the legal duty to grant holiday pay
tomonthly salaried employees, mandamus is an appropriateequitable
remedy.
Disposition
Questioned decision of respondent arbitrator isSET ASIDE and
respondent corporation is ordered to GRANTholiday pay to its monthly salaried
employees. No costs.
STATES MARINE CORP V CEBU SEAMEN’S ASSN
[PAGE 126]
MILLARES V NLRC
[PAGE 79]
TIPS
ACE NAVIGATION CO INC V CA (NLRC, ALONSAGAY)
338 SCRA 380PUNO; August 15, 2000
NATURE
Petitioner for review of the resolutions that dismissed the
petition for certiorari (Ang kulit no? na-dismiss na nga yungcertiorari eh
pume-petition pa!)
FACTS-
I n J u n e 1 9 9 4 , A c e N a v i g a t i o n C o . , I n c . r e c r u i t e d p r i v a t e res
pondent Orlando Alonsagay to work as a bartender on boardthe vessel M/V
"Orient Express" owned by Conning
ShippingL t d . U n d e r t h e i r P O E A a p p r o v e d c o n t r a c t o f e m p l o
y m e n t , Orlando shall receive a monthly basic salary of
four hundredfifty U.S. dollars (U.S. $450.00), flat rate, including overtime
payfor 12 hours of work daily plus tips of two U.S. dollars (U.S. $2.00)
per passenger per day. He, was also entitled to 2.5 daysof vacation leave with
pay each month. The contract was to lastfor one (1)
year.- P e t i t i o n e r s a l l e g e d t h a t o n J u n e 1 3 , 1 9 9 4 , O r l a n d o w a
s deployed and boarded M/V "Orient Express" at the seaport of Hong Kong.
-
After the expiration of the contract, Orlando returned to thePhilippines and demanded
from Ace Nav his vacation leave pay.
-
Ace Nav did not pay him immediately. It told him that
hes h o u l d h a v e b e e n p a i d p r i o r t o h i s d i s e m b a r k a t i o
n a n d repatriation to the Philippines.
-
Conning did not remit any amount for his vacation leave pay.Ace Nav
promised to verify the matter and asked Orlando to return after a few days.
Orlando never returned.
-
On November 25, 1995, Orlando filed a complaint before thelabor arbiter for
vacation leave pay of four hundred fifty U.S.dollars and unpaid tips amounting to
thirty six, thousand U.S.dollars
-
On November 15, 1996, Labor Arbiter Felipe P. Pati orderedAce Nav and
Conning to pay jointly and severally Orlando hisvacation leave pay of
US$450.00. The claim for tips of Orlandowas dismissed for lack of merit.
-
Orlando appealed to the NLRC on February 3, 1997. In adecision
penned by Commissioner Vicente S.E. Veloso andconcurred in by C
ommissi oner Alberto R. Quimpo the NLRCordered Ace Nav and Conning
to pay the unpaid tips of Orlandowhich amounted to US$36,000.00 in
addition to his vacation leave pay.- Ace Nav and Conning filed a motion
for reconsideration on February 2, 1998 which was denied on May 20, 1999.-
On July 2, 1999, Ace Nav and Conning filed a petition
f o r certiorari before the Court of Appeals- On July 28, 1999, the Court of Appeals
promulgated a three-page resolution and concurred in by Associate Justices
EubuloG. Verzola and Elvi John S. Asuncion dismissing the petition.- Their motion for
reconsideration filed was denied.
Petitioners:
> Petitioners argued that the Court of Appeals erred in
rigidlyand technically applying
S e c t i o n 1 3 , R u l e 1 3 1 0 - P r o o f o f personal service
shall consist of a written admission of the party served, or the official
return of the server, or the affidavit of the party serving, containing a full
statement of the date, place and manner of service. If the service is by
ordinary mail, proof thereof shall consist of an affidavit of the person mailingor
facts showin g compliance with section 7 of this Rule. If service is made by
registered mail, proof shall be made by suchaffidavit and the registry receipt issued by the
mailing office.The registr y return
card shall be filed immediately upon itsreceipt, or in lieu thereof of the
unclaimed letter together
witht h e c e r t i f i e d o r s w o r n c o p y o f t h e n o t i c e g i v e n b
y t h e postmaster to the addressee.> Section 1, Rule 6511 Section 1.-- When
any tribunal, board or officer exercising judicial or quasi judicial functions has
acted without or in excess of its or his jurisdiction,
or with graveabuse of discretion amounting to lack or excess of
jurisdiction,and there is no appeal, or any plain, speedy, and
adequate r e m e d y i n t h e o r d i n a r y c o u r s e o f l a w , a p e r s o n a g g
r i e v e d thereby may file a verified petition in the proper court, allegingthe facts
with certainty and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board,officer, and granting such incidental reliefs as
law and justicemay require.
> They also contend that the respondent court erred in rulingthat they are the
ones liable to pay tips to Orlando. They pointo u t t h a t i f t i p s w i l l b e
c o n s i d e r e d a s p a r t o f t h e s a l a r y o f Orlando, it will make him
the highest paid employee on
M/V" O r i e n t E x p r e s s . " I t w i l l c r e a t e a n u n f a v o r a b l e p r e c e d e
n t detrimental to the future recruitment, hiring and deployment
of F i l i p i n o o v e r s e a s w o r k e r s s p e c i a l l y i n s e r v i c e o r i
e n t e d businesses. It will also be a case of double compensation thatwill
unjustly enrich Orlando at the expense of petitioners.> They also stress that
Orlando never compla ined that theyshould pay him the said tips.-
Respondent filed a two-page comment to the petition adoptingthe resolution of the Court of
Appeals dated July 28, 1999.
ISSUES
1. WON the CA erred in rigidly applying Sec 13102. WON the CA erred in ruling that they
are the ones liable topay tips to petitioner (Orlando)
HELD
1. YES
Ratio

Rules of procedure are used to help secure and not override substantial
justice. [Heirs of Francisco Guballa Sr. vs.Court of Appeals] Even the Rules of
Court mandates a liberalconstruction in order to promote their objective of
securing a just, speedy and inexpen sive disposition
of every action andproceeding. Since rules of procedure are mere tools designed
tof a c i l i t a t e t h e a t t a i n m e n t o f j u s t i c e , t h e i r s t r i c t a n d r i g i d a
pplication which would result in technicalities that tend tofrustrate
rather than promote substantial justice must always
e avoided. Thus, the dismissal of an appeal on purely technicalground is frowned upon
especially if it will result to unfairness.
Reasoning
- We apply these sound rules in the case at bar. Petitioners'petition for certiorari before
the Court of Appeals contained thecertified true copy of the NLRC's decision dated
November 26,1997. Its order dated May 2, 199917 and the sworn certificationof non-
forum shopping. Petitioners also explained that theircounsel executed an affidavit of
proof of service andexplanation in the afternoon of July 1, 1999. However, he forgotto
attach it when he filed their petition the following daybecause of the volume and pressure
of work and lack of officepersonnel. However, the Registry which is the proof of
mailingto Orlando's counsel, issued by the Central Post Office wasattached on the
original petition they filed with the respondentcourt. It was also stamped by the NLRC
which is proof of receiptof the petition by the latter. The affidavit of service, which
wasoriginally omitted, was attached on their motion forreconsideration. Significantly, it
was dated July 1, 1999.- the subsequent filing of the affidavit of service may
beconsidered as substantial compliance with the rules.2. NO
Reasoning
- The word “tip” has several meanings. It is more frequentlyused to indicate additional
compensation, and in this sense "tip"is defined as meaning a gratuity; a gift; a present; a
fee; moneygiven, as to a servant to secure better or more prompt service.- Tipping is done
to get the attention and secure the immediateservices of a waiter, porter or others for their
services. Since atip is considered a pure gift out of benevolence or friendship, itcan not be
demanded from the customer. Whether or not tipswill be given is dependent on the will
and generosity of thegiver. Although a customer may give a tip as a consideration
forservices rendered, its value still depends on the giver. They aregiven in addition to the
compensation by the employer. Agratuity given by an employer in order to inspire the
employeeto exert more effort in his work is more appropriately called abonus.- The
contract of employment between petitioners and Orlandois categorical that the monthly
salary of Orlando is US$450.00flat rate. This already included his overtime pay which
isintegrated in his 12 hours of work. The words "plus tips of US$2.00 per passenger per
day" were written at the line forovertime. Since payment for overtime was included in
themonthly salary of Orlando, the supposed tips mentioned in thecontract should be
deemed included thereat.- The actuations of Orlando during his employment also
showthat he was aware his monthly salary is only US$450.00, nomore no less. He did not
raise any complaint about the non-payment of his tips during the entire duration of
hisemployment. After the expiration of his contract, he demandedpayment only of his
vacation leave pay. He did not immediatelyseek the payment of tips. He only asked for
the payment of tipswhen he filed this case before the labor arbiter. This shows thatthe
alleged non-payment of tips was a mere afterthought tobloat up his claim. The records of
the case do not show thatOrlando was deprived of any monthly salary. It will now
beunjust to impose a burden on the employer who performed thecontract in good faith.-
Furthermore, it is presumed that the parties were aware of theplain, ordinary and common
meaning of the word "tip." As abartender, Orlando can not feign ignorance on the practice
of tipping and that tips are normally paid by customers and not bythe employer.-
However, Orlando should be paid his vacation leave pay.Petitioners denied this liability
by raising the defense that theusual practice is that vacation leave pay is given
beforerepatriation. But as the labor arbiter correctly observed,petitioners did not present
any evidence to prove that theyalready paid the amount. The burden of proving payment
wasnot discharged by the petitioners.
Disposition

Reversed and set aside

CASH WAGE/COMMISSIONS
SONGCO V NLRC (AGUAS, F.E. ZUELLIG INC)
183 SCRA 610MEDIALDEA; March 23, 1990
FACTS
- Private respondent F.E. Zuellig (M), Inc., filed with theDepartment of Labor an
application seeking clearance toterminate the services of petitioners Jose Songco,
RomeoCipres, and Amancio Manuel allegedly on the ground of retrenchment due to
financial losses.- This application was seasonably opposed by petitionersalleging that the
company is not suffering from any losses. Theyalleged further that they are being
dismissed because of theirmembership in the union.- At the last hearing of the case,
however, petitionersmanifested that they are no longer contesting their dismissal. The
parties then agreed that the sole issue to be resolved is thebasis of the separation pay due
to petitioners.- Petitioners, who were in the sales force of Zuellig receivedmonthly
salaries of at least P40,000. In addition, they receivedcommissions for every sale they
made.- The CBA entered into between Zuellig and F.E. ZuelligEmployees Association, of
which petitioners are members,contains the following provision:ARTICLE XIV —
Retirement GratuitySection l(a)-Any employee, who is separated fromemployment due to
old age, sickness, death or permanentlay-off not due to the fault of said employee shall
receivefrom the company a retirement gratuity in an amountequivalent to one (1) month's

salary
per year of service.One month of
salary
as used in this paragraph shall bedeemed equivalent to the
salary
at date of retirement;years of service shall be deemed equivalent to total servicecredits, a
fraction of at least six months being consideredone year, including probationary
employment.- On the other hand, Article 284 of the Labor Code thenprevailing
provides:Art. 284.
Reduction of personnel
. — The termination of employment of any employee due to the installation of labor
saving-devices, redundancy, retrenchment to preventlosses, and other similar causes,
shall entitle the employeeaffected thereby to separation
pay
. In case of terminationdue to the installation of labor-saving devices orredundancy, the
separation pay shall be equivalent to one(1) month
pay
or to at least one (1) month
pay
for everyyear 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) monthpay 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.- In addition, Sections
9(b) and 10, Rule 1, Book VI of the RulesImplementing the Labor Code provide:Sec.
9(b). Where the termination of employment is due toretrechment initiated by the
employer to prevent losses orother similar causes, or where the employee suffers from
adisease and his continued employment is prohibited by lawor is prejudicial to his health
or to the health of his co-employees, the employee shall be entitled to terminationpay
equivalent at least to his one month salary, or to one-half month
pay
for every year of service, whichever ishigher, a fraction of at least six (6) months
beingconsidered as one whole year.Sec. 10.
Basis of termination pay
. — The computation of the termination pay of an employee as provided hereinshall be
based on his latest salary rate, unless the samewas reduced by the employer to defeat the
intention of theCode, in which case the basis of computation shall be therate before its
deductio
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- The Labor Arbiter rendered a decision ordering the respondentto pay the complainants
separation pay equivalent to their one-month salary (exclusive of commissions,
allowances, etc.) forevery year of service that they have worked with the company.- The
appeal by petitioners to the National Labor RelationsCommission was dismissed for lack
of merit.
- Petitioners' Arguments
> In arriving at the correct and legal amount of separation paydue them, whether under
the Labor Code or the CBA, their basicsalary, earned sales commissions and allowances
should beadded together. They cited Article 97(f) of the Labor Code whichincludes
commission as part on one's salary, to wit;(f) 'Wage' paid to any employee shall mean
theremuneration or earnings, however designated, capable of being expressed in terms of
money, whether fixed orascertained on a time, task, piece, or commission basis, orother
method of calculating the same, which is payable byan employer to an employee under a
written or unwrittencontract of employment for work done or to be done, or forservices
rendered or to be rendered, and includes the fairand reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities customarilyfurnished by the
employer to the employee. 'Fairreasonable value' shall not include any profit to
theemployer or to any person affiliated with the employer.
- Respondents’ Comments
> If it were really the intention of the Labor Code as well as itsimplementing rules to
include commission in the computation of separation pay, it could have explicitly said so
in clear andunequivocal terms. Furthermore, in the definition of the term"wage",
"commission" is used only as one of the features ordesignations attached to the word
remuneration or earnings.
ISSUE
WON earned sales commissions and allowances should beincluded in the monthly salary
of petitioners for the purpose of computation of their separation pa
HELD
YES
-
Article 97(f) by itself is explicit that commission is included inthe definition of the term
"wage". It has been repeatedlydeclared by the courts that where the law speaks in clear
andcategorical language, there is no room for interpretation orconstruction; there is only
room for application.- 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 theImplementing Rules, which mention the terms "pay"
and"salary", is more apparent than real.- Broadly, the word "salary" means a recompense
orconsideration made to a person for his pains or industry inanother man's business.
Whether it be derived from "salarium,"or more fancifully from "sal," the pay of the
Roman soldier, itcarries with it the fundamental idea of compensation forservices
rendered. -- Indeed, there is eminent authority for holding that the words"wages" and
"salary" are in essence synonymous. "Salary," theetymology of which is the Latin word
"salarium," is often usedinterchangeably with "wage", the etymology of which is
theMiddle English word "wagen". Both words generally refer to oneand the same
meaning, that is, a reward or recompense forservices performed.- Likewise, "pay" is the
synonym of "wages" and "salary".Inasmuch as the words "wages", "pay" and "salary"
have thesame meaning, and commission is included in the definition of "wage", the
logical conclusion, therefore, is, in the computationof the separation pay of petitioners,
their salary base shouldinclude also their earned sales commissions.- Granting,
in gratia argumenti
, that the commissions were inthe form of incentives or encouragement, so that the
petitionerswould be inspired to put a little more industry on the jobsparticularly assigned
to them, still these commissions are directremuneration services rendered which
contributed to theincrease of income of Zuellig.- Commission is the recompense,
compensation or reward of anagent, salesman, executor, trustees, receiver, factor, broker
orbailee, when the same is calculated as a percentage on theamount of his transactions or
on the profit to the principal. Thenature of the work of a salesman and the reason for such
typeof remuneration for services rendered demonstrate clearly thatcommission are part of
petitioners' wage or salary.- The Court took judicial notice of the fact that some
salesmendo not receive any basic salary but depend on commissions andallowances or
commissions alone, are part of petitioners' wageor salary. Also, that some salesman do
not received any basicsalary but depend on commissions and allowances orcommissions
alone, although an employer-employeerelationship exists.- Bearing in mind the preceding
discussions, if the opposite viewis adopted that commissions, do not form part of wage
orsalary, then, in effect, this kind of salesmen do not receive anysalary and therefore, not
entitled to separation pay in the eventof discharge from employment. This narrow
interpretation is notin accord with the liberal spirit of our labor laws and consideringthe
purpose of separation pay which is, to alleviate thedifficulties which confront a dismissed
employee thrown the thestreets to face the harsh necessities of life.- Additionally, in
Soriano v. NLRC, et al., supra
, in resolving theissue of the salary base that should be used in computing theseparation
pay, the Court held that: The commissions also claimed by petitioner
('overridecommission' plus 'net deposit incentive') are not properlyincludible in such base
figure since such commissions mustbe earned by actual market transactions attributable
topetitioner.- Applying this by analogy, since the commissions in the presentcase were
earned by actual market transactions attributable topetitioners, these should be included
in their separation pay. Inthe computation thereof, what should be taken into account
isthe average commissions earned during their last year of employment.- In carrying out
and interpreting the Labor Code's provisionsand its implementing regulations, the
workingman's welfareshould be the primordial and paramount consideration. Thiskind of
interpretation gives meaning and substance to theliberal and compassionate spirit of the
law as provided for inArticle 4 of the Labor Code which states that "all doubts in
theimplementation and interpretation of the provisions of the LaborCode including its
implementing rules and regulations shall beresolved in favor of labor", and Article 1702
of the Civil Codewhich provides that "in case of doubt, all labor legislation andall labor
contracts shall be construed in favor of the safety anddecent living for the laborer.
Disposition

The petition was granted.

IRAN V NLRC (RETRALBA)
106 SCRA 444ROMERO; April 22, 1998
FACTS
- Antonio Iran is engaged in softdrinks merchandising anddistribution in Mandaue
City, Cebu, employing truck drivers whodouble as salesmen, truck helpers, and
non-field personnel inpursuit thereof. He hired private respondents
asdrivers/salesmen and truck helpers. Drivers/salesmen drovepetitioner’s delivery
trucks and promoted, sold and deliveredsoftdrinks to various outlets in Mandaue
City. The truck helpersassisted in the delivery of softdrinks to the different
outletscovered by the driver/salesmen.- As part of their compensation, the
driver/salesmen and truckhelpers of petitioner received commissions per case of
softdrinks sold.- Sometime in June 1991, Iran discovered cash shortages
andirregularities allegedly committed by private respondents.Pending the
investigation of irregularities and settlement of thn. (Emphasis supplied)

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cash shortages, Iran required private respondents to report forwork everyday. They were
not allowed, however, to go on theirrespective routes. A few days thereafter, despite
aforesaidorder, private respondents stopped reporting for work,prompting Iran to
conclude that the former had abandonedtheir employment. Consequently, Iran terminated
their services.He also filed a complaint for
estafa
against them.- Private respondents filed complaints against Iran for illegaldismissal,
illegal deduction, underpayment of wages, premiumpay for holiday and rest day, holiday
pay, service incentiveleave pay, 13
th
month pay, allowances, separation pay,recovery of cash bond, damages and attorney’s
fees.- Said complaints were consolidated, and assigned to LaborArbiter Ernesto F.
Carreon. He found that Iran had validlyterminated private respondents, there being just
cause for thelatter’s dismissal. Nevertheless, he also ruled that Iran had notcomplied with
minimum wage requirements in compensatingprivate respondents, and had failed to pay
private respondentstheir 13
th
month pay.- On appeal, NLRC affirmed the validity of private respondent’sdismissal, but
found that said dismissal did not comply with theprocedural requirements for dismissing
employees. MR denied.
ISSUES
1. WON commissions are included in determining compliancewith the minimum wage
requirement2. WON Iran is guilty of procedural lapses in terminating
privaterespondentsIf yes, WON P1,000.00 indemnity fee to each of the
privaterespondents is proper3. WON the advance amount received by private
respondentsshould be credited as part of their 13
th
month pay
HELD
1. YES- The nature of the work of a salesman and the reason for suchtype of
remuneration for services rendered demonstrate clearlythat commissions are part of a
salesman’s wage or salary.- Article 97(f), LC explicitly includes commissions as part of
wages. While commissions are, indeed, incentives or forms of encouragement to inspire
employees to put a little moreindustry on the jobs particularly assigned to them, still
thesecommissions are direct remunerations for services rendered.-
Commissions
have been defined as the recompense,compensation or reward of an agent, salesman,
executor,trustee, receiver, factor, broker or bailee, when the same iscalculated as a
percentage on the amount of his transactions oron the profit to the principal.- SC has
taken judicial notice of the fact that some salesmen donot receive any basic salary but
depend entirely oncommissions and allowances or commissions alone, although
anemployer-employee relationship exists.

