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G.R. No.

172161

March 2, 2011

SLL INTERNATIONAL CABLES SPECIALIST and SONNY L.


LAGON, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, 4th DIVISION, ROLDAN
LOPEZ, EDGARDO ZUIGA and DANILO CAETE, Respondents.
DECISION
MENDOZA, J.:
Assailed in this petition for review on certiorari are the January 11, 2006
Decision1 and the March 31, 2006 Resolution2 of the Court of
Appeals (CA), in CA-G.R. SP No. 00598 which affirmed with modification the
March 31, 2004 Decision3 and December 15, 2004 Resolution4 of the
National Labor Relations Commission (NLRC). The NLRC Decision found the
petitioners, SLL International Cables Specialist (SLL) and its manager, Sonny
L. Lagon(petitioners), not liable for the illegal dismissal of Roldan Lopez,
Danilo Caete and Edgardo Zuiga (private respondents) but held them
jointly and severally liable for payment of certain monetary claims to said
respondents.
A chronicle of the factual antecedents has been succinctly summarized by
the CA as follows:
Sometime in 1996, and January 1997, private respondents Roldan Lopez
(Lopez for brevity) and Danilo Caete (Caete for brevity), and Edgardo
Zuiga (Zuiga for brevity) respectively, were hired by petitioner Lagon as
apprentice or trainee cable/lineman. The three were paid the full minimum
wage and other benefits but since they were only trainees, they did not report
for work regularly but came in as substitutes to the regular workers or in
undertakings that needed extra workers to expedite completion of work. After
their training, Zuiga, Caete and Lopez were engaged as project employees
by the petitioners in their Islacom project in Bohol. Private respondents
started on March 15, 1997 until December 1997. Upon the completion of
their project, their employment was also terminated. Private respondents
received the amount of P145.00, the minimum prescribed daily wage for
Region VII. In July 1997, the amount of P145 was increased to P150.00 by
the Regional Wage Board (RWB) and in October of the same year, the latter
was increased to P155.00. Sometime in March 1998, Zuiga and Caete were
engaged again by Lagon as project employees for its PLDT Antipolo, Rizal
project, which ended sometime in (sic) the late September 1998. As a
consequence, Zuiga and Caetes employment was terminated. For this
project, Zuiga and Caete received only the wage of P145.00 daily. The
minimum prescribed wage for Rizal at that time was P160.00.
Sometime in late November 1998, private respondents re-applied in the
Racitelcom project of Lagon in Bulacan. Zuiga and Caete were reemployed. Lopez was also hired for the said specific project. For this, private
respondents received the wage of P145.00. Again, after the completion of
their project in March 1999, private respondents went home to Cebu City.

On May 21, 1999, private respondents for the 4th time worked with Lagons
project in Camarin, Caloocan City with Furukawa Corporation as the general
contractor. Their contract would expire on February 28, 2000, the period of
completion of the project. From May 21, 1997-December 1999, private
respondents received the wage ofP145.00. At this time, the minimum
prescribed rate for Manila was P198.00. In January to February 28, the three
received the wage of P165.00. The existing rate at that time was P213.00.
For reasons of delay on the delivery of imported materials from Furukawa
Corporation, the Camarin project was not completed on the scheduled date of
completion. Face[d] with economic problem[s], Lagon was constrained to cut
down the overtime work of its worker[s][,] including private respondents.
Thus, when requested by private respondents on February 28, 2000 to work
overtime, Lagon refused and told private respondents that if they insist, they
would have to go home at their own expense and that they would not be
given anymore time nor allowed to stay in the quarters. This prompted
private respondents to leave their work and went home to Cebu. On March 3,
2000, private respondents filed a complaint for illegal dismissal, nonpayment of wages, holiday pay, 13th month pay for 1997 and 1998 and
service incentive leave pay as well as damages and attorneys fees.
In their answers, petitioners admit employment of private respondents but
claimed that the latter were only project employees[,] for their services were
merely engaged for a specific project or undertaking and the same were
covered by contracts duly signed by private respondents. Petitioners further
alleged that the food allowance ofP63.00 per day as well as private
respondents allowance for lodging house, transportation, electricity, water
and snacks allowance should be added to their basic pay. With these,
petitioners claimed that private respondents received higher wage rate than
that prescribed in Rizal and Manila.
Lastly, petitioners alleged that since the workplaces of private respondents
were all in Manila, the complaint should be filed there. Thus, petitioners
prayed for the dismissal of the complaint for lack of jurisdiction and utter
lack of merit. (Citations omitted.)
On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) rendered his
decision5 declaring that his office had jurisdiction to hear and decide the
complaint filed by private respondents. Referring to Rule IV, Sec. 1 (a) of the
NLRC Rules of Procedure prevailing at that time,6 the LA ruled that it had
jurisdiction because the "workplace," as defined in the said rule, included the
place where the employee was supposed to report back after a temporary
detail, assignment or travel, which in this case was Cebu.
As to the status of their employment, the LA opined that private respondents
were regular employees because they were repeatedly hired by petitioners
and they performed activities which were usual, necessary and desirable in
the business or trade of the employer.
With regard to the underpayment of wages, the LA found that private
respondents were underpaid. It ruled that the free board and lodging,
electricity, water, and food enjoyed by them could not be included in the

computation of their wages because these were given without their written
consent.
The LA, however, found that petitioners were not liable for illegal dismissal.
The LA viewed private respondents act of going home as an act of
indifference when petitioners decided to prohibit overtime work.7
In its March 31, 2004 Decision, the NLRC affirmed the findings of the LA. In
addition, the NLRC noted that not a single report of project completion was
filed with the nearest Public Employment Office as required
by the Department of Labor and Employment (DOLE) Department Order No.
19, Series of 1993.8 The NLRC later denied9 the motion for
reconsideration10 subsequently filed by petitioners.
When the matter was elevated to the CA on a petition for certiorari, it
affirmed the findings that the private respondents were regular employees. It
considered the fact that they performed functions which were the regular and
usual business of petitioners. According to the CA, they were clearly
members of a work pool from which petitioners drew their project employees.
The CA also stated that the failure of petitioners to comply with the simple
but compulsory requirement to submit a report of termination to the nearest
Public Employment Office every time private respondents employment was
terminated was proof that the latter were not project employees but regular
employees.
The CA likewise found that the private respondents were underpaid. It ruled
that the board and lodging, electricity, water, and food enjoyed by the private
respondents could not be included in the computation of their wages because
these were given without their written consent. The CA added that the private
respondents were entitled to 13th month pay.
The CA also agreed with the NLRC that there was no illegal dismissal. The CA
opined that it was the petitioners prerogative to grant or deny any request
for overtime work and that the private respondents act of leaving the
workplace after their request was denied was an act of abandonment.
In modifying the decision of the labor tribunal, however, the CA noted that
respondent Roldan Lopez did not work in the Antipolo project and, thus, was
not entitled to wage differentials. Also, in computing the differentials for the
period January and February 2000, the CA disagreed in the award of
differentials based on the minimum daily wage of P223.00, as the prevailing
minimum daily wage then was only P213.00. Petitioners sought
reconsideration but the CA denied it in its March 31, 2006 Resolution.11
In this petition for review on certiorari,12 petitioners seek the reversal and
setting aside of the CA decision anchored on this lone:
GROUND/ASSIGNMENT OF ERROR
THE PUBLIC RESPONDENT NLRC COMMITTED A SERIOUS ERROR IN LAW
IN AWARDING WAGE DIFFERENTIALS TO THE PRIVATE COMPLAINANTS
ON THE BASES OF MERE TECHNICALITIES, THAT IS, FOR LACK OF
WRITTEN CONFORMITY x x x AND LACK OF NOTICE TO THE DEPARTMENT
OF LABOR AND EMPLOYMENT (DOLE)[,] AND THUS, THE COURT OF

APPEALS GRAVELY ERRED IN AFFIRMING WITH MODIFICATION THE NLRC


DECISION IN THE LIGHT OF THE RULING IN THE CASE OF JENNY M.
AGABON and VIRGILIO AGABON vs, NLRC, ET AL., GR NO. 158963,
NOVEMBER 17, 2004, 442 SCRA 573, [AND SUBSEQUENTLY IN THE CASE
OF GLAXO
WELLCOME
PHILIPPINES,
INC.
VS. NAGAKAKAISANG
EMPLEYADO NG WELLCOME-DFA (NEW DFA), ET AL., GR NO. 149349, 11
MARCH 2005], WHICH FINDS APPLICATION IN THE INSTANT CASE BY
ANALOGY.13
Petitioners reiterated their position that the value of the facilities that the
private respondents enjoyed should be included in the computation of the
"wages" received by them. They argued that the rulings in Agabon v.
NLRC14and Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado Ng
Wellcome-DFA15 should be applied by analogy, in the sense that the lack of
written acceptance of the employees of the facilities enjoyed by them should
not mean that the value of the facilities could not be included in the
computation of the private respondents "wages."
On November 29, 2006, the Court resolved to issue a Temporary Restraining
Order (TRO) enjoining the public respondent from enforcing the NLRC and CA
decisions until further orders from the Court.
After a thorough review of the records, however, the Court finds no merit in
the petition.
This petition generally involves factual issues, such as, whether or not there
is evidence on record to support the findings of the LA, the NLRC and the CA
that private respondents were project or regular employees and that their
salary differentials had been paid. This calls for a re-examination of the
evidence, which the Court cannot entertain. Settled is the rule that factual
findings of labor officials, who are deemed to have acquired expertise in
matters within their respective jurisdiction, are generally accorded not only
respect but even finality, and bind the Court when supported by substantial
evidence. It is not the Courts function to assess and evaluate the evidence
all over again, particularly where the findings of both the Labor tribunals and
the CA concur. 16
As a general rule, on payment of wages, a party who alleges payment as a
defense has the burden of proving it.17Specifically with respect to labor cases,
the burden of proving payment of monetary claims rests on the employer, the
rationale being that the pertinent personnel files, payrolls, records,
remittances and other similar documents which will show that overtime,
differentials, service incentive leave and other claims of workers have been
paid are not in the possession of the worker but in the custody and
absolute control of the employer.18
In this case, petitioners, aside from bare allegations that private respondents
received wages higher than the prescribed minimum, failed to present any
evidence, such as payroll or payslips, to support their defense of payment.
Thus, petitioners utterly failed to discharge the onus probandi.
Private respondents, on the other hand, are entitled to be paid the minimum
wage, whether they are regular or non-regular employees.

Section 3, Rule VII of the Rules to Implement the Labor Code 19 specifically
enumerates those who are not covered by the payment of minimum wage.
Project employees are not among them.
On whether the value of the facilities should be included in the computation
of the "wages" received by private respondents, Section 1 of DOLE
Memorandum Circular No. 2 provides that an employer may provide
subsidized meals and snacks to his employees provided that the subsidy
shall not be less that 30% of the fair and reasonable value of such facilities.
In such cases, the employer may deduct from the wages of the employees not
more than 70% of the value of the meals and snacks enjoyed by the latter,
provided that such deduction is with the written authorization of the
employees concerned.
Moreover, before the value of facilities can be deducted from the employees
wages, the following requisites must all be attendant: first, proof must be
shown that such facilities are customarily furnished by the trade; second, the
provision of deductible facilities must be voluntarily accepted in writing by
the employee; and finally, facilities must be charged at reasonable
value.20 Mere availment is not sufficient to allow deductions from employees
wages.21
These requirements, however, have not been met in this case. SLL failed to
present any company policy or guideline showing that provisions for meals
and lodging were part of the employees salaries. It also failed to provide proof
of the employees written authorization, much less show how they arrived at
their valuations. At any rate, it is not even clear whether private respondents
actually enjoyed said facilities.
The Court, at this point, makes a distinction between "facilities" and
"supplements." It is of the view that the food and lodging, or the electricity
and water allegedly consumed by private respondents in this case were not
facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big
Wedge Co.,22 the two terms were distinguished from one another in this wise:
"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 distinction lies not so much in the kind of benefit
or item (food, lodging, bonus or sick leave) given, but in the purpose for
which it is given.23 In the case at bench, the items provided were given freely
by SLL for the purpose of maintaining the efficiency and health of its workers
while they were working at their respective projects.1avvphi1
For said reason, the cases of Agabon and Glaxo are inapplicable in this case.
At any rate, these were cases of dismissal with just and authorized causes.

The present case involves the matter of the failure of the petitioners to
comply with the payment of the prescribed minimum wage.
The Court sustains the deletion of the award of differentials with respect to
respondent Roldan Lopez. As correctly pointed out by the CA, he did not
work for the project in Antipolo.
WHEREFORE, the petition is DENIED. The temporary restraining order
issued by the Court on November 29, 2006 is deemed, as it is hereby
ordered, DISSOLVED.
SO ORDERED.

G.R. No. L-44169 December 3, 1985


ROSARIO A. GAA, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EUROPHIL INDUSTRIES
CORPORATION, and CESAR R. ROXAS, Deputy Sheriff of
Manila, respondents.
Federico C. Alikpala and Federico Y. Alikpala, Jr. for petitioner.
Borbe and Palma for private respondent.
PATAJO, J.:
This is a petition for review on certiorari of the decision of the Court of
Appeals promulgated on March 30, 1976, affirming the decision of the Court
of First Instance of Manila.
It appears that respondent Europhil Industries Corporation was formerly one
of the tenants in Trinity Building at T.M. Kalaw Street, Manila, while
petitioner Rosario A. Gaa was then the building administrator. On December
12, 1973, Europhil Industries commenced an action (Civil Case No. 92744) in
the Court of First Instance of Manila for damages against petitioner "for
having perpetrated certain acts that Europhil Industries considered a
trespass upon its rights, namely, cutting of its electricity, and removing its
name from the building directory and gate passes of its officials and
employees" (p. 87 Rollo). On June 28, 1974, said court rendered judgment in
favor of respondent Europhil Industries, ordering petitioner to pay the former
the sum of P10,000.00 as actual damages, P5,000.00 as moral damages,
P5,000.00 as exemplary damages and to pay the costs.
The said decision having become final and executory, a writ of garnishment
was issued pursuant to which Deputy Sheriff Cesar A. Roxas on August 1,
1975 served a Notice of Garnishment upon El Grande Hotel, where petitioner
was then employed, garnishing her "salary, commission and/or
remuneration." Petitioner then filed with the Court of First Instance of Manila
a motion to lift said garnishment on the ground that her "salaries,
commission and, or remuneration are exempted from execution under Article
1708 of the New Civil Code. Said motion was denied by the lower Court in an
order dated November 7, 1975. A motion for reconsideration of said order
was likewise denied, and on January 26, 1976 petitioner filed with the Court
of Appeals a petition for certiorari against filed with the Court of Appeals a
petition for certiorari against said order of November 7, 1975.
On March 30, 1976, the Court of Appeals dismissed the petition
for certiorari. In dismissing the petition, the Court of Appeals held that
petitioner is not a mere laborer as contemplated under Article 1708 as the
term laborer does not apply to one who holds a managerial or supervisory
position like that of petitioner, but only to those "laborers occupying the
lower strata." It also held that the term "wages" means the pay given" as hire
or reward to artisans, mechanics, domestics or menial servants, and laborers
employed in manufactories, agriculture, mines, and other manual occupation
and usually employed to distinguish the sums paid to persons hired to

perform manual labor, skilled or unskilled, paid at stated times, and


measured by the day, week, month, or season," citing 67 C.J. 285, which is
the ordinary acceptation of the said term, and that "wages" in Spanish is
"jornal" and one who receives a wage is a "jornalero."
In the present petition for review on certiorari of the aforesaid decision of the
Court of Appeals, petitioner questions the correctness of the interpretation of
the then Court of Appeals of Article 1708 of the New Civil Code which reads
as follows:
ART. 1708. The laborer's wage shall not be subject to
execution or attachment, except for debts incurred for food,
shelter, clothing and medical attendance.
It is beyond dispute that petitioner is not an ordinary or rank and file laborer
but "a responsibly place employee," of El Grande Hotel, "responsible for
planning, directing, controlling, and coordinating the activities of all
housekeeping personnel" (p. 95, Rollo) so as to ensure the cleanliness,
maintenance and orderliness of all guest rooms, function rooms, public
areas, and the surroundings of the hotel. Considering the importance of
petitioner's function in El Grande Hotel, it is undeniable that petitioner is
occupying a position equivalent to that of a managerial or supervisory
position.
In its broadest sense, the word "laborer" includes everyone who performs any
kind of mental or physical labor, but as commonly and customarily used and
understood, it only applies to one engaged in some form of manual or
physical labor. That is the sense in which the courts generally apply the term
as applied in exemption acts, since persons of that class usually look to the
reward of a day's labor for immediate or present support and so are more in
need of the exemption than are other. (22 Am. Jur. 22 citing Briscoe vs.
Montgomery, 93 Ga 602, 20 SE 40;Miller vs. Dugas, 77 Ga 4 Am St Rep
192; State ex rel I.X.L. Grocery vs. Land, 108 La 512, 32 So 433; Wildner vs.
Ferguson, 42 Minn 112, 43 NW 793; 6 LRA 338; Anno 102 Am St Rep. 84.
In Oliver vs. Macon Hardware Co., 98 Ga 249 SE 403, it was held that in
determining whether a particular laborer or employee is really a "laborer," the
character of the word he does must be taken into consideration. He must be
classified not according to the arbitrary designation given to his calling, but
with reference to the character of the service required of him by his employer.
In Wildner vs. Ferguson, 42 Minn 112, 43 NW 793, the Court also held that
all men who earn compensation by labor or work of any kind, whether of the
head or hands, including judges, laywers, bankers, merchants, officers of
corporations, and the like, are in some sense "laboring men." But they are
not "laboring men" in the popular sense of the term, when used to refer to a
must presume, the legislature used the term. The Court further held in said
case:
There are many cases holding that contractors, consulting or
assistant engineers, agents, superintendents, secretaries of
corporations and livery stable keepers, do not come within
the meaning of the term. (Powell v. Eldred, 39 Mich,
554, Atkin v. Wasson, 25 N.Y. 482; Short v. Medberry, 29

Hun. 39; Dean v. De Wolf, 16 Hun. 186; Krausen v.


Buckel, 17 Hun. 463; Ericson v. Brown, 39 Barb. 390; Coffin
v. Reynolds, 37 N.Y. 640; Brusie v. Griffith, 34 Cal. 306; Dave
v. Nunan,62 Cal. 400).
Thus, in Jones vs. Avery, 50 Mich, 326, 15 N.W. Rep. 494, it was held that a
traveling salesman, selling by sample, did not come within the meaning of a
constitutional provision making stockholders of a corporation liable for "labor
debts" of the corporation.
In Kline vs. Russell 113 Ga. 1085, 39 SE 477, citing Oliver vs. Macon
Hardware Co., supra, it was held that a laborer, within the statute exempting
from garnishment the wages of a "laborer," is one whose work depends on
mere physical power to perform ordinary manual labor, and not one engaged
in services consisting mainly of work requiring mental skill or business
capacity, and involving the exercise of intellectual faculties.
So, also in Wakefield vs. Fargo, 90 N.Y. 213, the Court, in construing an act
making stockholders in a corporation liable for debts due "laborers, servants
and apprentices" for services performed for the corporation, held that a
"laborer" is one who performs menial or manual services and usually looks to
the reward of a day's labor or services for immediate or present support. And
in Weymouth vs. Sanborn, 43 N.H. 173, 80 Am. Dec. 144, it was held that
"laborer" is a term ordinarily employed to denote one who subsists by
physical toil in contradistinction to those who subsists by professional skill.
And in Consolidated Tank Line Co. vs. Hunt, 83 Iowa, 6, 32 Am. St. Rep. 285,
43 N.W. 1057, 12 L.R.A. 476, it was stated that "laborers" are those persons
who earn a livelihood by their own manual labor.
Article 1708 used the word "wages" and not "salary" in relation to "laborer"
when it declared what are to be exempted from attachment and execution.
The term "wages" as distinguished from "salary", applies to the compensation
for manual labor, skilled or unskilled, paid at stated times, and measured by
the day, week, month, or season, while "salary" denotes a higher degree of
employment, or a superior grade of services, and implies a position of office:
by contrast, the term wages " indicates considerable pay for a lower and less
responsible character of employment, while "salary" is suggestive of a larger
and more important service (35 Am. Jur. 496).
The distinction between wages and salary was adverted to in Bell vs. Indian
Livestock Co. (Tex. Sup.), 11 S.W. 344, wherein it was said: "'Wages' are the
compensation given to a hired person for service, and the same is true of
'salary'. The words seem to be synonymous, convertible terms, though we
believe that use and general acceptation have given to the word 'salary' a
significance somewhat different from the word 'wages' in this: that the former
is understood to relate to position of office, to be the compensation given for
official or other service, as distinguished from 'wages', the compensation for
labor." Annotation 102 Am. St. Rep. 81, 95.
We do not think that the legislature intended the exemption in Article 1708
of the New Civil Code to operate in favor of any but those who are laboring
men or women in the sense that their work is manual. Persons belonging to
this class usually look to the reward of a day's labor for immediate or present

support, and such persons are more in need of the exemption than any
others. Petitioner Rosario A. Gaa is definitely not within that class.
We find, therefore, and so hold that the Trial Court did not err in denying in
its order of November 7, 1975 the motion of petitioner to lift the notice of
garnishment against her salaries, commission and other remuneration from
El Grande Hotel since said salaries, Commission and other remuneration due
her from the El Grande Hotel do not constitute wages due a laborer which,
under Article 1708 of the Civil Code, are not subject to execution or
attachment.
IN VIEW OF THE FOREGOING, We find the present petition to be without
merit and hereby AFFIRM the decision of the Court of Appeals, with costs
against petitioner.
SO ORDERED.

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


JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,
vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR
ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabora, Del Rosario & Castillo for private respondent.
MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of the National
Labor Relations Commission in NLRC Case No. RB-IV-20840-78-T entitled,
"Jose Songco and Romeo Cipres, Complainants-Appellants, v. F.E. Zuellig (M),
Inc., Respondent-Appellee" and NLRC Case No. RN- IV-20855-78-T
entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee," which dismissed the appeal of petitioners herein and
in effect affirmed the decision of the Labor Arbiter ordering private
respondent to pay petitioners separation pay equivalent to their one month
salary (exclusive of commissions, allowances, etc.) for every year of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig)
filed with the Department of Labor (Regional Office No. 4) an application
seeking clearance to terminate the services of petitioners Jose Songco, Romeo
Cipres, and Amancio Manuel (hereinafter referred to as petitioners) allegedly
on the ground of retrenchment due to financial losses. This application was
seasonably opposed by petitioners alleging that the company is not suffering
from any losses. They alleged further that they are being dismissed because
of their membership in the union. At the last hearing of the case, however,
petitioners manifested that they are no longer contesting their dismissal. The
parties then agreed that the sole issue to be resolved is the basis of the
separation pay due to petitioners. Petitioners, who were in the sales force of
Zuellig received monthly salaries of at least P40,000. In addition, they
received commissions for every sale they made.
The collective Bargaining Agreement entered into between Zuellig and F.E.
Zuellig Employees Association, of which petitioners are members, contains
the following provision (p. 71, Rollo):
ARTICLE XIV Retirement Gratuity
Section l(a)-Any employee, who is separated from
employment due to old age, sickness, death or permanent
lay-off not due to the fault of said employee shall receive
from the company a retirement gratuity in an amount
equivalent to one (1) month's salary per year of service. One
month of salary as used in this paragraph shall be deemed
equivalent to the salary at date of retirement; years of service

shall be deemed equivalent to total service credits, a fraction


of at least six months being considered one year, including
probationary employment. (Emphasis supplied)
On the other hand, Article 284 of the Labor Code then prevailing provides:
Art. 284. Reduction of personnel. The termination of
employment of any employee due to the installation of labor
saving-devices, redundancy, retrenchment to prevent losses,
and other similar causes, shall entitle the employee affected
thereby to separation pay. In case of termination due to the
installation of labor-saving devices or redundancy, the
separation pay shall be equivalent to one (1) month pay or to
at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent
losses and other similar causes, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year. (Emphasis supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing
the Labor Code provide:
xxx
Sec. 9(b). Where the termination of employment is due to
retrechment initiated by the employer to prevent losses or
other similar causes, or where the employee suffers from a
disease and his continued employment is prohibited by law
or is prejudicial to his health or to the health of his coemployees, the employee shall be entitled to termination pay
equivalent at least to his one month salary, or to one-half
month pay for every year of service, whichever is higher, a
fraction of at least six (6) months being considered as one
whole year.
xxx
Sec. 10. Basis of termination pay. The computation of the
termination pay of an employee as provided herein shall be
based on his latest salary rate, unless the same was reduced
by the employer to defeat the intention of the Code, in which
case the basis of computation shall be the rate before its
deduction. (Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the dispositive
portion of which reads (p. 78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent should be
as it is hereby, ordered to pay the complainants separation
pay equivalent to their one month salary (exclusive of
commissions, allowances, etc.) for every year of service that
they have worked with the company.

SO ORDERED.
The appeal by petitioners to the National Labor Relations Commission was
dismissed for lack of merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary
Abandonment and Withdrawal of Petition dated April 7, 1980 filed by
petitioner Romeo Cipres, based on the ground that he wants "to abide by the
decision appealed from" since he had "received, to his full and complete
satisfaction, his separation pay," resolved to dismiss the petition as to him.
The issue is whether or not earned sales commissions and allowances should
be included in the monthly salary of petitioners for the purpose of
computation of their separation pay.
The petition is impressed with merit.
Petitioners' position was that in arriving at the correct and legal amount of
separation pay due them, whether under the Labor Code or the CBA, their
basic salary, earned sales commissions and allowances should be added
together. They cited Article 97(f) of the Labor Code which includes
commission as part on one's salary, to wit;
(f) 'Wage' paid to any employee shall mean the remuneration
or earnings, however designated, capable of being expressed
in terms of money, whether fixed or ascertained on a time,
task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of
employment for work done or to be done, or for services
rendered or to be rendered, and includes the fair and
reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by
the employer to the employee. 'Fair reasonable value' shall
not include any profit to the employer or to any person
affiliated with the employer.
Zuellig argues that if it were really the intention of the Labor Code as well as
its implementing rules to include commission in the computation of
separation pay, it could have explicitly said so in clear and unequivocal
terms. Furthermore, in the definition of the term "wage", "commission" is
used only as one of the features or designations attached to the word
remuneration or earnings.
Insofar as the issue of whether or not allowances should be included in the
monthly salary of petitioners for the purpose of computation of their
separation pay is concerned, this has been settled in the case of Santos v.
NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where We
ruled that "in the computation of backwages and separation pay, account
must be taken not only of the basic salary of petitioner but also of her
transportation and emergency living allowances." This ruling was reiterated
in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987, 155 SCRA 124

and recently, in Planters Products, Inc. v. NLRC, et al., G.R. No. 78524,
January 20, 1989.
We shall concern ourselves now with the issue of whether or not earned sales
commission should be included in the monthly salary of petitioner for the
purpose of computation of their separation pay.
Article 97(f) by itself is explicit that commission is included in the definition
of the term "wage". It has been repeatedly declared by the courts that where
the law speaks in clear and categorical language, there is no room for
interpretation or construction; there is only room for application (Cebu
Portland Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August
22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals, G.R.No. L-2 7455,
June 28,1973, 51 SCRA 381). A plain and unambiguous statute speaks for
itself, and any attempt to make it clearer is vain labor and tends only to
obscurity. How ever, it may be argued that if We correlate Article 97(f) with
Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor
Code and Sections 9(b) and 10 of the Implementing Rules, there appears to
be an ambiguity. In this regard, the Labor Arbiter rationalized his decision in
this manner (pp. 74-76, Rollo):
The definition of 'wage' provided in Article 96 (sic) of the
Code can be correctly be (sic) stated as a general definition.
It is 'wage ' in its generic sense. A careful perusal of the same
does not show any indication that commission is part of
salary. We can say that commission by itself may be
considered a wage. This is not something novel for it cannot
be gainsaid that certain types of employees like agents, field
personnel and salesmen do not earn any regular daily,
weekly or monthly salaries, but rely mainly on commission
earned.
Upon the other hand, the provisions of Section 10, Rule 1,
Book VI of the implementing rules in conjunction with
Articles 273 and 274 (sic) of the Code specifically states that
the basis of the termination pay due to one who is sought to
be legally separated from the service is 'his latest salary
rates.
x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly pay
or monthly salary'.
The above terms found in those Articles and the particular
Rules were intentionally used to express the intent of the
framers of the law that for purposes of separation pay they
mean to be specifically referring to salary only.
.... Each particular benefit provided in the Code and other
Decrees on Labor has its own pecularities and nuances and
should be interpreted in that light. Thus, for a specific
provision, a specific meaning is attached to simplify matters
that may arise there from. The general guidelines in (sic) the

formation of specific rules for particular purpose. Thus, that


what should be controlling in matters concerning
termination pay should be the specific provisions of both
Book VI of the Code and the Rules. At any rate, settled is the
rule that in matters of conflict between the general provision
of law and that of a particular- or specific provision, the
latter should prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the
implementing rules, it could be deduced that wage is used in
its generic sense and obviously refers to the basic wage rate
to be ascertained on a time, task, piece or commission basis
or other method of calculating the same. It does not,
however, mean that commission, allowances or analogous
income necessarily forms part of the employee's salary
because to do so would lead to anomalies (sic), if not absurd,
construction of the word "salary." For what will prevent the
employee from insisting that emergency living allowance,
13th month pay, overtime, and premium pay, and other
fringe benefits should be added to the computation of their
separation pay. This situation, to our mind, is not the real
intent of the Code and its rules.
We rule otherwise. The ambiguity between Article 97(f), which defines the
term 'wage' and Article XIV of the Collective Bargaining Agreement, Article
284 of the Labor Code and Sections 9(b) and 10 of the Implementing Rules,
which mention the terms "pay" and "salary", is more apparent than real.
Broadly, the word "salary" means a recompense or consideration made to a
person for his pains or industry in another man's business. Whether it be
derived from "salarium," or more fancifully from "sal," the pay of the Roman
soldier, it carries with it the fundamental idea of compensation for services
rendered. Indeed, there is eminent authority for holding that the words
"wages" and "salary" are in essence synonymous (Words and Phrases, Vol. 38
Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89
App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is the Latin
word "salarium," is often used interchangeably with "wage", the etymology of
which is the Middle English word "wagen". Both words generally refer to one
and the same meaning, that is, a reward or recompense for services
performed. Likewise, "pay" is the synonym of "wages" and "salary" (Black's
Law Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary"
have the same meaning, and commission is included in the definition of
"wage", the logical conclusion, therefore, is, in the computation of the
separation pay of petitioners, their salary base should include also their
earned sales commissions.
The aforequoted provisions are not the only consideration for deciding the
petition in favor of the petitioners.
We agree with the Solicitor General that granting, in gratia argumenti, that
the commissions were in the form of incentives or encouragement, so that
the petitioners would be inspired to put a little more industry on the jobs

particularly assigned to them, still these commissions are direct


remuneration services rendered which contributed to the increase of income
of Zuellig . Commission is the recompense, compensation or reward of an
agent, salesman, executor, trustees, receiver, factor, broker or bailee, when
the same is calculated as a percentage on the amount of his transactions or
on the profit to the principal (Black's Law Dictionary, 5th Ed., citing Weiner
v. Swales, 217 Md. 123, 141 A.2d 749, 750). The nature of the work of a
salesman and the reason for such type of remuneration for services rendered
demonstrate clearly that commission are part of petitioners' wage or salary.
We take judicial notice of the fact that some salesmen do not receive any
basic salary but depend on commissions and allowances or commissions
alone, are part of petitioners' wage or salary. We take judicial notice of the
fact that some salesman do not received any basic salary but depend on
commissions and allowances or commissions alone, although an employeremployee relationship exists. Bearing in mind the preceeding dicussions, if
we adopt the opposite view that commissions, do not form part of wage or
salary, then, in effect, We will be saying that this kind of salesmen do not
receive any salary and therefore, not entitled to separation pay in the event of
discharge from employment. Will this not be absurd? This narrow
interpretation is not in accord with the liberal spirit of our labor laws and
considering the purpose of separation pay which is, to alleviate the
difficulties which confront a dismissed employee thrown the the streets to
face the harsh necessities of life.
Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the
salary base that should be used in computing the separation pay, We held
that:
The commissions also claimed by petitioner ('override
commission' plus 'net deposit incentive') are not properly
includible in such base figure since such commissions must
be earned by actual market transactions attributable to
petitioner.
Applying this by analogy, since the commissions in the present case were
earned by actual market transactions attributable to petitioners, these
should be included in their separation pay. In the computation thereof, what
should be taken into account is the average commissions earned during their
last year of employment.
The final consideration is, in carrying out and interpreting the Labor Code's
provisions and its implementing regulations, the workingman's welfare
should be the primordial and paramount consideration. This kind of
interpretation gives meaning and substance to the liberal and compassionate
spirit of the law as provided for in Article 4 of the Labor Code which states
that "all doubts in the implementation and interpretation of the provisions of
the Labor Code including its implementing rules and regulations shall be
resolved in favor of labor" (Abella v. NLRC, G.R. No. 71812, July 30,1987,152
SCRA 140; Manila Electric Company v. NLRC, et al., G.R. No. 78763, July
12,1989), and Article 1702 of the Civil Code which provides that "in case of
doubt, all labor legislation and all labor contracts shall be construed in favor
of the safety and decent living for the laborer.

ACCORDINGLY, the petition is hereby GRANTED. The decision of the


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

G.R. No. 127422

April 17, 2001

LMG CHEMICALS CORPORATION, LMG CHEMICALS


CORPORATION, petitioner,
vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT,
THE HON. LEONARDO A. QUISUMBING, and CHEMICAL WORKER'S
UNION, respondents.
SANDOVAL-GUTIERREZ, J.:
Before us is a petition certiorari with prayer for a temporary restraining order
and a writ of preliminary injunction under Rule 65 of the 1997 Rules of Civil
Procedure, as amended, seeking to nullify the orders dated October 7, 1996
and December 17, 1996, issued by the then Secretary of Labor and
Employment, Hon. Leonardo A. Quisumbing,1 in OS-AJ-05-10(1)-96, "IN RE:
LABOR DISPUTE AT LMB CHEMICALS CORPORATION"
The facts as culled from the records are:
LMG Chemicals Corporation, (petitioner) is a domestic corporation engaged
in the manufacture and sale of various kinds of chemical substances,
including aluminum sulfate which is essential in purifying water, and
technical grade sulfuric acid used in thermal power plants. Petitioner has
three divisions, namely: the Organic Division, Inorganic Division and the
Pinamucan Bulk Carriers. There are two unions within petitioner's Inorganic
Division. One union represents the daily paid employees and the other union
represents the monthly paid employees. Chemical Workers Union,
respondent, is a duly registered labor organization acting as the collective
bargaining agent of all the daily paid employees of petitioner's Inorganic
Division.
Sometime in December 1995, the petitioner and the respondent started
negotiation for a new Collective Bargaining Agreement (CBA) as their old CBA
was about to expire. They were able to agree on the political provisions of the
new CBA, but no agreement was reached on the issue of wage increase. The
economic issues were not also settled.
The positions of the parties with respect to wage issue were:
"Petitioner Company
P40 per day on the first year
P40 per day on the second year
P40 per day on the third year
Respondent Union

"P142 for the first 18 months


P73 for the second 18 months"
With the CBA negotiations at a deadlock, on March 6, 1996, respondent
union filed a Notice of Strike with the National Conciliation and Mediation
Board, National Capital Region. Despite several conferences and efforts of the
designated conciliator-mediator, the parties failed to reach an amicable
settlement.
On April 16, 1996, respondent union staged a strike. IN an attempt to end
the strike early, petitioner, on April 24, 1996, made an improved offer of
P135 per day, spread over the period of three years, as follows:
"P55 per day on the first year;
P45 per day on the second year;
P35 per day on the third year."
On May 9, 1996, another conciliation meeting was held between the parties.
In that meeting, petitioner reiterated its improved offer of P135 per day which
was again rejected by the respondent union.
On May 20, 1996, the Secretary of Labor and Employment, finding the
instant labor dispute impressed with national interest, assumed jurisdiction
over the same.
In compliance with the directive of the Labor Secretary, the parties submitted
their respective positive papers both dated June 21, 1996.
In its position paper, petitioner made a turn-around, stating that it could no
longer afford to grant its previous offer due to serious financial losses during
the early months of 1996. It then made the following offer:
Zero increase in the first year;
P30 per day increase in the second year; and
P20 per day increase in the third year.
In its reply to petitioner's position paper, respondent union claimed it had a
positive performance in terms of income during the covered period.
On October 7, 1996, the Secretary of Labor and Employment issued the first
assailed order, pertinent portions of which read:
"xxx. In the light of the Company's last offer and the Union's last
position, We decree that the Company's offer of P135 per day
wage increase be further increased to P140 per (day), which shall
be incorporated in the new CBA, as follows:

P350 per day on the first 18 months, and

P90 per day for the first 18 months, and

P150 per day for the next 18 months"

P50 per day for the next 18 months.

In the course of the negotiations, respondent union pruned down the


originally proposed wage increase quoted above to P215 per day, broken
down as follows:

After all, the Company had granted its supervisory employees an


increase of P4,500 per month or P166 per day, more or less, if
the period reckoned is 27 working days.

In regard to the division of the three-year period into two subperiods of 18 months each, this office take cognizance of the
same practice under the old CBA.
2. Other economic demands
Considering the financial condition of the Company, all other
economic demands except those provided in No. 3 below are
rejected. The provisions in the old CBA as well as those
contained in the Company's Employee's Primer of Benefits as of
Aug. 1, 1994 shall be retained and incorporated in the new CBA.
3. Effectivity of the new CBA
Article 253-A of the Labor Code, as amended, provides that when
no new CBA is signed during a period of six months from the
expiry date of the old CBA, the retroactivity period shall be
according to the parties' agreement, Inasmuch as the parties
could not agree on this issue and since this Office has assumed
jurisdiction, then this matter now lies at the discretion of the
Secretary of labor and Employment. Thus the new Collective
Bargaining Agreement which the parties will sign pursuant to
this Order shall retroact to January 1, 1996.
x

Forthwith, petitioner filed a motion for reconsideration but was denied by the
Secretary in his order dated December 16, 1996.
Petitioner now contends that in issuing the said orders, respondent Secretary
gravely abused his discretion, thus:
I
"THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION
IN DISREGARDING THE EVIDENCE OF PETITIONER'S FINANCIAL
LOSSES AND IN GRANTING A P140.00 WAGE INCREASE TO THE
RESPONDENT UNION.
II
THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION
IN DECREEING THAT THE NEW COLLECTIVE BARGAINING
AGREEMENT TO BE SIGNED BY THE PARTIES SHALL RETROACT
TO JANUARY 1, 1996."
Anent the first ground, petitioner asserts that the decreed amount of P140
wage increase has no basis in fact and in law. Petitioner insists that public
respondent Secretary whimsically presumed that the company can survive
despite the losses being suffered by its Inorganic Division and its additional
losses caused by the strike held by respondent union. Petitioner further
contends that respondent Secretary disregarded its evidence showing that for
the first part of 1996, its Inorganic Division suffered serious losses
amounting to P15.651 million. Hence, by awarding wage increase without

any basis, respondent Secretary gravely abused his discretion and violated
petitioner's right to due process.
We are not persuaded.
As aptly stated by the Solicitor General in his comment on the petition dated
July 1, 1996, respondent Secretary considered all the evidence and
arguments adduced by both parties. In ordering the wage increase, the
Secretary ratiocinated as follows:
"xxx
In the Company's Supplemental Comment, it says that it has
three divisions, namely: the Organic Division, Inorganic Division
and the Pinamucan Bulk Carriers. The Union in this instant
dispute represent the daily wage earners in the Inorganic
Division. The respective income of the three divisions is shown
in Annex B to the Company's Supplemental Comment. The
Organic Division posted an income of P369,754,000 in 1995.
The Inorganic Division realized an income of P261,288,000 in
the same period. The tail ender is the Pinamucan Bulk Carriers
Division with annual income of P11,803,000 for the same
period. Total Company income for the period was P642,845,000.
It is a sound business practice that a Company's income from all
sources are collated to determine its true financial condition.
Regardless of whether one division or another losses or gains in
its yearly operation is not material in reckoning a Company's
financial status. In fact, the loss in one is usually offset by the
gains in the others. It is not a good business practice to isolate
the employees or workers of one division, which incurred an
operating loss for a particular period. That will create
demoralization among its ranks, which will ultimately affect
productivity. The eventual loser will be the company.
So, even if We believe the position of the company that its
Inorganic Division lost last year and during the early months of
this year, it would not be a good argument to deny them of any
salary increase. When the Company made the offer of P135 per
day for the three year period, it was presumed to have studied
its financial condition properly, taking into consideration its
past performance and projected income. In fact, the Company
realized a net income of P10,806,678 for 1995 in all its
operations, which could be one factor why it offered the wage
increase package of P135 per day for the Union
members.1wphi1.nt
Besides, as a major player in the country's corporate field,
reneging from a wage increase package it previously offered and
later on withdrawing the same simply because this Office had
already assumed jurisdiction over its labor dispute with the
Union cannot be countenanced. It will be worse if the employer
is allowed to withdraw its offer on the ground that the union
staged a strike and consequently subsequently suffered business

setbacks in its income projections. To sustain the Company's


position is like hanging the proverbial sword of Damocles over
the Union's right to concerted activities, ready to fall when the
latter clamors for better terms and conditions of employment.
But we cannot also sustain the Union's demand for an increase
of P215 per day. If we add the overload factors such as the
increase in SSS premiums, medicare and medicaid, and other
multiplier costs, the Company will be saddled with additional
labor cost, and its projected income for the CBS period may not
be able to absorb the added cost without impairing its viability.
xxx"
Verily, petitioner's assertion that respondent Secretary failed to consider the
evidence on record lacks merit. It was only the Inorganic Division of the
petitioner corporation that was sustaining losses. Such incident does not
justify the withholding of any salary increase as petitioner's income from all
sources are collated for the determination of its true financial condition. As
correctly stated by the Secretary, "the loss in one is usually offset by the
gains in the others."
Moreover, petitioner company granted its supervisory employees, during the
pendency of the negotiations between the parties, a wage increase of P4,500
per month or P166 per day, more or less. Petitioner justified this by saying
that the said increase was pursuant to its earlier agreement with the
supervisions. Hence, the company had no choice but to abide by such
agreement even if it was already sustaining losses as a result of the strike of
the rank-and-file employees.
Petitioner's actuation is actually a discrimination against respondent union
members. If it could grant a wage increase to its supervisors, there is no valid
reason why it should deny the same to respondent union members.
Significantly, while petitioner asserts that it sustained losses in the first part
of 1996, yet during the May 9, 1996 conciliation meeting, it made the offer of
P135 daily wage to the said union members.
This Court, therefore, holds that respondent Secretary did not gravely abuse
his discretion in ordering the wage increase. Grave abuse of discretion
implies whimsical and capricious exercise of power which, in the instant
case, is not obtaining.
On the second ground, petitioner contends that public respondent committed
grave abuse of discretion when he ordered that the new CBA which the
parties will sign shall retroact to January 1, 1996, citing the cases of Union
of Filipro Employees vs. NLRC,2 and Pier 8 Arrastre and Stevedoring Services,
Inc. vs. Roldan Confesor.3
Invoking the provisions of Article 253-A of the Labor Code, petitioner insists
that public respondent's discretion on the issue of the date of the effectivity
of the new CBA is limited to either: (1) leaving the matter of the date of
effectivity of the new CBA is limited to either: (1) leaving the matter of the
date of effectivity of the new CBA to the agreement of the parties or (2)
ordering that the terms of the new CBA be prospectively applied.

It must be emphasized that respondent Secretary assumed jurisdiction over


the dispute because it is impressed with national interest. As noted by the
Secretary, "the petitioner corporation was then supplying the sulfate
requirements of MWSS as well as the sulfuric acid of NAPOCOR, and
consequently, the continuation of the strike would seriously affect the water
supply of Metro Manila and the power supply of the Luzon Grid." Such
authority of the Secretary to assume jurisdiction carries with it the power to
determine the retroactivity of the parties' CBA.
It is well settled in our jurisprudence that the authority of the Secretary of
Labor to assume jurisdiction over a labor dispute causing or likely to cause a
strike or lockout in an industry indispensable to national interest includes
and extends to all questions and controversies arising therefrom. The power
is plenary and discretionary in nature to enable him to effectively and
efficiently dispose of the primary dispute.4
In St. Luke's Medical Center, Inc. vs. Torres5, a deadlock developed during
the CBA negotiations between the management and the union. The Secretary
of Labor assumed jurisdiction and ordered that their CBA shall retroact to
the date of the expiration of the previous CBA. The management claimed that
the Secretary of Labor gravely abused his discretion. This Court held:
"xxx
Finally, the effectivity of the Order of January 28, 1991, must
retroact to the date of the expiration of the previous CBA,
contrary to the position of the petitioner. Under the
circumstances of the case, Art. 253-A cannot be properly applied
to herein case. As correctly stated by public respondent in his
assailed Order of April 12, 1991
'Anent the alleged lack of basis for retroactivity
provisions awarded, We would stress that the provision
of law invoked by the Hospital, Article 253-A of the
Labor Code, speaks of agreement by and between the
parties, and not arbitral awards.'
Therefore in the absence of the specific provision of law
prohibiting retroactivity of the effectivity of the arbitral awards
issued by the Secretary of Labor pursuant to Article 263(g) of
the Labor Code, such as herein involved, public respondent is
deemed vested with plenary powers to determine the effectivity
thereof."
Finally, to deprive respondent Secretary of such power and discretion would
run counter to the well-established rule that all doubts in the interpretation
of labor laws should be resolved in favor of labor. In upholding the assailed
orders of respondent Secretary, this Court is only giving meaning to this rule.
Indeed, the Court should help labor authorities in providing workers
immediate benefits, without being hampered by arbitration or litigation
processes that prove to be not only nerve-wracking but financially
burdensome in the long run.
As we said in Maternity Children's Hospital vs. Secretary of Labor 6:

"Social Justice Legislation, to be truly meaningful and rewarding


to our workers, must not be hampered in its application by long
winded-arbitration and litigation. Rights must be asserted and
benefits received with the least inconvenience. Labor laws are
meant to promote, not to defeat, social justice."
WHEREFORE, the instant petition is DENIED. The assailed orders of the
Secretary of Labor dated October 7, 1996 and December 16, 1996
are AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 112546 March 13, 1996

leaves. However, it appears that, during the life of the petitioner corporation,
from the beginning of its operations in 1981 until its closure in 1992, it had
been giving separation pay equivalent to thirty (30) days' pay for every year of
service. Moreover, inasmuch as the region where North Davao operated was
plagued by insurgency and other peace and order problems, the employees
had to collect their salaries at a bank in Tagum, Davao del Norte, some 58
kilometers from their workplace and about 2 1/2 hours' travel time by public
transportation; this arrangement lasted from 1981 up to 1990.

NORTH DAVAO MINING CORPORATION and ASSET PRIVATIZATION


TRUST, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER
ANTONIO M. VILLANUEVA and WILFREDO GUILLEMA, respondents.
PANGANIBAN, J.:p
Is a company which is forced by huge business losses to close its business,
legally required to pay separation benefits to its employees at the time of its
closure in an amount equivalent to the separation pay paid to those who
were separated when the company was still a going concern? This is the
main question brought before this Court in this petition for certiorari under
Rule 65 of the Revised Rules of Court, which seeks to reverse and set aside
the Resolutions dated July 29, 1993 1 and September 27, 1993 2 of the
National Labor Relations Commission 3 (NLRC) in NLRC CA No. M-00139593.
The Resolution dated July 29, 1993 affirmed in toto the decision of the Labor
Arbiter in RAB-11-08-00672-92 and RAB-11-08-00713-92 ordering
petitioners to pay the complainants therein certain monetary claims.
The Resolution dated September 27, 1993 denied
reconsideration of the said July 29, 1993 Resolution.

the

motion

for

The Facts
Petitioner North Davao Mining Corporation (North Davao) was incorporated
in 1974 as a 100% privately-owned company. Later, the Philippine National
Bank (PNB) became part owner thereof as a result of a conversion into equity
of a portion of loans obtained by North Davao from said bank. On June 30,
1986, PNB transferred all its loans to and equity in North Davao in favor of
the national government which, by virtue of Proclamation No. 50 dated
December 8, 1986, later turned them over to petitioner Asset Privatization
Trust (APT). As of December 31, 1990 the national government hold 81.8% of
the common stock and 100% of the preferred stock of said company.4
Respondent Wilfredo Guillema is one among several employees of North
Davao who were separated by reason of the company's closure on May 31,
1992, and who were the complainants in the cases before the respondent
labor arbiter.
On May 31, 1992, petitioner North Davao completely ceased operations due
to serious business reverses. From 1988 until its closure in 1992, North
Davao suffered net losses averaging three billion pesos (P3,000,000,000.00)
per year, for each of the five years prior to its closure. All told, as of
December 31, 1991, or five months prior to its closure, its total liabilities had
exceeded its assets by 20,392 billion pesos, as shown by its financial
statements audited by the Commission on Audit. When it ceased operations,
its remaining employees were separated and given the equivalent of 12.5
days' pay for every year of service, computed on their basic monthly pay, in
addition to the commutation to cash of their unused vacation and sick

Subsequently, a complaint was filed with respondent Labor Arbiter by


respondent Wilfredo Guillema and 271 other separated employees for: (1)
additional separation pay of 17.5 days for every year of service; (2) back
wages equivalent to two days a month; (3) transportation allowance; (4)
hazard pay; (5) housing allowance; (6) food allowance; (7) post-employment
medical clearance; and (8) future medical allowance, all of which amounted
to P58,022,878.31 as computed by private respondent. 5
On May 6, 1993, respondent Labor Arbiter rendered a decision ordering
petitioner North Davao to pay the complainants the following:
(a) Additional separation pay of 17.5 days for every year of
service;
(b) Backwages equivalent to two (2) days a month times the
number of years of service but not to exceed three (3) years;
(c) Transportation allowance at P80 a month times the
number of years of service but not to exceed three (3) years.
The benefits awarded by respondent Labor Arbiter amounted to
P10,240,517.75. Attorney's fees equivalent to ten percent (10%) thereof were
also granted. 6
On appeal, respondent NLRC affirmed the decision in toto. Petitioner North
Davao's motion for reconsideration was likewise denied. Hence, this petition.
The Parties' Submissions and the Issues
In affirming the Labor Arbiter's decision, respondent NLRC ruled that "since
(North Davao) has been paying its employees separation pay equivalent to
thirty (30) days pay for every year of service," knowing fully well that the law
provides for a lesser separation pay, then such company policy "has ripened
into an obligation," and therefore, depriving now the herein private
respondent and others similarly situated of the same benefits would be
discriminatory. 7 Quoting from Businessday Information Systems and
Services, Inc. (BISSI) vs. NLRC, 8 it said that petitioners "may not pay
separation benefits unequally for such discrimination breeds resentment and
ill-will among those who have been treated less generously than others." It
also cited Abella vs. NLRC, 9 as authority for saying that Art. 283 of the Labor
Code protects workers in case of closure of the establishment.
To justify the award of two days a month in backwages and P80 per month of
transportation allowance, respondent Commission ruled:

As to the appellants' claim that complainants-appellees' time


spent in collecting their wages at Tagum, Davao is not
compensable allegedly because it was on official time can not
be given credence. No iota of evidence has been presented to
back up said contention. The same is true with appellants'
assertion that the claim for transportation expenses is
without basis since they were incurred by the complainants.
Appellants should have submitted the payrolls to prove that
complainants appellees were not the ones who personally
collected their wages and/or the bus/jeep trip tickets or
vouchers to show that the complainants-appellees were
provided with free transportation as claimed.
Petitioner, through the Government Corporate Counsel, raised the following
grounds for the allowance of the petition:
1. The NLRC acted with grave abuse of discretion in
affirming without legal basis the award of additional
separation pay to private respondents who were separated
due to serious business losses on the part of petitioner.
2. The NLRC acted with grave abuse of discretion in
affirming without sufficient factual basis the award of
backwages and transportation expenses to private
respondents.
3. There is no appeal, nor any plain, speedy and adequate
remedy in the ordinary course of the law.
and the following issues:
1. Whether or not an employer whose business operations
ceased due to serious business losses or financial reverses is
obliged to pay separation pay to its employees separated by
reason of such closure.
2. Whether or not time spent in collecting wages in a place
other than the place of employment is compensable
notwithstanding that the same is done during official time.
3. Whether or not private respondents are entitled to
transportation expenses in the absence of evidence that
these expenses were incurred.
The First Issue: Separation Pay
To resolve this issue, it is necessary to revisit the provision of law adverted to
by the parties in their submissions, namely, Art. 283 of the Labor Code,
which reads as follows:
Art. 283. Closure of establishment and reduction of
personnel. The employer may also terminate the
employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses
or the closing or cessation of operation of the establishment

or undertaking unless the closing is for the purpose of


circumventing the provisions of this Title, by serving a
written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least his
one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment
to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year. (emphasis supplied)
The underscored portion of Art. 283 governs the grant of separation benefits
"in case of closures or cessation of operation" of business establishments
"NOT due to serious business losses or financial reverses . . . ". Where,
however, the closure was due to business losses as in the instant case, in
which the aggregate losses amounted to over P20 billion the Labor Code
does not impose any obligation upon the employer to pay separation benefits,
for obvious reasons. There is no need to belabor this point. Even the public
respondents, in their Comment 10 filed by the Solicitor General, impliedly
concede this point.
However, respondents tenaciously insist on the award of separation pay,
anchoring their claim solely on petitioner North Davao's long-standing policy
of giving separation pay benefits equivalent to 30-days' pay, which policy had
been in force in the years prior to its closure. Respondents contend that, by
denying the same separation benefits to private respondent and the others
similarly situated, petitioners discriminated against them. They rely on this
Court's ruling in Businessday Information Systems and Services, Inc. (BISSI)
vs. NLRC, (supra). In said case, petitioner BISSI, after experiencing financial
reverses, decided "as a retrenchment measure" to lay-off some employees on
May 16, 1988 and gave them separation pay equivalent to one-half (1/2)
month pay for every year of service. BISSI retained some employees in an
attempt to rehabilitate its business as a trading company. However, barely
two and a half months later, these remaining employees were likewise
discharged because the company decided to cease business operations
altogether. Unlike the earlier terminated employees, the second batch
received separation pay equivalent to a full month's salary for every year of
service, plus a mid-year bonus. This Court ruled that "there was
impermissible discrimination against the private respondents in the payment
of their separation benefits. The law requires an employer to extend equal
treatment to its employees. It may not, in the guise of exercising management
prerogatives, grant greater benefits to some and less to others. . . ."
In resolving the present case, it bears keeping in mind at the outset that the
factual circumstances of BISSI are quite different from the current case. The
Court noted that BISSI continued to suffer losses even after the

retrenchment of the first batch of employees: clearly, business did not


improve despite such drastic measure. That notwithstanding, when BISSI
finally shut down, it could well afford to (and actually did) pay off its
remaining employees with MORE separation benefits as compared with those
earlier laid off; obviously, then, there was no reason for BISSI to skimp on
separation pay for the first batch of discharged employees. That it was able to
pay one-month separation benefit for employees at the time of closure of its
business meant that it must have been also in a position to pay the same
amount to those who were separated prior to closure. That it did not do so
was a wrongful exercise of management prerogatives. That is why the Court
correctly faulted it with "impermissible discrimination." Clearly, it exercised
its management prerogatives contrary to "general principles of fair play and
justice."
In the instant case however, the company's practice of giving one month's
pay for every year of service could no longer be continued precisely because
the company could not afford it anymore. It was forced to close down on
account of accumulated losses of over P20 billion. This could not be said of
BISSI. In the case of North Davao, it gave 30-days' separation pay to its
employees when it was still a going concern even if it was already losing
heavily. As a going concern, its cash flow could still have sustained the
payment of such separation benefits. But when a business enterprise
completely ceases operations, i.e., upon its death as a going business
concern, its vital lifeblood its cashflow literally dries up. Therefore, the
fact that less separation benefits ware granted when the company finally met
its business death cannot be characterized as discrimination. Such action
was dictated not by a discriminatory management option but by its complete
inability to continue its business life due to accumulated losses. Indeed, one
cannot squeeze blood out of a dry stone. Nor water out of parched land.
As already stated, Art. 283 of the Labor Code does not obligate an employer
to pay separation benefits when the closure is due to losses. In the case
before us, the basis for the claim of the additional separation benefit of 17.5
days is alleged discrimination, i.e., unequal treatment of employees, which is
proscribed as an unfair labor practice by Art. 248 (e) of said Code. Under the
facts and circumstances of the present case, the grant of a lesser amount of
separation pay to private respondent was done, not by reason of
discrimination, but rather, out of sheer financial bankruptcy a fact that is
not controlled by management prerogatives. Stated differently, the total
cessation of operation due to mind-boggling losses was a supervening fact
that prevented the company from continuing to grant the more generous
amount of separation pay. The fact that North Davao at the point of its forced
closure voluntarily paid any separation benefits at all although not
required by law and 12.5-days worth at that, should have elicited
admiration instead of condemnation. But to require it to continue being
generous when it is no longer in a position to do so would certainly be
unduly oppressive, unfair and most revolting to the conscience. As this Court
held in Manila Trading & Supply Co. vs. Zulueta, 11 and reiterated in San
Miguel Corporation vs. NLRC 12 and later, in Allied Banking Corporation
vs. Castro, 13 "(t)he law, in protecting the rights of the laborer, authorizes
neither oppression nor self-destruction of the employer."

At this juncture, we note that the Solicitor General in his Comment


challenges the petitioners' assertion that North Davao, having closed down,
no longer has the means to pay for the benefits. The Solicitor General
stresses that North Davao was among the assets transferred by PNB to the
national government, and that by virtue of Proclamation No. 50 dated
December 8, 1986, the APT was constituted trustee of this government asset.
He then concludes that "(i)t would, therefore, be incongruous to declare that
the National Government, which should always be presumed to be solvent,
could not pay now private respondents' money claims." Such argumentation
is completely misplaced. Even if the national government owned or controlled
81.8% of the common stock and 100% of the preferred stock of North Davao,
it remains only a stockholder thereof, and under existing laws and prevailing
jurisprudence, a stockholder as a rule is not directly, individually and/or
personally liable for the indebtedness of the corporation. The obligation of
North Davao cannot be considered the obligation of the national government,
hence, whether the latter be solvent or not is not material to the instant case.
The respondents have not shown that this case constitutes one of the
instances where the corporate veil may be pierced. 14 From another angle,
the national government is not the employer of private respondent and his
co-complainants, so there is no reason to expect any kind of bailout by the
national government under existing law and jurisprudence.
The Second and Third Issues:
Back Wages and Transportation Allowance
Anent the award of back wages and transportation allowance, the issues
raised in connection therewith are factual, the determination of which is best
left to the respondent NLRC. It is well settled that this Court is bound by the
findings of fact of the NLRC, so long as said findings are supported by
substantial evidence 15.
As the Solicitor General pointed out in his comment:
It is undisputed that because of security reasons, from the
time of its operations, petitioner NDMC maintained its policy
of paying its workers at a bank in Tagum, Davao del Norte,
which usually took the workers about two and a half (2 1/2)
hours of travel from the place of work and such travel time is
not official.
Records also show that on February 12, 1992, when an
inspection was conducted by the Department of Labor and
Employment at the premises of petitioner NDMC at Amacan,
Maco, Davao del Norte, it was found out that petitioners had
violated labor standards law, one of which is the place of
payment of wages (p. 109, Vol. 1, Record)
Section 4, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code provides that:
Sec. 4. Place of payment. (a) As a general rule, the place of
payment
shall
be
at
or
near
the
place
of
undertaking. Payment in a place other than the workplace
shall be permissible only under the following circumstances:

(1) When payment cannot be effected at or near the place of


work by reason of the deterioration of peace and order
conditions, or by reason of actual or impending emergencies
caused by fire, flood, epidemic or other calamity rendering
payment thereat impossible;
(2) When the employer provides free transportation to the
employees back and forth; and
(3) Under any analogous circumstances; provided that the
time spent by the employees in collecting their wages shall
be considered as compensable hours worked.

On the contrary, it will be petitioners'


burden or duty to present evidence of
compliance of the law on labor standards,
rather than for private respondents to prove
that they were not paid/provided by
petitioners
of
their
backwages
and
transportation expenses.
Other than the bare denials of petitioners, the above findings stand
uncontradicted. Indeed we are not at liberty to set aside findings of facts of
the NLRC, absent any capriciousness, arbitrariness, or abuse or complete
lack of basis. In Maya Farms Employees Organizations vs. NLRC, 16 , we held:

(b) xxx xxx xxx

This Court has consistently ruled that findings of fact of


administrative agencies ad quasi-judicial bodies which have
acquired expertise because their jurisdiction is confined to
specific matters are generally accorded not only respect but
even finality and are binding upon this Court unless there is
a showing of grave abuse of discretion, or where it is clearly
shown that they were arrived at arbitrarily or in disregard of
the evidence on record.

(Emphasis supplied)
Accordingly, in his Order dated April 14, 1992 (p. 109, Vol.
1, Record), the Regional Director, Regional Office No. XI,
Department of Labor and Employment, Davao City, ordered
petitioner NDMC, among others, as follows:
WHEREFORE, . . . . Respondent is further
ordered to pay its workers salaries at the
plantsite at Amacan, New Leyte, Maco,
Davao del Norte or whenever not possible,
through the bank in Tagum, Davao del Norte
as already been practiced subject, however
to the provisions of Section 4 of Rule VIII,
Book III of the rules implementing the Labor
Code as amended.
Thus, public respondent Labor Arbiter Antonio M. Villanueva
correctly held that:
From the evidence on record, we find that
the hours spent by complainants in
collecting salaries at a bank in Tagum,
Davao del Norte shall be considered
compensable hours worked. Considering
further the distance between Amacan, Maco
to Tagum which is 2 1/2 hours by travel and
the risks in commuting all the time in
collecting complainants' salaries, would
justify the granting of backwages equivalent
to two (2) days in a month as prayed for.
Corollary to the above findings, and for
equitable
reasons, we
likewise
hold
respondents liable for the transportation
expenses incurred by complainants at
P40.00 round trip fare during pay days.
(p. 10, Decision; p. 207, Vol. 1, Record)

WHEREFORE, judgment is hereby rendered MODIFYING the assailed


Resolution by SETTING ASIDE and deleting the award for "additional
separation pay of 17.5 days for every year of service", and AFFIRMING it in
all other aspects. No costs.
SO ORDERED.

G.R. No. 168654

March 25, 2009

ZAYBER JOHN B. PROTACIO, Petitioner,


vs.
LAYA MANANGHAYA & CO. and/or MARIO T.
MANANGHAYA, Respondents.
DECISION
TINGA, J.:
Before the Court is a petition for review on certiorari1 under Rule 45 of the
1997 Rules of Civil Procedure, assailing the decision 2 and resolution3 of the
Court of Appeals in CA-G.R. SP No. 85038. The Court of Appeals decision
reduced the monetary award granted to petitioner by the National Labor
Relations Commission (NLRC) while the resolution denied petitioners motion
for reconsideration for lack of merit.
The following factual antecedents are matters of record.
Respondent KPMG Laya Mananghaya & Co. (respondent firm) is a general
professional partnership duly organized under the laws of the Philippines.
Respondent firm hired petitioner Zayber John B. Protacio as Tax Manager on
01 April 1996. He was subsequently promoted to the position of Senior Tax
Manager. On 01 October 1997, petitioner was again promoted to the position
of Tax Principal.4
However, on 30 August 1999, petitioner tendered his resignation effective 30
September 1999. Then, on 01 December 1999, petitioner sent a letter to
respondent firm demanding the immediate payment of his 13th month pay,
the cash commutation of his leave credits and the issuance of his 1999
Certificate of Income Tax Withheld on Compensation. Petitioner sent to
respondent firm two more demand letters for the payment of his
reimbursement claims under pain of the legal action.5
Respondent firm failed to act upon the demand letters. Thus, on 15
December 1999, petitioner filed before the NLRC a complaint for the nonissuance of petitioners W-2 tax form for 1999 and the non-payment of the
following benefits: (1) cash equivalent of petitioners leave credits in the
amount of P55,467.60; (2) proportionate 13th month pay for the year 1999;
(3) reimbursement claims in the amount of P19,012.00; and (4) lump sum
pay for the fiscal year 1999 in the amount of P674,756.70. Petitioner also
sought moral and exemplary damages and attorneys fees. Respondent Mario
T. Managhaya was also impleaded in his official capacity as respondent firms
managing partner.6
In his complaint,7 petitioner averred, inter alia, that when he was promoted
to the position of Tax Principal in October 1997, his compensation package
had consisted of a monthly gross compensation of P60,000.00, a 13th month
pay and a lump sum payment for the year 1997 in the amount
of P240,000.00 that was paid to him on 08 February 1998.
According to petitioner, beginning 01 October 1998, his compensation
package was revised as follows: (a) monthly gross compensation
of P95,000.00, inclusive of nontaxable allowance; (b) 13th month pay; and (c)

a lump sum amount in addition to the aggregate monthly gross


compensation. On 12 April 1999, petitioner received the lump sum amount
of P573,000.00 for the fiscal year ending 1998.8
Respondent firm denied it had intentionally delayed the processing of
petitioners claims but alleged that the abrupt departure of petitioner and
three other members of the firms Tax Division had created problems in the
determination of petitioners various accountabilities, which could be finished
only by going over voluminous documents. Respondents further averred that
they had been taken aback upon learning about the labor case filed by
petitioner when all along they had done their best to facilitate the processing
of his claims.9
During the pendency of the case before the Labor Arbiter, respondent firm on
three occasions sent check payments to petitioner in the following amounts:
(1) P71,250.00, representing petitioners 13th month pay; (2)P54,824.18, as
payments for the cash equivalent of petitioners leave credits and
reimbursement claims; and (3)P10,762.57, for the refund of petitioners taxes
withheld on his vacation leave credits. Petitioners copies of his withholding
tax certificates were sent to him along with the check payments.10 Petitioner
acknowledged the receipt of the 13th month pay but disputed the
computation of the cash value of his vacation leave credits and
reimbursement claims.11
On 07 June 2002, Labor Arbiter Eduardo J. Carpio rendered a decision,12 the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering respondents to jointly
and solidarily pay complainant the following:
P12,681.00 - representing the reimbursement claims of complainant;
P28,407.08 - representing the underpayment of the cash equivalent
of the unused leave credits of complainant;
P573,000.00 - representing complainants 1999 year-end lump sum
payment; and
10% of the total judgment awards way of attorneys fees.
SO ORDERED.13
The Labor Arbiter awarded petitioners reimbursement claims on the ground
that respondent firms refusal to grant the same was not so much because
the claim was baseless but because petitioner had failed to file the requisite
reimbursement forms. He held that the formal defect was cured when
petitioner filed several demand letters as well as the case before him. 14
The Labor Arbiter held that petitioner was not fully paid of the cash
equivalent of the leave credits due him because respondent firm had
erroneously based the computation on a basic pay of P61,000.00. He held
that the evidence showed that petitioners monthly basic salary
was P95,000.00 inclusive of the other benefits that were deemed included
and integrated in the basic salary and that respondent firm had computed
petitioners 13th month pay based on a monthly basic pay of P95,000.00;

thus, the cash commutation of the leave credits should also be based on this
figure.15

CONSTITUTIONAL REQUIREMENT THAT COURT DECISIONS MUST STATE


THE LEGAL AND FACTUAL BASIS [THEREOF].

The Labor Arbiter also ruled that petitioner was entitled to a year-end
payment of P573,000.00 on the basis of the company policy of granting
yearly lump sum payments to petitioner during all the years of service and
that respondent firm had failed to give petitioner the same benefit for the
year 1999 without any explanation.16

II

Aggrieved, respondent firm appealed to the NLRC. On 21 August 2003, the


NLRC rendered a modified judgment,17 the dispositive portion of which
states:
WHEREFORE, the Decision dated June 7, 2002 is hereby Affirmed with the
modification that the complainant is only entitled to receive P2,301.00 as
reimbursement claims. The award of P12,681.00 representing the
reimbursement claims of complainant is set aside for lack of basis.

III.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS WANTONLY
ABUSED ITS DISCRETION IN EMPLOYING A LARGER DIVISOR TO
COMPUTE PETITIONERS DAILY SALARY RATE THEREBY DIMINISHING HIS
BENEFITS, IN [VIOLATION] OF THE LABOR CODE.
IV.

SO ORDERED.18
From the amount of P12,681.00 awarded by the Labor Arbiter as payment for
the reimbursement claims, the NLRC lowered the same to P2,301.00
representing the amount which remained unpaid.19 As regards the issues on
the lump sum payments and cash equivalent of the leave credits, the NLRC
affirmed the findings of the Labor Arbiter.
Respondents filed a motion for reconsideration20 but the NLRC denied the
motion for lack of merit.21 Hence, respondents elevated the matter to the
Court of Appeals via a petition for certiorari.22
In the assailed Decision dated 19 April 2005, the Court of Appeals further
reduced the total money award to petitioner, to wit:
WHEREFORE, in the light of the foregoing, the assailed resolution of public
respondent NLRC dated August 21, 2003 in NLRC NCR Case No. 30-1200927-99 (CA No. 032304-02) is hereby MODIFIED, ordering petitioner firm
to pay private respondent the following:
(1) P2,301.00
claims;

WHETHER PUBLIC RESPONDENT COURT OF APPEALS COMMITTED


GRAVE ABUSE OF DISCRETION AND ACTED IN WANTON EXCESS OF
JURISDICTION IN TAKING COGNIZANCE OF [RESPONDENTS] PETITION
FOR CERTIORARI WHEN THE RESOLUTION THEREOF HINGES ON MERE
EVALUATION OF EVIDENCE.

representing

private

respondents

reimbursement

(2) P9,802.83 representing the underpayment of the cash equivalent


of private respondents unused leave credits;
(3) P10,000.00 attorneys fees.
SO ORDERED.23
Petitioner sought reconsideration. In the assailed Resolution dated 27 June
2005, the Court of Appeals denied petitioners motion for reconsideration for
lack of merit.
Hence, the instant petition, raising the following issues:
I.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS SUMMARY DENIAL
OF PETITIONERS MOTION FOR RECONSIDERATION VIOLATES THE

WHETHER PUBLIC RESPONDENT COURT OF APPEALS CAPRICIOUSLY


ABUSED ITS DISCRETION IN REVERSING THE [CONCURRING] FINDINGS
OF BOTH LABOR ARBITER AND NLRC ON THE COMPENSABLE NATURE
OF PETITIONERS YEAR END [LUMP] SUM PLAY [sic] CLAIM.24
Before delving into the merits of the petition, the issues raised by petitioner
adverting to the Constitution must be addressed. Petitioner contends that the
Court of Appeals resolution which denied his motion for reconsideration
violated Article VIII, Section 14 of the Constitution, which states:
Section 14. No decision shall be rendered by any court without expressing
therein clearly and distinctly the facts and the law on which it is based.
No petition for review or motion for reconsideration of a decision of the court
shall be refused due course or denied without stating the legal basis therefor.
Obviously, the assailed resolution is not a "decision" within the meaning of
the Constitutional requirement. This mandate is applicable only in cases
"submitted for decision," i.e., given due course and after filing of briefs or
memoranda and/or other pleadings, as the case may be.25 The requirement
is not applicable to a resolution denying a motion for reconsideration of the
decision. What is applicable is the second paragraph of the above-quoted
Constitutional provision referring to "motion for reconsideration of a decision
of the court." The assailed resolution complied with the requirement therein
that a resolution denying a motion for reconsideration should state the legal
basis of the denial. It sufficiently explained that after reading the pleadings
filed by the parties, the appellate court did not find any cogent reason to
reverse itself.
Next, petitioner argues that the Court of Appeals erred in giving due course
to the petition for certiorari when the resolution thereof hinged on mere
evaluation of evidence. Petitioner opines that respondents failed to make its
case in showing that the Labor Arbiter and the NLRC had exercised their
discretion in an arbitrary and despotic manner.

