Case no 1.

Autobus Transport System vs Bautista

May 16, 2005
FACTS:
Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus Transport
Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, BaguioTuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on commission basis, seven
percent (7%) of the total gross income per travel, on a twice a month basis.
On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus
hewas driving accidentally bumped the rear portion of Autobus No. 124.
Respondent alleged that he was not allowed to work until he fully paid the amount of P75,551.50,
representing thirty percent (30%) of the cost of repair of the damaged buses and that despite respondents
pleas for reconsideration, the same was ignored by management. After a month, management sent him a
letter of termination.
Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for
nonpayment of 13th month pay and service incentive leave pay against Autobus.
ISSUE:
Whether or not respondent is entitled to service incentive leave;
Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor Code, as
amended, is applicable to respondents claim of service incentive leave pay.
HELD:
First Issue:
Yes, respondent is entitled to his SIL
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service shall be entitled to a yearly
service incentive leave of five days with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage. This rule shall apply to all employees except:

(d) Field personnel and other employees whose performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those
who are paid in a fixed amount for performing work irrespective of the time consumed in the
performance thereof; . . .
The phrase other employees whose performance is unsupervised by the employer must not be understood
as a separate classification of employees to which service incentive leave shall not be granted. Rather, it

serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as
those whose actual hours of work in the field cannot be determined with reasonable certainty.
Petitioners contention that respondent is not entitled to the grant of service incentive leave just because he
was paid on purely commission basis is misplaced. What must be ascertained in order to resolve the issue of
propriety of the grant of service incentive leave to respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, field personnel shall refer to non-agricultural employees who
regularly perform their duties away from the principal place of business or branch office of the employer and
whose actual hours of work in the field cannot be determined with reasonable certainty.
It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors
assigned at strategic places who board the bus and inspect the passengers, the punched tickets, and the
conductors reports. There is also the mandatory once-a-week car barn or shop day, where the bus is
regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or not there are problems
thereon as reported by the driver and/or conductor. They too, must be at specific place as [sic] specified
time, as they generally observe prompt departure and arrival from their point of origin to their point of
destination. In each and every depot, there is always the Dispatcher whose function is precisely to see to it
that the bus and its crew leave the premises at specific times and arrive at the estimated proper time.
The driver, the complainant herein, was therefore under constant supervision while in the performance of
this work. He cannot be considered a field personnel.
Second Issue:
No, action for the claim of the SIL has NOT prescribed.
Accordingly, if the employee wishes to accumulate his leave credits and opts for its commutation upon his
resignation or separation from employment, his cause of action to claim the whole amount of his
accumulated service incentive leave shall arise when the employer fails to pay such amount at the time of his
resignation or separation from employment.
We can conclude that the three (3)-year prescriptive period commences, not at the end of the year when the
employee becomes entitled to the commutation of his service incentive leave, but from the time when the
employer refuses to pay its monetary equivalent after demand of commutation or upon termination of the
employees services, as the case may be.

Case no. 2 Millares et al. vs NLRC

March 29, 1999
FACTS:
Petitioners numbering one hundred sixteen (116) occupied the positions of Technical Staff, Unit Manager,
Section Manager, Department Manager, Division Manager and Vice President in the mill site of respondent
Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur. In 1992 PICOP suffered
a major financial setback allegedly brought about by the joint impact of restrictive government regulations
on logging and the economic crisis. To avert further losses, it undertook a retrenchment program and
terminated the services of petitioners. Accordingly, petitioners received separation pay computed at the rate
of one (1) month basic pay for every year of service. Believing however that the allowances they allegedly
regularly received on a monthly basis during their employment should have been included in the
computation thereof they lodged a complaint for separation pay differentials.
The allowances in question pertained to the following:
1. Staff/Manager's Allowance
2. Transportation Allowance
3. Bislig Allowance
ISSUE:
Whether or not the separation pay of said employees must include their allowances received
HELD:
No, in this case, said allowances cannot be included in the workers separation pay
We correlate Art. 283 with Art. 97 of the same Code on definition of terms. "Pay" is not defined therein but
"wage." In Songco the Court explained that both words (as well as salary) generally refer to one and the
same meaning, i.e., a reward or recompense for services performed. Specifically, "wage" is defined in letter
(f) as the remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished
by the employer to the employee.
We invite attention to the above-underlined clause. Stated differently, when an employer customarily
furnishes his employee board, lodging or other facilities, the fair and reasonable value thereof, as determined
by the Secretary of Labor and Employment, is included in "wage." In order to ascertain whether the subject
allowances form part of petitioner's "wages," we divide the discussion on the following - "customarily
furnished;" "board, lodging or other facilities;" and, "fair and reasonable value as determined by the
Secretary of Labor."
"Customary" is founded on long-established and constant practice connoting regularity. The receipt of an
allowance on a monthly basis does not ipso facto characterize it as regular and forming part of salary
because the nature of the grant is a factor worth considering. We agree with the observation of the Office of
the Solicitor General that the subject allowances were temporarily, not regularly, received by petitioners
becauseIn the case of the housing allowance, once a vacancy occurs in the company-provided housing
accommodations, the employee concerned transfers to the company premises and his housing allowance is