Undoubtedly, this salarystructure is intended for the benefit of the corporationestablishing

such, on the apparent assumption that thereby itssalesmen would be moved to greater
enterprise and diligenceand close more sales in the expectation of increasing their
salescommissions. This, however, does not detract from thecharacter of such
commissions as part of the salary or wagepaid to each of its salesmen for rendering
services to thecorporation.- There is no law mandating that commissions be paid only
afterthe minimum wage has been paid to the employee. Verily, theestablishment of a
minimum wage only sets a floor below whichan employee’s remuneration cannot fall, not
that commissionsare excluded from wages in determining compliance with theminimum
wage law.-

Philippine Agricultural Commercial and Industrial WorkersUnion vs. NLRC:

drivers and conductors who are compensatedpurely on a commission basis are
automatically entitled to thebasic minimum pay mandated by law should said
commissionsbe less than their basic minimum for eight hours work. Weresaid
commissions equal to or even exceed the minimum wage,the employer need not pay, in
addition, the basic minimum payprescribed by law.2. YES- In terminating employees, the
employer must furnish theworker with two written notices before the latter can be
legallyterminated: (a) a notice which apprises the employee of theparticular acts or
omissions
for which his dismissal is sought
,and (b) the subsequent notice which informs the employee of the employer’s decision to
dismiss him.- First notice informing the employee that his dismissal is beingsought is
absent in the present case. This makes thetermination of private respondents defective,
for which Iranmust be sanctioned for his non-compliance with therequirements of or for
failure to observe due process.- Section 2 of Book V, Rule XIV of the Omnibus
RulesImplementing the Labor Code requires that in cases of abandonment of work,
notice should be sent to the worker’slast known address. If indeed private respondents
hadabandoned their jobs, it was incumbent upon Iran to complywith this requirement.
This, Iran failed to do, entitlingrespondents to nominal damages in the amount of
P5,000.00each, in accord with recent jurisprudence, to vindicate orrecognize their right to
procedural due process which wasviolated by Iran.3. YES- Iran is entitled to credit only
the amounts paid for theparticular year covered by said vouchers.- While it is true that the
vouchers evidencing payments of 13
th
month pay were submitted only on appeal, it would have beenmore in keeping with the
directive of Article 221 of the LaborCode for the NLRC to have taken the same into
account.- In labor cases, technical rules of evidence are not binding.Labor officials should
use every and all reasonable means toascertain the facts in each case speedily and
objectively,without regard to technicalities of law or procedure.- The intent of P.D. No.
851 is the granting of additional incomein the form of 13
th
month pay to employees not as yet receivingthe same and not that a double burden should
be imposed onthe employer who is already paying his employees a 13
th
monthpay or its equivalent. An employer who pays less than 1/12
th
of the employees basic salary as their 13
th
month pay is onlyrequired to pay the difference.
Disposition
NLRC decision modified. Case remanded to theLabor Arbiter for a recomputation of the
alleged deficiencies. Nocosts.
WAGES AND SALARY
GAA V CA (EUROPHIL INDUSTRIES CORP.)
140 SCRA 304 (85)PATAJO; December 31, 1985
NATURE
A petition for review on certiorari of the decision of the Court of Appeals affirming the
decision of the Court of First Instance of Manila.
FACTS
 - - Respondent Europhil Industries Corporation was formerly oneof the tenants in
Trinity Building at T.M. Kalaw Street, Manila,while petitioner Rosario A. Gaa
was then the buildingadministrator.- December 12, 1973: Europhil Industries
commenced an actionin CFI for damages against petitioner "for having
perpetratedcertain acts that Europhil Industries considered a trespass uponits
rights, namely, cutting of its electricity, and removing itsname from the building
directory and gate passes of its officialsand employees." Court ruled in favor of
Europhil.- A writ of garnishment was issued pursuant to which DeputySheriff
Cesar A. Roxas served a Notice of Garnishment upon ElGrande Hotel, where
petitioner was then employed, garnishingher "salary, commission and/or
remuneration." Gaa filed withthe CFI a motion to lift said garnishment on the
ground that her

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"salaries, commission and or remuneration" are exempted fromexecution under Article
1708 of the New Civil Code.- CA dismissed the petition, saying that Gaa is not a
merelaborer as contemplated under Article 1708. The term laborerdoes not apply to one
who holds a managerial or supervisoryposition like that of petitioner, but only to those
"laborersoccupying the lower strata."
ISSUE
WON Gaa is a laborer falling under the exception of Art. 1708 of the Civil Code
HELD
NO, Gaa is not a laborer as contemplated by the Civil Code.
Ratio
The term "wages" as distinguished from "salary", appliesto the compensation for manual
labor, skilled or unskilled, paidat stated times, and measured by the day, week, month,
orseason, while "salary" denotes a higher degree of employment,or a superior grade of
services, and implies a position of office.
Reasoning
- The legislature intended the exemption in Article 1708 of theNew Civil Code to operate
in favor of laboring men or women inthe sense that their work is manual. Persons
belonging to thisclass usually look to the reward of a day's labor for immediateor present
support, and such persons are more in need of theexemption than any others.
LABORER:
everyone who performs any kind of mental orphysical labor, but as commonly and
customarily used andunderstood, it only applies to one engaged in some form of manual
or physical labor.
WAGE:
the pay given "as hire or reward to artisans, mechanics,domestics or menial servants, and
laborers employed inmanufactories, agriculture, mines, and other manual occupationand
usually employed to distinguish the sums paid to personshired to perform manual labor,
skilled or unskilled, paid atstated times, and measured by the day, week, month,
orseason."- Petitioner is not an ordinary or rank and file laborer but "aresponsibly-placed
employee," of El Grande Hotel, "responsiblefor planning, directing, controlling, and
coordinating theactivities of all housekeeping personnel" to ensure thecleanliness,
maintenance and orderliness of all guest rooms,function rooms, public areas, and the
surroundings of the hotel.Petitioner is occupying a position equivalent to that of
amanagerial or supervisory position.
Disposition
Decision of the CA affirmed, with costs against thepetitioner.
EQUITABLE BANKING CORP V SADAC
490 SCRA 380CHICO-NAZARIO; June 8, 2006
NATURE
Petition for Review on Certiorari, with Motion to Refer thePetition to the Court
En Banc
, seeking to reverse the Decisionand Resolution of the CA which reversed and set aside
theResolutions of the NLRC.
FACTS
- Respondent Sadac was appointed Vice President of the LegalDepartment of petitioner
Bank and subsequently GeneralCounsel thereof. Nine lawyers of petitioner Bank’s
LegalDepartment accused Sadac of abusive conduct and petitionedfor a change in
leadership of the department. On the ground of lack of confidence in Sadac, under the
rules of client and lawyerrelationship, petitioner Bank instructed him to deliver
allmaterials in his custody in all cases in which the latter wasappearing as its counsel of
record.- Sadac requested for a full hearing and formal investigation butthe same remained
unheeded. He filed a complaint for illegaldismissal with damages against petitioner Bank
and individualmembers of the Board of Directors thereof. After learning of thefiling of
the complaint, petitioner Bank terminated his services.Finally, Sadac was removed from
his office and ordereddisentitled to any compensation and other benefits. LaborArbiter
Jovencio Ll. Mayor, Jr., dismissed the complaint for lackof merit. On appeal, the NLRC
reversed the Labor Arbiter anddeclared Sadac’s dismissal as illegal.
ISSUE
1. WON Sadac is entitled to full backwages including salaryincreases2. WON Sadac is
entitled to receive certain benefits3. WON the CA erred in awarding attorney’s fees to
Sadac4. WON Sadac is entitled to legal interest5. WON the petition should be heard by
the court
en banc
HELD
1. NO
Ratio
The outstanding feature of backwages is the degree of assuredness to an employee that
he would have had them asearnings had he not been illegally terminated from
hisemployment. Salary increases, however, are a mereexpectancy. There is no vested
right to salary increases.
Reasoning-
That respondent Sadac may have received salary increases inthe past only proves fact of
receipt but does not establish adegree of assuredness that is inherent in backwages. The
merefact that petitioner had been previously granted salaryincreases by reason of his
excellent performance does notnecessarily guarantee that he would have performed in
thesame manner and, therefore, qualify for the said increase later.When there is an award
of backwages this actually refers tobackwages without qualifications and deductions.
Anunqualified award of backwages means that the employee ispaid at the wage rate at the
time of his dismissal. The basefigure to be used in the computation of backwages due to
theemployee should include not just the basic salary, but also theregular allowances that
he had been receiving.
Obiter
Broadly, the word "salary" means a recompense orconsideration made to a person for his
pains or industry inanother man’s business. It carries with it the fundamental ideaof
compensation for services rendered. In labor law, thedistinction between salary and wage
appears to be merelysemantics. That wage and salary are synonymous has beensettled.
Both words generally refer to one and the samemeaning, that is, a reward or recompense
for servicesperformed. Likewise, "pay" is the synonym of "wages" and"salary".2. NO
Ratio
Sadac did not present any evidence to prove entitlementto these claims.
Reasoning-
Petitioner Bank’s computation contains no acknowledgment of herein claimed benefits,
namely, check-up benefit, clothingallowance, and cash conversion of vacation leaves. We
cannotsustain the rationalization that the acknowledgment bypetitioner Bank in its
computation of certain benefits granted toSadac means that the latter is also entitled to the
other benefitsas claimed by him but not acknowledged by the Bank.3. NO
Ratio
The decision of the CA AFFIRMED with MODIFICATION theNLRC decision, which
modification did not touch upon the awardof attorney’s fees as granted, hence, the award
stands.
Reasoning-
When a final judgment becomes executory, it therebybecomes immutable and
unalterable. The CA’s decision becamefinal and executory. This renders moot whatever
argumentpetitioner Bank raised against the grant of attorney’s fees toSadac.4. YES
Ratio
The legal interest of 12% per annum shall be imposedfrom the time judgment becomes
final and executory, until fullsatisfaction thereof.
- Reasoning

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-
The CA was not in error in imposing the same notwithstandingthat the parties
were at variance in the computation of
Sadac’sb a c k w a g e s . W h a t i s s i g n i f i c a n t i s t h a t t h e d e c i s i o n
w h i c h awarded
backwages to Sadac became final and executory. Therefore, petitioner Bank
is liable to pay interest from the dateof finality of the decision.5. NO
Ratio
The instant case is not one that should be heard by theCourt
en banc
.
Reasoning-
We are
n o t h e r e i n m o d i f y i n g o r r e v e r s i n g a d o c t r i n e o r principle laid down
by the Court
en banc
or in a division.
Disposition
T h e p e t i t i o n i s P A R T I A L L Y G R A N T E D a n d PARTIA
LLY DENIED. The decision of the CA is hereby MODIFIED.
GRATUITY AND WAGES
PLASTIC TOWN CENTER CORPORATION V NLRC(NAGKAKAISANG LAKAS NG
MANGGAGAWA (NLM)-KATIPUNAN)
172 SCRA 380GUTIERREZ; April 19,1989
NATURE
Petition for review of the decision of the NLRC
FACTS-
There are 2 provisions of the CBA in question in this case.1) P1 increase in
salary is granted every July 1. Also, section 3provides: It is agreed and
understood by the parties herein thatthe aforementioned increase in pay shall be
credited againstfuture allowances or wage orders hereinafter implemented
orenforced by virtue of Letters of Instructions, Decrees and otherlabor legislation.-
Wage order number 4, effective on May 1 1984, provided forthe integration
of the emergency cost of living allowances(ECOLA). It also provided that
the minimum daily wage rate beP32. Petitioner Plastic Town incurred
a deficiency of P1 afterintegrating the ECOLA. They then advanced
the implementationof the wage increase as provided for by the CBA. The
petitionerargues that it did not credit the Pl.00 per day across the boardincrease
under the CBA as compliance with Wage Order No. 5implemented on June
16,1984 since it gave an additional P3.00per day to the basic salary pursuant to
said order. It, however,credited the Pl.00 a day increase to the
requirement underWage Order No. 4 to which the private respondents
allegedlydid not object.2) gratuity pay to resigning employees- Gratuity pay is based on the
monthly salary. Petitioner
arguest h a t t h e c o m p u t a t i o n o f t h e m o n t h l y s a l a r y s h o u l d b e
t h e equivalent of 26 days of salary, not 30 days as the respondentsaver.
ISSUES
1. WON the petitioners can credit the P1 increase in the CBA ascompliance with
wage order number 42. WON the monthly salary is equivalent to 26 days
HELD
1. NO.- In the case at bar, the petitioner alleges that on May 1, 1984,it granted a
Pl.00 increase pursuant to Wage Order No. 4 whichin consonance with Section 3
of the CBA was to be credited tothe July 1, 1984 increase under the CBA. It was, therefore, a
Julyincrease. Section 3 of the CBA, however, clearly states that CBAgranted increases shall be
credited against future allowances orwage orders. Thus, the CBA increase to be
effected on July 1,1984 can not be retroactively applied to mean compliance
withWage Order No. 4 which took effect on May 1, 1984.2. NO. It should be 30 days- To say
that awarding the daily wage earner salary for morethan 26 days is paying him
for days he does not work missest h e p o i n t
e n t i r e l y. T h e i s s u e h e r e i s n o t p a y m e n t f o r d a y s worked but
payment of gratuity pay equivalent to one month or30 days salary- From the
foregoing, gratuity pay is therefore, not intended topay a worker for actual
services rendered. It is a money benefitgiven to the workers whose purpose is "to
reward employees orlaborers, who have rendered satisfactory and efficient
serviceto the company." (Sec. 2, CBA) While it may be enforced once
itforms part of a contractual undertaking, the grant of suchbenefit is
not mandatory so as to be considered a part of laborstandard law unlike the salary, cost
of living allowances, holidaypay, leave benefits, etc., which are covered by the Labor
Code.Nowhere has it ever been stated that gratuity pay should
bebased on the actual number of days worked over the period of years forming
its basis. We see no point in counting the
numbero f d a y s w o r k e d o v e r a t e n - y e a r p e r i o d t o d e t e r m i n e
t h e meaning of "two and one- half months' gratuity." Moreover anydoubts or
ambiguity in the contract between management andthe union members
should be resolved in the light of Article 1702 of the Civil Code that:- In case of
doubt, all labor legislation and all labor contractsshall be construed in favor of the
safety and decent living forthe laborer
Disposition
Decision affirmed
13
TH
MONTH PAY
AGABON V NLRC
[PAGE 35]
B. PAYMENT OF WAGES
9.03 FORM
FULL PAYMENT
LOPEZ SUGAR CORPORATION V FRANCO
458 SCRA 515CALLEJO; May 16, 2005
NATURE
Petition for review on certiorari of the Decision of the Court of Appeals (CA)
FACTS
- Franco, Pabalan, Perrin and Candelario were supervisoryemployees
of the Lopez Sugar Corporation (the Corporation, forbrevity). Franco was barely
20 years old when he was employedin 1974 as Fuel-in-Charge. His co-
employee, Paba lan, wasabout 28 years old when he was hired by
the Corporation asShift Supervisor in the
Sugar Storage Department in 1975.P e r r i n a n d C a n d e l a r i o w e r e
e m p l o y e d i n 1 9 7 5 a n d 1 9 7 6 , respectively, as Planter Service Re
presentatives (PSRs), whor o s e f r o m t h e r a n k s a n d , b y 1 9 9 4 , o
c c u p i e d s u p e r v i s o r y positions in the Corporation’s Cane Marketing Section.- The
supervisory employees of the Corporation, spearheadedby Franco, Pabalan,
Perrin and Candelario, decided to form
al a b o r u n i o n c a l l e d L o p e z S u g a r C o r p o r a t i o n S u p e r v i s o r ’ s
Association. Franco was elected president and Paba lan
astreasurer. Perrin and Candelario, on the other han d, wereamong
its active members.The officers of the union and themanagement
held a meeting, which led to the submission of the union’s proposals for a
CBA on July 24, 1995.- The Corporation’s president issued a Memorandum to the vice-president
and department heads for the adoption of a specialretirement program for
supervisory and middle level managers.He emphasized that the management
shall have the final sayo n w h o w o u l d b e c o v e r e d , a n d t h a t t h e
p r o g r a m w o u l d b e irrevocable once approved.
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Perrin and Candelario were on leave when they were invited by Juan Masa, Jr., head of
the Cane Marketing Section, to theNortheast Beach Resort in Escalante, Negros
Occidental. Thelatter informed them that they were all included in the specialretirement
program and would receive their respective noticesof dismissal shortly.- Masa, Pabalan,
Franco, Perrin and Candelario received copiesof the Memorandum dated August 25, 1995
from theCorporation’s Vice-President for Administration and Finance,informing them
that they were included in the “specialretirement program” for supervisors and middle
levelmanagers; hence, their employment with the Corporation wasto be terminated
effective September 29, 1995, and they wouldbe paid their salaries until September 27,
1995. The privaterespondents received their respective separation pays andexecuted their
respective Release Waiver and Quitclaim afterreceiving their clearances from the
Corporation.- The private respondents filed separate complaints against thecorporation
with the NLRC for illegal dismissal, unfair laborpractice, reinstatement and damages.-
The Corporation maintained that the termination of theemployment of the complainants
was in response to thechallenges brought about by the General Agreement on Tariff and
Trade (GATT), the AFTA and other international tradeagreements, which greatly affected
the local sugar industry anda study done by Sycip, Gorres, Velayo and Company
(SGV)regarding the Corporation and its operations to identify changesthat could be
implemented to achieve cost effectiveness andglobal competitiveness- Labor Arbiter
rendered judgment in favor of the Corporationand ordered the dismissal of the
complainants. Thecomplainants appealed to the NLRC that granted their appealand
reversed the decision of the Labor Arbiter. The CA rendered judgment dismissing the
petition, on the ground that the NLRCdid not commit grave abuse of discretion in
rendering judgmentagainst the Corporation.
ISSUES
1. WON there was proof of redundancy in the fulfillment of the jobs of the employees
and whether there is a criteria, guideline,or standard for selection. If not whether it was
meant tointimidate the union2. WON the waiver and quitclaim was valid
HELD
1. NO- The SC agreed with the ruling of the CA that the petitionerillegally dismissed the
private respondents from theiremployment by including them in its special
retirementprogram, thus, debilitating the union, rendering it pliant bydecapacitating its
leadership. As such, the so-called“downsizing” of the Cane Marketing Department and
SMSDbased on the SGV Study Report was a farce – capricious andarbitrary.-
Complainants are not in a position to anticipate howrespondent will present its case for
redundancy particular[ly]because no standard, criteria or guidelines for the selection of
dismissed employees was made known to them, and all thatthey were told was that “you
were selected as among thosewho will be separated from the service;” nonetheless, this
early,it is possible to point out certain facts which throw light on theplausibility or want
of it, of the ground relied upon.1. No contingency has occurred, of the kind mentioned by
theSupreme Court in the Wiltshire case, (over-hiring of workers,decreased volume of
business or dropping of a particularservice line) which would explain the dismissal on the
ground of redundancy; over-hiring of workers cannot conceivably occur inthe level of the
supervisors; on the other hand, it would haverequired an event of cataclysmic proportion
to justify thedismissal for redundancy of a full one-third of the supervisors inan
establishment, and if such an event were to occur it wouldhave resulted in tremendous
losses which is not true herebecause the dismissal is not on account of or to prevent
losses;2. In no other category of employees did positions suddenlybecome redundant
except among the supervisors who have justorganized themselves into a labor union and
were working fortheir first-ever CBA in the establishment;3. The dismissal came at the
precise time when the LopezSugar Central Supervisors Association (LSCA) had
presented itsCBA proposals and was expecting the company’s reply asmandated by law;
in fact, the reply was overdue, being requiredto be submitted by management within ten
(10) days fromreceipt of the union proposal; there is no better proof that thedismissals
have served their hidden purpose than that the CBAnegotiation has ended to all intents
and purpose, beforemanagement could even present its counterproposal.Certainly, it
would be farfetched to say that the remaining unionofficers and members have
abandoned its objective of having aCBA for reasons other than the fear of suffering the
fate of those who had been dismissed.- The absence of criteria, guidelines, or standard for
selection of dismissed employees renders the dismissals whimsical,capricious and
vindictive; in the case of the complainantsFranco and Pabalan, who are the Union
President and Treasurer, respectively, the reason for their inclusion is
obvious.Additionally, it must be mentioned that in the case of Pabalan,there were three
shift supervisors, one for each 8-hour shiftbefore the “program” was implemented,
namely, Pabalan,Bitera and Lopez; Pabalan and Bitera (a union director) wereterminated,
leaving Lopez alone, who worked on 12-hour shiftduty with Henry Villa, department
head who was forced toperform the work of shift supervisor; Pabalan was offered to
berehired as an employee of BUGLAS, a labor-only contractor buthe refused; an
employee, Eugenio Bolanos was assigned fromanother department to do the work of shift
supervisor and threeof them (Lopez, Villa and Bolanos) now divide shift dutiesamong
themselves. There is no explanation why among theshift supervisors it was Pabalan and
Bitera who were included inthe program.- In the case of complainants [P]errin and
Candelario, bothPlanter Service Representatives, the manipulation is even moreapparent;
one year before the “program” was instituted, twonew PSRs were hired (Labrador and
Cambate) bringing to sixthe total number of PSRs; after the termination of [P]errin
andCandelario, who have served for nearly 20 years, two new PSRswere hired (Oropel
and Jeres) on contractual basis and whosecompensation is based on pakiao; additionally,
Candelario washired after his dismissal under the same arrangement as Oropeland Jeres,
which lasted only up to January 1996 whenmanagement learned of the filing of the first
of these cases;[P]errin, on his part, was offered the same arrangement but herefused.- The
rehiring of dismissed employees through a labor-onlycontractor exposes the “program” as
a circumvention of thelaw. This is true in the case of the following supervisors whowere
terminated with complainant but were subsequentlyemployed to do exactly the same
work, but as employees of BUGLAS, a labor-only contractor which supplies laborers
torespondent LSC. The above re-hiring in addition to othercircumstances earlier
mentioned, such as the hiring of 2 menPSRs after Candelario and [P]errin were
terminated; the short-lived rehiring of the former and the offer to hire the latter whichhe
refused, all indicate that there was no redundancy.- None of the work has been phased out
or rendered obsoleteby any event that took place. As to duplication of functions, itmust be
mentioned that the positions of complainants haveexisted for a long time judging from
their years of service withrespondent; the observation of the Supreme Court in
theWiltshire case to the effect that in a well-organizedestablishment, duplication of
functions is hardly to be expectedis pertinent.- Foremost, the petitioner failed to
formulate fair andreasonable criteria in ascertaining what positions were
declaredredundant and accordingly obsolete, such as preferred status,efficiency or
seniority. It, likewise, failed to formulate fair andreasonable parameters to determine who
among thesupervisors and middle-level managers should be “retired” for