As a general rule, in certiorari proceedings under Rule 65 of the Rules of


Court, the appellate court does not assess and weigh the sufficiency of
evidence upon which the Labor Arbiter and the NLRC based their conclusion.
The query in this proceeding is limited to the determination of whether or not
the NLRC acted without or in excess of its jurisdiction or with grave abuse of
discretion in rendering its decision. However, as an exception, the appellate
court may examine and measure the factual findings of the NLRC if the same
are not supported by substantial evidence.26 The Court has not hesitated to
affirm the appellate courts reversals of the decisions of labor tribunals if they
are not supported by substantial evidence.27
The Court is not unaware that the appellate court had reexamined and
weighed the evidence on record in modifying the monetary award of the
NLRC. The Court of Appeals held that the amount of the year-end lump sum
compensation was not fully justified and supported by the evidence on
record. The Court fully agrees that the lump sum award of P573,000.00 to
petitioner seemed to have been plucked out of thin air. Noteworthy is the fact
that in his position paper, petitioner claimed that he was entitled to the
amount of P674,756.70.28 The variance between the claim and the amount
awarded, with the record bereft of any proof to support either amount only
shows that the appellate court was correct in holding that the award was a
mere speculation devoid of any factual basis. In the exceptional circumstance
as in the instant case, the Court finds no error in the appellate courts review
of the evidence on record.
After an assessment of the evidence on record, the Court of Appeals reversed
the findings of the NLRC and the Labor Arbiter with respect to the award of
the year-end lump sum pay and the cash value of petitioners leave credits.
The appellate court held that while the lump sum payment was in the nature
of a proportionate share in the firms annual income to which petitioner was
entitled, the payment thereof was contingent upon the financial position of
the firm. According to the Court of Appeals, since no evidence was adduced
showing the net income of the firm for fiscal year ending 1999 as well as
petitioners corresponding share therein, the amount awarded by the labor
tribunals was a baseless speculation and as such must be deleted.29
On the other hand, the NLRC affirmed the Labor Arbiters award of the lump
sum payment in the amount ofP573,000.00 on the basis that the payment
thereof had become a company policy which could not be withdrawn
arbitrarily. Furthermore, the NLRC held that respondent firm had failed to
controvert petitioners claim that he was responsible for generating
some P7,365,044.47 in cash revenue during the fiscal year ending 1999.
The evidence on record establishes that aside from the basic monthly
compensation,30 petitioner received a yearly lump sum amount during the
first two years31 of his employment, with the payments made to him after the
annual net incomes of the firm had been determined. Thus, the amounts
thereof varied and were dependent on the firms cash position and financial
performance.32 In one of the letters of respondent Mananghaya to petitioner,
the amount was referred to as petitioners "share in the incentive
compensation program."33

While the amount was drawn from the annual net income of the firm, the
distribution thereof to non-partners or employees of the firm was not, strictly
speaking, a profit-sharing arrangement between petitioner and respondent
firm contrary to the Court of Appeals finding. The payment thereof to nonpartners of the firm like herein petitioner was discretionary on the part of the
chairman and managing partner coming from their authority to fix the
compensation of any employee based on a share in the partnerships net
income.34 The distribution being merely discretionary, the year-end lump
sum payment may properly be considered as a year-end bonus or incentive.
Contrary to petitioners claim, the granting of the year-end lump sum
amount was precisely dependent on the firms net income; hence, the same
was payable only after the firms annual net income and cash position were
determined.
By definition, a "bonus" is a gratuity or act of liberality of the giver. It is
something given in addition to what is ordinarily received by or strictly due
the recipient.35 A bonus is granted and paid to an employee for his industry
and loyalty which contributed to the success of the employers business and
made possible the realization of profits.36 Generally, a bonus is not a
demandable and enforceable obligation. It is so only when it is made part of
the wage or salary or compensation. When considered as part of the
compensation and therefore demandable and enforceable, the amount is
usually fixed. If the amount would be a contingent one dependent upon the
realization of the profits, the bonus is also not demandable and
enforceable.37
In the instant case, petitioners claim that the year-end lump sum
represented the balance of his total compensation package is incorrect. The
fact remains that the amounts paid to petitioner on the two occasions varied
and were always dependent upon the firms financial position.
Moreover, in Philippine Duplicators, Inc. v. NLRC,38 the Court held that if the
bonus is paid only if profits are realized or a certain amount of productivity
achieved, it cannot be considered part of wages. If the desired goal of
production is not obtained, of the amount of actual work accomplished, the
bonus does not accrue.39 Only when the employer promises and agrees to
give without any conditions imposed for its payment, such as success of
business or greater production or output, does the bonus become part of the
wage.40
Petitioners assertion that he was responsible for generating revenues
amounting to more than P7 million remains a mere allegation in his
pleadings. The records are absolutely bereft of any supporting evidence to
substantiate the allegation.
The granting of a bonus is basically a management prerogative which cannot
be forced upon the employer who may not be obliged to assume the onerous
burden of granting bonuses or other benefits aside from the employees basic
salaries or wages.41 Respondents had consistently maintained from the start
that petitioner was not entitled to the bonus as a matter of right. The
payment of the year-end lump sum bonus based upon the firms productivity
or the individual performance of its employees was well within respondent
firms prerogative. Thus, respondent firm was also justified in declining to

give the bonus to petitioner on account of the latters unsatisfactory


performance.
Petitioner failed to present evidence refuting respondents allegation and
proof that they received a number of complaints from clients about
petitioners "poor services." For purposes of determining whether or not
petitioner was entitled to the year-end lump sum bonus, respondents were
not legally obliged to raise the issue of substandard performance with
petitioner, unlike what the Labor Arbiter had suggested. Of course, if what
was in question was petitioners continued employment vis--vis the
allegations of unsatisfactory performance, then respondent firm was required
under the law to give petitioner due process to explain his side before
instituting any disciplinary measure. However, in the instant case, the
granting of the year-end lump sum bonus was discretionary and conditional,
thus, petitioner may not question the basis for the granting of a mere
privilege.1avvph!1
With regard to the computation of the cash equivalent of petitioners leave
credits, the Court of Appeals used a base figure of P71,250.00 representing
petitioners monthly salary as opposed to P95,000.00 used by the Labor
Arbiter and NLRC. Meanwhile, respondents insist on a base figure of
only P61,000.00, which excludes the advance incentive pay of P15,000.00,
transportation allowance of P15,000.00 and representation allowance
ofP4,000.00, which petitioner regularly received every month. Because of a
lower base figure (representing the monthly salary) used by the appellate
court, the cash equivalent of petitioners leave credits was lowered
fromP28,407.08 to P9,802.83.lawphil.net
The monthly compensation of P71,250.00 used as base figure by the Court of
Appeals is totally without basis. As correctly held by the Labor Arbiter and
the NLRC, the evidence on record reveals that petitioner was receiving a
monthly compensation of P95,000.00 consisting of a basic salary
of P61,000.00, advance incentive pay ofP15,000.00, transportation allowance
of P15,000.00 and representation allowance of P4,000.00. These amounts
totaling P95,000.00 are all deemed part of petitioners monthly compensation
package and, therefore, should be the basis in the cash commutation of the
petitioners leave credits. These allowances were customarily furnished by
respondent firm and regularly received by petitioner on top of the basic
monthly pay of P61,000.00. Moreover, the Labor Arbiter noted that
respondent firms act of paying petitioner a 13th month-pay at the rate
of P95,000.00 was an admission on its part that petitioners basic monthly
salary was P95,000.00
The Court of Appeals, Labor Arbiter and NLRC used a 30-working day divisor
instead of 26 days which petitioner insists. The Court of Appeals relied on
Section 2, Rule IV, Book III42 of the implementing rules of the Labor Code in
using the 30-working day divisor. The provision essentially states that
monthly-paid employees are presumed to be paid for all days in the month
whether worked or not.
The provision has long been nullified in Insular Bank of Asia and American
Employees Union (IBAAEU) v. Hon. Inciong, etc., et al.,43 where the Court
ruled that the provision amended the Labor Codes provisions on holiday pay

by enlarging the scope of their exclusion.44 In any case, the provision is


inapplicable to the instant case because it referred to the computation of
holiday pay for monthly-paid employees.
Petitioners claim that respondent firm used a 26-working day divisor is
supported by the evidence on record. In a letter addressed to
petitioner,45 respondents counsel expressly admitted that respondent used a
26-working day divisor. The Court is perplexed why the tribunals below used
a 30-day divisor when there was an express admission on respondents part
that they used a 26-day divisor in the cash commutation of leave credits.
Thus, with a monthly compensation of P95,000.00 and using a 26-working
day divisor, petitioners daily rate is P3,653.85.46 Based on this rate,
petitioners cash equivalent of his leave credits of 23.5 is P85,865.48.47 Since
petitioner has already received the amount P46,009.67, a balance
of P39,855.80 remains payable to petitioner.
WHEREFORE, the instant petition for review on certiorari is PARTLY
GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 85038
is AFFIRMED with the MODIFICATION that respondents are liable for the
underpayment of the cash equivalent of petitioners leave credits in the
amount of P39,855.80.
SO ORDERED.

G.R. No. 180866

March 2, 2010

LEPANTO CERAMICS, INC., Petitioner,


vs.
LEPANTO CERAMICS EMPLOYEES ASSOCIATION, Respondent.
DECISION
PEREZ, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 1 of the
1997 Rules of Civil Procedure filed by petitioner Lepanto Ceramics, Inc.
(petitioner), assailing the: (1) Decision2 of the Court of Appeals, dated 5 April
2006, in CA-G.R. SP No. 78334 which affirmed in toto the decision of the
Voluntary Arbitrator3 granting the members of the respondent association a
Christmas Bonus in the amount of Three Thousand Pesos (P3,000.00), or the
balance of Two Thousand Four Hundred Pesos (P2,400.00) for the year 2002,
and the (2) Resolution4 of the same court dated 13 December 2007 denying
Petitioners Motion for Reconsideration.
The facts are:
Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation
existing and operating by virtue of Philippine Laws. Its business is primarily
to manufacture, make, buy and sell, on wholesale basis, among others, tiles,
marbles, mosaics and other similar products.5
Respondent Lepanto Ceramics Employees Association (respondent
Association) is a legitimate labor organization duly registered with the
Department of Labor and Employment. It is the sole and exclusive bargaining
agent in the establishment of petitioner.6
In December 1998, petitioner gave a P3,000.00 bonus to its employees,
members of the respondent Association.7
Subsequently, in September 1999, petitioner and respondent Association
entered into a Collective Bargaining Agreement (CBA) which provides for,
among others, the grant of a Christmas gift package/bonus to the members
of the respondent Association.8 The Christmas bonus was one of the
enumerated "existing benefit, practice of traditional rights" which "shall
remain in full force and effect."
The text reads:
Section 8. All other existing benefits, practice of traditional rights
consisting of Christmas Gift package/bonus, reimbursement of
transportation expenses in case of breakdown of service vehicle and
medical services and safety devices by virtue of company policies by the
UNION and employees shall remain in full force and effect.
Section 1. EFFECTIVITY
This agreement shall become effective on September 1, 1999 and shall
remain in full force and effect without change for a period of four (4)
years or up to August 31, 2004 except as to the representation aspect
which shall be effective for a period of five (5) years. It shall bind each

and every employee in the bargaining unit including the present and
future officers of the Union.
In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash.
Instead, petitioner gave each of the members of respondent Association Tile
Redemption Certificates equivalent to P3,000.00.9 The bonus for the year
2002 is the root of the present dispute. Petitioner gave a year-end cash
benefit of Six Hundred Pesos (P600.00) and offered a cash advance to
interested employees equivalent to one (1) month salary payable in one
year.10 The respondent Association objected to the P600.00 cash benefit and
argued that this was in violation of the CBA it executed with the petitioner.
The parties failed to amicably settle the dispute. The respondent Association
filed a Notice of Strike with the National Conciliation Mediation Board,
Regional Branch No. IV, alleging the violation of the CBA. The case was
placed under preventive mediation. The efforts to conciliate failed. The case
was then referred to the Voluntary Arbitrator for resolution where the
Complaint was docketed as Case No. LAG-PM-12-095-02.
In support of its claim, respondent Association insisted that it has been the
traditional practice of the company to grant its members Christmas bonuses
during the end of the calendar year, each in the amount of P3,000.00 as an
expression of gratitude to the employees for their participation in the
companys continued existence in the market. The bonus was either in cash
or in the form of company tiles. In 2002, in a speech during the Christmas
celebration, one of the companys top executives assured the employees of
said bonus. However, the Human Resources Development Manager informed
them that the traditional bonus would not be given as the companys
earnings were intended for the payment of its bank loans. Respondent
Association argued that this was in violation of their CBA.
The petitioner averred that the complaint for nonpayment of the 2002
Christmas bonus had no basis as the same was not a demandable and
enforceable obligation. It argued that the giving of extra compensation was
based on the companys available resources for a given year and the workers
are not entitled to a bonus if the company does not make profits. Petitioner
adverted to the fact that it was debt-ridden having incurred net losses for the
years 2001 and 2002 totaling to P1.5 billion; and since 1999, when the CBA
was signed, the companys accumulated losses amounted to over P2.7 billion.
Petitioner further argued that the grant of a one (1) month salary cash
advance was not meant to take the place of a bonus but was meant to show
the companys sincere desire to help its employees despite its precarious
financial condition. Petitioner also averred that the CBA provision on a
"Christmas gift/bonus" refers to alternative benefits. Finally, petitioner
emphasized that even if the CBA contained an unconditional obligation to
grant the bonus to the respondent Association, the present difficult economic
times had already legally released it therefrom pursuant to Article 1267 of
the Civil Code.11
The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring
that petitioner is bound to grant each of its workers a Christmas bonus
of P3,000.00 for the reason that the bonus was given prior to the effectivity of
the CBA between the parties and that the financial losses of the company is

not a sufficient reason to exempt it from granting the same. It stressed that
the CBA is a binding contract and constitutes the law between the parties.
The Voluntary Arbitrator further expounded that since the employees had
already been given P600.00 cash bonus, the same should be deducted from
the claimed amount of P3,000.00, thus leaving a balance of P2,400.00. The
dispositive portion of the decision states, viz:
Wherefore, in view of the foregoing respondent LCI is hereby ordered to pay
the members of the complainant union LCEA their respective Christmas
bonus in the amount of three thousand (P3,000.00) pesos for the year 2002
less the P600.00 already given or a balance of P2,400.00.12
Petitioner sought reconsideration but the same was denied by the Voluntary
Arbitrator in an Order dated 27 June 2003, in this wise:
The Motion for Reconsideration filed by the respondent in the above-entitled
case which was received by the Undersigned on June 26, 2003 is hereby
denied pursuant to Section 7 Rule XIX on Grievance Machinery and
Voluntary Arbitration; Amending The Implementing Rules of Book V of the
Labor Code of the Philippines; to wit:
Section 7. Finality of Award/Decision The decision, order, resolution or
award of the voluntary arbitrator or panel of voluntary arbitrators shall be
final and executory after ten (10) calendar days from receipt of the copy of
the award or decision by the parties and it shall not be subject of a motion
for reconsideration.13
Petitioner elevated the case to the Court of Appeals via a Petition for
Certiorari under Rule 65 of the Rules of Court docketed as CA-G.R. SP No.
78334.14 As adverted to earlier, the Court of Appeals affirmed in toto the
decision of the Voluntary Arbitrator. The appellate court also denied
petitioners motion for reconsideration.
In affirming respondent Associations right to the Christmas bonus, the
Court of Appeals held:
In the case at bar, it is indubitable that petitioner offered private respondent
a Christmas bonus/gift in 1998 or before the execution of the 1999 CBA
which incorporated the said benefit as a traditional right of the employees.
Hence, the grant of said bonus to private respondent can be deemed a
practice as the same has not been given only in the 1999 CBA. Apparently,
this is the reason why petitioner specifically recognized the grant of a
Christmas bonus/gift as a practice or tradition as stated in the CBA. x x x.
xxxx
Evidently, the argument of petitioner that the giving of a Christmas bonus is
a management prerogative holds no water. There were no conditions specified
in the CBA for the grant of said benefit contrary to the claim of petitioner that
the same is justified only when there are profits earned by the company. As
can be gleaned from the CBA, the payment of Christmas bonus was not
contingent upon the realization of profits. It does not state that if the
company derives no profits, there are no bonuses to be given to the
employees. In fine, the payment thereof was not related to the profitability of
business operations.

Moreover, it is undisputed that petitioner, aside from giving the mandated


13th month pay, has further been giving its employees an additional
Christmas bonus at the end of the year since 1998 or before the effectivity of
the CBA in September 1999. Clearly, the grant of Christmas bonus from
1998 up to 2001, which brought about the filing of the complaint for alleged
non-payment of the 2002 Christmas bonus does not involve the exercise of
management prerogative as the same was given continuously on or about
Christmas time pursuant to the CBA. Consequently, the giving of said bonus
can no longer be withdrawn by the petitioner as this would amount to a
diminution of the employees existing benefits.15
Not to be dissuaded, petitioner is now before this Court. The only issue
before us is whether or not the Court of Appeals erred in affirming the ruling
of the voluntary arbitrator that the petitioner is obliged to give the members
of the respondent Association a Christmas bonus in the amount of P3,000.00
in 2002.16
We uphold the rulings of the voluntary arbitrator and of the Court of
Appeals. Findings of labor officials, who are deemed to have acquired
expertise in matters within their respective jurisdictions, are generally
accorded not only respect but even finality, and bind us when supported by
substantial evidence. This is the rule particularly where the findings of both
the arbitrator and the Court of Appeals coincide.17
As a general proposition, an arbitrator is confined to the interpretation and
application of the CBA. He does not sit to dispense his own brand of
industrial justice: his award is legitimate only in so far as it draws its essence
from the CBA.18 That was done in this case.
By definition, a "bonus" is a gratuity or act of liberality of the giver. It is
something given in addition to what is ordinarily received by or strictly due
the recipient. A bonus is granted and paid to an employee for his industry
and loyalty which contributed to the success of the employers business and
made possible the realization of profits.19
A bonus is also granted by an enlightened employer to spur the employee to
greater efforts for the success of the business and realization of bigger
profits.20
Generally, a bonus is not a demandable and enforceable obligation. For a
bonus to be enforceable, it must have been promised by the employer and
expressly agreed upon by the parties.21 Given that the bonus in this case is
integrated in the CBA, the same partakes the nature of a demandable
obligation. Verily, by virtue of its incorporation in the CBA, the Christmas
bonus due to respondent Association has become more than just an act of
generosity on the part of the petitioner but a contractual obligation it has
undertaken.22
A CBA refers to a negotiated contract between a legitimate labor organization
and the employer, concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit. As in all other contracts, the
parties to a CBA may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided these are not contrary to
law, morals, good customs, public order or public policy.23

It is a familiar and fundamental doctrine in labor law that the CBA is the law
between the parties and they are obliged to comply with its provisions. 24 This
principle stands strong and true in the case at bar.1avvphi1
A reading of the provision of the CBA reveals that the same provides for the
giving of a "Christmas gift package/bonus" without qualification. Terse and
clear, the said provision did not state that the Christmas package shall be
made to depend on the petitioners financial standing. The records are also
bereft of any showing that the petitioner made it clear during CBA
negotiations that the bonus was dependent on any condition. Indeed, if the
petitioner and respondent Association intended that the P3,000.00 bonus
would be dependent on the company earnings, such intention should have
been expressed in the CBA.
It is noteworthy that in petitioners 1998 and 1999 Financial Statements, it
took note that "the 1997 financial crisis in the Asian region adversely affected
the Philippine economy."25
From the foregoing, petitioner cannot insist on business losses as a basis for
disregarding its undertaking. It is manifestly clear that petitioner was very
much aware of the imminence and possibility of business losses owing to the
1997 financial crisis. In 1998, petitioner suffered a net loss
of P14,347,548.00.26 Yet it gave a P3,000.00 bonus to the members of the
respondent Association. In 1999, when petitioners very own financial
statement reflected that "the positive developments in the economy have yet
to favorably affect the operations of the company,"27 and reported a loss
of P346,025,733.00,28 it entered into the CBA with the respondent
Association whereby it contracted to grant a Christmas gift package/bonus
to the latter. Petitioner supposedly continued to incur losses in the years
200029 and 2001. Still and all, this did not deter it from honoring the CBA
provision on Christmas bonus as it continued to give P3,000.00 each to the
members of the respondent Association in the years 1999, 2000 and 2001.
All given, business losses are a feeble ground for petitioner to repudiate its
obligation under the CBA. The rule is settled that any benefit and
supplement being enjoyed by the employees cannot be reduced, diminished,
discontinued or eliminated by the employer. The principle of non-diminution
of benefits is founded on the constitutional mandate to protect the rights of
workers and to promote their welfare and to afford labor full protection.30
Hence, absent any proof that petitioners consent was vitiated by fraud,
mistake or duress, it is presumed that it entered into the CBA voluntarily
and had full knowledge of the contents thereof and was aware of its
commitments under the contract.
The Court is fully aware that implementation to the letter of the subject CBA
provision may further deplete petitioners resources. Petitioners remedy
though lies not in the Courts invalidation of the provision but in the parties
clarification of the same in subsequent CBA negotiations. Article 253 of the
Labor Code is relevant:
Art. 253. Duty to bargain collectively when there exists a collective
bargaining agreement. - When there is a collective bargaining agreement, the
duty to bargain collectively shall also mean that neither party shall terminate

nor modify such agreement during its lifetime. However, either party can
serve a written notice to terminate or modify the agreement at least sixty (60)
days prior to its expiration date. It shall be the duty of both parties to keep
the status quo and to continue in full force and effect the terms and
conditions of the existing agreement during the sixty (60)-day period and/or
until a new agreement is reached by the parties.
WHEREFORE, Premises considered, the petition is DENIED for lack of merit.
The Decision of the Court of Appeals dated 5 April 2006 and the Resolution
of the same court dated 13 December 2007 in CA-G.R. SP No. 78334
areAFFIRMED.
SO ORDERED.

G.R. No. 167760

March 7, 2007

MANILA JOCKEY CLUB EMPLOYEES LABOR UNION-PTGWO, Petitioner,


vs.
MANILA JOCKEY CLUB, INC., Respondent.
DECISION
GARCIA, J.:
Challenged in this petition for review under Rule 45 of the Rules of Court is
the decision1 dated December 17, 2004 of the Court of Appeals (CA), as
reiterated in its resolution2 of April 4, 2005, dismissing the petition for review
of herein petitioner in CA-G.R. SP No. 69240, entitled Manila Jockey Club
Employees Labor Union- PTGWO v. Manila Jockey Club, Inc.
The facts:
Petitioner Manila Jockey Club Employees Labor Union-PTGWO and
respondent Manila Jockey Club, Inc., a corporation with a legislative
franchise to conduct, operate and maintain horse races, entered into a
Collective Bargaining Agreement (CBA) effective January 1, 1996 to
December 31, 2000. The CBA governed the economic rights and obligations
of respondents regular monthly paid rank-and-file employees.3 In the CBA,
the parties agreed to a 7-hour work schedule from 9:00 a.m. to 12:00 noon
and from 1:00 p.m. to 5:00 p.m. on a work week of Monday to Saturday, as
contained under Section 1, Article IV,4 of the same CBA, to wit:
Section 1. Both parties to this Agreement agree to observe the seven-hour
work schedule herewith scheduled to be from 9:00 a.m. to 12:00 noon and
1:00 p.m. to 5 p.m. on work week of Monday to Saturday. All work performed
in excess of seven (7) hours work schedule and on days not included within
the work week shall be considered overtime and paid as such. Except those
monthly compensation which includes work performed during Saturday,
Sunday, and Holiday when races are held at the Club.
xxx xxx xxx
Accordingly, overtime on an ordinary working day shall be remunerated in an
amount equivalent to the worker's regular basic wage plus twenty five
percent (25%) thereof. Where the employee is permitted or suffered to work
on legally mandated holidays or on his designated rest day which is not a
legally mandated holiday, thirty percent (30%) shall be added to his basic
wage for a seven hour work; while work rendered in excess of seven hours on
legally mandated holidays and rest days not falling within the aforestated
categories day shall be additionally compensated for the overtime work
equivalent to his rate for the first seven hours on a legally mandated holiday
or rest day plus thirty percent (30%) thereof.
The CBA likewise reserved in respondent certain management prerogatives,
including the determination of the work schedule, as provided under Section
2, Article XI:
Section 2. The COMPANY shall have exclusive control in the management of
the offices and direction of the employees. This shall include, but shall not be

limited to, the right to plan, direct and control office operations, to hire,
assign and transfer employees from one job to another or from one
department to another; to promote, demote, discipline, suspend, discharge or
terminate employees for proper cause and/or in accordance with law, to
relieve employees from duty because of lack of work or for other legitimate
reasons; or to introduce new or improved methods or facilities; or to change
existing methods or facilities to change the schedules of work; and to make
and enforce rules and regulations to carry out the functions of management,
provided, however, that the COMPANY will not use these rights for the
purpose of discrimination against any employee because of his membership
in the UNION. Provided, further, that the prerogatives provided for under this
Section shall be subject to, and in accordance with pertinent directives,
proclamations and their implementing rules and regulations.
On April 3, 1999, respondent issued an inter-office memorandum declaring
that, effective April 20, 1999, the hours of work of regular monthly-paid
employees shall be from 1:00 p.m. to 8:00 p.m. when horse races are held,
that is, every Tuesday and Thursday. The memorandum, however,
maintained the 9:00 a.m. to 5:00 p.m. schedule for non-race days.
On October 12, 1999, petitioner and respondent entered into an Amended
and Supplemental CBA retaining Section 1 of Article IV and Section 2 of
Article XI, supra, and clarified that any conflict arising therefrom shall be
referred to a voluntary arbitrator for resolution.
Subsequently, before a panel of voluntary arbitrators of the National
Conciliation and Mediation Board (NCMB), petitioner questioned the above
office memorandum as violative of the prohibition against non-diminution of
wages and benefits guaranteed under Section 1, Article IV, of the CBA which
specified the work schedule of respondent's employees to be from 9:00 a.m.
to 5:00 p.m. Petitioner claimed that as a result of the memorandum, the
employees are precluded from rendering their usual overtime work from 5:00
p.m. to 9:00 p.m.
The NCMBs panel of voluntary arbitrators, in a decision dated October 18,
2001, upheld respondent's prerogative to change the work schedule of
regular monthly-paid employees under Section 2, Article XI, of the CBA.
Petitioner moved for reconsideration but the panel denied the motion.
Dissatisfied, petitioner then appealed the panels decision to the CA in CAG.R. SP No. 69240. In the herein assailed decision of December 17, 2004, the
CA upheld that of the panel and denied petitioners subsequent motion for
reconsideration via its equally challenged resolution of April 4, 2005.
Hence, petitioners present recourse, raising the following issues:
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT RESPONDENT MJCI DID NOT RELINQUISH PART OF ITS
MANAGEMENT PREROGATIVE WHEN IT STIPULATED A WORK SCHEDULE
IN THE CBA.
II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN


HOLDING THAT RESPONDENT MJCI DID NOT VIOLATE THE NONDIMINUTION PROVISION CONTAINED IN ARTICLE 100 OF THE LABOR
CODE.
We DENY.
Respondent, as employer, cites the change in the program of horse races as
reason for the adjustment of the employees work schedule. It rationalizes
that when the CBA was signed, the horse races started at 10:00 a.m. When
the races were moved to 2:00 p.m., there was no other choice for
management but to change the employees' work schedule as there was no
work to be done in the morning. Evidently, the adjustment in the work
schedule of the employees is justified.
We are not unmindful that every business enterprise endeavors to increase
profits. As it is, the Court will not interfere with the business judgment of an
employer in the exercise of its prerogative to devise means to improve its
operation, provided that it does not violate the law, CBAs, and the general
principles of justice and fair play. We have thus held that management is free
to regulate, according to its own discretion and judgment, all aspects of
employment, including hiring, work assignments, working methods, time,
place and manner of work, processes to be followed, supervision of workers,
working regulations, transfer of employees, work supervision, layoff of
workers and discipline, dismissal, and recall of workers.5
While it is true that Section 1, Article IV of the CBA provides for a 7-hour
work schedule from 9:00 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m.
from Mondays to Saturdays, Section 2, Article XI, however, expressly
reserves on respondent the prerogative to change existing methods or
facilities to change the schedules of work. As aptly ruled by the CA:
x x x. Such exact language lends no other meaning but that while respondent
may have allowed the initial determination of the work schedule to be done
through collective bargaining, it expressly retained the prerogative to change
it.
Moreover, it cannot be said that in agreeing to Section 1 of Article IV,
respondent already waived that customary prerogative of management to set
the work schedule. Had that been the intention, Section 2 of Article XI would
not have made any reference at all to the retention by respondent of that
prerogative. The CBA would have instead expressly prohibited respondent
from exercising it. x x x As it were, however, the CBA expressly recognized in
respondent the prerogative to change the work schedule. This effectively
rules out any notion of waiver on the part of respondent of its prerogative to
change the work schedule.
The same provision of the CBA also grants respondent the prerogative to
relieve employees from duty because of lack of work. Petitioners argument,
therefore, that the change in work schedule violates Article 100 of the Labor
Code because it resulted in the diminution of the benefit enjoyed by regular
monthly-paid employees of rendering overtime work with pay, is untenable.
Section 1, Article IV, of the CBA does not guarantee overtime work for all the
employees but merely provides that "all work performed in excess of seven (7)

hours work schedule and on days not included within the work week shall be
considered overtime and paid as such.".5
While it is true that Section 1, Article IV of the CBA provides for a 7-hour
work schedule from 9:00 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m.
from Mondays to Saturdays, Section 2, Article XI, however, expressly
reserves on respondent the prerogative to change existing methods or
facilities to change the schedules of work. As aptly ruled by the CA:
x x x. Such exact language lends no other meaning but that while respondent
may have allowed the initial determination of the work schedule to be done
through collective bargaining, it expressly retained the prerogative to change
it.
Moreover, it cannot be said that in agreeing to Section 1 of Article IV,
respondent already waived that customary prerogative of management to set
the work schedule. Had that been the intention, Section 2 of Article XI would
not have made any reference at all to the retention by respondent of that
prerogative. The CBA would have instead expressly prohibited respondent
from exercising it. x x x As it were, however, the CBA expressly recognized in
respondent the prerogative to change the work schedule. This effectively
rules out any notion of waiver on the part of respondent of its prerogative to
change the work schedule.
The same provision of the CBA also grants respondent the prerogative to
relieve employees from duty because of lack of work. Petitioners argument,
therefore, that the change in work schedule violates Article 100 of the Labor
Code because it resulted in the diminution of the benefit enjoyed by regular
monthly-paid employees of rendering overtime work with pay, is untenable.
Section 1, Article IV, of the CBA does not guarantee overtime work for all the
employees but merely provides that "all work performed in excess of seven (7)
hours work schedule and on days not included within the work week shall be
considered overtime and paid as such."
Respondent was not obliged to allow all its employees to render overtime
work everyday for the whole year, but only those employees whose services
were needed after their regular working hours and only upon the instructions
of management. The overtime pay was not given to each employee
consistently, deliberately and unconditionally, but as a compensation for
additional services rendered. Thus, overtime pay does not fall within the
definition of benefits under Article 100 of the Labor Code on prohibition
against elimination or diminution of benefits.
While the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be presumed that every labor
dispute will be automatically decided in favor of labor. The partiality for labor
has not in any way diminished our belief that justice in every case is for the
deserving, to be dispensed in the light of the established facts and the
applicable law and doctrine.6
WHEREFORE, the instant petition is DENIED and the assailed decision and
resolution of the CA are AFFIRMED.
Costs against petitioner.

SO ORDERED.

G.R. No. 176985

April 1, 2013

RICARDO E. VERGARA, JR., Petitioner,


vs.
COCA-COLA BOTTLERS PHILIPPINES, INC., Respondent.
DECISION
PERALTA, J.:
Before Us is a petition for review on certiorari under Rule 45 of the Rules of
Civil Procedure assailing the January 9, 2007 Decision 1 and March 6, 2007
Resolution2 of the Court of Appeals (CA) in CA .. G.R. SP No. 94622, which
affirmed the January 31, 2006 Decision3 and March 8, 2006 Resolution4 of
the National Labor Relations Commission (NLRC) modifying the September
30, 2003 Decision5 of the Labor Arbiter (LA) by deleting the sales
management incentives in the computation of petitioner's retirement
benefits.
Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-Cola
Bottlers Philippines, Inc. from May 1968 until he retired on January 31,
2002 as a District Sales Supervisor (DSS) for Las Pias City, Metro Manila.
As stipulated in respondents existing Retirement Plan Rules and Regulations
at the time, the Annual Performance Incentive Pay of RSMs, DSSs, and SSSs
shall be considered in the computation of retirement benefits, as follows:
Basic Monthly Salary + Monthly Average Performance Incentive (which is the
total performance incentive earned during the year immediately preceding
12 months) No. of Years in Service.6
Claiming his entitlement to an additional PhP474,600.00 as Sales
Management Incentives (SMI)7 and to the amount of PhP496,016.67 which
respondent allegedly deducted illegally, representing the unpaid accounts of
two dealers within his jurisdiction, petitioner filed a complaint before the
NLRC on June 11, 2002 for the payment of his "Full Retirement Benefits,
Merit Increase, Commission/Incentives, Length of Service, Actual, Moral and
Exemplary Damages, and Attorneys Fees."8
After a series of mandatory conference, both parties partially settled with
regard the issue of merit increase and length of service. 9 Subsequently, they
filed their respective Position Paper and Reply thereto dealing on the two
remaining issues of SMI entitlement and illegal deduction.
On September 30, 2003, the LA rendered a Decision 10 in favor of petitioner,
directing respondent to reimburse the amount illegally deducted from
petitioners retirement package and to integrate therein his SMI privilege.
Upon appeal of respondent, however, the NLRC modified the award and
deleted the payment of SMI.
Petitioner then moved to partially execute the reimbursement of illegal
deduction, which the LA granted despite respondents opposition. 11 Later,
without prejudice to the pendency of petitioners petition for certiorari before
the CA, the parties executed a Compromise Agreement12 on October 4, 2006,
whereby petitioner acknowledged full payment by respondent of the amount
of PhP496,016.67 covering the amount illegally deducted.

The CA dismissed petitioners case on January 9, 2007 and denied his


motion for reconsideration two months thereafter. Hence, this present
petition to resolve the singular issue of whether the SMI should be included
in the computation of petitioners retirement benefits on the ground of
consistent company practice. Petitioner insistently avers that many DSSs
who retired without achieving the sales and collection targets were given the
average SMI in their retirement package.
We deny.
This case does not fall within any of the recognized exceptions to the rule
that only questions of law are proper in a petition for review on certiorari
under Rule 45 of the Rules of Court. Settled is the rule that factual findings
of labor officials, who are deemed to have acquired expertise in matters
within their respective jurisdiction, are generally accorded not only respect
but even finality, and bind us when supported by substantial
evidence.13Certainly, it is not Our function to assess and evaluate the
evidence all over again, particularly where the findings of both the CA and
the NLRC coincide.
In any event, even if this Court would evaluate petitioner's arguments on its
supposed merits, We still find no reason to disturb the CA ruling that
affirmed the NLRC. The findings and conclusions of the CA show that the
evidence and the arguments of the parties had all been carefully considered
and passed upon. There are no relevant and compelling facts to justify a
different resolution which the CA failed to consider as well as no factual
conflict between the CA and the NLRC decisions.
Generally, employees have a vested right over existing benefits voluntarily
granted to them by their employer.14Thus, any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished, discontinued or
eliminated by the employer.15 The principle of non-diminution of benefits is
actually founded on the Constitutional mandate to protect the rights of
workers, to promote their welfare, and to afford them full protection. 16 In
turn, said mandate is the basis of Article 4 of the Labor Code which states
that "all doubts in the implementation and interpretation of this Code,
including its implementing rules and regulations, shall be rendered in favor
of labor."17
There is diminution of benefits when the following requisites are present: (1)
the grant or benefit is founded on a policy or has ripened into a practice over
a long period of time; (2) the practice is consistent and deliberate; (3) the
practice is not due to error in the construction or application of a doubtful or
difficult question of law; and (4) the diminution or discontinuance is done
unilaterally by the employer.18
To be considered as a regular company practice, the employee must prove by
substantial evidence that the giving of the benefit is done over a long period
of
time,
and
that
it
has
been
made
consistently
and
deliberately.19Jurisprudence has not laid down any hard-and-fast rule as to
the length of time that company practice should have been exercised in order
to constitute voluntary employer practice.20 The common denominator in
previously decided cases appears to be the regularity and deliberateness of

the grant of benefits over a significant period of time. 21 It requires an


indubitable showing that the employer agreed to continue giving the benefit
knowing fully well that the employees are not covered by any provision of the
law or agreement requiring payment thereof.22 In sum, the benefit must be
characterized by regularity, voluntary and deliberate intent of the employer to
grant the benefit over a considerable period of time.23
Upon review of the entire case records, We find no substantial evidence to
prove that the grant of SMI to all retired DSSs regardless of whether or not
they qualify to the same had ripened into company practice. Despite more
than sufficient opportunity given him while his case was pending before the
NLRC, the CA, and even to this Court, petitioner utterly failed to adduce
proof to establish his allegation that SMI has been consistently, deliberately
and voluntarily granted to all retired DSSs without any qualification or
conditions whatsoever. The only two pieces of evidence that he stubbornly
presented throughout the entirety of this case are the sworn statements of
Renato C. Hidalgo (Hidalgo) and Ramon V. Velazquez (Velasquez), former
DSSs of respondent who retired in 2000 and 1998, respectively. They claimed
that the SMI was included in their retirement package even if they did not
meet the sales and collection qualifiers.24 However, juxtaposing these with
the evidence presented by respondent would reveal the frailty of their
statements.
The declarations of Hidalgo and Velazquez were sufficiently countered by
respondent through the affidavits executed by Norman R. Biola (Biola),
Moises D. Escasura (Escasura), and Ma. Vanessa R. Balles (Balles). 25 Biola
pointed out the various stop-gap measures undertaken by respondent
beginning 1999 in order to arrest the deterioration of its accounts receivables
balance, two of which relate to the policies on the grant of SMI and to the
change in the management structure of respondent upon its re-acquisition
by San Miguel Corporation. Escasura represented that he has personal
knowledge of the circumstances behind the retirement of Hidalgo and
Velazquez. He attested that contrary to petitioners claim, Hidalgo was in fact
qualified for the SMI. As for Velazquez, Escasura asserted that even if he
(Velazquez) did not qualify for the SMI, respondents General Manager in its
Calamba plant still granted his (Velazquez) request, along with other
numerous concessions, to achieve industrial peace in the plant which was
then experiencing labor relations problems. Lastly, Balles confirmed that
petitioner failed to meet the trade receivable qualifiers of the SMI. She also
cited the cases of Ed Valencia (Valencia) and Emmanuel Gutierrez
(Gutierrez), both DSSs of respondent who retired on January 31, 2002 and
December 30, 2002, respectively. She noted that, unlike Valencia, Gutierrez
also did not receive the SMI as part of his retirement pay, since he failed to
qualify under the policy guidelines. The verity of all these statements and
representations stands and holds true to Us, considering that petitioner did
not present any iota of proof to debunk the same.1wphi1
Therefore, respondent's isolated act of including the SMI in the retirement
package of Velazquez could hardly be classified as a company practice that
may be considered an enforceable obligation. To repeat, the principle against
diminution of benefits is applicable only if the grant or benefit is founded on
an express policy or has ripened into a practice over a long period of time

which is consistent and deliberate; it presupposes that a company practice,


policy and tradition favorable to the employees has been clearly established;
and that the payments made by the company pursuant to it have ripened
into benefits enjoyed by them.26 Certainly, a practice or custom is, as a
general rule, not a source of a legally demandable or enforceable
right.27 Company practice, just like any other fact, habits, customs, usage or
patterns of conduct, must be proven by the offering party who must allege
and establish specific, repetitive conduct that might constitute evidence of
habit or company practice.28
To close, We rule that petitioner could have salvaged his case had he step up
to disprove respondents contention that he miserably failed to meet the
collection qualifiers of the SMI. Respondent argues that
An examination of the Companys aged trial balance reveals that petitioner
did not meet the trade receivable qualifier. On the contrary, the said trial
balance reveals that petitioner had a large amount of uncollected overdue
accounts. For the year 2001, his percentage collection efficiency for current
issuance was at an average of 13.5% a month as against the required 70%.
For the same, petitioners collection efficiency was at an average of 60.25%
per month for receivables aged 1-30 days, which is again, way below the
required 90%. For receivables aged 31-60 days during said year, petitioners
collection efficiency was at an average of 56.17% per month, which is
approximately half of the required 100%. Worse, for receivables over 60 days
old, petitioners average collection efficiency per month was a reprehensively
low 14.10% as against the required 100%.29
The above data was repeatedly raised by respondent in its Rejoinder (To
Complainants Reply) before the LA,30Memorandum of Appeal31 and
Opposition (To Complainant-Appellees Motion for Reconsideration)32 before
the NLRC, and Comment (On the Petition),33 Memorandum (For the Private
Respondent),34 and Comment (On the Motion for Reconsideration)35 before
the CA. Instead of frontally rebutting the data, petitioner treated them with
deafening silence; thus, reasonably and logically implying lack of evidence to
support the contrary.
WHEREFORE, the petition is DENIED. The January 9, 2007 Decision and
March 6, 2007 Resolution of the Court of Appeals in CA-G.R. SP No. 94622,
which affirmed the January 31, 2006 Decision and March 8, 2006 Resolution
of the NLRC deleting the LA's inclusion of sales management incentives in
the computation of petitioner's retirement benefits, is hereby AFFIRMED.
SO ORDERED.

G.R. No. 121439

January 25, 2000

AKLAN ELECTRIC COOPERATIVE INCORPORATED (AKELCO), petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION (Fourth Division),
RODOLFO M. RETISO and 165 OTHERS,1respondents.
GONZAGA-REYES, J.:
In his petition for certiorari and prohibition with prayer for writ of preliminary
injunction and/or temporary restraining order, petitioner assails (a) the
decision dated April 20, 1995, of public respondent National Labor Relations
Commission (NLRC), Fourth (4th) Division, Cebu City, in NLRC Case No. V0143-94 reversing the February 25, 1994 decision of Labor Arbiter Dennis D.
Juanon and ordering petitioner to pay wages in the aggregate amount of
P6,485,767.90 to private respondents, and (b) the resolution dated July 28,
1995 denying petitioner's motion for reconsideration, for having been issued
with grave abuse of discretion.
A temporary restraining order was issued by this Court on October 9, 1995
enjoining public respondent from executing the questioned decision upon a
surety bond posted by petitioner in the amount of P6,400,000.00.2
The facts as found by the Labor Arbiter are as follows:3
These are consolidated cases/claims for non-payment of salaries and
wages, 13th month pay, ECOLA and other fringe benefits as rice,
medical and clothing allowances, submitted by complainant Rodolfo
M. Retiso and 163 others, Lyn E. Banilla and Wilson B. Sallador
against respondents Aklan Electric Cooperative, Inc. (AKELCO), Atty.
Leovigildo Mationg in his capacity as General Manager; Manuel
Calizo, in his capacity as Acting Board President, Board of Directors,
AKELCO.
Complainants alleged that prior to the temporary transfer of the
office of AKELCO from Lezo Aklan to Amon Theater, Kalibo, Aklan,
complainants were continuously performing their task and were duly
paid of their salaries at their main office located at Lezo, Aklan.
That on January 22, 1992, by way of resolution of the Board of
Directors of AKELCO allowed the temporary transfer holding of office
at Amon Theater, Kalibo, Aklan per information by their Project
Supervisor, Atty. Leovigildo Mationg, that their head office is closed
and that it is dangerous to hold office thereat;
Nevertheless, majority of the employees including herein
complainants continued to report for work at Lezo Aklan and were
paid of their salaries.
That on February 6, 1992, the administrator of NEA, Rodrigo
Cabrera, wrote a letter addressed to the Board of AKELCO, that he is
not interposing any objections to the action taken by respondent
Mationg. . .

That on February 11, 1992, unnumbered resolution was passed by


the Board of AKELCO withdrawing the temporary designation of
office at Kalibo, Aklan, and that the daily operations must be held
again at the main office of Lezo, Aklan;4
That complainants who were then reporting at the Lezo office from
January 1992 up to May 1992 were duly paid of their salaries, while
in the meantime some of the employees through the instigation of
respondent Mationg continued to remain and work at Kalibo, Aklan;
That from June 1992 up to March 18, 1993, complainants who
continuously reported for work at Lezo, Aklan in compliance with the
aforementioned resolution were not paid their salaries;
That on March 19, 1993 up to the present, complainants were again
allowed to draw their salaries; with the exception of a few
complainants who were not paid their salaries for the months of April
and May 1993;
Per allegations of the respondents, the following are the facts:
1. That these complainants voluntarily abandoned their
respective work/job assignments, without any justifiable
reason and without notifying the management of the Aklan
Electric Cooperative, Inc. (AKELCO), hence the cooperative
suffered damages and systems loss;
2. That the complainants herein defied the lawful orders and
other issuances by the General Manager and the Board of
Directors of the AKELCO. These complainants were
requested to report to work at the Kalibo office . . . but
despite these lawful orders of the General Manager, the
complainants did not follow and wilfully and maliciously
defied said orders and issuance of the General Manager; that
the Board of Directors passed a Resolution resisting and
denying the claims of these complainants, . . . under the
principle of "no work no pay" which is legally justified; That
these complainants have "mass leave" from their customary
work on June 1992 up to March 18, 1993 and had a "sitdown" stance for these periods of time in their alleged protest
of the appointment of respondent Atty. Leovigildo Mationg as
the new General Manager of the Aklan Electric Cooperative,
Inc. (AKELCO) by the Board of Directors and confirmed by
the
Administrator
of
the
National
Electrification
Administration (NEA), Quezon City; That they engaged in ". .
. slowdown mass leaves, sit downs, attempts to damage,
destroy or sabotage plant equipment and facilities of the
Aklan Electric Cooperative, Inc. (AKELCO).
On February 25, 1994, a decision was rendered by Labor Arbiter Dennis D.
Juanon dismissing the complaints.5
Dissatisfied with the decision, private
respondent Commission.

respondents

appealed

to the

On appeal, the NLRC's Fourth Division, Cebu City,6 reversed and set aside
the Labor Arbiter's decision and held that private respondents are entitled to
unpaid wages from June 16, 1992 to March 18, 1993, thus:7
The evidence on records, more specifically the evidence submitted by
the complainants, which are: the letter dated April 7, 1993 of Pedrito
L. Leyson, Office Manager of AKELCO (Annex "C"; complainants'
position paper; Rollo, p. 102) addressed to respondent Atty.
Leovigildo T. Mationg; respondent AKELCO General Manager; the
memorandum of said Atty. Mationg dated 14 April 1993, in answer
to the letter of Pedrito Leyson (Annex "D" complainants' position
paper); as well as the computation of the unpaid wages due to
complainants (Annexes "E" to "E-3"; complainants' position
paper, Rollo, pages 1024 to 1027) clearly show that complainants
had rendered services during the period-June 16, 1992 to March 18,
1993. The record is bereft of any showing that the respondents had
submitted any evidence, documentary or otherwise, to controvert
this asseveration of the complainants that services were rendered
during this period. "Subjecting these evidences submitted by the
complainants to the crucible of scrutiny, We find that respondent
Atty. Mationg responded to the request of the Office Manager, Mr.
Leyson, which We quote, to wit:
Rest assured that We shall recommend your aforesaid
request to our Board of Directors for their consideration and
appropriate action. This payment, however, shall be subject,
among others, to the availability of funds.
This assurance is an admission that complainants are entitled to
payment for services rendered from June 16, 1992 to March 18,
1993, specially so that the recommendation and request comes from
the office manager himself who has direct knowledge regarding the
services and performance of employees under him. For how could
one office manager recommend payment of wages, if no services were
rendered by employees under him. An office manager is the most
qualified person to know the performance of personnel under him.
And therefore, any request coming from him for payment of wages
addressed to his superior as in the instant case shall be given
weight.
Furthermore, the record is clear that complainants were paid of their
wages and other fringe benefits from January, 1992 to May, 1992
and from March 19, 1993 up to the time complainants filed the
instant cases. In the interegnum, from June 16, 1992 to March 18,
1993, complainants were not paid of their salaries, hence these
claims. We could see no rhyme nor reason in respondents' refusal to
pay complainants salaries during this period when complainants had
worked and actually rendered service to AKELCO.
While the respondents maintain that complainants were not paid
during this interim period under the principle of "no work, no pay",
however, no proof was submitted by the respondents to substantiate
this allegation. The labor arbiter, therefore, erred in dismissing the

claims of the complainants, when he adopted the "no work, no pay"


principle advanced by the respondents.1wphi1.nt
WHEREFORE, in view of the foregoing, the appealed decision dated
February 25, 1994 is hereby Reversed and Set Aside and a new one
entered ordering respondent AKELCO to pay complainants their
claims amounting to P6,485,767.90 as shown in the computation
(Annexes "E" to "E-3").
A motion for reconsideration was filed by petitioner but the same was denied
by public respondent in a resolution dated July 28, 1995.8
Petitioner brought the case to this Court alleging that respondent NLRC
committed grave abuse of discretion citing the following grounds:9
1. PUBLIC RESPONDENT COMMITTED GRAVE DISCRETION IN
REVERSING THE FACTUAL FINDINGS AND CONCLUSIONS OF THE
LABOR ARBITER, AND DISREGARDING THE EXPRESS ADMISSION
OF PRIVATE RESPONDENTS THAT THEY DEFIED PETITIONER'S
ORDER TRANSFERRING THE PETITIONER'S OFFICIAL BUSINESS
OFFICE FROM LEZO TO KALIBO AND FOR THEM TO REPORT
THEREAT.
2. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION IN CONCLUDING THAT PRIVATE RESPONDENTS
WERE REALLY WORKING OR RENDERING SERVICE ON THE BASIS
OF THE COMPUTATION OF WAGES AND THE BIASED
RECOMMENDATION SUBMITTED BY LEYSON WHO IS ONE OF THE
PRIVATE RESPONDENTS WHO DEFIED THE LAWFUL ORDERS OF
PETITIONER.
3. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION IN CONSIDERING THE ASSURANCE BY PETITIONER'S
GENERAL MANAGER MATIONG TO RECOMMEND THE PAYMENT
OF THE CLAIMS OF PRIVATE RESPONDENTS AS AN ADMISSION
OF LIABILITY OR A RECOGNITION THAT COMPENSABLE
SERVICES WERE ACTUALLY RENDERED.
4. GRANTING THAT PRIVATE RESPONDENTS CONTINUED TO
REPORT AT THE LEZO OFFICE, IT IS STILL GRAVE ABUSE OF
DISCRETION FOR PUBLIC RESPONDENT TO CONSIDER THAT
PETITIONER IS LEGALLY OBLIGATED TO RECOGNIZE SAID
CIRCUMSTANCE AS COMPENSABLE SERVICE AND PAY WAGES TO
PRIVATE RESPONDENTS FOR DEFYING THE ORDER FOR THEM
TO REPORT FOR WORK AT THE KALIBO OFFICE WHERE THE
OFFICIAL BUSINESS AND OPERATIONS WERE CONDUCTED.
5. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION AND SERIOUS, PATENT AND PALPABLE ERROR IN
RULING THAT THE "NO WORK, NO PAY" PRINCIPLE DOES NOT
APPLY FOR LACK OF EVIDENTIARY SUPPORT WHEN PRIVATE
RESPONDENTS ALREADY ADMITTED THAT THEY DID NOT
REPORT FOR WORK AT THE KALIBO OFFICE.

6. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF


DISCRETION IN ACCORDING WEIGHT AND CREDIBILITY TO THE
SELF-SERVING AND BIASED ALLEGATIONS OF PRIVATE
RESPONDENTS, AND ACCEPTING THEM AS PROOF, DESPITE THE
ESTABLISHED
FACT
AND
ADMISSION
THAT
PRIVATE
RESPONDENTS DID NOT REPORT FOR WORK AT THE KALIBO
OFFICE, OR THAT THEY WERE NEVER PAID FOR ANY WAGES
FROM THE TIME THEY DEFIED PETITIONER'S ORDERS.
Petitioner contends that public respondent committed grave abuse of
discretion in finding that private respondents are entitled to their wages from
June 16, 1992 to March 18, 1993, thus disregarding the principle of "no
work, no pay". It alleges that private respondents stated in their pleadings
that they not only objected to the transfer of petitioner's business office to
Kalibo but they also defied the directive to report thereat because they
considered the transfer illegal. It further claims that private respondents
refused to recognize the authority of petitioner's lawful officers and agents
resulting in the disruption of petitioner's business operations in its official
business office in Lezo, Aklan, forcing petitioner to transfer its office from
Lezo to Kalibo transferring all its equipments, records and facilities; that
private respondents cannot choose where to work, thus, when they defied the
lawful orders of petitioner to report at Kalibo, private respondents were
considered dismissed as far as petitioner was concerned. Petitioner also
disputes private respondents' allegation that they were paid their salaries
from January to May 1992 and again from March 19, 1993 up to the present
but not for the period from June 1992 to March 18, 1993 saying that private
respondents illegally collected fees and charges due petitioner and
appropriated the collections among themselves for which reason they are
claiming salaries only for the period from June 1992 to March 1993 and that
private respondents were paid their salaries starting only in April 1993 when
petitioner's Board agreed to accept private respondents back to work at
Kalibo office out of compassion and not for the reason that they rendered
service at the Lezo office. Petitioner also adds that compensable service is
best shown by timecards, payslips and other similar documents and it was
an error for public respondent to consider the computation of the claims for
wages and benefits submitted merely by private respondents as substantial
evidence.
The Solicitor General filed its Manifestation in lieu of Comment praying that
the decision of respondent NLRC be set aside and payment of wages claimed
by private respondents be denied for lack of merit alleging that private
respondents could not have worked for petitioner's office in Lezo during the
stated period since petitioner transferred its business operation in Kalibo
where all its records and equipments were brought; that computations of the
claims for wages and benefits submitted by private respondents to petitioner
is not proof of rendition of work. Filing its own Comment, public respondent
NLRC claims that the original and exclusive jurisdiction of this Court to
review decisions or resolutions of respondent NLRC does not include a
correction of its evaluation of evidence as factual issues are not fit subject
for certiorari.

Private respondents, in their Comment, allege that review of a decision of


NLRC in a petition for certiorari under Rule 65 does not include the
correctness of its evaluation of the evidence but is confined to issues of
jurisdiction or grave abuse of discretion and that factual findings of
administrative bodies are entitled great weight, and accorded not only respect
but even finality when supported by substantial evidence. They claim that
petitioner's Board of Directors passed an unnumbered resolution on
February 11, 1992 returning back the office to Lezo from Kalibo Aklan with a
directive for all employees to immediately report at Lezo; that the letter-reply
of Atty. Mationg to the letter of office manager Leyson that he will recommend
the payment of the private respondents' salary from June 16, 1992 to March
18, 1993 to the Board of Directors was an admission that private respondent
are entitled to such payment for services rendered. Private respondents state
that in appreciating the evidence in their favor, public respondent NLRC at
most may be liable for errors of judgment which, as differentiated from errors
of jurisdiction, are not within the province of the special civil action
of certiorari.
Petitioner filed its Reply alleging that review of the decision of public
respondent is proper if there is a conflict in the factual findings of the labor
arbiter and the NLRC and when the evidence is insufficient and insubstantial
to support NLRC's factual findings; that public respondent's findings that
private respondent rendered compensable services were merely based on
private respondents' computation of claims which is self-serving; that the
alleged unnumbered board resolution dated February 11, 1992, directing all
employees to report to Lezo Officer was never implemented because it was
not a valid action of AKELCO's legitimate board.
The sole issue for determination is whether or not public respondent NLRC
committed grave abuse of discretion amounting to excess or want of
jurisdiction when it reversed the finding of the Labor Arbiter that private
respondent refused to work under the lawful orders of the petitioner AKELCO
management; hence they are covered by the "no work, no pay" principle and
are thus not entitled to the claim for unpaid wages from June 16, 1992 to
March 18, 1993.
We find merit in the petition.
At the outset, we reiterate the rule that in certiorari proceedings under Rule
65, this Court does not assess and weigh the sufficiency of evidence upon
which the labor arbiter and public respondent NLRC based their resolutions.
Our query is limited to the determination of whether or not public
respondent NLRC acted without or in excess of its jurisdiction or with grave
abuse of discretion in rendering the assailed resolutions.10 While
administrative findings of fact are accorded great respect, and even finality
when supported by substantial evidence, nevertheless, when it can be shown
that administrative bodies grossly misappreciated evidence of such nature as
to compel a contrary conclusion, this court had not hesitated to reverse their
factual findings.11 Factual findings of administrative agencies are not
infallible and will be set aside when they fail the test of
arbitrariness.12Moreover, where the findings of NLRC contradict those of the

labor arbiter, this Court, in the exercise of its equity jurisdiction, may look
into the records of the case and reexamine the questioned findings.13
We find cogent reason, as shown by the petitioner and the Solicitor General,
not to affirm the factual findings of public respondent NLRC.
We do not agree with the finding that private respondents had rendered
services from June 16, 1992 to March 18, 1993 so as to entitle them to
payment of wages. Public respondent based its conclusion on the following:
(a) the letter dated April 7, 1993 of Pedrito L. Leyson, Office Manager of
AKELCO addressed to AKELCO's General Manager, Atty. Leovigildo T.
Mationg, requesting for the payment of private respondents' unpaid wages
from June 16, 1992 to March 18, 1993; (b) the memorandum of said Atty.
Mationg dated 14 April 1993, in answer to the letter request of Pedrito
Leyson where Atty. Mationg made an assurance that he will recommend such
request; (c) the private respondents' own computation of their unpaid wages.
We find that the foregoing does not constitute substantial evidence to
support the conclusion that private respondents are entitled to the payment
of wages from June 16, 1992 to March 18, 1993. Substantial evidence is that
amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.14 These evidences relied upon by public
respondent did not establish the fact that private respondents actually
rendered services in the Kalibo office during the stated period.
The letter of Pedrito Leyson to Atty. Mationg was considered by public
respondent as evidence that services were rendered by private respondents
during the stated period, as the recommendation and request came from the
office manager who has direct knowledge regarding the services and
performance of employees under him. We are not convinced. Pedrito Leyson
is one of the herein private respondents who are claiming for unpaid wages
and we find his actuation of requesting in behalf of the other private
respondents for the payment of their backwages to be biased and selfserving, thus not credible.
On the other hand, petitioner was able to show that private respondents did
not render services during the stated period. Petitioner's evidences show that
on January 22, 1992, petitioner's Board of Directors passed a resolution
temporarily transferring the Office from Lezo, Aklan to Amon Theater, Kalibo,
Aklan upon the recommendation of Atty. Leovigildo Mationg, then project
supervisor, on the ground that the office at Lezo was dangerous and unsafe.
Such transfer was approved by then NEA Administrator, Rodrigo E. Cabrera,
in a letter dated February 6, 1992 addressed to petitioner's Board of
Directors.15 Thus, the NEA Administrator, in the exercise of supervision and
control over all electric cooperatives, including petitioner, wrote a letter dated
February 6, 1992 addressed to the Provincial Director PC/INP Kalibo Aklan
requesting for military assistance for the petitioner's team in retrieving the
electric cooperative's equipments and other removable facilities and/or
fixtures consequential to the transfer of its principal business address from
Lezo to Kalibo and in maintaining peace and order in the cooperative's
coverage area.16 The foregoing establishes the fact that the continuous
operation of the petitioner's business office in Lezo Aklan would pose a
serious and imminent threat to petitioner's officials and other employees,

hence the necessity of temporarily transferring the operation of its business


office from Lezo to Kalibo. Such transfer was done in the exercise of a
management prerogative and in the absence of contrary evidence is not
unjustified. With the transfer of petitioner's business office from its former
office, Lezo, to Kalibo, Aklan, its equipments, records and facilities were also
removed from Lezo and brought to the Kalibo office where petitioner's official
business was being conducted; thus private respondents' allegations that
they continued to report for work at Lezo to support their claim for wages has
no basis.
Moreover, private respondents in their position paper admitted that they did
not report at the Kalibo office, as Lezo remained to be their office where they
continuously reported, to wit:17
On January 22, 1991 by way of a resolution of the Board of Directors
of AKELCO it allowed the temporary holding of office at Amon
Theater, Kalibo, Aklan, per information by their project supervisor,
Atty. Leovigildo Mationg that their head office is closed and that it is
dangerous to hold office thereat.
Nevertheless, majority of the employees including the herein
complainants, continued to report for work at Lezo, Aklan and were
paid of their salaries.
xxx

xxx

xxx

The transfer of office from Lezo, Aklan to Kalibo, Aklan being illegal
for failure to comply with the legal requirements under P.D. 269, the
complainants remained and continued to work at the Lezo Office
until they were illegally locked out therefrom by the respondents.
Despite the illegal lock out however, complainants continued to
report daily to the location of the Lezo Office, prepared to continue in
the performance of their regular duties.
Complainants thus could not be considered to have abandoned their
work as Lezo remained to be their office and not Kalibo despite the
temporary transfer thereto. Further the fact that they were allowed to
draw their salaries up to May, 1992 is an acknowledgment by the
management that they are working during the period.
xxx

xxx

xxx

It must be pointed out that complainants worked and continuously


reported at Lezo office despite the management holding office at
Kalibo. In fact, they were paid their wages before it was withheld and
then were allowed to draw their salaries again on March 1993 while
reporting at Lezo up to the present.
Respondents' acts and payment of complainants' salaries and again
from March 1993 is an unequivocal recognition on the part of
respondents that the work of complainants is continuing and
uninterrupted and they are therefore entitled to their unpaid wages
for the period from June 1992 to March 1993.

The admission is detrimental to private respondents' cause. Their excuse is


that the transfer to Kalibo was illegal but we agree with the Labor Arbiter
that it was not for private respondents to declare the management's act of
temporarily transferring the AKELCO office to Kalibo as an illegal act. There
is no allegation nor proof that the transfer was made in bad faith or with
malice. The Labor Arbiter correctly rationalized in its decision as follows:18
We do not subscribe to complainants theory and assertions. They, by
their own allegations, have unilaterally committed acts in violation of
management's/respondents'
directives
purely
classified
as
management prerogative. They have taken amongst themselves
declaring management's acts oftemporarily transferring the holding
of the AKELCO office from Lezo to Kalibo, Aklan as illegal. It is never
incumbent upon themselves to declare the same as such. It is lodged
in another forum or body legally mantled to do the same. What they
should
have
done
was
first
to
follow
management's
orders temporarilytransferring office for it has the first presumption
of legality. Further, the transfer was only temporary. For:
The employer as owner of the business, also has inherent
rights, among which are the right to select the persons to be
hired and discharge them for just and valid cause; to
promulgate and enforce reasonable employment rules and
regulations and to modify, amend or revoke the same; to
designate the work as well as the employee or employees to
perform it; to transfer or promote employees; to schedule,
direct, curtail or control company operations; to introduce or
install new or improved labor or money savings methods,
facilities or devices; to create, merge, divide, reclassify and
abolish departments or positions in the company and to sell
or close the business.
xxx

xxx

xxx

Even as the law is solicitous of the welfare of the employees


it must also protect the right of an employer to exercise what
are clearly management prerogatives. The free will of
management to conduct its own business affairs to achieve
its purpose can not be denied. The transfer of assignment of
a medical representative from Manila to the province has
therefore been held lawful where this was demanded by the
requirements of the drug company's marketing operations
and the former had at the time of his employment
undertaken to accept assignment anywhere in the
Philippines. (Abbot Laboratories (Phils.), Inc., et al. vs.
NLRC, et al., G.R. No. L-76959, Oct. 12, 1987).
It is the employer's prerogative to abolish a position which it deems
no longer necessary, and the courts, absent any findings of malice on
the part of the management, cannot erase that initiative simply to
protect the person holding office (Great Pacific Life Assurance
Corporation vs. NLRC, et al., G.R. No. 88011, July 30, 1990).

Private respondents claim that petitioner's Board of Directors passed an


unnumbered resolution dated February 11, 1992 returning back the office
from its temporary office in Kalibo to Lezo. Thus, they did not defy any lawful
order of petitioner and were justified in continuing to remain at Lezo office.
This allegation was controverted by petitioner in its Reply saying that such
unnumbered resolution was never implemented as it was not a valid act of
petitioner's Board. We are convinced by petitioner's argument that such
unnumbered resolution was not a valid act of petitioners legitimate Board
considering the subsequent actions taken by the petitioner's Board of
Directors decrying private respondents inimical act and defiance, to wit (1)
Resolution No. 411, s. of 1992 on September 9, 1992, dismissing all AKELCO
employees who were on illegal strike and who refused to return to work
effective January 31, 1992 despite the directive of the NEA project supervisor
and petitioner's acting general manager;19(2) Resolution No. 477, s. of 1993
dated March 10, 1993 accepting back private respondents who staged illegal
strike, defied legal orders and issuances, out of compassion, reconciliation,
Christian values and humanitarian reason subject to the condition of "no
work, no pay"20 (3) Resolution No. 496, s. of 1993 dated June 4, 1993,
rejecting the demands of private respondents for backwages from June 16,
1992 to March 1993 adopting the policy of "no work, no pay" as such
demand has no basis, and directing the COOP Legal Counsel to file criminal
cases against employees who misappropriated collections and officers who
authorized disbursements of funds without legal authority from the NEA and
the AKELCO Board.21 If indeed there was a valid board resolution
transferring back petitioner's office to Lezo from its temporary office in
Kalibo, there was no need for the Board to pass the above-cited resolutions.
We are also unable to agree with public respondent NLRC when it held that
the assurance made by Atty. Mationg to the letter-request of office manager
Leyson for the payment of private respondents' wages from June 1992 to
March 1993 was an admission on the part of general manager Mationg that
private respondents are indeed entitled to the same. The letter reply of Atty.
Mationg to Leyson merely stated that he will recommend the request for
payment of backwages to the Board of Directors for their consideration and
appropriate action and nothing else, thus, the ultimate approval will come
from the Board of Directors. We find well-taken the argument advanced by
the Solicitor General as follows:22
The allegation of private respondents that petitioner had already
approved payment of their wages is without basis. Mationg's offer to
recommend the payment of private respondents' wages is hardly
approval of their claim for wages. It is just an undertaking to
recommend payment. Moreover, the offer is conditional. It is subject
to the condition that petitioner's Board of Directors will give its
approval and that funds were available. Mationg's reply to Leyson's
letter for payment of wages did not constitute approval or assurance
of payment. The fact is that, the Board of Directors of petitioner
rejected private respondents demand for payment (Board Resolution
No. 496, s. 1993).
We are accordingly constrained to overturn public respondent's findings that
petitioner is not justified in its refusal to pay private respondents' wages and

other fringe benefits from June 16, 1992 to March 18, 1993; public
respondents stated that private respondents were paid their salaries from
January to May 1992 and again from March 19, 1993 up to the present. As
cited earlier, petitioner's Board in a Resolution No. 411 dated September 9,
1992 dismissed private respondents who were on illegal strike and who
refused to report for work at Kalibo office effective January 31, 1992; since
no services were rendered by private respondents they were not paid their
salaries. Private respondents never questioned nor controverted the
Resolution dismissing them and nowhere in their Comment is it stated that
they questioned such dismissal. Private respondents also have not rebutted
petitioner's claim that private respondents illegally collected fees and charges
due petitioner and appropriated the collections among themselves to satisfy
their salaries from January to May 1992, for which reason, private
respondents are merely claiming salaries only for the period from June 16,
1992 to March 1993.
Private respondents were dismissed by petitioner effective January 31, 1992
and were accepted back by petitioner, as an act of compassion, subject to the
condition of "no work, no pay" effective March 1993 which explains why
private respondents were allowed to draw their salaries again. Notably, the
letter-request of Mr. Leyson for the payment of backwages and other fringe
benefits in behalf of private respondents was made only in April 1993, after a
Board Resolution accepting them back to work out of compassion and
humanitarian reason. It took private respondents about ten months before
they requested for the payment of their backwages, and the long inaction of
private respondents to file their claim for unpaid wages cast doubts as to the
veracity of their claim.
The age-old rule governing the relation between labor and capital, or
management and employee of a "fair day's wage for a fair day's labor"
remains as the basic factor in determining employees' wages. If there is no
work performed by the employee there can be no wage or pay unless, of
course, the laborer was able, willing and ready to work but was illegally
locked out, suspended or dismissed,23 or otherwise illegally prevented from
working,24 a situation which we find is not present in the instant case. It
would neither be fair nor just to allow private respondents to recover
something they have not earned and could not have earned because they did
not render services at the Kalibo office during the stated period.
Finally, we hold that public respondent erred in merely relying on the
computations of compensable services submitted by private respondents.
There must be competent proof such as time cards or office records to show
that they actually rendered compensable service during the stated period to
entitle them to wages. It has been established that the petitioner's business
office was .transferred to Kalibo and all its equipments, records and facilities
were transferred thereat and that it conducted its official business in Kalibo
during the period in question. It was incumbent upon private respondents to
prove that they indeed rendered services for petitioner, which they failed to
do. It is a basic rule in evidence that each party must prove his affirmative
allegation. Since the burden of evidence lies with the party who asserts the
affirmative allegation, the plaintiff or complainant has to prove his affirmative
allegations in the complaint and the defendant or the respondent has to

prove the affirmative


counterclaim.25

allegation

in

his

affirmative

defenses

and

WHEREFORE, in view of the foregoing, the petition for CERTIORARI is


GRANTED. Consequently the decision of public respondent NLRC dated April
20, 1995 and the Resolution dated July 28, 1995 in NLRC Case No. V-014394 are hereby REVERSED and SET ASIDE for having been rendered with
grave abuse of discretion amounting to lack or excess of jurisdiction. Private
respondents complaint for payment of unpaid wages before the Labor Arbiter
is DISMISSED.1wphi1.nt
SO ORDERED.

G.R. No. 128845

June 1, 2000

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner,


vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of
Labor and Employment; HON. CRESENCIANO B. TRAJANO in his
capacity as the Acting Secretary of Labor and Employment; DR. BRIAN
MACCAULEY in his capacity as the Superintendent of International
School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires
of private respondent School, mostly Filipinos, cry discrimination. We agree.
That the local-hires are paid more than their colleagues in other schools is, of
course, beside the point. The point is that employees should be given equal
pay for work of equal value. That is a principle long honored in this
jurisdiction. That is a principle that rests on fundamental notions of justice.
That is the principle we uphold today.1wphi1.nt
Private respondent International School, Inc. (the School, for short),
pursuant to Presidential Decree 732, is a domestic educational institution
established primarily for dependents of foreign diplomatic personnel and
other temporary residents.1 To enable the School to continue carrying out its
educational program and improve its standard of instruction, Section 2(c) of
the same decree authorizes the School to employ its own teaching and
management personnel selected by it either locally or abroad, from Philippine
or other nationalities, such personnel being exempt from otherwise
applicable laws and regulations attending their employment, except laws that
have been or will be enacted for the protection of employees.
Accordingly, the School hires both foreign and local teachers as members of
its faculty, classifying the same into two: (1) foreign-hires and (2) local-hires.
The School employs four tests to determine whether a faculty member should
be classified as a foreign-hire or a local hire:
a. What is one's domicile?
b. Where is one's home economy?
c. To which country does one owe economic allegiance?
d. Was the individual hired abroad specifically to work in the School
and was the School responsible for bringing that individual to the
Philippines?2
Should the answer to any of these queries point to the Philippines, the
faculty member is classified as a local hire; otherwise, he or she is deemed a
foreign-hire.
The School grants foreign-hires certain benefits not accorded localhires.1avvphi1 These include housing, transportation, shipping costs, taxes,
and home leave travel allowance. Foreign-hires are also paid a salary rate
twenty-five percent (25%) more than local-hires. The School justifies the
difference on two "significant economic disadvantages" foreign-hires have to

endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School
explains:
A foreign-hire would necessarily have to uproot himself from his
home country, leave his family and friends, and take the risk of
deviating from a promising career path all for the purpose of
pursuing his profession as an educator, but this time in a foreign
land. The new foreign hire is faced with economic realities: decent
abode for oneself and/or for one's family, effective means of
transportation, allowance for the education of one's children,
adequate insurance against illness and death, and of course the
primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with
the same economic reality after his term: that he will eventually and
inevitably return to his home country where he will have to confront
the uncertainty of obtaining suitable employment after along period
in a foreign land.
The compensation scheme is simply the School's adaptive measure
to remain competitive on an international level in terms of attracting
competent professionals in the field of international education.3
When negotiations for a new collective bargaining agreement were held on
June 1995, petitioner International School Alliance of Educators, "a
legitimate labor union and the collective bargaining representative of all
faculty members"4 of the School, contested the difference in salary rates
between foreign and local-hires. This issue, as well as the question of
whether foreign-hires should be included in the appropriate bargaining unit,
eventually caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the
National Conciliation and Mediation Board to bring the parties to a
compromise prompted the Department of Labor and Employment (DOLE) to
assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and
representation issues in favor of the School. Then DOLE Secretary Leonardo
A. Quisumbing subsequently denied petitioner's motion for reconsideration
in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School
is discriminatory to Filipinos and that the grant of higher salaries to foreignhires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its faculty
members, numbering 38 in all, with nationalities other than Filipino, who
have been hired locally and classified as local hires. 5 The Acting Secretary of
Labor found that these non-Filipino local-hires received the same benefits as
the Filipino local-hires.
The compensation package given to local-hires has been shown to
apply to all, regardless of race. Truth to tell, there are foreigners who
have been hired locally and who are paid equally as Filipino local
hires.6

The Acting secretary upheld the point-of-hire classification for the distinction
in salary rates:
The Principle "equal pay for equal work" does not find applications in
the present case. The international character of the School requires
the hiring of foreign personnel to deal with different nationalities and
different cultures, among the student population.
We also take cognizance of the existence of a system of salaries and
benefits accorded to foreign hired personnel which system is
universally recognized. We agree that certain amenities have to be
provided to these people in order to entice them to render their
services in the Philippines and in the process remain competitive in
the international market.
Furthermore, we took note of the fact that foreign hires have limited
contract of employment unlike the local hires who enjoy security of
tenure. To apply parity therefore, in wages and other benefits would
also require parity in other terms and conditions of employment
which include the employment which include the employment
contract.
A perusal of the parties' 1992-1995 CBA points us to the conditions
and provisions for salary and professional compensation wherein the
parties agree as follows:
All members of the bargaining unit shall be compensated
only in accordance with Appendix C hereof provided that the
Superintendent of the School has the discretion to recruit
and hire expatriate teachers from abroad, under terms and
conditions that are consistent with accepted international
practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the
Overseas Recruited Staff (OSRS) salary schedule. The 25%
differential is reflective of the agreed value of system
displacement and contracted status of the OSRS as
differentiated from the tenured status of Locally Recruited
Staff (LRS).
To our mind, these provisions demonstrate the parties' recognition of
the difference in the status of two types of employees, hence, the
difference in their salaries.
The Union cannot also invoke the equal protection clause to justify
its claim of parity. It is an established principle of constitutional law
that the guarantee of equal protection of the laws is not violated by
legislation or private covenants based on reasonable classification. A
classification is reasonable if it is based on substantial distinctions
and apply to all members of the same class. Verily, there is a
substantial distinction between foreign hires and local hires, the
former enjoying only a limited tenure, having no amenities of their
own in the Philippines and have to be given a good compensation

package in order to attract them to join the teaching faculty of the


School.7
We cannot agree.
That public policy abhors inequality and discrimination is beyond
contention. Our Constitution and laws reflect the policy against these evils.
The Constitution8 in the Article on Social Justice and Human Rights exhorts
Congress to "give highest priority to the enactment of measures that protect
and enhance the right of all people to human dignity, reduce social,
economic, and political inequalities." The very broad Article 19 of the Civil
Code requires every person, "in the exercise of his rights and in the
performance of his duties, [to] act with justice, give everyone his due, and
observe honesty and good faith.
International law, which springs from general principles of law, 9 likewise
proscribes discrimination. General principles of law include principles of
equity, 10 i.e., the general principles of fairness and justice, based on the test
of what is reasonable. 11 The Universal Declaration of Human Rights, 12 the
International Covenant on Economic, Social, and Cultural Rights, 13 the
International Convention on the Elimination of All Forms of Racial
Discrimination, 14 the Convention against Discrimination in Education, 15 the
Convention (No. 111) Concerning Discrimination in Respect of Employment
and Occupation 16 all embody the general principle against discrimination,
the very antithesis of fairness and justice. The Philippines, through its
Constitution, has incorporated this principle as part of its national laws.
In the workplace, where the relations between capital and labor are often
skewed in favor of capital, inequality and discrimination by the employer are
all the more reprehensible.
The Constitution 17 specifically provides that labor is entitled to "humane
conditions of work." These conditions are not restricted to the physical
workplace the factory, the office or the field but include as well the
manner by which employers treat their employees.
The Constitution 18 also directs the State to promote "equality of employment
opportunities for all." Similarly, the Labor Code 19 provides that the State
shall "ensure equal work opportunities regardless of sex, race or creed." It
would be an affront to both the spirit and letter of these provisions if the
State, in spite of its primordial obligation to promote and ensure equal
employment opportunities, closes its eyes to unequal and discriminatory
terms and conditions of employment. 20
Discrimination, particularly in terms of wages, is frowned upon by the Labor
Code. Article 135, for example, prohibits and penalizes 21 the payment of
lesser compensation to a female employee as against a male employee for
work of equal value. Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order to encourage or
discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and Cultural
Rights, supra, in Article 7 thereof, provides:

The States Parties to the present Covenant recognize the right of


everyone to the enjoyment of just and favourable conditions of work,
which ensure, in particular:
a. Remuneration which provides all workers, as a minimum,
with:
(i) Fair wages and equal remuneration for work of
equal value without distinction of any kind, in
particular women being guaranteed conditions of
work not inferior to those enjoyed by men, with
equal pay for equal work;
xxx

xxx

xxx

The foregoing provisions impregnably institutionalize in this jurisdiction the


long honored legal truism of "equal pay for equal work." Persons who work
with substantially equal qualifications, skill, effort and responsibility, under
similar conditions, should be paid similar salaries. 22 This rule applies to the
School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that localhires perform work equal to that of foreign-hires. 23 The Court finds this
argument a little cavalier. If an employer accords employees the same
position and rank, the presumption is that these employees perform equal
work. This presumption is borne by logic and human experience. If the
employer pays one employee less than the rest, it is not for that employee to
explain why he receives less or why the others receive more. That would be
adding insult to injury. The employer has discriminated against that
employee; it is for the employer to explain why the employee is treated
unfairly.
The employer in this case has failed to discharge this burden. There is no
evidence here that foreign-hires perform 25% more efficiently or effectively
than the local-hires. Both groups have similar functions and responsibilities,
which they perform under similar working conditions.
The School cannot invoke the need to entice foreign-hires to leave their
domicile to rationalize the distinction in salary rates without violating the
principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or
recompense for services performed." Similarly, the Philippine Legal
Encyclopedia states that "salary" is the "[c]onsideration paid at regular
intervals for the rendering of services." In Songco v. National Labor Relations
Commission, 24 we said that:
"salary" means a recompense or consideration made to a person for
his pains or industry in another man's business. Whether it be
derived from "salarium," or more fancifully from "sal," the pay of the
Roman soldier, it carries with it the fundamental idea of
compensation for services rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries
should not be used as an enticement to the prejudice of local-hires. The

local-hires perform the same services as foreign-hires and they ought to be


paid the same salaries as the latter. For the same reason, the "dislocation
factor" and the foreign-hires' limited tenure also cannot serve as valid bases
for the distinction in salary rates. The dislocation factor and limited tenure
affecting foreign-hires are adequately compensated by certain benefits
accorded them which are not enjoyed by local-hires, such as housing,
transportation, shipping costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and
promote their welfare," 25 "to afford labor full protection." 26 The State,
therefore, has the right and duty to regulate the relations between labor and
capital.27 These relations are not merely contractual but are so impressed
with public interest that labor contracts, collective bargaining agreements
included, must yield to the common good. 28 Should such contracts contain
stipulations that are contrary to public policy, courts will not hesitate to
strike down these stipulations.
In this case, we find the point-of-hire classification employed by respondent
School to justify the distinction in the salary rates of foreign-hires and local
hires to be an invalid classification. There is no reasonable distinction
between the services rendered by foreign-hires and local-hires. The practice
of the School of according higher salaries to foreign-hires contravenes public
policy and, certainly, does not deserve the sympathy of this Court.1avvphi1
We agree, however, that foreign-hires do not belong to the same bargaining
unit as the local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of
all or less than all of the entire body of employees, consistent with equity to
the employer, indicate to be the best suited to serve the reciprocal rights and
duties of the parties under the collective bargaining provisions of the
law." 29 The factors in determining the appropriate collective bargaining unit
are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the
employees' interest, such as substantial similarity of work and duties, or
similarity of compensation and working conditions (Substantial Mutual
Interests Rule); (3) prior collective bargaining history; and (4) similarity of
employment status. 30 The basic test of an asserted bargaining unit's
acceptability is whether or not it is fundamentally the combination which will
best assure to all employees the exercise of their collective bargaining
rights. 31
It does not appear that foreign-hires have indicated their intention to be
grouped together with local-hires for purposes of collective bargaining. The
collective bargaining history in the School also shows that these groups were
always treated separately. Foreign-hires have limited tenure; local-hires enjoy
security of tenure. Although foreign-hires perform similar functions under
the same working conditions as the local-hires, foreign-hires are accorded
certain benefits not granted to local-hires. These benefits, such as housing,
transportation, shipping costs, taxes, and home leave travel allowance, are
reasonably related to their status as foreign-hires, and justify the exclusion
of the former from the latter. To include foreign-hires in a bargaining unit
with local-hires would not assure either group the exercise of their respective
collective bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby


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

G.R. No. 79351 November 28, 1989


DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
THE HON. SECRETARY OF LABOR, CRESENCIA DIFONTORUM, ET
AL., respondents.
The Chief Legal Counsel for petitioner.
Dante P. Sindac for private respondents.
CORTES, J.:
Petitioner Development Bank of the Philippines seeks the nullification of an
order dated July 29, 1987 and issued by the Undersecretary of Labor and
Employment, affirming that of National Capital Region Officer-in-Charge
Romeo A. Young, directing the petitioner to deliver the properties of Riverside
Mills Corporation (RMC) which it had in its possession to the Ministry (now
Department) of Labor and Employment (MOLE) for proper disposition in Case
No. NCR-LSED-7-334-84 pursuant to Article 110 of the Labor Code.
Labor Case No. NCR-LSED-7-334-84 involves a complaint for illegal
dismissal, unfair labor practice, illegal deductions from salaries and violation
of the minimum wage law filed by private respondents herein against RMC.
On July 3, 1985, a decision was rendered by Director Severo M. Pucan of the
National Capital Region, MOLE, ordering RMC to pay private respondents
backwages and separation benefits. A corresponding writ of execution was
issued on October 22, 1985 directing the sheriff to collect the amount of ONE
MILLION TWO HUNDRED FIFTY-SIX THOUSAND SIX HUNDRED SEVENTYEIGHT PESOS AND SEVENTY SIX CENTAVOS (P1,256,678.76) from RMC
and, in case of failure to collect, to execute the writ by selling the goods and
chattel of RMC not exempt from execution or, in case of insufficiency thereof,
the real or immovable properties of RMC.