discontinued.
On the other hand, the transportation allowance is in the form of advances for actual transportation expenses
subject to liquidation x x x given only to employees who have personal cars.
The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig, Surigao del
Norte. Once the officer is transferred outside Bislig, the allowance stops.
Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5,
Rule VII, Book III, of the Rules Implementing the Labor Code gives meaning to the term as including
articles or services for the benefit of the employee or his family but excluding tools of the trade or articles or
service primarily for the benefit of the employer or necessary to the conduct of the employer's business. The
Staff / Manager's allowance may fall under "lodging" but the transportation and Bislig allowances are not
embraced in "facilities" on the main consideration that they are granted as well as the Staff/Manager's
allowance for respondent PICOP's benefit and convenience, i.e., to insure that petitioners render quality
performance. In determining whether a privilege is a facility, the criterion is not so much its kind but its
purpose.
In Santos the Court decreed that in the computation of separation pay awarded in lieu of reinstatement,
account must be taken not only of the basic salary but also of transportation and emergency living
allowances. Later, the Court in Soriano, citing Santos, was general in its holding that the salary base
properly used in computing separation pay where reinstatement was no longer feasible should include not
just the basic salary but also the regular allowances that the employee had been receiving. Insular merely
reiterated the aforementioned rulings. The rationale is not difficult to discern. It is the obligation of the
employer to pay an illegally dismissed employee the whole amount of his salaries plus all other benefits,
bonuses and general increases to which he would have been normally entitled had he not been dismissed and
had not stopped working. The same holds true in case of retrenched employees. And thus we applied Insular
and Soriano in Planters in the computation of separation pay of retrenched employees. Songco likewise
involved retrenchment and was relied upon in Planters, Soriano and Santos in determining the proper
amount of separation pay. As culled from the foregoing jurisprudence, separation pay when awarded to an
illegally dismissed employee in lieu of reinstatement or to a retrenched employee should be computed based
not only on the basic salary but also on the regular allowances that the employee had been receiving. But in
view of the previous discussion that the disputed allowances were not regularly received by petitioners
herein, there was no reason at all for petitioners to resort to the above cases.

Case #3 SLL INTERNATIONAL CABLE SPECIALIST vs. NLRC

Petitioners:

SLL Int'l Cable Specialist

Sonny L. Lagon (SLL Manager)

Respondents: NLRC
Roldan Lopez
Edgardo Zuiga
Danilo Caete
FACTS:
Sometime in 1996 and January 1997, Roldan Lopez and Danilo Caete, and Edgardo Zuiga respectively, were hired by
petitioner Lagon as apprentice or trainee cable/lineman. They were paid the full minimum wage and other benefits. As
trainees, they did not report for work regularly but came in as substitutes to the regular workers or in undertakings that
needed extra workers.
After their training, Zuiga, Caete and Lopez were engaged as project employees by the petitioners in their Islacom
project in Bohol. They started on March 15, 1997 until December 1997. Upon the completion of their project, their
employment was also terminated. They received the amount of P145.00, the minimum daily wage in Region VII.
In July 1997, it was increased to P150 by the Regional Wage Board and in October 1997, the latter was increased to
P155. In March 1998, Zuiga and Caete were engaged again by Lagon as project employees for its PLDT Antipolo, Rizal
project which ended late September 1998. As a consequence, their employment was terminated. For this project, Zuiga
and Caete received only the wage of P145 daily. The prescribed minimum wage at that time for Rizal was P160.
Sometime in late November 1998, respondents re-applied in the Recitelcom project of Lagon in Bulacan. The three were
hired for the specific project. For this, the respondents received the wage of P145. Again after the completion of their
project in March 1999, they went home to Cebu City.
On May 21, 1999, the three, for the 4th time worked with Lagon's 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 said project. From May 21, 1997-December 1999, they received the wage of P145. However, the prescribed rate at
this time for Manila was P198. In January-February 28, they received the wage of P165. The existing rate at that time
was P213.
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. Faced with economic problems, Lagon was constrained to cut down
the overtime work of its workers including the respondents. Thus, when requested by the respondents on February 28,
2000 to work overtime, Lagon refused and told them 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 the
respondents to leave their work and go home to Cebu.
On March 3, 2000, the private respondents filed a complaint for illegal dismissal, non-payment of wages, holiday pay,
13th month pay for 1997 and 1998 and service incentive pay as well as damages and attorney's fees.
PETITIONERS' CONTENTIONS:
- The three were only project employees for theire services were merely engaged for a specific undertaking which
were covered by a contract duly signed by the respondents.
- Food allowance of P63.00 per day, allowance for lodging house, transportation, electricity, water and snacks
allowance should be added to their basic pay. With these, petitioners claimed that respondents received higher
rate than that prescribed in Rizal and Manila.