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redundancy. Using the SGV report as anchor, the petitionercame out with a special
retirement program for its 108supervisors and middle-level managers, making it clear that
itsdecision to eliminate them was final and irrevocable. Moreover,the private respondents
were not properly apprised of theexistence of the special retirement program, as well as
thecriteria for the selection of the supervisors to be “retired,” andthose to be retained or
transferred or demoted.- Contrary to its submissions, the petitioner downsized the
CaneMarketing Department by eliminating private respondentsPerrin and Candelario;
and Franco and Candelario from theSugar and Molasses Storage Department. The
downsizing of personnel was not among the foregoing recommendations, andyet this was
what the petitioner did, through its specialretirement program, by including private
respondents Francoand Pabalan, thereby terminating their employment. It is toomuch of a
coincidence that the two private respondents wereactive members of the
union.Recommendations were made relating to the Cane MarketingDepartment, the
report recommended the beefing up of thepetitioner’s planter service representative force,
whileeliminating those who were ineffective. There is no showing inthe record that
respondents Perrin and Candelario wereeliminated solely because they were inefficient.
Neither is thereany substantial evidence on record that the privaterespondents’
performance had been deteriorating; on thecontrary, they had been so far so efficient that
they had beengiven promotions from time to time during their employment. Yet, the
petitioner eliminated private respondents Perrin andCandelario and retained three PSRs,
namely, Danilo Villanueva,Roberto Combate and Danilo Labrador, who were
employedwith the petitioner from one to three years and transferredRaymundo de la
Rosa, who had been working there for only sixyears. Again, it is too much of a
coincidence that Franco andPabalan, the President and Treasurer, respectively, of the
union,were included in the special retirement program.- As may be expected, the
dismissals generated a generalperception that management was sending a strong
messagethat all employees hold their position at its pleasure, and that itwas within its
power to dismiss anyone anytime. With thedismissal of the union officers and with the
membership noweffectively threatened, the union virtually collapsed as anorganization.
Out of fear, no one would even assume theposition of union President. An indication of
this sad state of affairs into which the union has fallen is that nothing came outof its CBA
proposal. It has been a year and three months as of this writing since the respondent
informed the union that itsproposal had been referred to the company’s external
counsel,but no counter-proposal has been submitted and no singleconference has been
held since then.- Redundancy exists when the service capability of the workforce is in
excess of what is reasonably needed to meet thedemands on the enterprise. “A redundant
position is onerendered superfluous by any number of factors, such as over-hiring of
workers, decreased volume of business, dropping of aparticular product line previously
manufactured by thecompany or phasing out of a service activity priorly undertakenby
the business. Under these conditions, the employer has nolegal obligation to keep in its
payroll more employees than arenecessary for the operation of its business.”- As seen in
the case it was seen that contrary to thepetitioner’s claim, the employer must comply with
the followingrequisites to ensure the validity of the implementation of aredundancy
program: (1) a written notice served on both theemployees and the Department of Labor
and Employment atleast one month prior to the intended date of retrenchment;
(2)payment of separation pay equivalent to at least one monthpay or at least one month
pay for every year of service,whichever is higher; (3) good faith in abolishing the
redundantpositions; and (4) fair and reasonable criteria in ascertainingwhat positions are
to be declared redundant and accordinglyabolished.- And as emphasized in the case of
Panlilio v. National LaborRelations Commission that it is imperative for the employer
tohave fair and reasonable criteria in implementing itsredundancy program, such as but
not limited to (a) preferredstatus; (b) efficiency; and (c) seniority.- The general rule is that
the characterization by an employer of an employee’s services as no longer necessary or
sustainable isan exercise of business judgment on the part of the employer. The wisdom
or soundness of such characterization or decision isnot, as a general rule, subject to
discretionary review on thepart of the Labor Arbiter, the NLRC and the CA.
Suchcharacterization may, however, be rejected if the same is foundto be in violation of
the law or is arbitrary or malicious.2. NO- While it may be true that the private
respondents signedseparate Deeds of Release Waiver and Quitclaim and
receivedseparation pay, nonetheless, we find and so hold that the NLRCdid not err in
nullifying the decision of the Labor Arbiter.- The Release Waiver and Quitclaim were not
verified by thecomplainants. “Under prevailing jurisprudence, the fact that anemployee
has signed a satisfaction receipt of his claims doesnot necessarily result in the waiver
thereof. The law does notconsider as valid any agreement whereby a worker agrees
toreceive less compensation than what he is entitled to recover.A deed of release or
quitclaim cannot bar an employee fromdemanding benefits to which he is legally entitled.
We haveherefore (sic) explained that the reason why quitclaims arecommonly frowned
upon as contrary to public policy and whythey are held to be ineffective to bar claims for
the fullmeasures of the workers’ legal rights is the fact the employerand the employee
obviously do not stand on the same footing. The employer drove the employees to the
wall. The latter musthave to get hold of the money. Because out of job, they had toface
the harsh necessities of life. x x x” (Marcos vs. NLRC, G.R.No. 111744, September 8,
1995). The private respondents hadno other recourse but to execute the said Release
Waiver andQuitclaim because the petitioner made it clear in itsMemorandum dated
August 8, 1995 that it had the final say onwho would be included in its special retirement
program. Theirdismissal from the petitioner corporation was a fait accompli,solely
because they organized a union that would bargain forreasonable terms and conditions of
employment sought to beincluded in a CBA. In fine, the private respondents were left
tofend for themselves, with no source of income from then on;prospects for new jobs
were dim. Their backs against the wall,the private respondents were forced to sign the
said documentsand receive their separation pay.
Disposition
petition is DENIED for lack of merit.
G&M INC V BATOMALAGUE
[PAGE 116]
PAYROLL PAYMENT
CHAVEZ V NLRC
[PAGE 59]
PHIL GLOBAL COMMUNICATIONS INC V DE VERA
[PAGE 52]
CASH WAGE
CONGSON V NLRC
243 SCRA 260PADILLA; April 5, 1995
NATURE
Appeal from a decision of NLRC
FACTS
- - Petitioner Dominico C. Congson is the registered owner of Southern Fishing
Industry. Private respondents Bargo, Himeno,
Badagos, et al were hired on various dates by Congson asregular piece-rate workers.
They were uniformly paid at a rateof P1 per tuna weighing 30-80 kilos per movement,
that is —from the fishing boats down to petitioner's storage plant at aload/unload cycle of
work until the tuna catch reached its finalshipment/destination. They did the work of
unloading tuna fromfishing boats to truck haulers; unloading them again atpetitioner's
cold storage plant for filing, storing, cleaning, andmaintenance; and finally loading the
processed tuna forshipment. They worked 7 days/week.- In June 1990, Congson notified
his workers of his proposal toreduce the rate-per-tuna movement due to the scarcity of
tuna.Private respondents resisted Congson's proposed ratereduction. When they reported
for work the next day, they wereinformed that they had been replaced by a new set of
workers.When they requested for a dialogue with the management, theywere instructed to
wait for further notice. They waited for thenotice of dialogue for a full week but in vain.-
So private complainant workers filed complaint againstCongson for underpayment of
wages, non-payment of overtimepay, 13th month pay, holiday pay, rest day pay, and 5-
dayservice incentive leave pay; and for constructive dismissal.Labor Arbiter and NLRC
ruled in favor of private respondentworkers. NLRC found Congson guilty of illegal
dismissal. It heldthat private respondents did not abandon their work, but thatCongson
replaced private respondents with a new set of workers without just cause and the
required notice and hearing.It also affirmed Labor Arbiter’s findings and monetary
awards.Hence, this appeal.
ISSUES
1. WON there was grave abuse of discretion on the part of respondent NLRC in
upholding Labor Arbiter’s award of salarydifferentials2. WON NLRC was correct in
affirming LA’s award of separationpay
HELD
1. NO- Petitioner Congson argues that despite the fact that privaterespondents' actual
cash wage fell below the minimum wagefixed by law, respondent NLRC should have
considered asforming a substantial part of private respondents' total wagesthe cash value
of the tuna liver and intestines privaterespondents were entitled to retrieve. Petitioner
thereforeargues that the combined value of private respondents' cashwage and the
monetary value of the tuna liver and intestinesclearly exceeded the minimum wage fixed
by law.
- Rule:
Congson’s practice of paying the private respondents theminimum wage by means of
legal tender combined with tunaliver and intestines runs counter to the above cited
provision of the Labor Code. The fact that said method of paying theminimum wage was
not only agreed upon by both parties in theemployment agreement but even expressly
requested byprivate respondents, does not shield petitioner. Article 102
1
of the Labor Code is clear. Wages shall be paid only by means of legal tender. The only
instance when an employer is permittedto pay wages informs other than legal tender, that
is, bychecks. or money order, is when the circumstances prescribedin the second
paragraph of Article 102 are present.2. YES- Congson contends that: assuming
arguendo
that LaborArbiter's findings were proper as to private respondents' illegaldismissal, it did
not state the reason why instead of reinstatement, separation pay has to be awarded.
Petitionersubmits that under existing laws and jurisprudence, wheneverthere is a finding
of illegal dismissal, the available and logical
1
Article 102. Forms of Payment. —No. employer shall pay the wages of an employeeby
means of, promissory notes, vouchers, coupons, tokens tickets, chits, or anyobject other
than legal tender,
even when expressly requested by the employee.
Payment of wages by check or money order shall be allowed when such manner of
payment is customary on the date of effectivity of this Code, or is necessary asspecified
in appropriate regulations to be issued by the Secretary of Labor or asstipulated in a
collective bargaining agreement.
remedy is reinstatement. As a permissible exception to thegeneral rule, separation pay
may be awarded to the employeein
lieu
of reinstatement, by reason of strained relationshipbetween the employer and employee.
Since there was nofinding or even allegation of strained relationship between.petitioner
and private respondents, NLRC should have deletedthe award of separation pay.- A
careful scrutiny of the records of the case discloses theexistence of strained relationship
between the petitionerCongson and private respondents:
[a]
petitioner consistentlyrefused to re-admit private respondents in his
establishment.Petitioner even replaced private respondents with a new set of workers to
perform the tasks of private respondents
[b]
privaterespondents themselves, from the very start, had alreadyindicated their aversion to
their continued employment inpetitioner's establishment.
Disposition

Petition DISMISSED. Challenged decision of NLRCAFFIRMED.

PAYROLL ENTRIES
KAR ASIA V CORONA
437 SCRA 184YNARES-SANTIAGO; August 24, 2004
FACTS
- Respondents, regular employees of petitioner KAR ASIA, Inc.,an automotive dealer in
Davao City, filed on September 24,1997 claimubg that they were not paid their cost of
livingallowance (COLA) for the months of December 1993 andDecember 1994.-
Petitioner company and its president Celestino Barrettocountered by saying that
respondents had already been paidtheir COLA for the said periods. Petitioners presented
inevidence the payrolls for December 1993 and December 1994showing that the
respondents acknowledged in writing thereceipt of their COLA, and the affidavits of
Ermina Daray andCristina Arana, cashiers of KAR ASIA, refuting respondents’claim that
they were made to sign blank pieces of paper.- Labor Arbiter rendered a decision in favor
of petitioners. NLRCaffirmed the decision of the Labor Arbiter. Court of Appealsreversed
the decision of the NLRC and ordered petitionercompany to pay the respondents the
P25.00 per day COLA forthe period December 1 to 31, 1994, plus interest thereon at
therate of 1% per month computed from the time the same waswithheld from respondents
up to the time they were actuallypaid the respective sums due them
ISSUE
WON not the petitioner company paid the respondents theCOLA for December 1993 and
December 1994 as mandated byRTWPB XI Wage Order No. 3
HELD
YES
Ratio
A close scrutiny of the payroll for the December 1993COLA readily disclose the
signatures of the respondentsopposite their printed names and the numeric value of
P654.00.Respondents’ averment that the petitioner company harassedthem into signing
the said payroll without giving them its cashequivalent cannot be given credence. He who
asserts not hewho denies must prove; unfortunately, the respondentsmiserably failed to
discharge this burden
Reasoning
- The payrolls for December 1 to 15, 1994 and December 16 to31, 1994 indicate an
allowance of P327.00 for each period, or atotal of P654.00 for the entire month.
However, a casualobservation of the payroll for the December 1993 COLA will alsoshow
that the respondents signed for the amount of P654.00.Also, the allowances appearing in
the two separate payslips forDecember 1 to 15, 1994 and December 16 to 31, 1994 sum
upto a total of P654.00. Although the numeric figures in the

Labor Law 1
A2010 - 156 -
Disini
December 1994 payroll and the payslips for the same periodwere denominated merely as
allowances while those in theDecember 1993 payroll were specifically identified as
COLA, thefact that they add up to the same figure,
i.e
., P654.00, is not acoincidence- While ordinarily a payslip is only a statement of the
grossmonthly income of the employee, his signature therein coupledby an
acknowledgement of full compensation alter the legalcomplexion of the document. The
payslip becomes a substantialproof of actual payment. Moreover, there is no hard-and-
fastrule requiring that the employee’s signature in the payroll is theonly acceptable proof
of payment. By implication, therespondents, in signing the payslips with
theiracknowledgement of full compensation, unqualifiedly admittedthe receipt thereof,
including the COLA for December 1994
9.04 TIME PAYMENT9.05 PLACE PAYMENT
LABOR ADVISORY ON PAYMENT OF SALARIESTHRU AUTOMATED TELLER
MACHINE (ATM)
- Article 104 of the Labor Code, as amended, requires thatpayment of wages shall be
made at or near the place of undertaking, except as otherwise provided by such
regulationsas the Secretary of Labor and Employment may prescribe underconditions that
would ensure prompt payment and protection of wages.- Based on Article 104, as well as
the provisions of Sec. 4, RuleVIII, Book III of the Code’s Implementing Rules and
consideringpresent-day circumstances, practices and technology,employers may adopt a
system of payment other than in theworkplace, such as through automated teller machine
(ATM) of banks, provided that the following conditions are met:1.The ATM systems of
payment is with the written consent of the employees concerned.2.The employees are
given reasonable time to withdraw theirwages from the bank facility which time, if done
duringworking hours, shall be considered compensable hoursworked.3.The system shall
allow workers to receive their wages withinthe period or frequency and in the amount
prescribed underthe Labor Code, as amended.4.There is a bank or ATM facility within a
radius of onekilometer to the place of work.5.Upon request of the concerned employee/s,
the employershall issue a record of payment of wages, benefits anddeductions for
particular period.6.There shall be no additional expenses and no diminution of benefits
and privileges as a result of the ATM system of payment.7.The employer shall assume
responsibility in case the wageprotection provisions of law and regulations are not
compliedwith under the arrangement.- Done in the City of Manila, this 25
th
day of November 1996.Sgd. Leonardo A. QuisumbingSecretary.
9.06 DIRECT PAYMENT9.07 CONTRACTOR – SUB-CONTRACTOR
C. PROHIBITION REGARDING WAGES
9.08 NON-INTERFERRENCE –DISPOSAL OF WAGES9.09 WAGE DEDUCTION
WAGE DEDUCTION
RADIO COMMUNICATIONS OF THE PHILS INC V SECOF LABOR
169 SCRA 38REGALADO; January 9, 1989
FACTS
- On May 4, 1981, petitioner, a domestic corporation engaged inthe telecommunications
business, filed with the National WagesCouncil an application for exemption from the
coverage of Wage Order No. 1. The application was opposed by respondentUnited RCPI
Communications Labor Association (URCPICLA-FUR), a labor organization affiliated
with the Federation of Unions of Rizal (FUR).- On May 22, 1981, the National Wages
Council disapprovedsaid application and ordered petitioner to pay its coveredemployees
the mandatory living allowance of P2.00 dailyeffective March 22, 1981.- As early as
March 13, 1985, before the aforesaid case waselevated to this Court, respondent union
filed a motion for theissuance of a writ of execution, asserting therein its claim to15% of
the total backpay due to all its members as "unionservice fee" for having successfully
prosecuted the latter'sclaim for payment of wages and for reimbursement of
expensesincurred by FUR and prayed for the segregation and remittanceof said amount to
FUR thru its National President.- On October 24, 1985, without the knowledge and
consent of respondent union, petitioner entered into a compromiseagreement with Buklod
ng Manggagawa sa RCPI-NFL (BMRCPI-NFL) as the new bargaining agent of
oppositors RCPIemployees.- Thereupon, the parties filed a joint motion praying for
thedismissal of the decision of the National Wages Council for ithad already been
novated by the Compromise Agreement re-defining the rights and obligations of the
parties. RespondentUnion on November 7, 1985 countered by opposing the motionand
alleging that one of the signatories thereof- BMRCPI-NFL isnot a party in interest in the
case but that it was respondentUnion which represented oppositors RCPI employees all
the wayfrom the level of the National Wages Council up the SupremeCourt. Respondent
Union therefore claimed that theCompromise Agreement is irregular and invalid, apart
from thefact that there was nothing to compromise in the face of a finaland executory
decision.
-
Director Severo M. Pucan issued an Order dated November 25,1985 awarding to
URCPICLA-FUR and FUR 15% of the totalbackpay of RCPI employees as their union
service fees, anddirecting RCPI to deposit said amount with the cashier of theRegional
Office for proper disposition to said awardees.
-
Despite said order, petitioner paid in full the coveredemployees on November 29, 1985,
without deducting the unionservice fee of 15%.
-
In an order dated May 7, 1986, NCR officer-in-charge foundpetitioner RCPI and its
employees jointly and severally liable forthe payment of the 15% union service fee
amounting toP427,845.60 to private respondent URCPICLA-FUR andconsequently
ordered the garnishment of petitioner's bankaccount to enforce said claim.
-
- Secretary of Labor and Employment issued an order on August18, 1986
modifying the order appealed from by holding
etitioner solely liable to respondent union for 10% of theawarded amounts as attorney's
fees
ISSUE
WON public respondents acted with grave abuse of discretionamounting to lack of
jurisdiction in holding the petitioner solelyliable for "union service fee' to respondent
URCPICLA-FUR
HELD
NO. Attorney's fee due the oppositor is chargeable against RCPI.
Ratio
The defaulting employer or government agency remainsliable for attorney's fees because
it compelled the complainantto employ the services of counsel by unjustly refusing
torecognize the validity of the claim. (Cristobal vs. ECC)
Reasoning-
It is undisputed that oppositor (private respondent herein) wasthe counsel on record of the
RCPI employees in their claim forEC0LA under Wage Order No. 1 since the inception of
theproceedings at the National Wages Council up to the SupremeCourt. It had therefore a
valid claim for attorney's fee which itcalled union service fee.- As is evident in the
compromise agreement, petitioner wasbound to pay only 30% of the amount due each
employee onNovember 30, 1985, while the balance of 70% would still be thesubject of
renegotiation by the parties. Yet, despite suchconditions beneficial to it, petitioner paid in
full the backpay of its employees on November 29, 1985, ignoring the service feedue the
private respondent.- Worse, petitioner supposedly paid to one Atty. Rodolfo M.Capocyan
the 10% fee that properly pertained to herein privaterespondent, an unjustified and
baffling diversion of funds.- Finally, petitioner cannot invoke the lack of an
individualwritten authorization from the employees as a shield for itsfraudulent refusal to
pay the service fee of private respondent.Be that as it may, the lack thereof was remedied
and suppliedby the execution of the compromise agreement whereby theemployees,
expressly approved the 10% deduction and heldpetitioner RCPI free from any claim, suit
or complaint arisingfrom the deduction thereof. When petitioner was thereafteragain
ordered to pay the 10% fees to respondent union, it nolonger had any legal basis or
subterfuge for refusing to pay thelatter.- We agree that Article 222 of the Labor Code
requiring anindividual written authorization as a prerequisite to wagedeductions seeks to
protect the employee against unwarrantedpractices that would diminish his compensation
without hisknowledge and consent. However, for all intents and purposes,the deductions
required of the petitioner and the employees donot run counter to the express mandate of
the law since thesame are not unwarranted or without their knowledge andconsent. Also,
the deductions for the union service fee inquestion are authorized by law and do not
require individualcheck-off authorizations.
Disposition
the order of the Secretary of Labor of August 16,1986 is hereby AFFIRMED and the
petition at bar is DISMISSED,with double costs against petitioner. The temporary
restrainingorder issued pursuant to the Resolution of the Court of June 22,1987 is
LIFTED and declared of no further force and effect.
APODACA V NLRC (MIRASOL, INTRANS PHILS)
172 SCRA 442GANCAYCO; April 18, 1989
NATURE
Special civil action for certiorari
FACTS
- Petitioner was employed in respondent corporation- 1975: petitioner was appointed
President and GeneralManager of respondent corporation- 1985: Respondent Mirasol
persuaded petitioner to subscribeto 1,500 shares of respondent corporation at P100 per
share(total of P150,000). He made an initial payment of P37,500.- January, 1986:
petitioner resigned- December, 1986: petitioner instituted with NLRC a complaintfor the
payment of his unpaid wages, his cost of livingallowance, the balance of his gas and
representation expenses,and his bonus compensation for 1986.- Private respondents
admitted there is due to the petitionerP17,060, but this was applied to the unpaid balance
of hissubscription in the amount of P95,439.93- Petitioner questioned the set off since
there was no call ornotice for the payment of the unpaid subscription, and that thealleged
obligation is not enforceable.- The NLRC held that a stockholder who fails to pay his
unpaidsubscription on call becomes a debtor of the corporation andthat the set-off of said
obligation against the wages and otherdue to petitioner is not contrary to law, morals,
public policy
ISSUE
1. WON the NLRC has jurisdiction to resolve a claim for non-payment of stock
subscriptions to a corporation2. WON an obligation arising from the non-payment of
stocksubscription can be offset against a money claim of anyemployee against an
employer
HELD
1. NO
Reasoning
- The NLRC has no jurisdiction to determine such intra-corporatedispute between the
stockholder and the corporation as in thematter of unpaid subscriptions. This is within the
exclusive jurisdiction of the Securities and Exchange Commission.2. NO
Reasoning-
Assuming arguendo that the NLRC may exercise jurisdiction inthis case, the unpaid
subscriptions are not due and payableuntil a call is made by the corporation for payment.
It does notappear that a notice of such call has been sent to petitioner. The records only
show that the respondent corporationdeducted the amount due to petitioner from the
amountreceivable from him from for the unpaid subscriptions. This set-off was without
lawful basis. As there was no notice or call forpayment, the same is not yet due or
payable.- Assuming that there had been a call for payment, the NLRCstill cannot validly
set it off against the wages and otherbenefits due petitioner.- Art. 113 of the Labor code
allows such a deduction from thewages of the employees by employer in only 3
instances: (a) Incases where the worker is insured with his consent by theemployer, and
the deduction is to recompense the employer forthe amount paid by him as premium on
the insurance; (b) Forunion dues, in cases where the right of the worker or his unionto
checkoff has been recognized by the employer or authorizedin writing by the individual
worker concerned; and (c) In caseswhere the employer is authorized by law or
regulations issuedby the Secretary of Labor.
Disposition
 The petition is GRANTED and the questioneddecision of the NLRC dated September
18, 1987 is hereby setaside and another judgment is hereby rendered orderingprivate
respondents to pay petitioner the amount of P17,060.07plus legal interest computed from
the time of the filing of thecomplaint on December 19, 1986, with costs against
privaterespondents.
CHECK OFF
MANILA TRADING & SUPPLY CO V MANILA TRADINGLABOR ASSN
93 PHIL 288REYES; April 29, 1953
NATURE