(NAMAWU-MIF) [G.R. No. 50402, August 19, 1982, 115 SCRA 873] support
the conclusion that private respondents still enjoyed a preferential lien for
the payment of their backwages and separation benefits over the properties
of RMC which were foreclosed by petitioner [Rollo, pp. 21-22].
Petitioner then filed its motion for reconsideration on December 24,1986
contending that Article 110 of the Labor Code finds no application in the case
at bar for the following reasons: (1) The properties sought to be delivered
have ceased to belong to RMC in view of the fact that petitioner had
foreclosed on the mortgage, and the properties have been sold and delivered
to third parties; (2) The requisite condition for the application of Article 110
of the Labor Code is not present since no bankruptcy or insolvency
proceedings over RMC properties and assets have been undertaken [Rollo,
pp. 24-28]. In an order dated July 29, 1987, petitioner's motion for
reconsideration was denied for lack of merit by Undersecretary Dionisio C.
dela Serna.
Hence, petitioner filed this special civil action for certiorari with prayer for the
issuance of a writ of preliminary injunction. On August 27, 1987, this Court
issued a temporary restraining order enjoining public respondent from
enforcing or carrying out its order dated July 29, 1987. After considering the
allegations made and issues raised in the petition, comments thereto and
reply, the Court, on March 14, 1988, resolved to give due course to the
petition and to require the parties to submit their respective memoranda.
Petitioner and private respondent submitted their memoranda, while public
respondent adopted as its memorandum the comment it had previously
submitted.
After a careful study of the various arguments adduced, as well as the legal
provisions and jurisprudence on the matter, the Court finds the petition
impressed with merit. Indeed, the assailed Order suffers from infirmities
which must be rectified by the grant of a writ of certiorari in favor of
petitioner.

However, on May 23, 1986, the writ of execution was returned unserved and
unsatisfied, with the information that the company premises of RMC had
been padlocked and foreclosed by petitioner. It appears that petitioner had
instituted extra-judicial foreclosure proceedings as early as 1983 on the
properties and other assets of RMC as a result of the latter's failure to meet
its obligations on the loans it secured from petitioner.

Firstly, public respondent acted with grave abuse of discretion amounting to


lack or excess of jurisdiction in enforcing private respondents' right of first
preference under Article 110 of the Labor Code notwithstanding the absence
of bankruptcy, liquidation or insolvency proceedings against RMC.

Consequently, private respondents filed with the MOLE a "Motion for Delivery
of Properties of the [RMC] in the Possession of the [DBP] to the [MOLE] for
Proper Disposition," stating that pursuant to Article 110 of the Labor Code,
they enjoy first preference over the mortgaged properties of RMC for the
satisfaction of the judgment rendered in their favor notwithstanding the
foreclosure of the same by petitioner as mortgage creditor [Rollo, pp. 16-17].
Petitioner filed its opposition.

Article 110. WORKER PREFERENCE IN CASE OF


BANKRUPTCY.In the event of bankruptcy or liquidation of
an employer's business, his workers shall enjoy first
preference as regards wages due them for services rendered
during the period prior to the bankruptcy or liquidation, any
provision of law to the contrary notwithstanding. Unpaid
wages shall be paid in full before other creditors may
establish any claim to a share in the assets of the employer
[Emphasis supplied].

In an order signed by Officer-in-Charge Romeo A. Young and dated December


11, 1986, private respondents' motion was granted based on the finding that
Article 110 of the Labor Code and the ruling laid down in Philippine
Commercial and Industrial Bank v. Natural Mines and Allied Workers'

Article 110 of the Labor Code and Section 10, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code provide the following:

Section 10. PAYMENT OF WAGES IN CASE OF


BANKRUPTCY. Unpaid wages earned by the employees

before the declaration of bankruptcy or judicial liquidation of


the employer's business shall be given first preference and
shall be paid in full before other creditors may establish any
claim to a share in the assets of the employer.
It is clear from the wording of the law that the preferential right accorded to
employees and workers under Article 110 may be invoked only during
bankruptcy or judicial liquidation proceedings against the employer. The law
is unequivocal and admits of no other construction.
Respondents contend that the terms "bankruptcy" or "liquidation" are broad
enough to cover a situation where there is a cessation of the operation of the
employer's business as in the case at bar. However, this very same
contention was struck down as unmeritorious in the case of Development
Bank of the Philippines vs. Hon. Labor Arbiter Ariel C. Santos [G.R. Nos.
78261-62, March 8, 1989] involving a group of RMC employees which sought
to enforce its preference of credit Article 110 against DBP over certain RMC
real properties. In that case, the Court laid down the ruling that Article 110
of the Labor Code, which cannot be viewed in isolation of, and must always
be reckoned with the provisions of the Civil Code on concurrence and
preference of credits, may not be invoked by employees or workers of RMC
like private respondents herein, in the absence of a formal declaration of
bankruptcy or a judicial liquidation order of RMC.
The rationale for making the application of Article 110 of the Labor Code
contingent upon the institution of bankruptcy or judicial liquidation
proceedings against the employer is premised upon the very nature of a
preferential right of credit. A preference of credit bestows upon the preferred
creditor an advantage of having his credit satisfied first ahead of other claims
which may be established against the debtor. Logically, it becomes material
only when the properties and assets of the debtor are insufficient to pay his
debts in full; for if the debtor is amply able to pay his various creditors in
full, how can the necessity exist to determine which of his creditors shall be
paid first or whether they shall be paid out of the proceeds of the sale of the
debtor's specific property? Indubitably, the preferential right of credit attains
significance only after the properties of the debtor have been inventoried and
liquidated, and the claims held by his various creditors have been
established [Kuenzle & Streiff (Ltd.) v. Villanueva, 41 Phil. 611 (1916);
Barrette v. Villanueva, G.R. No. L-14938, December 29, 1962, 6 SCRA 928;
Philippine Savings Bank v. Lantin, G.R. No. L-33929, September 2, 1983,
124 SCRA 476].
In this jurisdiction, bankruptcy, insolvency and general judicial liquidation
proceedings provide the only proper venue for the enforcement of a creditor's
preferential right such as that established in Article 110 of the Labor Code,
for these are in rem proceedings binding against the whole world where all
persons having any interest in the assets of the debtor are given the
opportunity to establish their respective credits [Philippine Savings Bank v.
Lantin, supra; Development Bank of the Philippines v. Santos supra].
Secondly, public respondent's Order directing petitioner to deliver to the
MOLE the properties it had foreclosed from RMC for the purpose of executing
the judgment rendered against RMC in Case No. NCR-LSED 7-334-84

violates the basic rule that the power of a court or tribunal in the execution
of its judgment extends only over properties unquestionably belonging to the
judgment debtor [Special Services Corporation v. Centro La Paz, G.R. No. L44100, April 28, 1983, 121 SCRA 748; National Mines and Allied Workers'
Union v. Vera, G.R. No. L-44230, November 19, 1984, 133 SCRA 295].
It appears on record, and remains undisputed by respondents, that
petitioner had extra-judicially foreclosed the subject properties from RMC as
early as 1983 and purchased the same at public auction, and that RMC had
failed to exercise its right to redeem. Thus, when Officer-in-Charge Young
issued on December 11, 1986 the order which directed the delivery of these
properties to the MOLE, RMC had ceased to be the absolute owner thereof
[See Dizon v. Gaborra, G.R. No. L-36821, June 22, 1978, 83 SCRA 688].
Consequently, the order was directed against properties which no longer
belonged to the judgment debtor RMC.
However, respondents, in citing the case of PCIB v. NAMAWU-MIF [supra],
argue that by virtue of Article 110 of the Labor Code, an "automatic first lien"
was created in favor of private respondents on RMC propertiesa "lien"
which predated the foreclosure of the subject properties by petitioner, and
remained vested on these properties even after its sale to petitioner and other
parties.
There is no merit to this contention. It proceeds from a misconception which
must be corrected.
What Article 110 of the Labor Code establishes is not a lien, but a preference
of credit in favor of employees [See Republic v. Peralta, G.R. No. 56568, May
20, 1987, 150 SCRA 37]. This simply means that during bankruptcy,
insolvency or liquidation proceedings involving the existing properties of the
employer, the employees have the advantage of having their unpaid wages
satisfied ahead of certain claims which may be proved therein.
It bears repeating that a preference of credit points out solely the order in
which creditors would be paid from the properties of a debtor inventoried and
appraised during bankruptcy, insolvency or liquidation proceedings.
Moreover, a preference does not exist in any effective way prior to, and apart
from, the institution of these proceedings, for it is only then that the legal
provisions on concurrence and preference of credits begin to apply. Unlike a
lien, a preference of credit does not create in favor of the preferred creditor a
charge or proprietary interest upon any particular property of the debtor.
Neither does it vest as a matter of course upon the mere accrual of a money
claim against the debtor. Certainly, the debtor could very well sell, mortgage
or pledge his property, and convey good title thereon, to third parties free
from such preference [Kuenzle & Streiff v. Villanueva,supra].
Incidentally, the Court is not unmindful of the 1989 amendments to the
article introduced by Section 1, R.A. No. 6715 [March 21, 1989]. Article 110
of the Labor Code as amended reads:
WORKER PREFERENCE IN CASE OF BANKRUPTCY. In
the event of bankruptcy or liquidation of an employer's
business, his workers shall enjoy first preference as regards
their unpaid wages and other monetary claims, any provision

of law to the contrary notwithstanding. Such unpaid


wages and monetary claims shall be paid in full before the
claims of the Government and other creditors may be paid.
[Amendments indicated.]
However, these amendments only relate to the scheme of concurrence and
preference of credits; they do not affect the issues heretofore discussed
regarding the applicability of Article 110 to the attendant facts.
WHEREFORE, considering the foregoing, the present petition is hereby
GRANTED. The assailed order dated July 29, 1987 is SET ASIDE and the
temporary restraining order issued by the Court on August 27, 1987 is made
PERMANENT.
SO ORDERED.

G.R. No. 128003

July 26, 2000

RUBBERWORLD [PHILS.], INC., and JULIE YAO ONG, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, AQUINO MAGSALIN,
PEDRO MAIBO, RICARDO BORJA, ALICIA M. SAN PEDRO AND
FELOMENA B. TOLIN, respondents.
DECISION
PARDO, J.:
What is before the Court for resolution is a petition to annul the resolution of
the National Labor Relations Commission (NLRC),1 affirming the laborarbiter's award but deleting the moral and exemplary damages.
The facts are as follows:
Petitioner Rubberworld (Phils.), Inc. [hereinafter Rubberworld], a corporation
established in 1965, was engaged in manufacturing footwear, bags and
garments.
Aquilino Magsalin, Pedro Manibo, Ricardo Borja, Benjamin Camitan, Alicia
M. San Pedro, and Felomena Tolin were employed 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 the effectivity date, however, Rubberworld was
forced to prematurely shutdown its operations.
On November 11, 1994, private respondents filed with the National Labor
Relations Commission a complaint2against petitioner for illegal dismissal and
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 with
a proposed rehabilitation plan.3
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 deemed
SUSPENDED.
"Consequently, all pending incidents for preliminary injunctions, writ or
attachments, foreclosures and the like are hereby rendered moot and
academic.
"SO ORDERED."4
On January 24, 1995, petitioners submitted to the labor arbiter a motion to
suspend the proceedings invoking the SEC order dated December 28, 1994.
The labor arbiter did not act on the motion and ordered the parties to submit
their respective position papers.

On December 10, 1995, the labor arbiter rendered a decision, which


provides:
"In the light of the foregoing, respondents are hereby declared guilty of
ILLEGAL SHUTDOWN and that respondents are ordered to pay complainants
their separation pay equivalent to one (1) month pay for every year of service.
Considering the malicious act of closing the business precipitately without
due regard to the rights of complainants, moral damages and exemplary
damage in the sum of P 50,000.00 and P 30,000.00 respectively is hereby
awarded for each of the complainants.
Finally 10 % of all sums owing to complainants is hereby adjudged as
attorney's fees.
SO ORDERED."5
On February 5, 1996, petitioners appealed to the National Labor Relations
Commission (NLRC) alleging abuse of discretion and serious errors in the
findings of facts of the labor arbiter.
On August 30, 1996, NLRC issued a resolution, the dispositive portion of
which reads:
"PREMISES CONSIDERED, the decision appealed from is hereby, AFFIRMED
with MODIFICATION in that the award of moral and exemplary damages is
hereby, DELETED.
SO ORDERED."6
On November 20, 1996, NLRC denied petitioners' motion for reconsideration.
Hence, this petition.7
The issue is whether or not the Department of Labor and Employment, the
Labor Arbiter and the National Labor Relations Commission may legally act
on the claims of respondents despite the order of the Securities and
Exchange Commission suspending all actions against a company under
rehabilitation by a management committee created by the Securities and
Exchange Commission.
Presidential Decree No. 902-A is clear that "all actions for claims against
corporations, partnerships or associations under management or
receivership pending before any court, tribunal, board or body shall be
suspended accordingly." The law did not make any exception in favor of labor
claims.8
"The justification for the automatic stay of all pending actions for claims is to
enable the management committee or the rehabilitation receiver to effectively
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 to continue would only add to the burden of the
management committee or rehabilitation receiver, whose time, effort and
resources would be wasted in defending claims against the corporation
instead of being directed toward its restructuring and rehabilitation."9

Thus, the labor case would defeat the purpose of an automatic


stay.1wphi1 To rule otherwise would open the floodgates to numerous
claims and would defeat the rescue efforts of the management committee.
Besides, even if an award is given to private respondents, the ruling could
not be enforced as long as petitioner is under management committee. 10
This finds ratiocination in that the power to hear and decide labor disputes is
deemed suspended when the Securities and Exchange Commission puts the
corporation under rehabilitation.
Thus, when NLRC proceeded to decide the case despite the SEC suspension
order, the NLRC acted without or in excess of its jurisdiction to hear and
decide cases. As a consequence, any resolution, decision or order that it
rendered or issued without jurisdiction is a nullity.
WHEREFORE, the petition is hereby GRANTED. The decision of the labor
arbiter dated December 10, 1995 and the NLRC resolution dated August 30,
1996, are SET ASIDE.
No costs.
SO ORDERED.

G.R. No. 159577

May 3, 2006

CHARLITO PEARANDA, Petitioner,


vs.
BAGANGA PLYWOOD CORPORATION and HUDSON CHUA, Respondents.
DECISION
PANGANIBAN, CJ:
Managerial employees and members of the managerial staff are exempted
from the provisions of the Labor Code on labor standards. Since petitioner
belongs to this class of employees, he is not entitled to overtime pay and
premium pay for working on rest days.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court,
assailing the January 27, 20032 and July 4, 20033 Resolutions of the Court
of Appeals (CA) in CA-GR SP No. 74358. The earlier Resolution disposed as
follows:

"Upon the other hand, respondent [BPC] is a domestic corporation duly


organized and existing under Philippine laws and is represented herein by its
General Manager HUDSON CHUA, [the] individual respondent. Respondents
thru counsel allege that complainants separation from service was done
pursuant to Art. 283 of the Labor Code. The respondent [BPC] was on
temporary closure due to repair and general maintenance and it applied for
clearance with the Department of Labor and Employment, Regional Office No.
XI to shut down and to dismiss employees (par. 2 position paper). And due to
the insistence of herein complainant he was paid his separation benefits
(Annexes C and D, ibid). Consequently, when respondent [BPC] partially
reopened in January 2001, [Pearanda] failed to reapply. Hence, he was not
terminated from employment much less illegally. He opted to severe
employment when he insisted payment of his separation benefits.
Furthermore, being a managerial employee he is not entitled to overtime pay
and if ever he rendered services beyond the normal hours of work, [there]
was no office order/or authorization for him to do so. Finally, respondents
allege that the claim for damages has no legal and factual basis and that the
instant complaint must necessarily fail for lack of merit."10

is

The labor arbiter ruled that there was no illegal dismissal and that
petitioners Complaint was premature because he was still employed by
BPC.11 The temporary closure of BPCs plant did not terminate his
employment, hence, he need not reapply when the plant reopened.

On the other hand, the Decision of the National Labor Relations Commission
(NLRC) challenged in the CA disposed as follows:

According to the labor arbiter, petitioners money claims for illegal dismissal
was also weakened by his quitclaim and admission during the clarificatory
conference that he accepted separation benefits, sick and vacation leave
conversions and thirteenth month pay.12

"WHEREFORE, premises
hereby DISMISSED."4

considered,

the

instant

petition

The latter Resolution denied reconsideration.

"WHEREFORE, premises considered, the decision of the Labor


Arbiter below awarding overtime pay and premium pay for rest day to
complainant is hereby REVERSED and SET ASIDE, and the
complaint in the above-entitled case dismissed for lack of merit.5
The Facts
Sometime in June 1999, Petitioner Charlito Pearanda was hired as an
employee of Baganga Plywood Corporation (BPC) to take charge of the
operations and maintenance of its steam plant boiler.6 In May 2001,
Pearanda filed a Complaint for illegal dismissal with money claims against
BPC and its general manager, Hudson Chua, before the NLRC.7
After the parties failed to settle amicably, the labor arbiter8 directed the
parties to file their position papers and submit supporting documents.9 Their
respective allegations are summarized by the labor arbiter as follows:
"[Pearanda] through counsel in his position paper alleges that he was
employed by respondent [Baganga] on March 15, 1999 with a monthly salary
of P5,000.00 as Foreman/Boiler Head/Shift Engineer until he was illegally
terminated on December 19, 2000. Further, [he] alleges that his services
[were] terminated without the benefit of due process and valid grounds in
accordance with law. Furthermore, he was not paid his overtime pay,
premium pay for working during holidays/rest days, night shift differentials
and finally claims for payment of damages and attorneys fees having been
forced to litigate the present complaint.

Nevertheless, the labor arbiter found petitioner entitled to overtime pay,


premium pay for working on rest days, and attorneys fees in the total
amount of P21,257.98.13
Ruling of the NLRC
Respondents filed an appeal to the NLRC, which deleted the award of
overtime pay and premium pay for working on rest days. According to the
Commission, petitioner was not entitled to these awards because he was a
managerial employee.14
Ruling of the Court of Appeals
In its Resolution dated January 27, 2003, the CA dismissed Pearandas
Petition for Certiorari. The appellate court held that he failed to: 1) attach
copies of the pleadings submitted before the labor arbiter and NLRC; and 2)
explain why the filing and service of the Petition was not done by personal
service.15
In its later Resolution dated July 4, 2003, the CA denied reconsideration on
the ground that petitioner still failed to submit the pleadings filed before the
NLRC.16
Hence this Petition.17
The Issues

Petitioner states the issues in this wise:


"The [NLRC] committed grave abuse of discretion amounting to excess or lack
of jurisdiction when it entertained the APPEAL of the respondent[s] despite
the lapse of the mandatory period of TEN DAYS.1avvphil.net
"The [NLRC] committed grave abuse of discretion amounting to an excess or
lack of jurisdiction when it rendered the assailed RESOLUTIONS dated May
8, 2002 and AUGUST 16, 2002 REVERSING AND SETTING ASIDE the
FACTUAL AND LEGAL FINDINGS of the [labor arbiter] with respect to the
following:
"I. The finding of the [labor arbiter] that [Pearanda] is a regular,
common employee entitled to monetary benefits under Art. 82 [of the
Labor Code].
"II. The finding that [Pearanda] is entitled to the payment of
OVERTIME PAY and OTHER MONETARY BENEFITS."18
The Courts Ruling
The Petition is not meritorious.
Preliminary Issue:
Resolution on the Merits
The CA dismissed Pearandas Petition on purely technical grounds,
particularly with regard to the failure to submit supporting documents.
In Atillo v. Bombay,19 the Court held that the crucial issue is whether the
documents accompanying the petition before the CA sufficiently supported
the allegations therein. Citing this case, Piglas-Kamao v. NLRC20 stayed the
dismissal of an appeal in the exercise of its equity jurisdiction to order the
adjudication on the merits.
The Petition filed with the CA shows a prima facie case. Petitioner attached
his evidence to challenge the finding that he was a managerial employee. 21 In
his Motion for Reconsideration, petitioner also submitted the pleadings
before the labor arbiter in an attempt to comply with the CA
rules.22 Evidently, the CA could have ruled on the Petition on the basis of
these attachments. Petitioner should be deemed in substantial compliance
with the procedural requirements.
Under these extenuating circumstances, the Court does not hesitate to grant
liberality in favor of petitioner and to tackle his substantive arguments in the
present case. Rules of procedure must be adopted to help promote, not
frustrate, substantial justice.23 The Court frowns upon the practice of
dismissing cases purely on procedural grounds.24 Considering that there was
substantial compliance,25 a liberal interpretation of procedural rules in this
labor case is more in keeping with the constitutional mandate to secure
social justice.26
First Issue:
Timeliness of Appeal

Under the Rules of Procedure of the NLRC, an appeal from the decision of the
labor arbiter should be filed within 10 days from receipt thereof.27
Petitioners claim that respondents filed their appeal beyond the required
period is not substantiated. In the pleadings before us, petitioner fails to
indicate when respondents received the Decision of the labor arbiter. Neither
did the petitioner attach a copy of the challenged appeal. Thus, this Court
has no means to determine from the records when the 10-day period
commenced and terminated. Since petitioner utterly failed to support his
claim that respondents appeal was filed out of time, we need not belabor
that point. The parties alleging have the burden of substantiating their
allegations.28
Second Issue:
Nature of Employment
Petitioner claims that he was not a managerial employee, and therefore,
entitled to the award granted by the labor arbiter.
Article 82 of the Labor Code exempts managerial employees from the
coverage of labor standards. Labor standards provide the working conditions
of employees, including entitlement to overtime pay and premium pay for
working on rest days.29 Under this provision, managerial employees are
"those whose primary duty consists of the management of the establishment
in which they are employed or of a department or subdivision."30
The Implementing Rules of the Labor Code state that managerial employees
are those who meet the following conditions:
"(1) Their primary duty consists of the management of the
establishment in which they are employed or of a department or
subdivision thereof;
"(2) They customarily and regularly direct the work of two or more
employees therein;
"(3) They have the authority to hire or fire other employees of lower
rank; or their suggestions and recommendations as to the hiring and
firing and as to the promotion or any other change of status of other
employees are given particular weight."31
The Court disagrees with the NLRCs finding that petitioner was a managerial
employee. However, petitioner was a member of the managerial staff, which
also takes him out of the coverage of labor standards. Like managerial
employees, officers and members of the managerial staff are not entitled to
the provisions of law on labor standards.32 The Implementing Rules of the
Labor Code define members of a managerial staff as those with the following
duties and responsibilities:
"(1) The primary duty consists of the performance of work directly
related to management policies of the employer;
"(2) Customarily and regularly exercise discretion and independent
judgment;

"(3) (i) Regularly and directly assist a proprietor or a managerial


employee whose primary duty consists of the management of the
establishment in which he is employed or subdivision thereof; or (ii)
execute under general supervision work along specialized or
technical lines requiring special training, experience, or knowledge;
or (iii) execute under general supervision special assignments and
tasks; and
"(4) who do not devote more than 20 percent of their hours worked in
a workweek to activities which are not directly and closely related to
the performance of the work described in paragraphs (1), (2), and (3)
above."33
As shift engineer, petitioners duties and responsibilities were as follows:
"1. To supply the required and continuous steam to all consuming
units at minimum cost.
"2. To supervise, check and monitor manpower workmanship as well
as operation of boiler and accessories.
"3. To evaluate performance of machinery and manpower.
"4. To follow-up supply of waste and other materials for fuel.
"5. To train new employees for effective and safety while working.
"6. Recommend parts and supplies purchases.
"7. To recommend personnel actions such as: promotion, or
disciplinary action.
"8. To check water from the boiler, feedwater and softener,
regenerate softener if beyond hardness limit.
"9. Implement Chemical Dosing.
"10. Perform other task as required by the superior from time to
time."34
The foregoing enumeration, particularly items 1, 2, 3, 5 and 7 illustrates that
petitioner was a member of the managerial staff. His duties and
responsibilities conform to the definition of a member of a managerial staff
under the Implementing Rules.
Petitioner supervised the engineering section of the steam plant boiler. His
work involved overseeing the operation of the machines and the performance
of the workers in the engineering section. This work necessarily required the
use of discretion and independent judgment to ensure the proper functioning
of the steam plant boiler. As supervisor, petitioner is deemed a member of
the managerial staff.35
Noteworthy, even petitioner admitted that he was a supervisor. In his
Position Paper, he stated that he was the foreman responsible for the
operation of the boiler.36 The term foreman implies that he was the
representative of management over the workers and the operation of the
department.37 Petitioners evidence also showed that he was the supervisor of

the steam plant.38 His classification as supervisor is further evident from the
manner his salary was paid. He belonged to the 10% of respondents 354
employees who were paid on a monthly basis; the others were paid only on a
daily basis.39
On the basis of the foregoing, the Court finds no justification to award
overtime pay and premium pay for rest days to petitioner.
WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERED.

G.R. Nos. 169295-96

November 20, 2006

REMINGTON INDUSTRIAL SALES CORPORATION, Petitioner,


vs.
ERLINDA CASTANEDA, Respondent.
DECISION
PUNO, J.:
Before this Court is the Petition for Review on Certiorari1 filed by Remington
Industrial Sales Corporation to reverse and set aside the Decision2 of the
Fourth Division of the Court of Appeals in CA-G.R. SP Nos. 64577 and
68477, dated January 31, 2005, which dismissed petitioners consolidated
petitions for certiorari, and its subsequent Resolution, 3 dated August 11,
2005, which denied petitioners motion for reconsideration.
The antecedent facts of the case, as narrated by the Court of Appeals, are as
follows:
The present controversy began when private respondent, Erlinda Castaneda
("Erlinda") instituted on March 2, 1998 a complaint for illegal dismissal,
underpayment of wages, non-payment of overtime services, non-payment of
service incentive leave pay and non-payment of 13th month pay against
Remington before the NLRC, National Capital Region, Quezon City. The
complaint impleaded Mr. Antonio Tan in his capacity as the Managing
Director of Remington.
Erlinda alleged that she started working in August 1983 as company cook
with a salary of Php 4,000.00 for Remington, a corporation engaged in the
trading business; that she worked for six (6) days a week, starting as early as
6:00 a.m. because she had to do the marketing and would end at around
5:30 p.m., or even later, after most of the employees, if not all, had left the
company premises; that she continuously worked with Remington until she
was unceremoniously prevented from reporting for work when Remington
transferred to a new site in Edsa, Caloocan City. She averred that she
reported for work at the new site in Caloocan City on January 15, 1998, only
to be informed that Remington no longer needed her services. Erlinda
believed that her dismissal was illegal because she was not given the notices
required by law; hence, she filed her complaint for reinstatement without loss
of seniority rights, salary differentials, service incentive leave pay, 13th
month pay and 10% attorneys fees.
Remington denied that it dismissed Erlinda illegally. It posited that Erlinda
was a domestic helper, not a regular employee; Erlinda worked as a cook and
this job had nothing to do with Remingtons business of trading in
construction or hardware materials, steel plates and wire rope products. It
also contended that contrary to Erlindas allegations that the (sic) she worked
for eight (8) hours a day, Erlindas duty was merely to cook lunch and
"merienda", after which her time was hers to spend as she pleased.
Remington also maintained that it did not exercise any degree of control
and/or supervision over Erlindas work as her only concern was to ensure
that the employees lunch and "merienda" were available and served at the
designated time. Remington likewise belied Erlindas assertion that her work

extended beyond 5:00 p.m. as she could only leave after all the employees
had gone. The truth, according to Remington, is that Erlinda did not have to
punch any time card in the way that other employees of Remington did; she
was free to roam around the company premises, read magazines, and to even
nap when not doing her assigned chores. Remington averred that the illegal
dismissal complaint lacked factual and legal bases. Allegedly, it was Erlinda
who refused to report for work when Remington moved to a new location in
Caloocan City.
In a Decision4 dated January 19, 1999, the labor arbiter dismissed the
complaint and ruled that the respondent was a domestic helper under the
personal service of Antonio Tan, finding that her work as a cook was not
usually necessary and desirable in the ordinary course of trade and business
of the petitioner corporation, which operated as a trading company, and that
the latter did not exercise control over her functions. On the issue of illegal
dismissal, the labor arbiter found that it was the respondent who refused to
go with the family of Antonio Tan when the corporation transferred office and
that, therefore, respondent could not have been illegally dismissed.
Upon appeal, the National Labor Relations Commission (NLRC) rendered a
Decision,5 dated November 23, 2000, reversing the labor arbiter, ruling, viz:
We are not inclined to uphold the declaration below that complainant is a
domestic helper of the family of Antonio Tan. There was no allegation by
respondent that complainant had ever worked in the residence of Mr. Tan.
What is clear from the facts narrated by the parties is that complainant
continuously did her job as a cook in the office of respondent serving the
needed food for lunch and merienda of the employees. Thus, her work as
cook inured not for the benefit of the family members of Mr. Tan but solely
for the individual employees of respondent.
Complainant as an employee of respondent company is even bolstered by no
less than the certification dated May 23, 1997 issued by the corporate
secretary of the company certifying that complainant is their bonafide
employee. This is a solid evidence which the Labor Arbiter simply brushed
aside. But, such error would not be committed here as it would be at the
height of injustice if we are to declare that complainant is a domestic helper.
Complainants work schedule and being paid a monthly salary of P4,000.00
are clear indication that she is a company employee who had been employed
to cater to the food needed by the employees which were being provided by
respondent to form part of the benefit granted them.
With regard to the issue of illegal dismissal, we believe that there is more
reason to believe that complainant was not dismissed because allegedly she
was the one who refused to work in the new office of respondent. However,
complainants refusal to join the workforce due to poor eyesight could not be
considered abandonment of work or voluntary resignation from employment.
Under the Labor Code as amended, an employee who reaches the age of sixty
years old (60 years) has the option to retire or to separate from the service
with payment of separation pay/retirement benefit.

In this case, we notice that complainant was already 60 years old at the time
she filed the complaint praying for separation pay or retirement benefit and
some money claims.
Based on Article 287 of the Labor Code as amended, complainant is entitled
to be paid her separation pay/retirement benefit equivalent to one-half (1/2)
month for every year of service. The amount of separation pay would be
based on the prescribed minimum wage at the time of dismissal since she
was then underpaid. In as much as complainant is underpaid of her wages,
it behooves that she should be paid her salary differential for the last three
years prior to separation/retirement.
xxx

xxx

xxx

WHEREFORE, premises considered, the assailed decision is hereby, SET


ASIDE, and a new one is hereby entered ordering respondents to pay
complainant the following:
1. Salary differential - P12,021.12 2. Service Incentive Leave Pay - 2,650.00
3. 13th Month Pay differential - 1,001.76 4. Separation Pay/retirement
benefit - 36,075.00
Total - P51,747.88
SO ORDERED.
Petitioner moved to reconsider this decision but the NLRC denied the motion.
This denial of its motion prompted petitioner to file a Petition for
Certiorari6 with the Court of Appeals, docketed as CA-G.R. SP No. 64577, on
May 4, 2001, imputing grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of the NLRC in (1) reversing in toto the decision of
the labor arbiter, and (2) awarding in favor of respondent salary differential,
service incentive leave pay, 13th month pay differential and separation
benefits in the total sum of P51,747.88.
While the petition was pending with the Court of Appeals, the NLRC rendered
another Decision7 in the same case on August 29, 2001. How and why
another decision was rendered is explained in that decision as follows:
On May 17, 2001, complainant filed a Manifestation praying for a resolution
of her Motion for Reconsideration and, in support thereof, alleges that,
sometime December 18, 2000, she mailed her Manifestation and Motion for
Reconsideration registered as Registered Certificate No. 188844; and that the
said mail was received by the NLRC, through a certain Roland Hernandez, on
December 26, 2000. Certifications to this effect was issued by the Postmaster
of the Sta. Mesa Post Office bearing the date May 11, 2001 (Annexes A and B,
Complainants Manifestation).
Evidence in support of complainants having actually filed a Motion for
Reconsideration within the reglementary period having been sufficiently
established, a determination of its merits is thus, in order.
On the merits, the NLRC found respondents motion for reconsideration
meritorious leading to the issuance of its second decision with the following
dispositive portion:

WHEREFORE, premises considered, the decision dated November 23, 2000,


is MODIFIED by increasing the award of retirement pay due the complainant
in the total amount of SIXTY TWO THOUSAND FOUR HUNDRED THIRTYSEVEN and 50/100 (P62,437.50). All other monetary relief so adjudged
therein are maintained and likewise made payable to the complainant.
SO ORDERED.
Petitioner challenged the second decision of the NLRC, including the
resolution denying its motion for reconsideration, through a second Petition
for Certiorari8 filed with the Court of Appeals, docketed as CA-G.R. SP No.
68477 and dated January 8, 2002, this time imputing grave abuse of
discretion amounting to lack of or excess of jurisdiction on the part of the
NLRC in (1) issuing the second decision despite losing its jurisdiction due to
the pendency of the first petition for certiorari with the Court of Appeals, and
(2) assuming it still had jurisdiction to issue the second decision
notwithstanding the pendency of the first petition for certiorari with the
Court of Appeals, that its second decision has no basis in law since
respondents motion for reconsideration, which was made the basis of the
second decision, was not filed under oath in violation of Section 14, Rule
VII9 of the New Rules of Procedure of the NLRC and that it contained no
certification as to why respondents motion for reconsideration was not
decided on time as also required by Section 10, Rule VI10 and Section 15,
Rule VII11 of the aforementioned rules.
Upon petitioners motion, the Court of Appeals ordered the consolidation of
the two (2) petitions, on January 24, 2002, pursuant to Section 7, par. b(3),
Rule 3 of the Revised Rules of the Court of Appeals. It summarized the
principal issues raised in the consolidated petitions as follows:
1. Whether respondent is petitioners regular employee or a domestic
helper;
2. Whether respondent was illegally dismissed; and
3. Whether the second NLRC decision promulgated during the
pendency of the first petition for certiorari has basis in law.
On January 31, 2005, the Court of Appeals dismissed the consolidated
petitions for lack of merit, finding no grave abuse of discretion on the part of
the NLRC in issuing the assailed decisions.
On the first issue, it upheld the ruling of the NLRC that respondent was a
regular employee of the petitioner since the former worked at the company
premises and catered not only to the personal comfort and enjoyment of Mr.
Tan and his family, but also to that of the employees of the latter. It agreed
that petitioner enjoys the prerogative to control respondents conduct in
undertaking her assigned work, particularly the nature and situs of her work
in relation to the petitioners workforce, thereby establishing the existence of
an employer-employee relationship between them.
On the issue of illegal dismissal, it ruled that respondent has attained the
status of a regular employee in her service with the company. It noted that
the NLRC found that no less than the companys corporate secretary certified
that respondent is a bonafide company employee and that she had a fixed

schedule and routine of work and was paid a monthly salary of P4,000.00;
that she served with petitioner for 15 years starting in 1983, buying and
cooking food served to company employees at lunch and merienda; and that
this work was usually necessary and desirable in the regular business of the
petitioner. It held that as a regular employee, she enjoys the constitutionally
guaranteed right to security of tenure and that petitioner failed to discharge
the burden of proving that her dismissal on January 15, 1998 was for a just
or authorized cause and that the manner of dismissal complied with the
requirements under the law.
Finally, on petitioners other arguments relating to the alleged irregularity of
the second NLRC decision, i.e., the fact that respondents motion for
reconsideration was not under oath and had no certification explaining why
it was not resolved within the prescribed period, it held that such violations
relate to procedural and non-jurisdictional matters that cannot assume
primacy over the substantive merits of the case and that they do not
constitute grave abuse of discretion amounting to lack or excess of
jurisdiction that would nullify the second NLRC decision.
The Court of Appeals denied petitioners contention that the NLRC lost its
jurisdiction to issue the second decision when it received the order indicating
the Court of Appeals initial action on the first petition for certiorari that it
filed. It ruled that the NLRCs action of issuing a decision in installments was
not prohibited by its own rules and that the need for a second decision was
justified by the fact that respondents own motion for reconsideration
remained unresolved in the first decision. Furthermore, it held that under
Section 7, Rule 65 of the Revised Rules of Court,12 the filing of a petition for
certiorari does not interrupt the course of the principal case unless a
temporary restraining order or a writ of preliminary injunction has been
issued against the public respondent from further proceeding with the case.
From this decision, petitioner filed a motion for reconsideration on February
22, 2005, which the Court of Appeals denied through a resolution dated
August 11, 2005.
Hence, the present petition for review.
The petitioner raises the following errors of law: (1) the Court of Appeals
erred in affirming the NLRCs ruling that the respondent was petitioners
regular employee and not a domestic helper; (2) the Court of Appeals erred in
holding that petitioner was guilty of illegal dismissal; and (3) the Court of
Appeals erred when it held that the issuance of the second NLRC decision is
proper.
The petition must fail. We affirm that respondent was a regular employee of
the petitioner and that the latter was guilty of illegal dismissal.
Before going into the substantive merits of the present controversy, we shall
first resolve the propriety of the issuance of the second NLRC decision.
The petitioner contends that the respondents motion for reconsideration,
upon which the second NLRC decision was based, was not under oath and
did not contain a certification as to why it was not decided on time as
required under the New Rules of Procedure of the NLRC. 13 Furthermore, the

former also raises for the first time the contention that respondents motion
was filed beyond the ten (10)-calendar day period required under the same
Rules,14 since the latter received a copy of the first NLRC decision on
December 6, 2000, and respondent filed her motion only on December 18,
2000. Thus, according to petitioner, the respondents motion for
reconsideration was a mere scrap of paper and the second NLRC decision
has no basis in law.
We do not agree.
It is well-settled that the application of technical rules of procedure may be
relaxed to serve the demands of substantial justice, particularly in labor
cases.15 Labor cases must be decided according to justice and equity and the
substantial merits of the controversy.16 Rules of procedure are but mere tools
designed to facilitate the attainment of justice.17 Their strict and rigid
application, which would result in technicalities that tend to frustrate rather
than promote substantial justice, must always be avoided.18
This Court has consistently held that the requirement of verification is
formal, and not jurisdictional. Such requirement is merely a condition
affecting the form of the pleading, non-compliance with which does not
necessarily render it fatally defective. Verification is simply intended to
secure an assurance that the allegations in the pleading are true and correct
and not the product of the imagination or a matter of speculation, and that
the pleading is filed in good faith.19 The court may order the correction of the
pleading if verification is lacking or act on the pleading although it is not
verified, if the attending circumstances are such that strict compliance with
the rules may be dispensed with in order that the ends of justice may thereby
be served.20
Anent the argument that respondents motion for reconsideration, on which
the NLRCs second decision was based, was filed out of time, such issue was
only brought up for the first time in the instant petition where no new issues
may be raised by a party in his pleadings without offending the right to due
process of the opposing party.
Nonetheless, the petitioner asserts that the respondent received a copy of the
NLRCs first decision on December 6, 2000, and the motion for
reconsideration was filed only on December 18, 2000, or two (2) days beyond
the ten (10)-calendar day period requirement under the New Rules of
Procedure of the NLRC and should not be allowed.21
This contention must fail.
Under Article 22322 of the Labor Code, the decision of the NLRC shall be final
and executory after ten (10) calendar days from the receipt thereof by the
parties.
While it is an established rule that the perfection of an appeal in the manner
and within the period prescribed by law is not only mandatory but
jurisdictional, and failure to perfect an appeal has the effect of rendering the
judgment final and executory, it is equally settled that the NLRC may
disregard the procedural lapse where there is an acceptable reason to excuse
tardiness in the taking of the appeal.23 Among the acceptable reasons

recognized by this Court are (a) counsel's reliance on the footnote of the
notice of the decision of the Labor Arbiter that "the aggrieved party may
appeal. . . within ten (10) working days";24 (b) fundamental consideration of
substantial justice;25 (c) prevention of miscarriage of justice or of unjust
enrichment, as where the tardy appeal is from a decision granting separation
pay which was already granted in an earlier final decision; 26 and (d) special
circumstances of the case combined with its legal merits 27 or the amount and
the issue involved.28
We hold that the particular circumstances in the case at bar, in accordance
with substantial justice, call for a liberalization of the application of this rule.
Notably, respondents last day for filing her motion for reconsideration fell on
December 16, 2000, which was a Saturday. In a number of cases,29 we have
ruled that if the tenth day for perfecting an appeal fell on a Saturday, the
appeal shall be made on the next working day. The reason for this ruling is
that on Saturdays, the office of the NLRC and certain post offices are closed.
With all the more reason should this doctrine apply to respondents filing of
the motion for reconsideration of her cause, which the NLRC itself found to
be impressed with merit. Indeed, technicality should not be permitted to
stand in the way of equitably and completely resolving the rights and
obligations of the parties for the ends of justice are reached not only through
the speedy disposal of cases but, more importantly, through a meticulous
and comprehensive evaluation of the merits of a case.
Finally, as to petitioners argument that the NLRC had already lost its
jurisdiction to decide the case when it filed its petition for certiorari with the
Court of Appeals upon the denial of its motion for reconsideration, suffice it
to state that under Section 7 of Rule 6530 of the Revised Rules of Court, the
petition shall not interrupt the course of the principal case unless a
temporary restraining order or a writ of preliminary injunction has been
issued against the public respondent from further proceeding with the case.
Thus, the mere pendency of a special civil action for certiorari, in connection
with a pending case in a lower court, does not interrupt the course of the
latter if there is no writ of injunction.31 Clearly, there was no grave abuse of
discretion on the part of the NLRC in issuing its second decision which
modified the first, especially since it failed to consider the respondents
motion for reconsideration when it issued its first decision.
Having resolved the procedural matters, we shall now delve into the merits of
the petition to determine whether respondent is a domestic helper or a
regular employee of the petitioner, and whether the latter is guilty of illegal
dismissal.
Petitioner relies heavily on the affidavit of a certain Mr. Antonio Tan and
contends that respondent is the latters domestic helper and not a regular
employee of the company since Mr. Tan has a separate and distinct
personality from the petitioner. It maintains that it did not exercise control
and supervision over her functions; and that it operates as a trading
company and does not engage in the restaurant business, and therefore
respondents work as a cook, which was not usually necessary or desirable to
its usual line of business or trade, could not make her its regular employee.
This contention fails to impress.

In Apex Mining Company, Inc. v. NLRC,32 this Court held that a househelper
in the staff houses of an industrial company was a regular employee of the
said firm. We ratiocinated that:
Under Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended, the
terms "househelper" or "domestic servant" are defined as follows:
"The term househelper as used herein is synonymous to the term domestic
servant and shall refer to any person, whether male or female, who renders
services in and about the employers home and which services are usually
necessary or desirable for the maintenance and enjoyment thereof, and
ministers exclusively to the personal comfort and enjoyment of the
employers family."
The foregoing definition clearly contemplates such househelper or domestic
servant who is employed in the employers home to minister exclusively to
the personal comfort and enjoyment of the employers family. Such definition
covers family drivers, domestic servants, laundry women, yayas, gardeners,
houseboys and similar househelps.
xxx

xxx

xxx

The criteria is the personal comfort and enjoyment of the family of the
employer in the home of said employer. While it may be true that the nature
of the work of a househelper, domestic servant or laundrywoman in a home
or in a company staffhouse may be similar in nature, the difference in their
circumstances is that in the former instance they are actually serving the
family while in the latter case, whether it is a corporation or a single
proprietorship engaged in business or industry or any other agricultural or
similar pursuit, service is being rendered in the staffhouses or within the
premises of the business of the employer. In such instance, they are
employees of the company or employer in the business concerned entitled to
the privileges of a regular employee.
Petitioner contends that it is only when the househelper or domestic servant
is assigned to certain aspects of the business of the employer that such
househelper or domestic servant may be considered as such an employee.
The Court finds no merit in making any such distinction. The mere fact that
the househelper or domestic servant is working within the premises of the
business of the employer and in relation to or in connection with its
business, as in its staffhouses for its guest or even for its officers and
employees, warrants the conclusion that such househelper or domestic
servant is and should be considered as a regular employee of the employer
and not as a mere family househelper or domestic servant as contemplated
in Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended.
In the case at bar, the petitioner itself admits in its position paper 33 that
respondent worked at the company premises and her duty was to cook and
prepare its employees lunch and merienda. Clearly, the situs, as well as the
nature of respondents work as a cook, who caters not only to the needs of
Mr. Tan and his family but also to that of the petitioners employees, makes
her fall squarely within the definition of a regular employee under the
doctrine enunciated in the Apex Mining case. That she works within
company premises, and that she does not cater exclusively to the personal

comfort of Mr. Tan and his family, is reflective of the existence of the
petitioners right of control over her functions, which is the primary indicator
of the existence of an employer-employee relationship.
Moreover, it is wrong to say that if the work is not directly related to the
employer's business, then the person performing such work could not be
considered an employee of the latter. The determination of the existence of an
employer-employee relationship is defined by law according to the facts of
each case, regardless of the nature of the activities involved.34 Indeed, it
would be the height of injustice if we were to hold that despite the fact that
respondent was made to cook lunch and merienda for the petitioners
employees, which work ultimately redounded to the benefit of the petitioner
corporation, she was merely a domestic worker of the family of Mr. Tan.
We note the findings of the NLRC, affirmed by the Court of Appeals, that no
less than the companys corporate secretary has certified that respondent is
a bonafide company employee;35 she had a fixed schedule and routine of
work and was paid a monthly salary of P4,000.00;36 she served with the
company for 15 years starting in 1983, buying and cooking food served to
company employees at lunch and merienda, and that this service was a
regular feature of employment with the company.37
Indubitably, the Court of Appeals, as well as the NLRC, correctly held that
based on the given circumstances, the respondent is a regular employee of
the petitioner.1wphi1
Having determined that the respondent is petitioners regular employee, we
now proceed to ascertain the legality of her dismissal from employment.
Petitioner contends that there was abandonment on respondents part when
she refused to report for work when the corporation transferred to a new
location in Caloocan City, claiming that her poor eyesight would make long
distance travel a problem. Thus, it cannot be held guilty of illegal dismissal.
On the other hand, the respondent claims that when the petitioner relocated,
she was no longer called for duty and that when she tried to report for work,
she was told that her services were no longer needed. She contends that the
petitioner dismissed her without a just or authorized cause and that she was
not given prior notice, hence rendering the dismissal illegal.
We rule for the respondent.
As a regular employee, respondent enjoys the right to security of tenure
under Article 27938 of the Labor Code and may only be dismissed for a
just39 or authorized40 cause, otherwise the dismissal becomes illegal and the
employee becomes entitled to reinstatement and full backwages computed
from the time compensation was withheld up to the time of actual
reinstatement.
Abandonment is the deliberate and unjustified refusal of an employee to
resume his employment.41 It is a form of neglect of duty; hence, a just cause
for termination of employment by the employer under Article 282 of the
Labor Code, which enumerates the just causes for termination by the
employer.42 For a valid finding of abandonment, these two factors should be
present: (1) the failure to report for work or absence without valid or

justifiable reason; and (2) a clear intention to sever employer-employee


relationship, with the second as the more determinative factor which is
manifested by overt acts from which it may be deduced that the employee
has no more intention to work.43 The intent to discontinue the employment
must be shown by clear proof that it was deliberate and unjustified. 44 This,
the petitioner failed to do in the case at bar.
Alongside the petitioners contention that it was the respondent who quit her
employment and refused to return to work, greater stock may be taken of the
respondents immediate filing of her complaint with the NLRC. Indeed, an
employee who loses no time in protesting her layoff cannot by any reasoning
be said to have abandoned her work, for it is well-settled that the filing of an
employee of a complaint for illegal dismissal with a prayer for reinstatement
is proof enough of her desire to return to work, thus, negating the employers
charge of abandonment.45
In termination cases, the burden of proof rests upon the employer to show
that the dismissal is for a just and valid cause; failure to do so would
necessarily mean that the dismissal was illegal. 46 The employers case
succeeds or fails on the strength of its evidence and not on the weakness of
the employees defense.47 If doubt exists between the evidence presented by
the employer and the employee, the scales of justice must be tilted in favor of
the latter.48
IN VIEW WHEREOF, the petition is DENIED for lack of merit. The assailed
Decision dated January 31, 2005, and the Resolution dated August 11,
2005, of the Court of Appeals in CA-G.R. SP Nos. 64577 and 68477 are
AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 96078 January 9, 1992


HILARIO RADA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Second Division) and
PHILNOR CONSULTANTS AND PLANNERS, INC., respondents.
Cabellero, Calub, Aumentado & Associates Law Offices for petitioner.
REGALADO, J.:
In this special civil action for certiorari, petitioner Rada seeks to annul the
decision of respondent National Labor Relations Commission (NLRC), dated
November 19, 1990, reversing the decision of the labor arbiter which ordered
the reinstatement of petitioner with backwages and awarded him overtime
pay. 1
The facts, as stated in the Comment of private respondent Philnor
Consultants and Planners, Inc. (Philnor), are as follows:
Petitioner's initial employment with this Respondent was
under a "Contract of Employment for a Definite Period" dated
July 7, 1977, copy of which is hereto attached and made an
integral part hereof as Annex A whereby Petitioner was hired
as "Driver" for the construction supervision phase of the
Manila North Expressway Extension, Second Stage
(hereinafter referred to as MNEE Stage 2) for a term of "about
24 months effective July 1, 1977.
xxx xxx xxx
Highlighting the nature of Petitioner's employment, Annex
A specifically provides as follows:
It is hereby understood that the Employer
does not have a continuing need for the
services of the Employee beyond the
termination date of this contract and that
the Employee's services shall automatically,
and without notice, terminate upon the
completion of the above specified phase of
the project; and that it is further understood
that the engagement of his/her services is
coterminus with the same and not with the
whole project or other phases thereof
wherein other employees of similar position
as he/she have been hired. (Par. 7,
emphasis supplied)
Petitioner's first contract of employment expired on June 30,
1979. Meanwhile, the main project, MNEE Stage 2, was not
finished on account of various constraints, not the least of
which was inadequate funding, and the same was extended

and remained in progress beyond the original period of 2.3


years. Fortunately for the Petitioner, at the time the first
contract of employment expired, Respondent was in need of
Driver for the extended project. Since Petitioner had the
necessary experience and his performance under the first
contract of employment was found satisfactory, the position
of Driver was offered to Petitioner, which he accepted. Hence
a second Contract of Employment for a Definite Period of 10
months, that is, from July 1, 1979 to April 30, 1980 was
executed between Petitioner and Respondent on July 7,
1979. . . .
In March 1980 some of the areas or phases of the project
were completed, but the bulk of the project was yet to be
finished. By that time some of those project employees whose
contracts of employment expired or were about to expire
because of the completion of portions of the project were
offered another employment in the remaining portion of the
project. Petitioner was among those whose contract was
about to expire, and since his service performance was
satisfactory, respondent renewed his contract of employment
in April 1980, after Petitioner agreed to the offer.
Accordingly, a third contract of employment for a definite
period was executed by and between the Petitioner and the
Respondent whereby the Petitioner was again employed as
Driver for 19 months, from May 1, 1980 to November 30,
1981, . . .
This third contract of employment was subsequently
extended for a number of times, the last extension being for
a period of 3 months, that is, from October 1, 1985 to
December 31, 1985, . . .
The last extension, from October 1, 1985 to December 31,
1985 (Annex E) covered by an "Amendment to the Contract
of Employment with a Definite Period," was not extended any
further because Petitioner had no more work to do in the
project. This last extension was confirmed by a notice on
November 28, 1985 duly acknowledged by the Petitioner the
very next day, . . .
Sometime in the 2nd week of December 1985, Petitioner
applied for "Personnel Clearance" with Respondent dated
December 9, 1985 and acknowledged having received the
amount of P3,796.20 representing conversion to cash of
unused leave credits and financial assistance. Petitioner also
released Respondent from all obligations and/or claims, etc.
in a "Release, Waiver and Quitclaim" . . .2
Culled from the records, it appears that on May 20, 1987, petitioner filed
before the NLRC, National Capital Region, Department of Labor and
Employment, a Complaint for non-payment of separation pay and overtime
pay. On June 3, 1987, Philnor filed its Position Paper alleging, inter alia, that

petitioner was not illegally terminated since the project for which he was
hired was completed; that he was hired under three distinct contracts of
employment, each of which was for a definite period, all within the estimated
period of MNEE Stage 2 Project, covering different phases or areas of the said
project; that his work was strictly confined to the MNEE Stage 2 Project and
that he was never assigned to any other project of Philnor; that he did not
render overtime services and that there was no demand or claim for him for
such overtime pay; that he signed a "Release, Waiver and Quitclaim"
releasing Philnor from all obligations and claims; and that Philnor's business
is to provide engineering consultancy services, including supervision of
construction services, such that it hires employees according to the
requirements of the project manning schedule of a particular contract. 3
On July 2, 1987, petitioner filed an Amended Complaint alleging that he was
illegally dismissed and that he was not paid overtime pay although he was
made to render three hours overtime work form Monday to Saturday for a
period of three years.
On July 7, 1987, petitioner filed his Position Paper claiming that he was
illegally dismissed since he was a regular employee entitled to security of
tenure; that he was not a project employee since Philnor is not engaged in
the construction business as to be covered by Policy Instructions No. 20; that
the contract of employment for a definite period executed between him and
Philnor is against public policy and a clear circumvention of the law designed
merely to evade any benefits or liabilities under the statute; that his position
as driver was essential, necessary and desirable to the conduct of the
business of Philnor; that he rendered overtime work until 6:00 p.m. daily
except Sundays and holidays and, therefore, he was entitled to overtime
pay. 4
In his Reply to Respondent's Position Paper, petitioner claimed that he was a
regular employee pursuant to Article 278(c) of the Labor Code and, thus, he
cannot be terminated except for a just cause under Article 280 of the Code;
and that the public respondent's ruling in Quiwa vs. Philnor Consultants and
Planners, Inc. 5 is not applicable to his case since he was an administrative
employee working as a company driver, which position still exists and is
essential to the conduct of the business of Philnor even after the completion
of his contract of employment. 6 Petitioner likewise avers that the contract of
employment for a definite period entered into between him and Philnor was a
ploy to defeat the intent of Article 280 of the Labor Code.
On July 28, 1987, Philnor filed its Respondent's Supplemental Position
Paper, alleging therein that petitioner was not a company driver since his job
was to drive the employees hired to work at the MNEE Stage 2 Project to and
from the filed office at Sto. Domingo Interchange, Pampanga; that the office
hours observed in the project were from 7:00 a.m. to 4:00 p.m. Mondays
through Saturdays; that Philnor adopted the policy of allowing certain
employees, not necessarily the project driver, to bring home project vehicles
to afford fast and free transportation to and from the project field office
considering the distance between the project site and the employees'
residence, to avoid project delays and inefficiency due to employee tardiness
caused by transportation problem; that petitioner was allowed to use a

project vehicle which he used to pick up and drop off some ten employees
along Epifanio de los Santos Avenue (EDSA), on his way home to Marikina,
Metro Manila; that when he was absent or on leave, another employee living
in Metro Manila used the same vehicle in transporting the same employees;
that the time used by petitioner to and from his residence to the project site
from 5:30 a.m. to 7:00 a.m. and from 4:00 p.m. to 6:00 p.m., or about three
hours daily, was not overtime work as he was merely enjoying the benefit and
convenience of free transportation provided by Philnor, otherwise without
such vehicle he would have used at least four hours by using public
transportation and spent P12.00 daily fare; that in the case of Quiwa
vs. Philnor Consultants and Planners, Inc., supra, the NLRC upheld Philnor's
position that Quiwa was a project employee and he was not entitled to
termination pay under Policy Instructions No. 20 since his employment was
coterminous with the completion of the project.
On August 25, 1987, Philnor filed its Respondent's Reply/Comments to
Complainant's Rejoinder and Reply, submitting therewith two letters dated
January 5, 1985 and February 6, 1985, signed by MNEE Stage 2 Project
employees, including herein petitioner, where they asked what termination
benefits could be given to them as the MNEE Stage 2 Project was nearing
completion, and Philnor's letter-reply dated February 22, 1985 informing
them that they are not entitled to termination benefits as they are
contractual/project employees.
On August 31, 1989, Labor Arbiter Dominador M. Cruz rendered a
decision 7 with the following dispositive portion:
WHEREFORE, in view of all the foregoing considerations,
judgment is hereby rendered:
(1) Ordering the respondent company to reinstate the
complainant to his former position without loss of seniority
rights and other privileges with full backwages from the time
of his dismissal to his actual reinstatement;
(2) Directing the respondent company to pay the
complainant overtime pay for the three excess hours of work
performed during working days from January 1983 to
December 1985; and
(3) Dismissing all other claims for lack of merit.
SO ORDERED.
Acting on Philnor's appeal, the NLRC rendered its assailed decision dated
November 19, 1990, setting aside the labor arbiter's aforequoted decision and
dismissing petitioner's complaint.
Hence this petition wherein petitioner charges respondent NLRC with grave
abuse of discretion amounting to lack of jurisdiction for the following
reasons:
1. The decision of the labor arbiter, dated August 31, 1989, has already
become final and executory;

2. The case of Quiwa vs. Philnor Consultants and Planners, Inc. is not binding
nor is it applicable to this case;
3. The petitioner is a regular employee with eight years and five months of
continuous services for his employer, private respondent Philnor;
4. The claims for overtime services, reinstatement and full backwages are
valid and meritorious and should have been sustained; and
5. The decision of the labor arbiter should be reinstated as it is more in
accord with the facts, the law and evidence.
The petition is devoid of merit.
1. Petitioner questions the jurisdiction of respondent NLRC in taking
cognizance of the appeal filed by Philnor in spite of the latter's failure to file a
supersedeas bond within ten days from receipt of the labor arbiter's decision,
by reason of which the appeal should be deemed to have been filed out of
time. It will be noted, however, that Philnor was able to file a bond although
it was made beyond the 10-day reglementary period.
While it is true that the payment of the supersedeas bond is an essential
requirement in the perfection of an appeal, however, where the fee had been
paid although payment was delayed, the broader interests of justice and the
desired objective of resolving controversies on the merits demands that the
appeal be given due course. Besides, it was within the inherent power of the
NLRC to have allowed late payment of the bond, considering that the
aforesaid decision of the labor arbiter was received by private respondent on
October 3, 1989 and its appeal was duly filed on October 13, 1989. However,
said decision did not state the amount awarded as backwages and overtime
pay, hence the amount of the supersedeas bond could not be determined. It
was only in the order of the NLRC of February 16, 1990 that the amount of
the supersedeas bond was specified and which bond, after an extension
granted by the NLRC, was timely filed by private respondent.
Moreover, as provided by Article 221 of the Labor Code, "in any proceeding
before the Commission or any of the Labor Arbiters, the rules of evidence
prevailing in Courts of law or equity shall not be controlling and it is the
spirit and intention of this Code that the Commission and its members and
the Labor Arbiters shall use every and all reasonable means to ascertain the
facts in each case speedily and objectively without regard to technicalities of
law or procedure, all in the interest of due process. 8 Finally, the issue of
timeliness of the appeal being an entirely new and unpleaded matter in the
proceedings below it may not now be raised for the first time before this
Court. 9
2. Petitioner postulates that as a regular employee, he is entitled to security
of tenure, hence he cannot be terminated without cause. Private respondent
Philnor believes otherwise and asserts that petitioner is merely a project
employee who was terminated upon the completion of the project for which
he was employed.
In holding that petitioner is a regular employee, the labor arbiter found that:

. . . There is no question that the complainant was employed


as driver in the respondent company continuously from July
1, 1977 to December 31, 1985 under various contracts of
employment. Similarly, there is no dispute that respondent
Philnor Consultant & Planner, Inc., as its business name
connotes, has been engaged in providing to its client(e)le
engineering consultancy services. The record shows that
while the different labor contracts executed by the parties
stipulated definite periods of engaging the services of the
complainant, yet the latter was suffered to continue
performing his job upon the expiration of one contract and
the renewal of another. Under these circumstances, the
complaint has obtained the status of regular employee, it
appearing that he has worked without fail for almost eight
years, a fraction of six months considered as one whole year,
and that his assigned task as driver was necessary and
desirable in the usual trade/business of the respondent
employer. Assuming to be true, as spelled out in the
employment contract, that the Employer has no "continuing
need for the services of the Employe(e) beyond the
termination date of this contract and that the Employee's
services shall automatically, and without notice, terminate
upon completion of the above specified phase of the project,"
still we cannot see our way clear why the complainant was
hired and his services engaged contract after contract
straight from 1977 to 1985 which, to our considered view,
lends credence to the contention that he worked as regular
driver ferrying early in the morning office personnel to the
company main office in Pampanga and bringing back late in
the afternoon to Manila, and driving company executives for
inspection of construction workers to the jobsites. All told,
we believe that the complainant, under the environmental
facts obtaining in the case at bar, is a regular employee, the
provisions
of
written
agreement
to
the
contrary notwithstanding and regardless of the oral
understanding of the parties . . . 10
On the other hand, respondent NLRC declared that, as between the
uncorroborated and unsupported assertions of petitioners and those of
private respondent which are supported by documents, greater credence
should be given the latter. It further held that:
Complainant was hired in a specific project or undertaking
as driver. While such project was still on-going he was hired
several times with his employment period fixed every time
his contract was renewed. At the completion of the specific
project or undertaking his employment contract was not
renewed.
We reiterate our ruling in the case of (Quiwa) vs. Philnor
Consultants and Planners, Inc., NLRC RAB III 5-1738-84, it is
being applicable in this case, viz.:

. . . While it is true that the activities


performed by him were necessary or
desirable in the usual business or trade of
the respondent as consultants, planners,
contractor and while it is also true that the
duration of his employment was for a period
of about seven years, these circumstances
did
not
make
him
a
regular employee in contemplation of Article
281 of (the) Labor Code. . . . 11
Our ruling in Sandoval Shipyards, Inc. vs. National Labor
Commission, et al. 12 is applicable to the case at bar. Thus:

Relations

We hold that private respondents were project employees


whose work was coterminous with the project or which they
were hired. Project employees, as distinguished from regular
or non-project employees, are mentioned in section 281 of
the Labor Code as those "where the employment has been
fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee."
Policy Instructions No. 20 of the Secretary of Labor, which
was issued to stabilize employer-employee relations in the
construction industry, provides:
Project employees are those employed in connection
with a particular construction project. Non-project
(regular) employees are those employed by a
construction company without reference to any
particular project.
Project employees are not entitled to termination pay
if they are terminated as a result of the completion of
the project or any phase thereof in which they are
employed, regardless of the number of projects in
which they have been employed by a particular
construction company. Moreover, the company is
not required to obtain clearance from the Secretary
of Labor in connection with such termination.
The petitioner cited three of its own cases wherein the
National Labor Relations Commission, Deputy Minister of
Labor and Employment Inciong and the Director of the
National Capital Region held that the layoff of its project
employees was lawful. Deputy Minister Inciong in TFU Case
No. 1530, In Re Sandoval Shipyards, Inc. Application for
Clearance to Terminate Employees, rendered the following
ruling on February 26, 1979;
We feel that there is merit in the contention of the applicant
corporation. To our mind, the employment of the employees
concerned were fixed for a specific project or undertaking.For

the nature of the business the corporation is engaged into is


one which will not allow it to employ workers for an indefinite
period.
It is significant to note that the corporation does not
construct vessels for sale or otherwise which will demand
continuous productions of ships and will need permanent or
regular workers. It merely accepts contracts for shipbuilding
or for repair of vessels form third parties and, only, on
occasion when it has work contract of this nature that it
hires workers to do the job which, needless to say, lasts only
for less than a year or longer.
The completion of their work or project automatically
terminates their employment, in which case, the employer is,
under the law, only obliged to render a report on the
termination of the employment. (139-140, Rollo of G.R. No.
65689) (Emphasis supplied)
In Cartagenas, et al. vs. Romago Electric Company, Inc., et al.,
held that:

13

we likewise

As an electrical contractor, the private respondent depends


for its business on the contracts it is able to obtain from real
estate developers and builders of buildings. Since its work
depends on the availability of such contracts or "projects,"
necessarily the duration of the employment's of this work
force is not permanent but co-terminus with the projects to
which they are assigned and from whose payrolls they are
paid. It would be extremely burdensome for their employer
who, like them, depends on the availability of projects, if it
would have to carry them as permanent employees and pay
them wages even if there are no projects for them to work on.
(Emphasis supplied.)
It must be stressed herein that although petitioner worked with Philnor as a
driver for eight years, the fact that his services were rendered only for a
particular project which took that same period of time to complete
categorizes him as a project employee. Petitioner was employed for one
specific project.
A non-project employee is different in that the employee is hired for more
than one project. A non-project employee, vis-a-vis a project employee, is best
exemplified in the case of Fegurin, et al. vs. National Labor Relations
Commission, et al. 14 wherein four of the petitioners had been working with
the company for nine years, one for eight years, another for six years, the
shortest term being three years. In holding that petitioners are regular
employees, this Court therein explained:
Considering the nature of the work of petitioners, that of
carpenter, laborer or mason, their respective jobs would
actually be continuous and on-going. When a project to
which they are individually assigned is completed, they
would be assigned to the next project or a phase thereof. In

other words, they belonged to a "work pool" from which the


company would draw workers for assignment to other
projects at its discretion. They are, therefore, actually "nonproject employees."
From the foregoing, it is clear that petitioner is a project employee
considering that he does not belong to a "work pool" from which the company
would draw workers for assignment to other projects at its discretion. It is
likewise apparent from the facts obtaining herein that petitioner was utilized
only for one particular project, the MNEE Stage 2 Project of respondent
company. Hence, the termination of herein petitioner is valid by reason of the
completion of the project and the expiration of his employment contract.
3. Anent the claim for overtime compensation, we hold that petitioner is
entitled to the same. The fact that he picks up employees of Philnor at
certain specified points along EDSA in going to the project site and drops
them off at the same points on his way back from the field office going home
to Marikina, Metro Manila is not merely incidental to petitioner's job as a
driver. On the contrary, said transportation arrangement had been adopted,
not so much for the convenience of the employees, but primarily for the
benefit of the employer, herein private respondent. This fact is inevitably
deducible from the Memorandum of respondent company:
The herein Respondent resorted to the above transport
arrangement because from its previous project construction
supervision experiences, Respondent found out that project
delays and inefficiencies resulted from employees' tardiness;
and that the problem of tardiness, in turn, was aggravated
by transportation problems, which varied in degrees in
proportion to the distance between the project site and the
employees' residence. In view of this lesson from experience,
and as a practical, if expensive, solution to employees'
tardiness and its concomitant problems, Respondent
adopted the policy of allowing certain employees not
necessarily project drivers to bring home project vehicles,
so that employees could be afforded fast, convenient and free
transportation to and from the project field office. . . . 15
Private respondent does not hesitate to admit that it is usually the project
driver who is tasked with picking up or dropping off his fellow employees.
Proof thereof is the undisputed fact that when petitioner is absent, another
driver is supposed to replace him and drive the vehicle and likewise pick up
and/or drop off the other employees at the designated points on EDSA. If
driving these employees to and from the project site is not really part of
petitioner's job, then there would have been no need to find a replacement
driver to fetch these employees. But since the assigned task of fetching and
delivering employees is indispensable and consequently mandatory, then the
time required of and used by petitioner in going from his residence to the
field office and back, that is, from 5:30 a.m. to 7:00 a.m. and from 4:00 p.m.
to around 6:00 p.m., which the labor arbiter rounded off as averaging three
hours each working day, should be paid as overtime work. Quintessentially,

petitioner should be given overtime pay for the three excess hours of work
performed during working days from January, 1983 to December, 1985.
WHEREFORE, subject to the modification regarding the award of overtime
pay to herein petitioner, the decision appealed from is AFFIRMED in all other
respects.
SO ORDERED.

G.R. No. L-18939

August 31, 1964

NATIONAL WATERWORKS and SEWERAGE AUTHORITY, petitioner,


vs.
NWSA CONSOLIDATED UNIONS, ET AL., respondents.
Govt. Corp. Counsel Simeon M. Gopengco and Asst. Govt. Corp. Counsel Arturo
B. Santos for petitioner.
Cipriano Cid and Associates and Israel Bocobo for respondents.
Alfredo M. Montesa for intervenor-respondent.
BAUTISTA ANGELO, J.:
Petitioner National Waterworks & Sewerage Authority is a government-owned
and controlled corporation created under Republic Act No. 1383, while
respondent NWSA Consolidated Unions are various labor organizations
composed of laborers and employees of the NAWASA. The other respondents
are intervenors Jesus Centeno, et al., hereinafter referred to as intervenors.
Acting on a certification of the President of the Philippines, the Court of
Industrial Relations conducted a hearing on December 5, 1957 on the
controversy then existing between petitioner and respondent unions which
the latter embodied in a "Manifesto" dated December 51, 1957, namely:
implementation of the 40-Hour Week Law (Republic Act No. 1880); alleged
violations of the collective bargaining agreement dated December 28, 1956
concerning "distress pay"; minimum wage of P5.25; promotional
appointments and filling of vacancies of newly created positions; additional
compensation for night work; wage increases to some laborers and
employees; and strike duration pay. In addition, respondent unions raised
the issue of whether the 25% additional compensation for Sunday work
should be included in computing the daily wage and whether, in determining
the daily wage of a monthly-salaried employee, the salary should be divided
by 30 days.
On December 13, 1957, petitioner and respondent unions, conformably to a
suggestion of the Court of Industrial Relations, submitted a joint stipulation
of facts on the issues concerning the 40-Hour Week Law, "distress pay,"
minimum wage of P5.25, filling of vacancies, night compensation, and salary
adjustments, reserving the right to present evidence on matters not covered
therein. On December 4, 1957, respondent intervenors filed a petition in
intervention on the issue for additional compensation for night work. Later,
however, they amended their petition by including a new demand for
overtime pay in favor of Jesus Centeno, Cesar Cabrera, Feliciano Duiguan,
Cecilio Remotigue, and other employees receiving P4,200.00 per annum or
more.
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. 1wph1.t
On February 5, 1958, petitioner filed a motion to dismiss the claim for
overtime pay alleging that respondent Court of Industrial Relations was
without jurisdiction to pass upon the same because, as mere intervenors, the

latter cannot raise new issues not litigated in the principal case, the same
not being the lis mota therein involved. To this motion the intervenors filed
an opposition. Thereafter, respondent court issued an order allowing the
issue to be litigated. Petitioner's motion to reconsider having been denied, it
filed its answer to the petition for intervention. Finally, on January 16, 1961,
respondent court rendered its decision stating substantially as follows:
The NAWASA is an agency not performing governmental functions and,
therefore, is liable to pay additional compensation for work on Sundays and
legal holidays conformably to Commonwealth Act No. 444, known as the
Eight-Hour Labor Law, even if said days should be within the staggered five
work days authorized by the President; the intervenors do not fall within the
category of "managerial employees" as contemplated in Republic Act 2377
and so are not exempt from the coverage of the Eight-Hour Labor Law; even
those intervenors attached to the General Auditing Office and the Bureau of
Public Works come within the purview of Commonwealth Act No. 444; the
computation followed by NAWASA in computing overtime compensation is
contrary to Commonwealth Act 444; the undertime of a worker should not be
set-off against the worker in determining whether the latter has rendered
service in excess of eight hours for that day; in computing the daily wage of
those employed on daily basis, the additional 25% compensation for Sunday
work should be included; the computation used by the NAWASA for monthly
salaried employees to wit, dividing the monthly basic pay by 30 is erroneous;
the minimum wage awarded by respondent court way back on November 25,
1950 in Case No. 359-V entitled MWD Workers Union v. Metropolitan Water
District, applies even to those who were employed long after the
promulgation of the award and even if their workers are hired only as
temporary, emergency and casual workers for a definite period and for a
particular project; the authority granted to NAWASA by the President to
stagger the working days of its workers should be limited exclusively to those
specified in the authorization and should not be extended to others who are
not therein specified; and under the collective bargaining agreement entered
into between the NAWASA and respondent unions on December 28, 1956, as
well as under Resolution No. 29, series of 1957 of the Grievance Committee,
even those who work outside the sewerage chambers should be paid 25%
additional compensation as "distress pay."
Its motion for reconsideration having been denied, NAWASA filed the present
petition for review raising merely questions of law. Succinctly, these
questions are:
1. Whether NAWASA is performing governmental functions and,
therefore, essentially a service agency of the government;
2. Whether NAWASA is a public utility and, therefore, exempted from
paying additional compensation for work on Sundays and legal
holidays;
3. Whether the intervenors are "managerial employees" within the
meaning of Republic Act 2377 and, therefore, not entitled to the
benefits of Commonwealth Act No. 444, as amended;

4. Whether respondent Court of Industrial Relations has jurisdiction


to adjudicate overtime pay considering that this issue was not among
the demands of respondent union in the principal case but was
merely dragged into the case by the intervenors;

function corporation because it enjoys that attribute of sovereignty. Petitioner


likewise invokes the opinion of the Secretary of Justice which holds that the
NAWASA being essentially a service agency of the government can be
classified as a corporation performing governmental function.

5. Whether those attached to the General Auditing Office and the


Bureau of Public Works come within the purview of Commonwealth
Act No. 444, as amended;

With this contention, we disagree. While under republic Act No. 1383 the
NAWASA is considered as a public corporation it does not show that it was so
created for the government of a portion of the State. It should be borne in
mind that there are two kinds of public corporation, namely, municipal and
non-municipal. A municipal corporation in its strict is the body politic
constituted by the inhabitants of a city or town for the purpose of local
government thereof. It is the body politic established by law particularly as
an agency of the State to assist in the civil government of the country chiefly
to regulate the local and internal affairs of the city or town that is
incorporated (62 C.J.S., p. 61). Non- municipal corporations, on the other
hand, are public corporations created as agencies of the State for limited
purposes to take charge merely of some public or state work other than
community government (Elliot, Municipal Corporations, 3rd ed., p. 7;
McQuillin, Mun. Corp., 3rd ed., Vol. 1, p. 476).