Since the workplaces of the 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.

LABOR ARBITER:
- LA Reynoso Belarmino had jurisdiction to hear and decide the complaint filed by the respondents.
- Respondents were regular employees because they were repeatedly hired by the petitioners and they
performed activities which were usual, necessary and desirable in the business or trade of the employer.
- Respondents were underpaid. Free board and lodging, electricity, water, and food allowance could not be
included in the computation of their wages because these were given without the respondents' written consent.
- Petitioners, however, are not liable for illegal dismissal. The LA viewed respondents' act of going home as an act
of indifference when petitioners decided to prohibit overtime work.
NLRC:
- Affirmed the decision of the LA
- NLRC noted that not a single report of project completion was filed with the nearest Public Employment Office
as required by DOLE Dept. Order 19, Series of 1993.
- Denied motion for reconsideration filed by the petitioners.
CA:

Affirmed that respondents were regular employees of petitioner.

Failure of petitioners to submit a report of termination to a Public Employment Office every time respondents'
employment was terminated was proof that they were not project employees.
Affirmed that respondents were underpaid. The CA added that they were entitled to 13th month pay.
Affirmed that there was no illegal dismissal on the part of the petitioners because of the act of abandonment of
the respondents.

Petitioners filed a petition for review on certiorari before the SC.

ISSUE:
Whether or not the value of the facilities that the private respondents enjoyed should be included in the computation of
the wages received by them.
HELD:
No, said facilities enjoyed by the workers were only supplements. 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 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. Mere availment is not sufficient to allow deductions from employees wages.
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 privaterespondents 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., 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.
PETITION DENIED.

Case no. 4 Songco et al. vs NLRC

March 23, 1990
FACTS:
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.
ISSUE:
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.
HELD:
Yes, sales commissions are included in the monthly salary of said petitioners and must be included in
their separation pay.
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.
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. "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".
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.
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. The nature of the work of a salesman and the reason for such type of remuneration for

services rendered demonstrate clearly that commission is part of petitioners' wage or salary. We take judicial
notice of the fact that some salesmen do not receive any basic salary but depend on commissions and
allowances or commissions alone, are part of petitioners' wage or salary. We take judicial notice of the fact that
some salesman do not received any basic salary but depend on commissions and allowances or commissions
alone, although an employer-employee relationship exists. Bearing in mind the preceding discussions, 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?
*Take note - another issue was whether there was a difference between salary and wage since the CBA and
Art 284 and its IRR use the word salary instead of wage. The employers contention was that Art 97 could not
be applied since said article used the word wage instead of salary

Case no 5. AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION vs. AMERICAN WIRE AND CABLE CO., INC.
and THE COURT OF APPEALS

ART. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS. Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.
American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of wires and cables. There are two
unions in this company, the AmericanWire and Cable Monthly-Rated Employees Union (Monthly-Rated Union) and the
American Wire and Cable Daily-Rated Employees Union (Daily-Rated Union)
An original action was filed before the NCMB of the Department of Labor and Employment (DOLE) by the two unions for
voluntary arbitration. They alleged that the private respondent, without valid cause, suddenly and unilaterally withdrew
and denied certain benefits and entitlements which they
have long enjoyed, including Service Award; 35% premium pay of an employee's basic pay for the work
rendered during Holy Monday, Holy Tuesday, Holy Wednesday, December 23, 26, 27, 28 and 29; Christmas Party; and
Promotional Increase.
A promotional increase was asked by the petitioner for fifteen (15) of its members who were given or assigned new job
classifications. According to petitioner, the new job classifications were in the nature of a promotion, necessitating the
grantof an increase in the salaries of the said 15 members.
Unions : Company violated Art 100 of LC
Voluntary Arbiter: No. (Appeal was made but Voluntary Arbiter dismissed it again)
Daily-Rated Union Appealed to CA; CA: Dismissed
Motion for Recon : Again denied by CA
Issue:Whether or not private respondent is guilty of violating Article 100 of the Labor Code, as
amended, when the benefits/entitlements given to the members of petitioner union were withdrawn
Union: Withdrawal of the private respondent of the 35% premium pay for selected days during the Holy Week and
Christmas season, theholding of the Christmas Party and its incidental benefits, and the giving of service awards violated
Article 100 of the Labor Code. The grant of these benefits was a customary practice that can no longer be unilaterally
withdrawn by private respondent without the tacit consent of the petitioner. The benefits in question were given by the
respondent to the petitioner consistently, deliberately, and unconditionally since time immemorial. The
benefits/entitlements were not given to petitioner due to an error in interpretation, or a construction of a difficult
question of law, but simply, the grant has been a practice over a long period of time. As such, it cannot be withdrawn
from the
petitioner at private respondent's whim and caprice, and without the consent of the former. The benefits given by the
private respondent cannot be considered as a "bonus" as they are not founded on profit. Even assuming that it can be
treated as a "bonus," the grant of the same, by reason of its long and regular concession, may beregarded as part of
regular compensation.
With respect to the fifteen (15) employees who are members of petitioner union that were given new job classifications,
it asserts that a promotional increase in their salaries was in order. Salary adjustment is a must due to their promotion.
Company: The grant of all subject benefits has not ripened into practice that the employees concerned can claima
demandable right over them. The grant of these benefits was conditional based upon the financial performance of the
company and that conditions/circumstances that existed before have indeed substantially changed thereby justifying
the discontinuance of said grants. The company's financial performance was affected by the recent political turmoil and
instability that led the entire nation to a bleeding economy.
SC: Benefits/entitlements subjects of the instant case are all bonuses which were given bythe private respondent out of
its generosity and munificence. The additional 35% premium pay for work done during selected days of the Holy Week
and Christmas season, the holding of Christmas parties with raffle, and the cash incentives given together with the