Labor Law 1
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Disini
Petition for certiorari to set aside decision of CIR.
FACTS
- On October 10, 1950, the Manila Trading Labor Association,composed of workers of
Manila Trading and Supply Co., made ademand upon said company for increase of
wages, increase of personnel, Christmas bonus, and other gratuities and privileges.As the
demand was refused and the Department of Labor -whose intervention had been sought
by the association - failedto effect an amicable settlement, the Head of the
Departmentcertified the dispute to the Court of Industrial Relations onOctober 25, and
there it was docketed as case No. 521-V. Thecompany, on its part, on that same day
applied to the Court of Industrial Relations for authority to lay off 50 laborers due
to"poor business," the application being docketed as Case No.415-V (4).- To resolve the
disputes involved in the two cases the Court of Industrial Relations conducted various
hearings betweenOctober 26, 1950, and January 18, 1951. Of their own volitionthe
president and vice-president of the association attendedsome if not all of the hearings,
and though they absentedthemselves from work for that reason they afterwards
claimedthat they were entitled to their wages. The Court of IndustrialRelations found
merit in the claim, and at their instance,ordered the company to pay them their wages
corresponding tothe days they were absent from work while in attendance at thehearings.-
Contending that the industrial court had no authority to issuesuch an order, the company
asks this Court to have it annulled.Opposing the petition, the association, on its part,
contends thatthe order comes within the broad powers of the industrial courtin the
settlement of disputes between capital and labor.
ISSUE
WON Court of Industrial Relations may require an employer topay the wages of officers
of its employees' labor union whileattending the hearing of cases between the employer
and theunion
HELD
Ratio
When in case of strikes, and according to the CIR even if the strike is legal, strikers may
not collect their wages duringthe days they did not go to work, for the same reasons if
notmore, laborers who voluntarily absent themselves from work toattend the hearing of a
case in which they seek to prove andestablish their demands against the company, the
legality andpropriety of which demands is not yet known, should lose theirpay during the
period of such absence from work.
Reasoning-
The age-old rule governing the relation between labor andcapital or management and
employee is that of a "fair day'swage for a fair day's labor.' If there is no work performed
by theemployee there can be no wage or pay, unless of course, thelaborer was able,
willing and ready to work but was illegallylocked out, dismissed or suspended. It is
hardly fair or just foran employee or laborer to fight or litigate against his employeron the
employer's time.- The respondent association, however, claims that it was notthe one that
brought the cases to the Court of IndustrialRelations, and the point is made that "if the
laborer who isdragged to court is deprived of his wages while attending courthearings, he
would in effect be denied the opportunity todefend himself and protect his interests and
those of his fellowworkers." But while it is true that it was the Secretary of Laborwho
certified the dispute involved in case No. 521-V to theCourt of Industrial Relations, the
fact remains that the disputewas initiated by a demand from the labor association. The
truth,therefore, is that while one of the cases was filed by theemployer, the offer was
initiated by the employees. It may beconceded that the employer is in most cases in a
better positionto bear the burdens of a litigation than the employees. But aswas said in the
case of J. P. Heilbronn Co. vs. National LaborUnion, supra, "It is hardly fair for an
employee or laborer to fightor litigate against his employer on the employer's time."
Themost that could be conceded in favor of the claimants herein isto have the absences
occasioned by their attendance at thehearings charged against their vacation leave if they
have any,or as suggested by three of the Justices who signed the decisionin the case just
cited, to have the wages they failed to earncharged as damages in the event the cases
whose hearingsthey attended are decided in favor of the association. But themajority of
the Justices make no commitment on this latterpoint.
Disposition
Petition for certiorari is granted and the ordercomplained of set aside.
9.10 DEPOSIT
DENTECH MANUFACTURING V NLRC (MARBELLA)
172 SCRA 588GANCAYCO; April 19, 1989
FACTS
- Dentech Manufacturing Corporation is a domestic corporationorganized under
Philippine laws owned and managed by thepetitioner Jacinto Ledesma. The firm is
engaged in themanufacture and sale of dental equipment and supplies.- Private
respondents Benjamin Marbella, Armando Torno, Juanito Tajan, Jr. and Joel Torno are
members of theConfederation of Citizens Labor Union (CCLU), a labororganization
registered with the DOLE. They used to be theemployees of Dentech, working as
welders, upholsterers andpainters. They were already employed with the company whenit
was still a sole proprietorship. They were dismissed from thefirm beginning February 14,
1985.- They filed a Complaint with the NLRC against Dentech andLedesma for, among
others, illegal dismissal and violation of PD851. They were originally joined by another
employee, oneRaymundo Labarda, who later withdrew his Complaint. At first,they only
sought the payment of their 13th month pay under PD851 as well as their separation pay,
and the refund of the cashbond they filed with the company at the start of
theiremployment. Later on, they sought their reinstatement as wellas the payment of their
13th month pay and service incentiveleave pay, and separation pay in the event that they
are notreinstated. It is alleged that they were dismissed from the firmfor pursuing union
activities.- Dentech argued that they are not entitled to a 13th monthpay. They maintained
that each of the private respondentsreceive a total monthly compensation of more that
P1,000 andthat under Section 1 of PD 851, such employees are not entitledto receive a
13th month pay. Also, the company is in badfinancial shape and that pursuant to Section
3, the firm isexempted from complying with the provisions of the Decree.Dentech also
contended that the refund of the cash bond filedby the Marbella, et al., is improper
inasmuch as the proceeds of the same had already been given to a certain carinderia to
payfor their outstanding accounts.
ISSUES
1. WON the private respondents are entitled as a matter of rightto a 13th month pay2.
WON the refund of the cash bond is proper
HELD
1. YES
Reasoning
- - PD 851 was signed into law in 1975 by then PresidentFerdinand Marcos. Under
the original provisions of Section 1, allemployers are required to pay all their
employees receiving abasic salary of not more than P1,000 a month, regardless of
thenature of their employment, a 13th month pay not later thanDecember 24 of
every year. Under Section 3 of the rules and
regulations implementing PD 851, financially distressedemployers, i.,e., those currently
incurring substantial losses, arenot covered by the Decree. Section 7 requires, however,
thatsuch distressed employers must obtain the prior authorizationof the Secretary of
Labor before they may qualify for suchexemption.- On May 1, 1978, PD 1364 was
signed into law. The Decreeenjoined the DOLE to stop accepting applications for
exemptionunder PD 851. On August 13, 1986, President Corazon Aquinoissued
Memorandum Order No. 28 which modified Section 1 of PD 851. The said issuance
eliminated the P1,000 salary ceiling.- It clearly appears that Dentech has no basis to claim
that it isexempted from complying with the provisions of the lawrelating to the 13
th
month pay. The P1,000 salary ceilingprovided in PD 851 pertains to basic salary, not total
monthlycompensation. Dentech admits that Marbella, at al., work onlyfive days a week
and that they each receive a basic daily wageof P40 only. A simple computation of the
basic daily wagemultiplied by the number of working days in a month results inan
amount of less than P1,000. Thus, there is no basis for thecontention that the company is
exempted from the provision of PD 851 which mandated the payment of 13th
monthcompensation to employees receiving less than P1,000 amonth. [NOTE: Cory’s
Memo (1986) is not yet applicable as of the time Marbella, et al., were dismissed
(1985).]- Even assuming, arguendo, that Marbella, et al., are each paida monthly salary of
over P1,000, Dentech is still not in aposition to claim exemption. The rules and
regulationsimplementing PD 851 provide that a distressed employer shallqualify for
exemption from the requirements of the Decree onlyupon prior authorization from the
Secretary of Labor. No suchprior authorization had been obtained by Dentech.2. YES
Reasoning
 - The refund of the cash bond is in order. Article 114 of theLabor Code prohibits an
employer from requiring his employeesto file a cash bond or to make deposits, subject to
certainexceptions.
- Art. 114. Deposits for loss or damage.
- No employershall require his worker to make deposits from whichdeductions shall be
made for the reimbursement of lossof or damage to tools, materials, or equipment
suppliedby the employer, except when the employer is engagedin such trades,
occupations or business where thepractice of making deductions or requiring deposits is
arecognized one, or is necessary or desirable asdetermined by the Secretary of Labor in
appropriaterules and regulations.
- Dentech has not satisfactorily disputed the applicability of thisprovision to the case at
bar. Considering further that it failed toshow that it is authorized by law to require
Marbella, et al., tofile the cash bond in question, the refund is in order.- The allegation
that the proceeds of the cash bond had alreadybeen given to a certain carinderia to pay for
the accounts of theprivate respondents does not merit serious consideration. Noevidence
or receipt has been shown to prove such payment.
Disposition
Petition is hereby DISMISSED for lack of merit.
FIVE J TAXI V NLRC
235 SCRA 556REGALADO; August 22, 1994
NATURE
Special civil action for certiorari to annul NLRC decision
FACTS
- Maldigan and Sabsalon were hired by the petitioners as taxidrivers. They paid daily
"boundary" of P700 for air-conditionedor P450 for non-air-conditioned taxi, P20 for car
washing, and aP15 deposit to answer for any deficiency in their "boundary," forevery
actual working day.- In less than 4 months, Maldigan already failed to report forwork.
Later, petitioners learned that he was working for "Mine of Gold" Taxi Company. -
Sabsalon was held up by his armedpassenger who took all his money and stabbed him.
After hishospital discharge, he went to his home province to recuperate.He was re-
admitted by petitioners after 4 years under the sameterms and conditions, but he was only
allowed to drive onlyevery other day. However, on several occasions, he failed toreport
for work during his schedule.-Sept. 1991: Sabsalon failed to remit his "boundary" for
theprevious day. Also, he abandoned his taxicab in Makati withoutfuel refill worth P300.
He adamantly refused to report to workdespite demands. Afterwards it was revealed that
he wasdriving a taxi for "Bulaklak Company."- 1989: Maldigan requested petitioners for
the reimbursementof his daily cash deposits for 2 years, but petitioners told himthat
nothing was left of his deposits as these were not evenenough to cover the amount spent
for the repairs of the taxi hewas driving- When Maldigan insisted on the refund,
petitioners terminatedhis services. Sabsalon claimed that his termination
fromemployment was effected when he refused to pay for thewashing of his taxi seat
covers. They filed a

complaint for illegaldismissal and illegal deductions- Labor arbiter dismissed case
holding that the unreasonabledelay in filing the case (two years) was not consistent with
thenatural reaction of a person who claimed to be unjustly treated.- NLRC: Private
respondents’ dismissal was legal since theyvoluntarily left to work for another company.
The deductionswere held illegal and it ordered petitioners to reimburse theaccumulated
deposits and car wash payments, plus interestthereon at the legal rate from the date of
promulgation of judgment to the date of actual payment, and 10% of the totalamount as
and for attorney's fees
ISSUE
WON private respondents are entitled to the refund of deposits
HELD
YES- NLRC held that the daily deposits made by respondents todefray any shortage in
their "boundary" is covered by thegeneral prohibition in Article 114 of the Labor Code
and thatthere is no showing that the Secretary of Labor has recognizedthe same as a
"practice" in the taxi industry.Art. 114.
Deposits for loss or damage
. — No employer shallrequire his worker to make deposits from which deductionsshall be
made for the reimbursement of loss of or damage totools, materials, or equipment
supplied by the employer,except when the employer is engaged in such
trades,occupations or business where the practice of makingdeposits is a recognized one,
or is necessary or desirable asdetermined by the Secretary of Labor in appropriate rules
andregulations.-
Article 114 does not apply to or permit deposits todefray any deficiency which the taxi
driver may incur inthe remittance of his "boundary
."

Also, when privaterespondents stopped working for petitioners, the allegedpurpose for
which petitioners required such unauthorizeddeposits no longer existed. In other case,
any balance due toprivate respondents after proper accounting must be returnedto them
with legal interest.-The evidence shows that Sabsalon was able to withdraw hisdeposits
through
vales
or he incurred shortages, such that he iseven indebted to petitioners in the amount of
P3,448.00. Withrespect to Maldigan's deposits, nothing was mentionedquestioning the
same. Since the evidence shows that he hadnot withdrawn the same, he should be
reimbursed the amountof his accumulated cash deposits.- On car wash payment: No
refund. There was nothing toprevent private respondents from cleaning the taxi
unitsthemselves, if they wanted to save their P20. Also, car washingafter a tour of duty is
a practice in the taxi industry, and is, infact, dictated by fair play.- On attorney’s fees:
Article 222 of the Labor Code, as amendedby Section 3 of PD. 1691, states that non-
lawyers may appear

Labor Law 1
A2010 - 160 -
Disini
before the NLRC or any labor arbiter only (1) if they representthemselves, or (2) if they
represent their organization or themembers thereof. While it may be true that Guillermo
H. Puliawas the authorized representative of private respondents, hewas a non-lawyer
who did not fall in either of the foregoingcategories. Hence, by clear mandate of the law,
he is notentitled to attorney's fees.
Disposition
NLRC decision MODIFIED by deleting the awardsfor reimbursement of car wash
expenses and attorney's feesand directing NLRC to order and effect the computation
andpayment by petitioners of the refund for Maldigan's deposits,plus legal interest
thereon from the date of finality of thisresolution up to the date of actual payment thereof.
9.11 WITHHOLDING OF WAGES;RECORD KEEPING
SPECIAL STEEL CORP V VILLAREAL
[PAGE 32]
PACIFIC CUSTOMS BROKERAGE V INTER-ISLANDDOCKMEN AND LABOR
UNION AND CIR
89 PHIL 722BAUTISTA ANGELO; August 24, 1951
NATURE
Petition for review on certiorari
FACTS
- Inter-island Dockmen and Labor Union filed petition in CIRagainst Pacific Customs
Brokerage praying that said companybe ordered to desist from dismissing members of
said union, toturn over to the treasurer of union all dues and fees withheld bythe company
and to reinstate with backpay the workers.- A motion was filed by labor union praying
that Pacific CustomsBrokerage be ordered to pay union members their wages whichwas
allegedly withheld by it for certain alleged damages causedby said members for staging a
strike. To this motion, Pacificobjected.
ISSUE
WON Pacific Customs Brokerage can be compelled by CIR topay wages of the union
members in spite of the writ of garnishment issued by CFI in civil case, directing the
sheriff tolevy upon moneys of Pacific Customs Brokerage Workers Unionwhich are in the
possession of Pacific Customs Brokerage
HELD
YES- Pacific Customs Brokerage contends otherwise because themoneys having been
garnished, are in custodia legis, and can’tbe controlled by CIR. The Court noticed that
this is the sameargument advanced by petitioner before the respondent courtin its effort to
frustrate the purpose of the motion of the laborunion, and the respondent court found said
argumentuntenable. Art 1708 of new Civil Code provides, “Laborers’wages shall not be
subject to execution or attachment, exceptfor debts incurred for food, shelter, clothing,
medicalattendance.”- Pacific Customs Brokerage doesn’t dispute that moneygarnished is
intended to pay wages of members of labor union. There is nothing to show that such
money was garnished orattached for debts incurred for food, shelter, clothing andmedical
attendance. The writ of garnishment issued by thecourt, while it purports to include all
moneys and propertiesbelonging to the employing company, cannot, in any manner,touch
or affect what said company has in its possession to paythe wages of its laborers.- When
CFI issued writ of garnishment, its scope could not havebeen extended to include money
intended to pay the wages of members of labor union.- But before the order of the
respondent court can be enforcedthere is need of lifting the garnishment by presentation
of amotion to that effect by the labor union.- Petitioner's contention that the motion
should be deniedbecause it is predicated on a labor contract entered intobetween the
petitioner and the Pacific Customs BrokerageWorkers Union has no foundation in fact, it
appearing that themembers of the two labor unions are one and the same. Themembers of
the Pacific Customs Brokerage Workers' Union arethe same laborers now members of the
petitioner union.
GAA V CA
[PAGE 148]
RECORD-KEEPING
SOUTH MOTORISTS ENTERPRISES V TOSOC [SECOF DOLE]
181 SCRA 386MELENCIO-HERRERA; January 23, 1990
NATURE
Certiorari
FACTS
- January 1983, complaints for non-payment of emergency costof living allowances were
filed by 46 workers, Tosoc, et als.,against SOUTH MOTORISTS(SM) before the Naga
City DistrictOffice of Regional Office No. 5 of the then Ministry of Labor- 10 January
1983 a Special Order was issued by the DistrictLabor Officer directing its Labor
Regulation Officers to conductan inspection and verification of SOUTH
MOTORISTS'employment records.- On the date of the inspection and verification,
SOUTHMOTORISTS was unable to present its employment records onthe allegation that
they had been sent to the main office inManila.- The case was then set for conference on
25 January 1983 butwas reset twice.- SM kept on requesting for postponements on the
ground thatthe documents were still being prepared and collated and that aformal
manifestation or motion would follow. Nothing did.- After the submission of an
Inspection Report on the basis of which an Order dated 14 April 1983 was issued by
Labor OfficerDomingo Reyes directing SMto pay Tosoc, et als., the totalamount of
P184,689.12 representing the latter's correspondingemergency cost of living allowances.-
SM FILED a M for R BUT was denied.- 11 July 1988, the Secretary of Labor and
Employment affirmedthe appealed Order.- 28 July 1988, SM FILED another MR BUT
WAS DENIED; FILEDANOTHER MR BUT WAS STILL DENIED.
CLAIMS:
- SOUTH MOTORISTS: this falls under the original and exclusive jurisdiction of Labor
Arbiters (LA- a trier of facts, may determineafter hearing such questions as WON an ER-
EE rel’p exists;WON the workers were project workers; WON the employeesworked
continuously or WON they should receive emergencycost of living allowances and if
entitled, how much each shouldreceive..)- TOSOC et al: maintain otherwise. ISSUE
WON Regional Directors of DOLE have jurisdiction to validly acton/ award money
claims
HELD
YES
Ratio
Regional Directors are empowered to hear and decide, ina summary proceeding, claims
for recovery of wages and othermonetary claims and benefits, including legal interest,
subjectto the concurrence of the following requisites:1) the claim is presented by an
employee or person employedin domestic or household service, or househelper under
theCode;2) the claim arises from employer-employee relations;3) the claimant no longer
being employed, does not seekreinstatement; and4) the aggregate money claim of each
employee or househelperdoes not exceed P5,000.00 (Art. 129, Labor Code, as
amendedby R.A. 6715).But where these requisites do not concur, the Labor Arbitersshall
have exclusive original jurisdiction over claims arising fromemployer-employee
relationship except claims for employees'compensation, social security, medicare and
maternity benefits(parag. 6, Art. 217, Labor Code as amended by R.A. 6715).
Reasoning
- Two provisions of law are crucial to the issue—A129 and A217of the LC, as recently
amended by Republic Act No. 6715,approved on 2 March 1989. Said amendments, being
curative innature, have retroactive effect and, thus, should apply in thiscase (BRIAD
AGRO vs. DE LA CERNA, G.R. No. 82805, andCAMUS ENGINEERING vs. DE LA
CERNA, G.R. No. 83225, 9November 1989).- The aforesaid Articles, as amended,
respectively read asfollows:
Art. 129.

Recovery of wages
,
simple money claims and other benefits
.— Upon complaint of any interested party, the
Regional Director
of the Department of Labor andEmployment or any of the duly authorized hearing
officers of the Department is empowered, through summary proceedingand after due
notice, to hear and decide cases involving therecovery of wages and other monetary
claims and benefits,including legal interest, owing to an employee or personemployed in
domestic or household service and househelperunder this Code, arising from employer-
employee relations:
Provided
, That such complaint does not include a claim forreinstatement:
Provided
,
further
, That
the aggregate claimof each employee or househelper does not exceed fivethousand pesos
(P5,000.00). . . .and
Art. 217.

Jurisdiction of Labor Arbiters and the Commission

.— (a) Except as otherwise provided under this Code, the
Labor Arbiters
shall have original and exclusive jurisdictionto hear and decide, within thirty (30)
calendar days after thesubmission of the case by the parties for decision
withoutextension, even in the absence of stenographic notes, thefollowing cases
involving all workers, whether agricultural ornon-agricultural:xxx xxx xxx(6)
Except claims
for employees compensation, socialsecurity, medicare and maternity benefits, all other
claimsarising from employer-employee relations, including those of persons in domestic
or household service,
involving anamount exceeding five thousand pesos (P5,000),whether or not accompanied
with a claim forreinstatement.
xxx xxx xxx- In accordance said articles, those awards in excess of P5,000.00,
particularly those given to Gavino, Euste, Brequillo,Cis, Agreda, Galona, Tosoc, Guinoo,
Cea, Guinoo, and Osoc,each of which exceeds P5,000.00, should be ventilated in
aproceeding before the LA’s.- SM also caused the resetting of all subsequent hearings on
theground that the documents were still being prepared andcollated. - Having been given
the opportunity to put forth itscase, SM has only itself to blame for having failed to avail
of thesame- What is more, its repeated failure to attend the hearings, andto submit any
motion as manifested may be construed as awaiver of its right to adduce evidence to
controvert the worker'sclaims.
Disposition
The award P l84,689.12 was MODIFIED. Theindividual claims of Gavino, Euste
,Brequillo, Cis, Agreda,Galona, Tosoc, Guinoo, Cea, Guinoo, and Osoc, each of
whichexceeds P5,000.00, were remanded to the LA for properdisposition. All other
individual awards not in excess of P5,000.00 were AFFIRMED.
D. OTHER FORMS OF RENUMERATIO N
9.12 SERVICE CHARGES
SERVICE CHARGES
MARANAW HOTELS AND RESORT CORPORATION VNLRC (DAMALERIO)
303 SCRA 540PURISIMA; February 23, 1999
NATURE
Special Civil Action in the Supreme Court
FACTS
- Damalerio, a room attendant of the Century Park SheratonHotel, operated by Maranaw
Hotel and Resort Corporation, wasseen by hotel guest Glaser with left hand inside the
latter'ssuitcase. Confronted with what he was doing, Damalerioexplained that he was
trying to tidy up the room. Not satisfiedwith the explanation of Damalerio, Glaser lodged
a writtencomplaint before Despuig, shift-in-charge of security of thehotel. Glaser also
reported that Damalerio had previously askedfrom him souvenirs, cassettes, and other
giveaways. Thecomplaint was later brought by Despuig to the attention of Major
Buluran, Chief of Security of the hotel.- Damalerio was given a Disciplinary Action
Notice (DAN ). Thenext day, an administrative hearing was conducted on thematter.
Among those present at the hearing were the roomattendant, floor supervisor, chief of
security, personnelrepresentative, and senior floor supervisor, and unionrepresentative.-
Damalerio received a memorandum issued by San Gabriel, Sr.Floor Supervisor, bearing
the approval of Kirit, ExecutiveHousekeeper, stating that he (Damalerio) was found to
havecommitted qualified theft in violation of House Rule No. 1,Section 3 of Hotel Rules
and Regulations. The samememorandum served as a notice of termination of
hisemployment.- Damalerio filed with the Labor Arbiter a Complaint for illegaldismissal
against the petitioner. After the parties had sent intheir position papers, Labor Arbiter
rendered judgment findingthe dismissal of complainant to be illegal and ordering
therespondents to reinstate him to his former or equivalentposition without loss of
seniority rights and with backwagesfrom April 15, 1992 when he was preventively
suspended up toactual reinstatement and other benefits, including but notlimited to his
share in the charges and/or tips which he failed toreceive, and all other CBA benefits that
have accrued since hisdismissal.- From the aforesaid Labor Arbiter's disposition, the
petitionerappealed to the NLRC, which modified the appealed decision bygiving
petitioner the option of paying Damalerio a separationpay equivalent to one month pay
for every year of service,instead of reinstating him.- Petitioner interposed a motion for
reconsideration but to noavail. NLRC denied the same. Undaunted, petitioner broughtthis
matter to the Court.