6. In determining whether one has worked in excess of eight hours,


whether the undertime for that day should be set off;
7. In computing the daily wage, whether the additional compensation
for Sunday work should be included;
8. What is the correct method to determine the equivalent daily wage
of a monthly salaried employee, especially in a firm which is a public
utility?;
9. Considering that the payment of night compensation is not by
virtue of any statutory provision but emanates only from an award of
respondent Court of Industrial Relations, whether the same can be
made retroactive and cover a period prior to the promulgation of the
award;
10. Whether the minimum wage fixed and awarded by respondent
Court of Industrial Relations in another case (MWD Workers Union v.
MWD CIR Case No. 359-V) applies to those employed long after the
promulgation thereof, whether hired as temporary, emergency and
casual workers for a definite period and for a specific project;
11. How should the collection bargaining agreement of December 28,
1956 and Resolution No. 29, series of 1957 of the Grievance
Committee be interpreted and construed insofar as the stipulations
therein contained relative to "distress pay" is concerned?; and
12. Whether, under the first indorsement of the President of the
Philippines dated August 12, 1957, which authorizes herein
petitioner to stagger the working days of its employees and laborers,
those whose services are indispensably continuous throughout the
year may be staggered in the same manner as the pump, valve, filter
and chlorine operators, guards, watchmen, medical services, and
those attached to the recreational facilities.
DISCUSSION OF THE ISSUES
1. Is NAWASA an agency that performs governmental functions and,
therefore, essentially a service agency of the government? Petitioner sustains
the affirmative because, under Republic Act No. 1383, it is a public
corporation, and such it exist a an agency independent of the Department of
Public Works of our government. It also contends that under the same Act
the Public Service Commission does not have control, supervision or
jurisdiction over it in the fixing of rates concerning of the operation of the
service. It can also incur indebtedness or issue bonds that are exempt from
taxation which circumstance implies that it is essentially a government-

The National Waterworks and Sewerage Authority was not created for
purposes of local government. It was created for the "purpose of consolidating
and centralizing all waterworks, sewerage and drainage system in the
Philippines under one control and direction and general supervision." The
NAWASA therefore, though a public corporation, is not a municipal
corporation, because it is not an agency of the State to regulate or administer
the local affairs of the town, city, or district which is incorporated.
Moreover, the NAWASA, by its charter, has personality and power separate
and distinct from the government. It is an independent agency of the
government although it ids placed, for administrative purposes, under the
Department of Public Works and Communications. It has continuous
succession under its corporate name and sue and be sued in court. It has
corporate power to exercised by its board of directors; it has its own assets
and liabilities; and it may charge rates for its services.
In Bacani vs. National Coconut Corporation, 53 O.G., 2798, we stated: "To
recapitulate, we may mention that the term 'Government of the Republic of
the Philippines'... refers only to that government entity through which the
functions of the government are exercised as an attribute of sovereignty, and
in this are included those arms through which political authority is made
effective whether they be provincial, municipal or other form of local
government. These are what we call municipal corporations. They do not
include government entities which are given a corporate personality separate
and distinct from the government and which are governed by the Corporation
Law. Their powers, duties and liabilities have to be determined in the light of
that law and of their corporate charter."
The same conclusion may be reached by considering the powers, functions
and activities of the NAWASA which are enumerated in Section 2, Republic
Act No. 1383, among others, as follows:

(e) To construct, maintain and operate mains pipes, water reservoirs,


machinery, and other waterworks for the purpose of supplying water
to the inhabitants of its zone, both domestic and other purposes; to
purify the source of supply, regulate the control and use, and
prevent the waste of water; and to fix water rates and provide for the
collection of rents therefor;
(f) To construct, maintain and operate such system of sanitary
sewers as may be necessary for the proper sanitation of the cities
and towns comprising the Authority and to charge and collect such
sums for construction and rates for this service as may be
determined by the Board to be equitable and just;
(g) To acquire, purchase, hold, transfer, sell, lease, rent, mortgage,
encumber, and otherwise dispose of real and personal property,
including rights and franchises, within the Philippines, as authorized
by the purpose for which the Authority was created and reasonably
and necessarily required of the transaction of the lawful business of
the same, unless otherwise provided in this Act;
The business of providing water supply and sewerage service, as this Court
held, "may for all practical purposes be likened to an industry engaged in by
coal companies, gas companies, power plants, ice plants, and the like"
(Metropolitan Water District v. Court of Industrial Relations, et al., L-4488,
August 27, 1952). These are but mere ministrant functions of government
which are aimed at advancing the general interest of society. As such they
are optional (Bacani v. National Coconut Corporation, supra). And it has
been held that "although the state may regulate the service and rates of
water plants owned and operated by municipalities, such property is not
employed for governmental purposes and in the ownership operation thereof
the municipality acts in its proprietary capacity, free from legislative
interference" (1 McQuillin, p. 683). In Mendoza v. De Leon, 33 Phil., 508, 509,
this Court also held:
Municipalities of the Philippine Islands organized under the
Municipal Code have both governmental and corporate or business
functions. Of the first class are the adoption of regulations against
fire and disease, preservation of the public peace, maintenance of
municipal prisons, establishment of primary schools and postoffices, etc. Of the latter class are the establishment of municipal
waterworks for the use of the inhabitants, the construction and
maintenance of municipal slaughterhouses, markets, stables,
bathing establishments, wharves, ferries, and fisheries. ...
On the strength of the foregoing considerations, our conclusions is that the
NAWASA is not an agency performing governmental functions. Rather, it
performs proprietary functions, and as such comes within the coverage of
Commonwealth Act No. 444.
2. We agree with petitioner that the NAWASA is a public utility because its
primary function is to construct, maintain and operate water reservoirs and
waterworks for the purpose of supplying water to the inhabitants, as well as
consolidate and centralize all water supplies and drainage systems in the

Philippines. We likewise agree with petitioner that a public utility is exempt


from paying additional compensation for work on Sundays and legal holidays
conformably to Section 4 of Commonwealth Act No. 444 which provides that
the prohibition, regarding employment of Sundays and holidays unless an
additional sum of 25% of the employee's regular remuneration is paid shall
not apply to public utilities such as those supplying gas, electricity, power,
water or providing means of transportation or communication. In other
words, the employees and laborers of NAWASA can be made to work on
Sundays and legal holidays without being required to pay them an additional
compensation of 25%.
It is to be noted, however, that in the case at bar it has been stipulated that
prior to the enactment of Republic Act No. 1880, providing for the
implementation of the 40-Hour Week Law, the Metropolitan Water District
had been paying 25% additional compensation for work on Sundays and
legal holidays to its employees and laborers by virtue of Resolution No. 47,
series of 1948, of its board of Directors, which practice was continued by the
NAWASA when the latter took over the service. And in the collective
bargaining agreement entered into between the NAWASA and respondent
unions it was agreed that all existing benefits enjoyed by the employees and
laborers prior to its effectivity shall remain in force and shall form part of the
agreement, among which certainly is the 25% additional compensation for
work on Sundays and legal holidays therefore enjoyed by said laborers and
employees. It may, therefore, be said that while under Commonwealth Act
No. 444 a public utility is not required to pay additional compensation to its
employees and workers for work done on Sundays and legal holidays, there
is, however, no prohibition for it to pay such additional compensation if it
voluntarily agrees to do so. The NAWASA committed itself to pay this
additional compensation. It must pay not because of compulsion of law but
because of contractual obligation.
3. This issue raises the question whether the intervenors are "managerial
employees" within the meaning of Republic Act 2377 and as such are not
entitled to the benefits of Commonwealth Act No. 444, as amended. Section 2
of Republic Act 2377 provides:
Sec. 2. This Act shall apply to all persons employed in any industry
or occupation, whether public or private with the exception of farm
laborers, laborers who prefer to be paid on piece work basis,
managerial employees, outside sales personnel, domestic servants,
persons in the personal service of another and members of the family
of the employer working for him.
The term "managerial employee" in this Act shall mean either (a) any
person whose primary duty consists of the management of the
establishment in which he is employed or of a customarily recognized
department or subdivision thereof, or (b) ally officer or member of the
managerial staff.
One of the distinguishing characteristics managerial employee may be known
as expressed in the explanatory note of Republic Act No. 2377 is that he is
not subject to the rigid observance of regular office hours. The true worth of
his service does not depend so much on the time he spends in office but

more on the results he accomplishes. In fact, he is free to go out of office


anytime.
On the other hand, in the Fair Labor Standards Act of the United States,
which was taken into account by the sponsors of the present Act in defining
the degree of work of a managerial employee, we find interesting the following
dissertation of the nature of work o a managerial employee:
Decisions have consumed and applied a regulation in substance
providing that the term "professional" employee shall mean any
employee ... who is engaged in work predominantly intellectual and
varied in character, and requires the consistent exercise of discretion
and judgment in its performance and is of such a character that the
output produced or the result accomplished cannot be standardized
in relation to a given period of time, and whose hours of work of the
same nature as that performed by non-exempt employees do not
exceed twenty percent of the hours worked in the work week by the
non-exempt employees, except where such work is necessarily
incident to work of a professional nature; and which requires, first,
knowledge of an advanced type in a field of science or learning
customarily acquired by a prolonged course or specialized
intellectual instruction and study, or, second, predominantly original
and creative in character in a recognized field of artistic
endeavor. Stranger v. Vocafilm Corp., C.C.A. N.Y., 151 F. 2d 894, 162
A.L.R. 216; Hofer v. Federal Cartridge Corp., D.C. Minn. 71 F. Supp.
243; Aulen v. Triumph Explosive, D.C. Md., 58 P. Supp. 4." (56 C.J.S.,
p. 666).
Under the provisions of the Fair Labor Standards Act 29 U.S.C.A.,
Section 23 (a) (1), executive employees are exempted from the
statutory requirements as to minimum wages and overtime pay. ...
Thus the exemption attaches only where it appears that the
employee's primary duty consists of the management of the
establishment or of a customarily recognized department or
subdivision thereof, that he customarily and regularly directs the
work of other employees therein, that he has the authority to hire or
discharge other employees or that his suggestions and
recommendations as to the hiring or discharging and as to the
advancement and promotion or any other change of status of other
employees are given particular weight, that he customarily and,
regularly exercises discretionary powers, ... . (56 C.J.S., pp. 666668.)
The term "administrative employee" ordinarily applies only to an
employee who is compensated for his services at a salary or fee of not
less than a prescribed sum per month, and who regularly and
directly assists an employee employed in a bona fide executive or
administrative capacity, where such assistance is nonmanual in
nature and requires the exercise of discretion and independent
judgment; or who performs under only general supervision,
responsible non-manual office or field work, directly related to
management policies or general business operations, along

specialized or technical lines' requiring special training experience, or


knowledge, and the exercise of discretion and independent judgment;
... . (56 C.J.S., p. 671.)
The reason underlying each exemption is in reality apparent.
Executive, administrative and professional workers are not usually
employed at hourly wages nor is it feasible in the case of such
employees to provide a fixed hourly rate of pay nor maximum hours
of labor, Helena Glendale Perry Co. v. Walling, C.C.A. Ark. 132 F. 2d
616, 619. (56 C.J.S., p. 664.)
The philosophy behind the exemption of managerial employees from the 8Hour Labor Law is that such workers are not usually employed for every
hour of work but their compensation is determined considering their special
training, experience or knowledge which requires the exercise of discretion
and independent judgment, or perform work related to management policies
or general business operations along specialized or technical lines. For these
workers it is not feasible to provide a fixed hourly rate of pay or maximum
hours of labor.
The intervenors herein are holding position of responsibility. One of them is
the Secretary of the Board of Directors. Another is the private secretary of the
general manager. Another is a public relations officer, and many other chiefs
of divisions or sections and others are supervisors and overseers. Respondent
court, however, after examining carefully their respective functions, duties
and responsibilities found that their primary duties do not bear any direct
relation with the management of the NAWASA, nor do they participate in the
formulation of its policies nor in the hiring and firing of its employees. The
chiefs of divisions and sections are given ready policies to execute and
standard practices to observe for their execution. Hence, it concludes, they
have little freedom of action, as their main function is merely to carry out the
company's orders, plans and policies.
To the foregoing comment, we agree. As a matter of fact, they are required to
observe working hours and record their time work and are not free to come
and go to their offices, nor move about at their own discretion. They do not,
therefore, come within the category of "managerial employees" within the
meaning of the law.
4. Petitioner's claim is that the issue of overtime compensation not having
been raised in the original case but merely dragged into it by intervenors,
respondent court cannot take cognizance thereof under Section 1, Rule 13, of
the Rules of Court.
Intervenors filed a petition for intervention alleging that being employees of
petitioner who have worked at night since 1954 without having been fully
compensated they desire to intervene insofar as the payment of their night
work is concerned. Petitioner opposed the petition on the ground that this
matter was not in the original case since it was not included in the dispute
certified by the President of the Philippines to the Court of Industrial
Relations. The opposition was overruled. This is now assigned as error.
There is no dispute that the intervenors were in the employ of petitioner
when they intervened and that their claim refers to the 8-Hour Labor Law

and since this Court has held time and again that disputes that call for the
application of the 8-Hour Labor Law are within the jurisdiction of the Court
of Industrial Relations if they arise while the employer-employee relationship
still exists, it is clear that the matter subject of intervention comes within the
jurisdiction of respondent court.1 The fact that the question of overtime
payment is not included in the principal casein the sense that it is not one of
the items of dispute certified to by the President is of no moment, for it comes
within the sound discretion of the Court of Industrial Relations. Moreover, in
labor disputes technicalities of procedure should as much as possible be
avoided not only in the interest of labor but to avoid multiplicity of action.
This claim has no merit.
5. It is claimed that some intervenors are occupying positions in the General
Auditing Office and in the Bureau of Public Works for they are appointed
either by the Auditor General or by the Secretary of Public Works and,
consequently, they are not officers of the NAWASA but of the insular
government, and as such are not covered by the Eight-Hour Labor Law.
The status of the GAO employees assigned to, and working in, governmentcontrolled corporations has already been decided by this Court in National
Marketing Corporation, et al. v. Court of Industrial Relations, et al., L-17804,
January 31, 1963. In said case, this Court said:
We agree with appellants that members of the auditing force can not
be regarded as employees of the PRISCO in matters relating to their
compensation. They are appointed and supervised by the Auditor
General, have an independent tenure, and work subject to his orders
and instructions, and not to those of the management of appellants.
Above all, the nature of their functions and duties, for the purpose of
fiscal control of appellants' operations, imperatively demands, as a
matter of policy, that their positions be completely independent from
interference or inducement on the part of the supervised
management, in order to assure a maximum of impartiality in the
auditing functions. Both independence and impartiality require that
the employees in question be utterly free from apprehension as to
their tenure and from expectancy of benefits resulting from any
action of the management, since in either case there would be an
influence at work that could possibly lead, if not to positive
malfeasance, to, laxity and indifference that would gradually erode
and endanger the critical supervision entrusted to these auditing
employees.
The inclusion of their items in the PRISCO budget should be viewed
as no more than a designation by the national government of the
fund or source from which their emoluments are to be drawn, and
does not signify that they are thereby made PRISCO employees.
The GAO employees assigned to the NAWASA are exactly in the same
position regarding their status, compensation and right to overtime pay as
the rest of the GAO employees assigned to the defunct PRISCO, and following
our ruling in the PRISCO case, we hold that the GAO employees herein are
not covered by the 8-Hour Labor Law, but by other pertinent laws on the
matter.

The same thing may be said with regard to the employer of the Bureau of
Public Works assigned to, and working in, the NAWASA. Their position is the
same as that of the GAO employees. Therefore, they are not also covered by
the 8-Hour Labor Law.
The respondent court, therefore, erred in considering them as employees of
the NAWASA for the mere reason that they are paid out of its fund and are
subject to its administration and supervision.
6. A worker is entitled to overtime pay only for work in actual service beyond
eight hours. If a worker should incur in undertime during his regular daily
work, should said undertime be deducted in computing his overtime work?
Petitioner sustains the affirmative while respondent unions the negative, and
respondent court decided the dispute in favor of the latter. Hence this error.
There is merit in the decision of respondent court that the method used by
petitioner in offsetting the overtime with the undertime and at the same time
charging said undertime to the accrued leave of the employee is unfair, for
under such method the employee is made to pay twice for his undertime
because his leave is reduced to that extent while he was made to pay for it
with work beyond the regular working hours. The proper method should be
to deduct the undertime from the accrued leave but pay the employee the
overtime to which he is entitled. This method also obviates the irregular
schedule that would result if the overtime should be set off against the
undertime for that would place the schedule for working hours dependent on
the employee.
7. and 8. How is a daily wage of a weekly employee computed in the light of
Republic Act 1880?
According to petitioner, the daily wage should be computed exclusively on the
basic wage, without including the automatic increase of 25% corresponding
to the Sunday differential. To include said Sunday differential would be to
increase the basic pay which is not contemplated by said Act. Respondent
court disagrees with this manner of computation. It holds that Republic Act
1880 requires that the basic weekly wage and the basic monthly salary
should not be diminished notwithstanding the reduction in the number of
working days a week. If the automatic increase corresponding to the salary
differential should not be included there would be a diminution of the weekly
wage of the laborer concerned. Of course, this should only benefit those who
have been working seven days a week and had been regularly receiving 25%
additional compensation for Sunday work before the effectivity of the Act.
It is evident that Republic Act 1880 does not intend to raise the wages of the
employees over what they are actually receiving. Rather, its purpose is to
limit the working days in a week to five days, or to 40 hours without however
permitting any reduction in the weekly or daily wage of the compensation
which was previously received. The question then to be determined is: what
is meant by weekly or daily wage? Does the regular wage include differential
payments for work on Sundays or at nights, or is it the total amount received
by the laborer for whatever nature or concept?
It has been held that for purposes of computing overtime compensation a
regular wage includes all payments which the parties have agreed shall be

received during the work week, including piece work wages, differential
payments for working at undesirable times, such as at night or on Sundays
and holidays, and the cost of board and lodging customarily furnished the
employee (Walling v. Yangermah-Reynolds Hardwook Co., 325 U.S. 419;
Walling v. Harischfeger Corp., 325 U.S. 427.) The "regular rate" of pay also
ordinarily includes incentive bonus or profit-sharing payments made in
addition to the normal basic pay (56 C.J.S., pp. 704-705), and it was also
held that the higher rate for night, Sunday and holiday work is just as much
a regular rate as the lower rate for daytime work. The higher rate is merely
an inducement to accept employment at times which are not as desirable
from a workman's standpoint (International L. Ass'n v. National Terminals
Corp. C.C. Wise, 50 F. Supp. 26, affirmed C.C.A. Carbunao v. National
Terminals Corp. 139 F. 2d 853).
Respondent court, therefore, correctly included such differential pay in
computing the weekly wages of those employees and laborers who worked
seven days a week and were continuously receiving 25% Sunday differential
for a period of three months immediately preceding the implementation of
Republic Act 1880.
The next issue refers to the method of computing the daily rate of a monthlysalaried employee. Petitioner in computing this daily rate divides the monthly
basic pay of the employee by 30 in accordance with Section 254 of the
Revised Administrative Code which in part provides that "In making payment
for part of a month, the amount to be paid for each day shall be determined
by dividing the monthly pay into as many parts as there are days in the
particular month." The respondent court disagrees with this method and
holds that the way to determine the daily rate of a monthly employee is to
divide the monthly salary by the actual number of working hours in the
month. Thus, according to respondent court, Section 8 (g) of Republic Act No.
1161, as amended by Republic Act 1792, provides that the daily rate of
compensation is the total regular compensation for the customary number of
hours worked each day. In other words, according to respondent court, the
correct computation shall be (a) the monthly salary divided by the actual of
working hours in a month or (b) the regular monthly compensation divided
by the number of working days in a month.
This finding of respondent court should be modified insofar as the employees
of the General Auditing Office and of the Bureau of Public Works assigned to
work in the NAWASA are concerned for, as already stated, they are
government employees and should be governed by Section 254 of the Revised
Administrative Code. This section provides that in making payments for part
of a month, the amount to be paid for each day shall be determined by
dividing the monthly pay. Into as many parts as there are days in the
particular month. With this modification we find correct the finding of the
respondent court on this issue.
9. The Court of Industrial Relations awarded an additional 25% night
compensation to some, workers with retroactive effect, that is, effective even
before the presentation of the claim, provided that they had been given
authorization by the general manager to perform night work. It is petitioner's
theory that since there is no statute requiring payment of additional

compensation for night work but it can only be granted either by the
voluntary act of the employer or by an award of the industrial court under its
compulsory arbitration power, such grant should only be prospective in
operation, and not retroactive, as authorized by the court.
It is of common occurrence that a working man who has already rendered
night time service takes him a long time before he can muster enough
courage to confront his employer with the demand for payment for it for fear
of possible reprisal. It happens that many months or years are allowed to
pass by before he could be made to present such claim against his employer,
and so it is neither fair nor just that he be deprived of what is due him
simply because of his silence for fear of losing the means of his livelihood.
Hence, it is not erroneous for the Court of Industrial Relations to make the
payment of such night compensation retroactive to the date when the work
was actually performed.
The power of the Court of Industrial Relations to order the payment of
compensation for overtime service prior to the date of the filing of the claim
has been recognized by this Court (Luzon Stevedoring Co., Inc. v. Luzon
Marine Department Union, et al., L-9265, April 29, 1957). The same reasons
given therein for the retroactivity of overtime compensation may also be given
for the retroactivity of payment of night compensation, as such reasoning
runs along the line already above-stated.
10. The Court of Industrial Relations in its resolution dated November 25,
1950 issued in Case No. 359-V entitled MWD Workers Union, et al. v.
Metropolitan Water District, fixed the following rates of minimum daily wage:
P5.25 for those working in Manila and suburbs; P4.50 for those working in
Quezon City; and P4.00 for those working in Ipo. Montalban and Balara. It
appears that in spite of the notice to terminate said award filed with the
court on December 29, 1953, the Metropolitan Water District continued
paying the above wages and the NAWASA which succeeded it adopted the
same rates for sometime. In September, 1955, the NAWASA hired the
claimants as temporary workers and it is now contended that said rates
cannot apply to these workers.
The Court of Industrial Relations, however, held that the discontinuance of
this minimum wage rate was improper and ordered the payment of the
difference to said workers from the date the payment of said rates was
discontinued, advancing, among others, the following reasons: that the
resolution of November 25, 1950 is applicable not only to those laborers
already in the service but also to those who may be employed thereafter; the
notice of determination of said award given on December 29, 1953 is not
legally effective because the same was given without hearing and the
employer continued paying the minimum wages even after the notice of
termination; and there is no showing that the minimum wages violate Civil
Service Law or the principles underlying the WAPCO.
We find no valid reason to disagree with the foregoing finding of the Court of
Industrial Relations considering that the award continued to be valid and
effective in spite of the notice of termination given by the employer. No good
reason is seen why such award should not apply to those who may be
employed after its approval by the court there being nothing therein that may

prevent its extension to them. Moreover, the industrial court can at any time
during the effectiveness of an award or reopen any question involved therein
under Section 17 of Commonwealth Act No. 103, and such is what said court
has done when it made the award extensive to the new employees, more so
when they are similarly situated. To do otherwise would be to foster
discrimination.
11. This issue has to do with the meaning of "distress pay." Paragraph 3,
Article VIII, of the collective bargaining agreement entered into between the
employer and respondent unions, provides:
Because of the peculiar nature of the function of those employees
and laborers of the Sewerage Division who actually work in the
sewerage chambers, causing "unusual distress" to them, they shall
receive extra compensation equivalent to twenty-five (25%) of their
basic wage.
Pursuant to said agreement, a grievance committee was created composed of
representatives of management and labor which adopted the following
resolution:
Resolution No. 9
Series of 1957
BE IT RESOLVED, That the employees and laborers of the Sewerage
Division who actually work in the sewerage chambers causing
unusual distress to them, be paid extra compensation equivalent to
25% of their basic wage, as embodied in Article VIII, Paragraph 3 of
the Collective Bargaining Agreement; PROVIDED, however, that any
employee who may be required to work actually in the sewerage
chambers shall also be paid 25% extra compensation and,
PROVIDED FURTHER, that the term "sewerage chambers" shall
include pits, trenches, and other excavations that are necessary to
tap the sewer line, and PROVIDED FINALLY that this will not
prejudice any laborer or employee who may be included in one way
or another in the term "unusual distress" within the purview of
Paragraph 3 of Article VIII, of the Collective Bargaining Agreement.
And in a conference held between management and labor on November 25,
1957, the following was agreed upon: "Distress Management agreed to pay
effective October 1, 1956 25% additional compensation for those who
actually work in and outside sewerage chambers in accordance with
Resolution No. 9 of the Grievance Committee."
The question that arose in connection with this distress pay is with regard to
the meaning of the phrase "who actually work in and outside sewerage
chambers." Petitioner contends that the distress pay should be given only to
those who actually work inside the sewerage chambers while the union
maintains that such pay should be given to all those whose work have to do
with the sewerage chambers, whether inside or outside. The Court of
Industrial Relations sustained the latter view holding that the distress pay
should be given to those who actually work in and outside the sewerage
chambers effective October 1, 1956. This view is now disputed by petitioner.

The solution of the present issue hinges upon the interpretation of paragraph
3, Article VIII of the collective bargaining agreement, copied above, as
explained by Resolution No. 9, and the agreement of November 25, 1957,
also copied above, which stipulation has to be interpreted as a whole
pursuant to Article 1374 of the Civil Code. As thus interpreted, we find that
those who are entitled to the distress pay are those employees and laborers
who work in the sewerage chambers whether they belong to the sewerage
division or not, and by sewerage chambers should be understood to mean as
the surroundings where the work is actually done, not necessarily "inside the
sewerage chambers." This is clearly inferred from the conference held in the
Department of Labor on November 25, 1957 where it was agreed that the
compensation should be paid to those who work "in and outside" the
sewerage chambers in accordance with the terms of Resolution No. 9 of the
Grievance Committee. It should be noted that according to said resolution,
sewerage chambers include "pits, trenches, and other excavations that are
necessary to tap the sewer lines." And the reason given for this extra
compensation is the "unusual distress" that is caused to the laborers by
working in the sewerage chambers in the form and extent above-mentioned.
It is clear then that all the laborers whether of the sewerage division or not
assigned to work in and outside the sewerage chambers and suffer in
unusual distress because of the nature of their work are entitled to the extra
compensatory. And this conclusion is further bolstered by the findings of the
industrial court regarding the main activities of the sewerage division.
Thus, the Court of Industrial Relations found that the sewerage division has
three main activities, to wit: (a) cooperation of the sewerage pumping
stations; (b) cleaning and maintenance of sewer mains; and (c) installation
and repairs of house sewer connections.
The pump operators and the sewer attendants in the seven pumping stations
in Manila, according to the industrial court, suffer unusual distress. The
pump operators have to go to the wet pit to see how the cleaning of the
screen protecting the pump is being performed, and go also to the dry pit
abutting the wet pit to make repairs in the breakdown of the pumps.
Although the operators used to stay near the motor which is but a few meters
from the pump, they unavoidably smell the foul odor emitting from the pit.
Thesewerage attendants go down and work in the wet pit containing
sewerage materials in order to clean the screen.
A group assigned to the cleaning and maintenance of the sewer mains which
are located in the middle of the streets of Manila is usually composed of
a capataz and four sewerage attendants. These attendants are rotated in
going inside the manholes, operation of the window glass, bailing out from
the main to the manhole and in supplying the water service as necessity
demand. These attendants come into contact with dirt, stink, and smell,
darkness and heat inside and near the sewage pipes. The capataz goes from
one manhole to another seeing to it that the work is properly performed and
as such also suffers unusual distress although to a lesser degree.
The group resigned to the third kind of activity is also usually composed of
a capataz and four attendants. Their work is to connect sewer pipes from
houses to the sewer mains and to do this they excavate the trench across the

street from the proper line to the sewer main and then they install the pipe
after tapping the sewer main. In the tapping, the sewer pipe is opened and so
the sewerage gets out and fills up the trench and the men have to wade in
and work with the sewerage water. The capataz has to go near the filthy
excavations or trenches full of filthy sewerage, matter to aid the attendants in
making pipe connections, especially when these are complicated.
It cannot therefore be gainsaid that all there laborers suffer unusual distress.
The wet pits, trenches, manholes, which are full of sewage matters, are filthy
sources of germs and different diseases. They emit foul and filthy odor
dangerous to health. Those working in such places and exposed directly to
the distress of contamination.
Premises considered, the decision of the Court of Industrial Relations in this
respect should be modified in the sense that all employees and laborers,
whether or not they belong to the sewerage division, who actually work in
and outside the sewerage chambers, should be paid the distress pay or the
extra compensation equivalent to 25% of their basic wage effective October 1,
1956.
12. On August 6, 1957, the NAWASA requested the President of the
Philippines for exemption from Executive Order No. 251 which prescribes the
office hours to be observed in government and government-owned or
controlled corporations in order that it could stagger the working hours of its
employees and laborers. The request is based on the fact that there are
essential and indispensable phases in the operation of the NAWASA that are
required to be attended to continuously for twenty-four hours for the entire
seven days of the week without interruption some of which being the work
performed by pump operators, valve operators, filter operators, chlorine
operators, watchmen and guards, and medical personnel. This request was
granted and, accordingly, the NAWASA staggered the work schedule of the
employees and laborers performing the activities above-mentioned.
Respondent unions protested against this staggering schedule of work and
this protest having been unheeded, they brought the matter to the Court of
Industrial Relations.
In resolving this issue, the industrial court justified the staggering of the
work days of those holding positions as pump operators, valve operators,
filter operators, chlorine operators, watchmen and guards, and those in the
medical service for the reason that the same was made pursuant to the
authority granted by the President who in the valid exercise of the powers
conferred upon him by Republic Act No. 1880 could prescribe the working
days of employees and laborers in government-owned and controlled
corporations depending upon the exigencies of the service. The court,
however, stated that the staggering should not apply to the personnel in the
construction, sewerage, maintenance, machineries and shops because they
work below 365 days a year and their services are not continuous to require
staggering. From this portion of the decision, the petitioner appeals.
Considering that respondent court found that the workers in question work
less than 365 days a year and their services are not continuous to require
staggering, we see no reason to disturb this finding. This is contrary to the
very essence of the request that the staggering should be made only with

regard to those phases of the operation of the NAWASA that have to be


attended to continuously for twenty-four hours without interruption which
certainly cannot apply to the workers mentioned in the last part of the
decision of the respondent court on the matter.
RECAPITULATION
In resume, this Court holds:
(1) The NAWASA, though a public corporation, does not perform
governmental functions. It performs proprietary functions, and
hence, it is covered by Commonwealth Act No. 444;
(2) The NAWASA is a public utility. Although pursuant to Section 4 of
Commonwealth Act 444 it is not obliged to pay an additional sum of
25% to its laborers for work done on Sundays and legal holidays, yet
it must pay said additional compensation by virtue of the contractual
obligation it assumed under the collective bargaining agreement;
(3) The intervenors are not "managerial employees" as defined in
Republic Act No. 2377, hence they are covered by Commonwealth
Act No. 444, as amended;
(4) The Court of Industrial Relations has jurisdiction to adjudicate
overtime pay in the case at bar there being an employer-employee
relationship existing between intervenors and petitioner;
(5) The GAO employees assigned to work in the NAWASA cannot be
regarded as employees of the NAWASA on matters relating to
compensation. They are employees of the national government and
are not covered by the Eight-Hour Labor Law. The same may be said
of the employees of the Bureau of Public Works assigned to work in
the NAWASA;
(6) The method used by the NAWASA in off-setting the overtime with
the undertime and at the same time charging said undertime to the
accrued leave is unfair;
(7) The differential pay for Sundays is a part of the legal wage. Hence,
it was correctly included in computing the weekly wages of those
employees and laborers who worked seven days a week and were
regularly receiving the 25% salary differential for a period of three
months prior to the implementation of Republic Act 1880. This is so
even if petitioner is a public utility in view of the contractual
obligation it has assumed on the matter;
(8) In the computation of the daily wages of employees paid by the
month distinction should be made between government employees
like the GAO employees and those who are not. The computation for
government employees is governed by Section 254 of the Revised
Administrative Code while for others the correct computation is the
monthly salary divided by the actual number of working hours in the
month or the regular monthly compensation divided by the number
of working days in the month;

(9) The Court of Industrial Relations did not err in ordering the
payment of night compensation from the time such services were
rendered. The laborer must be compensated for nighttime work as of
the date the same was rendered;
(10) The rates of minimum pay fixed in CIR Case No. 359-V are
applicable not only to those who were already in the service as of the
date of the decision but also to those who were employed subsequent
to said date;
(11) All the laborers, whether assigned to the sewerage division or
not who are actually working inside or outside the sewerage
chambers are entitled to distress pay; and
(12) There is no valid reason to disturb the finding of the Court of
Industrial Relations that the work of the personnel in the
construction, sewerage, maintenance, machineries and shops of
petitioner is not continous as to require staggering.
CONCLUSION
With the modification indicated in the above resume as elaborated in this
decision, we hereby affirm the decision of respondent court in all other
respects, without pronouncement as to costs.

G.R. No. L-31341 March 31, 1976


PHILIPPINE AIR LINES EMPLOYEES ASSOCIATION (PALEA) and
PHILIPPINE AIR LINES SUPERVISORS' ASSOCIATION
(PALSA), petitioners,
vs.
PHILIPPINE AIR INES, INC., respondent.
G.R. No. L-31341-43 March 31, 1976
PHILIPPINE AIR LINES, INC., petitioner,
vs.
PHILIPPINE AIR LINES EMPLOYEES' ASSOCIATION, PHILIPPINE AIR
LINES SUPERVISORS' ASSOCIATION, and the COURT OF INDUSTRIAL
RELATIONS, respondents.
Siguion Reyna, Montecillo, Belo & Ongsiako for Philippines Air lines, Inc.
Laquihon & Legayada for Philippine Air Lines Supervisors' Association
(PALEA).
MAKASIAR, J.:
Before US are consolidated petitions to review the Court of industrial
Relations en banc resolution dated October 9, 1969 in CIR Case No. 43-IPA.
In G.R. No. L-31341 (PALEA vs. PAL), petitioners question the date of
effectivity of the adjudicated pay differentials due to the monthly-salaried
employees of Philippine Air Lines, Inc.
In G.R. No. L-31343 (PAL vs. PALEA), petitioner assails the reversal by the
Court of Industrial Relations of its earlier resolution on the method employed
by the Philippine Air Lines in computing the basic daily and hourly rate of its
monthly salaried employees.
On February 14, 1963, the Philippine Air Lines Employees' Association
(PALEA) and the Philippine Air Lines Supervisors' Association (PALSA)
petitioners in G.R. No. L-31341 and respondents in G.R. No. 31343
commenced an action against the Philippine Air Lines (PAL) in the Court of
Industrial Relations, praying that PAL be ordered to revise its method of
computing the basic daily and hourly rate of its monthly salaried employees,
and necessarily, to pay them their accrued sala differentials.
Sought to be revised is PAL's formula in computing wages of
its employees:
Monthly salary x 12 365 (No. of calendar = x (Basic dailr
rate) days in a year)
x 8 = Basic hourly rate
The unions would like PAL to modify the above formula in this wise:
Monthly salary x 12 No. of actual working = x (Basic daily
rate) days

x 8 = Basic hourly rate


On May 23, 1964, the Court of Industrial Relations, through Presiding Judge
Jose S. Bautista, issued an order denying the unions' prayer for a modified
wage formula. Pertinent portion of the order reads:
On the issue of rate of pay, PALSA and PALEA seek to
change the long standing method in PAL of computing the
basic daily and hourly rate of monthly salaried employees for
the purpose of determining overtime pay, Sunday and legal
holiday premium pay, night differential pay, vacation and
sick leave pay, to wit, the monthly salary multiplied by 12
and dividing the product thereof by 365 and then the
quotient by 8. PALEA and PALSA claim that the method of
computing the basic daily and hourly rate of monthly
salaried employees of PAL prior to the implementation of the
40-hour week schedule in PAL should be by dividing the
monthly salary by 26 working days, and after the 40-hour
week schedule, by dividing the monthly salary by 20 working
days, and then dividing the quotient thereof in each case by
8. From the records, however, it appears that for may years
since 1952, and even previously, PAL has been consistently
and regularly determining the basic and hourly rates of
monthly salaried employees by multiplying the monthly
salary by 12 momths and dividing the product by 365 days
to arive at the basic daily rate, and dividing the quotient by 8
to compute the basic hourly rate. There has been no attempt
to revise this formula notwithstanding the various
negotiations PAL and with the unions ever since its
operations, and it was only on July 18, 1962, when PALSA,
for the first time, proposed that it be changed in accordance
with what is now alleged in the petition. This, however, was a
mere proposal by PALSA for the adoption of a new formula; it
was not a demand for the application of a formula claimed to
be correct under the law. Under this circumstance, PALSA
and PALEA are estopped from questioning the correctness
and propriety of PAL's method of determining the basic
hourly and daily rate of pay of its monthly salaried
personnel, and considering the long period of time that
elapsed before they brought their petition, are barred from
insisting or demanding a different rate of pay formula.
xxx xxx xxx
Upon the foregoing, the Court, therefore, declares PAL's
method of computing the basic daily and hourly rate of its
monthly salaried employees as legal and proper, and denies
the petition of PALSA and PALEA.
xxx xxx xxx
(pp. 47-48, 49, rec. G.R. No. L-31343).

On May 30, 1964, complaining unions promptly moved for


reconsideration of the above-sais order (p. 51, rec. G.R. No. L-31343).

the

On June 9, 1964, the unions filed their memorandum in support of their


motion for reconsideration alleging that the questioned order is (a) contrary
to law, and (b) contrary to evidence adduced during the trial (p. 53, ree G.R.
No. L-31343).

I
For easy comprehension, WE start with the Philippine Air Lines, Inc. versus
Philippine Air Lines Employees Association, Philippine Air Lines Supervisors
Association, and the Court of Industrial Relations, G.R. No. L-31343.
In this appeal PAL emphasizes three assignments of error, to wit:
1. RESPONDENT CIR ERRED AND COMMITTED GRAVE
ABUSE OF DISCRETION IN HOLDING THAT THE METHOD
OF COMPUTATION USED BY PAL IN DETERMINING TIIE
BASIC DAILY OR HOURLY RATE OF ITS MONTLY SALARIED
EMPLOYEES WHICH IS:

The unions attributed error to PAL's wage formula, particularly in the use of
365 days as divisor. The unions contended that the use of 365 days as
divisor would necessarily include off-days which, under the terms of the
collective bargaining agreements entered into between the parties,
were not paid days. This is so since for work done on an off-day, an employee
was paid 100% plus 25%, or 100% plus 37- of his regular working hour
rate.

MONTHLY SALARY x 1 365 (NO. OF CALENDAR DAYS IN


YEAR) = x (BASIC DAILY RATE)

On the issue of prescription, the unions pointed out:

x 8 = BASIC HOURLY RATE 8

With respect to the period of prescription, it is clear that


since the claim arises from the written contracts or collective
bargaining agreements between the petitioner unions and
the PAL, the action thereon prescribes in ten years from the
time the right of action accrues, in accordance with Article
1144 of the New Civil Code. .... (p. 68, rec., G.R. No. L31343).

IS NOT CORRECT, CONSIDERING THAT PAL, A PUBLIC


UTILITY WHERE THERE IS WORK EVERYDAY OF THE
WEEK FOR MANY YEARS EVEN BEFORE REPUBLIC ACT
602 AND WITH THE CONSENT AND APPROVAL OF THE
EMPLOYEES, CONSISTENT WITH SECTION 19 OF
REPUBLIC ACT 602 PROHIBITING REDUCTION OF WAGES
FOR OFF DAYS-WHICH WAS SUSTAINED BY THIS
HONORABLE COURT IN AUTOMOTIVE PARTS & EQUIPMENT
CO., INC. VS. JOSE B. LINGAD,G.R. NO. L- 26406, OCTOBER
31, 1969 HAS BEEN TREATING OFFSITE DAYS, 11 AS
SATURDAYS, SUNDAYS, COMPANY OBSERVED HOLIDAYS
OR ANY OTHER DESIGNATED HOLIDAYS AS PAID DAYS.

On June 26, 1964, the Philippine Air Lines answered point by point the
unions' memorandum, in a prompt reply.
On October 9, 1969, the Court of Industrial Relations, through Presiding
Judge Arsenio I. Martinez, ordered the reversal of its decision dated May 34,
1964 and sustained the unions' method of age computation.

2. RESPONDENT CIR ERRED AND COMMITTED GRAVE


ABUSE OF DISCRETION IN NOT FINDING. THAT
RESPONDENT UNIONS, BY THEIR LONG PERIOD OF
CONSENT, ACQUIESCENCE, INACTION AND ACCEPTANCE
OF BENEFITS THEREUNDER, ARE ESTOPPED AND
BARRED FROM CLAIMING THAT PAL'S FORMULA FOR
DETERMINING THE BASIC DAILY AND HOURLY RATE OF
PAY IS INCORRECT.

The industrial court, however, ordered the computation of pay differentials in


accordance with the sustained method of computation effective only July 1,
1957.
Said the Court of Industrial Relations in this regard:
... In this connection, however, it will be noted as previously
stated, that this case was considered as an incident of Case
No. 39-IPA, in which the issues involved were related to the
respondent PAL of the 40-Hour Week Law (Rep. Act 1880)
from the date of its effectivity July 1, 1957. ...

3. RESPONDENT CIR ERED AND ACTED IN EXCESS OF ITS


JURISDICTION
IN
SENTENCING
PAL
TO
PAY
DIFFERENTIALS FOR OVERTIME WORK, NIGHTWORK,
HOLIDAY AND SUNDAY PAY FROM JULY 1, 1957
CONSIDERING
THAT
UNDER
THE
THREE-YEAR
PRESCRIPTIVE PERIOD PROVIDED IN SECTION 7-a OF
COMMONWEALTH ACT NO. 444, AS AMENDED, THE
EIGHT-HOUR LABOR LAW, RESPONDENT UNIONS,
ASSUMING THEY HAD ANY CAUSE OF ACTION, COULD
RECOVER ONLY FROM FEBRUARY 14, 1960 UP TO THE
PRESENT, SINCE RESPONDENT UNIONS FILED THEIR
ACTION ONLY ON FEBRUARY 14, 1963.

This Cout therefore belives that in justice and equity and


substantial merits of the case, the aforesaid pay differentials
due to the employees involved herein by the application of
the correct methods of computation of the rate of pay should
be paid by the respondent also beginning July 1, 1957 (p.
117, rec., G.R. No. L-31343).
From the above resolution, both parties appealed to this COURT. The
Philippine Air Lines filed its appeal petition on December 13, 1969, while
PALEA filed its petition for review on certiorari on January 3, 1970.

PAL's maiden argument has a strong tendency to mislead. In an effort to


emphasize that off-days are paid and therefore should be reckoned with in
determing the divisor for computing daily and hourly rate, PAL leans heavily
on what it considers as additional payment of 125% or 137 %, as the case
may be, of an employee's basic hourly rate, given to a worker who worked on
his off-days. PAL would like us to believe that the word "Additional" all but
accentuates the existence of a regular basic rate; otherwise, the 125% or
137% shall be in addition to what?
The industrial court, however, had this to say:
Moreover, it will be noted that before September 4, 1961, a
monthly salaried employee of PAL had to work 304 days only
in a year,a nd after said date, he had to work only 258 days
in ayear, to be entitled to his equivalent yearly salary. When
he worked on his off-day, he was paid accordingly (125% or
137%), indicating that his off-days were not with pay. It
seems illogical for said employe to be paid 125% or 137 % of
his basic daily rate, if such off-days are already wtih pay, as
indicated by the company (p. 107, rec., G.R. No. L-31343,
emphasis supplied).

PAL maintains that the NAWASA doctrine should not apply to a public utility
like PAL which, from the nature of its operations, requires a whole-yearround, uninterrupted work by personnel. What PAL apparently forgets is that
just like it, NAWASA is also a public utility which likewise requires its
workers to work the whole year round. Moreover, the NAWASA is a
government-owned corporation to which PAL is akin, it being a
government-controlled corporation.
As will later be stated herein, PAL inked with the representative unions of the
employees collective bargaining agreements wherein it bound itself to duly
compensate employer working on their off-days. The same situation obtained
in the NAWASA case, wherein WE held:
And in the collective bargaining agreement entered into
between the NAWASA and respondent unions it was agreed
that all existing benefits enjoyed by the employees and
laborers prior to its effectivity shall remain in force and shall
form part of the agreement, among which certainly is the
25% additional compensation for work on Sundays and legal
holidays theretofore enjoyed by said laborers and employees.
It may, therefore, be said that while under Commonwealth
Act No. 444 a public utility is not required to pay additional
compensation to its employees and workers for work done on
Sundays and legal holidays, there is, however, no prohibition
ofr it to pay such additional compensation if it voluntarily
agrees to do so. The NAWASA committed itself to pay this
additional compensation. It must pay not because of
compulsion of law but because of contractual obligation (11
SCRA 766, 776).

WE agree.
There should hardly be any doubt that off-days are not paid days, Precisely,
off-days are rest days for the worker. He is not required to work on such
days. This finds support not only in the basic principle in labor that the basis
of remuneration or compensation is actual service rendered, but in the ever
pervading labor spirit aimed at humanizing the conditions of hie working
man.
Since during his off-days an employee is not compelled to work he cannot,
conversely, demand for his corresponding pay. If, however, a worker works
on his off-day, our welfare laws duly reward him with a premium higher than
what he would receive when he works on his regular working day.
Such being the case, the divisor in computing an employee's basic daily rate
should be the actual working days in a yar The number of off-days are not to
be counted precisely because on such off-days, an employee is not required
to work.
Simple common sense dictates that should an employee opt not to work
which he can legally do on an off-day, and for such he gets no pay, he
would be unduly robbed of a portion of his legitimate pay if and when in
computing his basic daily and hourly rate, such off-day is deemed subsumed
by the divisor. For it is elementary in the fundamental process of division
that with a constant dividend, the bigger your divisor is, the smaller our
quotient will be.
It bears emphasis that OUR view above constitutes the rationale behind the
landmark ruling, surprisingly, by the same trial Judge Jose S. Bautista of the
Court of Industrial Relations, in National Waterworks and Sewerage Authority
vs. NWSA Consolidated Unions, et al., (G.R. No. L-18938, August 31, 1964, 11
SCRA 766, 793-794), to which decision WE gave OUR affirmance.

The settled NAWASA doctrine should not be disturbed.


B
PAL also vigorously argues that the unions' longstanding silence with
respect, and acquiescence, to PAL's method of computation has placed them
in estoppel to impugn the correctness of the questioned wage formula. PAL
furthermore contends that laches has likewise set in precisely because of
stich long-standing inaction.
Our jurisprudence on estoppel is, however, to the effect that:
... (I)t is meet to recall that "mere innocent silence will not
work estoppel. There must also be some element of turpitude
or neglignece connected with the silence by which another is
misled to his injury" (Civil Code of the philippines by
Tolentino, Vol. IV, p. 600) ... [Beronilla vs. GSISK, G.R. No.
L-21723, Nov. 26, 1970, 36 SCRA 44, 46, 55, emphasis
supplied].
In the case befor US, it is not denied that PAL's formula of determining daily
and hourly rate of pay has been decided and adopted by
it unilaterally without the knowedge and express consent of the employees. It
was only later on that the employees came to know of the formula's

irregularity and its being violative of the collective bargaining agreements


previously executed by PAL and the unions. Precisely, PALSA immediately
proposed that PAL and the unions. Precisely, PALSA immediately proposed
that PAL use the correct method of computation, which proposa PAL chose to
ignore.
Clearly, therefore, the alleged long-standing silence by the PAL employees is
in truth and in fact innocent silence,which cannot place a party in estoppel.
The rationale for this is not difficult to see. The doctrine of estoppel had its
origin in equity. As such, its applicability depends, to a large extent, on the
circumstances surrounding a particular case. Where, therefore, the neglect
or omission alleged to haveplaced a party in estoppel cannot be invoked. This
was the essence of OUR ruling in the case of Mirasol vs. Municipality of
Tabaco (43 Phil. 610, 614). And this, in quintessence, was the compelling
reason why in Lodovica vs. Court of Appeals (L-29678, July 18, 1975, 65
SCRA 154, 158), WE held that a party who had no knowledge of or gave no
consent to a transaction may not be estopped by it.
Furthermore, jurisprudence likewise fortifies the position that in the interest
of public policy, estoppel and laches cannot arrest recover of evertime
compensation. The case of Manila Terminal Co. vs. CIR (G.R. NO. L-9265,
April 29, 1957, 91 Phil. 625), is squarely in point. In this case We intoned.
The principle of estoppel and laches cannot well be invoked
agains the Association. In the first place, it would be
contrary to the spirit of the Eight-Hour Labor Law, under
which, as already seen, the laborers cannot waive their right
to extra compensation. In the second place, the law
principally obligates the employer to observe it, as much so
that it punishes the employer for its employer for its violation
and leaves the employee or laborer is in such a
disadvantageous position as to be naturally reluctant or even
apprehensive in asserting any claim which may cause the
employher to devise a way for exercising his right to
terminate the employment.
If the principle of estoppel and laches is to be applied, it may
bring about a situation, whereby theemployee or laborer, who
cannot expressly renounce their right to extra compensation
under the Eight-Hour Labor Law, may be compelled to
accomplish the same thing by mere silence or lapse of
time, thereby frustrating the purpose of the law by
indirection (91 Phil. 625, 633, emphasis supplied).
In another count, the unilateral adoption by PAL of an irregular wage formula
being an act against public policy, the doctrine of estoppel cannot give
validity to the same (Auyong Hian vs. Court of Tax Appeals, 59 SCRA 110,
112).
II
G.R. No. L-31341 is an appeal from that portion of the en banc resolution of
the Court of Industrial Relations dated October 9, 1969 in case 43-IPA

making the payment of the adjudicated pay differentials effective only from
July 1, 1957.
In their lone assignment of error, February 14, 1953, or ten (10) years from
the date of the filing of their original complaint; because the claim for pay
differentials is based on written contracts i.e., the collective bargaining
agreements between PAL and the employees' representative uniuons and
under Article 1144(1) of the Civil Code, actions based on written contracts
prescribe in ten (10) years.
PAL, on the other hand, maintains that the employees' claim for pay
differential is"an action to enforce a cause of action under the Eight-Hour
Labor Law (CA No. 444, as amended): (p. 592, rec., G.R. No. L-31341). As
such, the applicable provision is Section 7-a of CA No. 4444, which reads:
Sec. 7-a. Any action to enforce any cause of action under
this Act shall be commenced within three years after the
cause of action accrued, otherwise such action shall be
forever barred; provided, however, that actions already
commenced before the effecitve date of this Act shall not be
affected by the period herein prescribed (As amended by Rep.
Act No. 1993, approved June 22, 1957, emphasis supplied).
Moreover, PAL argues that even assuming that the issue calls for the
application of Article 1144(1) of the New Civil Code, a general law, still in
case of conflict, Commonwealth ACt No. 444, as amended, should prevail
because the latter is a special law.
WE believe that the present case calls for the application of the Civil Code
provisions on the prescriptive period in the filing of actions based on written
contracts. The rason should be fairly obvious. Petitioners' claim
fundamentally involves the strict compliance by PAL of the pvosions on wage
computation embodied in the collective bargaining agreements inked between
it and the employees representative unions. These collective bargaining
agreements were: the PAS-PALEA collective bargaining agreement of 195253; the PAL-PALEA collective bargaining agreement of 1956-59; the PALPALEA collective bargaining agreement of 1959-61 (with Article VI as
supplement); the PAL-PALEA agreement of September 4, 1961; the PAL-ACAP
collective bargaining agreement of 1952-54; the PAL-ACAP collective
bargaining agreement of September 6, 1955; the PAL-ACAP collective
bargaining agreement of 1959-61; the PAL-PALSA collective bargaining
agreement of 1959-62; and the supplementary PAL-PALSA collective
bargaining agreement (pp. 54-55, rec., G.R. No. L-31343).
The three-year prescribed period fixed in the Eight-Hour Labor Law (CA No.
444, as amended) will apply, if the claim for differentials for overtime work is
solely based on said law, and not on a collective bargaining agreement or any
other contract. In the instant cases, the claim for overtime compensation is
not so much because of Commonwealth Act No. 444, as amended, but
because the claim is a demandable right of the employees, by reason of the
above-mentioned collective bargaining agreements. That is precisely why
petitioners did not make any reference as to the computation for overtime
work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 444), and

instead inissited that work computation provided in the collective bargaining


agreements between the parties be observed. Since the claim for pay
differentials is principally anchored on the written contracts between the
litigants, the ten-year prescriptive period between the litigants, the ten-year
prescriptive period provided by Art. 1144(1) of the New Civil Code should
govern. (General Insurance and Surety Corp. vs. Republic, L-13873, January
31, 1963, 7 SCRA 4; Heirs of the Deceased Juan Sindiong vs. Committee on
Burnt Areas and Improvements of Cebu, L-15975, April 30, 1964, 10 SCRA
715; Conde vs. Cuenca and Malaga, L-9405, July 31, 1956; Veluz vs. Veluz,
L-23261, July 31, 1968, 24 SCRA 559).
Finally, granting arguendo that there is doubt as to what labor legislation to
apply to the grievances of the employees in the cases at bar, it is OUR view
that that legislation which would enhance the plight of the workers should be
followed, consonant with the express pronouncement of the New Civil Code
that:
In case of doubt, all labor legislation and labor contracts
should be construed in favor of the safety and decent living
of the laborer (Article 1702).
WHEREFORE, THE APPEALED RESOLUTION IS HEREBY AFFIRMED, WITH
THE MODIFICATION THAT PAY DIFFERENTIALS BE PAID EFFECTIVE
FEBRUARY 14, 1953. WITH COSTS AGAINST PHILIPPINE AIR LINES, INC. IN
BOTH CASES.

G.R. No. 105963 August 22, 1996


PAL EMPLOYEES SAVING AND LOAN ASSOCIATION, INC.
(PESALA), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND ANGEL V.
ESQUEJO, respondents.
PANGANIBAN, J.:p
Is an employee entitled to overtime pay for work rendered in excess of eight
hours a day, given the fact that his employment contract specifies a twelvehour workday at a fixed monthly salary rate that is above the legal minimum
wage? This is the principal question answered by this Court in resolving this
petition
which
challenges
the
validity
and
legality
of
the
Decision 1 of
public
respondent
National
Labor
Relations
Commission 2 promulgated on April 23, 1992 in NLRC NCR CA No. 00252291 entitled "Angel V. Esquejo vs. PAL Employees Savings and Loan
Association" which Decision modified (slightly as to amount) the earlier
decision 3 dated November 11, 1991 of the labor arbiter granting private
respondent's claim of overtime pay.
The Facts and the Case Below
On October 10, 1990, private respondent filed with public respondent a
complaint docketed as NLRC NCR Case No. 10-05457-90 for non-payment of
overtime pay and non-payment of the P25.00 statutory minimum wage
increase mandated by Republic Act No. 6727.
Subsequently, private respondent filed a supplemental complaint for illegal
suspension with payer for reinstatement and payment of backwages.
However, before the case was submitted for resolution, private respondent
filed a "Motion to Withdraw Supplemental Complaint" on the ground that a
separate action for illegal suspension, illegal dismissal, etc. had been filed
and was pending before another labor arbiter. Hence, the issue decide by
public respondent and which is under review by this Court in this petition
involves only his claim for overtime pay.
On November 26, 1990, private respondent filed his position paper 4 with the
labor arbiter alleging the following facts constituting his cause of action:
Complaint (herein private respondent) started working with
respondent (PESALA) sometime last March 1, 1986 as a company
guard and was receiving a monthly basic salary of P1,990.00 plus an
emergency allowance in the amount of P510.00. He was required to
work a (sic) twelve (12) hours a day, a (sic) xerox copies of his
appointment are hereto attached and marked as Annexes "C" and "D"
of this position paper;
That on December 10, 1986, respondent Board of Directors in its
board meeting held on November 21, 1986 approved a salary
adjustment for the complainant increasing his monthly basic salary
to P2,310.00 and an emergency allowance of P510.00, a xerox copy

of the salary adjustment is hereto attached and marked as Annex "E"


hereof;
That on August 25, 1987, because of his impressive performance on
his assigned job, another adjustment was approved by the President
of the association increasing his monthly basic salary to P2,880.00, a
xerox copy of the salary adjustment is hereto attached and marked
as Annex "F" hereof;
That from January 4, 1988 up to June 1990, several salary
adjustments were made by the respondent on the monthly basic
salary of the complainant including a letter of appreciation for being
as (sic) one of the outstanding performers during the first half of
1988, the latest salary prior to the filing of the complaint was
P3,720.00, a (sic) xerox copies of all documents relative to the salary
adjustments are hereto attached and marked as annexes "G", "H",
and "K" of this position paper;
That during his entire period of employment with respondent, the
former was required to perform overtime work without any additional
compensation from the latter. It was also at this point wherein the
respondent refused to give the 25.00 increase on the minimum wage
rates as provided for by law. On October 12, 1990, complainant was
suspended for the period of thirty seven (37) days for an offense
allegedly committed by the respondent sometime last August 1989.
paper

On December 13, 1990, petitioner PESALA filed its position


alleging among other things:
On 01 March, 1986, complainant was appointed in a
permanent status as the company guard of respondent. In
the Appointment Memorandum dated February 24, 1986
which has the conformity of complaint, it is expressly
stipulated therein that complainant is to receive a monthly
salary of P1,900.00 plus P510.00 emergency allowance for a
twelve (12) hours work per day with one (1) day off. A copy of
said appointment memorandum is hereto attached as Annex
"A" and made an integral part hereof.
On 01 December, 1986, the monthly salary of complainant
was increased to P2,310,00 plus P510.00 emergency
allowance. Latter, or on 01 January, 1988, the monthly
salary of complainant was again increased to P3,420.00. And
still later, or on 01 February, 1989, complainant's monthly
salary was increased are hereto attached as Annexes "B", "B1" and "B-2" and are made integral parts hereof.
On 29, November, 1989, the manager of respondent in the
person of Sulpicio Jornales wrote to complainant informing
the latter that the position of a guard will be abolished
effective November 30, 1989, and that complainant will be
re-assigned to the position of a ledger custodian effective
December 1, 1989.

Pursuant to the above-mentioned letter-agreement of Mr.


Jornales, complaint was formally appointed by respondent
as its ledger custodian on December 1, 1989. The monthly
salary of complainant as ledger custodian starting on
December 1, 1989 was P3,720,00 for forty (40) working
hours a week or eight (8) working hours a day. a copy of said
Appointment memorandum is hereto attached as Annex "C"
and made an integral part hereof.
On 29 August, 1990, complainant was administratively
charged with a serious misconduct or disobedience of the
lawful orders of respondent or its officers, and gross and
habitual neglect of his duties, committed as follows:
1. Sometime in August, 1989, you (referring to
complainant Esquejo) forwarded the checks
corresponding to the withdrawals of Mr. Jose
Jimenez and Mr. Anselmo dela Banda of Davao and
Iloilo Station, respectively, without the signature of
the Treasurer and the President of PESALA, in
violation of your duty and function that you should
see to it that the said checks should be properly
signed by the two PESALA officials before you send
out said checks to their addresses. As a result of
which, there was a substantial delay in the
transmission of the checks to its owners resulting to
an embarrassment on the part of the PESALA
officers and damage and injury to the recipients (sic)
of the checks since they needed the money badly.
2. Sometime in August, 1989, before you
(complainant) went on your vacation, you failed to
leave or surrender the keys of the office, especially
the keys of the keys to the main and back doors
which
resulted
to
damage,
injury
and
embarrassment to PESALA. This is a gross violation
of your assigned duties and you disobeyed the
instruction of your Superior.
xxx xxx xxx
Herein complainant was informed of the aforequoted charges
against him and was given the opportunity to be heard and
present evidence in his behalf as shown by the Notice of
Hearing (Annex "D" hereof) sent to him. Complainant did in
fact appeared (sic) at the hearing, assisted by his counsel,
Atty. Mahinardo G. Mailig, and presented his evidence in the
form of a Counter-Affidavit. A copy of said Counter-Affidavit
is hereto attached as Annex "E" and made an integral part
hereof.
On 12 October, 1990, after due deliberation on the merits of
the administrative charges filed against herein complainant,

the Investigating Officer in the person of Capt. Rogelio


Enverga resolved the same imposing a penalty of suspension
of herein complainant, thus:
"PENALTY: 1. For the first offense, you (referring to
complaint Esquejo) are suspended for a period of
thirty (30) working days without pay effective
October 15, 1990.
2. For the second offense, your (sic) are suspended
for a period of seven (7) working days whiteout pay
effective from the date first suspension will expire".
On March 7, 1991, private respondent filed a detailed and itemized
computation of his money claims totaling P107,495.90, to which
petitioner filed its comment on April 28, 1991. The computation filed
on March 7, 1991 was later reduced to P65,302.80. To such revised
computation, the petitioner submitted its comment on April 28,
1991.
WHEREFORE, judgment is hereby rendered:
1. Granting the claim for overtime pay covering the period
October 10, 1987 to November 30, 1989 in the amount of
P28,344.55.
2. The claim for non-payment of P25.00 salary increase
pursuant to Republic Act No. 6727 is dismissed for lack of
merit.
Aggrieved by the aforesaid decision, petitioner appealed to public
respondent NLRC only to be rejected on April 23, 1992 via the herein
assailed Decision, the dispositive portion of which reads as follows:
WHEREFORE, premises considered, the award is reduced to
an amount of TWENTY EIGHT THOUSAND SIXTY-SIX
PESOS AND 45/100 (P28,066.45). In all other respects, the
Decision under review is hereby AFFIRMED and the appeal
DISMISSED for lack of merit.
No motion for reconsideration of the Decision was filed by
the petitioner. 6
What transpired afterwards is narrated by the Solicitor General in
his memorandum, 7 which we presume to be correct since petitioner
did not contradict the same in its memorandum:
. . . Petitioner did not appeal the Decision of respondent
NLRC. When it became final, the parties were called to a
conference on June 29, 1992 to determine the possibility of
the parties' voluntary compliance with the Decision (Order of
Labor Arbiter Linsangan. dated July 23, 1992).
. . . In their second conference, held on July 15, 1992,
petitioner proposed to private respondent a package
compromise agreement in settlement of all pending claims.

Private respondent for his part demanded (P150,000.00 as


settlement of his complaint which was turned down by
petitioner as too excessive. Unfortunately, no positive results
were achieved.

THE RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF


DISCRETION IF AWARDING OVERTIME PAY OF P28,066.45 TO
PRIVATE RESPONDENT WHEN THE SAME IS A CLEAR VIOLATION
OF ARTICLE 22 OF THE CIVIL CODE ON UNJUST ENRICHMENT.

As a result, pleading was filed by petitioner captioned:


Motion to Defer Execution and Motion to Re-Compute
alleged overtime pay. Petitioner states that "quite recently,
the Employee Payroll Sheets pertaining to the salaries,
overtime pay, vacation and sick leave of Angel Esquejo were
located".

III

. . . Petitioner's Motion to Defer Execution and Motion to ReCompute respondent's overtime pay was denied in an Order
dated July 23, 1992.
. . . Petitioner moved to reconsider the Denial Order on July
27, 1992. Private respondent opposed.
In the meantime, petitioner filed the instant special civil action
for certiorari before this Court on July 10, 1992. Later, on July 17,
1992, citing as reason that ". . . quite recently, the Employee Payroll
Sheets which contained the salaries and overtime pay received by
respondent Esquejo were located in the bodega of the petitioner and
based on said Payroll Sheets, it appears that substantial overtime
pay have been paid to respondent Esquejo in the amount of
P24,238.22 for the period starting January 1987 up to November
1989". petitioner asked this Court for the issuance of a temporary
restraining order or writ of preliminary injunction. On the same date
of July 17, 1992, a "Supplemental Petition Based On Newly
Discovered Evidence" was filed by petitioner to which was attached
photocopies of payroll sheets of the aforestated period.
On July 29, 1992, this court issued a temporary restraining order
enjoining the respondents from enforcing the Decision dated April
23, 1992 issued in NLRC NCR No. 002522-91, the case below subject
of the instant petition.
The Issues
Four issues have been raised by the petitioner in its effort to obtain a
reversal of the assailed Decision, to wit:
I
THE RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF
DISCRETION WHEN IT RULED THAT PRIVATE RESPONDENT IS
ENTITLED TO OVERTIME PAY WHEN THE SAME IS A GROSS
CONTRAVENTION OF THE CONTRACT OF EMPLOYMENT
BETWEEN PETITIONER AND RESPONDENT ESQUEJO AND A
PATENT VIOLATION OF ARTICLES 1305, 1306 AND 1159 OF THE
CIVIL CODE.
II

THE RESPONDENT NLRC COMMITTED A GRAVE ABUSED OF


DISCRETION WHEN IT RULED THAT PRIVATE RESPONDENT WAS
NOT PAID THE OVERTIME PAY BASED ON THE COMPUTATION OF
LABOR ARBITER CORNELIO LINSANGAN WHICH WAS AFFIRMED
BY SAID RESPONDENT NLRC WHEN THE SAME IS NOT
SUPPORTED BY SUBSTANTIAL EVIDENCE AND IT, THEREFORE,
VIOLATED THE CARDINAL PRIMARY RIGHTS OF PETITIONER AS
PRESCRIBED IN "AND TIBAY VS. CIR." 69 PHIL. 635.
IV
WHETHER OR NOT THE PETITIONER'S SUPPLEMENTAL PETITION
BASED ON NEWLY DISCOVERED EVIDENCE MAY BE ADMITTED
AS PART OF ITS EVIDENCE IT BEING VERY VITAL TO THE
JUDICIOUS DETERMINATION OF THE CASE. (Rollo, p. 367)
In essence the above issued boil down to this query: Is an employee entitled
to overtime pay for work rendered in excess of the regular eight hour day
given the fact that he entered into a contract of labor specifying a work-day of
twelve hours at a fixed monthly rate above the legislated minimum wage?
The Court's Ruling
At the outset, we would like to rectify the statement made by the Solicitor
General that the "petitioner did not appeal from the Decision of (public)
respondent NLRC". The elevation of the said case by appeal is not possible.
The only remedy available from an order or decision of the NLRC is a petition
for certiorari under Rule 65 of the Rules of Court alleging lack or excess of
jurisdiction or grave abuse of discretion. 8 The general rule now is that the
special civil action of certiorari should be instituted within a period of three
months. 9 Hence, when the petition was filed on July 10, 1992, three months
had not yet elapsed from petitioner's receipt of the assailed Decision (should
really be from receipt of the order denying the motion for reconsideration).
However, aside from failing to show clearly grave abuse of discretion on the
part of respondent NLRC, which we shall discuss shortly, the petitioner also
failed to comply with the mandatory requirement of filing a motion for
reconsideration from the Decision of the public respondent before resorting
to the remedy of certiorari. We have previously held that:
. . . The implementing rules of respondent NLRC are
unequivocal in requiring that a motion for reconsideration of
the order, resolution, or decision of respondent commission
should be seasonably filed as a precondition for pursuing
any further or subsequent remedy, otherwise the said order,
resolution, or decision shall become final and executory after
ten calendar days from receipts thereof. Obviously, the
rationale therefor is that the law intends to afford the NLRC

an opportunity to rectify such errors or mistakes it may have


lapsed into before resort to the courts of justice can be had.
This merely adopts the rule that the function of a motion for
reconsideration is to point out to the court the error that it
may have committed and to give it a chance to correct
itself. 10
Additionally, the allegations in the petition clearly show that
petitioner failed to file a motion for reconsideration of the
assailed Resolution before filing the instant petition. As
correctly argued by private respondent Rolando Tan, such
failure constitutes a fatal infirmity. . . . The unquestioned
rule in this jurisdiction is that certiorari will only if there is
no appeal or any other plain, speedy an adequate remedy in
the ordinary course of law against the acts of public
respondent. In the instant case, the plain and adequate
remedy expressly provided by law was a motion for
reconsideration of the assailed decision, based on a palpable
or patent errors, to be made under oath and filed within ten
(10) calendar days from receipt of the questioned decision.
And for failure to avail of the correct remedy expressly
provided by law, petitioner has permitted the subject
Resolution to become final and executory after the lapse of
the ten day period within which to file such motion for
reconsideration. 11
In brief, the filing of the instant petition was premature and did not toll the
running of the 3 month period. Thus, the assailed Decision became final and
executory. On this ground alone, this petition must therefore be dismissed.
However, in view of the importance of the substantial query raised in the
petition, we have resolved to decide the case on the merits also.
The First Issue: Was Overtime Pay Included?
The main disagreement between the parties centers on how the contract of
employment of the private respondent should be interpreted. The terms and
conditions thereof reads as follows:
Date: February 24, 1986
NAME : ESQUEJO, ANGEL
NATURE OF ACTION : APPOINTMENT
FROM :
POSITION TITLE : COMPANY GUARD
TO :
STATUS : PERMANENT
EFFECTIVE DATE : MARCH 1, 1986
FROM : P1,990.00 per month
plus P510.00 emergency
allowance
SALARY :
TO :

REMARKS : To confirm permanent


appointment as company
guard who will render 12
hours a day with one (1)
day off
RECOMMENDED BY: APPROVED BY:
(Signed) (Signed)
SULPICIO B. JORNALES CATALINO F. BANEZ
(Signed)
ANGEL V. ESQUEJO 12
Petitioner faults the public respondent when it said that there was "no
meeting of minds between the parties," since the employment contract
"explicitly states without any equivocation" that the overtime pay for work
rendered for four (4) hours in excess of the eight (8) hour regular working
period is already included in the P1,990.00 basic salary. "This is very clear
from the fact that the appointment states 12 hours a day work." 13 By its
computations, 14petitioner tried to illustrate the private respondent was paid
more than the legally required minimum salary then prevailing.
To prove its contention, petitioner argues that:
The legal minimum wage prescribed by our statutes, the legally
computed overtime pay and monthly salaries being paid by petitioner
to respondent Esquejo would show that indeed, the overtime pay has
always been absorbed and included in the said agreed monthly
salaries.
In 1986, the legal minimum salary of Esquejo is computed as follows
(per Appointment Memoranda dated February 4, 1986 and June 6,
1986 [Annex "C" and "D" of Annex "B" of this Petition]):
54
x
314
------------12 months = P1,413.00 monthly salary

days

The hourly overtime pay is computed as follows:


54/8 hours = P6.75 x 4 hrs. = P27.00
P27.00 x 1.25 = P33.75 x 20 (should be 26)days =
P887.50
(should be P877.50)
P1,413.00

legal
minimum
wage
+
887.50(877.50)

legal
overtime
pay
--------------P2,290.50

amount
due
to
respondent
Esquejo under the law
P2,500.00 gross salary of Esquejo per contract
-2,290.50
----------

P209.50 Difference (Rolllo, p. 371).