service awards are all in excess of what the law requires each employer to give its employees. Since they are above what
is strictly due to the members of petitioner-union, the granting of the same was a management prerogative, which,
whenever management sees necessary, may be withdrawn, unless they have been made a part of the wage or salary or
compensation of the employees
For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by the parties,
or it must have had a fixed amount and had been a long and regular practice on the part of the employer.
The benefits/entitlements in question were never subjects of any express agreement between the parties. They were
never incorporated in the Collective Bargaining Agreement (CBA). As observed by the Voluntary Arbitrator, the records
reveal that these benefits/entitlements have not been subjects of any express agreement between the union and the
company, and have not yet been incorporated in
the CBA. In fact, the petitioner has not denied having made proposals with the private
respondent for the service award and the additional 35% premium pay to be made part
of the CBA
Considering that the Union was unable to adduce proof that a promotion indeed occur[ed] with respect to the 15
employees, the Daily Rated Union's claim for promotional increase likewise fall[s] there being no promotion established
under the records at hand.

G.R. No. 163419

VELASCO, JR., J.:

Case no. 6. TSPIC CORPORATION vs TSPIC EMPLOYEES UNION (FFW),

FACTS:
Background: TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve
the communication, automotive, data processing, and aerospace industries. Respondent TSPIC Employees Union (FFW)
(Union), on the other hand, is the registered bargaining agent of the rank-and-file employees of TSPIC. The respondents
are all members of the Union.
In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA) for the years 2000 to 2004.
The CBA included a provision on yearly salary increases starting January 2000 until January 2002. Consequently, on
January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10% increase in their salary(FIRST GROUP).
The CBA also provided that employees who acquire regular employment status within the year but after the effectivity
of a particular salary increase shall receive a proportionate part of the increase upon attainment of their regular status.
Sometime in 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region, issued Wage Order No.
NCR-081 (WO No. 8) which raised the daily minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000.
Conformably, the wages of 17 probationary employees(2nd Group) were increased to PhP 250.00 effective November 1,
2000. On various dates during the last quarter of 2000, the 17 employees attained regular employment and received
25% of 10% of their salaries as granted under the provision on regularization increase under the CBA. In January 2001,
TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine employees (first group), who were
senior to the above-listed recently regularized employees, received less wages.
On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective, TSPICs Human
Resources Department notified 24 employees that due to an error in the automated payroll system, they were overpaid
and the overpayment would be deducted from their salaries in a staggered basis, starting February 2001. TSPIC
explained that the correction of the erroneous computation was based on the crediting provision of Sec. 1, Art. X of the
CBA.
The Union, on the other hand, asserted that there was no error and the deduction of the alleged overpayment from
employees constituted diminution of pay. The issue was brought to the grievance machinery, but TSPIC and the Union
failed to reach an agreement.
Petitioner Contention: TSPIC maintains that the formula proposed by the Union, was flawed, inasmuch as it completely
disregarded the crediting provision of the CBA. TSPIC also maintains that charging the overpayments made to the 16
respondents through staggered deductions from their salaries does not constitute diminution of benefits.
Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of whether or not the
acts of the management in making deductions from the salaries of the affected employees constituted diminution of
pay.
Decision of Voluntary Arbitrator Jimenez: Rendered a Decision, holding that the unilateral deduction made by TSPIC
violated the provision of Labor Code. TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated
November 21, 2001. Aggrieved, TSPIC filed before the CA a petition for review under Rule 43.
Decision of Court of Appeals: Dismissed the petition and affirmed in toto the decision of the voluntary arbitrator. The
CA declared TSPICs computation allowing PhP 287 as daily wages to the newly regularized employees to be correct,