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ISSUES
WON respondent NLRC committed grave abuse of discretion innot reversing that portion
of the decision of the labor arbiterordering petitioner to pay private respondent his share
in theservice charge which was collected during the time he was notworking in the hotel
HELD
NO- Damalerio is entitled not only to full backwages but also toother benefits, including
a just share in the service charges, tobe computed from the start of his preventive
suspension untilhis reinstatement.- However, mindful of the animosity and strained
relationsbetween the parties, emanating from this litigation, we upholdthe ruling a quo
that in lieu of reinstatement, separation paymay be given to the private respondent, at the
rate of onemonth pay for every year of service. Should petitioner opt infavor of
separation pay, the private respondent shall no longerbe entitled to share in the service
charges collected during hispreventive suspension.
Disposition
Petition dismissed
TIPS
ACE NAVIGATION CO INC V CA
[PAGE 146]
9.13 THIRTEENTH MONTH PAY [PD 851]
COVERAGE
ULTRA VILLA FOOD HAUS V GENISTON
309 SCRA 17KAPUNAN; June 23, 1999.
FACTS
- Geniston claims he is employed as a “do it all guy” in theUVFH owned by Rosie Tio.
He claims he was employed as awaiter, driver and maintenance guy in the restaurant. Tio
claimsGeniston is her personal driver. Tio works as a manager of theCFC Corporation.-
On May 12, 1992, Tio called Geniston’s house to ask him toreport for work even though
it was a holiday because sheneeded to do something important in the office. (The
electionthat year was on May 11. May 11 & 12 were holidays.) His wifetook the call and
informed Tio that he wasn’t there as he wasworking as a poll watcher.- Tio says that
Geniston abandoned his work. Geniston wasdismissed. He filed case for illegal dismissal
and asked forbenefits, including 13
th
month pay. LA found that he wasn’t anemployee of UVFH, but instead was a personal
driver of Tio. Itfound that his claim of being a waiter isn’t true because thepositions of
waiter and driver are incongruent --- as a waiter hewould have to be at the resto all day;
as a driver, he would haveto be away from the resto. LA also told Tio to
indemnifyGeniston for P1k for failing to comply with the due processrequirement. NLRC
reversed LA’s decision.
ISSUES
1. WON Geniston was a personal driver and not an employee of UVHF2. WON personal
drivers are entitled to 13
th
month pay,according to the law3. WON Geniston abandoned his work
HELD
1. YES- The facts support Tio’s claim that Geniston was her personaldriver. He was not
in the payroll of UVFH; UVFH employeesattested that he was not one of them;
warehousemen of CFCCorp described Geniston’s relationship to Tio, ie, he brings herto
work, waits/sleeps in her car until she goes out for lunch,brings her back after lunch, then
waits/sleeps in her car untilshe goes home.2. NO- Art 141 of the LC defines “Domestic or
household service” asto include services of family drivers.- The Revised Guidelines on
the Implementation of the 13thMonth Pay Law excludes employers of household helpers
fromthe coverage of
PD 851
, thus:
2.. Exempted EmployersThe following employers are still not covered by P.D. No. 851:a.
. . .;b.
Employers of household helpers
. . .;c. . . .;d. . . .
- BUT Geniston was awarded 13th month pay in view of Tio’spractice of according
private respondent such benefit. Indeed,petitioner admitted that she gave private
respondent 13thmonth pay every December.3. NO- To constitute abandonment, two
requisites must concur: (1)the failure to report to work or absence without valid or
justifiable reason, and (2) a clear intention to sever theemployer-employee relationship as
manifested by some overtacts, with the second requisite as the more determinativefactor.
The burden of proving abandonment as a just cause fordismissal is on the employer.
Petitioner failed to discharge thisburden.
Note
- The court also found that Geniston is not entitled to the otherbenefits he was asking for
because Art 82 (LC) excludesdomestic helpers from the mandatory grant of overtime
pay,holiday pay, premium pay and service incentive leave.
Disposition
NLRC decision is reversed.
PETROLEUM SHIPPING V NLRC
[PAGE 79]
MANNER OF WAGE PAYMENT
JACKSON BLDG V NLRC (GUMOGDA)
246 SCRA 329QUIASON; July 14, 1995
FACTS-
Ferdinand Gumogda underwent an appendectomy. Becausehis doctor advised him to rest
for at least 30 days, Gumogdafiled for a 45-day LOA. He came back 50 days after
theoperation but to his surprise, her wasn’t allowed to return towork because according to
petitioners, Gumogda hadabandoned his work. The Labor Arbiter and NLRC ruled in
favorof Gumogda. Petitioners appealed.
ISSUES
1. WON private respondent abandoned his work;2. WON petitioners are liable for the
payment of privaterespondent's back wages, differential pay, thirteenth-month payand
service-incentive leave pay for 1991
HELD
1. NO- For abandonment to be a valid ground for dismissal, tworequisites must be
copresent: the intention by an employee toabandon coupled with an overt act from which
it may beinferred that the employee had no more intention to resume hiswork (People's
Security, Inc. vs. National Labor RelationsCommission, 226 SCRA 146 [1993])

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ULTRAVILLA FOOD HOUSE V GENISTON
[PAGE 157]
GOVERNMENT EMPLOYEES
ALLIANCE OF GOVERNMENT WORKERS V MINISTEROF LABOR (PNB)
124 SCRA 1GUTIERREZ JR; August 3, 1983
NATURE
Petition to review decision of the Minister of Labor andEmployment
FACTS
- Petitioner Alliance of Government Workers (AGW) is aregistered labor federation while
the other petitioners are itsaffiliate unions with members who are employees of
PNB,MWSS, GSIS, SSS, PVTA, PNC, PUP, and PGEA.- PD 851 was enacted:
WHEREAS, it is necessary to further protect the level of realwages from the ravage of
world-wide inflation;WHEREAS, there has been no increase case in the legalminimum
wage rates since 1970;WHEREAS, the Christmas season is an opportune time for society
to show its concern for the plight of the workingmasses so they may properly celebrate
Christmas and NewYear.NOW, THEREFORE, I, FERDINAND E. MARCOS, by virtue
of the powers vested in me by the Constitution do hereby decree asfollows:SECTION 1.
All employers are hereby required to pay all their employees receiving a basic salary of
not more than Pl,000 amonth, regardless of the nature of their employment, a 13th-month
pay not later than December 24 of every year.SECTION 2. Employers already paying
their employees a13th-month pay or its equivalent are not covered by
thisDecree.SECTION 3. This Decree shall take effect immediately. Donein the City of
Manila, this 16th day of December 1975.
- According to the petitioners, P.D. No. 851 requires
allemployers
to pay the 13th-month pay to their employees withone sole exception found in Section 2.
BUT Sec.3 of the Rulesand Regulations Implementing PD 851 included other types of
employers not exempted by the decree. (1) Distressedemployees, (2) Government
employees
2
, (3) Those alreadypaying 13
th
month pay, (4) Household helpers, (5) Those paid onpurely commission, boundary or task
basis.- Sec 3 is then challenged as a substantial modification by ruleof a Presidential
Decree and an unlawful exercise of legislativepower.- Sol Gen: “What the P.D. No. 851
intended to cover are onlythose in the private sector whose real wages require
protectionfrom world-wide inflation. This is emphasized by the "whereas"clause which
states that 'there has been no increase in the legalminimum wage rates since 1970'. This
could only refer to theprivate sector, and not to those in the government servicebecause at
the time of the enactment of PD 851 in 1975, onlythe employees in the private sector had
not been given anyincrease in their minimum wage. The employees in thegovernment
service had already been granted in 1974 a tenpercent across-the-board increase.”
ISSUE
WON the branches, agencies, subdivisions, andinstrumentalities of the Government,
including GOCCs arerequired to pay all their employees receiving a basic salary of
2

b) The Government and any of its political subdivisions, including government-owned

and controlled corporations, except)t those corporation, operating essentially as private,
,subsidiaries of the government
not more than P1,000.00 a month, a 13th month pay (not laterthan December 24 of every
year)
HELD
NO
Ratio
Since the terms and conditions of governmentemployment are
fixed by law
, government workers cannot usethe same weapons employed by workers in the private
sector tosecure concessions from their employers. Subject to theminimum requirements
of wage laws and other labor andwelfare legislation, the terms and conditions of
employment inthe unionized private sector are settled through the process of collective
bargaining. In government employment, however, itis the legislature and, where properly
given delegated power,the administrative heads of government which fix the terms
andconditions of employment.
Reasoning
- An analysis of the "whereases" of P.D. No. 851 shows that thePresident had in mind
only workers in private employmentwhen he issued the decree. There was no intention to
coverpersons working in the government service.- Under the present Constitution,
govemment-owned orcontrolled corporations are specifically mentioned as embracedby
the civil service. The amendment was intended to correctthe situation where more
favored employees of the governmentcould enjoy the benefits of two worlds. They were
protected bythe laws governing government employment.- Why are the GOCCs part of
the Civil Service?(1) Nature of the public employer and peculiar character of public
service: the Gov’t protects the interests of ALL people inthe public service, hence there
would never be conflictinginterests.(2) Gov’t agencies have a right to demand undivided
allegiance.(3) Governmental machinery must be impartial and non-political.(4) To meet
increasing social challenges of the times- thetendency towards a greater socialization of
economic forces.- Section 6
3
, Article XII-B of the Constitution gives addedreasons why the government employees
represented by thepetitioners cannot expect treatment in matters of salariesdifferent from
that extended to all others governmentpersonnel.- The Solicitor-General correctly points
out that to interpret P.D.No. 851 as including government employees would upset
thecompensation levels of government employees in violation of those fixed.
Disposition
Petition is DISMISSED for lack of merit.
SEPARATE OPINIONFERNANDO [concur pro hac vice]
- The approach taken by opinion of the Court is distinguished byits conformity to the
prevailing doctrine of statutoryconstruction that
unless so specified, the government does not fall within the terms of any legislation or
decree
.- "Since the terms and conditions of government employment
are fixed by law
, government workers cannot use the sameweapons employed by workers in the private
sector to secureconcessions from their employers.”- In government employment,
however, it is the legislature and,where properly given delegated power, the
administrativeheads of government which fix the terms and conditions of employment.
This is effected through statutes or administrativecirculars, rules, and regulations, not
through collectivebargaining agreements.
MAKASIAR [dissent]
3
SEC. 6. The National Assembly shall provide for the standardization of compensation of
government officials and employees, including those ingovernment-owned or controlled
corporations, taking into account the nature of theresponsibilities pertaining to, and the
qualifications required for the positionsconcerned.

Labor Law 1
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- It will be noted that the PD 851 provides only one exception inits Section 2: "Employers
already paying their employees a13th-month pay or its equivalent..." Hence, all other
employers,whether of the private sectors or of GOCCs and governmentagencies, are
thereunder obligated to pay their employees.- If the President intended to favor only
employees of theprivate sector, he could have easily inserted the phrase "in theprivate
sector between the words "wages" and "from" in thefirst WHEREAS, and between the
words masses" and "so" in thethird WHEREAS; or the President could have included the
otherfour classes of employers in the questioned Section 3.- The position taken by public
respondents is repugnant to thesocial justice guarantee under the new Constitution.
“Thelaboring masses of the government- owned and -controlledagencies are entitled to
such dignity, welfare and security aswell as an equitable share in the profits of
respondents whichwill inevitably contribute to enhancing their dignity, welfare
andsecurity, as much as those of the workers and employees of theprivate sector.”- Basic
rule is that all doubts should be interpreted in favor of labor.- To deny them this right
would render the State culpable of failing to "afford protection to labor, promote...
equality inemployment…” as well as "just and humane conditions of work."
TERMINATED EMPLOYEES
ARCHILLES MANUFACTURING CORP V NLRC(MANUEL, ET AL)
244 SCRA 750BELLOSILLO; June 2, 1995
NATURE
Appeal on certiorari
FACTS
- Private respondents Geronimo Manuel, Arnulfo Diaz, JaimeCarunungan and Benjamin
Rindon were employed by ArchillesManufacturing Corporation, (Alberto Yu - Chairman)
and (Adrian Yu-VP) as laborers in its steel factory located in Bulacan, eachreceiving a
daily wage of P96.00.

- ARCHILLES was maintaining a bunkhouse in the work areawhich served as resting

place for its workers. In 1988 a maulingincident nearly took place involving a relative of
an employee.As a result, ARCHILLES prohibited its workers from bringing anymember
of their family to the bunkhouse. But despite thisprohibition, private respondents
continued to bring theirrespective families to the bunkhouse, causing annoyance
anddiscomfort to the other workers. This was brought to theattention of ARCHILLES.-
The management ordered private respondent to remove theirfamilies from the bunkhouse
and to explain their violation of thecompany rule. Private respondents removed their
families fromthe premises but failed to report to the management asrequired; instead,
they absented themselves from 14 to 18 May1990. Consequently, ARCHILLES
terminated their employmentfor abandonment and for violation of the company
ruleregarding the use of the bunkhouse.
3
- Private respondents filed a complaint for illegal dismissal. TheLabor Arbiter found the
dismissal of private respondents illegaland ordered their reinstatement as well as the
payment to themthe backwages, proportionate 13th month pay for the year1990 and
attorney'sfees. ARCHILLES appealed.- NLRC set aside the decision of the LA and ruled
that thedismissal of private respondents was valid. However, it orderedARCHILLES to
pay private respondents their "withheld" salariesfrom 19 September 1991and to pay their
proportionate 13thmonth pay for 1990.
ISSUE
WON dismissal for cause results in the forfeiture of theemployee's right to a 13th month
pay
HELD
NO- Paragraph 6 of the Revised Guidelines on the Implementationof the 13th Month Pay
Law (P. D. 851) provides that "anemployee who has resigned or whose services were
terminatedat any time before the payment of the 13th month pay isentitled to this
monetary benefit in proportion to the length of time he worked during the year, reckoned
from the time hestarted working during the calendar year up to the time of hisresignation
or termination from the service . . . The payment of the 13th month pay may be
demanded by the employee uponthe cessation of employer-employee relationship. This
isconsistent with the principle of equity that as the employer canrequire the employee to
clear himself of all liabilities andproperty accountability, so can the employee demand
thepayment of all benefits due him upon the termination of therelationship."-
Furthermore, Sec. 4 of the original Implementing Rules of P.D.851 mandates employers
to pay their employees a 13th monthpay not later than the 24th of December every year
providedthat they have worked for at least one (1) month during acalendar year. In effect,
this statutory benefit isautomatically vested in the employee who has at least worked for
one month during the calendar year
. Ascorrectly stated by the Solicitor General,
such benefit may not be lost or forfeited even in the event of theemployee's subsequent
dismissal for cause without violating his property rights.
RATIONALE – PD 851 – WHEREASCLAUSE AND LIMITATIONSBASIC
WAGE/COMMISSIONS
BOIE TAKEDA V DELA SERNA
228 SCRA 329NARVASA; December 10, 1993
NATURE
Petition for review via certiorari and for issuance of writ of prohibition (consolidated)
FACTS
(HISTORY OF 13TH MONTH PAY – PD 851)- Initially, PD 851 ordered the payment of
13th month pay toworkers receiving basic salary of not more than P1,000.00 amonth,
regardless of the nature of the employment.-
D
ECEMBER
22, 1975
: Rules and Regulations Implementing P.D.851 promulgated by Labor Minister Ople,
defined 13th monthpay, and basic salary as including “all remunerations orearnings paid
by an employer to an employee for servicesrendered but
may not include
cost of living allowancesgranted pursuant to Presidential Decree No. 525 or Letter of
Instructions No. 174, profit sharing payments, and allallowances and monetary benefits
which are not considered orintegrated as part of the regular or basic salary of the
employeeat the time of the promulgation of the Decree on December 16,1975;” and
exempted employers of those who are
paid onpurely commission, boundary, or task basis, and thosewho are paid a fixed amount
for performing a specificwork
from payment of 13
th
month pay- Supplementary Rules and Regulations implementing P.D. 851were
subsequently issued by Minister Ople, which enumerateditems not included in the
computation of the 13
th
month pay:
overtime pay, earnings and other remunerations whichare not part of the basic salary- A
UGUST
13, 1986
: President Corazon C. Aquino promulgatedMemorandum Order No. 28 which modified
PD 851 by

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removing the salary ceiling of P1,000.00 a month set bythe latter
,
-N
OVEMBER
16, 1987
: Revised Guidelines on theImplementation of the 13th Month Pay Law were
promulgatedby Sec. Drilon which, among other things
, enumeratedremunerative items not embraced in the concept of 13thmonth pay (
allowances and monetary benefits which are not considered or integrated as part of the
regular or basic salary,such as the cash equivalent of unused vacation and sick
leavecredits, overtime, premium, night differential and holiday pay,and cost-of-living
allowances)
, and specifically dealt withemployees who are paid a fixed or guaranteed wage
pluscommission (
Employees who are paid
a fixed or guaranteedwage plus commission
are also entitled to the mandated13th month pay
based on their total earnings during thecalendar year,
i
.
e
.,
on both their
fixed or guaranteed wageand commission)
- DOLE conducted a routine inspection in the premises of bothBoie Takeda and
Philippine Fuji Xerox Corp. It was found thatboth companies failed to pay the 13
th
month pay of theiremployees for the years 1986, 1987, and 1988. Both companieswere
ordered to restitute the said underpayment within 5-10days. Both companies appealed but
were denied.
-B
ASIC

CONTENTION

OF

THE
PETITIONERS
: commissions should not beincluded in the computation of the basic salary as basis for
the13
th
month pay
-B
ASIC
C
ONTENTION