On the other hand, private respondent in his position paper claims that
overtime pay is not so incorporated and should be considered apart from the
P1,990.00 basic salary. 15
We find for the private respondent and uphold the respondent NLRC's ruling
that he is entitled to overtime pay.
Based on petitioner's own computation, it appears that the basic salary plus
emergency allowance given to private respondent did not actually include the
overtime pay claimed by private respondent. Following the computations it
would appear that by adding the legal minimum monthly salary which at the
time was P1,413.00 and the legal overtime minimum monthly salary which at
the time was P1,413.00 and the legal overtime pay of P877.50, the total
amount due the private respondent as basic salary should have been
P2,290.50. By adding the emergency cost of living allowance (ECOLA) of
P510.00 as provided by the employment contract, the total basic salary plus
emergency allowance should have amounted to P2,800.50. However,
petitioner admitted that it actually paid private respondent P1,990.00 as
basic salary plus P510.00 emergency allowance or a total of only P2,500.00.
Undoubtedly, private respondent was shortchanged in the amount of
P300.50. Petitioner's own computations thus clearly establish that private
respondent's claim for overtime pay is valid.
Side Issue: Meeting of the Minds?
The petitioner contends that the employment contract between itself and the
private respondent "perfectly satisfies" the requirements of Article 1305 of the
Civil Code as to the "meeting of the minds" such that there was a "legal and
valid contract" entered into by the parties. Thus, private respondent "cannot
be allowed to question the said salary arrangements for the extra 4 hours
overtime pay after the lapse of 4 years and claim only now that the same is
not included in the terms of the employment contracts." 16
We disagree. Public respondent correctly found no such agreement as to
overtime pay. In fact. the contract was definite only as to the number of
hours of work to be rendered but vague as to what is covered by the salary
stipulated. Such ambiguity was resolved by the public respondent, thus:
In resolving the issue of whether or not complainant's
overtime pay for the four (4) hours of work rendered in
excess of the normal eight hour work period is incorporated
in the computation of his monthly salary, respondent
invokes its contract of employment with the complainant.
Said contract appears to be in the nature of a document
identifiable as an appointment memorandum which took
effect on March 1, 1986 (Records, p. 56) by virtue of which
complaint expressed conformity to his appointment as
company guard with a work period of twelve (12) hours a day
with one (1) day off. Attached to this post is a basic salary of
P1,900.00 plus P510.00 emergency allowance. It is (a)
cardinal rule in the interpretation of a contract that if the
terms thereof are clear and leave no doubt upon the

intention of the contracting parties, then the literal meaning


of its stipulations shall control. (Art. 1370, Civil Code of the
Philippines).
To
this,
respondent
seeks
refuge.
Circumstances, however, do not allow us to consider this
rule in the light of complainant's claim for overtime pay
which is an evident indication that as to this matter, it
cannot be said that there was a meeting of the minds
between the parties, it appearing that respondent considered
the four (4) hours work in excess of the eight hours as
overtime work and compensated by way of complainant's
monthly salary while on the latter's part, said work rendered
is likewise claimed as overtime work but yet unpaid in view
of complainant's being given only his basic salary.
Complainant claims that the basic salary could not possibly
include therein the overtime pay for his work rendered in
excess of eight hours. Hence, respondent's Appointment
Memorandum cannot be taken and accorded credit as it is
so worded in view of this ambiguity. We therefore proceeded
to determine the issue in the light of existing law related
thereto. while it is true that the complainant received a
salary rate which is higher that the minimum provided by
law, it does not however follow that any additional
compensation due the complainant can be offset by his
salary in excess of the minimum, especially in the absence of
an express agreement to that effect. To consider otherwise
would be in disregard of the rule of non-diminution of
benefits which are above the minimum being extended to the
employees. Furthermore, such arrangement is likewise in
disregard of the manner required by the law on how overtime
compensation must be determined. There is further the
possibility that in view of subsequent increases in the
minimum wage, the existing salary for twelve (12) hours
could no longer account for the increased wage level together
with the overtime rate for work rendered in excess of eight
hours. This fertile ground for a violation of a labor standards
provision can be effectively thwarted if there is a clear and
definite delineation between an employee's regular and
overtime compensation. It is, further noted that a reading of
respondent's Appointment Memoranda issued to the
complainant on different dates (Records, pp. 56-60) shows
that the salary being referred to by the respondent which
allegedly included complainant's overtime pay, partakes of
the nature of a basic salary and as such, does not
contemplate any other compensation above thereof including
complaint's overtime pay. We therefore affirm complainant's
entitlement to the latter benefit. 17
Petitioner also insists that private respondent's delay in asserting his
right/claim demonstrates his agreement to the inclusion of overtime pay in
his monthly salary rate. This argument is specious. First of all, delay cannot
be attributed to the private respondent. He was hired on March 1, 1986. His

twelve-hour work periods continued until November 30, 1989. On October


10, 1990 (just before he was suspended) he filed his money claims with the
labor arbiter. Thus, the public respondent in upholding the decision of the
arbiter computed the money claims for the three years period from the date
claims were filed, with the computation starting as of October 10, 1987
onwards.
In connection with the foregoing, we should add that even if there had been a
meeting of the minds in the instant case, the employment contract could not
have effectively shielded petitioner from the just and valid claims of private
respondent. Generally speaking, contracts are respected as the law between
the contracting, parties, and they may establish such stipulation, clause,
terms and conditions as they may see fit; and for as long as such agreements
are not contrary to law, morals, good customs, public policy or public order,
they shall have the fore of law between them. 18 However, ". . ., while it is the
inherent and inalienable right of every man to have the most liberty of
contracting, and agreements voluntarily and fairly made will be held valid
and enforced in the courts, the general right to contract is subject to the
limitation that the agreement must not be in violation of the Constitution,
the statute of some rule of law (12 Am. Jur. pp. 641-642)." 19 And under the
Civil Code, contracts of labor are explicitly subject to the police power of the
State because they are not ordinary contracts but are impressed with public
interest. 20 Inasmuch as in this particular instance the contract is question
would have been deemed in violation of pertinent labor laws, the provisions
of said laws would prevail over the terms of the contract, and private
respondent would still be entitled to overtime pay.
Moreover, we cannot agree with petitioner's assertion that by judging the
intention of the parties from their contemporaneous acts it would appear that
the "failure of respondent Esquejo to claim such alleged overtime pay since
1986 clearly demonstrate(s) that the agreement on his gross salary as
contained in his appointment paper is conclusive on the matter of the
inclusion of overtime pay." (Rollo, pp. 13-15; also, Rollo, pp. 378-380). This is
simply not the case here. The interpretation of the provision in question
having been put in issue, the Court is constrained to determine which
interpretation is more in accord with the intent of the parties. 21 To ascertain
the intent of the parties, the Court is bound to look at their
contemporaneous and subsequent acts. 22 Private respondent's silence and
failure to claim his overtime pay since 1986 cannot be considered as proving
the understanding on his part that the rate provided in his employment
contract covers overtime pay. Precisely, that is the very question raised by
private respondent with the arbiter, because contrary to the claim of
petitioner, private respondent believed that he was not paid his overtime pay
and that such pay is not covered by the rate agreed upon and stated in his
Appointment Memorandum. The subsequent act of private respondent in
filing money claims negates the theory that there was clear agreements as to
the inclusion of his overtime pay in the contracted salary rate. When an
employee fails to assert his right immediately upon violation thereof, such
failure cannot ipso facto be deemed as a waiver of the oppression. We must
recognize that the worker and his employer are not equally situated. When a
worker keeps silent inspite of flagrant violations of his rights, it may be

because he is seriously fearful of losing his job. And the dire consequences
thereof on his family and his dependents prevent him from complaining. In
short, his thoughts of sheer survival weight heavily against launching an
attack upon his more powerful employer.
The petitioner contends that the agreed salary rate in the employment
contract should be deemed to cover overtime pay, otherwise serious
distortions in wages would result "since a mere company guard will be
receiving a salary much more that the salaries of other employees who are
much higher in rank and position than him in the company." (Rollo, p. 16)
We find this argument flimsy and undeserving of consideration. How can
paying an employee the overtime pay due him cause serious distortions in
salary rates or scales? And how can "other employees" be aggrieved when
they did not render any overtime service?
Petitioner's allegation that private respondent is guilty of laches is likewise
devoid of merit. Laches is defined as failure or neglect for an unreasonable
and unexplained length of time to do that which, by exercising due diligence,
could or should have been done earlier. It is negligence or omission to assert
a right within an unreasonable time, warranting the presumption that the
party entitled to assert it has either abandoned or declined to assert it 23 The
question of laches is addressed to the sound discretion of the court, and
since it is an equitable doctrine, its application is controlled by equitable
considerations. It cannot work to defeat justice or to perpetrate fraud and
injustice. 24 Laches cannot be charged against any worker when he has not
incurred undue delay in the assertion of his rights. Private respondent filed
his complaint within the three-year reglementary period. He did not sleep on
his rights for an unreasonable length of time. 25
Second Issue: Unjust Enrichment?
Petitioner contends that the award of overtime pay is "plain and simple
unjust and illegal enrichment." Such award "in effect sanctioned and
approved the grant of payment to respondent Esquejo which will result in
double payment for the overtime work rendered by paid employee." 26 Also,
per petitioner, "(n)othing in the Labor Code nor in the Rules and Regulations
issued in the implementation thereof prohibits the manner of paying the
overtime pay (by) including the same in the salary." 27
This is begging the issue. To reiterate, the main question raised before the
labor tribunals is whether the provision on wages in the contract of
employment already included the overtime pay for four (4) working hours
rendered six days a week in excess of the regular eight-hour work. And we
hold that the tribunals below were correct in ruling that the stipulated pay
did not include overtime. Hence, there can be no undue enrichment in
claiming what legally belongs to private respondent.
Third Issue: Basic of NLRC's Decision?
Petitioner assails respondent NLRC for adopting that portion of the decision
of the labor arbiter, which reads as follows:
. . . Our conclusion is quite clear considering the fact that at
the time of his employment in March 1986, during which the

minimum wage was P37.00 a day for 8 hours work,


complaint's total take-home-pay working 12 hours a day
including ECOLA, was only P2,500.00 a month. And
immediately prior to his appointment as Ledger Custodian
effective December 1, 1989, with the working hours reduced
to 8 hours a week, complainant's monthly salary was
P3,420.00 (instead of P5,161.01 minimum monthly with 4
hours overtime work everyday, or a difference of P1,741.01 a
month).
Accordingly, the claim for overtime pay reckoned from
October 10, 1987 up to November 30, 1989 should be, as it
is hereby, granted. 28 (Rollo, p. 201).
Petitioner believes that by adopting the above-quoted portion of the arbiter's
decision, respondent NLRC violated the cardinal rule that its decisions must
be supported by substantial evidence. In doing so, petitioner claims that the
NLRC violated is primary rights as enunciated in the case of Ang Tibay
vs. CIR 29. In other words, petitioner holds the view that the arbiter's
decision failed to explain how the amount of P5,161.01 was arrived at. 30
Petitioner is in error. The public respondent did not adopt in toto the
aforequoted portion of the arbiter's decision. It made its own computations
and arrived at a slightly different amount, with a difference of P278.10 from
the award granted by the labor arbiter. To refute petitioner's claim, public
respondent attached (as Annexes "1", "1-A" "1-B" and "1-C") to its Comment,
the computations made by the labor arbiter in arriving at the sum of
P5,161,00. On the other hand, public respondent made its own computation
in its assailed Decision and arrived at a slightly different figure from the
computed by the labor arbiter:
Respondent claims that the award of P28,344.55 is bereft of
any factual basis. Records show that as per computation of
the office of the Fiscal Examiner, (Records, p. 116) the said
amount was arrived at. The computation was however based
on the assumption that the complainant regularly reported
for work. Records however show that the complainant
absented himself from work for one day in August 1989.
(Records, p. 63) For this unworked day, no overtime pay
must be due. As to the rest of his period of employment
subject to the three year limitation rule which dates from
October 10, 1987 up to his appointment as Ledger
Custodian on December 1, 1989 after which his regular work
period was already reduced to eight hours, there being no
showing that the complainant absented himself from work,
and he being then required to work for period of twelve hours
daily, We therefore rule on complainant's entitlement to
overtime compensation for the duration of the aforesaid
period in excess of one working day. Consequently,
complainant's overtime pay shall be computed as follow:
OVERTIME
PAY:
(4
HRS/DAY)
October 10, 1987 December 13, 1987 =

2.10
mos.
P54/8hrs. = P6.75 x 4 hrs. = P27.00
P27 x 1.25 = P33.75 x 26 x 2.10 mos. =
P1,842.75

December 14, 1987 June 30, 1989 =


18.53
mos.
P64/8 hrs. = P8 x 4 hrs. = P32.00
P32 x 1.25 = P40 x 26 x 18.53 = P19,271.20

July 1, 1989 November 30, 1989 = 5 mos.


P89/8 hrs. = P11.12 x 4 hrs. = P44.50
P44.50 x 1.25 = P55.62 x 25 x 5 mos. =
P6,952.50
(P6,953.125)

TOTAL OVERTIME PAY


P28,066.45 (P28,067.075)" (Rollo, pp. 210212)
Prescinding therefrom, it is evident that petitioner had no basis to argue that
respondent NLRC committed any grave abuse of discretion in quoting the
questioned portion of the labor arbiter's holding.
Fourth Issue: Newly Discovered Evidence?
In its Supplemental Petition filed on July 17, 1996, petitioner alleges in part:
2. That only recently, the petitioner was able to locate the
Employees Payroll Sheets which contained the salaries,
overtime pay, vacation and sick leaves of respondent Esquejo
which pertains to the period starting from January 1, 1987
up to November 1989. Therefore, said total amount of
overtime pay paid to and received by respondent Esquejo
should be deducted from the computed amount of
P28,066.45 based on the questioned decision; (Rollo, p. 220).
Contrary to petitioner's claim however, said documents consisting of
payroll sheets, cannot be considered as "newly-discovered evidence"
since said papers were in its custody and possession all along,
petitioner being the employer of private respondent
Furthermore, petitioner offers no satisfactory explanation why these
documents were unavailable at the time the case was being heard by
the labor arbiter. In its Memorandum, petitioner excused itself for its
failure to present such evidence before the labor arbiter and
respondent NLRC by saying that "petitioner('s office) appeared to be
in disorder or in a state of confusion since the then officers (of
petitioner) were disqualified by the Monetary Board on grounds of
misappropriation of funds of the association and other serious
irregularities. There was no formal turn-over of the documents from
the disqualified set of officer to the new officers of petitioner." 31 We

find such excuse weak and unacceptable, the same not being
substantiated by any evidence on record. Moreover, payroll records
are normally not in the direct custody and possession of corporate
officers but of their subordinates, i.e., payroll clerks and the like. In
the normal course of business, such payroll sheets are not the
subject of formal turnovers by outgoing officers to their successors of
office. And if indeed it is true that the petitioner had been looking for
such records or documents during the pendency of the case with the
labor arbiter and with public respondent, petitioner never alleged
such search before the said labor tribunals a quo. Hence, such bare
allegations of facts cannot be fairly appreciated in this petition
for certiorari, which is concerned only with grave abuse of discretion
of lack (or excess) of jurisdiction.
The Solicitor General quotes with approval a portion of private
respondent's Opposition to petitioner's motion for reconsideration
thus:
It is clear from the payroll, although the substantial pages
thereof do not show that the net amount indicated therein
have been received or duly acknowledged to have been
received by the complainant, THAT OVERTIME PAYMENTS
THAT WERE MADE REFER TO WORK RENDERED DURING
COMPLAINANT'S OFF DAYS. What has been rightfully,
claimed by the complainant and awarded by this Honorable
Office is the overtime works (sic) rendered by the
complainant daily for six (6) days a week computed at four
(4) hours per day. This computation is based on the evidence
thus submitted by the parties. All appointment by the
respondent carries (sic) with it (sic) that the basic salary of
the complainant is equivalent to 12 hours work everyday for
six (6) days a week, hence, the four (4) hours overtime daily
was not considered and therefore not paid by the
respondent. (Rollo, p. 327).
It has been consistently held that factual issued are not proper subjects of a
petition for certiorari, as the power of the Supreme Court to review labor
cases is limited to questions of jurisdiction and grave abuse of
discretion. 32The introduction in this petition of so-called newly discovered
evidence is unwarranted. This Court is not a trier of facts and it is not its
function to examine and evaluate the evidence presented (or which ought to
have been presented) in the tribunals below. 33
WHEREFORE, in view of the foregoing considerations, the Petition is
DISMISSED, the temporary restraining order issued on July 30, 1992
LIFTED, and the assailed decision of the public respondent AFFIRMED. Cost
against petitioner.

G.R. No. 142824

December 19, 2001

INTERPHIL LABORATORIES EMPLOYEES UNION-FFW, ENRICO


GONZALES and MA. THERESA MONTEJO,petitioners,
vs.
INTERPHIL LABORATORIES, INC., AND HONORABLE LEONARDO A.
QUISUMBING, SECRETARY OF LABOR AND EMPLOYMENT, respondents.
KAPUNAN, J.:
Assailed in this petition for review on certiorari are the decision, promulgated
on 29 December 1999, and the resolution, promulgated on 05 April 2000, of
the Court of Appeals in CA-G.R. SP No. 50978.
Culled from the questioned decision, the facts of the case are as follows:
Interphil Laboratories Employees Union-FFW is the sole and exclusive
bargaining agent of the rank-and-file employees of Interphil Laboratories,
Inc., a company engaged in the business of manufacturing and packaging
pharmaceutical products. They had a Collective Bargaining Agreement (CBA)
effective from 01 August 1990 to 31 July 1993.
Prior to the expiration of the CBA or sometime in February 1993, Allesandro
G. Salazar,1 Vice-President-Human Resources Department of respondent
company, was approached by Nestor Ocampo, the union president, and
Hernando Clemente, a union director. The two union officers inquired about
the stand of the company regarding the duration of the CBA which was set to
expire in a few months. Salazar told the union officers that the matter could
be best discussed during the formal negotiations which would start soon.
In March 1993, Ocampo and Clemente again approached Salazar. They
inquired once more about the CBA status and received the same reply from
Salazar. In April 1993, Ocampo requested for a meeting to discuss the
duration and effectivity of the CBA. Salazar acceded and a meeting was held
on 15 April 1993 where the union officers asked whether Salazar would be
amenable to make the new CBA effective for two (2) years, starting 01 August
1993. Salazar, however, declared that it would still be premature to discuss
the matter and that the company could not make a decision at the moment.
The very next day, or on 16 April 1993, all the rank-and-file employees of the
company refused to follow their regular two-shift work schedule of from 6:00
a.m. to 6:00 p.m., and from 6:00 p.m. to 6:00 a.m. At 2:00 p.m. and 2:00
a.m., respectively, the employees stopped working and left their
workplacewithout sealing the containers and securing the raw materials they
were working on. When Salazar inquired about the reason for their refusal to
follow their normal work schedule, the employees told him to "ask the union
officers." To minimize the damage the overtime boycott was causing the
company, Salazar immediately asked for a meeting with the union officers. In
the meeting, Enrico Gonzales, a union director, told Salazar that the
employees would only return to their normal work schedule if the company
would agree to their demands as to the effectivity and duration of the new
CBA. Salazar again told the union officers that the matter could be better
discussed during the formal renegotiations of the CBA. Since the union was
apparently unsatisfied with the answer of the company, the overtime boycott
continued. In addition, the employees started to engage in a work slowdown

campaign during the time they were working, thus substantially delaying the
production of the company.2
On 14 May 1993, petitioner union submitted with respondent company its
CBA proposal, and the latter filed its counter-proposal.
On 03 September 1993, respondent company filed with the National Labor
Relations Commission (NLRC) a petition to declare illegal petitioner union's
"overtime boycott" and "work slowdown" which, according to respondent
company, amounted to illegal strike. The case, docketed NLRC-NCR Case No.
00-09-05529-93, was assigned to Labor Arbiter Manuel R. Caday.
On 22 October 1993, respondent company filed with the National
Conciliation and Mediation Board (NCMB) an urgent request for preventive
mediation aimed to help the parties in their CBA negotiations.3 The parties,
however, failed to arrive at an agreement and on 15 November 1993,
respondent company filed with the Office of the Secretary of Labor and
Employment a petition for assumption of jurisdiction.
On 24 January 1994, petitioner union filed with the NCMB a Notice of Strike
citing unfair labor practice allegedly committed by respondent company. On
12 February 1994, the union staged a strike.
On 14 February 1994, Secretary of Labor Nieves Confesor issued an
assumption order4 over the labor dispute. On 02 March 1994, Secretary
Confesor issued an order directing respondent company to "immediately
accept all striking workers, including the fifty-three (53) terminated union
officers, shop stewards and union members back to work under the same
terms and conditions prevailing prior to the strike, and to pay all the unpaid
accrued year end benefits of its employees in 1993."5 On the other hand,
petitioner union was directed to "strictly and immediately comply with the
return-to-work orders issued by (the) Office x x x6 The same order
pronounced that "(a)ll pending cases which are direct offshoots of the instant
labor dispute are hereby subsumed herewith."7
In the i, the case before Labor Arbiter Caday continued. On 16 March 1994,
petitioner union filed an "Urgent Manifestation and Motion to Consolidate the
Instant Case and to Suspend Proceedings" seeking the consolidation of the
case with the labor dispute pending before the Secretary of Labor. Despite
objection by respondent company, Labor Arbiter Caday held in abeyance the
proceedings before him. However, on 06 June 1994, Acting Labor Secretary
Jose S. Brillantes, after finding that the issues raised would require a formal
hearing and the presentation of evidentiary matters, directed Labor Arbiters
Caday and M. Sol del Rosario to proceed with the hearing of the cases before
them and to thereafter submit their report and recommendation to his office.
On 05 September 1995, Labor Arbiter Caday submitted his recommendation
to the then Secretary of Labor Leonardo A. Quisumbing.8 Then Secretary
Quisumbing approved and adopted the report in his Order, dated 13 August
1997, hence:
WHEREFORE, finding the said Report of Labor Arbiter Manuel R.
Caday to be supported by substantial evidence, this Office hereby

RESOLVES to APPROVE and ADOPT the same as the decision in this


case, and judgment is hereby rendered:
(1) Declaring the 'overtime boycott' and 'work slowdown' as illegal
strike;
(2) Declaring the respondent union officers namely:
Nestor Ocampo

President

Carmelo Santos

Vice-President

Marites Montejo

Treasurer/Board Member

Rico Gonzales

Auditor

Rod Abuan

Director

Segundino Flores

Director

Hernando Clemente Director


who spearheaded and led the overtime boycott and work slowdown,
to have lost their employment status; and
(3) Finding the respondents guilty of unfair labor practice for
violating the then existing CBA which prohibits the union or any
employee during the existence of the CBA from staging a strike or
engaging in slowdown or interruption of work and ordering them to
cease and desist from further committing the aforesaid illegal acts.
Petitioner union moved for the reconsideration of the order but its motion
was denied. The union went to the Court of Appeals via a petition
for certiorari. In the now questioned decision promulgated on 29 December
1999, the appellate court dismissed the petition. The union's motion for
reconsideration was likewise denied.
Hence, the present recourse where petitioner alleged:
THE HONORABLE FIFTH DIVISION OF THE COURT OF APPEALS,
LIKE THE HONORABLE PUBLIC RESPONDENT IN THE
PROCEEDINGS BELOW, COMMITTED GRAVE ABUSE OF
DISCRETION, AMOUNTING TO LACK AND/OR EXCESS OF
JURISDICTION WHEN IT COMPLETELY DISREGARDED "PAROL
EVIDENCE RULE" IN THE EVALUATION AND APPRECIATION OF
EVIDENCE PROFERRED BY THE PARTIES.
THE HONORABLE FIFTH DIVISION OF THE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION, AMOUNTING TO
LACK AND/OR EXCESS OF JURISDICTION, WHEN IT DID NOT

DECLARE PRIVATE RESPONDENT'S ACT OF EXTENDING


SUBSTANTIAL SEPARATION PACKAGE TO ALMOST ALL INVOLVED
OFFICERS OF PETITIONER UNION, DURING THE PENDENCY OF
THE CASE, AS TANTAMOUNT TO CONDONATION, IF INDEED,
THERE WAS ANY MISDEED COMMITTED.
THE HONORABLE FIFTH DIVISION OF THE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION, AMOUNTING TO
LACK AND/OR EXCESS OF JURISDICTION WHEN IT HELD THAT
THE SECRETARY OF LABOR AND EMPLOYMENT HAS
JURISDICTION OVER A CASE (A PETITION TO DECLARE STRIKE
ILLEGAL) WHICH HAD LONG BEEN FILED AND PENDING BEFORE
THE LABOR ARBITER.9
We sustain the questioned decision.
On the matter of the authority and jurisdiction of the Secretary of Labor and
Employment to rule on the illegal strike committed by petitioner union, it is
undisputed that the petition to declare the strike illegal before Labor Arbiter
Caday was filed long before the Secretary of Labor and Employment issued
the assumption order on 14 February 1994. However, it cannot be denied
that the issues of "overtime boycott" and "work slowdown" amounting to
illegal strike before Labor Arbiter Caday are intertwined with the labor
dispute before the Labor Secretary. In fact, on 16 March 1994, petitioner
union even asked Labor Arbiter Caday to suspend the proceedings before
him and consolidate the same with the case before the Secretary of Labor.
When Acting Labor Secretary Brillantes ordered Labor Arbiter Caday to
continue with the hearing of the illegal strike case, the parties acceded and
participated in the proceedings, knowing fully well that there was also a
directive for Labor Arbiter Caday to thereafter submit his report and
recommendation to the Secretary. As the appellate court pointed out, the
subsequent participation of petitioner union in the continuation of the
hearing was in effect an affirmation of the jurisdiction of the Secretary of
Labor.
The appellate court also correctly held that the question of the Secretary of
Labor and Employment's jurisdiction over labor and labor-related disputes
was already settled in International Pharmaceutical, Inc. vs. Hon. Secretary of
Labor and Associated Labor Union (ALU)10 where the Court declared:
In the present case, the Secretary was explicitly granted by Article
263(g) of the Labor Code the authority to assume jurisdiction over a
labor dispute causing or likely to cause a strike or lockout in an
industry indispensable to the national interest, and decide the same
accordingly. Necessarily, this authority to assume jurisdiction over
the said labor dispute must include and extend to all questions and
controversies arising therefrom, including cases over which the labor
arbiter has exclusive jurisdiction.
Moreover, Article 217 of the Labor Code is not without, but
contemplates, exceptions thereto. This is evident from the opening
proviso therein reading '(e)xcept as otherwise provided under this
Code . . .' Plainly, Article 263(g) of the Labor Code was meant to

make both the Secretary (or the various regional directors) and the
labor arbiters share jurisdiction, subject to certain conditions.
Otherwise, the Secretary would not be able to effectively and
efficiently dispose of the primary dispute. To hold the contrary may
even lead to the absurd and undesirable result wherein the Secretary
and the labor arbiter concerned may have diametrically opposed
rulings. As we have said, '(i)t is fundamental that a statute is to be
read in a manner that would breathe life into it, rather than defeat it.
In fine, the issuance of the assailed orders is within the province of
the Secretary as authorized by Article 263(g) of the Labor Code and
Article 217(a) and (5) of the same Code, taken conjointly and
rationally construed to subserve the objective of the jurisdiction
vested in the Secretary.11
Anent the alleged misappreciation of the evidence proffered by the parties, it
is axiomatic that the factual findings of the Labor Arbiter, when sufficiently
supported by the evidence on record, must be accorded due respect by the
Supreme Court.12 Here, the report and recommendation of Labor Arbiter
Caday was not only adopted by then Secretary of Labor Quisumbing but was
likewise affirmed by the Court of Appeals. We see no reason to depart from
their findings.
Petitioner union maintained that the Labor Arbiter and the appellate court
disregarded the "parol evidence rule"13when they upheld the allegation of
respondent company that the work schedule of its employees was from 6:00
a.m. to 6:00 p.m. and from 6:00 p.m. to 6:00 am. According to petitioner
union, the provisions of their CBA on working hours clearly stated that the
normal working hours were "from 7:30 a.m. to 4:30 p.m."14 Petitioner union
underscored that the regular work hours for the company was only eight (8)
hours. It further contended that the Labor Arbiter as well as the Court of
Appeals should not have admitted any other evidence contrary to what was
stated in the CBA.
The reliance on the parol evidence rule is misplaced. In labor cases pending
before the Commission or the Labor Arbiter, the rules of evidence prevailing
in courts of law or equity are not controlling.15 Rules of procedure and
evidence are not applied in a very rigid and technical sense in labor
cases.16 Hence, the Labor Arbiter is not precluded from accepting and
evaluating evidence other than, and even contrary to, what is stated in the
CBA.
In any event, the parties stipulated:
Section 1. Regular Working Hours A normal workday shall consist
of not more than eight (8) hours. The regular working hours for the
Company shall be from 7:30 A.M. to 4:30 P.M. The schedule of shift
work shall be maintained; however the company may change the
prevailing work time at its discretion, should such change be
necessary in the operations of the Company. All employees shall
observe such rules as have been laid down by the company for the
purpose of effecting control over working hours.17

It is evident from the foregoing provision that the working hours may be
changed, at the discretion of the company, should such change be necessary
for its operations, and that the employees shall observe such rules as have
been laid down by the company. In the case before us, Labor Arbiter Caday
found that respondent company had to adopt a continuous 24-hour work
daily schedule by reason of the nature of its business and the demands of its
clients. It was established that the employees adhered to the said work
schedule since 1988. The employees are deemed to have waived the eighthour schedule since they followed, without any question or complaint, the
two-shift schedule while their CBA was still in force and even prior thereto.
The two-shift schedule effectively changed the working hours stipulated in
the CBA. As the employees assented by practice to this arrangement, they
cannot now be heard to claim that the overtime boycott is justified because
they were not obliged to work beyond eight hours.
As Labor Arbiter Caday elucidated in his report:
Respondents' attempt to deny the existence of such regular overtime
schedule is belied by their own awareness of the existence of the
regular overtime schedule of 6:00 A.M. to 6:00 P.M. and 6:00 P.M. to
6:00 A.M. of the following day that has been going on since 1988.
Proof of this is the case undisputedly filed by the union for and in
behalf of its members, wherein it is claimed that the company has
not been computing correctly the night premium and overtime pay
for work rendered between 2:00 A.M. and 6:00 A.M. of the 6:00 P.M.
to 6:00 A.M. shift. (tsn pp. 9-10, testimony of Alessandro G. Salazar
during hearing on August 9, 1994). In fact, the union Vice-President
Carmelo C. Santos, demanded that the company make a
recomputation of the overtime records of the employees from 1987
(Exh. "P"). Even their own witness, union Director Enrico C.
Gonzales, testified that when in 1992 he was still a Quality Control
Inspector at the Sucat Plant of the company, his schedule was
sometime at 6:00 A.M. to 6:00 P.M., sometime at 6:00 A.M. to 2:00
P.M., at 2:00 P.M. to 10:00 P.M. and sometime at 6:00 P.M. to 6:00
A.M., and when on the 6 to 6 shifts, he received the commensurate
pay (t.s.n. pp. 7-9, hearing of January 10, 1994). Likewise, while in
the overtime permits, dated March 1, 6, 8, 9 to 12, 1993, which were
passed around daily for the employees to sign, his name appeared
but without his signatures, he however had rendered overtime
during those dates and was paid because unlike in other
departments, it has become a habit to them to sign the overtime
schedule weekly (t.s.n. pp. 26-31, hearing of January 10, 1994). The
awareness of the respondent union, its officers and members about
the existence of the regular overtime schedule of 6:00 A.M. to 6:00
P.M. and 6:00 P.M. to 6:00 A.M. of the following day will be further
shown in the discussion of the second issue.18
As to the second issue of whether or not the respondents have
engaged in "overtime boycott" and "work slowdown" from April 16,
1993 up to March 7, 1994, both amounting to illegal strike, the
evidence presented is equally crystal clear that the "overtime boycott"

and "work slowdown" committed by the respondents amounted to


illegal strike.
As undisputably testified to by Mr. Alessandro G. Salazar, the
company's Vice-President-Human Resources Department, sometime
in February, 1993, he was approached by the union President Nestor
Ocampo and Union Director Hernando Clemente who asked him as
to what was the stand of the company regarding the duration of the
CBA between the company and which was set to expire on July 31,
1993. He answered that the matter could be best discussed during
the formal renegotiations which anyway was to start soon. This
query was followed up sometime in March, 1993, and his answer
was the same. In early April, 1993, the union president requested for
a meeting to discuss the duration and effectivity of the CBA.
Acceding to the request, a meeting was held on April 15, 1993
wherein the union officers asked him if he would agree to make the
new CBA effective on August 1, 1993 and the term thereof to be valid
for only two (2) years. When he answered that it was still premature
to discuss the matter, the very next day, April 16, 1993, all the rank
and file employees of the company refused to follow their regular
two-shift work schedule of 6:00 A.M. to 6:00 P.M. and 6:00 P.M. to
6:00 A.M., when after the 8-hours work, they abruptly stopped
working at 2:00 P.M. and 2:00 A.M., respectively, leaving their place
of work without sealing the containers and securing the raw
materials they were working on. When he saw the workers leaving
before the end of their shift, he asked them why and their reply was
"asked (sic) the union officers." Alarmed by the overtime boycott and
the damage it was causing the company, he requested for a meeting
with the union officers. In the meeting, he asked them why the
regular work schedule was not being followed by the employees, and
union Director Enrico Gonzales, with the support of the other union
officers, told him that if management would agree to a two-year
duration for the new CBA and an effectivity date of August 1, 1993,
all employees will return to the normal work schedule of two 12-hour
shifts. When answered that the management could not decide on the
matter at the moment and to have it discussed and agreed upon
during the formal renegotiations, the overtime boycott continued and
the employees at the same time employed a work slowdown
campaign during working hours, causing considerable delay in the
production and complaints from the clients/customers (Exh. "O",
Affidavit of Alessandro G. Salazar which formed part of his direct
testimony). This testimonial narrations of Salazar was, as earlier
said, undisputed because the respondents' counsel waived his cross
examination (t.s.n. p. 15, hearing on August 9, 1994).
Aside from the foregoing undisputed testimonies of Salazar, the
testimonies of other Department Managers pointing to the union
officers as the instigators of the overtime boycott and work
slowdown, the testimony of Epifanio Salumbides (Exh. "Y") a union
member at the time the concerted activities of the respondents took
place, is quoted hereunder:

"2. Noon Pebrero 1993, ipinatawag ng Presidente ng Unyon


na si Nestor Ocampo ang lahat ng taga-maintenance ng
bawat departamento upang dumalo sa isang miting. Sa
miting na iyon, sinabi ni Rod Abuan, na isang Direktor ng
Unyon, na mayroon ilalabas na memo ang Unyon na naguutos sa mga empleyado ng Kompanya na mag-imbento ng
sari-saring dahilan para lang hindi sila makapagtrabaho ng
"overtime". Sinabihan rin ako ni Tessie Montejo na siya
namang Treasurer ng Unyon na 'Manny, huwag ka na lang
pumasok sa Biyernes para hindi ka masabihan ng
magtrabaho ng Sabado at Linggo' na siya namang araw ng
"overtime" ko x x x
"3. Nakalipas ang dalawang buwan at noong unang bahagi
ng Abril 1993, miniting kami ng Shop Stewards namin na
sina Ariel Abenoja, Dany Tansiongco at Vicky Baron.
Sinabihan kami na huwag ng mag-overtime pag nagbigay ng
senyas ang Unyon ng "showtime."
"4. Noong umaga ng ika-15 ng Abril 1993, nagsabi na si
Danny Tansiongco ng "showtime". Dahil dito wala ng
empleyadong nag-overtime at sabay-sabay silang umalis,
maliban sa akin. Ako ay pumasok rin noong Abril 17 at 18,
1993 na Sabado at Linggo.
"5. Noong ika-19 ng Abril 1993, ako ay ipinatawag ni Ariel
Abenoja Shop Steward, sa opisina ng Unyon. Nadatnan ko
doon ang halos lahat ng opisyales ng Unyon na sina:
Nestor Ocampo

Presidente

Carmelo Santos

Bise-Presidente

Nanding Clemente Director


TessMontejo

Chief Steward

Segundo Flores

Director

Enrico Gonzales

Auditor

Boy Alcantara

Shop Steward

Rod Abuan

Director

at marami pang iba na hindi ko na maala-ala. Pagpasok ko,


ako'y pinaligiran ng mga opisyales ng Unyon. Tinanong ako

ni Rod Aguan kung bakit ako "nag-overtime" gayong


"Binigyan ka na namin ng instruction na huwag pumasok,
pinilit mo pa ring pumasok." "Management ka ba o
Unyonista." Sinagot ko na ako ay Unyonista. Tinanong niya
muli kung bakit ako pumasok. Sinabi ko na wala akong
maibigay na dahilan para lang hindi pumasok at "magovertime." Pagkatapos nito, ako ay pinagmumura ng mga
opisyales ng Unyon kaya't ako ay madaliang umalis.

x x x (T)he concerted activity in question would still be illicit because


contrary to the workers' explicit contractual commitment "that there
shall be no strikes, walkouts, stoppage or slowdown of work,
boycotts, secondary boycotts, refusal to handle any merchandise,
picketing, sit-down strikes of any kind, sympathetic or general
strikes, or any other interference with any of the operations of the
COMPANY during the term of x x x (their collective bargaining)
agreement."

xxx

What has just been said makes unnecessary resolution of SMC's


argument that the workers' concerted refusal to adhere to the work
schedule in force for the last several years, is a slowdown, an
inherently illegal activity essentially illegal even in the absence of a
no-strike clause in a collective bargaining contract, or statute or rule.
The Court is in substantial agreement with the petitioner's concept of
a slowdown as a "strike on the installment plan;" as a willful
reduction in the rate of work by concerted action of workers for the
purpose of restricting the output of the employer, in relation to a
labor dispute; as an activity by which workers, without a complete
stoppage of work, retard production or their performance of duties
and functions to compel management to grant their demands. The
Court also agrees that such a slowdown is generally condemned as
inherently illicit and unjustifiable, because while the employees
"continue to work and remain at their positions and accept the wages
paid to them," they at the same time "select what part of their
allotted tasks they care to perform of their own volition or refuse
openly or secretly, to the employer's damage, to do other work;" in
other words, they "work on their own terms." x x x24

xxx

xxx

Likewise, the respondents' denial of having a hand in the work


slowdown since there was no change in the performance and work
efficiency for the year 1993 as compared to the previous year was
even rebuffed by their witness Ma. Theresa Montejo, a Quality
Control Analyst. For on cross-examination, she (Montejo) admitted
that she could not answer how she was able to prepare the
productivity reports from May 1993 to February 1994 because from
April 1993 up to April 1994, she was on union leave. As such, the
productivity reports she had earlier shown was not prepared by her
since she had no personal knowledge of the reports (t.s.n. pp. 32-35,
hearing of February 27, 1995). Aside from this admission, the
comparison made by the respondents was of no moment, because
the higher production for the years previous to 1993 was reached
when the employees regularly rendered overtime work. But
undeniably, overtime boycott and work slowdown from April 16,
1993 up to March 7, 1994 had resulted not only in financial losses to
the company but also damaged its business reputation.
Evidently, from all the foregoing, respondents' unjustified unilateral
alteration of the 24-hour work schedule thru their concerted
activities of "overtime boycott" and "work slowdown" from April 16,
1993 up to March 7, 1994, to force the petitioner company to accede
to their unreasonable demands, can be classified as a strike on an
installment basis, as correctly called by petitioner company x x x19
It is thus undisputed that members of the union by their own volition
decided not to render overtime services in April 1993.20 Petitioner union even
admitted this in its Memorandum, dated 12 April 1999, filed with the Court
of Appeals, as well as in the petition before this Court, which both stated that
"(s)ometime in April 1993, members of herein petitioner, on their own volition
and in keeping with the regular working hours in the Company x x x decided
not to render overtime".21 Such admission confirmed the allegation of
respondent company that petitioner engaged in "overtime boycott" and "work
slowdown" which, to use the words of Labor Arbiter Caday, was taken as a
means to coerce respondent company to yield to its unreasonable demands.
More importantly, the "overtime boycott" or "work slowdown" by the
employees constituted a violation of their CBA, which prohibits the union or
employee, during the existence of the CBA, to stage a strike or engage in
slowdown or interruption of work.22 In Ilaw at Buklod ng Manggagawa vs.
NLRC ,23 this Court ruled:

Finally, the Court cannot agree with the proposition that respondent
company, in extending substantial separation package to some officers of
petitioner union during the pendency of this case, in effect, condoned the
illegal acts they committed.
Respondent company correctly postured that at the time these union officers
obtained their separation benefits, they were still considered employees of the
company. Hence, the company was merely complying with its legal
obligations.25 Respondent company could have withheld these benefits
pending the final resolution of this case. Yet, considering perhaps the
financial hardships experienced by its employees and the economic situation
prevailing, respondent company chose to let its employees avail of their
separation benefits. The Court views the gesture of respondent company as
an act of generosity for which it should not be punished.
WHEREFORE, the petition is DENIED DUE COURSE and the 29 December
1999 decision of the Court of Appeals is AFFIRMED.
SO ORDERED.

G.R. No. 159832

May 5, 2006

MERCEDITA
ACUA,
MYRNA
RAMONES,
and
JULIET
MENDEZ, Petitioners,
vs.
HON. COURT OF APPEALS and JOIN INTERNATIONAL CORPORATION
and/or ELIZABETH ALAON,Respondents.
DECISION
QUISUMBING, J.:
This petition seeks the review and reversal of the Court of
Appeals Decision1 dated January 27, 2003, in CA-G.R. SP No. 70724,
entitled Join International Corporation and/or Elizabeth Alaon v. National
Labor Relations Commission (Third Division), Mercedita Acua, Juliet Mendez,
and Myrna Ramones, setting aside the resolutions of the NLRC and
dismissing the complaint of petitioners.
Petitioners are Filipino overseas workers deployed by private respondent Join
International Corporation (JIC), a licensed recruitment agency, to its
principal, 3D Pre-Color Plastic, Inc., (3D) in Taiwan, Republic of China,
under a uniformly-worded employment contract for a period of two years.
Herein private respondent Elizabeth Alaon is the president of Join
International Corporation.
Sometime in September 1999, petitioners filed with private respondents
applications for employment abroad. They submitted their passports, NBI
clearances, medical clearances and other requirements and each paid a
placement fee of P14,850, evidenced by official receipts2 issued by private
respondents.
After their papers were processed, petitioners claimed they signed a
uniformly-worded employment contract3 with private respondents which
stipulated that they were to work as machine operators with a monthly
salary of NT$15,840.00, exclusive of overtime, for a period of two years.
On December 9, 1999, with 18 other contract workers they left for Taiwan.
Upon arriving at the job site, a factory owned by 3D, they were made to sign
another contract which stated that their salary was only NT$11,840.00.4They
were likewise informed that the dormitory which would serve as their living
quarters was still under construction. They were requested to temporarily
bear with the inconvenience but were assured that their dormitory would be
completed in a short time.5
Petitioners alleged that they were brought to a "small room with a cement
floor so dirty and smelling with foul odor (sic)". Forty women were jampacked
in the room and each person was given a pillow. Since the ladies comfort
room was out of order, they had to ask permission to use the mens comfort
room.6 Petitioners claim they were made to work twelve hours a day, from
8:00 p.m. to 8:00 a.m.
The petitioners averred that on December 16, 1999, due to unbearable
working conditions, they were constrained to inform management that they
were leaving. They booked a flight home, at their own expense. Before they

left, they were made to sign a written waiver.7 In addition, petitioners were
not paid any salary for work rendered on December 11-15, 1999.8
Immediately upon arrival in the Philippines, petitioners went to private
respondents office, narrated what happened, and demanded the return of
their placement fees and plane fare. Private respondents refused.
On December 28, 1999, private respondents offered a settlement. Petitioner
Mendez received P15,080.9 The next day, petitioners Acua and Ramones
went back and received P13,64010 and P16,200,11 respectively. They claim
they signed a waiver, otherwise they would not be refunded.12
On January 14, 2000, petitioners Acua and Mendez invoking Republic Act
No. 8042,13 filed a complaint for illegal dismissal and nonpayment/underpayment of salaries or wages, overtime pay, refund of
transportation fare, payment of salaries/wages for 3 months, moral and
exemplary damages, and refund of placement fee before the National Labor
Relations Commission (NLRC). Petitioner Ramones filed her complaint on
January 20, 2000.
The Labor Arbiter ruled in favor of petitioners, declaring that Myrna
Ramones, Juliet Mendez and Mercedita Acua did not resign voluntarily from
their jobs. Thus, private respondents were ordered to pay jointly and
severally, in Philippine Peso, at the rate of exchange prevailing at the time of
payment, the following:
1. MERCEDITA ACUA
a.
Unexpired
NT$95,000.00
Portion
b. Salary
days

for

2,436.92

c. Overtime pay
for 4 hrs. in 4 1,523.07
days

NT$98,960.00
d. Refund of placement fee
(Less:

Amount

received

PHP45,000.00
per 13,640.00

31,360.00

Quitclaim)

a.
Unexpired
NT$95,000.00
Portion

e. Moral damages

25,000.00

f. Exemplary damages

40,000.00

b. Salary
days

for

2,436.92

c. Overtime pay
for 4 hrs. in 4 1,523.07
days

2. JULIET C. MENDEZ
a.
Unexpired
NT$95,000.00
Portion

NT$98,960.00
b. Salary
days

for

2,436.92

d. Refund of placement fee

c. Overtime pay
for 4 hrs. in 4 1,523.07
days

(Less:
Amount
Quitclaim)

NT$98,960.00
d. Refund of placement fee
(Less:
Amount
Quitclaim)

received

PHP45,000.00
per

16,200.00

28,800.00

e. Moral damages

25,000.00

f. Exemplary damages

40,000.0015

PHP45,000.00
per 15,080.0014

29,920.00

e. Moral damages

25,000.00

f. Exemplary damages

40,000.00

3. MYRNA R. RAMONES

received

The Labor Arbiter likewise ordered the payment of attorneys fees equivalent
to ten percent (10%) of the award which totaled NT$296,880.00
and P285,080.00 The other claims were dismissed for lack of merit.
Private respondents thereafter appealed the decision to the National Labor
Relations Commission. The NLRC ruled that the inclusion of Alaon as party
respondent in this case had no basis since respondent JIC, being a juridical
person, has a legal personality, separate and distinct from its officers. 16 It
partially granted the appeal and ordered that the amounts
of P15,080, P13,640 and P16,200 received under the quitclaim by Mendez,
Acua and Ramones, respectively, be deducted from their respective awards.
They were awarded attorneys fees equivalent to ten percent (10%) of their
awarded labor-standards claims for unpaid wages and overtime pays. No
moral and exemplary damages and placement fees were awarded. 17 Private
respondents motion for partial reconsideration was denied.
On appeal, the Court of Appeals ruled for private respondents. It set aside
the resolutions dated February 26, 2002 and December 10, 2001 of the
NLRC and dismissed the complaint of petitioners.18
In their petition before us, petitioners raise the following issues:

I
Whether or not public respondent court of appeals erred and/or GRAVELY
abused its discretion, amounting to lack of jurisdiction, in taking cognizance
of the petition for certiorari filed by the private respondents, despite the fact
that the nlrcs resolution of December 10, 2001 had already become final and
executory, private respondents motion for partial reconsideration with the
nlrc having been filed out of time
II
Alternatively, whether or not public respondent court of appeals erred in
setting aside the resolutions of the nlrc, and in dismissing the complaint of
the petitioners.19
Prefatorily, petitioners aver that private respondents Verification and
Certification of the Petition for Certiorari stated that the copy of the
resolution of the NLRC dated December 10, 2001 was received on January 4,
2002 and its partial motion for reconsideration filed on January 29, 2002, or
15 days beyond the reglementary period. However, a perusal of the Partial
Motion for Reconsideration20 filed by private respondents show that the
NLRC Resolution dated December 10, 2001 was in fact received by private
respondents on January 24, 2002 and not on January 4, 2002. Hence, the
appeal was properly filed within the 10-day reglementary period.
In this petition the issue left for resolution is whether petitioners were
illegally dismissed under Rep. Act No. 8042, thus entitling them to benefits
plus damages.
The Labor Arbiter and the NLRC found that petitioners admitted they
resigned from their jobs without force, coercion, intimidation and pressure
from private respondents principal abroad.21
According to the Labor Arbiter, while it may be true that petitioners were not
coerced into giving up their jobs, the deplorable, oppressive and sub-human
working conditions drove petitioners to resign. In effect, according to the
Labor Arbiter, the petitioners did not voluntarily resign.22
The NLRC also ruled that there was constructive dismissal since working
under said conditions was unbearable.23
As we have held previously, constructive dismissal covers the involuntary
resignation resorted to when continued employment becomes impossible,
unreasonable or unlikely; when there is a demotion in rank or a diminution
in pay; or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to an employee.24
In this case, the appellate court found that petitioners did not deny that the
accommodations were not as homely as expected. In the petitioners
memorandum, they admitted that they were told by the principal, upon their
arrival, that the dormitory was still under construction and were requested to
bear with the temporary inconvenience and the dormitory would soon be
finished. We likewise note that petitioners did not refute private respondents
assertion that they had deployed approximately sixty other workers to their

principal, and to the best of their knowledge, no other worker assigned to the
same principal has resigned, much less, filed a case for illegal dismissal.25
To our mind these cited circumstances do not reflect malice by private
respondents nor do they show the principals intention to subject petitioners
to unhealthy accommodations. Under these facts, we cannot rule that there
was constructive dismissal.
Private respondents also claim that petitioners were not entitled to overtime
pay, since they had offered no proof that they actually rendered overtime
work. Petitioners, on the other hand, say that they could not show any
documentary proof since their employment records were all in the custody of
the principal employer. It was sufficient, they claim, that they alleged the
same with particularity.
On this matter, we rule for the petitioners. The claim for overtime pay should
not have been disallowed because of the failure of the petitioners to
substantiate them.26 The claim of overseas workers against foreign employers
could not be subjected to same rules of evidence and procedure easily
obtained by complainants whose employers are locally based.27 While
normally we would require the presentation of payrolls, daily time records
and similar documents before allowing claims for overtime pay, in this case,
that would be requiring the near-impossible.
To our mind, it is private respondents who could have obtained the records of
their principal to refute petitioners claim for overtime pay. By their failure to
do so, private respondents waived their defense and in effect admitted the
allegations of the petitioners.
It is a time-honored rule that in controversies between a worker and his
employer, doubts reasonably arising from the evidence, or in the
interpretation of agreements and writing should be resolved in the workers
favor.28 The policy is to extend the applicability of the decree to a greater
number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and
protection to labor.29 Accordingly, we rule that private respondents are
solidarily liable with the foreign principal for the overtime pay claims of
petitioners.
On the award of moral and exemplary damages, we hold that such award
lacks legal basis. Moral and exemplary damages are recoverable only where
the dismissal of an employee was attended by bad faith or fraud, or
constituted an act oppressive to labor, or was done in a manner contrary to
morals, good customs or public policy.30 The person claiming moral damages
must prove the existence of bad faith by clear and convincing evidence, for
the law always presumes good faith.31 Petitioners allege they suffered
humiliation, sleepless nights and mental anguish, thinking how they would
pay the money they borrowed for their placement fees.32 Even so, they failed
to prove bad faith, fraud or ill motive on the part of private
respondents.33 Moral damages cannot be awarded. Without the award of
moral damages, there can be no award of exemplary damages, nor attorneys
fees.34

Quitclaims executed by the employees are commonly frowned upon as


contrary to public policy and ineffective to bar claims for the full measure of
the workers legal rights, considering the economic disadvantage of the
employee and the inevitable pressure upon him by financial
necessity.35 Nonetheless, the so-called "economic difficulties and financial
crises" allegedly confronting the employee is not an acceptable ground to
annul the compromise agreement36 unless it is accompanied by a gross
disparity between the actual claim and the amount of the settlement. 37
A perusal of the records reveals that petitioners were not in any way
deceived, coerced or intimidated into signing a quitclaim waiver in the
amounts of P13,640, P15,080 and P16,200 respectively. Nor was there a
disparity between the amount of the quitclaim and the amount actually due
the petitioners.
Conformably then the petitioners are entitled to the following amounts in
Philippine Peso at the rate of exchange prevailing at the time of payment:
1. MERCEDITA ACUA
a. Salary for 4 days

NT $ 2,436.92

NT $ 3,959.99

2. JULIET C. MENDEZ
NT $ 2,436.92

b. Overtime pay for 4 hours in 4 days 1,523.07


NT $ 3,959.99

3. MYRNA R. RAMONES

NT $ 2,436.92

b. Overtime pay for 4 hours in 4 days 1,523.07


NT $ 3,959.99
According to the Bangko Sentral Treasury Department, the prevailing
exchange rates on December 1999 was NT$1 to P1.268805. Hence, after
conversion to Philippine pesos, the amount of the quitclaim paid to
petitioners was actually higher than the amount due them.
WHEREFORE, the petition is DISMISSED, without prejudice to the filing of
illegal recruitment complaint against the respondents pursuant to Section
6(i) of The Migrant Workers and Overseas Filipino Act of 1995 (Rep. Act No.
8042).
SO ORDERED.

b. Overtime pay for 4 hours in 4 days 1,523.07

a. Salary for 4 days

a. Salary for 4 days

G.R. No. 112546 March 13, 1996

leaves. However, it appears that, during the life of the petitioner corporation,
from the beginning of its operations in 1981 until its closure in 1992, it had
been giving separation pay equivalent to thirty (30) days' pay for every year of
service. Moreover, inasmuch as the region where North Davao operated was
plagued by insurgency and other peace and order problems, the employees
had to collect their salaries at a bank in Tagum, Davao del Norte, some 58
kilometers from their workplace and about 2 1/2 hours' travel time by public
transportation; this arrangement lasted from 1981 up to 1990.

NORTH DAVAO MINING CORPORATION and ASSET PRIVATIZATION


TRUST, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER
ANTONIO M. VILLANUEVA and WILFREDO GUILLEMA, respondents.
PANGANIBAN, J.:p
Is a company which is forced by huge business losses to close its business,
legally required to pay separation benefits to its employees at the time of its
closure in an amount equivalent to the separation pay paid to those who
were separated when the company was still a going concern? This is the
main question brought before this Court in this petition for certiorari under
Rule 65 of the Revised Rules of Court, which seeks to reverse and set aside
the Resolutions dated July 29, 1993 1 and September 27, 1993 2 of the
National Labor Relations Commission 3 (NLRC) in NLRC CA No. M-00139593.
The Resolution dated July 29, 1993 affirmed in toto the decision of the Labor
Arbiter in RAB-11-08-00672-92 and RAB-11-08-00713-92 ordering
petitioners to pay the complainants therein certain monetary claims.
The Resolution dated September 27, 1993 denied
reconsideration of the said July 29, 1993 Resolution.

the

motion

for

The Facts
Petitioner North Davao Mining Corporation (North Davao) was incorporated
in 1974 as a 100% privately-owned company. Later, the Philippine National
Bank (PNB) became part owner thereof as a result of a conversion into equity
of a portion of loans obtained by North Davao from said bank. On June 30,
1986, PNB transferred all its loans to and equity in North Davao in favor of
the national government which, by virtue of Proclamation No. 50 dated
December 8, 1986, later turned them over to petitioner Asset Privatization
Trust (APT). As of December 31, 1990 the national government hold 81.8% of
the common stock and 100% of the preferred stock of said company.4
Respondent Wilfredo Guillema is one among several employees of North
Davao who were separated by reason of the company's closure on May 31,
1992, and who were the complainants in the cases before the respondent
labor arbiter.
On May 31, 1992, petitioner North Davao completely ceased operations due
to serious business reverses. From 1988 until its closure in 1992, North
Davao suffered net losses averaging three billion pesos (P3,000,000,000.00)
per year, for each of the five years prior to its closure. All told, as of
December 31, 1991, or five months prior to its closure, its total liabilities had
exceeded its assets by 20,392 billion pesos, as shown by its financial
statements audited by the Commission on Audit. When it ceased operations,
its remaining employees were separated and given the equivalent of 12.5
days' pay for every year of service, computed on their basic monthly pay, in
addition to the commutation to cash of their unused vacation and sick

Subsequently, a complaint was filed with respondent Labor Arbiter by


respondent Wilfredo Guillema and 271 other separated employees for: (1)
additional separation pay of 17.5 days for every year of service; (2) back
wages equivalent to two days a month; (3) transportation allowance; (4)
hazard pay; (5) housing allowance; (6) food allowance; (7) post-employment
medical clearance; and (8) future medical allowance, all of which amounted
to P58,022,878.31 as computed by private respondent. 5
On May 6, 1993, respondent Labor Arbiter rendered a decision ordering
petitioner North Davao to pay the complainants the following:
(a) Additional separation pay of 17.5 days for every year of
service;
(b) Backwages equivalent to two (2) days a month times the
number of years of service but not to exceed three (3) years;
(c) Transportation allowance at P80 a month times the
number of years of service but not to exceed three (3) years.
The benefits awarded by respondent Labor Arbiter amounted to
P10,240,517.75. Attorney's fees equivalent to ten percent (10%) thereof were
also granted. 6
On appeal, respondent NLRC affirmed the decision in toto. Petitioner North
Davao's motion for reconsideration was likewise denied. Hence, this petition.
The Parties' Submissions and the Issues
In affirming the Labor Arbiter's decision, respondent NLRC ruled that "since
(North Davao) has been paying its employees separation pay equivalent to
thirty (30) days pay for every year of service," knowing fully well that the law
provides for a lesser separation pay, then such company policy "has ripened
into an obligation," and therefore, depriving now the herein private
respondent and others similarly situated of the same benefits would be
discriminatory. 7 Quoting from Businessday Information Systems and
Services, Inc. (BISSI) vs. NLRC, 8 it said that petitioners "may not pay
separation benefits unequally for such discrimination breeds resentment and
ill-will among those who have been treated less generously than others." It
also cited Abella vs. NLRC, 9 as authority for saying that Art. 283 of the Labor
Code protects workers in case of closure of the establishment.
To justify the award of two days a month in backwages and P80 per month of
transportation allowance, respondent Commission ruled:

As to the appellants' claim that complainants-appellees' time


spent in collecting their wages at Tagum, Davao is not
compensable allegedly because it was on official time can not
be given credence. No iota of evidence has been presented to
back up said contention. The same is true with appellants'
assertion that the claim for transportation expenses is
without basis since they were incurred by the complainants.
Appellants should have submitted the payrolls to prove that
complainants appellees were not the ones who personally
collected their wages and/or the bus/jeep trip tickets or
vouchers to show that the complainants-appellees were
provided with free transportation as claimed.
Petitioner, through the Government Corporate Counsel, raised the following
grounds for the allowance of the petition:
1. The NLRC acted with grave abuse of discretion in
affirming without legal basis the award of additional
separation pay to private respondents who were separated
due to serious business losses on the part of petitioner.
2. The NLRC acted with grave abuse of discretion in
affirming without sufficient factual basis the award of
backwages and transportation expenses to private
respondents.
3. There is no appeal, nor any plain, speedy and adequate
remedy in the ordinary course of the law.
and the following issues:
1. Whether or not an employer whose business operations
ceased due to serious business losses or financial reverses is
obliged to pay separation pay to its employees separated by
reason of such closure.
2. Whether or not time spent in collecting wages in a place
other than the place of employment is compensable
notwithstanding that the same is done during official time.
3. Whether or not private respondents are entitled to
transportation expenses in the absence of evidence that
these expenses were incurred.
The First Issue: Separation Pay
To resolve this issue, it is necessary to revisit the provision of law adverted to
by the parties in their submissions, namely, Art. 283 of the Labor Code,
which reads as follows:
Art. 283. Closure of establishment and reduction of
personnel. The employer may also terminate the
employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses
or the closing or cessation of operation of the establishment

or undertaking unless the closing is for the purpose of


circumventing the provisions of this Title, by serving a
written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least his
one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment
to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year. (emphasis supplied)
The underscored portion of Art. 283 governs the grant of separation benefits
"in case of closures or cessation of operation" of business establishments
"NOT due to serious business losses or financial reverses . . . ". Where,
however, the closure was due to business losses as in the instant case, in
which the aggregate losses amounted to over P20 billion the Labor Code
does not impose any obligation upon the employer to pay separation benefits,
for obvious reasons. There is no need to belabor this point. Even the public
respondents, in their Comment 10 filed by the Solicitor General, impliedly
concede this point.
However, respondents tenaciously insist on the award of separation pay,
anchoring their claim solely on petitioner North Davao's long-standing policy
of giving separation pay benefits equivalent to 30-days' pay, which policy had
been in force in the years prior to its closure. Respondents contend that, by
denying the same separation benefits to private respondent and the others
similarly situated, petitioners discriminated against them. They rely on this
Court's ruling in Businessday Information Systems and Services, Inc. (BISSI)
vs. NLRC, (supra). In said case, petitioner BISSI, after experiencing financial
reverses, decided "as a retrenchment measure" to lay-off some employees on
May 16, 1988 and gave them separation pay equivalent to one-half (1/2)
month pay for every year of service. BISSI retained some employees in an
attempt to rehabilitate its business as a trading company. However, barely
two and a half months later, these remaining employees were likewise
discharged because the company decided to cease business operations
altogether. Unlike the earlier terminated employees, the second batch
received separation pay equivalent to a full month's salary for every year of
service, plus a mid-year bonus. This Court ruled that "there was
impermissible discrimination against the private respondents in the payment
of their separation benefits. The law requires an employer to extend equal
treatment to its employees. It may not, in the guise of exercising management
prerogatives, grant greater benefits to some and less to others. . . ."
In resolving the present case, it bears keeping in mind at the outset that the
factual circumstances of BISSI are quite different from the current case. The
Court noted that BISSI continued to suffer losses even after the

retrenchment of the first batch of employees: clearly, business did not


improve despite such drastic measure. That notwithstanding, when BISSI
finally shut down, it could well afford to (and actually did) pay off its
remaining employees with MORE separation benefits as compared with those
earlier laid off; obviously, then, there was no reason for BISSI to skimp on
separation pay for the first batch of discharged employees. That it was able to
pay one-month separation benefit for employees at the time of closure of its
business meant that it must have been also in a position to pay the same
amount to those who were separated prior to closure. That it did not do so
was a wrongful exercise of management prerogatives. That is why the Court
correctly faulted it with "impermissible discrimination." Clearly, it exercised
its management prerogatives contrary to "general principles of fair play and
justice."
In the instant case however, the company's practice of giving one month's
pay for every year of service could no longer be continued precisely because
the company could not afford it anymore. It was forced to close down on
account of accumulated losses of over P20 billion. This could not be said of
BISSI. In the case of North Davao, it gave 30-days' separation pay to its
employees when it was still a going concern even if it was already losing
heavily. As a going concern, its cash flow could still have sustained the
payment of such separation benefits. But when a business enterprise
completely ceases operations, i.e., upon its death as a going business
concern, its vital lifeblood its cashflow literally dries up. Therefore, the
fact that less separation benefits ware granted when the company finally met
its business death cannot be characterized as discrimination. Such action
was dictated not by a discriminatory management option but by its complete
inability to continue its business life due to accumulated losses. Indeed, one
cannot squeeze blood out of a dry stone. Nor water out of parched land.
As already stated, Art. 283 of the Labor Code does not obligate an employer
to pay separation benefits when the closure is due to losses. In the case
before us, the basis for the claim of the additional separation benefit of 17.5
days is alleged discrimination, i.e., unequal treatment of employees, which is
proscribed as an unfair labor practice by Art. 248 (e) of said Code. Under the
facts and circumstances of the present case, the grant of a lesser amount of
separation pay to private respondent was done, not by reason of
discrimination, but rather, out of sheer financial bankruptcy a fact that is
not controlled by management prerogatives. Stated differently, the total
cessation of operation due to mind-boggling losses was a supervening fact
that prevented the company from continuing to grant the more generous
amount of separation pay. The fact that North Davao at the point of its forced
closure voluntarily paid any separation benefits at all although not
required by law and 12.5-days worth at that, should have elicited
admiration instead of condemnation. But to require it to continue being
generous when it is no longer in a position to do so would certainly be
unduly oppressive, unfair and most revolting to the conscience. As this Court
held in Manila Trading & Supply Co. vs. Zulueta, 11 and reiterated in San
Miguel Corporation vs. NLRC 12 and later, in Allied Banking Corporation
vs. Castro, 13 "(t)he law, in protecting the rights of the laborer, authorizes
neither oppression nor self-destruction of the employer."

At this juncture, we note that the Solicitor General in his Comment


challenges the petitioners' assertion that North Davao, having closed down,
no longer has the means to pay for the benefits. The Solicitor General
stresses that North Davao was among the assets transferred by PNB to the
national government, and that by virtue of Proclamation No. 50 dated
December 8, 1986, the APT was constituted trustee of this government asset.
He then concludes that "(i)t would, therefore, be incongruous to declare that
the National Government, which should always be presumed to be solvent,
could not pay now private respondents' money claims." Such argumentation
is completely misplaced. Even if the national government owned or controlled
81.8% of the common stock and 100% of the preferred stock of North Davao,
it remains only a stockholder thereof, and under existing laws and prevailing
jurisprudence, a stockholder as a rule is not directly, individually and/or
personally liable for the indebtedness of the corporation. The obligation of
North Davao cannot be considered the obligation of the national government,
hence, whether the latter be solvent or not is not material to the instant case.
The respondents have not shown that this case constitutes one of the
instances where the corporate veil may be pierced. 14 From another angle,
the national government is not the employer of private respondent and his
co-complainants, so there is no reason to expect any kind of bailout by the
national government under existing law and jurisprudence.
The Second and Third Issues:
Back Wages and Transportation Allowance
Anent the award of back wages and transportation allowance, the issues
raised in connection therewith are factual, the determination of which is best
left to the respondent NLRC. It is well settled that this Court is bound by the
findings of fact of the NLRC, so long as said findings are supported by
substantial evidence 15.
As the Solicitor General pointed out in his comment:
It is undisputed that because of security reasons, from the
time of its operations, petitioner NDMC maintained its policy
of paying its workers at a bank in Tagum, Davao del Norte,
which usually took the workers about two and a half (2 1/2)
hours of travel from the place of work and such travel time is
not official.
Records also show that on February 12, 1992, when an
inspection was conducted by the Department of Labor and
Employment at the premises of petitioner NDMC at Amacan,
Maco, Davao del Norte, it was found out that petitioners had
violated labor standards law, one of which is the place of
payment of wages (p. 109, Vol. 1, Record)
Section 4, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code provides that:
Sec. 4. Place of payment. (a) As a general rule, the place of
payment
shall
be
at
or
near
the
place
of
undertaking. Payment in a place other than the workplace
shall be permissible only under the following circumstances:

(1) When payment cannot be effected at or near the place of


work by reason of the deterioration of peace and order
conditions, or by reason of actual or impending emergencies
caused by fire, flood, epidemic or other calamity rendering
payment thereat impossible;
(2) When the employer provides free transportation to the
employees back and forth; and
(3) Under any analogous circumstances; provided that the
time spent by the employees in collecting their wages shall
be considered as compensable hours worked.

On the contrary, it will be petitioners'


burden or duty to present evidence of
compliance of the law on labor standards,
rather than for private respondents to prove
that they were not paid/provided by
petitioners
of
their
backwages
and
transportation expenses.
Other than the bare denials of petitioners, the above findings stand
uncontradicted. Indeed we are not at liberty to set aside findings of facts of
the NLRC, absent any capriciousness, arbitrariness, or abuse or complete
lack of basis. In Maya Farms Employees Organizations vs. NLRC, 16 , we held:

(b) xxx xxx xxx

This Court has consistently ruled that findings of fact of


administrative agencies ad quasi-judicial bodies which have
acquired expertise because their jurisdiction is confined to
specific matters are generally accorded not only respect but
even finality and are binding upon this Court unless there is
a showing of grave abuse of discretion, or where it is clearly
shown that they were arrived at arbitrarily or in disregard of
the evidence on record.

(Emphasis supplied)
Accordingly, in his Order dated April 14, 1992 (p. 109, Vol.
1, Record), the Regional Director, Regional Office No. XI,
Department of Labor and Employment, Davao City, ordered
petitioner NDMC, among others, as follows:
WHEREFORE, . . . . Respondent is further
ordered to pay its workers salaries at the
plantsite at Amacan, New Leyte, Maco,
Davao del Norte or whenever not possible,
through the bank in Tagum, Davao del Norte
as already been practiced subject, however
to the provisions of Section 4 of Rule VIII,
Book III of the rules implementing the Labor
Code as amended.
Thus, public respondent Labor Arbiter Antonio M. Villanueva
correctly held that:
From the evidence on record, we find that
the hours spent by complainants in
collecting salaries at a bank in Tagum,
Davao del Norte shall be considered
compensable hours worked. Considering
further the distance between Amacan, Maco
to Tagum which is 2 1/2 hours by travel and
the risks in commuting all the time in
collecting complainants' salaries, would
justify the granting of backwages equivalent
to two (2) days in a month as prayed for.
Corollary to the above findings, and for
equitable
reasons, we
likewise
hold
respondents liable for the transportation
expenses incurred by complainants at
P40.00 round trip fare during pay days.
(p. 10, Decision; p. 207, Vol. 1, Record)

WHEREFORE, judgment is hereby rendered MODIFYING the assailed


Resolution by SETTING ASIDE and deleting the award for "additional
separation pay of 17.5 days for every year of service", and AFFIRMING it in
all other aspects. No costs.
SO ORDERED.

G.R. No. 121004 January 28, 1998


ROMEO LAGATIC, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CITYLAND DEVELOPMENT
CORPORATION, STEPHEN ROXAS, JESUS GO, GRACE LIUSON, and
ANDREW LIUSON, respondents.
ROMERO, J.:
Petitioner seeks, in this petition for certiorari under Rule 65, the reversal of
the resolution of the National Labor Relations Commission dated May 12,
1995, affirming the February 17, 1994, decision of Labor Arbiter Ricardo C.
Nora finding that petitioner had been validly dismissed by private respondent
Cityland Development Corporation (hereafter referred to as Cityland) and that
petitioner was not entitled to separation pay, premium pay and overtime pay.
The facts of the case are as follows:
Petitioner Romeo Lagatic was employed in May 1986 by Cityland, first as a
probationary sales agent, and later on as a marketing specialist. He was
tasked with soliciting sales for the company, with the corresponding duties of
accepting call-ins, referrals, and making client calls and cold calls. Cold calls
refer to the practice of prospecting for clients through the telephone
directory. Cityland, believing that the same is an effective and cost-efficient
method of finding clients, requires all its marketing specialists to make cold
calls. The number of cold calls depends on the sales generated by each: more
sales mean less cold calls. Likewise, in order to assess cold calls made by the
sales staff, as well as to determine the results thereof, Cityland requires the
submission of daily progress reports on the same.
On October 22, 1991, Cityland issued a written reprimand to petitioner for
his failure to submit cold call reports for September 10, October 1 and 10,
1991. This notwithstanding, petitioner again failed to submit cold call reports
for September 2, 5, 8, 10, 11, 12, 15, 17, 18, 19, 20, 22, and 28, as well as
for October 6, 8, 9, 10, 12, 13 and 14, 1992. Petitioner was required to
explain his inaction, with a warning that further non-compliance would
result in his termination from the company. In a reply dated October 18,
1992, petitioner claimed that the same was an honest omission brought
about by his concentration on other aspects of his job. Cityland found said
excuse inadequate and, on November 9, 1992, suspended him for three days,
with a similar warning.
Notwithstanding the aforesaid suspension and warning, petitioner again
failed to submit cold call reports for February 5, 6, 8, 10 and 12, 1993. He
was verbally reminded to submit the same and was even given up to
February 17, 1993 to do so. Instead of complying with said directive,
petitioner, on February 16, 1993, wrote a note, "TO HELL WITH COLD
CALLS! WHO CARES?" and exhibited the same to his co-employees. To
worsen matters, he left the same lying on his desk where everyone could see
it.

On February 23, 1993, petitioner received a memorandum requiring him to


explain why Cityland should not make good its previous warning for his
failure to submit cold call reports, as well as for issuing the written
statement aforementioned. On February 24, 1993, he sent a letter-reply
alleging that his failure to submit cold call reports should trot be deemed as
gross insubordination. He denied any knowledge of the damaging statement,
"TO HELL WITH COLD CALLS!"
Finding petitioner guilty of gross insubordination, Cityland served a notice of
dismissal upon him on February 26, 1993. Aggrieved by such dismissal,
petitioner filed a complaint against Cityland for illegal dismissal, illegal
deduction, underpayment, overtime and rest day pay, damages and
attorney's fees. The labor arbiter dismissed the petition for lack of merit. On
appeal, the same was affirmed by the NLRC; hence the present recourse.
Petitioner raises the following issues:
1. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED ITS
DISCRETION 1N NOT FINDING THAT PETITIONER WAS ILLEGALLY
DISMISSED;
2. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED ITS
DISCRETION IN RULING THAT PETITIONER IS NOT ENTITLED TO
SALARY DIFFERENTIALS, BACKWAGES, SEPARATION PAY,
OVERTIME PAY, REST DAY PAY, UNPAID COMMISSIONS, MORAL
AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES.
The petition lacks merit.
To constitute a valid dismissal from employment, two requisites must be met,
namely: (1) the employee must be afforded due process, and (2) the dismissal
must be for a valid cause. 1 In the case at bar, petitioner contends that his
termination was illegal on both substantive and procedural aspects. It is his
submission that the failure to submit a few cold calls does not qualify as
willful disobedience, as, in his experience, cold calls are one of the least
effective means of soliciting sales. He thus asserts that a couple of cold call
reports need not be accorded such tremendous significance as to warrant his
dismissal for failure to submit them on time.
These arguments are specious. Petitioner loses sight of the fact that "(e)xcept
as provided for, or limited by, special laws, an employer is free to regulate,
according
to
his
discretion
and
judgment,
all
aspects
of
employment."2 Employers may, thus, make reasonable rules and regulations
for the government of their employees, and when employees, with knowledge
of an established rule, enter the service, the rule becomes a part of the
contract of employment. 3 It is also generally recognized that company
policies and regulations, unless shown to be grossly oppressive or contrary to
law, are generally valid and binding on the parties and must be complied
with. 4 "Corollarily, an employee may be validly dismissed for violation of a
reasonable company rule or regulation adopted for the conduct of the
company business. An employer cannot rationally be expected to retain the
employment of a person whose . . . lack of regard for his employer's rules . . .
has so plainly and completely been bared." 5 Petitioner's continued infraction
of company policy requiring cold call reports, as evidenced by the 28

instances of non-submission of aforesaid reports, justifies his dismissal. He


cannot be allowed to arrogate unto himself the privilege of setting company
policy on the effectivity of solicitation methods. To do so would be to sanction
oppression and the self-destruction of the employer.
Moreover, petitioner made it worse for himself when he wrote the statement,
"TO HELL WITH COLD CALLS! WHO CARES?" When required to explain, he
merely denied ally knowledge of the same. Cityland, on the other hand,
submitted the affidavits of his co-employees attesting to his authorship of the
same. Petitioner's only defense is denial. The rule, however, is that denial, if
unsubstantiated by clear and convincing evidence, is negative and selfserving evidence which has no weight in law. 6 More telling, petitioner, while
making much capital out of his lack of opportunity to confront the affiants,
never, in all of his pleadings, categorically denied writing the same. He only
denied knowledge of the allegation that he issued such a statement.
Based on the foregoing, we find petitioner guilty of willful disobedience.
Willful disobedience requires the concurrence of at least two requisites: the
employee's assailed conduct must have been willful or intentional, the
willfulness being characterized by a wrongful and perverse attitude; and the
order violated must have been reasonable, lawful, made known to the
employee and must pertain to the duties which he had been engaged to
discharge. 7
Petitioner's failure to comply with Cityland's policy of requiring cold call
reports is clearly willful, given the 28 instances of his failure to do so, despite
a previous reprimand and suspension. More than that, his written statement
shows his open defiance and disobedience to lawful rules and regulations of
the company. Likewise, said company policy of requiring cold calls and the
concomitant reports thereon is clearly reasonable and lawful, sufficiently
known to petitioner, and in connection with the duties which he had been
engaged to discharge. There is, thus, just cause for his dismissal.
On the procedural aspect, petitioner claims that he was denied due process.
Well settled is the dictum that the twin requirements of notice and hearing
constitute the elements of due process in the dismissal of employees. Thus,
the employer must furnish the employee with two written notices before the
termination of employment can be effected. The first apprises the employee of
the particular acts or omissions for which his dismissal is sought; the second
informs him of the employer's decision to dismiss him. 8
In the case at bar, petitioner was notified of the charges against him in a
memorandum dated February 19, 1993, which he received on February 23,
1993. He submitted a letter-reply thereto on February 24, 1993, wherein he
asked that his failure to submit cold call reports be not interpreted as gross
insubordination. 9 He was given notice of his termination on February 26,
1993. This chronology of events clearly show that petitioner was served with
the required written notices.
Nonetheless, petitioner contends that he has not been given the benefit of an
effective hearing. He alleges that he was not adequately informed of the
results of the investigation conducted by the company, nor was he able to
confront the affiants who attested to his writing the statement, "TO HELL

WITH COLD CALLS!" While we have held that in dismissing employees, the
employee must be afforded ample opportunity to be heard, "ample
opportunity" connoting every kind of assistance that management must
afford the employee to enable him to prepare adequately for his defense, 10 it
is also true that the requirement of a hearing is complied with as long as
there was an opportunity to be heard, and not necessarily that an actual
hearing be conducted. 11 Petitioner had an opportunity to be heard as he
submitted a letter-reply to the charge. He, however, adduced no other
evidence on his behalf. In fact, he admitted his failure to submit cold call
reports, praying that the same be not considered as gross insubordination.
As held by this Court in Bernardo vs. NLRC, 12 there is no necessity for a
formal hearing where an employee admits responsibility for an alleged
misconduct. As to the written statement, "TO HELL WITH COLD CALLS!,"
petitioner merely denied knowledge of the same. He failed to submit
controverting evidence thereon although the memorandum of February 19,
1993, clearly charged that he had shown said statement to several sales
personnel. Denials are weak forms of defenses, particularly when they are
not substantiated by clear and convincing evidence. Given the foregoing, we
hold that petitioner's constitutional right to due process has not been
violated.
As regards the second issue, petitioner contends that he is entitled to
amounts illegally deducted from his commissions, to unpaid overtime, rest
day and holiday premiums, to moral and exemplary damages, as well as
attorney's fees and costs.
Petitioner anchors his claim for illegal deductions of commissions on
Cityland's formula for determining commissions, viz:
COMMISSIONS = Credits Earned (CE) less CUMULATIVE NEGATIVE
(CN) less AMOUNTS RECEIVED (AR)
= (CE - CN) - AR where CE = Monthly Sales Volume x
Commission
Rate
(CR)
AR
=
Monthly
Compensation/.75
CR = 4.5%
Under said formula, an increase in salary would entail an increase in AR,
thus diminishing the amount of commissions that petitioner would receive.
Petitioner construes the same as violative of the non-diminution of benefits
clause embodied in the wage orders applicable to petitioner. Inasmuch as
Cityland has paid petitioner commissions based on a higher AR each time
there has been a wage increase, the difference between the original AR and
the subsequent ARs have been viewed by petitioner as illegal deductions, to
wit:
Wage
Order

Date
of
Effectivity

Amount
of
Increase

Corresponding
Increase
in
Quota (AR)

Duration
Up
To
2/26/93

Total

P265.75

62 mos.

the privilege of sales personnel to earn a commission, not that they are
entitled to a fixed amount thereof.

P
96,973.22 13

With respect to petitioner's claims for overtime pay, rest day pay and holiday
premiums, Cityland maintains that Saturday and Sunday call-ins were
voluntary activities on the part of sales personnel who wanted to realize more
sales and thereby earn more commissions. It is their contention that sales
personnel were clamoring for the "privilege" to attend Saturday and Sunday
call-ins, as well as to entertain walk-in clients at project sites during
weekends, that Cityland had to stagger the schedule of sales employees to
give everyone a chance to do so. But simultaneously, Cityland claims that the
same were optional because call-ins and walk-ins were not scheduled every
weekend. If there really were a clamor on the part of sales staff to
"voluntarily" work on weekends, so much so that Cityland needed to
schedule them, how come no call-ins or walk-ins were scheduled on some
weekends?

1/1/88

RA
6727

7/1/89

780.75

1,040.00

44 mos.

45,760.00

NCR
01

11/1/90

785.75

1,046.67

28 mos.