noting that the computation conformed to WO No. 8 and the provisions of the CBA. According to the CA, TSPIC failed to
convince the appellate court that the deduction was a result of a system error in the automated payroll system. The
CA explained that when WO No. 8 took effect on November 1, 2000, the concerned employees were still probationary
employees who were receiving the minimum wage of PhP 223.50. The CA said that effective November 1, 2000, said
employees should have received the minimum wage of PhP 250. The CA held that when respondents became regular
employees on November 29, 2000, they should be allowed the salary increase granted them under the CBA at the rate
of 25% of 10% of their basic salary for the year 2000; thereafter, the 12% increase for the year 2001 and the 10%
increase for the year 2002 should also be made applicable to them.
ISSUE: Does the TSPICs decision to deduct the alleged overpayment from the salaries of the affected members of the
Union constitute diminution of benefits in violation of the Labor Code?
SUPREME COURT DECISION: Meritorious
A Collective Bargaining Agreement is the law between the parties
It is 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. We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda: A
collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor organization and
the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit.
As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem
convenient provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the
CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the
express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of their stipulations shall control. However, sometimes, as in this case, though the provisions
of the CBA seem clear and unambiguous, the parties sometimes arrive at conflicting interpretations. Here, TSPIC wants
to credit the increase granted by WO No. 8 to the increase granted under the CBA. According to TSPIC, it is specifically
provided in the CBA that the salary/wage increase for the year 2001 shall be deemed inclusive of the mandated
minimum wage increases under future wage orders that may be issued after Wage Order No. 7. The Union, on the
other hand, insists that the crediting provision of the CBA finds no application in the present case, since at the time
WO No. 8 was issued, the probationary employees (second group) were not yet covered by the CBA, particularly by its
crediting provision.
As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued.Littera necat spiritus
vivificat. An instrument must be interpreted according to the intention of the parties. It is the duty of the courts to
place a practical and realistic construction upon it, giving due consideration to the context in which it is negotiated and
the purpose which it is intended to serve. Absurd and illogical interpretations should also be avoided. Considering that
the parties have unequivocally agreed to substitute the benefits granted under the CBA with those granted under wage
orders, the agreement must prevail and be given full effect.
Diminution of benefits
Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the employees.
There is diminution of benefits when it is shown that: (1) the grant or benefit is founded on a policy or has ripened
into a practice over a long period; (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.
As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This error was
immediately rectified by TSPIC upon its discovery. We have ruled before that an erroneously granted benefit may be
withdrawn without violating the prohibition against non-diminution of benefits. We ruled in Globe-Mackay Cable and

Radio Corp. v. NLRC: Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous
application of the law. Payment may be said to have been made by reason of a mistake in the construction or
application of a doubtful or difficult question of law. (Article 2155, in relation to Article 2154 of the Civil Code). Since it
is a past error that is being corrected, no vested right may be said to have arisen nor any diminution of benefit under
Article 100 of the Labor Code may be said to have resulted by virtue of the correction. Here, no vested right accrued to
individual respondents when TSPIC corrected its error by crediting the salary increase for the year 2001 against the
salary increase granted under WO No. 8, all in accordance with the CBA.
Hence, any amount given to the employees in excess of what they were entitled to, as computed above, may be legally
deducted by TSPIC from the employees salaries. It was also compassionate and fair that TSPIC deducted the
overpayment in installments over a period of 12 months starting from the date of the initial deduction to lessen the
burden on the overpaid employees. TSPIC, in turn, must refund to individual respondents any amount deducted from
their salaries which was in excess of what TSPIC is legally allowed to deduct from the salaries based on the computations
discussed in this Decision.
As a last word, it should be reiterated that though it is the states responsibility to afford protection to labor, this policy
should not be used as an instrument to oppress management and capital. In resolving disputes between labor and
capital, fairness and justice should always prevail. We ruled in Norkis Union v. Norkis Trading that in the resolution of
labor cases, we have always been guided by the State policy enshrined in the Constitution: social justice and protection
of the working class. Social justice does not, however, mandate that every dispute should be automatically decided in
favor of labor. In any case, justice is to be granted to the deserving and dispensed in the light of the established facts
and the applicable law and doctrine.2[30]
WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor Arbitrator in National
Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57 and the October 22, 2003 CA Decision in CA-G.R. SP No.
68616 are hereby AFFIRMED with MODIFICATION. TSPIC is hereby ORDERED to pay respondents their salary increases
in accordance with this Decision, as follows:

Case NO. 7 LEPANTO CERAMICS, INC. vs. LEPANTO CERAMICS EMPLOYEES ASSOCIATION
FACTS: Lepanto Ceramics, Inc (LCI), in December 1998, gave to its employees, members of Lepanto Ceramics
Employees Association (LCEA), a P3,000 Christmas bonus. In 1999, LCI and LCEA entered into a Collective
Bargaining Agreement (CBA) which provides for, among others, the grant of a Christmas gift package/bonus to the
members of LCEA. The Christmas bonus was one of the enumerated "existing benefit, practice of traditional
rights" which "shall remain in full force and effect" for a period of 4 years.
In 1999, 2000 and 2001, instead of cash, LCI gave each members of LCEA Redemption Certificates equivalent to
P3,000 as bonus. In 2002, LCI gave year-end cash benefit of P600.00 and offered a cash advance to interested
employees equivalent to 1 month salary payable in one year. LCEA objected to the P600.00 cash benefit and
argued that this was in violation of the CBA.
They failed to settle amicably and LCEA filed a Notice of Strike with the National Conciliation Mediation Board.
Efforts to conciliate failed thus the case was referred to the Voluntary Arbitrator.
LCI argued that the giving of extra compensation was based on the company's available resources for a given year
and the workers are not entitled to a bonus if the company does not make profits. LCI adverted that it was debtridden having incurred net losses.
VOLUNTARY ARBITRATOR (VA): Declared LCI is bound to grant each worker a Christmas bonus of P3,000 (less
P600 cash benefit) for the reason that the bonus was given prior to the effectivity of the CBA 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
COURT OF APPEALS: In a petition for certiorari, the CA affirmed in toto the decision of the VA holding that the
benefit is a traditional right of the employees since it was granted in 1998.

ISSUE: W/N LCI is obliged to give the members of the LCEA a Christmas bonus amounting to P3,000.
HELD: YES
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. 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 LCEA has become more than just an act of generosity on the
part of the LCI but a contractual obligation it has undertaken.
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 LCI's financial standing. Indeed, if LCI and LCEA intended that the P3,000.00 bonus
would be dependent on the company earnings, such intention should have been expressed in the CBA.
Business losses are a feeble ground for LCI to repudiate its obligation under the CBA because in 1998, LCI suffered
a net loss of P14,347,548.00. Yet it gave a P3,000.00 bonus to the members of LCEA. In 1999, when LCI's very own
financial statement reflected that "the positive developments in the economy have yet to favorably affect the
operations of the company," and reported a loss of P346,025,733.00, it entered into the CBA with LCEA whereby
it contracted to grant a Christmas gift package/bonus to the latter. LCI supposedly continued to incur losses in the
years 2000 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 LCEA in the years 1999, 2000 and 2001.

DEFINITION:
"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 employer's business and made possible the realization of profits.
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.

Case no 8. EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. vs. EASTERN TELECOMS EMPLOYEES UNION
Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business of providing
telecommunications facilities, particularly leasing international date lines or circuits, regular landlines, internet and data
services, employing approximately 400 employees.
Eastern Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent of the company's rank and file
employees with a strong following of 147 regular members. It has an existing collecti[ve] bargaining agreement with the
company to expire in the year 2004 with a Side Agreement signed on September 3, 2001.
The company planned to defer payment of the 2003 14th, 15th and 16th month bonuses sometime in
April 2004. The company's main ground in postponing the payment of bonuses is due to allege continuing deterioration
of company's financial position which started in the year 2000. However, ETPI while postponing payment of bonuses
sometime in April 2004, such payment would also be subject to availability of funds.
Invoking the Side Agreement of the existing Collective Bargaining Agreement for the period 2001-2004 between ETPI
and ETEU which stated as follows:
"4. Employment Related Bonuses. The Company confirms that the 14th, 15th and 16th month bonuses (other than 13th
month pay) are granted."
the union strongly opposed the deferment in payment of the bonuses by filing a preventive mediation complaint with
the NCMB on July 3, 2003, the purpose of which complaint is to determine the date when the bonus should be paid.
Company argues: It is under no legal compulsion to pay 14th, 15th and 16th month bonuses for the year 2003 and 14th
month bonus for the year 2004 contending that they are not part of the demandable wage or salary and that their grant
is conditional based on successful business performance and the availability of company profits from which to source
the same. To thwart ETEU's monetary claims, it insists that the distribution of the subject bonuses falls well within the
company's prerogative, being an act of pure gratuity and generosity on its part. Thus, it can withhold the grant thereof
especially since it is currently plagued with economic difficulties and financial losses.
ETPI further avers that the act of giving the subject bonuses did not ripen into a company practice arguing that it has
always been a contingent one dependent on the realization of profits and, hence, the workers are not entitled to
bonuses if the company does not make profits for a given year.
Issues: Whether the company is obliged to pay the 14th, 15th and 16th month bonuses based on the CBA
Whether the payment of such bonuses has become a regular practice
SC: Yes to both. From a legal point of view, a bonus is a gratuity or act of liberality of the giver which the recipient has
no right to demand as a matter of right.
The grant of a bonus is basically a management prerogative which cannot be forced upon the employer who may not be
obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or
wages.
A bonus, however, becomes a demandable or enforceable obligation when it is made part of the wage or salary or
compensation of the employee.
Parties agreed on the inclusion of a provision for the grant of 14th, 15th an
d 16th month bonuses in the 1998-2001 CBA Side Agreement, as well as in the 2001-2004 CBA Side