OF

THE
R
ESPONDENTS
: Commissions are nowincluded in the computation for the 13
th
month pay, as clarifiedby the Revised Guidelines issued by Sec. Drilon
ISSUE
WON the Revised Guidelines on the Implementation of the 13thMonth Pay Law issued
by Labor Sec. Drilon
should bedeclared null and void
as being violative of the law saidGuidelines were issued to implement, hence issued with
graveabuse of discretion correctible by the writ of prohibition and
certiorari (Thus, commissions should not be included in thecomputation for basic salary
as basis for 13
th
month pay)
HELD
YES- In including commissions in the computation of the 13thmonth pay, the second
paragraph of Section 5(a) of the RevisedGuidelines on the Implementation of the 13th
Month Pay Lawunduly expanded the concept of "basic salary" as defined inP.D. 851. It is
a fundamental rule
that implementing rulescannot add to or detract from the provisions of the lawit is
designed to implement. Administrative regulationsadopted under legislative authority by
a particular department must be in harmony with the provisions of the law they are
intended to carry into effect. They cannot widen its scope. An administrative agency
cannot amend an act of Congress.Ratio
.
In remunerative schemes consisting of a fixed orguaranteed wage plus commission, the
fixed or guaranteedwage is patently the "basic salary" for this is what the
employeereceives for a standard work period. Commissions are given forextra efforts
exerted in consummating sales or other relatedtransactions. They are, as such, additional
pay, which this Courthas made clear do not form part of the "basic salary."
Reasoning-
San Miguel Corp
.
vs
.
Inciong discussion on history of 13
th
Month Pay Law.
The exclusion of all allowances and monetarybenefits such as profit-sharing payments,
COLA, overtime pay,premiums for special holiday, and the like indicate the intentionto
strip basic salary of other payments, and any and alladditions which may be in the form
of allowances or “fringe”benefits. If they were not excluded, it is hard to find
any“earnings and other remunerations” (exclusionary phrase)expressly excluded in the
computation of the 13th month pay. Then the exclusionary provision would prove to be
idle and withno purpose.
Disposition
the consolidated petitions are hereby GRANTED. The second paragraph of Section 5 (a)
of the Revised Guidelineson the Implementation of the 13th Month Pay Law issued
onNovember 126, 1987 by then Labor Secretary Franklin M. Drilonis declared null and
void as being violative of the law saidGuidelines were issued to implement, hence issued
with graveabuse of discretion correctible by the writ of prohibition andcertiorari. The
assailed Orders of January 17, 1990 and October10, 1991 based thereon are SET ASIDE.
SO ORDERED
PHIL DUPLICATORS V NLRC (PHIL DUP. EMPLOYEESUNION)
241 SCRA 380FELICIANO; February 15, 1995
FACTS
- The Court rendered a decision dismissing a petition forcertiorari by Phil. Duplicators,
Inc (PDI). The Court upheld thedecision of public respondent NLRC ordering PDI to pay
13
th
month pay to private respondent employees computed on thebasis of their fixed wages
plus sales commissions.- PDI filed an MFR, invoking the decisions in the 2
consolidatedcases of
Boie-Takeda Chem. vs Hon. Dionisio de la Serna
and
Phil. Fuji Xerox Corp. vs Hon. Cresenciano Trajano
. PDI allegedthat the decision in the Duplicators case should be reversedsince the Boie-
Takeda decision went “directly opposite andcontrary to” the conclusion reached in the
former furtherseeking to dismiss the money claims of private respondentunion. In view of
the nature of the issues raised, the Courtconsidered the MFR and accepted it as a banc
case.
ISSUES
1. WON the Duplicators decision goes against the Boie-Takedadecision2. WON the sales
commission earned by the salesmen of PDIconstitute a part of their “wage” and should be
included in thecomputation of 13
th
month pay
HELD
1. NO- The doctrines enunciated in the 2 cases present differentfactual situations. The so-
called commissions received by theBoie-Takeda medical reps or by the rank and file
employees of Fuji were characterized as “productivity bonuses”. These areadditional
monetary benefits generally tied to the capacity forrevenue production of a corporation.
As such, they more closelyresemble profit-sharing payments and are not directly relatedto
the amount of work actually done by an employee.-The “commissions” paid to the
medical reps were not “salescommissions” in the same sense as in the Duplicators
case.Medical representatives are not salesmen; they merely promoteproducts and leave
samples with physicians. As such, no actualsales are made placing the commissions in the
nature of aprofit-sharing bonus.2. YES- The commissions received by every duplicating
machine soldconstitute part of the basic compensation of PDI’s salesmen,apart from a
small fixed wage. It is important to note that thefixed portion of their salaries represent
only 15-30% of anemployee’s total earnings in a year. Considering this, the
salescommissions were an integral part of PDI’s basic salarystructure and not mere profit-
sharing payments or fringebenefits.-The Supplementary Rules and Regulations
Implementing P.D.851(The 13
th
Month Pay Law) clarifies the scope of itemsexcluded in the computation of 13
th
month pay. Section 4 of theLaw states that “
Overtime pay, earnings and other remunerations which are not part of the basic salary
shall not be included in the computation of the 13
th
month pay
- .” Whatconstitutes “other remunerations not part of basic salary” is a
question to be resolved on a case-to-case basis. In the instantcase, it is important to
distinguish the productivity bonusesgranted in Boie-Takeda from the sales commissions
of theDuplicators case.- A productivity bonus is something extra given to an employeefor
which no specific additional services are rendered. Since abonus is a gratuity of the
employer, the recipient cannotdemand its payment as a matter of right. If an employer
cannotbe compelled to pay a productivity bonus to his employees,then it follows that the
bonus should not fall under “basicsalary” when computing 13
th
month pay.- Sales commissions, on the other hand, are directlyproportional to the extent
or energy of an employee’s work.Such commissions are paid upon the specific results
achievedby a salesman and form an integral part of his basic pay andshould thus be
included in the computation of 13
th
month pay.
Disposition
MFR is denied for lack of merit
IRAN V NLRC
[PAGE 148]
HONDA PHILS INC V SAMAHAN NG MALAYANGMANGGAGAWA SA HONDA
460 SCRA 186YNARES-SANTIAGO; June 15, 2005
FACTS
- A Collective Bargaining Agreement (CBA) was forged betweenpetitioner Honda and
respondent union Samahan ng MalayangManggagawa sa Honda (respondent union).
Among others, theCBA provides that the Company will maintain the presentpractice in
the implementation of the 13th month pay, shallgrant a 14
th
Month Pay, computed on the same basis ascomputation of 13th Month Pay and shall
continue the practiceof granting, in its discretion, financial assistance to
coveredemployees in December of each year, of not less than 100% of basic pay. This
CBA is effective until year 2000.- In 1998, the two parties started re-negotiations for the
4
th
and5
th
years of their CBA (meaning for yr 1999 to 2000). However,the talks bogged down. The
union filed a Notice of Strike on theground of bargaining deadlock. Thereafter, Honda
filed a Noticeof Lockout. DOLE intervened and ordered the parties to ceaseand desist
from committing acts that would aggravate thesituation. Both parties complied
accordingly.- On May 11, 1999, however, respondent union filed a secondNotice of
Strike on the ground of unfair labor practice allegingthat Honda illegally contracted out
work to the detriment of theworkers. The DOLE again intervened and the
strikingemployees were ordered to return to work and themanagement accepted them
back under the same terms priorto the strike staged.- On November 22, 1999, the
management of Honda issued amemorandum[4] announcing its new computation of the
13thand 14th month pay to be granted to all its employees wherebythe thirty-one (31)-
day long strike shall be considered unworkeddays for purposes of computing said
benefits. As per thecompany’s new formula, the amount equivalent to 1/12 of
theemployees’ basic salary shall be deducted from these bonuses,with a commitment
however that in the event that the strike isdeclared legal, Honda shall pay the amount
deducted (In effect,this enabled them to devise a formula using 11/12 of the totalannual
salary as base amount for computation instead of theentire amount for a 12-month
period.- The union opposed the pro-rated computation of the bonuses.
ISSUE
WON the pro-rated computation of the 13th month pay and theother bonuses in question
is valid and lawful
HELD
NO
Reasoning
- The said pro-rated computation is violative of the provisions of the CBA. A collective
bargaining agreement refers to thenegotiated contract between a legitimate labor
organizationand the employer concerning wages, hours of work and allother terms and
conditions of employment in a bargaining unit.As in all contracts, the parties in a CBA
may establish suchstipulations, clauses, terms and conditions as they may
deemconvenient provided these are not contrary to law, morals, goodcustoms, public
order or public policy. Thus, where the CBA isclear and unambiguous, it becomes the law
between the partiesand compliance therewith is mandated by the express policy of the
law.- It is violative of the provision of P.D. No. 851 which, providedthat the minimum
13th month pay required by law shall not beless than one-twelfth (1/12) of the total basic
salary earned byan employee within a calendar year.- The act has ripened into a practice
and therefore can nolonger be withdrawn, reduced, diminished, discontinued
oreliminated. Honda did not adduce evidence to show that the13th month, 14th month
and financial assistance benefits werepreviously subject to deductions or pro-rating or
that thesewere dependent upon the company’s financial standing.- It is more in keeping
with the underlying principle for the grantof this benefit. It is primarily given to alleviate
the plight of workers and to help them cope with the exorbitant increases inthe cost of
living. To allow the pro-ration of the 13th month payin this case is to undermine the
wisdom behind the law and themandate that the workingman’s welfare should be
theprimordial and paramount consideration.- To rule otherwise inevitably results to
dissuasion, if not adeterrent, for workers from the free exercise of theirconstitutional
rights to self-organization and to strike inaccordance with law.
Disposition

Denied.
SUBSTITUTE PAYMENTS
FRAMANLIS FARMS INC V MOLE
171 SCRA 87GRINO-AQUINO; March 8, 1989
NATURE
Petition for certiorari to reverse the denied MFR denied by MOLEorder.
FACTS
(The facts are difficult to digest because they involved numbers.For recitation purposes,
the reasoning is enough.)- Employees of the petitioners filed against their employer
andthe other petitioners 2 labor standard cases in the RTC allegingthat they were not paid
emergency cost of living allowance(ECOLA), minimum wage 13
th
month pay, holiday pay, andservice incentive leave pay.- Petitioners, in an answer to the
amended complaint, allegedthat (1) the private respondents were not regular workers,
butwere migratory (sacadas) or pakyaw workers who were hiredseasonally, or only
during the milling season, to so piece-of work on the farms, hence they were not entitled
to benefitsbeing claimed, (2) they applied for an exception to pay for theliving allowance
although the MOLE has no ruling yet.- The claims for holiday pay, service incentive pay,
socialamelioration bonus and underpayment fo minimum wage werenot controverted. On
the other claims, the petitioners submittedonly random payrolls which showed that the
women workerswere, although the male workers received P10 more or less, perday.- In
an Order, the Minister of Labor (MOLE), through AssistantRegional Director Dante
Ardivilla, adopting therecommendations of the Chief of the Labor Regulation
Section,Bacolod District Office, directed the respondents (nowpetitioners) to pay: (1)
deficiency payments under PD 925,PD1614 , under Ministry Order No. 5, under PD
1678, service

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incentive leave pay, holiday pay and social amelioration bonusand 13
th
month pay and emergency living allowance under PD1123- Upon the petitioners' appeal
of that Order, the Deputy MOLEmodified it ordering the employer to all non-pakyaw
workerstheir claim for holiday and incentive leave pay, their 13thmonth pay, pay
differentials and ECOLA excluding the pakyawworkers from holiday and service
incentive leave pay- Framanlis filed for MFR, which was denied hence, this petitionfor
certiorari
ISSUE
1. WON Minister erred in requiring the petitioners to pay wagedifferentials to their
pakyaw workers who worked for at leasteight hours daily2. WON benefits in form of
food and electricity are equivalent tothe 13
th
month pay
HELD
1. NO- In 1976, PD No. 928 fixed a minimum wage for agriculturalworkers in any
plantation or agricultural enterprise irrespectiveof WON the worker was paid on a piece-
rate basis. However,effective July 1, 1978, the minimum wage was increased (Sec.1, PD
1389). Subsequently, PD 1614 provided for anotherincrease in the daily wage of all
workers effective April 1, 1979. The petitioners admit that those were the minimum
ratesprevailing then. Therefore, the respondent Minister did not errin requiring the
petitioners to pay wage differentials to theirpakyaw workers who worked for at least eight
hours daily andearned less than P8.00 per day in 1978 to 1979.2. NO- With regard to the
13th month pay, petitioners admitted thatthey failed to pay their workers 13th month pay.
However, theyargued that they substantially complied with the law by givingtheir
workers a yearly bonus and other non-monetary benefitsamounting to not less than 1/12th
of their basic salary in weeklysubsidy of choice pork meat, free choice pork meat and
freelight or electricity which were allegedly "the equivalent" of the13th month pay.-
Under Section 3 of PD No. 851
4
,such benefits in the form of food or free electricity, assuming they were given, were not
aproper substitute for the 13th month pay required by law.- Neither may year-end rewards
for loyalty and service beconsidered in lieu of 13th month pay according to Section 10 of
the Rules and Regulations Implementing Presidential DecreeNo.- The failure of the
Minister's decision to identify the pakyawand non-pakyaw workers does not render said
decision invalid. The workers may be identified or determined in the proceedingsfor
execution of the judgment.
Disposition
petition for certiorari is dismissed with costsagainst the petitioners.
14
th
MONTH PAY
4
Section 3. Employees covered The Decree shall apply to all employees except to:xxx xxx
xxx"The term 'its equivalent' as used in paragraph (c) hereof shall include
Christmasbonus, mid-year bonus, profit-sharing payments and other cash bonuses
amountingto not less than 1/12 of the basic salary but shall not include cash and
stockdividends, cost of living allowances and all other allowances regularly enjoyed by
theemployee, as well as non-monetary benefits."Where an employer pays less than 1/12
of the employee's basic salary the employershall pay the difference."
KAMAYA PORT HOTEL V NLRC (FEDERATION OFFREE WORKERS)
177 SCRA 87FERNAN; August 31, 1989
NATURE
Petition for review on certiorari
FACTS
- Respondent Memia Quiambao with thirty others who aremembers of the Federation of
Free Workers (FFW) wereemployed by Kamaya as hotel crew.
On the basis of theprofitability of the company's business operations,management granted
a 14th month pay to its employeesstarting in 1979.
In January 1982, the hotel converted into atraining center for Libyan scholars. Hoever,
the Libyanspreterminated their programleaving Kamayan without any business, aside
from the fact thatit was not paid for the use of the hotel premises. All in allKamayan
allegedly suffered losses amounting to P2 million.- Although Kamayan reopened the
hotel premises to the public,it was not able to pick-up its lost patronage. In a couple of
months it effected a retrenchment program until finally, ittotally closed its business.-
FFW then filed with the Ministry of Labor and Employment acomplaint against petitioner
for illegal suspension, violation of the CBA and non-payment of the 14th month pay.
Recordshowever show that the case was submitted for decision on thesole issue of
alleged non-payment of the 14th month pay forthe year 1982.- The LA rendered a
decision ordering Kamaya to pay the 14thmonth pay. On appeal, the NLRCaffirmed the
grant of the 14thmonth pay on the ground that the granting of this 14th monthpay has
already ripened into a company practice whichrespondent company cannot withdraw
unilaterally. This 14thmonth pay is now an existing benefit which cannot bewithdrawn
without violating article 100 of the Labor Code. Toallow its withdrawal now would
certainly amount to a diminutionof existing benefits which complainants are presently
enjoying.
ISSUE
WON the latter tribunal committed grave abuse of discretionwhen it adopted the Labor
Arbiter's decision saying that the14th month pay cannot be withdrawn without violating
Article100 of the Labor Code
HELD
YES- Art. 100 of the LC states: Prohibition against elimination ordiminution of benefits.-
Nothing in this Book shall be construedto eliminate or in any way diminish supplements,
or otheremployee benefits being enjoyed at the time of promulgation of this Code.- It is
patently obvious that Article 100 is clearly withoutapplicability.
The date of effectivity of the Labor Code is May 1,1974. In the case at bar, petitioner
extended its 14th month pay beginning 1979 until 1981. What is demanded is payment of
the 14th month pay for 1982. Indubitably from these factsalone, Article 100 of the Labor
Code cannot apply.
- Moreover, there is no law that mandates the payment of the14th month pay. This is
emphasized in the grant of exemptionunder Presidential Decree 851 (13th Month Pay
Law) whichstates: "Employers already paying their employees a 13thmonth pay or its
equivalent are not covered by this Decree."
Necessarily then, only the 13th month pay is mandated.
Havingenjoyed the additional income in the form of the 13th monthpay, private
respondents' insistence on the 14th month pay for1982 is already an unwarranted
expansion of the liberality of the law.- Verily, a 14th month pay is a misnomer because it
is basicallya bonus and, therefore, gratuitous in nature. The granting of the

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14th month pay is a management prerogative which cannot beforced upon the employer.
It is something given in addition towhat is ordinarily received by or strictly due the
recipient. It is agratuity to which the recipient has no right to make a demand.- This Court
is not prepared to compel petitioner to grant the14th month pay solely because it has
allegedly ripened into acompany practice" as the labor arbiter has put it. Having lost
itscatering business derived from Libyan students, Kamaya Hotelshould not be penalized
for its previous liberality.An employer may not be obliged to assume a "double burden"of
paying the 13th month pay in addition to bonuses or otherbenefits aside from the
employee's basic salaries or wages.Restated differently, we rule that an employer may not
beobliged to assume the onerous burden of granting bonuses orother benefits aside from
the employee's basic salaries orwages in addition to the required 13th month pay.
Disposition

petition is hereby GRANTED. The portion of thedecision of the National Labor Relations
Commission dated June25, 1986 ordering the payment of 14th month pay to
privaterespondents is set aside.
DIMINUTION
DAVAO FRUITS CORP V ASSOCIATED LABORUNIONS
[PAGE 3]
MANAGEMENT FUNCTION
BUSINESSDAY INFORMATION SYSTEMS ANDSERVICES INC V NLRC (MOYA)
221 SCRA 9GRIÑO-AQUINO; April 5, 1993
NATURE
PETITION for certiorari of the decision of the National LaborRelations Commission.
FACTS
- BSSI was engaged in the manufacture and sale of computerforms. Due to financial
reverses, its creditors, the DevelopmentBank of the Philippines (DBP) and the Asset
Privatization Trust(APT), took possession of its assets, including a manufacturingplant in
Marilao, Bulacan.- As a retrenchment measure, some plant employees, includingthe
private respondents, were laid off on May 16, 1988, afterprior notice, and were paid
separation pay equivalent to one-half (1/2) month pay for every year of service. Upon
receipt onher separation may, the private respondents signed individualreleases and
quitclaims in favor of BSSI.- BSSI retained some employees in an attempt to rehabilitate
itsbusiness as a trading company.- However, barely two and a half months later, these
remainingemployees were likewise discharged because the companydecided to cease
business operations altogether. Unlike theprivate respondents, that batch of employees
receivedseparation pay equivalent to a full month's salary for every yearof service plus
mid-year bonus.- Protesting against the discrimination in the payment of theirseparation
benefits, the twenty-seven (27) private respondentsfiled complaints against the BSSI and
Raul Locsin.
ISSUES
1. WON there was unlawful discrimination in the payment of separation benefits to the
employees.2. WON the company is obliged to pay mid-year bonus.3. WON Locsin
should be held liable.
HELD
1. YES- Petitioners' right to terminate employees on account of retrenchment to prevent
losses or closure of businessoperations, is recognized by law, but it may not pay
separationbenefits unequally for such discrimination breeds resentmentand ill-will among
those who have been treated less generouslythan others.- The respondents cited financial
business difficulties to justifytheir termination of the complainants' employment. They
weregiven one-half (1/2) month of their salary for every year of service. Due to
continuing looms, they closed operations wherethey dismissed the second batch of
employees who were givenone (1) month pay for every year they served. The third
batchof employees were terminated and were likewise given one (1)monthly pay for
every year of service. The business climatewhen the complainants were terminated did
not at all deferimprovement-wise. The interval between the dates of termination was so
close to each other, so that, noimprovement in business maybe likely expected.- The law
requires the granting of the same amount of separation benefits to the affected employees
in any of thecases. The respondent argued that the giving of moreseparation benefit to the
second and third batches of employees separated was their expression of gratitude
andbenevolence to the remaining employees who have tried tosave and make the
company viable in the remaining lays of operations. This justification is not plausible.
There are workersin the first batch who have rendered more years of service andmore
efficient than those separated subsequently, yet, they didnot receive the same
recognition.- There was impermissible discrimination against the privaterespondents in
the payment of their separation benefits. Thelaw requires an employer to extend equal
treatment to itsemployees. It may not, in the guise of exercising managementprerogatives,
grant greater benefits to some and less to others.Management prerogatives are not
absolute prerogatives but aresubject to legal limits, collective bargaining agreements,
orgeneral principles of fair play and justice2. NO- The grant of a bonus is a prerogative,
not an obligation, of theemployer. The matter of giving a bonus over and above
theworker's lawful salaries and allowances is entirely dependent onthe financial
capability of the employer to give it. The fact thatthe company's business was no longer
profitable (it was in factmoribund) plus the fact that the private respondents did notwork
up to the middle of the year (they were discharged in May1993) were valid reasons for
not granting them a mid-yearbonus.3. NO- A corporate officer is not personally liable for
the moneyclaims of discharged corporate employees unless he acted withevident malice
and bad faith in terminating their employment. There is no evidence in this case that
Locsin acted in bad faithor with malice in carrying out the retrenchment and
eventualclosure of the company, hence, he may not be held personallyand solidarily liable
with the company for the satisfaction of the judgment in favor of the retrenched
employees.
Disposition
The resolution of the NLRC ordering the petitionercompany to pay separation pay
differentials to the privaterespondents is AFFIRMED. However, the award of mid-
yearbonus to them is hereby deleted and set aside. Petitioner RaulLocsin is absolved from
any personal liability to the respondentemployees. No costs.
ASIAN TRANSUNION CORP V CA
[PAGE 45]
- NATURE – BONUS – WHENDEMANDABLE

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> denied the demand for gratuity because gratuity isessentially voluntary and the
management cannot becompelled to give the same.> NDC responsible for the ejection of
the crew of the M/S "DoñaAlicia", in view of its failure to incorporate in the deed of sale
infavor of LISTCO a provision on the retention of the services of the complement of the
vessels, in spite of the latter's requeststherefor prior to the consummation of the sale.>
NDC ordered to pay the back wages of the ejected crew up tothe date of their actual
reinstatement.> LISTCO was completely exonerated from any liability, the trialcourt
reasoning that the lay off of the crew of the M/S "DoñaAlicia" was committed on June
21, 1961, or before saidrespondent became subject to the restraining order of June
30,1961.- September 2, 1965 – CIR, upon the MFR of NDC, modified thedecision of the
trial Judge> NDC and LISTCO solidarity liable for payment of thebackwages> LISTCO
equally responsible, the court en banc took intoaccount the fact that as of April 29, 1961,
it was already anindispensable party to the case. Thus, with knowledge of therestraining
order of May 3, 1961 to the "management" againstunauthorized dismissal of employees
and laborers, the courtheld that LISTCO could not claim to have acted in good faithwhen
it ejected the crew of the M/S "Doña Alicia" on June 21,1961.> increased the allowable
accumulated vacation and sickleaves with pay of the petitioners, from 5 to 10 months
becauseof RA1081.> new sale of the "Doña" vessels had taken place during thependency
of the motion for reconsideration, the case wasordered reopened, but only for the purpose
of determining themerits of the demand for gratuity pay.-
LISTCO assails
> ruling on paying, jointly and severally with the NDC, backwages to the affected
officers and crew members of the M/S"Doña Alicia", claiming(1) that the Industrial Court
was without jurisdiction over itspersons, LISTCO not being a party to the labor dispute
certifiedto it by the President;(2) that the restraining order of May 3, 1961 did not include
thispetitioner; and(3) that it cannot legally be compelled to retain the services of the
original crew of the M/S "Doña Alicia"-
NDC raises
(1) legality of the strike staged by the crews of the threevessels and of their right to
strike-duration pay(2) liability for such strike-duration pay and for reinstatement of the
officers and crew-members who were not reemployed afterthe conclusion of the
Agreement of November 28, 1961(3) jurisdiction of' the Court of Industrial Relations
over theofficers of the vessels(4) legality of the ruling that the crew-members are entitled
toaccumulated sick and vacation leaves with pay(5) correctness of the order of the court
en banc to reopen thecase, insofar as the union's demands for gratuity are concerned
ISSUES
1. WON CIR has jurisdiction over the case since, at that time,LISTCO is not an employer
of the petitioners2. WON LISTCO is bound by the TRO3. WON NDC is liable for
backwages4. WON crew-members are entitled to accumulated sick andvacation leaves
with pay5. WON crew-members are entitled to gratuity
HELD
1. YES- It cannot be denied that when the certification was made bythe President on
April 25, 1961, and the Court of IndustrialRelations assumed jurisdiction over the case,
the three "Doña"vessels were still owned and operated by the NDC.Understandably, the
presidential certification mentioned onlythe crew of the vessels and the NDC as parties to
the dispute.Although not originally named as respondent. the court,informed of the
consummation of the sale, ordered the inclusionof LISTCO as an indispensable party.-
LISTCO cannot contest the authority of the trial judge inordering it to be impleaded in
the proceeding.(1) this being a certified case, the CIR, in the exercise of itsarbitration
power, can direct the inclusion or exclusion of parties therefrom; it is clothed with
authority to issue suchorder or orders as may be necessary to make effective theexercise
of its jurisdiction, which may include the bringing in of parties into the case.(2) what
confers jurisdiction on the Industrial Court is not theform or manner of certification by
the President, but the referralto said court of the industrial dispute between the employer
andthe employee. Thus, the court is not deprived of jurisdictionover a case simply
because the certification of the President iserroneous. That LISTCO was not so named in
the certificationwould not make it any less the employer of the petitioningemployees
within the contemplation of law, since by thetransfer of ownership of the vessels it
actually became suchemployer.2. YES- April 29, 1961 LISTCO, as the new owner of the
vessels, wasincluded as an indispensable party in the litigation, "withoutwhich no final
determination of this case can be had." It was,therefore, made of record that LISTCO was
then already theowner and operator of the ships, there having been no showingthat the
management thereof was lodged in another; it was aparty against which any appropriate
order shall be binding andenforceable. The order of the trial judge to "the
management",to reinstate the strikers under the last terms existing before thedispute arose
and to refrain from dismissing any employee orlaborer, could not have been directed
solely against the NDCbut also to LISTCO which had the power to admit or
dischargeemployees.3. YES- there is no reason for exempting the NDC from liability
forpayment of the employees' back wages. CIR’s back to workorder simultaneously
ordering management to refrain fromdismissing laborers without the labor court's
authority wasalready in full force, having been issued since May 3. Yet, in itsletter dated
June 17, 1961 and sent to the Master of the M/S"Doña Alicia", the General Manager of
the NDC "enjoined" theofficers and crew members thereof, who were not selected bythe
new owner to debark. This letter, in effect, was a
defianceof the Industrial Court's injunction
, just as the LISTCO'sreplacement of the "Doña Alicia" crew was in
disregard of thesame order
. This cooperation and concordant action of bothappellants, plainly contrary to the
express CIR order of May 3, justifies their being held solidarily liable for the back wages
of the officers and crew of said motor vessel.4. YES- RIGHT TO ACCUMULATION OF
SICK AND VACATION LEAVESWITH PAY - The lower court's recognition of the right
of theemployees of the NDC, admittedly a government-owned andcontrolled corporation
to accumulation of sick and vacationleaves with pay is based on the provisions of
GovernmentEnterprises Counsel Circular No. 4 of March 1948 and of Sections 294-286
of the Administrative Code as amended byRepublic Act No. 1081, which increased the
allowableaccumulated vacation and sick of government employees to10 months. The fact
that the officers and unlicensed membersof the crew of the vessel had a collective
bargaining contractthat did not contain any provision on the payment of accumulated
leaves does not by itself bar the employees' resortto the Leave Law. The rule is that the
law forms part of, andinto, every contract, unless clearly excluded therefrom in
thosecases where such exclusion is allowed.5. There should be a reopening of the case to
determinewhether such conditions operated in the instant case- GRANT OF GRATUITY;
NORMALLY DISCRETIONARY BUT MAYBECOME PART OF COMPENSATION.-
While normallydiscretionary, the grant of a gratuity or bonus by reason of its