29,306.76

NCR
01-A

P 353.33

RA
6640

Grand Total

P
1,906.46

Petitioner even goes as far as to claim that with the use of Cityland's formula,
he is indebted to the company in the amount of P1,410.00, illustrated as
follows:
Petitioner' s Basic Salary = P 4,230.00
= 4,230.00/.75
A.R. = 5,640.00
Petitioner's Basic Salary AR = P 1,410.00
While it is true that an increase in salary would cause an increase in AR,
with the same being deducted from credits earned, thus lessening his
commissions, the fact remains that petitioner still receives his basic salary
without deductions. Petitioner's argument that he is indebted to respondent
by P1,410.00 is fallacious as his basic salary remains the same and he
continues to receive the same, regardless of his collections. The failure to
attain a CE equivalent to the AR of P5,640.00 only means that the difference
would be credited to his CN for the next month. Clearly, the purpose of the
same is to encourage sales personnel to accelerate their sales in order for
them to earn commissions.
Additionally, there is no law which requires employers to pay commissions,
and when they do so, as stated in the letter-opinion of the Department of
Labor and Employment dated February 19, 1993, "there is no law which
prescribes a method for computing commissions. The determination of the
amount of commissions is the result of collective bargaining negotiations,
individual employment contracts or established employer practice." 14 Since
the formula for the computation of commissions was presented to and
accepted by petitioner, such prescribed formula is in order. As to the
allegation that said formula diminishes the benefits being received by
petitioner whenever there is a wage increase, it must be noted that his
commissions are not meant to be in a fixed amount. In fact, there was no
assurance that he would receive any commission at all. Non-diminution of
benefits, as applied here, merely means that the company may not remove

In addition to the above, the labor arbiter and the NLRC sanctioned
respondent's practice of offsetting rest day or holiday work with equivalent
time on regular workdays on the ground that the same is authorized by
Department Order 21, Series of 1990. As correctly pointed out by petitioner,
said D.O. was misapplied in this case. The D.O. involves the shortening of
the workweek from six days to five days but with prolonged hours on those
five days. Under this scheme, non-payment of overtime premiums was
allowed in exchange for longer weekends for employees. In the instant case,
petitioner's workweek was never compressed. Instead, he claims payment for
work over and above his normal 5 1/2 days of work in a week. Applying by
analogy the principle that overtime cannot be offset by undertime, to allow
off-setting would prejudice the worker. He would be deprived of the
additional pay for the rest day work he has rendered and which is utilized to
offset his equivalent time off on regular workdays. To allow Cityland to do so
would be to circumvent the law on payment of premiums for rest day and
holiday work.
Notwithstanding the foregoing discussion, petitioner failed to show his
entitlement to overtime and rest day pay due, to the lack of sufficient
evidence as to the number of days and hours when he rendered overtime and
rest day work. Entitlement to overtime pay must first be established by proof
that said overtime work was actually performed, before an employee may
avail of said benefit. 15 To support his allegations, petitioner submitted in
evidence minutes of meetings wherein he was assigned to work on weekends
and holidays at Cityland's housing projects. Suffice it to say that said
minutes do not prove that petitioner actually worked on said dates. It is a
basic rule in evidence that each party must prove his affirmative
allegations. 16 This petitioner failed to do. He explains his failure to submit
more concrete evidence as being due to the decision rendered by the labor
arbiter without resolving his motion for the production and inspection of
documents in the control of Cityland. Petitioner conveniently forgets that on
January 27, 1994, he agreed to submit the case for decision based on the
records available to the labor arbiter. This amounted to an abandonment of
above-said motion, which was then pending resolution.

Lastly, with the finding that petitioner's dismissal was for a just and valid
cause, his claims for moral and exemplary damages, as well as attorney's
fees, must fail.
WHEREFORE, premises considered, the assailed Resolution is AFFIRMED
and this petition is hereby DISMISSED for lack of merit. Costs against
petitioner.
SO ORDERED.

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


JOSE RIZAL COLLEGE, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND NATIONAL ALLIANCE
OF TEACHERS/OFFICE WORKERS,respondents.
PARAS, J.:
This is a petition for certiorari with prayer for the issuance of a writ of
preliminary injunction, seeking the annulment of the decision of the National
Labor Relations Commission * in NLRC Case No. RB-IV 23037-78 (Case No.
R4-1-1081-71) entitled "National Alliance of Teachers and Office Workers and
Juan E. Estacio, Jaime Medina, et al. vs. Jose Rizal College" modifying the
decision of the Labor Arbiter as follows:
WHEREFORE, in view of the foregoing considerations, the
decision appealed from is MODIFIED, in the sense that
teaching personnel paid by the hour are hereby declared to
be entitled to holiday pay.
SO ORDERED.
The factual background of this case which is undisputed is as follows:
Petitioner is a non-stock, non-profit educational institution duly organized
and existing under the laws of the Philippines. It has three groups of
employees categorized as follows: (a) personnel on monthly basis, who receive
their monthly salary uniformly throughout the year, irrespective of the actual
number of working days in a month without deduction for holidays; (b)
personnel on daily basis who are paid on actual days worked and they
receive unworked holiday pay and (c) collegiate faculty who are paid on the
basis of student contract hour. Before the start of the semester they sign
contracts with the college undertaking to meet their classes as per schedule.
Unable to receive their corresponding holiday pay, as claimed, from 1975 to
1977, private respondent National Alliance of Teachers and Office Workers
(NATOW) in behalf of the faculty and personnel of Jose Rizal College filed
with the Ministry of Labor a complaint against the college for said alleged
non-payment of holiday pay, docketed as Case No. R04-10-81-72. Due to the
failure of the parties to settle their differences on conciliation, the case was
certified for compulsory arbitration where it was docketed as RB-IV-2303778 (Rollo, pp. 155-156).
After the parties had submitted their respective position papers, the Labor
Arbiter ** rendered a decision on February 5, 1979, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered as follows:
1. The faculty and personnel of the respondent Jose Rizal
College who are paid their salary by the month uniformly in
a school year, irrespective of the number of working days in
a month, without deduction for holidays, are presumed to be

already paid the 10 paid legal holidays and are no longer


entitled to separate payment for the said regular holidays;
2. The personnel of the respondent Jose Rizal College who
are paid their wages daily are entitled to be paid the 10
unworked regular holidays according to the pertinent
provisions of the Rules and Regulations Implementing the
Labor Code;
3. Collegiate faculty of the respondent Jose Rizal College who
by contract are paid compensation per student contract hour
are not entitled to unworked regular holiday pay considering
that these regular holidays have been excluded in the
programming of the student contact hours. (Rollo. pp. 26-27)
On appeal, respondent National Labor Relations Commission in a decision
promulgated on June 2, 1982, modified the decision appealed from, in the
sense that teaching personnel paid by the hour are declared to be entitled to
holiday pay (Rollo. p. 33).
Hence, this petition.
The sole issue in this case is whether or not the school faculty who according
to their contracts are paid per lecture hour are entitled to unworked holiday
pay.
Labor Arbiter Julio Andres, Jr. found that faculty and personnel employed by
petitioner who are paid their salaries monthly, are uniformly paid throughout
the school year regardless of working days, hence their holiday pay are
included therein while the daily paid employees are renumerated for work
performed during holidays per affidavit of petitioner's treasurer (Rollo, pp.
72-73).
There appears to be no problem therefore as to the first two classes or
categories of petitioner's workers.
The problem, however, lies with its faculty members, who are paid on an
hourly basis, for while the Labor Arbiter sustains the view that said
instructors and professors are not entitled to holiday pay, his decision was
modified by the National Labor Relations Commission holding the contrary.
Otherwise stated, on appeal the NLRC ruled that teaching personnel paid by
the hour are declared to be entitled to holiday pay.
Petitioner maintains the position among others, that it is not covered by
Book V of the Labor Code on Labor Relations considering that it is a nonprofit institution and that its hourly paid faculty members are paid on a
"contract" basis because they are required to hold classes for a particular
number of hours. In the programming of these student contract hours, legal
holidays are excluded and labelled in the schedule as "no class day. " On the
other hand, if a regular week day is declared a holiday, the school calendar is
extended to compensate for that day. Thus petitioner argues that the advent
of any of the legal holidays within the semester will not affect the faculty's
salary because this day is not included in their schedule while the calendar
is extended to compensate for special holidays. Thus the programmed
number of lecture hours is not diminished (Rollo, pp. 157- 158).

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

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

In addition, respondent National Labor Relations Commission in its decision


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

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

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

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

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

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

(b) The employer may require an employee to work on any


holiday but such employee shall be paid a compensation
equivalent to twice his regular rate; ... "
and in the Implementing Rules and Regulations, Rule IV, Book III,
which reads:
SEC. 8. Holiday pay of certain employees. (a) Private
school teachers, including faculty members of colleges and
universities, may not be paid for the regular holidays during
semestral vacations. They shall, however, be paid for the
regular holidays during Christmas vacations. ...
Under the foregoing provisions, apparently, the petitioner, although a nonprofit institution is under obligation to give pay even on unworked regular
holidays to hourly paid faculty members subject to the terms and conditions
provided for therein.
We believe that the aforementioned implementing rule is not justified by the
provisions of the law which after all is silent with respect to faculty members
paid by the hour who because of their teaching contracts are obliged to work
and consent to be paid only for work actually done (except when an
emergency or a fortuitous event or a national need calls for the declaration of
special holidays). Regular holidays specified as such by law are known to
both school and faculty members as no class days;" certainly the latter do
not expect payment for said unworked days, and this was clearly in their
minds when they entered into the teaching contracts.

The records show petitioner JRC was amply heard and represented in the
instant proceedings. It submitted its position paper before the Labor Arbiter
and the NLRC and even filed a motion for reconsideration of the decision of
the latter, as well as an "Urgent Motion for Hearing En Banc" (Rollo, p. 175).
Thus, petitioner's claim of lack of due process is unfounded.
PREMISES CONSIDERED, the decision of respondent National Labor
Relations Commission is hereby set aside, and a new one is hereby
RENDERED:
(a) exempting petitioner from paying hourly paid faculty members their pay
for regular holidays, whether the same be during the regular semesters of the
school year or during semestral, Christmas, or Holy Week vacations;
(b) but ordering petitioner to pay said faculty members their regular hourly
rate on days declared as special holidays or for some reason classes are

called off or shortened for the hours they are supposed to have taught,
whether extensions of class days be ordered or not; in case of extensions said
faculty members shall likewise be paid their hourly rates should they teach
during said extensions.
SO ORDERED.

G.R. No. L-52415 October 23, 1984

retail and service establishments regularly


employing less than 10 workers.

INSULAR BANK OF ASIA AND AMERICA EMPLOYEES' UNION


(IBAAEU), petitioner,
vs.
HON. AMADO G. INCIONG, Deputy Minister, Ministry of Labor and
INSULAR BANK OF ASIA AND AMERICA,respondents.

(b) The term "holiday" as used in this


chapter, shall include: New Year's Day,
Maundy Thursday, Good Friday, the ninth of
April the first of May, the twelfth of June,
the fourth of July, the thirtieth of November,
the twenty-fifth and the thirtieth of
December and the day designated by law for
holding a general election.

Sisenando R. Villaluz, Jr. for petitioner.


Abdulmaid Kiram Muin colloborating counsel for petitioner.
The Solicitor General Caparas, Tabios, Ilagan Alcantara & Gatmaytan Law
Office and Sycip, Salazar, Feliciano & Hernandez Law Office for respondents.
MAKASIAR, J.:
This is a petition for certiorari to set aside the order dated November 10,
1979, of respondent Deputy Minister of Labor, Amado G. Inciong, in NLRC
case No. RB-IV-1561-76 entitled "Insular Bank of Asia and America
Employees' Union (complainant-appellee), vs. Insular Bank of Asia and
America" (respondent-appellant), the dispositive portion of which reads as
follows: t.hqw
xxx xxx xxx
ALL THE FOREGOING CONSIDERED, let the appealed
Resolution en banc of the National Labor Relations
Commission dated 20 June 1978 be, as it is hereby, set
aside and a new judgment. promulgated dismissing the
instant case for lack of merit (p. 109 rec.).
The antecedent facts culled from the records are as follows:
On June 20, 1975, petitioner filed a complaint against the respondent bank
for the payment of holiday pay before the then Department of Labor, National
Labor Relations Commission, Regional Office No. IV in Manila. Conciliation
having failed, and upon the request of both parties, the case was certified for
arbitration on July 7, 1975 (p. 18, NLRC rec.
On August 25, 1975, Labor Arbiter Ricarte T. Soriano rendered a decision in
the above-entitled case, granting petitioner's complaint for payment of
holiday pay. Pertinent portions of the decision read: t.hqw
xxx xxx xxx
The records disclosed that employees of respondent bank
were not paid their wages on unworked regular holidays as
mandated by the Code, particularly Article 208, to
wit: t.hqw
Art. 208. Right to holiday pay.
(a) Every worker shall be paid his regular
daily wage during regular holidays, except in

xxx xxx xxx


This conclusion is deduced from the fact that the daily rate of
pay of the bank employees was computed in the past with the
unworked regular holidays as excluded for purposes of
determining
the
deductible
amount
for
absences
incurred Thus, if the employer uses the factor 303 days as a
divisor in determining the daily rate of monthly paid
employee, this gives rise to a presumption that the monthly
rate does not include payments for unworked regular
holidays. The use of the factor 303 indicates the number of
ordinary working days in a year (which normally has 365
calendar days), excluding the 52 Sundays and the 10 regular
holidays. The use of 251 as a factor (365 calendar days less
52 Saturdays, 52 Sundays, and 10 regular holidays) gives
rise likewise to the same presumption that the unworked
Saturdays, Sundays and regular holidays are unpaid. This
being the case, it is not amiss to state with certainty that the
instant claim for wages on regular unworked holidays is
found to be tenable and meritorious.
WHEREFORE, judgment is hereby rendered:
(a) xxx xxxx xxx
(b) Ordering respondent to pay wages to all its employees for
all regular h(olidays since November 1, 1974 (pp. 97-99, rec.,
underscoring supplied).
Respondent bank did not appeal from the said decision. Instead, it complied
with the order of Arbiter Ricarte T. Soriano by paying their holiday pay up to
and including January, 1976.
On December 16, 1975, Presidential Decree No. 850 was promulgated
amending, among others, the provisions of the Labor Code on the right to
holiday pay to read as follows: t.hqw
Art. 94. Right to holiday pay. (a) Every worker shall be
paid his regular daily wages during regular holidays, except
in retail and service establishments regularly employing less
than ten (10) workers;

(b) The employer may require an employee to work on any


holiday but such employee shall be paid a compensation
equivalent to twice his regular rate and
(c) As used in this Article, "holiday" includes New Year's Day,
Maundy Thursday, Good Friday, the ninth of April, the first
of May, the twelfth of June, the fourth of July, the thirtieth
of November, the twenty-fifth and the thirtieth of December,
and the day designated by law for holding a general election.
Accordingly, on February 16, 1976, by authority of Article 5 of the same
Code, the Department of Labor (now Ministry of Labor) promulgated the rules
and regulations for the implementation of holidays with pay. The
controversial section thereof reads: t.hqw
Sec. 2. Status of employees paid by the month. Employees
who are uniformly paid by the month, irrespective of the
number of working days therein, with a salary of not less
than the statutory or established minimum wage shall be
presumed to be paid for all days in the month whether
worked or not.
For this purpose, the monthly minimum wage shall not be
less than the statutory minimum wage multiplied by 365
days divided by twelve" (italics supplied).
On April 23, 1976, Policy Instruction No. 9 was issued by the then Secretary
of Labor (now Minister) interpreting the above-quoted rule, pertinent portions
of which read: t.hqw
xxx xxx xxx
The ten (10) paid legal holidays law, to start with, is intended
to benefit principally daily employees. In the case of monthly,
only those whose monthly salary did not yet include
payment for the ten (10) paid legal holidays are entitled to
the benefit.
Under the rules implementing P.D. 850, this policy has been
fully clarified to eliminate controversies on the entitlement of
monthly paid employees, The new determining rule is this: If
the monthly paid employee is receiving not less than P240,
the maximum monthly minimum wage, and his monthly pay
is uniform from January to December, he is presumed to be
already paid the ten (10) paid legal holidays. However, if
deductions are made from his monthly salary on account of
holidays in months where they occur, then he is still entitled
to the ten (10) paid legal holidays. ..." (emphasis supplied).
Respondent bank, by reason of the ruling laid down by the aforecited rule
implementing Article 94 of the Labor Code and by Policy Instruction No. 9,
stopped the payment of holiday pay to an its employees.
On August 30, 1976, petitioner filed a motion for a writ of execution to
enforce the arbiter's decision of August 25, 1975, whereby the respondent

bank was ordered to pay its employees their daily wage for the unworked
regular holidays.
On September 10, 1975, respondent bank filed an opposition to the motion
for a writ of execution alleging, among others, that: (a) its refusal to pay the
corresponding unworked holiday pay in accordance with the award of Labor
Arbiter Ricarte T. Soriano dated August 25, 1975, is based on and justified
by Policy Instruction No. 9 which interpreted the rules implementing P. D.
850; and (b) that the said award is already repealed by P.D. 850 which took
effect on December 16, 1975, and by said Policy Instruction No. 9 of the
Department of Labor, considering that its monthly paid employees are not
receiving less than P240.00 and their monthly pay is uniform from January
to December, and that no deductions are made from the monthly salaries of
its employees on account of holidays in months where they occur (pp. 64-65,
NLRC rec.).
On October 18, 1976, Labor Arbiter Ricarte T. Soriano, instead of issuing a
writ of execution, issued an order enjoining the respondent bank to continue
paying its employees their regular holiday pay on the following grounds: (a)
that the judgment is already final and the findings which is found in the
body of the decision as well as the dispositive portion thereof is res
judicata or is the law of the case between the parties; and (b) that since the
decision had been partially implemented by the respondent bank, appeal
from the said decision is no longer available (pp. 100-103, rec.).
On November 17, 1976, respondent bank appealed from the above-cited
order of Labor Arbiter Soriano to the National Labor Relations Commission,
reiterating therein its contentions averred in its opposition to the motion for
writ of execution. Respondent bank further alleged for the first time that the
questioned order is not supported by evidence insofar as it finds that
respondent bank discontinued payment of holiday pay beginning January,
1976 (p. 84, NLRC rec.).
On June 20, 1978, the National Labor Relations Commission promulgated its
resolution en banc dismissing respondent bank's appeal, the dispositive
portion of which reads as follows: t.hqw
In view of the foregoing, we hereby resolve to dismiss, as we
hereby dismiss, respondent's appeal; to set aside Labor
Arbiter Ricarte T. Soriano's order of 18 October 1976 and, as
prayed for by complainant, to order the issuance of the
proper writ of execution (p. 244, NLRC rec.).
Copies of the above resolution were served on the petitioner only on February
9, 1979 or almost eight. (8) months after it was promulgated, while copies
were served on the respondent bank on February 13, 1979.
On February 21, 1979, respondent bank filed with the Office of the Minister
of Labor a motion for reconsideration/appeal with urgent prayer to stay
execution, alleging therein the following: (a) that there is prima facie evidence
of grave abuse of discretion, amounting to lack of jurisdiction on the part of
the National Labor Relations Commission, in dismissing the respondent's
appeal on pure technicalities without passing upon the merits of the appeal

and (b) that the resolution appealed from is contrary to the law and
jurisprudence (pp. 260-274, NLRC rec.).

Code's provisions on holiday pay, they in effect amended them by enlarging


the scope of their exclusion (p. 1 1, rec.).

On March 19, 1979, petitioner filed its opposition to the respondent bank's
appeal and alleged the following grounds: (a) that the office of the Minister of
Labor has no jurisdiction to entertain the instant appeal pursuant to the
provisions of P. D. 1391; (b) that the labor arbiter's decision being final,
executory and unappealable, execution is a matter of right for the petitioner;
and (c) that the decision of the labor arbiter dated August 25, 1975 is
supported by the law and the evidence in the case (p. 364, NLRC rec.).

Article 94 of the Labor Code, as amended by P.D. 850, provides: t.hqw

On July 30, 1979, petitioner filed a second motion for execution pending
appeal, praying that a writ of execution be issued by the National Labor
Relations Commission pending appeal of the case with the Office of the
Minister of Labor. Respondent bank filed its opposition thereto on August 8,
1979.
On August 13, 1979, the National Labor Relations Commission issued an
order which states: t.hqw
The Chief, Research and Information Division of this
Commission is hereby directed to designate a SocioEconomic Analyst to compute the holiday pay of the
employees of the Insular Bank of Asia and America from
April 1976 to the present, in accordance with the Decision of
the Labor Arbiter dated August 25, 1975" (p. 80, rec.).
On November 10, 1979, the Office of the Minister of Labor, through Deputy
Minister Amado G. Inciong, issued an order, the dispositive portion of which
states: t.hqw
ALL THE FOREGOING CONSIDERED, let the appealed
Resolution en banc of the National Labor Relations
Commission dated 20 June 1978 be, as it is hereby, set
aside and a new judgment promulgated dismissing the
instant case for lack of merit (p. 436, NLRC rec.).
Hence, this petition for certiorari charging public respondent Amado G.
Inciong with abuse of discretion amounting to lack or excess of jurisdiction.
The issue in this case is: whether or not the decision of a Labor Arbiter
awarding payment of regular holiday pay can still be set aside on appeal by
the Deputy Minister of Labor even though it has already become final and
had been partially executed, the finality of which was affirmed by the
National Labor Relations Commission sitting en banc, on the basis of an
Implementing Rule and Policy Instruction promulgated by the Ministry of
Labor long after the said decision had become final and executory.
WE find for the petitioner.
I
WE agree with the petitioner's contention that Section 2, Rule IV, Book III of
the implementing rules and Policy Instruction No. 9 issued by the then
Secretary of Labor are null and void since in the guise of clarifying the Labor

Art. 94. Right to holiday pay. (a) Every worker shall be


paid his regular daily wage during regular holidays, except in
retail and service establishments regularly employing less
than ten (10) workers. ...
The coverage and scope of exclusion of the Labor Code's holiday pay
provisions is spelled out under Article 82 thereof which reads: t.hqw
Art. 82. Coverage. The provision of this Title shall apply to
employees in all establishments and undertakings, whether
for profit or not, but not to government employees, managerial
employees, field personnel members of the family of the
employer who are dependent on him for support domestic
helpers, persons in the personal service of another, and
workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
... (emphasis supplied).
From the above-cited provisions, it is clear that monthly paid employees are
not excluded from the benefits of holiday pay. However, the implementing
rules on holiday pay promulgated by the then Secretary of Labor excludes
monthly paid employees from the said benefits by inserting, under Rule IV,
Book Ill of the implementing rules, Section 2, which provides that:
"employees who are uniformly paid by the month, irrespective of the number
of working days therein, with a salary of not less than the statutory or
established minimum wage shall be presumed to be paid for all days in the
month whether worked or not. "
Public respondent maintains that "(T)he rules implementing P. D. 850 and
Policy Instruction No. 9 were issued to clarify the policy in the
implementation of the ten (10) paid legal holidays. As interpreted, 'unworked'
legal holidays are deemed paid insofar as monthly paid employees are
concerned if (a) they are receiving not less than the statutory minimum wage,
(b) their monthly pay is uniform from January to December, and (c) no
deduction is made from their monthly salary on account of holidays in
months where they occur. As explained in Policy Instruction No, 9, 'The ten
(10) paid legal holidays law, to start with, is intended to benefit principally
daily paid employees. In case of monthly, only those whose monthly salary
did not yet include payment for the ten (10) paid legal holidays are entitled to
the benefit' " (pp. 340-341, rec.). This contention is untenable.
It is elementary in the rules of statutory construction that when the language
of the law is clear and unequivocal the law must be taken to mean exactly
what it says. In the case at bar, the provisions of the Labor Code on the
entitlement to the benefits of holiday pay are clear and explicit - it provides
for both the coverage of and exclusion from the benefits. In Policy Instruction
No. 9, the then Secretary of Labor went as far as to categorically state that
the benefit is principally intended for daily paid employees, when the law

clearly states that every worker shall be paid their regular holiday pay. This
is a flagrant violation of the mandatory directive of Article 4 of the Labor
Code, which states that "All doubts in the implementation and interpretation
of the provisions of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor." Moreover, it shall always be
presumed that the legislature intended to enact a valid and permanent
statute which would have the most beneficial effect that its language permits
(Orlosky vs. Haskell, 155 A. 112.)
Obviously, the Secretary (Minister) of Labor had exceeded his statutory
authority granted by Article 5 of the Labor Code authorizing him to
promulgate the necessary implementing rules and regulations.
Public respondent vehemently argues that the intent and spirit of the holiday
pay law, as expressed by the Secretary of Labor in the case of Chartered
Bank Employees Association v. The Chartered Bank (NLRC Case No. RB1789-75, March 24, 1976), is to correct the disadvantages inherent in the
daily compensation system of employment holiday pay is primarily
intended to benefit the daily paid workers whose employment and income are
circumscribed by the principle of "no work, no pay." This argument may
sound meritorious; but, until the provisions of the Labor Code on holiday pay
is amended by another law, monthly paid employees are definitely included
in the benefits of regular holiday pay. As earlier stated, the presumption is
always in favor of law, negatively put, the Labor Code is always strictly
construed against management.
While it is true that the contemporaneous construction placed upon a statute
by executive officers whose duty is to enforce it should be given great weight
by the courts, still if such construction is so erroneous, as in the instant
case, the same must be declared as null and void. It is the role of the
Judiciary to refine and, when necessary, correct constitutional (and/or
statutory) interpretation, in the context of the interactions of the three
branches of the government, almost always in situations where some agency
of the State has engaged in action that stems ultimately from some legitimate
area of governmental power (The Supreme Court in Modern Role, C. B.
Swisher 1958, p. 36).
Thus. in the case of Philippine Apparel Workers Union vs. National Labor
Relations Commission (106 SCRA 444, July 31, 1981) where the Secretary of
Labor enlarged the scope of exemption from the coverage of a Presidential
Decree granting increase in emergency allowance, this Court ruled
that: t.hqw
... the Secretary of Labor has exceeded his authority when he
included paragraph (k) in Section 1 of the Rules implementing P. D.
1 1 23.
xxx xxx xxx
Clearly, the inclusion of paragraph k contravenes the statutory
authority granted to the Secretary of Labor, and the same is
therefore void, as ruled by this Court in a long line of cases . . .
.. t.hqw

The recognition of the power of administrative


officials to promulgate rules in the administration of
the statute, necessarily limited to what is provided
for in the legislative enactment, may be found in the
early case of United States vs. Barrios decided in
1908. Then came in a 1914 decision, United States
vs. Tupasi Molina (29 Phil. 119) delineation of the
scope of such competence. Thus: "Of course the
regulations adopted under legislative authority by a
particular department must be in harmony with the
provisions of the law, and for the sole purpose of
carrying into effect its general provisions. By such
regulations, of course, the law itself cannot be
extended. So long, however, as the regulations relate
solely to carrying into effect the provisions of the
law, they are valid." In 1936, in People vs.
Santos, this Court expressed its disapproval of an
administrative order that would amount to an excess
of the regulatory power vested in an administrative
official We reaffirmed such a doctrine in a 1951
decision, where we again made clear that where an
administrative order betrays inconsistency or
repugnancy to the provisions of the Act, 'the
mandate of the Act must prevail and must be
followed. Justice Barrera, speaking for the Court in
Victorias Milling inc. vs. Social Security Commission,
citing Parker as well as Davis did tersely sum up the
matter thus: "A rule is binding on the Courts so long
as the procedure fixed for its promulgation is
followed and its scope is within the statutory
authority granted by the legislature, even if the
courts are not in agreement with the policy stated
therein or its innate wisdom. ... On the other hand,
administrative interpretation of the law is at best
merely advisory, for it is the courts that finally
determine chat the law means."
"It cannot be otherwise as the Constitution limits the
authority of the President, in whom all executive
power resides, to take care that the laws be faithfully
executed. No lesser administrative executive office or
agency then can, contrary to the express language of
the Constitution assert for itself a more extensive
prerogative. Necessarily, it is bound to observe the
constitutional mandate. There must be strict
compliance with the legislative enactment. Its terms
must be followed the statute requires adherence to,
not departure from its provisions. No deviation is
allowable. In the terse language of the present Chief
Justice, an administrative agency "cannot amend an
act of Congress." Respondents can be sustained,

therefore, only if it could be shown that the rules


and regulations promulgated by them were in
accordance with what the Veterans Bill of Rights
provides" (Phil. Apparel Workers Union vs. National
Labor Relations Commission, supra, 463, 464, citing
Teozon vs. Members of the Board of Administrators,
PVA 33 SCRA 585; see also Santos vs. Hon. Estenzo,
et al, 109 Phil. 419; Hilado vs. Collector of Internal
Revenue, 100 Phil. 295; Sy Man vs. Jacinto &
Fabros, 93 Phil. 1093; Olsen & Co., Inc. vs. Aldanese
and Trinidad, 43 Phil. 259).
This ruling of the Court was recently reiterated in the case of American Wire
& Cable Workers Union (TUPAS) vs. The National Labor Relations Commission
and American Wire & Cable Co., Inc., G.R. No. 53337, promulgated on June
29, 1984.
In view of the foregoing, Section 2, Rule IV, Book III of the Rules to
implement the Labor Code and Policy instruction No. 9 issued by the then
Secretary of Labor must be declared null and void. Accordingly, public
respondent Deputy Minister of Labor Amado G. Inciong had no basis at all to
deny the members of petitioner union their regular holiday pay as directed by
the Labor Code.
II
It is not disputed that the decision of Labor Arbiter Ricarte T. Soriano dated
August 25, 1975, had already become final, and was, in fact, partially
executed by the respondent bank.
However, public respondent maintains that on the authority of De Luna vs.
Kayanan, 61 SCRA 49, November 13, 1974, he can annul the final decision
of Labor Arbiter Soriano since the ensuing promulgation of the integrated
implementing rules of the Labor Code pursuant to P.D. 850 on February 16,
1976, and the issuance of Policy Instruction No. 9 on April 23, 1976 by the
then Secretary of Labor are facts and circumstances that transpired
subsequent to the promulgation of the decision of the labor arbiter, which
renders the execution of the said decision impossible and unjust on the part
of herein respondent bank (pp. 342-343, rec.).
This contention is untenable.
To start with, unlike the instant case, the case of De Luna relied upon by the
public respondent is not a labor case wherein the express mandate of the
Constitution on the protection to labor is applied. Thus Article 4 of the Labor
Code provides that, "All doubts in the implementation and interpretation of
the provisions of this Code, including its implementing rules and regulations,
shall be resolved in favor of labor and Article 1702 of the Civil Code provides
that, " In case of doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living for the laborer.
Consequently, contrary to public respondent's allegations, it is patently
unjust to deprive the members of petitioner union of their vested right

acquired by virtue of a final judgment on the basis of a labor statute


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

Section I of Rule 39 of the Revised Rules of Court provides that "... execution
shall issue as a matter of right upon the expiration of the period to appeal ...
or if no appeal has been duly perfected." This rule applies to decisions or
orders of labor arbiters who are exercising quasi-judicial functions since "...
the rule of execution of judgments under the rules should govern all kinds of
execution of judgment, unless it is otherwise provided in other laws" Sagucio
vs. Bulos 5 SCRA 803) and Article 223 of the Labor Code provides that "...
decisions, awards, or orders of the Labor Arbiter or compulsory arbitrators
are final and executory unless appealed to the Commission by any or both of
the parties within ten (10) days from receipt of such awards, orders, or
decisions. ..."
Thus, under the aforecited rule, the lapse of the appeal period deprives the
courts of jurisdiction to alter the final judgment and the judgment becomes
final ipso jure (Vega vs. WCC, 89 SCRA 143, citing Cruz vs. WCC, 2
PHILAJUR 436, 440, January 31, 1978; see also Soliven vs. WCC, 77 SCRA
621; Carrero vs. WCC and Regala vs. WCC, decided jointly, 77 SCRA 297;
Vitug vs. Republic, 75 SCRA 436; Ramos vs. Republic, 69 SCRA 576).
In Galvez vs. Philippine Long Distance Telephone Co., 3 SCRA 422, 423,
October 31, 1961, where the lower court modified a final order, this Court
ruled thus: t.hqw
xxx xxx xxx
The lower court was thus aware of the fact that it was
thereby altering or modifying its order of January 8, 1959.
Regardless of the excellence of the motive for acting as it did,
we are constrained to hold however, that the lower court had
no authorities to make said alteration or modification. ...
xxx xxx xxx
The equitable considerations that led the lower court to take
the action complained of cannot offset the dem ands of
public policy and public interest which are also responsive
to the tenets of equity requiring that an issues passed
upon in decisions or final orders that have become
executory, be deemed conclusively disposed of and definitely
closed for, otherwise, there would be no end to litigations,
thus setting at naught the main role of courts of justice,
which is to assist in the enforcement of the rule of law and
the maintenance of peace and order, by settling justiciable
controversies with finality.
xxx xxx xxx
In the recent case of Gabaya vs. Mendoza, 113 SCRA 405, 406, March 30,
1982, this Court said: t.hqw
xxx xxx xxx
In Marasigan vs. Ronquillo (94 Phil. 237), it was categorically
stated that the rule is absolute that after a judgment
becomes final by the expiration of the period provided by the

rules within which it so becomes, no further amendment or


correction can be made by the court except for clerical errors
or mistakes. And such final judgment is conclusive not only
as to every matter which was offered and received to sustain
or defeat the claim or demand but as to any other admissible
matter which must have been offered for that purpose (L7044, 96 Phil. 526). In the earlier case of Contreras and
Ginco vs. Felix and China Banking Corp., Inc. (44 O.G.
4306), it was stated that the rule must be adhered to
regardless of any possible injustice in a particular case for
(W)e have to subordinate the equity of a particular situation to
the over-mastering need of certainty and immutability of
judicial pronouncements
xxx xxx xxx
III
The despotic manner by which public respondent Amado G. Inciong divested
the members of the petitioner union of their rights acquired by virtue of a
final judgment is tantamount to a deprivation of property without due
process of law Public respondent completely ignored the rights of the
petitioner union's members in dismissing their complaint since he knew for a
fact that the judgment of the labor arbiter had long become final and was
even partially executed by the respondent bank.
A final judgment vests in the prevailing party a right recognized and
protected by law under the due process clause of the Constitution (China Ins.
& Surety Co. vs. Judge of First Instance of Manila, 63 Phil. 324). A final
judgment is "a vested interest which it is right and equitable that the
government should recognize and protect, and of which the individual could
no. be deprived arbitrarily without injustice" (Rookledge v. Garwood, 65 N.W.
2d 785, 791).
lt is by this guiding principle that the due process clause is interpreted.
Thus, in the pithy language of then Justice, later Chief Justice, Concepcion
"... acts of Congress, as well as those of the Executive, can deny due process
only under pain of nullity, and judicial proceedings suffering from the same
flaw are subject to the same sanction, any statutory provision to the contrary
notwithstanding (Vda. de Cuaycong vs. Vda. de Sengbengco 110 Phil. 118,
emphasis supplied), And "(I)t has been likewise established that a violation of
a constitutional right divested the court of jurisdiction; and as a consequence
its judgment is null and void and confers no rights" (Phil. Blooming Mills
Employees Organization vs. Phil. Blooming Mills Co., Inc., 51 SCRA 211,
June 5, 1973).
Tested by and pitted against this broad concept of the constitutional
guarantee of due process, the action of public respondent Amado G. Inciong
is a clear example of deprivation of property without due process of law and
constituted grave abuse of discretion, amounting to lack or excess of
jurisdiction in issuing the order dated November 10, 1979.
WHEREFORE, THE PETITION IS HEREBY GRANTED, THE ORDER OF
PUBLIC RESPONDENT IS SET ASIDE, AND THE DECISION OF LABOR

ARBITER RICARTE T. SORIANO DATED AUGUST 25, 1975, IS HEREBY


REINSTATED.
COSTS AGAINST PRIVATE RESPONDENT INSULAR BANK OF ASIA AND
AMERICA
SO ORDERED.

G.R. No. L-75038 August 23, 1993


ELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES ABAD,
BENJAMIN BRIZUELA, NORLITO LADIA, MARCELO AGUILAN, DAVID
ORO, NELIA BRIZUELA, FLORA ESCOBIDO, JUSTILITA CABANIG, and
DOMINGO SAGUIT, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) and
BROAD STREET TAILORING and/or RODOLFO ZAPANTA, respondents.
Balguma, Macasaet & Associates for petitioners.
Teresita Gandionco Oledan for private respondents.
NOCON, J.:
A basic factor underlying the exercise of rights and the filing of claims for
benefits under the Labor Code and other presidential issuances or labor
legislations is the status and nature of one's employment. Whether an
employer-employee relationship exist and whether such employment is
managerial in character or that of a rank and file employee are primordial
considerations before extending labor benefits. Thus, petitioners in this case
seek a definitive ruling on the status and nature of their employment with
Broad Street Tailoring and pray for the nullification of the resolution dated
May 12, 1986 of the National Labor Relations Commissions in NLRC Case
No. RB-IV- 21558-78-T affirming the decision of Labor Arbiter Ernilo V.
Pealosa dated May 28, 1979, which held eleven of them as independent
contractors and the remaining one as employee but of managerial rank.
The facts of the case shows that petitioner Elias Villuga was employed as
cutter in the tailoring shop owned by private respondent Rodolfo Zapanta
and known as Broad Street Tailoring located at Shaw Boulevard,
Mandaluyong, Metro Manila. As cutter, he was paid a fixed monthly salary of
P840.00 and a monthly transportation allowance of P40.00. In addition to his
work as cutter, Villuga was assigned the chore of distributing work to the
shop's tailors or sewers when both the shop's manager and assistant
manager would be absent. He saw to it that their work conformed with the
pattern he had prepared and if not, he had them redone, repaired or resewn.
The other petitioners were either ironers, repairmen and sewers. They were
paid a fixed amount for every item ironed, repaired or sewn, regardless of the
time consumed in accomplishing the task. Petitioners did not fill up any time
record since they did not observe regular or fixed hours of work. They were
allowed to perform their work at home especially when the volume of work,
which depended on the number of job orders, could no longer be coped up
with.
From February 17 to 22, 1978, petitioner Villuga failed to report for work
allegedly due to illness. For not properly notifying his employer, he was
considered to have abandoned his work.
In a complaint dated March 27, 1978, filed with the Regional Office of the
Department of Labor, Villuga claimed that he was refused admittance when

he reported for work after his absence, allegedly due to his active
participation in the union organized by private respondent's tailors. He
further claimed that he was not paid overtime pay, holiday pay, premium pay
for work done on rest days and holidays, service incentive leave pay and 13th
month pay.
Petitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and David Oro
also claimed that they were dismissed from their employment because they
joined the Philippine Social Security Labor Union (PSSLU). Petitioners Andres
Abad, Norlito Ladia, Marcelo Aguilan, Nelia Brizuela, Flora Escobido, Justilita
Cabaneg and Domingo Saguit claimed that they stopped working because
private respondents gave them few pieces of work to do after learning of their
membership with PSSLU. All the petitioners laid claims under the different
labor standard laws which private respondent allegedly violated.
On May 28, 1979, Labor Arbiter Ernilo V. Pealosa rendered a decision
ordering the dismissal of the complaint for unfair labor practices, illegal
dismissal and other money claims except petitioner Villuga's claim for 13th
month pay for the years 1976, 1977 and 1980. The dispositive portion of the
decision states as follows:
WHEREFORE, premises considered, the respondent Broad
Street Tailoring and/or Rodolfo Zapanta are hereby ordered
to pay complainant Elias Villuga the sum of ONE
THOUSAND TWO HUNDRED FORTY-EIGHT PESOS AND
SIXTY-SIX CENTAVOS (P1,248.66) representing his 13th
month pay for the years 1976, 1977 and 1978. His other
claims in this case are hereby denied for lack of merit.
The complaint insofar as the other eleven (11) complainants
are concerned should be, as it is hereby dismissed for want
of jurisdiction. 1
On appeal, the National Labor Relations Commission affirmed the questioned
decision in a resolution dated May 12, 1986, the dispositive portion of which
states as follows:
WHEREFORE, premises considered, the decision appealed
from is, as it is hereby AFFIRMED, and the appeal
dismissed. 2
Presiding Commissioner Guillermo C. Medina merely concurred in the result
while Commissioner Gabriel M. Gatchalian rendered a dissenting opinion
which states as follows:
I am for upholding employer-employee relationship as
argued by the complainants before the Labor Arbiter and on
appeal. The further fact that the proposed decision
recognizes complainant's status as piece-rate worker all the
more crystallizes employer-employee relationship the
benefits prayed for must be granted. 3
Hence, petitioners filed this instant certiorari case on the following grounds:

1. That the respondent National Labor Relations Commission


abused
its
discretion
when
it
ruled
that
petitioner/complainant, Elias Villuga falls within the
category of a managerial employee;
2. . . . when it ruled that the herein petitioners were not
dismissed by reason of their union activities;
3. . . . when it ruled that petitioners Andres Abad, Benjamin
Brizuela, Norlito Ladia, Marcelo Aguilan, David Oro, Nelia
Brizuela, Flora Escobido, Justilita Cabaneg and Domingo
Saguit were not employees of private respondents but were
contractors.
4. . . . when it ruled that petitioner Elias Villuga is not
entitled to overtime pay and services for Sundays and Legal
Holidays; and
5. . . . when it failed to grant petitioners their respective
claims under the provisions of P.D. Nos. 925, 1123 and
851. 4
Under Rule 1, Section 2(c), Book III of the Implementing Rules of Labor Code,
to be a member of a managerial staff, the following elements must concur or
co-exist, to wit: (1) that his primary duty consists of the performance of work
directly related to management policies; (2) that he customarily and regularly
exercises discretion and independent judgment in the performance of his
functions; (3) that he regularly and directly assists in the management of the
establishment; and (4) that he does not devote his twenty per cent of his time
to work other than those described above.
Applying the above criteria to petitioner Elias Villuga's case, it is undisputed
that his primary work or duty is to cut or prepare patterns for items to be
sewn, not to lay down or implement any of the management policies, as there
is a manager and an assistant manager who perform said functions. It is true
that in the absence of the manager the assistant manager, he distributes and
assigns work to employees but such duty, though involving discretion, is
occasional and not regular or customary. He had also the authority to order
the repair or resewing of defective item but such authority is part and parcel
of his function as cutter to see to it that the items cut are sewn correctly lest
the defective nature of the workmanship be attributed to his "poor cutting."
Elias Villuga does not participate in policy-making. Rather, the functions of
his position involve execution of approved and established policies.
InFranklin Baker Company of the Philippines v. Trajano, 5 it was held that
employees who do not participate in policy-making but are given ready
policies to execute and standard practices to observe are not managerial
employees. The test of "supervisory or managerial status" depends on
whether a person possesses authority that is not merely routinary or clerical
in nature but one that requires use of independent judgment. In other words,
the functions of the position are not managerial in nature if they only execute
approved and established policies leaving little or no discretion at all whether
to implement said policies or not. 6

Consequently, the exclusion of Villuga from the benefits claimed under


Article 87 (overtime pay and premium pay for holiday and rest day work),
Article 94, (holiday pay), and Article 95 (service incentive leave pay) of the
Labor Code, on the ground that he is a managerial employee is unwarranted.
He is definitely a rank and file employee hired to perform the work of the
cutter and not hired to perform supervisory or managerial functions. The fact
that he is uniformly paid by the month does not exclude him from the
benefits of holiday pay as held in the case ofInsular Bank of America
Employees Union v. Inciong. 7 He should therefore be paid in addition to the
13th month pay, his overtime pay, holiday pay, premium pay for holiday and
rest day, and service incentive leave pay.
As to the dismissal of the charge for unfair labor practices of private
respondent consisting of termination of employment of petitioners and acts of
discrimination against members of the labor union, the respondent
Commission correctly held the absence of evidence that Mr. Zapanta was
aware of petitioners' alleged union membership on February 22, 1978 as the
notice of union existence in the establishment with proposal for recognition
and collective bargaining negotiation was received by management only an
March 3, 1978. Indeed, self-serving allegations without concrete proof that
the private respondent knew of their membership in the union and
accordingly reacted against their membership do not suffice.
Nor is private respondent's claim that petitioner Villuga abandoned his work
acceptable. For abandonment to constitute a valid cause for dismissal, there
must be a deliberate and unjustified refusal of the employee to resume his
employment. Mere absence is not sufficient, it must be accompanied by overt
acts unerringly pointing to the fact that the employee simply does not want
to work anymore. 8 At any rate, dismissal of an employee due to his
prolonged absence without leave by reason of illness duly established by the
presentation of a medical certificate is not justified. 9 In the case at bar,
however, considering that petitioner Villuga absented himself for four (4)
days without leave and without submitting a medical certificate to support
his claim of illness, the imposition of a sanction is justified, but surely, not
dismissal, in the light of the fact that this is petitioner's first offense. In lieu
of reinstatement, petitioner Villuga should be paid separation pay where
reinstatement can no longer be effected in view of the long passage of time or
because of the realities of the situation. 10 But petitioner should not be
granted backwages in addition to reinstatement as the same is not just and
equitable under the circumstances considering that he was not entirely free
from blame. 11
As to the other eleven petitioners, there is no clear showing that they were
dismissed because the circumstances surrounding their dismissal were not
even alleged. However, we disagree with the finding of respondent
Commission that the eleven petitioners are independent contractors.
For an employer-employee relationship to exist, the following elements are
generally considered: "(1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal and (4) the power to
control the employee's conduct." 12

Noting that the herein petitioners were oftentimes allowed to perform their
work at home and were paid wages on a piece-rate basis, the respondent
Commission apparently found the second and fourth elements lacking and
ruled that "there is no employer-employee relationship, for it is clear that
respondents are interested only in the result and not in the means and
manner and how the result is obtained."
Respondent Commission is in error. The mere fact that petitioners were paid
on a piece-rate basis is no argument that herein petitioners were not
employees. The term "wage" has been broadly defined in Article 97 of the
Labor Code as remuneration or earnings, capable of being expressed in terms
of money whether fixed or ascertained on a time, task, piece or commission
basis. . . ." The facts of this case indicate that payment by the piece is just a
method of compensation and does not define the essence of the
relation. 13 The petitioners were allowed to perform their work at home does
not likewise imply absence of control and supervision. The control test calls
merely for the existence of a right to control the manner of doing the work,
not the actual exercise of the right. 14
In determining whether the relationship is that of employer and employee or
one of an independent contractor, "each case must be determined on its own
facts
and
all the
features
of the relationship
are
to be
considered." 15Considering that petitioners who are either sewers, repairmen
or ironer, have been in the employ of private respondent as early as 1972 or
at the latest in 1976, faithfully rendering services which are desirable or
necessary for the business of private respondent, and observing
management's approved standards set for their respective lines of work as
well as the customers' specifications, petitioners should be considered
employees, not independent contractors.
Independent contractors are those who exercise independent employment,
contracting to do a piece of work according to their own methods and without
being subjected to control of their employer except as to the result of their
work. By the nature of the different phases of work in a tailoring shop where
the customers' specifications must be followed to the letter, it is
inconceivable that the workers therein would not be subjected to control.
In Rosario Brothers, Inc. v. Ople, 16 this Court ruled that tailors and similar
workers hired in the tailoring department, although paid weekly wages on
piece work basis, are employees not independent contractors. Accordingly, as
regular employees, paid on a piece-rate basis, petitioners are not entitled to
overtime pay, holiday pay, premium pay for holiday/rest day and service
incentive leave pay. Their claim for separation pay should also be defined for
lack of evidence that they were in fact dismissed by private respondent. They
should be paid, however, their 13th month pay under P.D. 851, since they
are employees not independent contractors.
WHEREFORE, in view of the foregoing reasons, the assailed decision of
respondent National Labor Relations Commission is hereby MODIFIED by
awarding

(a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay for
holiday and rest day, service incentive leave pay and separation pay, in
addition to his 13th month pay; and
(b) in favor of the rest of the petitioners, their respective 13th month pay.
The case is hereby REMANDED to the National Labor Relations Commission
for the computation of the claims herein-above mentioned.
SO ORDERED.

G.R. No. 145561

June 15, 2005

HONDA PHILS., INC., petitioner,


vs.
SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review under Rule 45 seeks the reversal of the Court of
Appeals decision1 dated September 14, 20002 and its resolution3 dated
October 18, 2000, in CA-G.R. SP No. 59052. The appellate court affirmed the
decision dated May 2, 2000 rendered by the Voluntary Arbitrator who ruled
that petitioner Honda Philippines, Inc.s (Honda) pro-rated payment of the
13th and 14th month pay and financial assistance to its employees was
invalid.
As found by the Court of Appeals, the case stems from the Collective
Bargaining Agreement (CBA) forged between petitioner Honda and
respondent union Samahan ng Malayang Manggagawa sa Honda (respondent
union) which contained the following provisions:

On November 22, 1999, the management of Honda issued a


memorandum4 announcing its new computation of the 13th and 14th month
pay to be granted to all its employees whereby the thirty-one (31)-day long
strike shall be considered unworked days for purposes of computing said
benefits. As per the companys new formula, the amount equivalent to 1/12
of the employees basic salary shall be deducted from these bonuses, with a
commitment however that in the event that the strike is declared legal,
Honda shall pay the amount deducted.
Respondent union opposed the pro-rated computation of the bonuses in a
letter dated November 25, 1999. Honda sought the opinion of the Bureau of
Working Conditions (BWC) on the issue. In a letter dated January 4,
2000,5 the BWC agreed with the pro-rata payment of the 13th month pay as
proposed by Honda.
The matter was brought before the Grievance Machinery in accordance with
the parties existing CBA but when the issue remained unresolved, it was
submitted for voluntary arbitration. In his decision6 dated May 2, 2000,
Voluntary Arbitrator Herminigildo C. Javen invalidated Hondas computation,
to wit:

Section 6. 14th Month Pay

WHEREFORE, in view of all foregoing premises being duly considered and


evaluated, it is hereby ruled that the Companys implementation of pro-rated
13th Month pay, 14th Month pay and Financial Assistance [is] invalid. The
Company is thus ordered to compute each provision in full month basic pay
and pay the amounts in question within ten (10) days after this Decision
shall have become final and executory.

The COMPANY shall grant a 14th Month Pay, computed on the same basis as
computation of 13th Month Pay.

The three (3) days Suspension of the twenty one (21) employees is hereby
affirmed.

Section 7. The COMPANY agrees to continue the practice of granting, in its


discretion, financial assistance to covered employees in December of each
year, of not less than 100% of basic pay.

SO ORDERED.7

Section 3. 13th Month Pay


The COMPANY shall maintain the present practice in the implementation [of]
the 13th month pay.

This CBA is effective until year 2000. In the latter part of 1998, the parties
started re-negotiations for the fourth and fifth years of their CBA. When the
talks between the parties bogged down, respondent union filed a Notice of
Strike on the ground of bargaining deadlock. Thereafter, Honda filed a Notice
of Lockout. On March 31, 1999, then Department of Labor and Employment
(DOLE) Secretary Laguesma assumed jurisdiction over the labor dispute and
ordered the parties to cease and desist from committing acts that would
aggravate the situation. Both parties complied accordingly.
On May 11, 1999, however, respondent union filed a second Notice of Strike
on the ground of unfair labor practice alleging that Honda illegally contracted
out work to the detriment of the workers. Respondent union went on strike
and picketed the premises of Honda on May 19, 1999. On June 16, 1999,
DOLE Acting Secretary Felicisimo Joson, Jr. assumed jurisdiction over the
case and certified the same to the National Labor Relations Commission
(NLRC) for compulsory arbitration. The striking employees were ordered to
return to work and the management accepted them back under the same
terms prior to the strike staged.

Hondas Motion for Partial Reconsideration was denied in a resolution dated


May 22, 2000. Thus, a petition was filed with the Court of Appeals, however,
the petition was dismissed for lack of merit.
Hence, the instant petition for review on the sole issue of whether the prorated computation of the 13th month pay and the other bonuses in question
is valid and lawful.
The petition lacks merit.
A collective bargaining agreement refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of
work and all other terms and conditions of employment in a bargaining
unit.8 As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient
provided these are not contrary to law, morals, good customs, public order or
public policy.9 Thus, where the CBA is clear and unambiguous, it becomes
the law between the parties and compliance therewith is mandated by the
express policy of the law.10
In some instances, however, the provisions of a CBA may become
contentious, as in this case. Honda wanted to implement a pro-rated

computation of the benefits based on the "no work, no pay" rule. According to
the company, the phrase "present practice" as mentioned in the CBA refers to
the manner and requisites with respect to the payment of the bonuses, i.e.,
50% to be given in May and the other 50% in December of each year.
Respondent union, however, insists that the CBA provisions relating to the
implementation of the 13th month pay necessarily relate to the computation
of the same.
We agree with the findings of the arbitrator that the assailed CBA provisions
are far from being unequivocal. A cursory reading of the provisions will show
that they did not state categorically whether the computation of the 13th
month pay, 14th month pay and the financial assistance would be based on
one full months basic salary of the employees, or pro-rated based on the
compensation actually received. The arbitrator thus properly resolved the
ambiguity in favor of labor as mandated by Article 1702 of the Civil
Code.11 The Court of Appeals affirmed the arbitrators finding and added that
the computation of the 13th month pay should be based on the length of
service and not on the actual wage earned by the worker.
We uphold the rulings of the arbitrator and the Court of Appeals. Factual
findings of labor officials, who are deemed to have acquired expertise in
matters within their respective jurisdiction, are generally accorded not only
respect but even finality, and bind us when supported by substantial
evidence. It is not our function to assess and evaluate the evidence all over
again, particularly where the findings of both the arbiter and the Court of
Appeals coincide.12
Presidential Decree No. 851, otherwise known as the 13th Month Pay Law,
which required all employers to pay their employees a 13 th month pay, was
issued to protect the level of real wages from the ravages of worldwide
inflation. It was enacted on December 16, 1975 after it was noted that there
had been no increase in the minimum wage since 1970 and the Christmas
season was an opportune time for society to show its concern for the plight of
the working masses so that they may properly celebrate Christmas and New
Year.13
Under the Revised Guidelines on the Implementation of the 13 th month pay
issued on November 16, 1987, the salary ceiling of P1,000.00 under P.D. No.
851 was removed. It further provided that the minimum 13 th month pay
required by law shall not be less than one-twelfth (1/12) of the total basic
salary earned by an employee within a calendar year. The guidelines
pertinently provides:
The "basic salary" of an employee for the purpose of computing the
13th month pay shall include allremunerations or earnings paid by his
employer for services rendered but does not include 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 leave credits, overtime premium, night differential and holiday pay, and
cost-of-living allowances.14 (Emphasis supplied)
For employees receiving regular wage, we have interpreted "basic salary" to
mean, not the amount actually received by an employee, but 1/12 of their

standard monthly wage multiplied by their length of service within a given


calendar year. Thus, we exclude from the computation of "basic salary"
payments for sick, vacation and maternity leaves, night differentials, regular
holiday pay and premiums for work done on rest days and special
holidays.15 In Hagonoy Rural Bank v. NLRC,16 St. Michael Academy v.
NLRC,17 Consolidated Food Corporation v. NLRC,18 and similar cases, the
13th month pay due an employee was computed based on the employees
basic monthly wage multiplied by the number of months worked in a
calendar year prior to separation from employment.
The revised guidelines also provided for a pro-ration of this benefit only in
cases of resignation or separation from work. As the rules state, under these
circumstances, an employee is entitled to a pay in proportion to the length of
time he worked during the year, reckoned from the time he started working
during the calendar year.19 The Court of Appeals thus held that:
Considering the foregoing, the computation of the 13th month pay should be
based on the length of service and not on the actual wage earned by the
worker. In the present case, there being no gap in the service of the workers
during the calendar year in question, the computation of the 13th month pay
should not be pro-rated but should be given in full.20 (Emphasis supplied)
More importantly, it has not been refuted that Honda has not implemented
any pro-rating of the 13th month pay before the instant case. Honda did not
adduce evidence to show that the 13 th month, 14th month and financial
assistance benefits were previously subject to deductions or pro-rating or
that these were dependent upon the companys financial standing. As held by
the Voluntary Arbitrator:
The Company (Honda) explicitly accepted that it was the strike held that
prompt[ed] them to adopt a pro-rata computation, aside [from] being in [a]
state of rehabilitation due to 227M substantial losses in 1997, 114M in 1998
and 215M lost of sales in 1999 due to strike. This is an implicit acceptance
that prior to the strike, a full month basic pay computation was the "present
practice" intended to be maintained in the CBA.21
The memorandum dated November 22, 1999 which Honda issued shows that
it was the first time a pro-rating scheme was to be implemented in the
company. It was a convenient coincidence for the company that the work
stoppage held by the employees lasted for thirty-one (31) days or exactly one
month. This enabled them to devise a formula using 11/12 of the total
annual salary as base amount for computation instead of the entire amount
for a 12-month period.
That a full month payment of the 13th month pay is the established practice
at Honda is further bolstered by the affidavits executed by Feliteo Bautista
and Edgardo Cruzada. Both attested that when they were absent from work
due to motorcycle accidents, and after they have exhausted all their leave
credits and were no longer receiving their monthly salary from Honda, they
still received the full amount of their 13th month, 14th month and financial
assistance pay.22
The case of Davao Fruits Corporation v. Associated Labor Unions, et
al.23 presented an example of a voluntary act of the employer that has

ripened into a company practice. In that case, the employer, from 1975 to
1981, freely and continuously included in the computation of the 13th month
pay those items that were expressly excluded by the law. We have held that
this act, which was favorable to the employees though not conforming to law,
has ripened into a practice and therefore can no longer be withdrawn,
reduced, diminished, discontinued or eliminated. Furthermore, in Sevilla
Trading Company v. Semana,24 we stated:
With regard to the length of time the company practice should have been
exercised to constitute voluntary employer practice which cannot be
unilaterally withdrawn by the employer, we hold that jurisprudence has not
laid down any rule requiring a specific minimum number of years. In the
above quoted case of Davao Fruits Corporation vs. Associated Labor
Unions, the company practice lasted for six (6) years. In another case, Davao
Integrated Port Stevedoring Services vs. Abarquez, the employer, for three (3)
years and nine (9) months, approved the commutation to cash of the
unenjoyed portion of the sick leave with pay benefits of its intermittent
workers. While in Tiangco vs. Leogardo, Jr. the employer carried on the
practice of giving a fixed monthly emergency allowance from November 1976
to February 1980, or three (3) years and four (4) months. In all these cases,
this Court held that the grant of these benefits has ripened into
company practice or policy which cannot be peremptorily
withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of
including non-basic benefits such as paid leaves for unused sick leave and
vacation leave in the computation of their 13th-month pay for at least two (2)
years. This, we rule likewise constitutes voluntary employer practice
which cannot be unilaterally withdrawn by the employer without
violating Art. 100 of the Labor Code.25 (Emphasis supplied)
Lastly, the foregoing interpretation of law and jurisprudence is more in
keeping with the underlying principle for the grant of this benefit. It is
primarily given to alleviate the plight of workers and to help them cope with
the exorbitant increases in the cost of living. To allow the pro-ration of the
13th month pay in this case is to undermine the wisdom behind the law and
the mandate that the workingmans welfare should be the primordial and
paramount consideration.26 What is more, the factual milieu of this case is
such that to rule otherwise inevitably results to dissuasion, if not a deterrent,
for workers from the free exercise of their constitutional rights to selforganization and to strike in accordance with law.27
WHEREFORE, the instant petition is DENIED. The decision and the
resolution of the Court of Appeals dated September 14, 2000 and October 18,
2000, respectively, in CA-G.R. SP No. 59052, affirming the decision rendered
by the Voluntary Arbitrator on May 2, 2000, are hereby AFFIRMED in toto.
SO ORDERED.

G.R. No. 149013 August 31, 2006


HOUSE OF SARA LEE, Petitioner,
vs.
CYNTHIA F. REY, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before this Court is a Petition for Certiorari under Rule 45 seeking to reverse
and set aside the Decision1 dated August 25, 2000 of the Court of Appeals
(CA) in CA-G.R. SP No. 51653 which affirmed the Decision dated October 29,
1998 of the National Labor Relations Commission (NLRC); and the CA
Resolution2 dated July 4, 2001 which denied the petitioner's3 Motion for
Reconsideration.
The case originated from a Complaint for illegal dismissal instituted on
September 24, 1996 by the respondent against the petitioner before the
NLRC Arbitration Branch No. 10 in Cagayan de Oro City. The Complaint
prayed for reinstatement with full backwages without loss of seniority rights,
payment of 13th, 14th and 15th month pay, and the award of moral damages
and attorneys fees.
The essential facts:
The House of Sara Lee (petitioner) is engaged in the direct selling of a variety
of product lines for men and women, including cosmetics, intimate apparels,
perfumes, ready to wear clothes and other novelty items, through its various
outlets nationwide. In the pursuit of its business, the petitioner engages and
contracts with dealers to sell the aforementioned merchandise. These
dealers, known either as "Independent Business Managers" (IBMs) or
"Independent Group Supervisors" (IGSs), depending on whether they sell
individually or through their own group, would obtain at discounted rates the
merchandise from the petitioner on credit and then sell the same products to
their own customers at fixed prices also determined by the petitioner. In
turn, the dealers are paid "Services Fees," or sales commissions, the amount
of which depends on the volume and value of their sales. Under existing
company policy, the dealers must remit to the petitioner the proceeds of their
sales within a designated credit period, which would either be 38 days for
IGSs or 52 days for IBMs, counted from the day the said dealers acquired the
merchandise from the petitioner. To discourage late remittances, the
petitioner imposes a "Credit Administration Charge," or simply, a penalty
charge, on the value of the unremitted payment. Additionally, if the dealer
concerned has overdue payments or is said to be in "default," he or she
cannot purchase additional products from the petitioner. The dealers under
this system earn income through a profit margin between the discounted
purchase price they pay on credit to the petitioner and the fixed selling price
their customers will have to pay. On top of this margin, the dealer is given
the Service Fee, a sales commission, based on the volume of sales generated
by him or her. Due to the sheer volume of sales generated by all of its outlets,
the petitioner has found the need to strictly monitor the 38- or 52-day
"rolling due date" of each of its IBMs and IGSs through the employment of
"Credit Administration Supervisors" (CAS) for each branch. The primary duty

of the CAS is to strictly monitor each of these deadlines, to supervise the


credit and collection of payments and outstanding accounts due to the
petitioner from its independent dealers and various customers, and to screen
prospective IBMs. To discharge these responsibilities, the CAS is provided
with a computer equipped with control systems through which data is readily
generated. Under this organizational setup, the CAS is under the direct and
immediate supervision of the Branch Operations Manager (BOM).
Cynthia Rey (respondent), at the time of her dismissal from employment, or
on June 25, 1996, held the position of Credit Administration Supervisor or
CAS at the Cagayan de Oro City branch of the petitioner. Respondent was
first employed by the petitioner in July 16, 1993 as an Accounts Receivable
Clerk at its Caloocan City branch. In November 1993, respondent was
transferred to the Cagayan de Oro City branch retaining the same position.
In January 1994, respondent was elevated to the position of CAS. At that
time, the Branch Operations Manager or BOM of the Cagayan de Oro City
branch was a certain Mr. Jeremiah Villagracia. In March 1995, respondent
was temporarily assigned to the Butuan City branch.
Sometime in June 1995, while respondent was still working in Butuan City,
she allegedly instructed the Accounts Receivable Clerk of the Cagayan de Oro
outlet, a certain Ms. Magi Caroline Mendoza, to change the credit term of one
of the IBMs of the petitioner, a certain Ms. Mariam Rey-Petilla, who happens
to be respondents sister-in-law, from the 52-day limit to an "unauthorized"
term of 60 days. The respondent made the instruction, the petitioner avers,
just before the computer data for the computation of the Service Fee accruing
to Ms. Rey-Petilla was about to be generated. Ms. Mendoza then reported this
allegedly unauthorized act of respondent to her Branch Operations Manager,
Mr. Villagracia. Acting on the report, as the petitioner alleges, BOM
Villagracia discreetly verified the records and discovered that it was not only
the 52-day credit term of IBM Rey-Petilla that had been extended by the
respondent, but there were several other IBMs whose credit terms had been
similarly extended beyond the periods allowed by company policy. BOM
Villagracia then summoned the respondent and required her to explain the
unauthorized credit extensions. The petitioner alleges that during that
confrontation, respondent admitted her infractions and begged the BOM not
to elevate or disclose the matter further to higher authorities. In a letter
dated June 22, 1995, Villagracia formally reported the matter to higher
management, stating that respondent, "in tears and remorse" and confiding
"her sincerest apology," personally admitted that the credit terms of certain
IBMs were adjusted in the computer for purposes of computing the Service
Fees.4 On June 24, 1995, Villagracia formally served a "show-cause" letter to
respondent and placed her on "indefinite suspension" effective on the same
day.5 On June 27, 1995, respondent submitted her explanation denying the
accusations made against her and stated that the "discrepancies" in the
service fees may have been the result of deadlines falling on holidays, after
"reconsiderations" had been requested by the IBM concerned and with the
full knowledge of and approval by BOM Villagracia as part of his campaign to
increase collections.6 Additionally, in the same letter-response, respondent
vehemently denied that she waived her right to explain as well as any

admission she allegedly made before Villagracia, and she pointed to the latter
as the author of the "discrepancies."7
As a consequence of the discovery of the foregoing alleged "anomalous
practice" of extending the credit terms of certain IBMs, management
undertook an audit of the Cagayan de Oro City and Butuan City branches.
During the process, the petitioner alleges, respondent was interviewed by the
auditors before whom she again openly admitted her infractions. Upon being
furnished a copy of the Auditors Report, portions of which read:
xxxx
OBJECTIVE OF THE AUDIT UNDERTAKEN
This activity has been conducted to establish facts that would determine
whether Ms. Cynthia Rey did change the credit terms or not for whatever
reason resulting in the companys payments of undue service fees.
AUDIT FINDINGS
We conducted examination of Service Fee Report for 15 selected IBMs with
the largest service fee pay-outs fromNovember 1993 up to April 1995 for
Cagayan de Oro Branch and from February 1995 to March 1995 for Butuan
Service Center. Set forth are the results of this activity:
CAGAYAN DE ORO BRANCH
FINDING
In all 15 samples, credit terms were changed by then CAS Cynthia Rey
beyond 52 days to as high as 90 days as evidenced by the IBM Credit Terms
Exception Report . . . . The exception report revealed that the CAS with User
ID "credit1" often changes/increases the credit terms of several IBMs, since
February 1994, usually a day before or during SF cut-off dates (20th, 21st,
22nd, or 23rd of the month) and would return it to original credit terms after
completion of SF print-outs. Total SF discrepancy for the 15 samples as a
result of credit term adjustment amounts to P 211K x x x x
It is apparent that credit term adjustments resulted in payment of significant
amount of undue service fees. Such fraudulent practice clearly favors the
interest of the IBMs to the detriment of the company. This constitutes
conflict of interest and should be dealt with accordingly.
xxx
FINDING
Ms. Cynthia Rey was on maternity leave from March 07, 1994 up to May 30,
1994 during which time no changing of credit term was recorded by the
parameter 23.8.2. This simply means that no credit term adjustment was
made during the period Ms. Rey was on leave. Again, this confirms that
without Ms. Rey around, nobody ever changed/adjusted the credit terms
beyond 52 days.
xxxx
BUTUAN SERVICE CENTER

FINDING
On a concurrent capacity as OIC and CAS of Butuan Service Center starting
sometime February 1995, Ms. Cynthia Rey changed the credit terms of IBMs
as shown in the IBM Credit Terms Exception Report . . . . Total discrepancies
for February and March 1995 Service Fees as a result of the credit term
adjustments amounts to P3,716.44 . . . . Analysis showed that credit terms
used by Cynthia for each of the IBMs/IBMC/IGSs ranged from 55 to 90 days
xxxx
Surprised with the Exception Reports, Ms. Rey admitted having done the
credit term adjustments at Butuan. Her statements therefore showed
inconsistencies as she previously denied this allegation. However, she cited
no clear reasons for such malpractice.
Recommendation
Materiality of the amount involved is not the issue at hand. Her admission to
the auditor of the violation committed does not absolve her from being meted
disciplinary actions as determined by management. We would like to
emphasize that any leniency on this case might have far reaching
implications to the branch operations and the company as a whole.
x x x.8
Petitioner, on July 29, 1995, directed respondent again to explain, but in
more detail, the alleged "anomalies" uncovered by the audit. After requesting
more time to review the report and submit her comment, on July 31, 1995,
respondent requested instead that a formal investigation be conducted in the
presence of her lawyer.9 In the meantime, respondents suspension was
lifted, but without prejudice to the outcome of the administrative
investigation.10 On September 7, 1995, the petitioner conducted a formal
hearing which was attended by respondent and her counsel of
record.11 Subsequently, respondent and her counsel affixed their respective
signatures on the transcripts of the hearing.12
Meanwhile, on April 15, 1996, BOM Villagracia resigned. Upon his
resignation, respondent managed the Cagayan de Oro branch for three
months pending the appointment of a new BOM.
On the basis of the hearing, the alleged voluntary admissions of respondent,
and the findings of the auditors report, the petitioner, on June 25, 1996,
formally dismissed the respondent for breach of trust and confidence.13
On September 24, 1996, as stated above, respondent filed her Complaint for
illegal dismissal, backwages and damages, with the Labor Arbiter. On April
30, 1998, the Labor Arbiter rendered a decision in favor of the respondent,
the dispositive portion of which states:
WHEREFORE, in view of all the foregoing, judgment is hereby entered
ordering [petitioner] House of Sara Lee to immediately pay [respondent]
Cynthia F. Rey the sum of P177,052.05 as full backwages from July 1, 1996
up to the date of this decision; 13th month pay in the sum of P18,666.67 and
separation pay in the sum of P40,000.00 and likewise to pay the sum of

P23,571.72 equivalent to 10% of the aggregate monetary award as attorneys


fees.
The rest of the claims are dismissed for lack of merit.
SO ORDERED.14
To the Labor Arbiter, the question to be resolved is whether the petitioner
validly terminated respondents employment on the ground of loss of trust
and confidence. In declaring the termination illegal, the Labor Arbiter held
that the petitioner, as employer, failed to discharge its burden of proof in
showing that the dismissal was for a just or authorized cause; that, in
particular, the petitioner failed to establish that respondent was the very
person who allegedly manipulated the credit terms of certain IBMs through
the computer terminals, since other employees had access to the same; that
respondents alleged admissions before Villagracia, her BOM, and M.D.
Sabayle, the company auditor, are based on self-serving evidence; that the
petitioner failed to substantiate the loss ofP211,000.00 which it imputed to
the respondent; that the petitioner failed to show that it apprised its
employees of the terms of the company policy which respondent allegedly
violated, or, in other words, that respondent was not fully informed of the
possible sanctions for such acts; that reinstatement would be impractical
under the circumstances since the relations of the parties were already
strained, hence, the award of full backwages and separation pay is justified;
that petitioner failed to refute the claim for 13th month pay, hence, as a
statutory relief, respondent should be awarded the same; and that the claims
for 14th and 15th month pay as well as moral and exemplary damages
should be denied for having no legal basis.
Aggrieved, the petitioner appealed to the NLRC. On October 29, 1998, the
NLRC rendered its Decision dismissing the appeal. In affirming the Decision
of the Labor Arbiter, the NLRC additionally held that if indeed benefits
accrued to the IBMs by virtue of the credit term extensions, it was BOM
Villagracia who benefited from this scheme which he himself adopted; that
the auditors report showed that the scheme had been a "long standing
practice" of the branch office of the petitioner; that after Villagracia resigned,
respondent was left to manage the Cagayan de Oro branch which, at that
time, registered the highest growth rate and for which reason respondent
earned a commendation from the petitioner; and that the loss of trust and
confidence advanced by the petitioner is negated by the fact that respondent,
after Villagracias resignation, was allowed to manage the Cagayan de Oro
City branch and by the fact that she was commended for her good
performance.
The petitioner appealed to the CA under Rule 65. On August 25, 2000, the
CA dismissed the Petition on the sole ground that factual issues are not
proper subjects for a special civil action of certiorari.
The petitioner is now before this Court under Rule 45, assigning the following
errors:
I.

IN DISMISSING THE PETITION FOR CERTIORARI ASSAILING THE


RESOLUTIONS OF THE NATIONAL LABOR RELATIONS COMMISSION IN
THE LABOR CASE BELOW ON THE GROUND THAT FACTUAL ISSUES ARE
NOT THE PROPER SUBJECT OF CERTIORARI, THE COURT OF APPEALS
HAS IN EFFECT DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD
WITH LAW AND JURISPRUDENCE.
II.
IN DOING SO, THE COURT OF APPEALS DEVIATED FROM ESTABLISHED
DOCTRINES LONG SETTLED BY CONSISTENT JURISPRUDENCE
ENUNCIATED BY THIS HONORABLE COURT.15
We grant the petition.
As a preliminary matter, we shall resolve the procedural concern raised by
the respondent. She maintains that no grave abuse of discretion was
committed by the NLRC. This is incorrect.
In the recent case of Manila Memorial Park Cemetery, Inc. v. Panado,16 we
held that where the NLRC or the labor arbiter acted capriciously and
whimsically in total disregard of evidence material to or even decisive of the
controversy, the extraordinary writ of certiorari will lie.17 While as a general
rule, the factual findings of administrative agencies are not subject to review
by this Court, it is equally established that we will not uphold erroneous
conclusions which are contrary to the evidence, because the agency a quo,
for that reason, would be guilty of a grave abuse of discretion. Nor is this
Court bound by conclusions which are not supported by substantial
evidence.18 The substantial evidence rule does not authorize any finding just
as long as there is any evidence to support it. It does not excuse
administrative agencies from considering contrary evidence which fairly
detracts from the evidence supporting a finding.19
In this case, the NLRC and the CA consistently ignored the following facts
established in the record:
a) respondent, during the formal hearing on September 7, 1995, in the
presence of her counsel, clearly admitted in several instances that, beginning
June 1994, she herself actually extended, on a monthly basis, the credit
terms of certain IBMs from the company-fixed 52 days to as high as 90
days;20
b) as Credit Administration Supervisor, she knew the appropriate credit
terms (38 days for IGSs and 52 days for IBMs) under the company guidelines
and which would serve as the bases for the computation of the correct
Service Fees or sales commissions;21
c) she was fully aware of the financial implications whenever she would
extend the credit terms, in that all late remittances by the IBMs concerned
would be considered in the computation of their Service Fees which would
not otherwise be due to them under company guidelines;22
d) the computation of the Service Fees, on many occasions, had been
finalized, processed, and printed out;23

e) she changed the credit terms in the Cagayan de Oro branch under the
alleged "blanket approval" of BOM Villagracia;24
f) she changed the credit terms in the Cagayan de Oro branch since it was a
"standard practice" in Caloocan City where she had been previously
assigned;25
g) during her stint in the Butuan City branch, she admitted that there had
been no such "blanket approval," but she nonetheless kept changing the
credit terms because, according to her, this had become "standard practice"
in the Cagayan de Oro branch as well;26
h) in several instances, she acted on her own accord and without the
requisite authority in extending the credit terms, since there were no specific
nor direct instructions from Villagracia to change those terms;27
i) she even assisted Mr. Villagracia and Ms. Mendoza in the process of
changing the credit terms since they were ignorant of the procedure;28
j) she would change the credit terms whenever the IBMs concerned would
ask for "reconsideration;"29 and finally,
k) her statements suffered notable inconsistencies, oscillating between
denying or not remembering the alleged act and categorically admitting
having done them.30
The consideration of the foregoing facts, as disclosed in the record, justifies a
different conclusion. Although numerous exceptions to the general rule have
been fairly established in case law, it must be stressed that the meticulous
constitution of the factual findings are functions that principally lie with the
NLRC and the CA as well as the other tribunals that may come under the
review power of the Supreme Court. It is a strict judicial policy to hand down
an incisive ruling in the first instance in order to relieve this Court from
exercising its extraordinary powers of excavating the facts, so that the Court
may thoroughly devote its energies to the disposition of questions of law, and
only questions of law, under the extent of Rule 45.
Contrary to the findings of the NLRC and the CA, the Court holds that
respondent was dismissed for a just cause.
Law31 and jurisprudence have long recognized the right of employers to
dismiss employees by reason of loss of trust and confidence.32 More so, in the
case of supervisors or personnel occupying positions of responsibility, loss of
trust justifies termination.33 Loss of confidence as a just cause for dismissal
is premised on the fact that an employee concerned holds a position of trust
and confidence. This situation applies where a person is entrusted with
confidence on delicate matters, such as the custody, handling, or care and
protection of the employers property. But, in order to constitute a just cause
for dismissal, the act complained of must be "work-related," such that the
employee concerned is unfit to continue working for the employer.34
The degree of proof required in labor cases is not as stringent as in other
types of cases.35 It must be noted, however, that recent decisions of this
Court have distinguished the treatment of managerial employees from that of
rank-and-file personnel in the application of the doctrine of loss of trust and

confidence.36 With respect to rank-and-file personnel, loss of trust and


confidence as ground for valid dismissal requires proof of involvement in the
alleged events in question, and that mere uncorroborated assertions and
accusations by the employer will not be sufficient. But as to a managerial
employee, the mere existence of a basis for believing that such employee has
breached the trust of his employer would suffice for his dismissal. Hence, in
the case of managerial employees, proof beyond reasonable doubt is not
required; it is sufficient that there is some basis for the loss of confidence, as
when the employer has reasonable ground to believe that the employee
concerned is responsible for the purported misconduct, and the nature of his
participation therein renders him unworthy of the trust and confidence
demanded by his position.37
In the present case, the respondent is not an ordinary rank-and-file
employee. The nature of her work requires a substantial amount of trust and
confidence on the part of the employer. Being the Credit Administration
Supervisor of the Cagayan de Oro and Butuan City branches of the
petitioner, respondent occupied a highly sensitive and critical position and
may thus be dismissed on the ground of loss of trust and confidence. The
duties of the respondent included the strict monitoring of the 38- or 52-day
"rolling due date" of each of its IBMs and IGSs, as well as the supervision of
the credit and collection of payments and outstanding accounts due to the
petitioner from its dealers. More importantly, respondent has a direct hand
in the preparation and computation of the Service Fees or sales commissions
accruing to each dealer. The computation of these commissions depends on
whether the dealer concerned was able to remit the sales proceeds within the
38-day or 52-day rolling deadline.
Clearly, respondents position involves a high degree of responsibility
requiring trust and confidence. The position carried with it the duty to
observe proper company procedures in the fulfillment of her job, as it relates
closely to the financial interests of the company. Respondents unauthorized
extensions of the credit periods of the dealers are prejudicial to the interest of
the petitioner and bear serious financial implications: First, the dealer
concerned is allowed to withhold remittances to the company for his or her
credit purchases beyond the expiration of the 38- or 52-day rolling deadline;
second, the Credit Administration Charges or interest penalties are not
imposed on the erring dealer; third, the dealer concerned is allowed to
purchase goods on credit despite the fact that he or she has not remitted
payment, which is against company policy; and fourth, undue Service Fees
were unknowingly paid by the company to certain IBMs. Moreover,
respondent was not guilty of one-time unauthorized extension of the credit
terms, but of repeated acts over the course of several months. Her bare,
unsubstantiated and uncorroborated denial of her participation in the
anomalies does not prove her innocence nor disprove her alleged
guilt,38 especially considering that she would vacillate between admitting and
denying the charges. On the contrary, such denial or failure to rebut the
serious accusations hurled against her militate against her innocence and
strengthen the adverse averments of the petitioner.39 The requirement that
there must be some basis or reasonable ground to believe that the employee
is responsible for the misconduct was sufficiently met in this case.