Agreement, which was signed on September 3, 2001. The provision, which was similarly worded, states:
Employment-Related Bonuses. The Company confirms that the 14th, 15th and 16th month bonuses
(other than the 13th month pay) are granted.
A reading of the above provision reveals that the same provides for the giving of 14th, 15th and 16th month bonuses
without qualification. The wording of the provision does not allow any other interpretation. There were no conditions
specifiedin the CBA Side Agreements for the grant of the benefits contrary to the claim of ETPI that the same is justified
only when there are profits earned by the company. Terse and clear, the said provision does not state that the subject
bonuses shall be
made to depend on the ETPI's financial standing or that their payment was contingent upon the realization of profits.
Neither does it state that if the company derives no profits, no bonuses are to be given to the employees. In fine, the
payment of these bonuses was not related to the profitability of business operations.
Granting arguendo that the CBA Side Agreement does not contractually bind petitioner ETPI to give the subject bonuses,
nevertheless, the Court finds that its act of granting the same has become an established company practice such that it
has virtually become part of the employees' salary or wage. A bonus may be granted on equitable consideration when
the giving of such bonus has been the company's long and regular practice.
In Philippine Appliance Corporation v. Court of Appeals,it was pronounced:
To be considered a "regular practice," however, the giving of the bonus should have been done over a long period of
time, and must be shown to havebeen consistent and deliberate. The test or rationale of this rule on long practice
requires an indubitable showing that the employer agreed to continue giving thebenefits knowing fully well that said
employees are not covered by the law
requiring payment thereof.
The records show that ETPI, aside from complying with the regular 13th month bonus, has been further giving its
employees 14th month bonus every April as well as 15th and 16th month bonuses every December of the year, without
fail, from 1975 to 2002 or for 27 years whether it earned profits or not. The considerable length of time. ETPI has been
giving the special grants to its employees indicates a unilateral and voluntary act on its part to continue giving said
benefits knowing that such act was not
required by law. Accordingly, a company practice in favor of the employees has been
established and the payments made by ETPI pursuant thereto ripened into benefits
enjoyed by the employees. The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI
without violating Article 100 of the Labor Code

Case no. 9 GSIS vs. NATIONAL LABOR RELATIONS COMMISSION

FACTS: Respondents Dionisio Banlasan, Alfredo T. Tafalla, Telesforo D. Rubia, Rogelio A. Alvarez, Dominador A.
Escobal, and Rosauro Panis were employed as security guards by DNL Security Agency (DNL Security). In 1978,
DNL Security and GSIS entered into a service contact and respondents were assigned to GSISs Tacloban City office
with monthly income of P1,400. In 1989, GSIS voluntarily increased respondents monthly salary to P3,000.
In Februrary 1993, DNL Security informed respondents that its service contract with GSIS was terminated but they
were instructed to continue reporting for work to GSIS. Respondents worked as instructed until April 20, 1993,
but without receiving their wages; after which, they were terminated from employment.
On June 15, 1995, respondents filed with NLRC a complaint against DNL Security and GSIS for illegal dismissal,
separation pay, salary differential, 13th month pay, and payment of unpaid salary.
LABOR ARBITER: Ordering DNL Security to give separation pay and wages representing February to April 1993.
Ordering as joint and solidary liability by DNL Security and GSIS for salary differential and 13th month pay. Found
no illegal dismissal because the employment of security guards is dependent on the service contract between the
security agency and its client.
NLRC: dismissed appeal of GSIS because it was filed beyond the reglementary period.
COURT OF APPEALS: Affirmed decision of NLRC.
In present petition, GSIS insists that its appeal before the NLRC was filed on time through registered mail; and that
GSIS is not solidarily liable with DNL Security, GSIS questions the award of monetary benefit for lack of evidence,
and GSISs charter unequivocally exempts it from execution.

ISSUE: W/N GSIS is liable as indirect employer.

HELD: YES. Solidarily liable with DNL Security for wage differential, 13th month pay, and
unpaid wages from February to April 1993, but exonerated from paying separation pay.
When GSIS contracted DNL Security's services, GSIS became an indirect employer of respondents, pursuant to
Article 107 of the Labor Code. After DNL Security failed to pay respondents the correct wages and other monetary
benefits, GSIS, as principal, became jointly and severally liable, as provided in Articles 106 and 109 of the Labor
Code. This statutory scheme is designed to give the workers ample protection, consonant with labor and social
justice provisions of the 1987 Constitution.
GSIS's liability covers the payment of respondents' salary differential and 13th month pay during the time they
worked for GSIS. In addition, GSIS is solidarily liable with DNL Security for respondents' unpaid wages from
February 1993 until April 20, 1993. While it is true that respondents continued working for GSIS after the
expiration of their contract, based on the instruction of DNL Security, GSIS did not object to such assignment and
allowed respondents to render service. Thus, GSIS impliedly approved the extension of respondents' services.
Accordingly, GSIS is bound by the provisions of the Labor Code on indirect employment. GSIS cannot be allowed
to deny its obligation to respondents after it had benefited from their services. So long as the work, task, job, or
project has been performed for GSIS's benefit or on its behalf, the liability accrues for such services.
GSIS's liability, however, cannot extend to the payment of separation pay. An order to pay separation pay is
invested with a punitive character, such that an indirect employer should not be made liable without a finding
that it had conspired in the illegal dismissal of the employees.