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long and regular concession may become regarded as part of regular compensation. (Phil.
Education Co., Inc., vs. C.I.R., 92Phil., 382, 385). For this reason, where there is a resale
of thevessels to another party during the pendency of the motion forreconsideration, the
court may order the reopening of the caseinsofar as the demands for gratuity are
concerned, in order todetermine whether aforecited conditions operated in the instantcase.
Disposition
resolution appealed from is hereby affirmed
MARCOS V NLRC (INSULAR LIFE ASSURANCE COLTD)
248 SCRA 146REGALADO; September 8, 1995
NATURE
Petition for certiorari
FACTS
- Petitioners were regular employees of private respondentInsular Life Assurance Co.,
Ltd., but they were dismissed whentheir positions were declared redundant. A special
redundancybenefit was paid to them. However, not included in thisredundancy benefit
were their respective service awards andother prorated bonuses which they had earned at
the time theywere dismissed. Because of this, petitioners questioned theredundancy
package. Nevertheless, they signed a Release andQuitclaim but with a written protest
reiterating their previousdemand that they were nonetheless entitled to receive
theirservice awards.- Petitioners inquired from the Legal Service of the Departmentof
Labor and Employment whether respondent corporationcould legally refuse the payment
of their service awards asmandated in their Employee's Manual.- DOLE ruled in their
favor. However, this decision wasoverturned by the NLRC affirming the validity of the
“Releaseand Quitclaim” which consequently bar the petitioners todemand for service
awards and other bonuses. Thus, thispetition.
ISSUE
WON respondent NLRC committed reversible error or graveabuse of discretion in
affirming the validity of the "Release andQuitclaim" and, consequently, that petitioners
are not entitledto payment of service awards and other bonuses
HELD
YES
Ratio On “Release and Quitclaim
”
-
The fact that anemployee has signed a satisfaction receipt for his claims doesnot
necessarily result in the waiver thereof. The law does notconsider as valid any agreement
whereby a worker agrees toreceive less compensation than what he is entitled to recover.
Adeed of release or quitclaim cannot bar an employee fromdemanding benefits to which
he is legally entitled.
Renuntiationon praesumitur.
While there may be possible exceptions tothis holding, we do not perceive any in the case
at bar.
Reasoning
a. The element of total voluntariness in executing thatinstrument is negated by the fact
that they expressly statedtherein their claim for the service awards, a
manifestationequivalent to a protest and a disavowal of any waiver thereof.b. Petitioners
even sought the opinion of the Department of Labor and Employment to determine where
and how they stoodin the controversy. This act only shows their adamant desire toobtain
their service awards and to underscore theirdisagreement with the "Release and
Quitclaim" they werevirtually forced to sign in order to receive their separation pay.c.
While rights may be waived, the same must not be contraryto law, public order, public
policy, morals or good customs orprejudicial to a third person with a right recognized by
law.- Article 6 of the Civil Code renders a quitclaim agreement voidab initio where the
quitclaim obligates the workers concerned toforego their benefits while at the same time
exempting theemployer from any liability that it may choose to reject. Thisruns counter
to Art. 22 of the Civil Code which provides that noone shall be unjustly enriched at the
expense of another.
Ratio On Service Awards and other Bonuses -
Thepetitioners are entitled to receive service awards and otherbonuses. The contention of
the respondent that service award isa bonus and therefore is an act of gratuity which
thecomplainants have no right to demand and service awards aregoverned by
respondent's employee's manual and (are)therefore contractual in nature is not
impressive.
Reasoning
a. Anniversary and performance bonuses have ripened into a
company practice
therefore become demandable. It is notdisputed that it is respondent's practice to give an
anniversarybonus every five years from its incorporation. The prerogativeof the employer
to determine who among its employees shallbe entitled to receive bonuses which are, as a
matter of practice, given periodically cannot be exercised arbitrarily.b. Pursuant to their
policies
on the matter, the service awarddifferential is given at the end of the year to an employee
whohas completed years of service divisible by 5.c. A
bonus
is not a gift or gratuity, but is paid for someservices or consideration and is in addition to
what wouldordinarily be given. The term "bonus" as used in employmentcontracts, also
conveys an idea of something which isgratuitous, or which may be claimed to be
gratuitous, over andabove the prescribed wage which the
employer agrees topay
.- If one enters into a
contract of employment
under anagreement that he shall be paid a certain salary by the week orsome other stated
period and, in addition, a bonus, in case heserves for a specified length of time, there is
no reason forrefusing to enforce the promise to pay the bonus,
if theemployee has served during the stipulated time, on the groundthat it was a promise
of a mere gratuity.
Disposition
The assailed decision and resolution of respondent National Labor Relations
Commissions are herebySET ASIDE and the decision of Labor Arbiter Alex Arcadio
Lopezis REINSTATED.
PHILIPPINE NATIONAL CONSTRUCTION CORP VNLRC (ANGELES, PABLO, JR)
307 SCRA 21818 May 1999
NATURE
Petition for
certiorari
of a decision of NLRC.

FACTS
- ANGELES and PABLO, JR. [COMPLAINANTS, for brevity] wereemployed by PNCC
as tollway guards. Acting on a privatecomplaint regarding “mulcting activities” of some
of its tollwaypersonnel, PNCC created an investigating team. During itsinvestigation,
said team saw COMPLAINANTS accept cash and adog from a motorist.- After due
investigation, COMPLAINANTS were dismissed byPNCC for serious misconduct. When
the COMPLAINANTS’complaint for illegal dismissal reached NLRC, the latter heldthat
COMPLAINANTS’ act of receiving a sum of money and a dogfrom motorists constituted
bribery which was a sufficientground for their dismissal. NLRC, nonetheless, ordered
PNCC topay COMPLAINANTS their mid-year bonus for 1994, amongothers. Hence, the
present petition.
ISSUE
- WON COMPLAINANTS entitled to the disputed mid-year bonus

Labor Law 1
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Disini
HELD
NO
Ratio
A bonus is a gift from the employer and the grantthereof is a management prerogative. A
bonus becomes ademandable or enforceable obligation only when it is made partof the
compensation of the employee. “Whether… a bonusforms part of wages depends upon
the circumstances… for itspayment. If it is additional compensation which the
employerpromised and agreed to give without any conditions imposedfor its payment,
such as success of business or greaterproduction or output, then it is part of the wage. But
if it is paidonly if profits are realized or if a certain level of productivity isachieved, it
cannot be considered part of the wage. Where itis… payable… only to some employees
and only when theirlabor becomes more efficient or more productive, it is only
aninducement for efficiency, a prize therefor, not a part of thewage” [citing
Metro Transit vs NLRC,
245 SCRA 767 (1995)].- COMPLAINANTS neither alleged nor adduced evidence to
showthat the bonus they are claiming is a regular benefit which hasbecome part of their
compensation. Thus, the presumption isthat it is not a demandable obligation from the
employer andthe latter may not be compelled to grant the same toundeserving employees.
Disposition
NLRC decision set aside.
PRODUCERS BANK OF THE PHILIPPINES V NLRC(PRODUCERS BANK
EMPLOYEES ASSN)
355 SCRA 489GONZAGA-REYES; March 28, 2001
NATURE
A special civil action for certiorari with prayer for preliminaryinjunction and/or
restraining order seeking the nullification of the decision of NLRC
FACTS
- The present petition originated from a complaint filed byprivate respondent with the
Arbitration Branch, National CapitalRegion, National Labor Relations Commission
(NLRC), chargingpetitioner with diminution of benefits, non-compliance withWage
Order No. 6 and non-payment of holiday pay. In addition,private respondent prayed for
damages.- Labor Arbiter Nieves found private respondent's claims to beunmeritorious
and dismissed its complaint.- NLRC4 granted all of private respondent's claims, except
fordamages ordering respondent- appellee to pay complainant-appellant:1. The unpaid
bonus (mid-year and Christmas bonus) and 13thmonth pay;2. Wage differentials under
Wage Order No. 6 for November 1,1984 and the corresponding adjustment thereof; and3.
Holiday pay under Article 94 of the Labor Code, but not toexceed three (3) years.-
Petitioner now contends that the NLRC gravely abused itsdiscretion in ruling as it did for
the succeeding reasons stated inits Petition
ISSUES
1. WON petitioner should pay the unpaid bonus2. WON petitioner should pay the 13
th
month pay3. WON petitioner complied with Wage Order No.64. WON petitioner
complied with Art.94 of the Labor Code onholiday pay
HELD
1. NO
Ratio
A bonus is an amount granted and paid to an employeefor 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 granted by an enlightenedemployer to spur the employee
to greater efforts for thesuccess of the business and realization of bigger profits.
Thegranting of a bonus is a management prerogative, somethinggiven in addition to what
is ordinarily received by or strictly duethe recipient.13 Thus, a bonus is not a demandable
andenforceable obligation, except when it is made part of thewage, salary or
compensation of the employee.- However, an employer cannot be forced to distribute
bonuseswhich it can no longer afford to pay. To hold otherwise would beto penalize the
employer for his past generosity.
Reasoning
- private respondent declared in its position papers filed withthe NLRC that Producers
Bank of the Philippines has beenproviding several benefits to its employees since 1971
when itstarted its operation. Among the benefits it had been regularlygiving is a mid-year
bonus equivalent to an employee's one-month basic pay and a Christmas bonus
equivalent to anemployee's one whole month salary (basic pay plus allowance).However,
it has changed this practice. In a tabular form, hereare the bank's violations:- Private
respondent argues that the mid-year and Christmasbonuses, by reason of their having
been given for thirteenconsecutive years, have ripened into a vested right and, assuch, can
no longer be unilaterally withdrawn by petitionerwithout violating Art.100 of PD No.
4429 which prohibits thediminution or elimination of benefits already being enjoyed
bythe employees.- Petitioner was not only experiencing a decline in its profits, butwas
reeling from tremendous losses triggered by a bank-runwhich began in 1983. In such a
depressed financial condition,petitioner cannot be legally compelled to continue paying
thesame amount of bonuses to its employees. Thus, theconservator was justified in
reducing the mid-year andChristmas bonuses of petitioner's employees. To hold
otherwisewould be to defeat the reason for the conservatorship which isto preserve the
assets and restore the viability of the financiallyprecarious bank.2. NO
Ratio
The intention of the law was to grant some relief - not toall workers - but only to those
not actually paid a 13th monthsalary or what amounts to it, by whatever name called. It
wasnot envisioned that a double burden would be imposed on theemployer already
paying his employees a 13th month pay or itsequivalent whether out of pure generosity or
on the basis of abinding agreement. To impose upon an employer already giving
YEARMID- YEARBONUSCHRISTMASBONUS13TH MO.PAYpreviousyearsone mo.
basicone mo. basicone mo. Basic1984[one mo. basic]-none-one-half mo.Basic1985one-
half mo.basic-none-one-half mo.Basic1986one-half mo.basicone-half mo.basicone mo.
Basic1987one-half mo.basicone-half mo.basicone mo. basic

Labor Law 1
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Disini
best efforts to conclude a CBA. Upon conclusion of the CBAnegotiations, petitioner
accordingly gave this early signingbonus.- After this CBA expired in Aug.1999, the 2
parties begannegotiations for a new CBA but after 11 meetings, respondentunion declared
a deadlock and a few days later filed a notice of strike. A conciliation and mediation
conference was held but itstill left the ff. issues unresolved: wages, rice subsidy,
signingand retroactive bonus. Failure to come to an agreement ledrespondent union to go
on an 11-day strike which resulted instoppage of manufacturing operations as well as
losses forpetitioner. This constrained petitioner to file a petition beforethe DOLE and the
Labor Secretary Laguesma resolved thedispute by issuing an order which, among others,
granted asigning bonus of P3,000 to the union.- Petitioner filed a MFR, stating that it
accepted the decision buttook exception to the award of the signing bonus, claiming thatit
is not demandable or enforceable since it is in the nature of an incentive. Labor Sec.
denied this motion. Petitioner then filedfor Certiorari with the CA which was dealt with
similarly. TheLabor Sec’s award of signing bonus was affirmed sincepetitioner itself
offered the same incentive to expedite the CBAnegotiations, which they did not withdraw
and was stilloutstanding when the dispute reached the DOLE. Petitioner fileda MFR
which was again denied, leading to this petition.
ISSUE
WON the signing bonus awarded by the Labor Secretary (andaffirmed by respondent
CA) was proper
HELD
NO
Ratio
A signing bonus may not be demanded as a matter of right if it is not agreed upon by the
parties or unilaterallyoffered as an additional incentive. It is not a demandable
andenforceable obligation. The condition for awarding it must beduly satisfied.
Reasoning-
2 things militate against the grant of the signing bonus: first,the non-fulfillment of the
condition for which it was offered, i.e.,the speedy and amicable conclusion of the CBA
negotiations;and second, the failure of respondent union to prove that thegrant of the said
bonus is a long established tradition or a“regular practice” on the part of petitioner.
Petitioner admits,and respondent union does not dispute, that it offered an
“earlyconclusion bonus” or an incentive for a swift finish to the CBAnegotiations.- A
signing bonus is justified by and is the consideration paid forthe goodwill that existed in
the negotiations that culminated inthe signing of a CBA. In the case at bar, the CBA
negotiationbetween petitioner and respondent union failed. Respondentunion went on
strike for eleven days and blocked the ingress toand egress from petitioner’s work plants.
The labor dispute hadto be referred to the Secretary of Labor and Employmentbecause
neither of the parties was willing to compromise theirrespective positions regarding the
four remaining items whichstood unresolved. While we do not fault any one party for
thefailure of the negotiations, it is apparent that there was no moregoodwill between the
parties and that the CBA was clearly notsigned through their mutual efforts alone. Hence,
the paymentof the signing bonus is no longer justified and to order suchpayment would
be unfair and unreasonable for petitioner.- We have consistently ruled that although a
bonus is not ademandable and enforceable obligation, it may nevertheless begranted on
equitable considerations as when the giving of suchbonus has been the company’s long
and regular practice. To beconsidered a “regular practice,” however, the giving of
thebonus should have been done over a long period of time, andmust be shown to have
been consistent and deliberate. The testor rationale of this rule on long practice requires
an indubitableshowing that the employer agreed to continue giving thebenefits knowing
fully well that said employees are not coveredby the law requiring payment thereof.
Respondent does notcontest the fact that petitioner initially offered a signing bonusonly
during the previous CBA negotiation. Previous to that,there is no evidence on record that
petitioner ever offered thesame or that the parties included a signing bonus among
theitems to be resolved in the CBA negotiation. Hence, the givingof such bonus cannot be
deemed as an established practiceconsidering that the same was given only once.
Disposition
petition is GRANTED. CA decision affirming theOrder of the Secretary of Labor and
Employment is REVERSEDand SET ASIDE.
9.15 PRODUCTIVITY INCENTIVESACT OF 1990 – RA 6971
E. WAGE RECOVERY, LIABILITIES, ANDWORKER PREFERENCE
EMPLOYER, INDEPENDENT CONTRACTOR AND SUB-CONTRACTOR AND
LABOR—ONLY CONTRACTING
SENTINEL SECURITY AGENCY INC V NLRC
[PAGE 140]
LAPANDAY AGRICULTURA DEVT CORP V CA
[PAGE 7]
OSM SHIPPING V NLRC (GUERRERO)
398 SCRA 606PANGANIBAN; March 5, 2003
FACTS
- Fermin Guerrero was hired by OSM for and in behalf of itsprincipal, Phil Carrier
Shipping Agency Services Co. (PCSASCO)as a Master Mariner of M/V Princess Hoa for
a contract period of 10 months. Guerrero alleged that for almost 7 months (fromstart of
his work in July 1994 until Jan 1995), despite theservices he rendered, no compensation
or remuneration wasever paid to him. He was forced to disembark because hecannot even
buy his basic personal necessities (wawa naman!).He filed for illegal dismissal and non-
payment of wages, etc.-
OSM
: Philippine Carrier Shipping Lines Co. (PCSLC) is thedisponent owner/employer, and
PCSLC is now responsible forthe payment of complainant's wages (Because
ConcordePacific, an American company w/c owns M/V Princess Hoa,decided to use ship
in the coastwise trade. Since the M/VPrincess Hoa was a foreign registered vessel and
could not beused in the coastwise trade, the shipowner converted the vesselto Philippine
registry on Sept 28, 1994 by way of bareboatchartering it out to another entity named
Philippine CarrierShipping Lines Co. [PCSLC]. To do this, the shipowner had
toterminate its management agreement with PCSASCO on Sept28, 1994 by a letter of
termination. Consequently, PCSASCOterminated its crew agreement with OSM in a
letter dated Dec5, 1994. Because of the bareboat charter of the vessel to PCSLCand its
subsequent conversion to Philippine registry and use incoastwise trade as well as to the
termination of themanagement agreement and crew agency agreement, atermination of
contract ensued whereby PCSLC, the bareboatcharterer, became the disponent
owner/employer of the crew.)-
NLRC:
OSM Shipping Phils. Inc. and its principal, PCSASCO are jointly and severally ordered
to pay complainant
ISSUE
WON OSM is liable for the payment of unpaid salary of Guerrero
HELD

Labor Law 1
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Disini
YES- Petitioner, as manning agent, is jointly and severally liablewith its principal,
PCSASCO, for private respondent's claim. Thisconclusion is in accordance with Section
1 of Rule II of the POEARules and Regulations
7
. - Joint and solidary liability is meant to assure aggrievedworkers of immediate and
sufficient payment of what is duethem. The fact that petitioner and its principal have
alreadyterminated their agency agreement does not relieve the formerof its liability. The
reason for this ruling was given by this Courtin Catan National Labor Relations
Commission, which wereproduce in part as follows:"This must be so, because the
obligations covenanted in the[manning] agreement between the local agent and its
foreignprincipal are not coterminus with the term of such agreementso that if either or
both of the parties decide to end theagreement, the responsibilities of such parties towards
thecontracted employees under the agreement do not at all end,but the same extends up to
and until the expiration of the,employment contracts of the employees recruited
andemployed pursuant to the said recruitment agreement.Otherwise, this will render
nugatory the very purpose forwhich the law governing the employment of workers
forforeign jobs abroad was enacted."
Disposition
NLRC Decision REINSTATED and AFFIRMED
MANILA ELECTRIC CO V BENAMIRA
[PAGE 62]
9.17 WORKER PREFERENCE –BANKRUPTCY
CIVIL CODE – LABOR CODE
REPUBLIC V PERALTA
150 SCRA 37FELICIANO; May 20, 1987
NATURE:
Review on certiorari
FACTS:
- The Republic of the Philippines seeks the review on certiorariof the Order of the CFI of
Manila in its Civil Case No. 108395entitled "In the Matter of Voluntary Insolvency of
Quality Tobacco Corporation, Quality Tobacco.”- In its questioned Order, the trial court
held that the above-enumerated claims of USTC and FOITAF (hereafter
collectivelyreferred to as the "Unions") for separation pay of theirrespective members
embodied in final awards of the NLRC wereto be preferred over the claims of the Bureau
of Customs andthe BIR. The trial court, in so ruling, relied primarily upon Article110 of
the Labor Code.- The Solicitor General, in seeking the reversal of the questionedOrders,
argues that Article 110 of the Labor Code is notapplicable as it speaks of "wages," a term
which he assertsdoes not include the
separation pay
claimed by the Unions."Separation pay," the Solicitor General contends: is given to
alaborer for a separation from employment computed on thebasis of the number of years
the laborer was employed by the
7
SEC. 1. Requirements for Issuance of License. Every applicant for license to operatea
private employment agency or manning agency shall submit a written applicationtogether
with the following requirements:xxx xxxf. A verified undertaking stating that the
applicant:xxx xxx xxx(3) Shall assume joint and solidary liability with the employer for
all claims andliabilities which may arise in connection with the implementation of the
contract;including but not limited to payment of wages, health and disability
compensationand reparation.
employer;
it is a form of penalty or damage against theemployer in favor of the employee for the
latter's dismissal or separation from service
ISSUE
WON separation pay of their respective members embodied infinal awards of the NLRC
were to be preferred over the claims of the Bureau of Customs and the BIR (WON
separation pay isincluded in the term “wages”
8
)
HELD1.
YES
Ratio

For the specific purposes of Article 110

9
and in thecontext of insolvency termination or separation pay isreasonably regarded as
forming part of the remuneration orother money benefits accruing to employees or
workers byreason of their having previously rendered services to theiremployer; as such,
they fall within the scope of "
remunerationor earnings —
for services rendered or to be rendered — ."Liability for separation pay might indeed
have the effect of apenalty, so far as the employer is concerned. So far as concernsthe
employees, however, separation pay is additionalremuneration to which they become
entitled because, havingpreviously rendered services, they are separated from
theemployer's service.
Reasoning-
We note, in this connection, that in
Philippine Commercial and Industrial Bank (PCIB) us. National Mines and Allied
WorkersUnion,

the Solicitor General took a different view and thereurged that the term "wages" under
Article 110 of the LaborCode may be regarded as embracing within its scope
severancepay or termination or separation pay. In PCIB, this Court agreedwith the
position advanced by the Solicitor General.
We see noreason for overturning this particular position.- The resolution of the issue of
priority among the severalclaims filed in the insolvency proceedings instituted by
theInsolvent cannot, however, rest on a reading of Article 110 of the labor Code alone.
-
Article 110 of the Labor Code, in determining the reach of itsterms, cannot be viewed in
isolation. Rather, Article 110 mustbe read in relation to the provisions of the Civil Code
concerningthe classification, concurrence and preference of credits, whichprovisions find
particular application in insolvency proceedingswhere the claims of all creditors,
preferred or non-preferred,may be adjudicated in a binding manner.
Disposition

MODIFIED and REMANDED to the trial court forfurther proceedings in insolvency.