The NLRC and the CA held that there were other co-employees who had
access to the same computer terminals, hence, it cannot be pinpointed who
was responsible. Even if this is true, as respondent argues, this point is not
material. It must be stressed that the respondent was the Credit
Administration Supervisor, one tasked to directly supervise each and every
collectible due to the petitioner. Recently, this Court has held that even if the
employee had no actual and direct participation in the alleged anomalies, his
failure to detect any anomaly that would normally fall within the scope of his
work reflects his ineffectiveness and amounts to gross negligence and
incompetence, which are, likewise, justifiable grounds for his dismissal; and
that it is not necessary to prove the employees direct participation in the
irregularity, for what is material is that his actuations were more than
sufficient to sow in his employer the seed of mistrust and loss of
confidence.40 The records show that respondent, by her very own admission,
actually participated in the foregoing irregularities. Although the petitioner
could not directly and wholly attribute the monetary loss of P211,000.00
linked to the 15 samples as reflected in the Auditors Report, to the
actuations of the respondent, it is conceded in all quarters that the repeated
and unauthorized extensions of the credit terms no doubt have serious
financial implications that affect the company as a whole. Whether the
petitioner was financially prejudiced is immaterial.41 What matters is not the
amount involved, rather, it is the fraudulent scheme in which the respondent
was involved, and which constitutes a clear betrayal of trust and confidence.
In fact, there are indications that these acts had been done before, and
probably would have continued had it not been discovered.42
The Court is not impressed with respondents claim that Villagracia, her
BOM at that time, "cleverly pinned her down" as the culprit; that he deleted
from the computer files all the credit extensions that took place; and that he
"created a scenario" for a graceful exit. There is nothing in the record that
would substantiate these bare allegations. Nor can the Court accept
respondents assertion that she was never apprised of the company policies
with respect to the allowable credit terms. As Credit Administration
Supervisor, the respondent cannot feign ignorance of the irregularity as she
was sufficiently aware that the credit extensions she made were beyond
acceptable limits. By her very own admission, and in the presence of her
counsel, she was fully aware of the company-fixed rolling due dates for the
dealers and that their commissions were to be determined by their timely
remittances of the sales proceeds. In other words, respondent was aware of
the financial implications of her extension of the credit terms, especially the
outcome where the consideration of late remittances, after the extension,
would unduly inflate the sales commissions. It is also an established fact
that the petitioner, to ensure the correct computation of the commissions,
installed internal control systems in the computer terminals and that
respondent, through "practice" and "experience," acquired the proficiency
and computer literacy as to be able to override these control systems in order
to make the changes43 in clear deviation from company policy.
But the respondent, quoting the agencies a quo, insists that her extensions
of the credit terms of certain dealers were predicated on a "long standing
policy" in the Cagayan de Oro branch, and that this "arrangement" had the

"blessings of the manager." She did not prove these allegations. While case
law provides that where a violation of company policy or breach of company
rules and regulations was found to have been tolerated by management, then
the same could not serve as a basis for termination,44 in this case respondent
failed to show that her extensions of the credit terms were condoned by
management. Her BOM, Mr. Villagracia, categorically denied that he had
given her the requisite and direct authority to change the credit terms. When
the respondent, while in Butuan City, instructed Ms. Mendoza, the Accounts
Receivable Clerk of the Cagayan de Oro outlet, to change the credit terms of
IBM Mariam Rey-Petilla, respondents sister-in-law,45 to an unauthorized
term of 60 days, she reported this instruction to Villagracia who, in turn,
verified the records and reported his findings to higher management.
Villagracia even reprimanded Ms. Mendoza for carrying out respondents
instructions.46 As a consequence, higher management immediately
undertook an audit of the Cagayan de Oro and Butuan City branches where
the respondent had been assigned. And, as a consequence, an Auditors
Report was issued, expressly finding the respondent guilty of violating
company policy. Respondent was again directed by the higher authorities to
explain, in more detail, the anomalies uncovered by the audit. The foregoing
activities negate the suggestion that management tolerated respondents
unauthorized extension of credit terms. Despite the marked inconsistencies
of her statements during the formal investigation, respondent only offered the
following explanation: because of the alleged "standard practice" in the
Caloocan City branch where she worked as an Accounts Receivable Clerk,
she assumed that the extensions can be done in the Cagayan de Oro City
branch and where she allegedly procured the "blanket approval" of BOM
Villagracia; and that, since this "standard practice" had allegedly taken root
in Cagayan de Oro City (mainly owing to her activities), she assumed that the
same can be carried over to the Butuan City branch, even without any
"blanket approval" of her BOM. These declarations, self-serving as they are,
taken together, are also not demonstrative of any acquiescence on the part of
management. Even if the Court were to accept her allegation that Villagracia
deleted the pertinent files and destroyed evidence otherwise favorable to her,
she must at least show how such evidence, if hypothetically produced, would
constitute an adequate defense against the charge of carrying out
unauthorized acts. At any rate, even if the Court finds credible her
accusation that Villagracia "cleverly pinned her down" as the culprit, she will
not be exonerated for that reason alone, since it is established that she
directly and actively participated in the acts which amounted to violations of
company policy. Certainly the prerogative lies with the company to hold
Villagracia accountable, if indeed he was: the option to discipline lies with
the employer. But since Villagracia was not made a party in this proceeding,
further discussion on the point is useless.
Respondent argues that the loss of trust and confidence as Credit
Administration Supervisor had been effectively negated by the fact that she
was made to occupy the position of Branch Operations Manager for three
months immediately after Villagracia resigned. This act of the petitioner,
respondent reasons, is an express recognition of her capability and integrity
or trustworthiness as an employee.47 To support this contention, she
adduces several cash advance slips which she signed as BOM as evidence of

her appointment.48 Even in light of this "promotion," it must be noted that at


the time she occupied this position, which the petitioner asserts was done in
an acting capacity only, the investigation over the anomalies committed by
respondent had been pending. The Memorandum dated August 21, 1995
reinstating respondent and granting her request to conduct a formal
investigation with the presence of counsel expressly stated that the
reinstatement is "without prejudice" to "a reinvestigation" of her
case.49 Pending the final outcome of the investigation, respondent, as with all
persons, has in her favor the presumption of innocence, and for this reason
she may even be entitled to a promotion in due course. But after due
investigation and marshalling of facts, after the employer forms a moral
conviction that indeed the employee breached its trust and confidence, and
despite such promotion, the employer may then proceed to dismiss the erring
employee.
As stated, the rules on termination of employment and the penalties for
infractions, insofar as fiduciary employees are concerned, are not necessarily
the same as those applicable to the termination of employment of ordinary
employees. Employers, generally, are allowed a wider latitude of discretion in
terminating the employment of managerial personnel or those of similar rank
performing functions which by their nature require the employers trust and
confidence, than in the case of ordinary rank-and-file employees.50 There can
be no doubt that the respondents continuance in the sensitive fiduciary
position of Credit Administration Supervisor would be patently inimical to
the interests of the petitioner. It would be oppressive and unjust to order the
petitioner to take her back, for the law, in protecting the rights of the
employee, authorizes neither oppression nor self-destruction of the
employer.51
The award of 13th month pay must be deleted. Respondent is not a rankand-file employee and is, therefore, not entitled to thirteenth-month pay.52
However, the NLRC and the CA are correct in refusing to award 14th and
15th month pay as well as the "monthly salary increase of 10 percent per
year for two years based on her latest salary rate." The respondent must
show that these benefits are due to her as a matter of right. 53 The rule in
these cases is, she who alleges, not she who denies, must prove. Mere
allegations by the respondent do not suffice in the absence of proof
supporting the same.54 With respect to salary increases in particular, the
respondent must likewise show that she has a vested right to the same, such
that her salary increases can be made a component in the computation of
backwages. What is evident is that salary increases are a mere expectancy.
They are by nature volatile and dependent on numerous variables, including
the companys fiscal situation, the employees future performance on the job,
or the employees continued stay in a position.55 In short, absent any proof,
there is no vested right to salary increases.56
The claims for moral and exemplary damages, as correctly held by the NLRC
and the CA, should be denied for having no basis in fact and law.57 The
award of attorneys fees should likewise be deleted for the same reason. 58
And last, the Court is constrained to delete the award of separation pay.
Well-settled is the rule that separation pay shall be allowed only in those

instances where the employee is validly dismissed for causes other than
serious misconduct or those reflecting on her moral character.59 Inasmuch
as the reason for which the respondent was validly separated involves her
integrity, which is required for the position of Credit Administration
Supervisor, she is not worthy of compassion as to deserve separation pay for
her length of service.60
WHEREFORE, the petition is GRANTED. The challenged Decision and
Resolution of the Court of Appeals are hereby SET ASIDE and a new one
entered DECLARING respondents dismissal valid. The complaint of
respondent is DISMISSED.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 151966 July 8, 2005


JPL MARKETING PROMOTIONS, Petitioner,
vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION,
NOEL GONZALES, RAMON ABESA III and FAUSTINO
ANINIPOT, Respondents.
DECISION
Tinga, J.:
This is a petition for review of the Decision1 of the Court of Appeals in CAG.R. SP No. 62631 dated 03 October 2001 and its Resolution2 dated 25
January 2002 denying petitioners Motion for Reconsideration, affirming
theResolution of the National Labor Relations Commission (NLRC), Second
Division, dated 27 July 2000, awarding separation pay, service incentive
leave pay, and 13th month pay to private respondents.
JPL Marketing and Promotions (hereinafter referred to as "JPL") is a domestic
corporation engaged in the business of recruitment and placement of
workers. On the other hand, private respondents Noel Gonzales, Ramon
Abesa III and Faustino Aninipot were employed by JPL as merchandisers on
separate dates and assigned at different establishments in Naga City and
Daet, Camarines Norte as attendants to the display of California Marketing
Corporation (CMC), one of petitioners clients.
On 13 August 1996, JPL notified private respondents that CMC would stop
its direct merchandising activity in the Bicol Region, Isabela, and Cagayan
Valley effective 15 August 1996.3 They were advised to wait for further notice
as they would be transferred to other clients. However, on 17 October
1996,4 private respondents Abesa and Gonzales filed before the National
Labor Relations Commission Regional Arbitration Branch (NLRC) Sub V
complaints for illegal dismissal, praying for separation pay, 13th month pay,
service incentive leave pay and payment for moral damages.5 Aninipot filed a
similar case thereafter.
After the submission of pertinent pleadings by all of the parties and after
some clarificatory hearings, the complaints were consolidated and submitted
for resolution. Executive Labor Arbiter Gelacio L. Rivera, Jr. dismissed the
complaints for lack of merit.6 The Labor Arbiter found that Gonzales and
Abesa applied with and were employed by the store where they were
originally assigned by JPL even before the lapse of the six (6)-month period
given by law to JPL to provide private respondents a new assignment. Thus,
they may be considered to have unilaterally severed their relation with JPL,
and cannot charge JPL with illegal dismissal.7 The Labor Arbiter held that it
was incumbent upon private respondents to wait until they were reassigned
by JPL, and if after six months they were not reassigned, they can file an
action for separation pay but not for illegal dismissal. 8 The claims for 13th
month pay and service incentive leave pay was also denied since private
respondents were paid way above the applicable minimum wage during their
employment.9

Private respondents appealed to the NLRC. In its Resolution,10 the Second


Division of the NLRC agreed with the Labor Arbiters finding that when
private respondents filed their complaints, the six-month period had not yet
expired, and that CMCs decision to stop its operations in the areas was
beyond the control of JPL, thus, they were not illegally dismissed. However, it
found that despite JPLs effort to look for clients to which private respondents
may be reassigned it was unable to do so, and hence they are entitled to
separation pay.11 Setting aside the Labor Arbiters decision, the NLRC
ordered the payment of:
1. Separation pay, based on their last salary rate and counted from the first
day of their employment with the respondent JPL up to the finality of this
judgment;
2. Service Incentive Leave pay, and 13th month pay, computed as in No.1
hereof.12
Aggrieved, JPL filed a petition for certiorari under Rule 65 of the Rules of
Court with the Court of Appeals, imputing grave abuse of discretion on the
part of the NLRC. It claimed that private respondents are not by law entitled
to separation pay, service incentive leave pay and 13th month pay.
The Court of Appeals dismissed the petition and affirmed in toto the NLRC
resolution. While conceding that there was no illegal dismissal, it justified the
award of separation pay on the grounds of equity and social justice. 13 The
Court of Appeals rejected JPLs argument that the difference in the amounts
of private respondents salaries and the minimum wage in the region should
be considered as payment for their service incentive leave and 13th month
pay.14 Notwithstanding the absence of a contractual agreement on the grant
of 13th month pay, compliance with the same is mandatory under the law.
Moreover, JPL failed to show that it was exempt from paying service incentive
leave pay. JPL filed a motion for reconsideration of the said resolution, but
the same was denied on 25 January 2002.15
In the instant petition for review, JPL claims that the Court of Appeals
committed
reversible
error
in
rendering
the
assailed Decision and Resolution.16 The instant case does not fall under any
of the instances where separation pay is due, to wit: installation of laborsaving devices, redundancy, retrenchment or closing or cessation of business
operation,17 or disease of an employee whose continued employment is
prejudicial to him or co-employees,18 or illegal dismissal of an employee but
reinstatement is no longer feasible.19 Meanwhile, an employee who
voluntarily resigns is not entitled to separation unless stipulated in the
employment contract, or the collective bargaining agreement, or is sanctioned
by established practice or policy of the employer.20 It argues that private
respondents good record and length of service, as well as the social justice
precept, are not enough to warrant the award of separation pay. Gonzales
and Aninipot were employed by JPL for more than four (4) years, while Abesa
rendered his services for more than two (2) years, hence, JPL claims that
such short period could not have shown their worth to JPL so as to reward
them with payment of separation pay.21

In addition, even assuming arguendo that private respondents are entitled to


the benefits awarded, the computation thereof should only be from their first
day of employment with JPL up to 15 August 1996, the date of termination of
CMCs contract, and not up to the finality of the 27 July 2000 resolution of
the NLRC.22 To compute separation pay, 13th month pay, and service
incentive leave pay up to 27 July 2000 would negate the findings of both the
Court of Appeals and the NLRC that private respondents were not unlawfully
terminated.23 Additionally, it would be erroneous to compute service
incentive leave pay from the first day of their employment up to the finality of
the NLRC resolution since an employee has to render at least one (1) year of
service before he is entitled to the same. Thus, service incentive leave pay
should be counted from the second year of service.24
On the other hand, private respondents maintain that they are entitled to the
benefits being claimed as per the ruling of this Court in Serrano v. NLRC, et
al.25 They claim that their dismissal, while not illegal, was tainted with bad
faith.26 They allege that they were deprived of due process because the notice
of termination was sent to them only two (2) days before the actual
termination.27 Likewise, the most that JPL offered to them by way of
settlement was the payment of separation pay of seven (7) days for every year
of service.28
Replying to private respondents allegations, JPL disagrees that the notice it
sent to them was a notice of actual termination. The said memo merely
notified them of the end of merchandising for CMC, and that they will be
transferred to other clients.29 Moreover, JPL is not bound to observe the
thirty (30)-day notice rule as there was no dismissal to speak of. JPL
counters that it was private respondents who acted in bad faith when they
sought employment with another establishment, without even the courtesy of
informing JPL that they were leaving for good, much less tender their
resignation.30 In addition, the offer of seven (7) days per year of service as
separation pay was merely an act of magnanimity on its part, even if private
respondents are not entitled to a single centavo of separation pay.31
The case thus presents two major issues, to wit: whether or not private
respondents are entitled to separation pay, 13th month pay and service
incentive leave pay, and granting that they are so entitled, what should be
the reckoning point for computing said awards.
Under Arts. 283 and 284 of the Labor Code, separation pay is authorized
only in cases of dismissals due to any of these reasons: (a) installation of
labor saving devices; (b) redundancy; (c) retrenchment; (d) cessation of the
employer's business; and (e) when the employee is suffering from a disease
and his continued employment is prohibited by law or is prejudicial to his
health and to the health of his co-employees. However, separation pay shall
be allowed as a measure of social justice in those cases where the employee
is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character, but only when he was illegally
dismissed.32 In addition, Sec. 4(b), Rule I, Book VI of the Implementing Rules
to Implement the Labor Code provides for the payment of separation pay to
an employee entitled to reinstatement but the establishment where he is to
be reinstated has closed or has ceased operations or his present position no

longer exists at the time of reinstatement for reasons not attributable to the
employer.
The common denominator of the instances where payment of separation pay
is warranted is that the employee was dismissed by the employer. 33 In the
instant case, there was no dismissal to speak of. Private respondents were
simply not dismissed at all, whether legally or illegally. What they received
from JPL was not a notice of termination of employment, but a memo
informing them of the termination of CMCs contract with JPL. More
importantly, they were advised that they were to be reassigned. At that time,
there was no severance of employment to speak of.
Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of
the operation of a business or undertaking for a period not exceeding six (6)
months, wherein an employee/employees are placed on the so-called
"floating status." When that "floating status" of an employee lasts for more
than six months, he may be considered to have been illegally dismissed from
the service. Thus, he is entitled to the corresponding benefits for his
separation, and this would apply to suspension either of the entire business
or of a specific component thereof.34
As clearly borne out by the records of this case, private respondents sought
employment from other establishments even before the expiration of the six
(6)-month period provided by law. As they admitted in their comment, all
three of them applied for and were employed by another establishment after
they received the notice from JPL.35 JPL did not terminate their employment;
they themselves severed their relations with JPL. Thus, they are not entitled
to separation pay.
The Court is not inclined in this case to award separation pay even on the
ground of compassionate justice. The Court of Appeals relied on the
cases36 wherein the Court awarded separation pay to legally dismissed
employees on the grounds of equity and social consideration. Said cases
involved employees who were actually dismissed by their employers, whether
for cause or not. Clearly, the principle applies only when the employee is
dismissed by the employer, which is not the case in this instance. In seeking
and obtaining employment elsewhere, private respondents effectively
terminated their employment with JPL.
In addition, the doctrine enunciated in the case of Serrano37 cited by private
respondents has already been abandoned by our ruling in Agabon v. National
Labor Relations Commission.38 There we ruled that an employer is liable to
pay indemnity in the form of nominal damages to a dismissed employee if, in
effecting such dismissal, the employer failed to comply with the requirements
of due process. However, private respondents are not entitled to the payment
of damages considering that there was no violation of due process in this
case. JPLs memo dated 13 August 1996 to private respondents is not a
notice of termination, but a mere note informing private respondents of the
termination of CMCs contract and their re-assignment to other clients. The
thirty (30)-day notice rule does not apply.

Nonetheless, JPL cannot escape the payment of 13th month pay and service
incentive leave pay to private respondents. Said benefits are mandated by law
and should be given to employees as a matter of right.
Presidential Decree No. 851, as amended, requires an employer to pay its
rank and file employees a 13th month pay not later than 24 December of
every year. However, employers not paying their employees a 13th month pay
or its equivalent are not covered by said law.39 The term "its equivalent" was
defined by the laws implementing guidelines as including Christmas bonus,
mid-year bonus, cash bonuses and other payment amounting to not less
than 1/12 of the basic salary but shall not include cash and stock dividends,
cost-of-living-allowances and all other allowances regularly enjoyed by the
employee, as well as non-monetary benefits.40
On the other hand, service incentive leave, as provided in Art. 95 of the Labor
Code, is a yearly leave benefit of five (5) days with pay, enjoyed by an
employee who has rendered at least one year of service. Unless specifically
excepted, all establishments are required to grant service incentive leave to
their employees. The term "at least one year of service" shall mean service
within twelve (12) months, whether continuous or broken reckoned from the
date the employee started working.41 The Court has held in several instances
that "service incentive leave is clearly demandable after one year of service." 42
Admittedly, private respondents were not given their 13th month pay and
service incentive leave pay while they were under the employ of JPL. Instead,
JPL provided salaries which were over and above the minimum wage. The
Court rules that the difference between the minimum wage and the actual
salary received by private respondents cannot be deemed as their 13th
month pay and service incentive leave pay as such difference is not
equivalent to or of the same import as the said benefits contemplated by law.
Thus, as properly held by the Court of Appeals and by the NLRC, private
respondents are entitled to the 13th month pay and service incentive leave
pay.
However, the Court disagrees with the Court of Appeals ruling that the 13th
month pay and service incentive leave pay should be computed from the start
of employment up to the finality of the NLRC resolution. While computation
for the 13th month pay should properly begin from the first day of
employment, the service incentive leave pay should start a year after
commencement of service, for it is only then that the employee is entitled to
said benefit. On the other hand, the computation for both benefits should
only be up to 15 August 1996, or the last day that private respondents
worked for JPL. To extend the period to the date of finality of the NLRC
resolution would negate the absence of illegal dismissal, or to be more
precise, the want of dismissal in this case. Besides, it would be unfair to
require JPL to pay private respondents the said benefits beyond 15 August
1996 when they did not render any service to JPL beyond that date. These
benefits are given by law on the basis of the service actually rendered by the
employee, and in the particular case of the service incentive leave, is granted
as a motivation for the employee to stay longer with the employer. There is no
cause for granting said incentive to one who has already terminated his
relationship with the employer.

The law in protecting the rights of the employees authorizes neither


oppression nor self-destruction of the employer. It should be made clear that
when the law tilts the scale of justice in favor of labor, it is but recognition of
the inherent economic inequality between labor and management. The intent
is to balance the scale of justice; to put the two parties on relatively equal
positions. There may be cases where the circumstances warrant favoring
labor over the interests of management but never should the scale be so
tilted if the result is an injustice to the employer. Justitia nemini neganda
est (Justice is to be denied to none).43
WHEREFORE,
the
petition
is
GRANTED
IN
PART.
The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 62631
are hereby MODIFIED. The award of separation pay is deleted. Petitioner is
ordered to pay private respondents their 13th month pay commencing from
the date of employment up to 15 August 1996, as well as service incentive
leave pay from the second year of employment up to 15 August 1996. No
pronouncement as to costs.
SO ORDERED.

G.R. No. 107994 August 14, 1995


PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKERS
UNION (PACIWU)-TUCP, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND VALLACAR TRANSIT,
INC., respondents.
KAPUNAN, J.:
This is a petition for certiorari seeking to reverse the decision of the National
Labor Relations Commission (NLRC) in NLRC Case No. V-0159-92 which
dismissed the appeal of petitioner union and in effect, affirmed the decision
of the Labor Arbiter ordering the dismissal of the complaint of petitioner for
payment of 13th month pay to the drivers and conductors of respondent
company.
Petitioner Philippine Agricultural Commercial and Agricultural Workers
Union TUCP is the exclusive bargaining agent of the rank and file
employees of respondent Vallacar Transit, Inc. Petitioner union instituted a
complaint with NLRC Regional Arbitration Branch No. VI, Bacolod City, for
payment of 13th month pay in behalf of the drivers and conductors of
respondent company's Visayan operation on the ground that although said
drivers and conductors are compensated on a "purely commission" basis as
described in their Collective Bargaining Agreement (CBA), they are
automatically entitled to the basic minimum pay mandated by law should
said commission be less than their basic minimum for eight (8) hours work. 1
In its position paper, respondent Vallacar Transit, Inc. contended that since
said drivers and conductors are compensated on a purely commission basis,
they are not entitled to 13th month pay pursuant to the exempting
provisions enumerated in paragraph 2 of the Revised Guidelines on the
Implementation of the Thirteenth Month Pay Law. 2 It further contended that
Section 2 of Article XIV of the Collective Bargaining Agreement (CBA)
concluded on October 17, 1988 expressly provided that "drivers and
conductors paid on a purely commission are not legally entitled to 13th
month pay." Said CBA, being the law between the parties, must be respected,
respondent opined.
On May 22, 1992, Labor Arbiter Reynaldo Gulmatico rendered a decision
dismissing the complaint. 3
The appeal of the petitioner to the National Labor Relations Commission was
likewise dismissed 4 so was the motion for reconsideration of the said
decision. 5
Hence, the present petition.
The principal issue posed for consideration is whether or not the bus drivers
and conductors of respondent Vallacar Transit, Inc. are entitled to 13th
month pay.
We rule in the affirmative.

It may be recalled that on December 16, 1975, P.D. 851, otherwise known as
the "13th Month Pay" Law, was promulgated. The same prescribed payment
of 13th month pay in the following terms:
Sec. 1. All employers are hereby required to pay all their employees
receiving a basic salary of not more than P1,000.00 a month,
regardless of the nature of the employment, a 13th month pay not
later than December 24 of every year.
Sec. 2. Employers already paying their employees a 13th month pay
or its equivalent are not covered by this Decree.
The Rules and Regulations Implementing P.D. No. 851, issued by the then
Secretary of Labor and Employment on December 22, 1975, defined the
following basic terms:
xxx xxx xxx
(a) 13th month pay shall mean one-twelfth (1/12) of the basic salary
of an employee within a calendar year;
(b) basic salary shall include all remunerations or earnings paid by an
employer to an employer for services rendered, but may not include
cost of living allowances granted pursuant to Presidential Decree No.
525 or Letter of Instructions No. 174, profitsharing payments, and all
allowances and monetary benefits which are not considered or
integrated as part of the regular or basic salary of the employee at
the time of the promulgation of the Decree on December 16, 1975.
xxx xxx xxx
On August 13, 1986, President Corazon C. Aquino, exercising both executive
and legislative authority, issued Memorandum Order No. 28 which provided
as follows:
xxx xxx xxx
Sec.1. of Presidential Decree No. 851 is hereby modified to the extent
that all employers are hereby required to pay all their rank-and-file
employees a 13th month pay not later than December 24 of every
year.
xxx xxx xxx
In connection with and in implementation of Memorandum Order No. 28, the
then Minister of Labor and Employment issued MOLE Explanatory Bulletin
No. 86-12 on November 24, 1986. Item No. 5 (a) of the said issuance read:
xxx xxx xxx
Employees who are paid a fixed or guaranteed wage plus commission
are also entitled to the mandated 13th month pay, based on their
total earning(s) during the calendar year, i.e., on both their fixed and
guaranteed wage and commission.
xxx xxx xxx
(emphasis ours)

From the foregoing legal milieu, it is clear that every employee receiving a
commission in addition to a fixed or guaranteed wage or salary, is entitled to
a 13th month pay. For purposes of entitling rank and file employees a 13th
month pay, it is immaterial whether the employees concerned are paid a
guaranteed wage plus commission or a commission with guaranteed wage
inasmuch as the botton line is that they receive a guaranteed wage. This is
correctly construed in the MOLE Explanatory Bulletin No. 86-12.
In the case at bench, while the bus drivers and conductors of respondent
company are considered by the latter as being compensated on a commission
basis, they are not paid purely by what they receive as commission. As
admitted by respondent company, the said bus drivers and conductors are
automatically entitled to the basic minimum pay mandated by law in case
the commissions they earned be less than their basic minimum for eight (8)
hours work. 6 Evidently therefore, the commissions form part of the wage or
salary of the bus drivers and conductors. A contrary interpretation would
allow an employer to skirt the law and would result in an absurd situation
where an employee who receives a guaranteed minimum basic pay cannot be
entitled to a 13th month pay simply because he is technically referred to by
his employer per the CBA as an employee compensated on a purely
commission basis. Such would be a narrow interpretation of the law,
certainly not in accord with the liberal spirit of our labor laws. Moreover,
what is controlling is not the label attached to the remuneration that the
employee receives but the nature of the remuneration 7 and the purpose for
which the 13th month pay was given to alleviate the plight of the working
masses who are receiving low wages. This is extant from the "WHEREASES"
of PD 851, to wit:
WHEREAS, it is necessary to further protect the level of real wages
from the ravage of world-wide inflation.
WHEREAS, there has been no increase in the legal minimum wage
since 1970.
WHEREAS, the Christmas season is an opportune time for society to
show its concern for the plight of the working masses so they may
properly celebrate Christmas and New Year.
Misplaced legal hermeneutics cannot be countenanced to evade paying the
rank and file what is due to them under the law.
Commission is the recompense, compensation, reward of an employee, agent,
salesman, executor, trustee, receiver, factor, broker or bailee, when the same
is calculated as a percentage on the amount of his transactions or on the
profit of the principal. 8 While said commissions may be in the form of
incentives or encouragement to inspire said bus drivers and conductors to
put a little more zeal and industry on their jobs, still, it is safe to say that the
same are direct remunerations for services rendered, given the small
remuneration they receive for the services they render, 9 which is precisely
the reason why private respondent allowed the drivers and conductors a
guaranteed minimum wage. The conclusion is ineluctable that said
commissions are part of their salary. In Philippine Duplicators, Inc. v. National
Labor Relations Commission, 10 we had the occasion to estate that:

. . . Article 97 (f) of the Labor Code defines the term "wage" (which is
equivalent to "salary," as used in P.D. No. 851 and Memorandum
Order No. 28) in the following terms:
(f) "Wage" paid to any employee shall mean the
remuneration or earnings, however designated,
capable of being expressed in term of money, money,
whether fixed or ascertained on a time, task, piece,
or commission basis, or other method of calculating
the same, which is payable by an employer to
employee under a written or unwritten contract of
employment for work done or to be done, or for
services rendered or to be rendered, and includes
the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to
the employee. "Fair and reasonable value" shall not
include any profit to the employer or to any person
affiliated with the employer.
In the instant case, there is no question that the sales commissions
earned by salesmen who make or close a sale of duplicating
machines distributed by petitioner corporation, constitute part of the
compensation or remuneration paid to salesmen for serving as
salesmen, and hence as part of the "wage" or "salary" of petitioner's
salesmen. Indeed, it appears that petitioner pays its salesmen a
small fixed or guaranteed wage; the greater part of the salesmen's
wages or salaries being composed of the sales or incentive
commissions earned on actual sales closed by them. No doubt this
particular salary structure was intended for the benefit of petitioner
corporation, on the apparent assumption that thereby its salesmen
would be moved to greater enterprise and diligence and close more
sales in the expectation of increasing their sales commissions. This,
however, does not detract from the character of such commissions as
part of the salary or wage paid to each or its salesmen for rendering
services to petitioner corporation. 11
In sum, the 13th month pay of the bus drivers and conductors who are paid
a fixed or guaranteed minimum wage in case their commissions be less than
the statutory minimum, and commissions only in case where the same is
over and above the statutory minimum, must be equivalent to one-twelfth
(1/12) of their total earnings during the calendar year.
WHEREFORE, the petition is hereby GRANTED. The decision of respondent
National Labor Relations Commission is hereby REVERSED and SET ASIDE.
The case is remanded to the labor Arbiter for the proper computation of 13th
month pay.
SO ORDERED.

G.R. No. 110068 February 15, 1995


PHILIPPINE DUPLICATORS, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE
DUPLICATORS EMPLOYEES UNION-TUPAS,respondents.
RESOLUTION
FELICIANO, J.:
On 11 November 1993, this Court, through its Third Division, rendered a
decision dismissing the Petition forCertiorari filed by petitioner Philippine
Duplicators, Inc. (Duplicators) in G.R. No. 110068. The Court upheld the
decision of public respondent National Labor Relations Commission (NLRC),
which affirmed the order of Labor Arbiter Felipe T. Garduque II directing
petitioner to pay 13th month pay to private respondent employees computed
on the basis of their fixed wages plus sales commissions. The Third Division
also denied with finality on 15 December 1993 the Motion for
Reconsideration filed (on 12 December 1993) by petitioner.
On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to
Admit Second Motion for Reconsideration and (b) a Second Motion for
Reconsideration. This time, petitioner invoked the decision handed down by
this Court, through its Second Division, on 10 December 1993 in the two (2)
consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la
Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B.Trajano, in G.R.
Nos. 92174 and 102552, respectively. In its decision, the Second
Division inter alia declared null and void the second paragraph of Section 5
(a) 1 of the Revised Guidelines issued by then Secretary of Labor Drilon.
Petitioner submits that the decision in the Duplicators case should now be
considered as having been abandoned or reversed by the BoieTakeda decision, considering that the latter went "directly opposite and
contrary to" the conclusion reached in the former. Petitioner prays that the
decision rendered in Duplicators be set aside and another be entered
directing the dismissal of the money claims of private respondent Philippine
Duplicators' Employees' Union.
In view of the nature of the issues raised, the Third Division of this Court
referred the petitioner's Second Motion for Reconsideration, and its Motion
for Leave to Admit the Second Motion for Reconsideration, to the Court en
banc en consulta. The Court en banc, after preliminary deliberation, and
inorder to settle the condition of the relevant case law, accepted G.R. No.
110068 as a banc case.
Deliberating upon the arguments contained in petitioner's Second Motion for
Reconsideration, as well as its Motion for Leave to Admit the Second Motion
for Reconsideration, and after review of the doctrines embodied, respectively,
in Duplicators and Boie-Takeda, we consider that these Motions must fail.
The decision rendered in Boie-Takeda cannot serve as a precedent under the
doctrine of stare decisis. The Boie-Takeda decision was promulgated a month
after this Court, (through its Third Division), had rendered the decision in the
instant case. Also, the petitioner's (first) Motion for Reconsideration of the

decision dated 10 November 1993 had already been denied, with finality, on
15 December 1993, i.e.; before the Boie-Takeda decision became final on 5
January 1994.
Preliminarily, we note that petitioner Duplicators did not put in issue the
validity of the Revised Guidelines on the Implementary on of the 13th Month
Pay Law, issued on November 16, 1987, by then Labor Secretary Franklin M.
Drilon, either in its Petition for Certiorari or in its (First) Motion for
Reconsideration. In fact, petitioner's counsel relied upon these Guidelines
and asserted their validity in opposing the decision rendered by public
respondent NLRC. Any attempted change in petitioner's theory, at this late
stage of the proceedings, cannot be allowed.
More importantly, we do not agree with petitioner that the decision in BoieTakeda is "directly opposite or contrary to" the decision in the present
(Philippine Duplicators). To the contrary, the doctrines enunciated in these
two (2) cases in fact co-exist one with the other. The two (2) cases present
quite different factual situations (although the same word "commissions" was
used or invoked) the legal characterizations of which must accordingly differ.
The Third Division in Durplicators found that:
In the instant case, there is no question that the sales
commission earned by the salesmen who make or close a
sale of duplicating machines distributed by petitioner
corporation, constitute part of the compensation or
remuneration paid to salesmen for serving as salesmen, and
hence as part of the "wage" or salary of petitioner's salesmen.
Indeed, it appears that petitioner pays its salesmen a small
fixed or guaranteed wage; the greater part of the salesmen's
wages or salaries being composed of the sales or incentive
commissions earned on actual sales closed by them. No
doubt this particular galary structure was intended for the
benefit of the petitioner corporation, on the apparent
assumption that thereby its salesmen would be moved to
greater enterprise and diligence and close more sales in the
expectation of increasing their sales commissions. This,
however, does not detract from the character of such
commissions as part of the salary or wage paid to each of its
salesmen for rendering services to petitioner corporation.
In other words, the sales commissions received for every duplicating machine
sold constituted part of the basic compensation or remuneration of the
salesmen of Philippine Duplicators for doing their job. The portion of the
salary structure representing commissions simply comprised an automatic
increment to the monetary value initially assigned to each unit of work
rendered by a salesman. Especially significant here also is the fact that the
fixed or guaranteed portion of the wages paid to the Philippine Duplicators'
salesmen represented only 15%-30% of an employee's total earnings in a
year. We note the following facts on record:
Salesmen's Total Earnings and 13th Month Pay
For the Year 1986 2

Name of Total Amount Paid Montly Fixed


Salesman Earnings as 13th Month Pay Wages x 12 3

Carrasco, 50,201.20 403.75*


Cicero

Baylon, P76,610.30 P1,350.00 P16,200.00


Benedicto

Punzalan, 24,351.89 1,266.00 15,192.00


Reynaldo

Bautista 90,780.85 1,182.00 14,184.00


Salvador

Poblador, 25,516.75 323.00*


Alberto

Brito, 64,382.75 1,238.00 14,856.00


Tomas

Cruz, 32,950.45 323.00*


Danilo

Bunagan, 89,287.75 1,266.00 15,192.00


Jorge

Baltazar, 15,681.35 323.00*


Carlito

Canilan, 74,678.17 1,350.00 16,200.00


Rogelio
Dasig, 54,625.16 1,378,00 16,536.00
Jeordan
Centeno, 51,854.15 1,266.04 15,192.00
Melecio, Jr.
De los Santos 73,551.39 1,322.00 15,864.00
Ricardo
del Mundo, 108,230.35 1,406.00 16,872.00
Wilfredo
Garcia, 93,753.75 1,294.00 15,528.00
Delfin
Navarro, 98,618.71 1,266.00 15,192.00
Ma. Teresa
Ochosa, 66,275.65 1,406.00 16,872.00
Rolano
Quisumbing, 101,065.75 1,406.00 16,872.00
Teofilo
Rubina, 42,209.73 1,266.00 15,192.00
Emma
Salazar, 64,643.65 1,238.00 14,856.00
Celso
Sopelario, 52,622.27 1,350.00 16,200.00
Ludivico
Tan, 30,127.50 1,238.00 14,856.00
Leynard
Talampas, 146,510.25 1,434.00 17,208.00
Pedro
Villarin, 41,888.10 1,434.00 17,208.00
Constancio

Considering the above circumstances, the Third Division held, correctly, that
the sales commissions were an integral part of the basic salary structure of
Philippine Duplicators' employees salesmen. These commissions are not
overtime payments, nor profit-sharing payments nor any other fringe benefit.
Thus, the salesmen's commissions, comprising a pre-determined percent of
the selling price of the goods sold by each salesman, were properly included
in the term "basic salary" for purposes of computing their 13th month pay.
In Boie-Takeda the so-called commissions "paid to or received by medical
representatives of Boie-Takeda Chemicals or by the rank and file employees
of Philippine Fuji Xerox Co.," were excluded from the term "basic salary"
because these were paid to the medical representatives and rank-and-file
employees as "productivity bonuses." 4 The Second Division characterized
these payments as additional monetary benefits not properly included in the
term "basic salary" in computing their 13th month pay. We note that
productivity bonuses are generally tied to the productivity, or capacity for
revenue production, of a corporation; such bonuses closely resemble profitsharing payments and have no clear director necessary relation to the
amount of work actually done by each individual employee. More generally, a
bonus is an amount granted and paid ex gratia to the employee; its payment
constitutes an act of enlightened generosity and self-interest on the part of
the employer, rather than as a demandable or enforceable obligation.
In Philippine Education Co. Inc. (PECO) v. Court of Industrial Relations, 5 the
Court explained the nature of a bonus in the following general terms:
As a rule a bonus is an amount granted and paid to an
employee for his industry loyalty which contributed to the
success of the employer's business and made possible the
realization of profits. It is an act of generosity of the employer
for which the employee ought to be thankful and grateful. It
is also granted by an enlightened employer to spur the
employee to greater efforts for the success of the business and
realization of bigger profits. . . . . From the legal point of view
a bonus is not and mandable and enforceable obligation. It is
so when It is made part of the wage or salary or
compensation. In such a case the latter would be a fixed
amount and the former would be a contingent one dependent
upon the realization of profits. . . . 6 (Emphasis supplied)

In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge


Association, 7 the Court amplified:

Mutual

Benefit

. . . . Whether or not [a] bonus forms part of waqes depends


upon the circumstances or conditions for its payment. If it is
an additional compensation which the employer promised
and agreed to give without any conditions imposed for its
payment, such as success of business or greater production
or output, then it is part of the wage. But if it is paid only if
profits are realized or a certain amount of productivity
achieved, it cannot be considered part of wages. . . . It is also
paid on the basis of actual or actual work accomplished. If
the desired goal of production is not obtained, or the amount
of actual work accomplished, the bonus does not accrue. . .
. 8 (Emphasis supplied)
More recently, the non-demandable character of a bonus was stressed by the
Court in Traders Royal Bank v.National Labor Relations Commission: 9
A bonus is a "gratuity or act of liberality of the giver which the
recipient has no right to demand as a matter of right." (Aragon
v. Cebu Portland Cement Co., 61 O.G. 4567). "It is something
given in addition to what is ordinarily received by or strictly
due the recipient." The granting of a bonus is basically a
management prerogative which cannot be forced upon the
employer "who may not be obliged to assume the onerous
burden of granting bonuses or other benefits aside from the
employee's basic salaries or wages . . ." (Kamaya Point Hotel
v. NLRC, 177 SCRA 160 [1989]). 10(Emphasis supplied)
If an employer cannot be compelled to pay a productivity bonus to his
employees, it should follow that such productivity bonus, when given, should
not be deemed to fall within the "basic salary" of employees when the time
comes to compute their 13th month pay.
It is also important to note that the purported "commissions" paid by the
Boie-Takeda Company to its medical representatives could not have been
"sales commissions" in the same sense that Philippine Duplicators paid its
salesmen Sales commissions. Medical representatives are not salesmen; they
do not effect any sale of any article at all. In common commercial practice, in
the Philippines and elsewhere, of which we take judicial notice, medical
representatives are employees engaged in the promotion of pharmaceutical
products or medical devices manufactured by their employer. They promote
such products by visiting identified physicians and inform much physicians,
orally and with the aid of printed brochures, of the existence and chemical
composition and virtues of particular products of their company. They
commonly leave medical samples with each physician visited; but those
samples are not "sold" to the physician and the physician is, as a matter of
professional ethics, prohibited from selling such samples to their patients.
Thus, the additional payments made to Boie-Takeda's medical
representatives were not in fact sales commissions but rather partook of the
nature of profit-sharing bonuses.

The doctrine set out in the decision of the Second Division is, accordingly,
that additional payments made to employees, to the extent they partake of the
nature of profit-sharing payments, are properly excluded from the ambit of the
term "basic salary" for purposes of computing the 13th month pay due to
employees. Such additional payments are not "commissions" within the
meaning of the second paragraph of Section 5 (a) of the Revised Guidelines
Implementing 13th Month Pay.
The Supplementary Rules and Regulations Implementing P.D. No. 851
subsequently issued by former Labor Minister Ople sought to clarify the
scope of items excluded in the computation of the 13th month pay; viz.:
Sec. 4. Overtime pay, earnings and other remunerations
which are not part of the basic salary shall not be included in
the computation of the 13th month pay.
We observe that the third item excluded from the term "basic salary" is cast
in open ended and apparently circular terms: "other remunerations which
are not part of the basic salary." However, what particular types of earnings
and remuneration are or are not properly included or integrated in the basic
salary are questions to be resolved on a case to case basis, in the light of the
specific and detailed facts of each case. In principle, where these earnings
and remuneration are closely akin to fringe benefits, overtime pay or profitsharing payments, they are properlyexcluded in computing the 13th month
pay. However, sales commissions which are effectively an integral portion of
the basic salary structure of an employee, shall be included in determining
his 13th month pay.
We recognize that both productivity bonuses and sales commissions may
have an incentive effect. But there is reason to distinguish one from the other
here. Productivity bonuses are generally tied to the productivity or profit
generation of the employer corporation. Productivity bonuses are not directly
dependent on the extent an individual employee exerts himself. A
productivity bonus is something extra for which no specific additional
services are rendered by any particular employee and hence not legally
demandable, absent a contractual undertaking to pay it. Sales commissions,
on the other hand, such as those paid in Duplicators, are intimately related
to or directly proportional to the extent or energy of an employee's endeavors.
Commissions are paid upon the specific results achieved by a salesmanemployee. It is a percentage of the sales closed by a salesman and operates
as an integral part of such salesman's basic pay.
Finally, the statement of the Second Division in Boie-Takeda declaring null
and void the second paragraph of Section 5(a) of the Revised Guidelines
Implementing the 13th Month Pay issued by former Labor Secretary Drilon,
is properly understood as holding that that second paragraph provides no
legal basis for including within the term "commission" there used additional
payments to employees which are, as a matter of fact, in the nature of profitsharing payments or bonuses. If and to the extent that such second
paragraph is so interpreted and applied, it must be regarded as invalid as
having been issued in excess of the statutory authority of the Secretary of
Labor. That same second paragraph however, correctly recognizes that
commissions, like those paid in Duplicators, may constitute part of the basic

salary structure of salesmen and hence should be included in determining


the 13th month pay; to this extent, the second paragraph is and remains
valid.
ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for
Reconsideration and the (b) aforesaid Second Reconsideration are DENIED
for lack of merit. No further pleadings will be entertained.

G.R. No. 118978 May 23, 1997


PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, * petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and GRACE DE
GUZMAN, respondents.
REGALADO, J.:
Seeking relief through the extraordinary writ of certiorari, petitioner
Philippine Telegraph and Telephone Company (hereafter, PT & T) invokes the
alleged concealment of civil status and defalcation of company funds as
grounds to terminate the services of an employee. That employee, herein
private respondent Grace de Guzman, contrarily argues that what really
motivated PT & T to terminate her services was her having contracted
marriage during her employment, which is prohibited by petitioner in its
company policies. She thus claims that she was discriminated against in
gross violation of law, such a proscription by an employer being outlawed by
Article 136 of the Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever, specifically as
a "Supernumerary Project Worker," for a fixed period from November 21,
1990 until April 20, 1991 vice one C.F. Tenorio who went on maternity
leave.1 Under the Reliever Agreement which she signed with petitioner
company, her employment was to be immediately terminated upon expiration
of the agreed period. Thereafter, from June 10, 1991 to July 1, 1991, and
from July 19, 1991 to August 8, 1991, private respondent's services as
reliever were again engaged by petitioner, this time in replacement of one
Erlinda F. Dizon who went on leave during both periods. 2 After August 8,
1991, and pursuant to their Reliever Agreement, her services were
terminated.
On September 2, 1991, private respondent was once more asked to join
petitioner company as a probationary employee, the probationary period to
cover 150 days. In the job application form that was furnished her to be filled
up for the purpose, she indicated in the portion for civil status therein that
she was single although she had contracted marriage a few months earlier,
that is, on May 26, 1991. 3

1992, 6 which she readily contested by initiating a complaint for illegal


dismissal, coupled with a claim for non-payment of cost of living allowances
(COLA), before the Regional Arbitration Branch of the National Labor
Relations Commission in Baguio City.
At the preliminary conference conducted in connection therewith, private
respondent volunteered the information, and this was incorporated in the
stipulation of facts between the parties, that she had failed to remit the
amount of P2,380.75 of her collections. She then executed a promissory note
for that amount in favor of petitioner 7. All of these took place in a formal
proceeding and with the agreement of the parties and/or their counsel.
On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a
decision declaring that private respondent, who had already gained the
status of a regular employee, was illegally dismissed by petitioner. Her
reinstatement, plus payment of the corresponding back wages and COLA,
was correspondingly ordered, the labor arbiter being of the firmly expressed
view that the ground relied upon by petitioner in dismissing private
respondent was clearly insufficient, and that it was apparent that she had
been discriminated against on account of her having contracted marriage in
violation of company rules.
On appeal to the National Labor Relations Commission (NLRC), said public
respondent upheld the labor arbiter and, in its decision dated April 29, 1994,
it ruled that private respondent had indeed been the subject of an unjust and
unlawful discrimination by her employer, PT & T. However, the decision of
the labor arbiter was modified with the qualification that Grace de Guzman
deserved to be suspended for three months in view of the dishonest nature of
her acts which should not be condoned. In all other respects, the NLRC
affirmed the decision of the labor arbiter, including the order for the
reinstatement of private respondent in her employment with PT & T.
The subsequent motion for reconsideration filed by petitioner was rebuffed by
respondent NLRC in its resolution of November 9, 1994, hence this special
civil action assailing the aforestated decisions of the labor arbiter and
respondent NLRC, as well as the denial resolution of the latter.

It now appears that private respondent had made the same representation in
the two successive reliever agreements which she signed on June 10, 1991
and July 8, 1991. When petitioner supposedly learned about the same later,
its branch supervisor in Baguio City, Delia M. Oficial, sent to private
respondent a memorandum dated January 15, 1992 requiring her to explain
the discrepancy. In that memorandum, she was reminded about the
company's policy of not accepting married women for employment. 4

1. Decreed in the Bible itself is the universal norm that women should be
regarded with love and respect but, through the ages, men have responded to
that injunction with indifference, on the hubristic conceit that women
constitute the inferior sex. Nowhere has that prejudice against womankind
been so pervasive as in the field of labor, especially on the matter of equal
employment opportunities and standards. In the Philippine setting, women
have traditionally been considered as falling within the vulnerable groups or
types of workers who must be safeguarded with preventive and remedial
social legislation against discriminatory and exploitative practices in hiring,
training, benefits, promotion and retention.

In her reply letter dated January 17, 1992, private respondent stated that
she was not aware of PT&T's policy regarding married women at the time,
and that all along she had not deliberately hidden her true civil
status. 5Petitioner nonetheless remained unconvinced by her explanations.
Private respondent was dismissed from the company effective January 29,

The Constitution, cognizant of the disparity in rights between men and


women in almost all phases of social and political life, provides a gamut of
protective provisions. To cite a few of the primordial ones, Section 14, Article
II 8on the Declaration of Principles and State Policies, expressly recognizes
the role of women in nation-building and commands the State to ensure, at

all times, the fundamental equality before the law of women and men.
Corollary thereto, Section 3 of Article XIII 9 (the progenitor whereof dates
back to both the 1935 and 1973 Constitution) pointedly requires the State to
afford full protection to labor and to promote full employment and equality of
employment opportunities for all, including an assurance of entitlement to
tenurial security of all workers. Similarly, Section 14 of Article
XIII 10 mandates that the State shall protect working women through
provisions for opportunities that would enable them to reach their full
potential.
2. Corrective labor and social laws on gender inequality have emerged with
more frequency in the years since the Labor Code was enacted on May 1,
1974 as Presidential Decree No. 442, largely due to our country's
commitment as a signatory to the United Nations Convention on the
Elimination of All Forms of Discrimination Against Women (CEDAW). 11
Principal among these laws are Republic Act No. 6727 12 which explicitly
prohibits discrimination against women with respect to terms and conditions
of employment, promotion, and training opportunities; Republic Act No.
6955 13 which bans the "mail-order-bride" practice for a fee and the export of
female labor to countries that cannot guarantee protection to the rights of
women workers; Republic Act No. 7192 14 also known as the "Women in
Development and Nation Building Act," which affords women equal
opportunities with men to act and to enter into contracts, and for
appointment, admission, training, graduation, and commissioning in all
military or similar schools of the Armed Forces of the Philippines and the
Philippine National Police; Republic Act No. 7322 15 increasing the maternity
benefits granted to women in the private sector; Republic Act No.
7877 16 which outlaws and punishes sexual harassment in the workplace
and in the education and training environment; and Republic Act No.
8042, 17 or the "Migrant Workers and Overseas Filipinos Act of 1995," which
prescribes as a matter of policy, inter alia, the deployment of migrant
workers, with emphasis on women, only in countries where their rights are
secure. Likewise, it would not be amiss to point out that in the Family
Code, 18 women's rights in the field of civil law have been greatly enhanced
and expanded.
In the Labor Code, provisions governing the rights of women workers are
found in Articles 130 to 138 thereof. Article 130 involves the right against
particular kinds of night work while Article 132 ensures the right of women
to be provided with facilities and standards which the Secretary of Labor may
establish to ensure their health and safety. For purposes of labor and social
legislation, a woman working in a nightclub, cocktail lounge, massage clinic,
bar or other similar establishments shall be considered as an employee
under Article 138. Article 135, on the other hand, recognizes a woman's right
against discrimination with respect to terms and conditions of employment
on account simply of sex. Finally, and this brings us to the issue at hand,
Article 136 explicitly prohibits discrimination merely by reason of the
marriage of a female employee.
3. Acknowledged as paramount in the due process scheme is the
constitutional guarantee of protection to labor and security of tenure. Thus,

an employer is required, as a condition sine qua non prior to severance of the


employment ties of an individual under his employ, to convincingly establish,
through substantial evidence, the existence of a valid and just cause in
dispensing with the services of such employee, one's labor being regarded as
constitutionally protected property.
On the other hand, it is recognized that regulation of manpower by the
company falls within the so-called management prerogatives, which
prescriptions encompass the matter of hiring, supervision of workers, work
assignments, working methods and assignments, as well as regulations on
the transfer of employees, lay-off of workers, and the discipline, dismissal,
and recall of employees. 19 As put in a case, an employer is free to regulate,
according to his discretion and best business judgment, all aspects of
employment, "from hiring to firing," except in cases of unlawful
discrimination or those which may be provided by law. 20
In the case at bar, petitioner's policy of not accepting or considering as
disqualified from work any woman worker who contracts marriage runs afoul
of the test of, and the right against, discrimination, afforded all women
workers by our labor laws and by no less than the Constitution. Contrary to
petitioner's assertion that it dismissed private respondent from employment
on account of her dishonesty, the record discloses clearly that her ties with
the company were dissolved principally because of the company's policy that
married women are not qualified for employment in PT & T, and not merely
because of her supposed acts of dishonesty.
That it was so can easily be seen from the memorandum sent to private
respondent by Delia M. Oficial, the branch supervisor of the company, with
the reminder, in the words of the latter, that "you're fully aware that the
company is not accepting married women employee (sic), as it was verbally
instructed to you." 21 Again, in the termination notice sent to her by the same
branch supervisor, private respondent was made to understand that her
severance from the service was not only by reason of her concealment of her
married status but, over and on top of that, was her violation of the
company's policy against marriage ("and even told you that married women
employees
are
not
applicable
[sic]
or
accepted
in
our
company.") 22 Parenthetically, this seems to be the curious reason why it was
made to appear in the initiatory pleadings that petitioner was represented in
this case only by its said supervisor and not by its highest ranking officers
who would otherwise be solidarily liable with the corporation. 23
Verily, private respondent's act of concealing the true nature of her status
from PT & T could not be properly characterized as willful or in bad faith as
she was moved to act the way she did mainly because she wanted to retain a
permanent job in a stable company. In other words, she was practically
forced by that very same illegal company policy into misrepresenting her civil
status for fear of being disqualified from work. While loss of confidence is a
just cause for termination of employment, it should not be simulated. 24 It
must rest on an actual breach of duty committed by the employee and not on
the employer's caprices. 25 Furthermore, it should never be used as a
subterfuge for causes which are improper, illegal, or unjustified. 26

In the present controversy, petitioner's expostulations that it dismissed


private respondent, not because the latter got married but because she
concealed that fact, does have a hollow ring. Her concealment, so it is
claimed, bespeaks dishonesty hence the consequent loss of confidence in her
which justified her dismissal.
Petitioner would asseverate, therefore, that while it has nothing against
marriage, it nonetheless takes umbrage over the concealment of that fact.
This improbable reasoning, with interstitial distinctions, perturbs the Court
since private respondent may well be minded to claim that the imputation of
dishonesty should be the other way around.
Petitioner would have the Court believe that although private respondent
defied its policy against its female employees contracting marriage, what
could be an act of insubordination was inconsequential. What it submits as
unforgivable is her concealment of that marriage yet, at the same time,
declaring that marriage as a trivial matter to which it supposedly has no
objection. In other words, PT & T says it gives its blessings to its female
employees contracting marriage, despite the maternity leaves and other
benefits it would consequently respond for and which obviously it would have
wanted to avoid. If that employee confesses such fact of marriage, there will
be no sanction; but if such employee conceals the same instead of proceeding
to the confessional, she will be dismissed. This line of reasoning does not
impress us as reflecting its true management policy or that we are being
regaled with responsible advocacy.
This Court should be spared the ennui of strained reasoning and the tedium
of propositions which confuse through less than candid arguments. Indeed,
petitioner glosses over the fact that it was its unlawful policy against married
women, both on the aspects of qualification and retention, which compelled
private respondent to conceal her supervenient marriage. It was, however,
that very policy alone which was the cause of private respondent's secretive
conduct now complained of. It is then apropos to recall the familiar saying
that he who is the cause of the cause is the cause of the evil caused.
Finally, petitioner's collateral insistence on the admission of private
respondent that she supposedly misappropriated company funds, as an
additional ground to dismiss her from employment, is somewhat insincere
and self-serving. Concededly, private respondent admitted in the course of
the proceedings that she failed to remit some of her collections, but that is an
altogether different story. The fact is that she was dismissed solely because of
her concealment of her marital status, and not on the basis of that supposed
defalcation of company funds. That the labor arbiter would thus consider
petitioner's submissions on this supposed dishonesty as a mere afterthought,
just to bolster its case for dismissal, is a perceptive conclusion born of
experience in labor cases. For, there was no showing that private respondent
deliberately misappropriated the amount or whether her failure to remit the
same was through negligence and, if so, whether the negligence was in
nature simple or grave. In fact, it was merely agreed that private respondent
execute a promissory note to refund the same, which she did, and the matter
was deemed settled as a peripheral issue in the labor case.

Private respondent, it must be observed, had gained regular status at the


time of her dismissal. When she was served her walking papers on January
29, 1992, she was about to complete the probationary period of 150 days as
she was contracted as a probationary employee on September 2, 1991. That
her dismissal would be effected just when her probationary period was
winding down clearly raises the plausible conclusion that it was done in
order to prevent her from earning security of tenure. 27 On the other hand,
her earlier stints with the company as reliever were undoubtedly those of a
regular employee, even if the same were for fixed periods, as she performed
activities which were essential or necessary in the usual trade and business
of PT & T. 28 The primary standard of determining regular employment is the
reasonable connection between the activity performed by the employee in
relation to the business or trade of the employer. 29
As an employee who had therefore gained regular status, and as she had
been dismissed without just cause, she is entitled to reinstatement without
loss of seniority rights and other privileges and to full back wages, inclusive
of allowances and other benefits or their monetary equivalent. 30 However, as
she had undeniably committed an act of dishonesty in concealing her status,
albeit under the compulsion of an unlawful imposition of petitioner, the
three-month suspension imposed by respondent NLRC must be upheld to
obviate the impression or inference that such act should be condoned. It
would be unfair to the employer if she were to return to its fold without any
sanction whatsoever for her act which was not totally justified. Thus, her
entitlement to back wages, which shall be computed from the time her
compensation was withheld up to the time of her actual reinstatement, shall
be reduced by deducting therefrom the amount corresponding to her three
months suspension.
4. The government, to repeat, abhors any stipulation or policy in the nature
of that adopted by petitioner PT & T. The Labor Code state, in no uncertain
terms, as follows:
Art. 136. Stipulation against marriage. It shall be unlawful
for an employer to require as a condition of employment or
continuation of employment that a woman shall not get
married, or to stipulate expressly or tacitly that upon getting
married, a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or
otherwise prejudice a woman employee merely by reason of
marriage.
This provision had a studied history for its origin can be traced to Section 8
of Presidential Decree No. 148, 31better known as the "Women and
Child Labor Law," which amended paragraph (c), Section 12 of Republic Act
No. 679, 32 entitled "An Act to Regulate the Employment of Women and
Children, to Provide Penalties for Violations Thereof, and for Other Purposes."
The forerunner to Republic Act No. 679, on the other hand, was Act No. 3071
which became law on March 16, 1923 and which regulated the employment
of women and children in shops, factories, industrial, agricultural, and
mercantile establishments and other places of labor in the then Philippine
Islands.

It would be worthwhile to reflect upon and adopt here the rationalization


in Zialcita, et al. vs. Philippine Air Lines, 33a decision that emanated from the
Office of the President. There, a policy of Philippine Air Lines requiring that
prospective flight attendants must be single and that they will be
automatically separated from the service once they marry was declared void,
it being violative of the clear mandate in Article 136 of the Labor Code with
regard to discrimination against married women. Thus:
Of first impression is the incompatibility of the respondent's
policy or regulation with the codal provision of law.
Respondent is resolute in its contention that Article 136 of
the Labor Code applies only to women employed in ordinary
occupations and that the prohibition against marriage of
women engaged in extraordinary occupations, like flight
attendants, is fair and reasonable, considering the
pecularities of their chosen profession.
We cannot subscribe to the line of reasoning pursued by
respondent. All along, it knew that the controverted policy
has already met its doom as early as March 13, 1973 when
Presidential Decree No. 148, otherwise known as the Women
and Child Labor Law, was promulgated. But for the timidity
of those affected or their labor unions in challenging the
validity of the policy, the same was able to obtain a
momentary reprieve. A close look at Section 8 of said decree,
which amended paragraph (c) of Section 12 of Republic Act
No. 679, reveals that it is exactly the same provision
reproduced verbatim in Article 136 of the Labor Code, which
was promulgated on May 1, 1974 to take effect six (6)
months later, or on November 1, 1974.
It cannot be gainsaid that, with the reiteration of the same
provision in the new Labor Code, all policies and acts against
it are deemed illegal and therefore abrogated. True, Article
132 enjoins the Secretary of Labor to establish standards
that will ensure the safety and health of women employees
and in appropriate cases shall by regulation require
employers to determine appropriate minimum standards for
termination in special occupations, such as those of flight
attendants, but that is precisely the factor that militates
against the policy of respondent. The standards have not yet
been established as set forth in the first paragraph, nor has
the Secretary of Labor issued any regulation affecting flight
attendants.
It is logical to presume that, in the absence of said standards
or regulations which are as yet to be established, the policy
of respondent against marriage is patently illegal. This finds
support in Section 9 of the New Constitution, which
provides:
Sec. 9. The State shall afford protection to labor, promote full
employment and equality in employment, ensure equal work

opportunities regardless of sex, race, or creed, and regulate


the relations between workers and employees. The State
shall assure the rights of workers to self-organization,
collective bargaining, security of tenure, and just and
humane conditions of work . . . .
Moreover, we cannot agree to the respondent's proposition
that termination from employment of flight attendants on
account of marriage is a fair and reasonable standard
designed for their own health, safety, protection and welfare,
as no basis has been laid therefor. Actually, respondent
claims that its concern is not so much against the continued
employment of the flight attendant merely by reason of
marriage as observed by the Secretary of Labor, but rather
on the consequence of marriage-pregnancy. Respondent
discussed at length in the instant appeal the supposed ill
effects of pregnancy on flight attendants in the course of
their employment. We feel that this needs no further
discussion as it had been adequately explained by the
Secretary of Labor in his decision of May 2, 1976.
In a vain attempt to give meaning to its position, respondent
went as far as invoking the provisions of Articles 52 and 216
of the New Civil Code on the preservation of marriage as an
inviolable social institution and the family as a basic social
institution, respectively, as bases for its policy of nonmarriage. In both instances, respondent predicates absence
of a flight attendant from her home for long periods of time
as contributory to an unhappy married life. This is pure
conjecture not based on actual conditions, considering that,
in this modern world, sophisticated technology has narrowed
the distance from one place to another. Moreover,
respondent overlooked the fact that married flight attendants
can program their lives to adapt to prevailing circumstances
and events.
Article 136 is not intended to apply only to women employed
in ordinary occupations, or it should have categorically
expressed so. The sweeping intendment of the law, be it on
special or ordinary occupations, is reflected in the whole text
and supported by Article 135 that speaks of nondiscrimination on the employment of women.
The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque
Mining & Industrial Corporation 34considered as void a policy of the same
nature. In said case, respondent, in dismissing from the service the
complainant, invoked a policy of the firm to consider female employees in the
project it was undertaking as separated the moment they get married due to
lack of facilities for married women. Respondent further claimed that
complainant was employed in the project with an oral understanding that
her services would be terminated when she gets married. Branding the policy
of the employer as an example of "discriminatory chauvinism" tantamount to

denying equal employment opportunities to women simply on account of


their sex, the appellate court struck down said employer policy as unlawful
in view of its repugnance to the Civil Code, Presidential Decree No. 148 and
the Constitution.
Under American jurisprudence, job requirements which establish employer
preference or conditions relating to the marital status of an employee are
categorized as a "sex-plus" discrimination where it is imposed on one sex and
not on the other. Further, the same should be evenly applied and must not
inflict adverse effects on a racial or sexual group which is protected by
federal job discrimination laws. Employment rules that forbid or restrict the
employment of married women, but do not apply to married men, have been
held to violate Title VII of the United States Civil Rights Act of 1964, the main
federal statute prohibiting job discrimination against employees and
applicants on the basis of, among other things, sex. 35
Further, it is not relevant that the rule is not directed against all women but
just against married women. And, where the employer discriminates against
married women, but not against married men, the variable is sex and the
discrimination is unlawful. 36 Upon the other hand, a requirement that a
woman employee must remain unmarried could be justified as a "bona fide
occupational qualification," or BFOQ, where the particular requirements of
the job would justify the same, but not on the ground of a general principle,
such as the desirability of spreading work in the workplace. A requirement of
that nature would be valid provided it reflects an inherent quality reasonably
necessary for satisfactory job performance. Thus, in one case, a no-marriage
rule applicable to both male and female flight attendants, was regarded as
unlawful since the restriction was not related to the job performance of the
flight attendants. 37
5. Petitioner's policy is not only in derogation of the provisions of Article 136
of the Labor Code on the right of a woman to be free from any kind of
stipulation against marriage in connection with her employment, but it
likewise assaults good morals and public policy, tending as it does to deprive
a woman of the freedom to choose her status, a privilege that by all accounts
inheres in the individual as an intangible and inalienable right. 38 Hence,
while it is true that the parties to a contract may establish any agreements,
terms, and conditions that they may deem convenient, the same should not
be contrary to law, morals, good customs, public order, or public
policy. 39 Carried to its logical consequences, it may even be said that
petitioner's policy against legitimate marital bonds would encourage illicit or
common-law relations and subvert the sacrament of marriage.
Parenthetically, the Civil Code provisions on the contract of labor state that
the relations between the parties, that is, of capital and labor, are not merely
contractual, impressed as they are with so much public interest that the
same should yield to the common good. 40 It goes on to intone that neither
capital nor labor should visit acts of oppression against the other, nor impair
the interest or convenience of the public. 41 In the final reckoning, the danger
of just such a policy against marriage followed by petitioner PT & T is that it
strikes at the very essence, ideals and purpose of marriage as an inviolable
social institution and, ultimately, of the family as the foundation of the

nation. 42 That it must be effectively interdicted here in all its indirect,


disguised or dissembled forms as discriminatory conduct derogatory of the
laws of the land is not only in order but imperatively required.
ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and
Telephone Company is hereby DISMISSED for lack of merit, with double
costs against petitioner.
SO ORDERED.

G.R. No. 166379 October 20, 2005


LAKPUE DRUG, INC., LA CROESUS PHARMA, INC., TROPICAL
BIOLOGICAL PHILS., INC. (all known as LAKPUE GROUP OF
COMPANIES) and/or ENRIQUE CASTILLO, JR., Petitioners,
vs.
MA. LOURDES BELGA, Respondent.
DECISION
YNARES-SANTIAGO, J.:
Before us is a petition for review of the July 28, 2004 Decision1 of the Court
of Appeals in CA-G.R. SP No. 80616 which reversed and set aside the April
14, 2003 Decision2 of the National Labor Relations Commission (NLRC) in
NLRC NCR 00-09-04981-01; and its December 17, 2004 Resolution3 denying
the motion for reconsideration.
Petitioner Tropical Biological Phils., Inc. (Tropical), a subsidiary of Lakpue
Group of Companies, hired on March 1, 1995 respondent Ma. Lourdes Belga
(Belga) as bookkeeper and subsequently promoted as assistant cashier. On
March 19, 2001, Belga brought her daughter to the Philippine General
Hospital (PGH) for treatment of broncho-pneumonia. On her way to the
hospital, Belga dropped by the house of Marylinda O. Vegafria, Technical
Manager of Tropical, to hand over the documents she worked on over the
weekend and to give notice of her emergency leave.
While at the PGH, Belga who was pregnant experienced labor pains and gave
birth on the same day. On March 22, 2001, or two days after giving birth,
Tropical summoned Belga to report for work but the latter replied that she
could not comply because of her situation. On March 30, 2001, Tropical sent
Belga another memorandum ordering her to report for work and also
informing her of the clarificatory conference scheduled on April 2, 2001.
Belga requested that the conference be moved to April 4, 2001 as her
newborn was scheduled for check-up on April 2, 2001. When Belga attended
the clarificatory conference on April 4, 2001, she was informed of her
dismissal effective that day.
Belga thus filed a complaint with the Public Assistance and Complaint Unit
(PACU) of the Department of Labor and Employment (DOLE). Attempts to
settle the case failed, hence the parties brought the case before the NLRCNCR.
Tropical, for its part, averred that it hired Belga on March 1, 1995 as a
bookkeeper and later promoted to various positions the last of which was as
"Treasury Assistant". Tropical claimed that this position was not merely
clerical because it included duties such as assisting the cashier in preparing
deposit slips, bills purchased, withdrawal slips, provisional receipts,
incoming and outgoing bank transactions, postdated checks, suppliers
checklist and issuance of checks, authorities to debit and doing liaison work
with banks.
Tropical also alleged that Belga concealed her pregnancy from the company.
She did not apply for leave and her absence disrupted Tropicals financial
transactions. On March 21, 2001, it required Belga to explain her

unauthorized absence and on March 30, 2001, it informed her of a


conference scheduled on April 2, 2001. Tropical claimed that Belga refused to
receive the second memorandum and did not attend the conference. She
reported for work only on April 4, 2001 where she was given a chance to
explain.
On April 17, 2001, Tropical terminated Belga on the following grounds: (1)
Absence without official leave for 16 days; (2) Dishonesty, for deliberately
concealing her pregnancy; (3) Insubordination, for her deliberate refusal to
heed and comply with the memoranda sent by the Personnel Department on
March 21 and 30, 2001 respectively.4
The Labor Arbiter ruled in favor of Belga and found that she was illegally
dismissed, thus:
WHEREFORE, the termination of complainant is hereby declared illegal.
ACCORDINGLY, she should be reinstated with full backwages, which as of
May 31, 2002, now amounts to P122, 248.71.
Ten (10%) percent of the total monetary award as attorneys fees is likewise
ordered.
SO ORDERED.5
Tropical appealed to the NLRC, which reversed the findings of the labor
arbiter in its Decision dated April 14, 2003, thus:
WHEREFORE, in the light of the foregoing, the assailed Decision is
REVERSED and SET ASIDE. We thereby render judgment:
(1) declaring complainant-appellees dismissal valid; and
(2) nullifying complainant-appellees monetary claims.
SO ORDERED.6
Upon denial of the motion for reconsideration on September 24, 2003,7 Belga
filed a petition for certiorari with the Court of Appeals which found in favor of
Belga, thus:
WHEREFORE, premises considered, the Decision promulgated on April 14,
2003 and the Resolution promulgated on September 24, 2003 of the public
respondent National Labor Relations Commission are hereby REVERSED
and SET ASIDE. The decision of the Labor Arbiter dated June 15, 2002 is
hereby REINSTATED.
SO ORDERED.8
Hence, Tropical filed the instant petition claiming that:
I.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN
HOLDING THAT RESPONDENT WAS ILLEGALLY DISMISSED.
II.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN


DISREGARDING THE FINDINGS OF THE NATIONAL LABOR RELATIONS
COMMISSION.9

subordination.11 In the instant case, the memoranda were given to Belga two
days after she had given birth. It was thus physically impossible for Belga to
report for work and explain her absence, as ordered.

The petition lacks merit.

Tropical avers that Belgas job as Treasury Assistant is a position of


responsibility since she handles vital transactions for the company. It adds
that the nature of Belgas work and the character of her duties involved
utmost trust and confidence.

Tropicals ground for terminating Belga is her alleged concealment of


pregnancy. It argues that such non-disclosure is tantamount to dishonesty
and impresses upon this Court the importance of Belgas position and the
gravity of the disruption her unexpected absence brought to the company.
Tropical also charges Belga with insubordination for refusing to comply with
its directives to report for work and to explain her absence.
Tropical cites the following paragraphs of Article 282 of the Labor Code as
legal basis for terminating Belga:
Article 282. Termination by employer. An employer may terminate an
employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or representative in connection with his work;
....
(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative; ....
We have defined misconduct as a transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in
character, and implies wrongful intent and not mere error in judgment. The
misconduct to be serious must be of such grave and aggravated character
and not merely trivial and unimportant. Such misconduct, however serious,
must, nevertheless, be in connection with the employees work to constitute
just cause for his separation.10
In the instant case, the alleged misconduct of Belga barely falls within the
situation contemplated by the law. Her absence for 16 days was justified
considering that she had just delivered a child, which can hardly be
considered a forbidden act, a dereliction of duty; much less does it imply
wrongful intent on the part of Belga. Tropical harps on the alleged
concealment by Belga of her pregnancy. This argument, however, begs the
question as to how one can conceal a full-term pregnancy. We agree with
respondents position that it can hardly escape notice how she grows bigger
each day. While there may be instances where the pregnancy may be
inconspicuous, it has not been sufficiently proven by Tropical that Belgas
case is such.
Belgas failure to formally inform Tropical of her pregnancy can not be
considered as grave misconduct directly connected to her work as to
constitute just cause for her separation.
The charge of disobedience for Belgas failure to comply with the memoranda
must likewise fail. Disobedience, as a just cause for termination, must be
willful or intentional. Willfulness is characterized by a wrongful and perverse
mental attitude rendering the employees act inconsistent with proper

Time and again, we have recognized the right of employers to dismiss


employees by reason of loss of trust and confidence. However, we emphasize
that such ground is premised on the fact that the employee concerned holds
a position of responsibility or trust and confidence.12 In order to constitute a
just cause for dismissal, the act complained of must be "work-related" such
as would show the employee concerned to be unfit to continue working for
the employer.13 More importantly, the loss of trust and confidence must be
based on the willful breach of the trust reposed in the employee by his
employer. A breach of trust is willful if it is done intentionally, knowingly and
purposely, without justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently.14
Belga was an assistant cashier whose primary function was to assist the
cashier in such duties as preparation of deposit slips, provisional receipts,
post-dated checks, etc. As correctly observed by the Court of Appeals, these
functions are essentially clerical. For while ostensibly, the documents that
Belga prepares as Assistant Cashier pertain to her employers property, her
work does not call for independent judgment or discretion. Belga simply
prepares the documents as instructed by her superiors subject to the latters
verification or approval. Hence, her position cannot be considered as one of
responsibility or imbued with trust and confidence.
Furthermore, Tropical has not satisfactorily shown how and to what extent it
had suffered damages because of Belgas absences. For while it may be true
that the company was caught unprepared and unable to hire a temporary
replacement, we are not convinced that Belgas absence for 16 days has
wreaked havoc on Tropicals business as to justify her termination from the
company. On the other hand, it is undisputed that Belga has worked for
Tropical for 7 years without any blemish on her service record. In fact, the
company admitted in its petition that she "has rendered seven (7) years of
service in compliance with [the companys] rules". 15 And her fidelity to her
work is evident because even in the midst of an emergency, she managed to
transmit to the company the documents she worked on over the weekend so
that it would not cause any problem for the company.
All told, we find that the penalty of dismissal was too harsh in light of the
circumstances obtaining in this case. While it may be true that Belga ought
to have formally informed the company of her impending maternity leave so
as to give the latter sufficient time to find a temporary replacement, her
termination from employment is not commensurate to her lapse in judgment.
Even assuming that there was just cause for terminating Belga, her
dismissal is nonetheless invalid for failure of Tropical to observe the twinnotice requirement. The March 21, 2001 memorandum merely informed her

to report for work and explain her absences. The March 30, 2001
memorandum demanded that she report for work and attend a clarificatory
conference. Belga received the first memorandum but allegedly refused to
receive the second.
In Electro System Industries Corporation v. National Labor Relations
Commission,16 we held that, in dismissing an employee, the employer has the
burden of proving that the worker has been served two notices: (1) one to
apprise him of the particular acts or omissions for which his dismissal is
sought, and (2) the other to inform him of his employers decision to dismiss
him. The first notice must state that the dismissal is sought for the act or
omission charged against the employee, otherwise the notice cannot be
considered sufficient compliance with the rules. It must also inform outright
that an investigation will be conducted on the charges particularized therein
which, if proven, will result to his dismissal. Further, we held that a notation
in the notice that the employee refused to sign is not sufficient proof that the
employer attempted to serve the notice to the employee.
An employee who was illegally dismissed from work is entitled to
reinstatement without loss of seniority rights, and other privileges and to his
full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.17 Thus, Belga is entitled
to be reinstated to her former or equivalent position and to the payment of
full backwages from the time she was illegally dismissed until her actual
reinstatement.
WHEREFORE, the instant petition is DENIED. The July 28, 2004 Decision of
the Court of Appeals in CA-G.R. SP No. 80616 and its December 17, 2004
Resolution are AFFIRMED in toto.
SO ORDERED.

G.R. No. 164774

April 12, 2006

STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN


CHUA, Petitioners,
vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E.
ESTRELLA, Respondents.
DECISION
PUNO, J.:
We are called to decide an issue of first impression: whether the policy of the
employer banning spouses from working in the same company violates the
rights of the employee under the Constitution and the Labor Code or is a
valid exercise of management prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the Court of
Appeals dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the
decision of the National Labor Relations Commission (NLRC) which affirmed
the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation engaged in
trading principally of paper products. Josephine Ongsitco is its Manager of
the Personnel and Administration Department while Sebastian Chua is its
Managing Director.
The evidence for the petitioners show that respondents Ronaldo D. Simbol
(Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all
regular employees of the company.1
Simbol was employed by the company on October 27, 1993. He met Alma
Dayrit, also an employee of the company, whom he married on June 27,
1998. Prior to the marriage, Ongsitco advised the couple that should they
decide to get married, one of them should resign pursuant to a company
policy promulgated in 1995,2 viz.:
1. New applicants will not be allowed to be hired if in case he/she
has [a] relative, up to [the] 3rd degree of relationship, already
employed by the company.
2. In case of two of our employees (both singles [sic], one male and
another female) developed a friendly relationship during the course of
their employment and then decided to get married, one of them
should resign to preserve the policy stated above.3
Simbol resigned on June 20, 1998 pursuant to the company policy.4
Comia was hired by the company on February 5, 1997. She met Howard
Comia, a co-employee, whom she married on June 1, 2000. Ongsitco likewise
reminded them that pursuant to company policy, one must resign should
they decide to get married. Comia resigned on June 30, 2000.5
Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a
co-worker. Petitioners stated that Zuiga, a married man, got Estrella

pregnant. The company allegedly could have terminated her services due to
immorality but she opted to resign on December 21, 1999.6
The respondents each signed a Release and Confirmation Agreement. They
stated therein that they have no money and property accountabilities in the
company and that they release the latter of any claim or demand of whatever
nature.7
Respondents offer a different version of their dismissal. Simbol and Comia
allege that they did not resign voluntarily; they were compelled to resign in
view of an illegal company policy. As to respondent Estrella, she alleges that
she had a relationship with co-worker Zuiga who misrepresented himself as
a married but separated man. After he got her pregnant, she discovered that
he was not separated. Thus, she severed her relationship with him to avoid
dismissal due to the company policy. On November 30, 1999, she met an
accident and was advised by the doctor at the Orthopedic Hospital to
recuperate for twenty-one (21) days. She returned to work on December 21,
1999 but she found out that her name was on-hold at the gate. She was
denied entry. She was directed to proceed to the personnel office where one
of the staff handed her a memorandum. The memorandum stated that she
was being dismissed for immoral conduct. She refused to sign the
memorandum because she was on leave for twenty-one (21) days and has not
been given a chance to explain. The management asked her to write an
explanation. However, after submission of the explanation, she was
nonetheless dismissed by the company. Due to her urgent need for money,
she later submitted a letter of resignation in exchange for her thirteenth
month pay.8
Respondents later filed a complaint for unfair labor practice, constructive
dismissal, separation pay and attorneys fees. They averred that the
aforementioned company policy is illegal and contravenes Article 136 of the
Labor Code. They also contended that they were dismissed due to their union
membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the
complaint for lack of merit, viz.:
[T]his company policy was decreed pursuant to what the respondent
corporation perceived as management prerogative. This management
prerogative is quite broad and encompassing for it covers hiring, work
assignment, working method, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers, working regulations,
transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers. Except as provided for or limited by special
law, an employer is free to regulate, according to his own discretion and
judgment all the aspects of employment.9 (Citations omitted.)
On appeal to the NLRC, the Commission affirmed the decision of the Labor
Arbiter on January 11, 2002. 10
Respondents filed a Motion for Reconsideration but was denied by the NLRC
in a Resolution11 dated August 8, 2002. They appealed to respondent
court via Petition for Certiorari.

In its assailed Decision dated August 3, 2004, the Court of Appeals reversed
the NLRC decision, viz.:

Art. 1702. In case of doubt, all labor legislation and all labor contracts shall
be construed in favor of the safety and decent living for the laborer.

WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the
National Labor Relations Commission is hereby REVERSED and SET ASIDE
and a new one is entered as follows:

The Labor Code is the most comprehensive piece of legislation protecting


labor. The case at bar involves Article 136 of the Labor Code which provides:

(1) Declaring illegal, the petitioners dismissal from employment and


ordering private respondents to reinstate petitioners to their former
positions without loss of seniority rights with full backwages from
the time of their dismissal until actual reinstatement; and
(2) Ordering private respondents to pay petitioners attorneys fees
amounting to 10% of the award and the cost of this suit.13
On appeal to this Court, petitioners contend that the Court of Appeals erred
in holding that:
1. x x x the subject 1995 policy/regulation is violative of the
constitutional rights towards marriage and the family of employees
and of Article 136 of the Labor Code; and
2. x x x respondents resignations were far from voluntary.14
We affirm.
The 1987 Constitution15 states our policy towards the protection of labor
under the following provisions, viz.:
Article II, Section 18. The State affirms labor as a primary social economic
force. It shall protect the rights of workers and promote their welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full employment and
equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.
The State shall promote the principle of shared responsibility between
workers and employers, recognizing the right of labor to its just share in the
fruits of production and the right of enterprises to reasonable returns on
investments, and to expansion and growth.
The Civil Code likewise protects labor with the following provisions:
Art. 1700. The relation between capital and labor are not merely contractual.
They are so impressed with public interest that labor contracts must yield to
the common good. Therefore, such contracts are subject to the special laws
on labor unions, collective bargaining, strikes and lockouts, closed shop,
wages, working conditions, hours of labor and similar subjects.

Art. 136. It shall be unlawful for an employer to require as a condition of


employment or continuation of employment that a woman employee shall not
get married, or to stipulate expressly or tacitly that upon getting married a
woman employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a woman employee
merely by reason of her marriage.
Respondents submit that their dismissal violates the above provision.
Petitioners allege that its policy "may appear to be contrary to Article 136 of
the Labor Code" but it assumes a new meaning if read together with the first
paragraph of the rule. The rule does not require the woman employee to
resign. The employee spouses have the right to choose who between them
should resign. Further, they are free to marry persons other than coemployees. Hence, it is not the marital status of the employee, per se, that is
being discriminated. It is only intended to carry out its no-employment-forrelatives-within-the-third-degree-policy which is within the ambit of the
prerogatives of management.16
It is true that the policy of petitioners prohibiting close relatives from working
in the same company takes the nature of an anti-nepotism employment
policy. Companies adopt these policies to prevent the hiring of unqualified
persons based on their status as a relative, rather than upon their
ability.17 These policies focus upon the potential employment problems
arising from the perception of favoritism exhibited towards relatives.
With more women entering the workforce, employers are also enacting
employment policies specifically prohibiting spouses from working for the
same company. We note that two types of employment policies involve
spouses: policies banning only spouses from working in the same
company (no-spouse employment policies), and those banning all
immediate family members, including spouses, from working in the same
company (anti-nepotism employment policies).18
Unlike in our jurisdiction where there is no express prohibition on marital
discrimination,19 there are twenty state statutes 20 in the United States
prohibiting marital discrimination. Some state courts 21 have been confronted
with the issue of whether no-spouse policies violate their laws prohibiting
both marital status and sex discrimination.
In challenging the anti-nepotism employment policies in the United States,
complainants utilize two theories of employment discrimination:
the disparate treatment and the disparate impact. Under the disparate
treatment analysis, the plaintiff must prove that an employment policy is
discriminatory on its face. No-spouse employment policies requiring an
employee of a particular sex to either quit, transfer, or be fired are facially
discriminatory. For example, an employment policy prohibiting the employer
from hiring wives of male employees, but not husbands of female employees,
is discriminatory on its face.22

On the other hand, to establish disparate impact, the complainants must


prove that a facially neutral policy has a disproportionate effect on a
particular class. For example, although most employment policies do not
expressly indicate which spouse will be required to transfer or leave the
company, the policy often disproportionately affects one sex.23
The state courts rulings on the issue depend on their interpretation of the
scope of marital status discrimination within the meaning of their respective
civil rights acts. Though they agree that the term "marital status"
encompasses discrimination based on a person's status as either married,
single, divorced, or widowed, they are divided on whether the term has
a broader meaning. Thus, their decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a person's
status as married, single, divorced, or widowed reason that if the legislature
intended a broader definition it would have either chosen different language
or specified its intent. They hold that the relevant inquiry is if one is married
rather than to whom one is married. They construe marital status
discrimination to include only whether a person is single, married, divorced,
or widowed and not the "identity, occupation, and place of employment of
one's spouse." These courts have upheld the questioned policies and ruled
that they did not violate the marital status discrimination provision of their
respective state statutes.
The courts that have broadly26 construed the term "marital status" rule that
it encompassed the identity, occupation and employment of one's spouse.
They strike down the no-spouse employment policies based on the broad
legislative intent of the state statute. They reason that the no-spouse
employment policy violate the marital status provision because it arbitrarily
discriminates against all spouses of present employees without regard to the
actual effect on the individual's qualifications or work performance. 27 These
courts also find the no-spouse employment policy invalid for failure of the
employer to present any evidence of business necessity other than the
general perception that spouses in the same workplace might adversely affect
the business.28 They hold that the absence of such a bona fide occupational
qualification29 invalidates a rule denying employment to one spouse due to
the current employment of the other spouse in the same office.30 Thus, they
rule that unless the employer can prove that the reasonable demands of the
business require a distinction based on marital status and there is no better
available or acceptable policy which would better accomplish the business
purpose, an employer may not discriminate against an employee based on
the identity of the employees spouse.31 This is known as the bona fide
occupational qualification exception.
We note that since the finding of a bona fide occupational qualification
justifies an employers no-spouse rule, the exception is interpreted strictly
and narrowly by these state courts. There must be a compelling business
necessity for which no alternative exists other than the discriminatory
practice.32 To justify a bona fide occupational qualification, the employer
must prove two factors: (1) that the employment qualification is reasonably
related to the essential operation of the job involved; and, (2) that there is a

factual basis for believing that all or substantially all persons meeting the
qualification would be unable to properly perform the duties of the job.33
The concept of a bona fide occupational qualification is not foreign in our
jurisdiction. We employ the standard ofreasonableness of the company
policy which is parallel to the bona fide occupational qualification
requirement. In the recent case of Duncan Association of DetailmanPTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we
passed on the validity of the policy of a pharmaceutical company prohibiting
its employees from marrying employees of any competitor company. We held
that Glaxo has a right to guard its trade secrets, manufacturing formulas,
marketing strategies and other confidential programs and information from
competitors. We considered the prohibition against personal or marital
relationships with employees of competitor companies upon Glaxos
employeesreasonable under the circumstances because relationships of that
nature might compromise the interests of Glaxo. In laying down the assailed
company policy, we recognized that Glaxo only aims to protect its interests
against the possibility that a competitor company will gain access to its
secrets and procedures.35
The requirement that a company policy must be reasonable under the
circumstances to qualify as a valid exercise of management prerogative was
also at issue in the 1997 case of Philippine Telegraph and Telephone
Company v. NLRC.36 In said case, the employee was dismissed in violation
of petitioners policy of disqualifying from work any woman worker who
contracts marriage. We held that the company policy violates the right
against discrimination afforded all women workers under Article 136 of the
Labor Code, but established a permissible exception, viz.:
[A] requirement that a woman employee must remain unmarried could be
justified as a "bona fide occupational qualification," or BFOQ, where the
particular requirements of the job would justify the same, but not on the
ground of a general principle, such as the desirability of spreading work in
the workplace. A requirement of that nature would be valid provided it
reflects an inherent quality reasonably necessary for satisfactory job
performance.37 (Emphases supplied.)
The cases of Duncan and PT&T instruct us that the requirement of
reasonableness must be clearly established to uphold the questioned
employment policy. The employer has the burden to prove the existence of a
reasonable business necessity. The burden was successfully discharged in
Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.
Petitioners sole contention that "the company did not just want to have two
(2) or more of its employees related between the third degree by affinity
and/or consanguinity"38 is lame. That the second paragraph was meant to
give teeth to the first paragraph of the questioned rule39 is evidently not the
valid reasonable business necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after
they were found fit for the job, but were asked to resign when they married a
co-employee. Petitioners failed to show how the marriage of Simbol, then a

Sheeting Machine Operator, to Alma Dayrit, then an employee of the


Repacking Section, could be detrimental to its business operations. Neither
did petitioners explain how this detriment will happen in the case of Wilfreda
Comia, then a Production Helper in the Selecting Department, who married
Howard Comia, then a helper in the cutter-machine. The policy is premised
on the mere fear that employees married to each other will be less efficient. If
we uphold the questioned rule without valid justification, the employer can
create policies based on an unproven presumption of a perceived danger at
the expense of an employees right to security of tenure.

avoid embarrassment and humiliation, she would not have gone back to
work at all. Nor would she have filed a suit for illegal dismissal and pleaded
for reinstatement. We have held that in voluntary resignation, the employee
is compelled by personal reason(s) to dissociate himself from employment. It
is done with the intention of relinquishing an office, accompanied by the act
of abandonment. 44 Thus, it is illogical for Estrella to resign and then file a
complaint for illegal dismissal. Given the lack of sufficient evidence on the
part of petitioners that the resignation was voluntary, Estrellas dismissal is
declared illegal.

Petitioners contend that their policy will apply only when one employee
marries a co-employee, but they are free to marry persons other than coemployees. The questioned policy may not facially violate Article 136 of the
Labor Code but it creates a disproportionate effect and under the disparate
impact theory, the only way it could pass judicial scrutiny is a showing that
it is reasonable despite the discriminatory, albeit disproportionate, effect.
The failure of petitioners to prove a legitimate business concern in imposing
the questioned policy cannot prejudice the employees right to be free from
arbitrary discrimination based upon stereotypes of married persons working
together in one company.40

IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No.


73477 dated August 3, 2004 isAFFIRMED.1avvphil.net

Lastly, the absence of a statute expressly prohibiting marital discrimination


in our jurisdiction cannot benefit the petitioners. The protection given to
labor in our jurisdiction is vast and extensive that we cannot prudently draw
inferences from the legislatures silence 41 that married persons are not
protected under our Constitution and declare valid a policy based on a
prejudice or stereotype. Thus, for failure of petitioners to present undisputed
proof of a reasonable business necessity, we rule that the questioned policy
is an invalid exercise of management prerogative. Corollarily, the issue as to
whether respondents Simbol and Comia resigned voluntarily has become
moot and academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling
on the singular fact that her resignation letter was written in her own
handwriting. Both ruled that her resignation was voluntary and thus valid.
The respondent court failed to categorically rule whether Estrella voluntarily
resigned but ordered that she be reinstated along with Simbol and Comia.
Estrella claims that she was pressured to submit a resignation letter because
she was in dire need of money. We examined the records of the case and find
Estrellas contention to be more in accord with the evidence. While findings of
fact by administrative tribunals like the NLRC are generally given not only
respect but, at times, finality, this rule admits of exceptions, 42 as in the case
at bar.
Estrella avers that she went back to work on December 21, 1999 but was
dismissed due to her alleged immoral conduct. At first, she did not want to
sign the termination papers but she was forced to tender her resignation
letter in exchange for her thirteenth month pay.
The contention of petitioners that Estrella was pressured to resign because
she got impregnated by a married man and she could not stand being looked
upon or talked about as immoral43 is incredulous. If she really wanted to

SO ORDERED.

G.R. No. 155831

February 18, 2008

MA. LOURDES T. DOMINGO, petitioner,


vs.
ROGELIO I. RAYALA, respondent.
x-------------------------x
G.R. No. 155840

February 18, 2008

ROGELIO I. RAYALA, petitioner,


vs.
OFFICE OF THE PRESIDENT; RONALDO V. ZAMORA, in his capacity as
Executive Secretary; ROY V. SENERES, in his capacity as Chairman of
the National Labor Relations Commission (in lieu of RAUL T. AQUINO, in
his capacity as Acting Chairman of the National labor Relations
Commission); and MA. LOURDES T. DOMINGO, respondents.
x-------------------------x
G.R. No. 158700

February 18, 2008

The REPUBLIC OF THE PHILIPPINES, represented by the OFFICE OF


THE PRESIDENT; and ALBERTO G. ROMULO, in his capacity as
Executive Secretary, petitioners,
vs.
ROGELIO I. RAYALA, respondent.
DECISION
NACHURA, J.:
Sexual harassment is an imposition of misplaced "superiority" which is
enough to dampen an employees spirit and her capacity for advancement. It
affects her sense of judgment; it changes her life.1
Before this Court are three Petitions for Review on Certiorari assailing the
October 18, 2002 Resolution of the CAs Former Ninth Division2 in CA-G.R.
SP No. 61026. The Resolution modified the December 14, 2001 Decision 3of
the Court of Appeals Eleventh Division, which had affirmed the Decision of
the Office of the President (OP) dismissing from the service then National
Labor Relations Commission (NLRC) Chairman Rogelio I. Rayala (Rayala) for
disgraceful and immoral conduct.
All three petitions stem from the same factual antecedents.
On November 16, 1998, Ma. Lourdes T. Domingo (Domingo), then
Stenographic Reporter III at the NLRC, filed a Complaint for sexual
harassment against Rayala before Secretary Bienvenido Laguesma of the
Department of Labor and Employment (DOLE).
To support the Complaint, Domingo executed an Affidavit narrating the
incidences of sexual harassment complained of, thus:
xxxx
4. Sa simula ay pabulong na sinasabihan lang ako ni Chairman
Rayala ng mga salitang "Lot, gumaganda ka yata?"

5. Sa ibang mga pagkakataon nilalapitan na ako ni Chairman at


hahawakan ang aking balikat sabay pisil sa mga ito habang ako ay
nagta-type at habang nagbibigay siya ng diktasyon. Sa mga
pagkakataong ito, kinakabahan ako. Natatakot na baka mangyari sa
akin ang mga napapabalitang insidente na nangyari na noon tungkol
sa mga sekretarya niyang nagbitiw gawa ng mga mahahalay na
panghihipo ni Chairman.
6. Noong ika-10 ng Setyembre, 1998, nang ako ay nasa 8 th Floor,
may nagsabi sa akin na kailangan akong bumaba sa 7 th Floor kung
nasaan ang aming opisina dahil sa may koreksyon daw na gagawin
sa mga papel na tinayp ko. Bumaba naman ako para gawin ito.
Habang ginagawa ko ito, lumabas si Chairman Rayala sa silid ni Mr.
Alex Lopez. Inutusan ako ni Chairman na sumunod sa kaniyang
silid. Nang nasa silid na kami, sinabi niya sa akin:
Chairman: Lot, I like you a lot. Naiiba ka sa lahat.
At pagkatapos ako ay kaniyang inusisa tungkol sa mga personal na
bagay sa aking buhay. Ang ilan dito ay tungkol sa aking mga
magulang, kapatid, pag-aaral at kung may boyfriend na raw ba ako.
Chairman: May boyfriend ka na ba?
Lourdes: Dati nagkaroon po.
Chairman: Nasaan na siya?
Lourdes: Nag-asawa na ho.
Chairman: Bakit hindi kayo nagkatuluyan?
Lourdes: Nainip po.
Chairman: Pagkatapos mo ng kurso mo ay kumuha ka ng
Law at ako ang bahala sa iyo, hanggang ako pa ang
Chairman dito.
Pagkatapos ay kumuha siya ng pera sa kaniyang amerikana at
inaabot sa akin.
Chairman: Kuhanin mo ito.
Lourdes: Huwag na ho hindi ko kailangan.
Chairman: Hindi sige, kuhanin mo. Ayusin mo ang dapat
ayusin.
Tinanggap ko po ang pera ng may pag-aalinlangan. Natatakot at
kinakabahan na kapag hindi ko tinanggap ang pera ay baka siya
magagalit kasabay na rito ang pagtapon sa akin kung saan-saan
opisina o kaya ay tanggalin ako sa posisyon.
Chairman: Paglabas mo itago mo ang pera. Ayaw ko ng may
makaka-alam nito. Just the two of us.
Lourdes: Bakit naman, Sir?

Chairman: Basta. Maraming tsismosa diyan sa labas. But I


dont give them a damn. Hindi ako mamatay sa kanila.
Tumayo na ako at lumabas. Pumanhik na ako ng 8 th Floor at
pumunta ako sa officemate ko na si Agnes Magdaet. Ikinwento ko
ang nangyari sa akin sa opisina ni Chairman. Habang kinikwento ko
ito kay Agnes ay binilang namin ang pera na nagkakahalaga ng
tatlong libong piso (PHP 3,000). Sinabi ni Agnes na isauli ko raw ang
pera, pero ang sabi ko ay natatakot ako baka magalit si Sir. Nagsabi
agad kami kay EC Perlita Velasco at sinalaysay ko ang nangyari.
Sinabi niya na isauli ko ang pera at noong araw ding iyon ay
nagpasiya akong isauli na nga ito ngunit hindi ako nagkaroon ng
pagkakataon dahil marami siyang naging bisita. Isinauli ko nga ang
pera noong Lunes, Setyembre 14, 1998.
7. Noong huling linggo ng Setyembre, 1998, ay may tinanong din sa
akin si Chairman Rayala na hindi ko masikmura, at sa aking
palagay at tahasang pambabastos sa akin.
Chairman: Lot, may ka live-in ka ba?
Lourdes: Sir, wala po.
Chairman: Bakit malaki ang balakang mo?
Lourdes: Kayo, Sir ha! Masama sa amin ang may ka live-in.
Chairman: Bakit, ano ba ang relihiyon ninyo?
Lourdes: Catholic, Sir. Kailangan ikasal muna.
Chairman: Bakit ako, hindi kasal.
Lourdes: Sir, di magpakasal kayo.
Chairman: Huh. Ibahin na nga natin ang usapan.
8. Noong Oktubre 29, 1998, ako ay pumasok sa kwarto ni Chairman
Rayala. Ito ay sa kadahilanang ang fax machine ay nasa loob ng
kaniyang kwarto. Ang nag-aasikaso nito, si Riza Ocampo, ay nakaleave kaya ako ang nag-asikaso nito noong araw na iyon. Nang
mabigyan ko na ng fax tone yung kausap ko, pagharap ko sa kanan
ay nakaharang sa dadaanan ko si Chairman Rayala. Tinitingnan ako
sa mata at ang titig niya ay umuusad mula ulo hanggang dibdib
tapos ay ngumiti na may mahalay na pakahulugan.
9. Noong hapon naman ng pareho pa ring petsa, may nag-aapply na
sekretarya sa opisina, sinabi ko ito kay Chairman Rayala:
Lourdes: Sir, si Pinky po yung applicant, mag-papainterview
po yata sa inyo.
Chairman: Sabihin mo magpa-pap smear muna siya
Chairman: O sige, i-refer mo kay Alex. (Alex Lopez, Chief of
Staff).

10. Noong Nobyembre 9, 1998, ako ay tinawag ni Chairman Rayala


sa kaniyang opisina upang kuhanin ko ang diktasyon niya para kay
ELA Oscar Uy. Hindi pa kami nakakatapos ng unang talata, may
pumasok na bisita si Chairman, si Baby Pangilinan na sinamahan ni
Riza Ocampo. Pinalabas muna ako ni Chairman. Nang maka-alis na
si Ms. Pangilinan, pinapasok na niya ako ulit. Umupo ako. Lumapit
sa likuran ko si Chairman, hinawakan ang kaliwang balikat ko na
pinipisil ng kanang kamay niya at sinabi:
Chairman: Saan na ba tayo natapos?
Palakad-lakad siya sa aking likuran habang nag-didikta. Huminto
siya pagkatapos, at nilagay niya ang kanang kamay niya sa aking
kanang balikat at pinisil-pisil ito pagkatapos ay pinagapang niya ito
sa kanang bahagi ng aking leeg, at pinagapang hanggang kanang
tenga at saka kiniliti. Dito ko inalis ang kaniyang kamay sa
pamamagitan ng aking kaliwang kamay. At saka ko sinabi:
Lourdes: Sir, yung kamay ninyo alisin niyo!
Natapos ko rin ang liham na pinagagawa niya pero halos hindi ko na
maintindihan ang na-isulat ko dahil sa takot at inis na
nararamdaman ko.4
After the last incident narrated, Domingo filed for leave of absence and asked
to be immediately transferred. Thereafter, she filed the Complaint for sexual
harassment on the basis of Administrative Order No. 250, the Rules and
Regulations Implementing RA 7877 in the Department of Labor and
Employment.
Upon receipt of the Complaint, the DOLE Secretary referred the Complaint to
the OP, Rayala being a presidential appointee. The OP, through then
Executive Secretary Ronaldo Zamora, ordered Secretary Laguesma to
investigate the allegations in the Complaint and create a committee for such
purpose. On December 4, 1998, Secretary Laguesma issued Administrative
Order (AO) No. 280, Series of 1998,5 constituting a Committee on Decorum
and Investigation (Committee) in accordance with Republic Act (RA) 7877,
the Anti-Sexual Harassment Act of 1995.6
The Committee heard the parties and received their respective evidence. On
March 2, 2000, the Committee submitted its report and recommendation to
Secretary Laguesma. It found Rayala guilty of the offense charged and
recommended the imposition of the minimum penalty provided under AO
250, which it erroneously stated as suspension for six (6) months.
The following day, Secretary Laguesma submitted a copy of the Committee
Report and Recommendation to the OP, but with the recommendation that
the penalty should be suspension for six (6) months and one (1) day, in
accordance with AO 250.
On May 8, 2000, the OP, through Executive Secretary Zamora, issued AO
119,7 the pertinent portions of which read:
Upon a careful scrutiny of the evidence on record, I concur with the
findings of the Committee as to the culpability of the respondent

[Rayala], the same having been established by clear and convincing


evidence. However, I disagree with the recommendation that
respondent be meted only the penalty of suspension for six (6)
months and one (1) day considering the circumstances of the case.
What aggravates respondents situation is the undeniable
circumstance that he took advantage of his position as the superior
of the complainant. Respondent occupies the highest position in the
NLRC, being its Chairman. As head of said office, it was incumbent
upon respondent to set an example to the others as to how they
should conduct themselves in public office, to see to it that his
subordinates work efficiently in accordance with Civil Service Rules
and Regulations, and to provide them with healthy working
atmosphere wherein co-workers treat each other with respect,
courtesy and cooperation, so that in the end the public interest will
be benefited (City Mayor of Zamboanga vs. Court of Appeals, 182
SCRA 785 [1990]).
What is more, public service requires the utmost integrity and
strictest discipline (Gano vs. Leonen, 232 SCRA 99 [1994]). Thus, a
public servant must exhibit at all times the highest sense of honesty
and integrity, and "utmost devotion and dedication to duty" (Sec. 4
(g), RA 6713), respect the rights of others and shall refrain from
doing acts contrary to law, and good morals (Sec. 4(c)). No less than
the Constitution sanctifies the principle that a public office is a
public trust, and enjoins all public officers and employees to serve
with the highest degree of responsibility, integrity, loyalty and
efficiency (Section 1, Article XI, 1987 Constitution).
Given these established standards, I see respondents acts not just
[as] a failure to give due courtesy and respect to his co-employees
(subordinates) or to maintain good conduct and behavior but
defiance of the basic norms or virtues which a government official
must at all times uphold, one that is contrary to law and "public
sense of morality." Otherwise stated, respondent to whom stricter
standards must apply being the highest official [of] the NLRC had
shown an attitude, a frame of mind, a disgraceful conduct, which
renders him unfit to remain in the service.
WHEREFORE, in view of the foregoing, respondent Rogelio I. Rayala,
Chairman, National Labor Relations Commission, is found guilty of
the grave offense of disgraceful and immoral conduct and is
herebyDISMISSED from the service effective upon receipt of this
Order.
SO ORDER[ED].
Rayala filed a Motion for Reconsideration, which the OP denied in a
Resolution8 dated May 24, 2000. He then filed a Petition for Certiorari and
Prohibition with Prayer for Temporary Restraining Order under Rule 65 of
the Revised Rules on Civil Procedure before this Court on June 14,
2000.9 However, the same was dismissed in a Resolution dated June 26,
2000 for disregarding the hierarchy of courts.10 Rayala filed a Motion for

Reconsideration11 on August 15, 2000. In its Resolution12 dated September


4, 2000, the Court recalled its June 26 Resolution and referred the petition
to the Court of Appeals (CA) for appropriate action.
The CA rendered its Decision13 on December 14, 2001. It held that there was
sufficient evidence on record to create moral certainty that Rayala committed
the acts he was charged with. It said:
The complainant narrated her story complete with details. Her
straightforward and uninhibited testimony was not emasculated by
the declarations of Commissioner Rayala or his witnesses. x x x
Moreover, Commissioner Rayala has not proven any vicious motive
for Domingo and her witnesses to invent their stories. It is very
unlikely that they would perjure themselves only to accommodate
the alleged conspiracy to oust petitioner from office. Save for his
empty conjectures and speculations, Rayala failed to substantiate his
contrived conspiracy. It is a hornbook doctrine that conspiracy must
be proved by positive and convincing evidence (People v. Noroa, 329
SCRA 502 [2000]). Besides, it is improbable that the complainant
would concoct a story of sexual harassment against the highest
official of the NLRC and thereby expose herself to the possibility of
losing her job, or be the subject of reprisal from her superiors and
perhaps public ridicule if she was not telling the truth.
It also held that Rayalas dismissal was proper. The CA pointed out that
Rayala was dismissed for disgraceful and immoral conduct in violation of RA
6713, the Code of Conduct and Ethical Standards for Public Officials and
Employees. It held that the OP was correct in concluding that Rayalas acts
violated RA 6713:
Indeed, [Rayala] was a public official, holding the Chairmanship of
the National Labor Relations Commission, entrusted with the sacred
duty of administering justice. Occupying as he does such an exalted
position, Commissioner Rayala must pay a high price for the honor
bestowed upon him. He must comport himself at all times in such a
manner that the conduct of his everyday life should be beyond
reproach and free from any impropriety. That the acts complained of
were committed within the sanctuary of [his] office compounded the
objectionable nature of his wrongdoing. By daring to violate the
complainant within the solitude of his chambers, Commissioner
Rayala placed the integrity of his office in disrepute. His disgraceful
and immoral conduct warrants his removal from office.14
Thus, it dismissed the petition, to wit:
IN VIEW OF ALL THE FOREGOING, the instant petition is hereby
DISMISSED and Administrative Order No. 119 as well [as] the
Resolution of the Office of the President in O.P. Case No. 00-E-9118
dated May 24, 2000 are AFFIRMED IN TOTO. No cost.
SO ORDERED.15
Rayala timely filed a Motion for Reconsideration. Justices Vasquez and
Tolentino voted to affirm the December 14 Decision. However, Justice Reyes

dissented mainly because AO 250 states that the penalty imposable is


suspension for six (6) months and one (1) day.16 Pursuant to the internal
rules of the CA, a Special Division of Five was constituted.17 In its October
18, 2002 Resolution, the CA modified its earlier Decision:
ACCORDINGLY, the Decision dated December [14], 2001 is
MODIFIED to the effect that the penalty of dismissal is DELETED
and instead the penalty of suspension from service for the maximum
period of one (1) year is HEREBY IMPOSED upon the petitioner. The
rest of the challenged decision stands.
SO ORDERED.
Domingo filed a Petition for Review18 before this Court, which we denied in
our February 19, 2003 Resolution for having a defective verification. She filed
a Motion for Reconsideration, which the Court granted; hence, the petition
was reinstated.
Rayala likewise filed a Petition for Review19 with this Court essentially
arguing that he is not guilty of any act of sexual harassment.
Meanwhile, the Republic filed a Motion for Reconsideration of the CAs
October 18, 2002 Resolution. The CA denied the same in its June 3, 2003
Resolution, the dispositive portion of which reads:
ACCORDINGLY, by a majority vote, public respondents Motion for
Reconsideration, (sic) is DENIED.
SO ORDERED.
The Republic then filed its own Petition for Review.20
On June 28, 2004, the Court directed the consolidation of the three (3)
petitions.
G.R. No. 155831
Domingo assails the CAs resolution modifying the penalty imposed by the
Office of the President. She raises this issue:
The Court of Appeals erred in modifying the penalty for the
respondent from dismissal to suspension from service for the
maximum period of one year. The President has the prerogative to
determine the proper penalty to be imposed on an erring Presidential
appointee. The President was well within his power when he fittingly
used that prerogative in deciding to dismiss the respondent from the
service.21
She argues that the power to remove Rayala, a presidential appointee, is
lodged with the President who has control of the entire Executive
Department, its bureaus and offices. The OPs decision was arrived at after
affording Rayala due process. Hence, his dismissal from the service is a
prerogative that is entirely with the President.22
As to the applicability of AO No. 250, she argues that the same was not
intended to cover cases against presidential appointees. AO No. 250 refers
only to the instances wherein the DOLE Secretary is the disciplining

authority, and thus, the AO does not circumscribe the power of the President
to dismiss an erring presidential appointee.
G.R. No. 155840
In his petition, Rayala raises the following issues:
I. CONTRARY TO THE FINDINGS OF THE COURT OF APPEALS,
THE ACTS OF HEREIN PETITIONER DO NOT CONSTITUTE
SEXUAL HARASSMENT AS LAID DOWN BY THE En Banc RULING
IN THE CASE OFAQUINO vs. ACOSTA, ibid., AS WELL AS IN THE
APPLICATION OF EXISTING LAWS.
II. CONTRARY TO THE FINDINGS OF THE HONORABLE COURT
OF APPEALS, INTENT IS AN INDISPENSABLE ELEMENT IN A
CASE FOR SEXUAL HARASSMENT. THE HONORABLE COURT
ERRED IN ITS FINDING THAT IT IS AN OFFENSE THAT IS
MALUM PROHIBITUM.
III. THE INVESTIGATION COMMITTEE, THE OFFICE OF THE
PRESIDENT, AND NOW, THE HONORABLE COURT OF APPEALS,
HAS MISAPPLIED AND EXPANDED THE DEFINITION OF SEXUAL
HARASSMENT IN THE WORKPLACE UNDER R.A. No. 7877, BY
APPLYING DOLE A.O. 250, WHICH RUNS COUNTER TO THE
RECENT PRONOUNCEMENTS OF THIS HONORABLE SUPREME
COURT.23
Invoking Aquino v. Acosta,24 Rayala argues that the case is the definitive
ruling on what constitutes sexual harassment. Thus, he posits that for
sexual harassment to exist under RA 7877, there must be: (a) demand,
request, or requirement of a sexual favor; (b) the same is made a precondition to hiring, re-employment, or continued employment; or (c) the
denial thereof results in discrimination against the employee.
Rayala asserts that Domingo has failed to allege and establish any sexual
favor, demand, or request from petitioner in exchange for her continued
employment or for her promotion. According to Rayala, the acts imputed to
him are without malice or ulterior motive. It was merely Domingos
perception of malice in his alleged acts a "product of her own
imagination"25 that led her to file the sexual harassment complaint.
Likewise, Rayala assails the OPs interpretation, as upheld by the CA, that
RA 7877 is malum prohibitum such that the defense of absence of malice is
unavailing. He argues that sexual harassment is considered an offense
against a particular person, not against society as a whole. Thus, he claims
that intent is an essential element of the offense because the law requires as
a conditio sine qua non that a sexual favor be first sought by the offender in
order to achieve certain specific results. Sexual harassment is committed
with the perpetrators deliberate intent to commit the offense.26
Rayala next argues that AO 250 expands the acts proscribed in RA 7877. In
particular, he assails the definition of the forms of sexual harassment:
Rule IV

FORMS OF SEXUAL HARASSMENT


Section 1. Forms of Sexual Harassment. Sexual harassment may
be committed in any of the following forms:
a) Overt sexual advances;
b) Unwelcome or improper gestures of affection;
c) Request or demand for sexual favors including but not limited to
going out on dates, outings or the like for the same purpose;
d) Any other act or conduct of a sexual nature or for purposes of
sexual gratification which is generally annoying, disgusting or
offensive to the victim.27
He posits that these acts alone without corresponding demand, request, or
requirement do not constitute sexual harassment as contemplated by the
law.28 He alleges that the rule-making power granted to the employer in
Section 4(a) of RA 7877 is limited only to procedural matters. The law did not
delegate to the employer the power to promulgate rules which would provide
other or additional forms of sexual harassment, or to come up with its own
definition of sexual harassment.29
G.R. No. 158700
The Republic raises this issue:
Whether or not the President of the Philippines may validly
dismiss respondent Rayala as Chairman of the NLRC for
committing acts of sexual harassment.30
The Republic argues that Rayalas acts constitute sexual harassment under
AO 250. His acts constitute unwelcome or improper gestures of affection and
are acts or conduct of a sexual nature, which are generally annoying or
offensive to the victim.31
It also contends that there is no legal basis for the CAs reduction of the
penalty imposed by the OP. Rayalas dismissal is valid and warranted under
the circumstances. The power to remove the NLRC Chairman solely rests
upon the President, limited only by the requirements under the law and the
due process clause.
The Republic further claims that, although AO 250 provides only a one (1)
year suspension, it will not prevent the OP from validly imposing the penalty
of dismissal on Rayala. It argues that even though Rayala is a presidential
appointee, he is still subject to the Civil Service Law. Under the Civil Service
Law, disgraceful and immoral conduct, the acts imputed to Rayala,
constitute grave misconduct punishable by dismissal from the service.32 The
Republic adds that Rayalas position is invested with public trust and his
acts violated that trust; thus, he should be dismissed from the service.
This argument, according to the Republic, is also supported by Article 215 of
the Labor Code, which states that the Chairman of the NLRC holds office
until he reaches the age of 65 only during good behavior.33 Since Rayalas

security of tenure is conditioned upon his good behavior, he may be removed


from office if it is proven that he has failed to live up to this standard.
All the issues raised in these three cases can be summed up in two ultimate
questions, namely:
(1) Did Rayala commit sexual harassment?
(2) If he did, what is the applicable penalty?
Initially, however, we must resolve a procedural issue raised by Rayala. He
accuses the Office of the Solicitor General (OSG), as counsel for the Republic,
of forum shopping because it filed a motion for reconsideration of the
decision in CA-G.R. SP No. 61026 and then filed a comment in G.R. No.
155840 before this Court.
We do not agree.
Forum shopping is an act of a party, against whom an adverse judgment or
order has been rendered in one forum, of seeking and possibly securing a
favorable opinion in another forum, other than by appeal or special civil
action for certiorari.34 It consists of filing multiple suits involving the same
parties for the same cause of action, either simultaneously or successively,
for the purpose of obtaining a favorable judgment.35
There is forum shopping when the following elements concur: (1) identity of
the parties or, at least, of the parties who represent the same interest in both
actions; (2) identity of the rights asserted and relief prayed for, as the latter is
founded on the same set of facts; and (3) identity of the two preceding
particulars such that any judgment rendered in the other action will amount
to res judicata in the action under consideration or will constitute litis
pendentia.36
Reviewing the antecedents of these consolidated cases, we note that the CA
rendered the assailed Resolution on October 18, 2002. The Republic filed its
Motion for Reconsideration on November 22, 2002. On the other hand,
Rayala filed his petition before this Court on November 21, 2002. While the
Republics Motion for Reconsideration was pending resolution before the CA,
on December 2, 2002, it was directed by this Court to file its Comment on
Rayalas petition, which it submitted on June 16, 2003.
When the CA denied the Motion for Reconsideration, the Republic filed its
own Petition for Review with this Court on July 3, 2003. It cited in its
"Certification and Verification of a Non-Forum Shopping" (sic), that there was
a case involving the same facts pending before this Court denominated as
G.R. No. 155840. With respect to Domingos petition, the same had already
been dismissed on February 19, 2003. Domingos petition was reinstated on
June 16, 2003 but the resolution was received by the OSG only on July 25,
2003, or after it had filed its own petition.37
Based on the foregoing, it cannot be said that the OSG is guilty of forum
shopping. We must point out that it was Rayala who filed the petition in the
CA, with the Republic as the adverse party. Rayala himself filed a motion for
reconsideration of the CAs December 21, 2001 Decision, which led to a more
favorable ruling, i.e., the lowering of the penalty from dismissal to one-year

suspension. The parties adversely affected by this ruling (Domingo and the
Republic) had the right to question the same on motion for reconsideration.
But Domingo directly filed a Petition for Review with this Court, as did
Rayala. When the Republic opted to file a motion for reconsideration, it was
merely exercising a right. That Rayala and Domingo had by then already filed
cases before the SC did not take away this right. Thus, when this Court
directed the Republic to file its Comment on Rayalas petition, it had to
comply, even if it had an unresolved motion for reconsideration with the CA,
lest it be cited for contempt.

Sec. 3. Work, Education or Training-related Sexual Harassment


Defined. Work, education or training-related sexual harassment is
committed by an employer, manager, supervisor, agent of the
employer, teacher, instructor, professor, coach, trainor, or any other
person who, having authority, influence or moral ascendancy over
another in a work or training or education environment, demands,
requests or otherwise requires any sexual favor from the other,
regardless of whether the demand, request or requirement for
submission is accepted by the object of said Act.

Accordingly, it cannot be said that the OSG "file[d] multiple suits involving
the same parties for the same cause of action, either simultaneously or
successively, for the purpose of obtaining a favorable judgment."

(a) In a work-related or employment environment, sexual harassment


is committed when:

We now proceed to discuss the substantive issues.


It is noteworthy that the five CA Justices who deliberated on the case were
unanimous in upholding the findings of the Committee and the OP. They
found the assessment made by the Committee and the OP to be a
"meticulous and dispassionate analysis of the testimonies of the complainant
(Domingo), the respondent (Rayala), and their respective witnesses." 38 They
differed only on the appropriate imposable penalty.
That Rayala committed the acts complained of and was guilty of sexual
harassment is, therefore, the common factual finding of not just one, but
three independent bodies: the Committee, the OP and the CA. It should be
remembered that when supported by substantial evidence, factual findings
made by quasi-judicial and administrative bodies are accorded great respect
and even finality by the courts.39 The principle, therefore, dictates that such
findings should bind us.40
Indeed, we find no reason to deviate from this rule. There appears no valid
ground for this Court to review the factual findings of the CA, the OP, and
the Investigating Committee. These findings are now conclusive on the Court.
And quite significantly, Rayala himself admits to having committed some of
the acts imputed to him.
He insists, however, that these acts do not constitute sexual harassment,
because Domingo did not allege in her complaint that there was a demand,
request, or requirement of a sexual favor as a condition for her continued
employment or for her promotion to a higher position.41 Rayala urges us to
apply to his case our ruling in Aquino v. Acosta.42
We find respondents insistence unconvincing.

(1) The sexual favor is made as a condition in the hiring or in the


employment, re-employment or continued employment of said
individual, or in granting said individual favorable compensation,
terms, conditions, promotions, or privileges; or the refusal to grant
the sexual favor results in limiting, segregating or classifying the
employee which in a way would discriminate, deprive or diminish
employment opportunities or otherwise adversely affect said
employee;
(2) The above acts would impair the employees rights or privileges
under existing labor laws; or
(3) The above acts would result in an intimidating, hostile, or
offensive environment for the employee.
This section, in relation to Section 7 on penalties, defines the criminal aspect
of the unlawful act of sexual harassment. The same section, in relation to
Section 6, authorizes the institution of an independent civil action for
damages and other affirmative relief.
Section 4, also in relation to Section 3, governs the procedure for
administrative cases, viz.:
Sec. 4. Duty of the Employer or Head of Office in a Work-related,
Education or Training Environment. It shall be the duty of the
employer or the head of the work-related, educational or training
environment or institution, to prevent or deter the commission of
acts of sexual harassment and to provide the procedures for the
resolution, settlement or prosecution of acts of sexual harassment.
Towards this end, the employer or head of office shall:

Basic in the law of public officers is the three-fold liability rule, which states
that the wrongful acts or omissions of a public officer may give rise to civil,
criminal and administrative liability. An action for each can proceed
independently of the others.43 This rule applies with full force to sexual
harassment.

(a) Promulgate appropriate rules and regulations in


consultation with and jointly approved by the employees or
students or trainees, through their duly designated
representatives, prescribing the procedure for the
investigation or sexual harassment cases and the
administrative sanctions therefor.

The law penalizing sexual harassment in our jurisdiction is RA 7877. Section


3 thereof defines work-related sexual harassment in this wise:

Administrative sanctions shall not be a bar to prosecution in


the proper courts for unlawful acts of sexual harassment.

The said rules and regulations issued pursuant to this


section (a) shall include, among others, guidelines on proper
decorum in the workplace and educational or training
institutions.
(b) Create a committee on decorum and investigation of
cases on sexual harassment. The committee shall conduct
meetings, as the case may be, with other officers and
employees, teachers, instructors, professors, coaches,
trainors and students or trainees to increase understanding
and prevent incidents of sexual harassment. It shall also
conduct the investigation of the alleged cases constituting
sexual harassment.
In the case of a work-related environment, the committee shall be
composed of at least one (1) representative each from the
management, the union, if any, the employees from the supervisory
rank, and from the rank and file employees.
In the case of the educational or training institution, the committee
shall be composed of at least one (1) representative from the
administration, the trainors, teachers, instructors, professors or
coaches and students or trainees, as the case maybe.
The employer or head of office, educational or training institution
shall disseminate or post a copy of this Act for the information of all
concerned.
The CA, thus, correctly ruled that Rayalas culpability is not to be determined
solely on the basis of Section 3, RA 7877, because he is charged with the
administrative offense, not the criminal infraction, of sexual harassment. 44 It
should be enough that the CA, along with the Investigating Committee and
the Office of the President, found substantial evidence to support the
administrative charge.
Yet, even if we were to test Rayalas acts strictly by the standards set in
Section 3, RA 7877, he would still be administratively liable. It is true that
this provision calls for a "demand, request or requirement of a sexual favor."
But it is not necessary that the demand, request or requirement of a sexual
favor be articulated in a categorical oral or written statement. It may be
discerned, with equal certitude, from the acts of the offender. Holding and
squeezing Domingos shoulders, running his fingers across her neck and
tickling her ear, having inappropriate conversations with her, giving her
money allegedly for school expenses with a promise of future privileges, and
making statements with unmistakable sexual overtones all these acts of
Rayala resound with deafening clarity the unspoken request for a sexual
favor.
Likewise, contrary to Rayalas claim, it is not essential that the demand,
request or requirement be made as a condition for continued employment or
for promotion to a higher position. It is enough that the respondents acts
result in creating an intimidating, hostile or offensive environment for the
employee.45 That the acts of Rayala generated an intimidating and hostile
environment for Domingo is clearly shown by the common factual finding of

the Investigating Committee, the OP and the CA that Domingo reported the
matter to an officemate and, after the last incident, filed for a leave of
absence and requested transfer to another unit.
Rayalas invocation of Aquino v. Acosta46 is misplaced, because the factual
setting in that case is different from that in the case at bench. In Aquino,
Atty. Susan Aquino, Chief of the Legal and Technical Staff of the Court of Tax
Appeals (CTA), charged then CTA Presiding Judge (now Presiding Justice)
Ernesto Acosta of sexual harassment. She complained of several incidents
when Judge Acosta allegedly kissed her, embraced her, and put his arm
around her shoulder. The case was referred to CA Justice Josefina G.
Salonga for investigation. In her report, Justice Salonga found that "the
complainant failed to show by convincing evidence that the acts of Judge
Acosta in greeting her with a kiss on the cheek, in a `beso-beso fashion, were
carried out with lustful and lascivious desires or were motivated by malice or
ill motive. It is clear from the circumstances that most of the kissing
incidents were done on festive and special occasions," and they "took place in
the presence of other people and the same was by reason of the exaltation or
happiness of the moment." Thus, Justice Salonga concluded:
In all the incidents complained of, the respondent's pecks on the
cheeks of the complainant should be understood in the context of
having been done on the occasion of some festivities, and not the
assertion of the latter that she was singled out by Judge Acosta in
his kissing escapades. The busses on her cheeks were simply
friendly and innocent, bereft of malice and lewd design. The fact that
respondent judge kisses other people on the cheeks in the 'besobeso' fashion, without malice, was corroborated by Atty. Florecita P.
Flores, Ms. Josephine Adalem and Ms. Ma. Fides Balili, who stated
that they usually practice 'beso-beso' or kissing on the cheeks, as a
form of greeting on occasions when they meet each other, like
birthdays, Christmas, New Year's Day and even Valentine's Day, and
it does not matter whether it is Judge Acosta's birthday or their
birthdays. Theresa Cinco Bactat, a lawyer who belongs to
complainant's department, further attested that on occasions like
birthdays, respondent judge would likewise greet her with a peck on
the cheek in a 'beso-beso' manner. Interestingly, in one of several
festive occasions, female employees of the CTA pecked respondent
judge on the cheek where Atty. Aquino was one of Judge Acosta's
well wishers.
In sum, no sexual harassment had indeed transpired on those six
occasions. Judge Acosta's acts of bussing Atty. Aquino on her cheek
were merely forms of greetings, casual and customary in nature. No
evidence of intent to sexually harass complainant was apparent, only
that the innocent acts of 'beso-beso' were given malicious
connotations by the complainant. In fact, she did not even relate to
anyone what happened to her. Undeniably, there is no manifest
sexual undertone in all those incidents.47
This Court agreed with Justice Salonga, and Judge Acosta was exonerated.

To repeat, this factual milieu in Aquino does not obtain in the case at bench.
While in Aquino, the Court interpreted the acts (of Judge Acosta) as casual
gestures of friendship and camaraderie, done during festive or special
occasions and with other people present, in the instant case, Rayalas acts of
holding and squeezing Domingos shoulders, running his fingers across her
neck and tickling her ear, and the inappropriate comments, were all made in
the confines of Rayalas office when no other members of his staff were
around. More importantly, and a circumstance absent in Aquino, Rayalas
acts, as already adverted to above, produced a hostile work environment for
Domingo, as shown by her having reported the matter to an officemate and,
after the last incident, filing for a leave of absence and requesting transfer to
another unit.
Rayala also argues that AO 250 does not apply to him. First, he argues that
AO 250 does not cover the NLRC, which, at the time of the incident, was
under the DOLE only for purposes of program and policy coordination.
Second, he posits that even assuming AO 250 is applicable to the NLRC, he
is not within its coverage because he is a presidential appointee.
We find, however, that the question of whether or not AO 250 covers Rayala
is of no real consequence. The events of this case unmistakably show that
the administrative charges against Rayala were for violation of RA 7877; that
the OP properly assumed jurisdiction over the administrative case; that the
participation of the DOLE, through the Committee created by the Secretary,
was limited to initiating the investigation process, reception of evidence of the
parties, preparation of the investigation report, and recommending the
appropriate action to be taken by the OP. AO 250 had never really been
applied to Rayala. If it was used at all, it was to serve merely as an auxiliary
procedural guide to aid the Committee in the orderly conduct of the
investigation.
Next, Rayala alleges that the CA erred in holding that sexual harassment is
an offense malum prohibitum. He argues that intent is an essential element in
sexual harassment, and since the acts imputed to him were done allegedly
without malice, he should be absolved of the charges against him.
We reiterate that what is before us is an administrative case for sexual
harassment. Thus, whether the crime ofsexual harassment is malum in
se or malum prohibitum is immaterial.
We also reject Rayalas allegations that the charges were filed because of a
conspiracy to get him out of office and thus constitute merely political
harassment. A conspiracy must be proved by clear and convincing evidence.
His bare assertions cannot stand against the evidence presented by
Domingo. As we have already ruled, the acts imputed to Rayala have been
proven as fact. Moreover, he has not proven any ill motive on the part of
Domingo and her witnesses which would be ample reason for her to conjure
stories about him. On the contrary, ill motive is belied by the fact that
Domingo and her witnesses all employees of the NLRC at that time stood
to lose their jobs or suffer unpleasant consequences for coming forward and
charging their boss with sexual harassment.

Furthermore, Rayala decries the alleged violation of his right to due process.
He accuses the Committee on Decorum of railroading his trial for violation of
RA 7877. He also scored the OPs decision finding him guilty of "disgraceful
and immoral conduct" under the Revised Administrative Code and not for
violation of RA 7877. Considering that he was not tried for "disgraceful and
immoral conduct," he argues that the verdict is a "sham and total nullity."
We hold that Rayala was properly accorded due process. In previous cases,
this Court held that:
[i]n administrative proceedings, due process has been recognized to
include the following: (1) the right to actual or constructive notice of
the institution of proceedings which may affect a respondents legal
rights; (2) a real opportunity to be heard personally or with the
assistance of counsel, to present witnesses and evidence in ones
favor, and to defend ones rights; (3) a tribunal vested with
competent jurisdiction and so constituted as to afford a person
charged administratively a reasonable guarantee of honesty as well
as impartiality; and (4) a finding by said tribunal which is supported
by substantial evidence submitted for consideration during the
hearing or contained in the records or made known to the parties
affected.48
The records of the case indicate that Rayala was afforded all these procedural
due process safeguards. Although in the beginning he questioned the
authority of the Committee to try him,49 he appeared, personally and with
counsel, and participated in the proceedings.
On the other point raised, this Court has held that, even in criminal cases,
the designation of the offense is not controlling, thus:
What is controlling is not the title of the complaint, nor the
designation of the offense charged or the particular law or part
thereof allegedly violated, these being mere conclusions of law made
by the prosecutor, but the description of the crime charged and the
particular facts therein recited. The acts or omissions complained of
must be alleged in such form as is sufficient to enable a person of
common understanding to know what offense is intended to be
charged, and enable the court to pronounce proper judgment. No
information for a crime will be sufficient if it does not accurately and
clearly allege the elements of the crime charged. Every element of the
offense must be stated in the information. What facts and
circumstances are necessary to be included therein must be
determined by reference to the definitions and essentials of the
specified crimes. The requirement of alleging the elements of a crime
in the information is to inform the accused of the nature of the
accusation against him so as to enable him to suitably prepare his
defense.50
It is noteworthy that under AO 250, sexual harassment amounts to
disgraceful and immoral conduct.51 Thus, any finding of liability for sexual
harassment may also be the basis of culpability for disgraceful and immoral
conduct.

With the foregoing disquisitions affirming the finding that Rayala committed
sexual harassment, we now determine the proper penalty to be imposed.
Rayala attacks the penalty imposed by the OP. He alleges that under the
pertinent Civil Service Rules, disgraceful and immoral conduct is punishable
by suspension for a period of six (6) months and one (1) day to one (1) year.
He also argues that since he is charged administratively, aggravating or
mitigating circumstances cannot be appreciated for purposes of imposing the
penalty.
Under AO 250, the penalty for the first offense is suspension for six (6)
months and one (1) day to one (1) year, while the penalty for the second
offense is dismissal.52 On the other hand, Section 22(o), Rule XVI of the
Omnibus Rules Implementing Book V of the Administrative Code of
198753 and Section 52 A(15) of the Revised Uniform Rules on Administrative
Cases in the Civil Service 54 both provide that the first offense of disgraceful
and immoral conduct is punishable by suspension of six (6) months and one
(1) day to one (1) year. A second offense is punishable by dismissal.
Under the Labor Code, the Chairman of the NLRC shall hold office during
good behavior until he or she reaches the age of sixty-five, unless sooner
removed for cause as provided by law or becomes incapacitated to
discharge the duties of the office.55
In this case, it is the President of the Philippines, as the proper disciplining
authority, who would determine whether there is a valid cause for the
removal of Rayala as NLRC Chairman. This power, however, is qualified by
the phrase "for cause as provided by law." Thus, when the President found
that Rayala was indeed guilty of disgraceful and immoral conduct, the Chief
Executive did not have unfettered discretion to impose a penalty other than
the penalty provided by law for such offense. As cited above, the imposable
penalty for the first offense of either the administrative offense of sexual
harassment or for disgraceful and immoral conduct is suspension of six (6)
months and one (1) day to one (1) year. Accordingly, it was error for the Office
of the President to impose upon Rayala the penalty of dismissal from the
service, a penalty which can only be imposed upon commission of a second
offense.
Even if the OP properly considered the fact that Rayala took advantage of his
high government position, it still could not validly dismiss him from the
service. Under the Revised Uniform Rules on Administrative Cases in the Civil
Service,56 taking undue advantage of a subordinate may be considered as an
aggravating circumstance57and where only aggravating and no mitigating
circumstances are present, the maximum penalty shall be imposed.58 Hence,
the maximum penalty that can be imposed on Rayala is suspension for one
(1) year.
Rayala holds the exalted position of NLRC Chairman, with the rank
equivalent to a CA Justice. Thus, it is not unavailing that rigid standards of
conduct may be demanded of him. In Talens-Dabon v. Judge Arceo,59 this
Court, in upholding the liability of therein respondent Judge, said:
The actuations of respondent are aggravated by the fact that
complainant is one of his subordinates over whom he exercises

control and supervision, he being the executive judge. He took


advantage of his position and power in order to carry out his lustful
and lascivious desires. Instead of he being in loco parentis over his
subordinate employees, respondent was the one who preyed on
them, taking advantage of his superior position.
In yet another case, this Court declared:
As a managerial employee, petitioner is bound by more exacting work
ethics. He failed to live up to his higher standard of responsibility
when he succumbed to his moral perversity. And when such moral
perversity is perpetrated against his subordinate, he provides a
justifiable ground for his dismissal for lack of trust and confidence. It
is the right, nay, the duty of every employer to protect its employees
from oversexed superiors.60
It is incumbent upon the head of office to set an example on how his
employees should conduct themselves in public office, so that they may work
efficiently in a healthy working atmosphere. Courtesy demands that he
should set a good example.61
Rayala has thrown every argument in the book in a vain effort to effect his
exoneration. He even puts Domingos character in question and casts doubt
on the morality of the former President who ordered, albeit erroneously, his
dismissal from the service. Unfortunately for him, these are not significant
factors in the disposition of the case. It is his character that is in question
here and sadly, the inquiry showed that he has been found wanting.
WHEREFORE, the foregoing premises considered, the October 18, 2002
Resolution of the Court of Appeals in CA-G.R. SP No. 61026
is AFFIRMED. Consequently, the petitions in G.R. Nos. 155831, 155840,
and 158700 areDENIED. No pronouncement as to costs.
SO ORDERED.

A.M. No. CTA-01-1

April 2, 2002

ATTY. SUSAN M. AQUINO, complainant,


vs.
HON. ERNESTO D. ACOSTA, Presiding Judge, Court of Tax
Appeals, respondent.
SANDOVAL-GUTIERREZ, J.:
The present administrative case filed with this Court originated from a sworn
affidavit-complaint1 of Atty. Susan M. Aquino, Chief of the Legal and
Technical Staff of the Court of Tax Appeals (CTA), charging Judge Ernesto
Acosta, Presiding Judge of the same court, with sexual harassment under
R.A. 7877 and violation of the Canons of Judicial Ethics and Code of
Professional Responsibility.
In her affidavit-complaint, complainant alleged several instances when
respondent judge sexually harassed her.
On November 21, 2000, she reported for work after her vacation in the
United States, bringing gifts for the three judges of the CTA, including
respondent. In the afternoon of the same day, he entered her room and
greeted her by shaking her hand. Suddenly, he pulled her towards him and
kissed her on her cheek.

complainant sat in front of respondent's table and asked him what he wanted
to know about the Senate bill. Respondent seemed to be at a loss for words
and kept glancing at Ruby who was searching for something at the
secretary's desk. Forthwith, respondent approached Ruby, asked her what
she was looking for and stepped out of the office. When he returned, Ruby
said she found what she was looking for and left. Respondent then
approached complainant saying, "me gusto akong gawin sa iyo kahapon pa."
Thereupon, he tried to "grab" her. Complainant instinctively raised her hands
to protect herself but respondent held her arms tightly, pulled her towards
him and kissed her. She pushed him away, then slumped on a chair
trembling. Meantime, respondent sat on his chair and covered his face with
his hands. Thereafter, complainant left crying and locked herself inside a
comfort room. After that incident, respondent went to her office and tossed a
note3 stating, "sorry, it won't happen again."
In his comment, respondent judge denied complainant's allegation that he
sexually harassed her six times. He claimed that he has always treated her
with respect, being the head of the CTA Legal Staff. In fact, there is no strain
in their professional relationship.
On the first incident, he explained that it was quite unlikely that complainant
would ask him to go to her office on such date in order to give him a
"pasalubong."

On December 28, 2000, while respondent was on official leave, he called


complainant by phone, saying he will get something in her office. Shortly
thereafter, he entered her room, shook her hand and greeted her, "Merry
Christmas." Thereupon, he embraced her and kissed her. She was able to
free herself by slightly pushing him away. Complainant submitted the Joint
Affidavit2 of Ma. Imelda C. Samonte and Anne Benita M. Santos, CTA Tax
Specialists, to prove that respondent went to her office that day.

With respect to the second incident on December 28, he claimed it could not
have happened as he was then on official leave.

On the first working day in January, 2001, respondent phoned complainant,


asking if she could see him in his chambers in order to discuss some
matters. When complainant arrived there, respondent tried to kiss her but
she was able to evade his sexual attempt. She then resolved not to enter his
chambers alone.

As to the fourth episode, he averred that he and complainant had been


attending the deliberations of the Bicameral Conference Committee at the
Senate on the bill expanding the jurisdiction of the CTA. Hence, when the bill
was finally approved that particular day, respondent, in jubilation and in the
presence of other people, gave complainant a spontaneous peck on her
cheek. He could not recall any resentment on her part when he kissed her.
She even congratulated him in return, saying "Justice ka na Judge." Then he
treated her to a lunch to celebrate the event. Respondent recounted several
times when they would return to the CTA in the evening after attending the
committee hearings in Congress to retrieve complainant's personal
belongings from her office. Surely, if he had malice in his mind, those
instances would have been the perfect opportunities for him to sexually
harass her.

Weeks later, after the Senate approved the proposed bill expanding the
jurisdiction of the CTA, while complainant and her companions were
congratulating and kissing each other, respondent suddenly placed his arms
around her shoulders and kissed her.
In the morning of February 14, 2001, respondent called complainant,
requesting her to go to his office. She then asked Ruby Lanuza, a clerk in the
Records Section, to accompany her. Fortunately, when they reached his
chambers, respondent had left.
The last incident happened the next day. At around 8:30 a.m., respondent
called complainant and asked her to see him in his office to discuss the
Senate bill on the CTA. She again requested Ruby to accompany her. The
latter agreed but suggested that they should act as if they met by accident in
respondent's office. Ruby then approached the secretary's table which was
separated from respondent's office by a transparent glass. For her part,

Anent the third incident, respondent explained that he went to the various
offices of the CTA to extend New Year's greetings to the personnel. He also
greeted complainant with a casual buss on her cheek and gave her a
calendar. In turn, she also greeted him.

As to the fifth incident, respondent alleged that he did not call complainant
to harass her, but to discuss with her and Elizabeth Lozano, HRMO III, and
Elsie T. Forteza, Administrative Officer, the health plan for the CTA officers
and employees. The fact that such meeting took place was confirmed by a
Certification issued by Lozano.4
Regarding the sixth incident, respondent narrated his version as follows:
Complainant arrived in his office past 9 a.m. that day, followed by another

court employee, Ruby Lanuza. He proceeded to discuss the CTA Expansion


Bill with complainant. Then he went for a while to the rest room. When he
returned, Ruby had already left but complainant was still there. Forthwith,
he remarked that he forgot to greet her on Valentine's Day, the day before.
He approached complainant to give her a casual buss on the cheek. But she
suddenly stood and raised her arms to cover her face, causing her to lose her
balance. So he held her arms to prevent her from falling. Her rejection came
as a surprise to him and made him feel quite embarrassed. Shortly,
complainant excused herself and left the room. Stunned at the thought that
she might misinterpret his gesture, he sent her a short note of apology.
Respondent further explained that the structure of his office, being seen
through a transparent glass divider, makes it impossible for anyone to
commit any improper conduct inside.
In a Resolution dated August 21, 2001, this Court referred the instant case
to Justice Josefina G. Salonga of the Court of Appeals for investigation,
report and recommendation.
Justice Salonga set the hearing of the case on November 6, 2001. However,
the parties, through counsel, manifested that "they will not be adducing any
further evidence." On November 7, 2001, Justice Salonga issued an Order
directing them to submit their memoranda simultaneously, after which, the
case shall be considered submitted for resolution.
On January 9, 2002, Justice Salonga forwarded to this Court her Report on
Investigation and Recommendation, thus:
"We find for the respondent.
"The complainant failed to show by convincing evidence that the acts
of Judge Acosta in greeting her with a kiss on the cheek, in a 'besobeso' fashion, were carried out with lustful and lascivious desires or
were motivated by malice or ill-motive. It is clear under the
circumstances that most of the kissing incidents were done on festive
and special occasions. In fact, complainant's testimony that she was
sexually harassed on November 21, 2000, is hardly believable.
Notably, complainant declared in her affidavit-complaint that she
brought some 'pasalubongs' for the respondent judge from her trip
abroad. Therefore, Atty. Aquino could not have been 'taken aback' by
the respondent's act of greeting her in a friendly manner and
thanking her by way of a kiss on the cheek. Moreover, it was
established that Judge Acosta was on official leave of absence from
December 26-29, 2000. This was corroborated by Ricardo Hebia, the
driver of respondent judge, in his Panunumpa (Affidavit) dated March
26, 2001, where he stated among others, to wit:
x xx
"Corollarily, the joint affidavit of Ms. Santos and Ms. Samonte
attesting to the fact that respondent dropped by at the third floor of
the CTA and greeted them Happy New Year, even if it true, can not
be given any evidentiary weight. Clearly, they did not make any
categorical statement that they had witnessed or seen Judge Acosta
making sexual advances on the complainant. Nor did they even

attribute any malicious acts on respondent constituting sexual


harassment.
"In addition, the respondent admitted that when he handed a
calendar and greeted complainant with a buss, complainant
reciprocated by greeting him a Happy New Year. The allegation of
Atty. Aquino that the respondent merely used the calendars as
'props' to kiss her on the cheek and that she was singled out by
respondent is not supported by any convincing evidence. The
affidavit of Ms. Aurora U. Aso and Renelyn L. Larga that Ms. Carmen
Acosta gave them calendars for the office of Attys. Margarette
Guzman and Felizardo O. Consing, is immaterial and irrelevant, as
Judge Acosta had stated that he handed to complainant Aquino, a
2001 calendar in the course of greeting her with a buss on the cheek.
Said affidavit could not account for the calendars distributed to the
other offices in the CTA, more specifically, the Legal and Technical
Staff headed by Atty. Aquino.
"Moreover, the claim of the complainant that she was sexually
harassed immediately after the final reading of the bill anent the
expansion of the CTA at the Senate, can not be accorded great
evidentiary value. The alleged kissing incident took place in the
presence of other people and the same was by reason of the
exaltation or happiness of the moment, due to the approval of the
subject bill. Quite interesting to note, is that Atty. Aquino
reciprocated by congratulating respondent and remarking "justice ka
na judge" after the latter had bussed her on the cheek. Complainant
even failed to dispute the fact that after the kissing incident, she
joined Judge Acosta and his driver for lunch at a seafood restaurant
in Luneta. There was even a time that she allowed the respondent
judge to accompany her to the office alone and at nighttime at that,
to retrieve her car keys and bag when they returned to the CTA after
the hearing at the Senate on the CTA expansion bill. These acts are
not at square with the behavior of one who has been sexually
harassed, for the normal reaction of a victim of sexual harassment
would be to avoid the harasser or decline his invitations after being
offended. In fact, this occasion could have provided the respondent
judge with the right opportunity to commit malicious acts or to
sexually harass complainant, but then Judge Acosta never even
attempted to do so. Undoubtedly, it could be said that no strained
relations existed between Atty. Aquino and Judge Acosta at that
moment.
"Neither can the alleged continuous call of Judge Acosta on
complainant in the morning of February 14, 2001 to see him in his
office, be considered as acts constituting sexual harassment. Atty.
Aquino failed to state categorically in her affidavit-complaint that
respondent demanded sexual advances or favors from her, or that
the former had committed physical conduct of sexual nature against
her. The telephone calls were attributed malicious implications by
the complainant. To all intents and purposes, the allegation was
merely a product of her imagination, hence, the same deserves no

weight in law. Indeed, Atty. Aquino's own version, indicates that she
well knew that the purpose of the respondent in calling her in the
morning of February 14, 2001 was to discuss the CTA Health Plan
which was disapproved by the Supreme Court and not for the
respondent to demand sexual favors from her. This was corroborated
by Atty. Margarette Guzman in her affidavit dated February 28,
2001, attached to the complainant's affidavit, where she stated:
x xx
"Finally, while Judge Acosta admitted having pecked Atty. Aquino on
her cheek, which was avoided by the latter, the same was not meant
to sexually harass her. Judge Acosta's act of extending his post
Valentine greeting to complainant was done in good faith and sans
any malice. This is so because immediately after the complainant
had displayed annoyance to the kissing episode, Judge Acosta
immediately extended an apology by way of a handwritten note
saying that the incident won't happen again.
"Parenthetically, the undersigned is convinced that Ms. Lanuza's
affidavit that she supposedly accompanied complainant to
respondent's office as she allegedly had a previous 'bad experience'
with the latter when he was still an Associate Judge, was merely
concocted to add flavor to the baseless imputations hurled against
Judge Acosta. The accusation is implausible as Ms. Lanuza did not
seem to complain about the alleged bad experience she had with
Judge Acosta or relate it to anyone until ten (10) years later. It must
be stressed that Ms. Lanuza is a biased-witness who harbored ill
feelings against the respondent, as she was reprimanded by Judge
Acosta for habitual absenteeism and tardiness in 1996. More
importantly, Ms. Lanuza did not even attest that she was a witness
to the alleged sexual advances of Judge Acosta.
"In all the incidents complained of, the respondent's pecks on the
cheeks of the complainant should be understood in the context of
having been done on the occasion of some festivities, and not the
assertion of the latter hat she was singled out by Judge Acosta in his
kissing escapades. The busses on her cheeks were simply friendly
and innocent, bereft of malice and lewd design. The fact that
respondent judge kisses other people on the cheeks in the 'besobeso' fashion, without malice, was corroborated by Atty. Florecita P.
Flores, Ms. Josephine Adalem and Ms. Ma. Fides Balili, who stated
that they usually practice 'beso-beso' or kissing on the cheeks, as a
form of greeting on occasions when they meet each other, like
birthdays, Christmas, New Year's Day and even Valentine's Day, and
it does not matter whether it is Judge Acosta's birthday or their
birthdays. Theresa Cinco Bactat, a lawyer who belongs to
complainant's department, further attested that on occasions like
birthdays, respondent judge would likewise greet her with a peck on
the cheek in a 'beso-beso' manner. Interestingly, in one of several
festive occasions, female employees of the CTA pecked respondent

judge on the cheek where Atty. Aquino was one of Judge Acosta's
well wishers. (Annex "8" to Comment, p. 65, Rollo)
"In sum, no sexual harassment had indeed transpired on those six
occasions. Judge Acosta's acts of bussing Atty. Aquino on her cheek
were merely forms of greetings, casual and customary in nature. No
evidence of intent to sexually harass complainant was apparent, only
that the innocent acts of 'beso-beso'were given malicious
connotations by the complainant. In fact, she did not even relate to
anyone what happened to her. Undeniably, there is no manifest
sexual undertone in all those incidents."5
Justice Salonga then made the following recommendation:
"Considering the above, the undersigned respectfully recommends
that the administrative complaint for sexual harassment and
violations of the Canons of Judicial Ethics and the Code of
Professional Responsibility be DISMISSED and accordingly,
respondent Presiding Judge Ernesto D. Acosta be exonerated
therefrom; that in view of these charges which might have tainted the
image of the Court, though unsubstantiated they may be, Judge
Acosta is WARNED to refrain from doing similar acts, or any act for
that matter on the complainant and other female employees of the
Court of Tax Appeals, which in any manner may be interpreted as
lustful advances."6
We agree with the findings of Justice Salonga.
Administrative complaints against members of the judiciary are viewed by
this Court with utmost care, for proceedings of this nature affect not only the
reputation of the respondents concerned, but the integrity of the entire
judiciary as well.
We have reviewed carefully the records of this case and found no convincing
evidence to sustain complainant's charges. What we perceive to have been
committed by respondent judge are casual gestures of friendship and
camaraderie, nothing more, nothing less. In kissing complainant, we find no
indication that respondent was motivated by malice or lewd design.
Evidently, she misunderstood his actuations and construed them as workrelated sexual harassment under R.A. 7877.
As aptly stated by the Investigating Justice:
"A mere casual buss on the cheek is not a sexual conduct or favor
and does not fall within the purview of sexual harassment under R.A.
No. 7877. Section 3 (a) thereof provides, to wit:
'Sec. 3. Work, Education or Training - related Sexual
Harassment Defined. - Work, education or training-related
sexual harassment is committed by an employer, employee,
manager, supervisor, agent of the employer, teacher,
instructor, professor, coach, trainor, or any other person
who, having authority, influence or moral ascendancy over
another in a work or training or education environment,
demands, requests or otherwise requires any sexual favor

from the other, regardless of whether the demand, request or


requirement for submission is accepted by the object of said
Act.
a) In a work-related or employment environment, sexual
harassment is committed when:
1) The sexual favor is made as a condition in the
hiring or in the employment, re-employment or
continued employment of said individual, or in
granting said individual favorable compensation,
terms, conditions, promotions or privileges; or the
refusal to grant sexual favor results in limiting,
segregating or classifying the employee which in
anyway would discriminate, deprive or diminish
employment opportunities or otherwise adversely
affect said employees;
2) The above acts would impair the employee's right
or privileges under existing labor laws; or
3) The above acts would result in an intimidating,
hostile, or offensive environment for the employee.'
"Clearly, under the foregoing provisions, the elements of sexual
harassment are as follows:
1) The employer, employee, manager, supervisor, agent of
the employer, teacher, instructor, professor, coach, trainor,
or any other person has authority, influence or moral
ascendancy over another;
2) The authority, influence or moral ascendancy exists in a
working environment;
3) The employer, employee, manager, supervisor, agent of
the employer, teacher, instructor, professor, coach, or any
other person having authority, influence or moral
ascendancy makes a demand, request or requirement of a
sexual favor.
"In her Complaint-affidavit, Reply and Sur-rejoinder, complainant
did not even allege that Judge Acosta demanded, requested or
required her to give him a buss on the cheek which, she resented.
Neither did Atty. Aquino establish by convincing evidence that the
busses on her cheek, which she considers as sexual favors,
discriminated against her continued employment, or resulted in an
intimidating, hostile or offensive environment. In fact, complainant
continued to perform her work in the office with the usual normalcy.
Obviously, the alleged sexual favor, if there ever was, did not
interfere with her working condition (Annexes "9" - "9-FFF").
Moreover, Atty. Aquino also continued to avail of benefits and leaves
appurtenant to her office and was able to maintain a consistent
outstanding performance. On top of this, her working area which, is
at the third floor of the CTA, is far removed from the office of Judge

Acosta located at the fourth floor of the same building. Resultantly,


no hostile or intimidating working environment is apparent.
"Based on the foregoing findings, there is no sufficient evidence to
create a moral certainty that Judge Acosta committed the acts
complained of; that Atty. Aquino's determination to seek justice for
herself was not substantiated by convincing evidence; that the
testimony of respondent judge and his witnesses are credible and
therefore, should be given weight and probative value; that the
respondent's acts undoubtedly do not bear the marks of misconduct,<