PHILIPPINE EXPORT V CA (DIEHL)
251 SCRA 354VITUG; December 12, 1995
NATURE
Petition for review on
certiorari
FACTS
8
Article 97 (f) of the Labor Code defines "wages" in the following terms: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, orother method of calculating the same, which is
payable by an employer toan 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 includesthe fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished by the
employer tothe employee. 'Fair and reasonable value' shall not include any profit to
theemployer or to any person affiliated with the employer.(emphasis supplied)
9
Article 110.
Worker preference in case of bankruptcy —
In the event of bankruptcyor liquidation of an employer's business, his workers shall
enjoy first preference asregards wages due them for services rendered during the period
prior to thebankruptcy or liquidation, any provision of law to the contrary
notwithstanding. Unionpaid wages shall be paid in full before other creditors may
establish any claim to ashare in the assets of the employer. (emphasis supplied).

Labor Law 1
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Disini
-
On 13 May 1988, private respondent Raimund Diehl, aresident alien, lodged a complaint
for illegal dismissal againstthe Philippine German Wire Mesh Reinforcing
Corporation("FILFORCE") with the National Labor Relations Commission("NLRC").
Parenthetically, five (5) years earlier, or on 28 July1983, FILFORCE had mortgaged its
plant and other propertylocated at EPZA, Mariveles, Bataan, in favor of herein
petitionerPhilippine Export and Foreign Loan Guarantee
Corporation("PHILGUARANTEE"), a government owned and controlledcorporation, to
secure a guarantee which the latter executed infavor of Kuwait Asia Bank, E.C., over fifty
one percent (51%) of the US$1,357,600.00 loan which had been extended toFILFORCE
by the bank.- The Labor Arbiter rendered a judgment favorable to Diehl.Since no appeal
was filed, the decision became final and theLabor Arbiter issued a writ of execution

directing NLRC Sheriff toexecute the judgment against FILFORCE and Basilio
Sison.Failing to collect the sum due, the Sheriff was directed to causethe satisfaction of
the award by levying on the property of FILFORCE. The Deputy Sheriff effected the levy
and scheduled apublic auction sale.- Since the assets had previously been mortgaged to
it,PHILGUARANTEE filed a third-party claim which resulted in thesuspension of the
scheduled auction sale. Upon the submissionby Diehl of an indemnity bond issued by
Plaridel Surety andInsurance Company, with a face value of P1,320,772.11, theDeputy
Sheriff issued a notice resetting the auction sale.PHILGUARANTEE promptly filed a
petition/manifestation beforethe Labor Arbiter questioning, among other things, the
integrityof the indemnity bond

posted by Diehl and, at the same time,asserting its superior right and prior lien over the
leviedproperty. Deputy Sheriff proceeded, nonetheless, with theauction sale at which
Diehl was declared the sole and winningbidder.- PHILGUARANTEE went to the
Regional Trial Court of Makatiand there filed a complaint for "Annulment of Sale,
Recovery of Possession and Injunction with Urgent Prayer for the Issuance of a Writ of
Preliminary Injunction and/or Temporary RestrainingOrder and/or
Status Quo
Order".
ISSUE
WON CA can issue a preliminary injunction
HELD
- The appellate court did not commit error. The question of whether or not the trial court
below was in any good position totake cognizance over the complaint filed by
PHILGUARANTEEand to issue an injunctive relief depended, in turn, on whetheror not
the acts complained of arose out of, or were connectedor interwoven with, cases falling
under the exclusive jurisdictionof the Labor Arbiter or the NLRC.

While, ostensibly, thecomplaint filed with the trial court was for the annulment of sale,
recovery of possession and injunction, in essence,however, the action challenged the legal
propriety of theexecution sale, as well as the acts performed by the LaborArbiter and the
Deputy Sheriff in the conduct thereof, and thesubsequent issuance of an
alias
writ of execution. In reality,petitioner's action to annul the execution sale was a motion
toquash the writ of execution on a case aptly within the jurisdiction of the Labor Arbiter.
The case brought before thetrial court, being a matter growing out of the labor
disputedecided by the Labor Arbiter, clearly fell outside thecompetence of the trial court.-
Another reason that militates against the trial court'sassumption of jurisdiction over the
case is Article 254 of theLabor Code which states:Art. 254.
Injunction prohibited
. — No temporary or permanentinjunction or restraining order in any case involving
orgrowing out of labor disputes shall be issued by any court orother entity, The Court,
however, cannot end its
ponencia
on this simplecase without calling attention to serious lapses in theproceedings before the
Labor Arbiter concerning the third partyclaim of PHILGUARANTEE. Section 2, Rule
VI, of the Manual of Instructions for Sheriffs of the NLRC prescribes in detail
theprocedure that must be followed in the event that the propertylevied upon to satisfy a
final judgment is claimed by any personother than the losing party,

viz
.:Sec. 2. Proceedings. — If property levied upon be claimed byany person other than the
losing party or his agent, suchperson shall make an affidavit of his title thereto or right
tothe possession thereof, stating the grounds of such right ortitle and shall file the same
with the sheriff and copies thereof served upon the Labor Arbiter or proper officer issuing
thewrit and upon the prevailing party. Upon receipt of the thirdparty claim, all
proceedings with respect to the execution of the property subject of the third party claim
shallautomatically be suspended and the Labor Arbiter or properofficer issuing the writ
shall conduct a hearing with due noticeto all parties concerned and resolve the validity of
the claimwithin ten (10) working days from receipt thereof and hisdecision is appealable
to the Commission within ten (10)working days from notice, and the Commission shall
likewiseresolve the appeal within the same period.However, should the

prevailing party put up an indemnitybond in a sum not less than the value of the property
levied,the execution shall proceed. In case of disagreement as tosuch value, the same
shall be determined by the LaborArbiter, National Labor Relations Commission or the
PhilippineOverseas Employment Administration issuing the writ, as thecase may
be.Evidently, the Court's exhortation in
Guimoc v
.
Rosales
,
i
.
e
.,that "(i)n executing an order, resolution, or decision of theNLRC, the sheriff of the
Commission, or other officer acting assuch, must be guided strictly by the Sheriff's
Manual . . .," wasnot properly heeded.- We could consider the following:1. The Manual
requires that the indemnity bond that must beposted up by the prevailing party should be
in a sum not lessthan the value of the property levied. Here, Diehl has put upa bond of
only P1,320,772.11; the appraised value, however,totals P4,934,000.00.2. The Manual
provides that in case of disagreement on thevalue of the property levied, the matter shall
be determinedby the Labor Arbiter. Not only did PHILGUARANTEE promptlychallenge
the integrity of the bond submitted by Diehl but italso did question the amount of the
bond. Since thedifference is substantial, it should have behooved the LaborArbiter to take
more than just a passing glance on the claimof PHILGUARANTEE.- A final observation.
On 21 March 1989, Article 110 of theLabor Code was amended by Republic Act No.
6715 so as toread:Art. 110. Worker preference in case of bankruptcy. — In theevent of
bankruptcy or liquidation of an employer's business,his workers shall enjoy first
preference as regards their wagesand other monetary claims, any provisions of law to
thecontrary notwithstanding. Such unpaid wages and monetaryclaims shall be paid in full
before claims of the Governmentand other creditors may be paid.- In
Development Bank of the Philippines vs
.
National Labor Relations Commission
(183 SCRA 328, 336-339), the Court hassaid: The amendment expands worker
preference to cover not onlyunpaid wages but also other monetary claims to which
evenclaims of the Government must be deemed subordinate.xxx xxx xxxNotably, the
terms "declaration" of bankruptcy or "judicial"liquidation have been eliminated. Does
this mean then thatliquidation proceedings have been done away with?We opine in the
negative, upon the following considerations:1. Because of its impact on the entire system
of credit, Article110 of the Labor Code cannot be viewed in isolation but mustbe read in
relation to the Civil Code scheme on classificationand preference of credits.xxx xxx
xxx2. In the same way that the Civil Code provisions onclassification of credits and the
Insolvency Law have been
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brought into harmony, so also must the kindred provisions of the Labor Law be made to
harmonize with those laws.3. In the event of insolvency, a principal objective should beto
effect an equitable distribution of the insolvent's propertyamong his creditors. To
accomplish this there must first besome proceeding where notice to all of the
insolvent'screditors may be given and where the claims of preferredcreditors may be
bindingly adjudicated (De Barretto vs.Villanueva, No. L-14938, December 29, 1962, 6
SCRA 928). The rationale therefore has been expressed in the recentcase of
DBP vs
.
Secretary of Labor
(G.R. No. 79351, 28November 1989), which we quote:xxx xxx xxx4. A distinction
should be made between a preference of credit and a lien. A preference applies only to
claims which donot attach to specific properties. A lien creates a charge on aparticular
property. The right of first preference as regardsunpaid wages recognized by Article 110
does not constitute alien on the property of the insolvent debtor in favor of workers. It is
but a preference of credit in their favor, apreference in application. It is a method adopted
todetermine and specify the order in which credits should bepaid in the final distribution
of the proceeds of the insolvent'sassets. It is a right to a first preference in the discharge
of thefunds of the judgment debtor.xxx xxx xxx6. Even if Article 110 and its
implementing Rule, as amended,should be interpreted to mean "absolute preference,"
thesame should be given only prospective effect in line with thecardinal rule that laws
shall have no retroactive effect, unlessthe contrary is provided (Article 4, Civil Code).
Thereby, anyinfringement on the constitutional guarantee on non-impairment of the
obligation of contracts (Section 10, ArticleIII, 1987 Constitution) is also avoided. In point
of fact, DBP'smortgage credit antedated by several years the amendatorylaw, RA No.
6715. To give Article 110 retroactive effect wouldbe to wipe out the mortgage in DBP's
favor and expose it to arisk which it sought to protect itself against by requiring
acollateral in the form of real property.In fine, the right to preference given to workers
under Article110 of the Labor Code cannot exist in any effective way priorto the time of
its presentation in distribution proceedings. Itwill find application when, in proceedings
such as insolvency,such unpaid wages shall be paid in full before the "claims of the
Government and other creditors" may be paid. But, for anorderly settlement of a debtor's
assets, all creditors must beconvened, their claims ascertained and inventoried,
andthereafter the preferences determined in the course of judicial proceedings which
have for their object the subjectionof the property of the debtor to the payment of his
debts orother lawful obligations. Thereby, an orderly determination of preference of
creditors' claims is assured (Philippine SavingsBank vs. Lantin, No. L-33929, September
2, 1983, 124 SCRA476); the adjudication made will be binding on all parties-in-interest,
since those proceedings are proceedings
in rem
; andthe legal scheme of classification, concurrence andpreference of credits in the Civil
Code, the Insolvency Law,and the Labor Code is preserved in harmony.
Disposition
Petition DENIED. Assailed decision of the CAAFFIRMED.
BARAYOGA V ASSET PRIVATIZATION TRUST
473 SCRA 690PANGANIBAN; October 24, 2005
NATURE
Petition for review of the decision of the CA reversing thefindings of the NLRC
FACTS
- “Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia
Sugar Development Corporation(BISUDECO), a sugar plantation mill located in
Himaao, Pili,Camarines Sur.- On December 8, 1986, Respondent Asset Privatization
Trust(APT), a public trust was created under Proclamation No. 50, asamended, mandated
to take title to and possession of,conserve, provisionally manage and dispose of non-
performingassets of the Philippine government identified for privatizationor disposition.-
Pursuant to Section 23 of Proclamation No. 50, formerPresident Corazon Aquino issued
Administrative Order No. 14identifying certain assets of government institutions that
wereto be transferred to the National Government and among theassets transferred was
the financial claim of the PhilippineNational Bank against BISUDECO in the form of a
secured loan.- Consequently, by virtue of a Trust Agreement executedbetween the
National Government and APT on February 27,1987, APT was constituted as trustee over
BISUDECO’s accountwith the PNB. Sometime later, on August 28, 1988,
BISUDECOcontracted the services of Philippine Sugar Corporation(Philsucor) to take
over the management of the sugarplantation and milling operations until August 31,
1992.- Meanwhile, because of the continued failure of BISUDECO topay its outstanding
loan with PNB, its mortgaged propertieswere foreclosed and subsequently sold in a
public auction toAPT, as the sole bidder. On April 2, 1991, APT was issued aSheriff’s
Certificate of Sale.- On July 23, 1991, the union filed a complaint for unfair
laborpractice, illegal dismissal, illegal deduction and underpaymentof wages and other
labor standard benefits plus damages.- On March 2, 1993, the union filed an amended
complaint,impleading as additional party respondents APT and Pensumil,the company
that took over its sugar milling operations.- In their Position Paper, the union alleged that
when Philsucorinitially took over the operations of the company, it retainedBISUDECO’s
existing personnel under the same terms andconditions of employment. Nonetheless, at
the start of theseason sometime in May 1991, Philsucor started recallingworkers back to
work, to the exception of the union members.Management told them that they will be re-
hired only if theyresign from the union. Just the same, thereafter, the companystarted to
employ the services of outsiders under the ‘pakyaw’system.- BISUDECO, Pensumil and
APT all interposed the defense of lack of employer-employee relationship.
ISSUE
WON APT is liable for the claims of petitioners against theirformer employer
HELD
NO- Responsibility for the liabilities of a mortgagor towards itsemployees cannot be
transferred via an auction sale to apurchaser who is also the mortgagee-creditor of the
foreclosedassets and chattels. Clearly, the mortgagee-creditor has noemployer-employee
relations with the mortgagor’s workers. The mortgage constitutes a lien on the
determinate propertiesof the employer-debtor, because it is a specially preferred creditto
which the worker’s monetary claims is deemed subordinate.- The duties and liabilities of
BISUDECO, including its monetaryliabilities to its employees, were not all automatically
assumedby APT as purchaser of the foreclosed properties at the auctionsale. Any
assumption of liability must be specifically andcategorically agreed upon. In
Sundowner Development Corp. v.Drilon
the Court ruled that, unless expressly assumed, laborcontracts like collective bargaining
agreements are notenforceable against the transferee of an enterprise. Laborcontracts are
in personam and thus binding only between theparties.- No succession of employment
rights and obligations can besaid to have taken place between the two. Between
theemployees of BISUDECO and APT, there is no privity of contract

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that would make the latter a substitute employer that should beburdened with the
obligations of the corporation.- The rule has been laid down that the sale or disposition
mustbe motivated by good faith as an element of exemption fromliability. Indeed, an
innocent transferee of a businessestablishment has no liability to the employees of the
transferorto continue employing them. Nor is the transferee liable forpast unfair labor
practices of the previous owner, except, whenthe liability therefor is assumed by the new
employer under thecontract of sale, or when liability arises because of the newowner’s
participation in thwarting or defeating the rights of theemployees.- The liabilities of the
previous owner to its employees are notenforceable against the buyer or transferee, unless
(1) thelatter unequivocally assumes them; or (2) the sale or transferwas made in bad faith.
Thus, APT cannot be held responsiblefor the monetary claims of petitioners who had
been dismissedeven before it actually took over BISUDECO’s assets.- it should be
remembered that APT merely became atransferee of BISUDECO’s assets for purposes of
conservationbecause of its lien on those assets -- a lien it assumed asassignee of the loan
secured by the corporation from PNB.Subsequently, APT, as the highest bidder in the
auction sale,acquired ownership of the foreclosed properties.- Relevant to this transfer of
assets is Article 110 of the LaborCode, as amended by Republic Act No. 6715, which
reads:“Article 110.
Worker’s preference in case of bankruptcy
. – Inthe event of bankruptcy or liquidation of the employer’sbusiness, his workers shall
enjoy first preference as regardstheir unpaid wages and other monetary claims shall be
paidin full
before the claims of the Government and other creditors may be paid
.”- This Court has ruled in a long line of cases that
underArticles 2241 and 2242 of the Civil Code, a mortgagecredit is a special preferred
credit that enjoyspreference with respect to a specific/determinateproperty of the debtor.
On the other hand, the worker’spreference under Article 110 of the Labor Code is
anordinary preferred credit. While this provision raises theworker’s money claim to first
priority in the order of preference established under Article 2244 of the CivilCode, the
claim has no preference over special preferredcredits.
- Thus, the right of employees to be paid benefits due themfrom the properties of their
employer cannot have anypreference over the latter’s mortgage credit. In other
words,being a mortgage credit, APT’s lien on BISUDECO’s mortgagedassets is a special
preferred lien that must be satisfied firstbefore the claims of the workers.- In
Development Bank of the Philippines v. NLRC
the rationaleof this ruling was explained as follows:A preference applies only to claims
which do not attach tospecific properties. A lien creates a charge on a particularproperty.
The right of first preference as regards unpaidwages recognized by Article 110 does not
constitute a lien onthe property of the insolvent debtor in favor of workers. It isbut a
preference of credit in their favor, a preference inapplication. It is a method adopted to
determine and specifythe order in which credits should be paid in the finaldistribution of
the proceeds of the insolvent’s assets. It is aright to a first preference in the discharge of
the funds of the judgment debtor. Furthermore, workers’ claims for unpaidwages and
monetary benefits cannot be paid outside of abankruptcy or judicial liquidation
proceedings against theemployer. It is settled that the application of Article 110 of the
Labor Code is contingent upon the institution of thoseproceedings, during which all
creditors are convened, theirclaims ascertained and inventoried, and their
preferencesdetermined.

Assured thereby is an orderly determination of the preference given to creditors’ claims;

and preserved inharmony is the legal scheme of classification, concurrenceand preference
of credits in the Civil Code, the InsolvencyLaw, and the Labor Code. The Court hastens
to add that thepresent Petition was brought against APT alone. In holdingthat the latter,
which has never really been an employer of petitioners, is not liable for their claims, this
Court is notreversing or ruling upon their entitlement to back wages andother unpaid
benefits from their previous employer.
Disposition
Petition denied
RECEIVERSHIP
RUBBERWORLD (PHILS) INC V NLRC
336 S 433PARDO; July 26, 2000
NATURE
Petition to annul the resolution of the National Labor RelationsCommission
FACTS
- Aquilino Magsalin, Pedro Manibo, Ricardo Borja, BenjaminCamitan, Alicia M. San
Pedro, and Felomena Tolin wereemployed as dispatcher, warehouseman, issue
monitor,foreman, jacks cementer and outer sole attacher, respectively.On August 26,
1994, Rubberworld filed with the Department of Labor and Employment a notice of
temporary shutdown of operations to take effect on September 26, 1994. Before
theeffectivity date, however, Rubberworld was forced toprematurely shutdown its
operations. On November 11, 1994,private respondents filed with the National Labor
RelationsCommission a complaint against petitioner for illegal dismissaland non-
payment of separation pay.On November 22, 1994,Rubberworld filed with the Securities
and Exchange Commission(SEC) a petition for declaration of suspension of payments
witha proposed rehabilitation plan- On December 28, 1994, SEC issued the following
order:"Accordingly, with the creation of the Management Committee,all actions for
claims against Rubberworld Philippines, Inc.pending before any court, tribunal, office,
board, body,Commission or sheriff are hereby deemedSUSPENDED."Consequently, all
pending incidents forpreliminary injunctions, writ or attachments, foreclosures andthe
like are hereby rendered moot and academic.- On January 24, 1995, petitioners submitted
to the labor arbitera motion to suspend the proceedings invoking the SEC orderdated
December 28, 1994. The labor arbiter did not act on themotion and ordered the parties to
submit their respectiveposition papers.- On December 10, 1995, the labor arbiter rendered
a decision,which provides: "In the light of the foregoing, respondents arehereby declared
guilty of Illegal Shurtdown. On February 5,1996, petitioners appealed to the National
Labor RelationsCommission (NLRC) alleging abuse of discretion and seriouserrors in the
findings of facts of the labor arbiter. On August 30,1996, NLRC issued a resolution
affirming the decision withmodification in that the award of moral and exemplary
damageswere deleted
ISSUE
WON the Department of Labor and Employment, the LaborArbiter and the National
Labor Relations Commission maylegally act on the claims of respondents despite the
order of theSecurities and Exchange Commission suspending all actionsagainst a
company under rehabilitation by a managementcommittee created by the Securities and
ExchangeCommission.
HELD
NO- The petition is hereby granted. The decision of the labor arbiterdated December 10,
1995 and the NLRC resolution dated August30, 1996, are SET ASIDE.
Ratio
Presidential Decree No. 902-A is clear that "all actions forclaims against corporations,
partnerships or associations undermanagement or receivership pending before any court,
tribunal,board or body shall be suspended accordingly." The law did not

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make any exception in favor of labor claims. The justification forthe automatic stay of all
pending actions for claims is to enablethe management committee or the rehabilitation
receiver toeffectively exercise its/his powers free from any judicial or extra judicial
interference that might unduly hinder or prevent the'rescue' of the debtor company. To
allow such other actions tocontinue would only add to the burden of the
managementcommittee or rehabilitation receiver, whose time, effort andresources would
be wasted in defending claims against thecorporation instead of being directed toward its
restructuringand rehabilitation. Thus, the labor case would defeat thepurpose of an
automatic stay. To rule otherwise would open thefloodgates to numerous claims and
would defeat the rescueefforts of the management committee.- This finds ratiocination in
that the power to hear and decidelabor disputes is deemed suspended when the Securities
andExchange Commission puts the corporation under rehabilitation. Thus, when NLRC
proceeded to decide the case despite the SECsuspension order, the NLRC acted without
or in excess of its jurisdiction to hear and decide cases. As a consequence, anyresolution,
decision or order that it rendered or issued without jurisdiction is a nullity.
9.18 WAGE RECOVERY ANDATTORNEY’S FEES
PLACEWELL INTERNATIONAL V CAMOTE
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