IN CASE TATANUNGIN NI MAAM:

Appeal filed on time. The date of filing is determinable from two sources: from the post office stamp on the
envelope or from the registry receipt, either of which may suffice to prove the timeliness of the filing of the
pleadings.
GSISs charter should not be used to evade its liabilities to its employees, even to its indirect employees, as
mandated by the Labor Code.
In Rubia vs. GSIS:
The processual exemption of the GSIS funds and properties under Section 39 of the GSIS Charter, in our view,
should be read consistently with its avowed principal purpose: to maintain actuarial solvency of the GSIS in the
protection of assets which are to be used to finance the retirement, disability and life insurance benefits of its
members. Clearly, the exemption should be limited to the purposes and objects covered. Any interpretation that
would give it an expansive construction to exempt all GSIS assets from legal processes absolutely would be
unwarranted.

G.R. No. 160506

DEL CASTILLO, J.:

Case no 10. ALIVIADO vs PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC.,
June 6, 2011

FACTS: Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as 1982 or as late as
June 1991, to either May 5, 1992 or March 11, 1993. They all individually signed employment contracts with either
Promm-Gem or SAPS for periods of more or less five months at a time. They were assigned at different outlets,
supermarkets and stores where they handled all the products of P&G. They received their wages from Promm-Gem or
SAPS. SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as habitual
absenteeism, dishonesty or changing day-off without prior notice. P&G is principally engaged in the manufacture and
production of different consumer and health products, which it sells on a wholesale basis to various supermarkets and
distributors. To enhance consumer awareness and acceptance of the products, P&G entered into contracts with PrommGem and SAPS for the promotion and merchandising of its products.In December 1991, petitioners filed a complaint
against P&G for regularization, service incentive leave pay and other benefits with damages. The complaint was later
amended to include the matter of their subsequent dismissal.
Petitioners Arguments
Petitioners insist that they are employees of P&G. They claim that they were recruited by the salesmen of P&G and were
engaged to undertake merchandising chores for P&G long before the existence of Promm-Gem and/or SAPS. They
further claim that when the latter had its so-called re-alignment program, petitioners were instructed to fill up
application forms and report to the agencies which P&G created. Petitioners further claim that P&G instigated their
dismissal from work as can be gleaned from its letter to SAPS dated February 24, 1993, informing the latter that their
Merchandising Services Contract will no longer be renewed. Petitioners further assert that Promm-Gem and SAPS are
labor-only contractors providing services of manpower to their client. They claim that the contractors have neither
substantial capital nor tools and equipment to undertake independent labor contracting. Petitioners insist that since
they had been engaged to perform activities which are necessary or desirable in the usual business or trade of P&G,
then they are its regular employees.
Respondents Arguments
On the other hand, P&G points out that the instant petition raises only questions of fact and should thus be thrown out
as the Court is not a trier of facts. It argues that findings of facts of the NLRC, particularly where the NLRC and the Labor
Arbiter are in agreement, are deemed binding and conclusive on the Supreme Court.
P&G further argues that there is no employment relationship between it and petitioners. It was Promm-Gem or SAPS
that (1) selected petitioners and engaged their services; (2) paid their salaries; (3) wielded the power of dismissal; and
(4) had the power of control over their conduct of work.
P&G also contends that the Labor Code neither defines nor limits which services or activities may be validly outsourced.
Thus, an employer can farm out any of its activities to an independent contractor, regardless of whether such activity is
peripheral or core in nature. It insists that the determination of whether to engage the services of a job contractor or to
engage in direct hiring is within the ambit of management prerogative.
Ruling of the Labor Arbiter: dismissed the complaint for lack of merit and ruled that there was no employer-employee
relationship between petitioners and P&G. He found that the selection and engagement of the petitioners, the payment
of their wages, the power of dismissal and control with respect to the means and methods by which their work was
accomplished, were all done and exercised by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were
legitimate independent job contractors.
Ruling of the NLRC: rendered a Decision affirming the Decision of the Labor Arbiter.
Ruling of the Court of Appeals: the decision of the National Labor Relations Commission is AFFIRMED with the
MODIFICATION that respondent Procter & Gamble Phils., Inc. is ordered to pay service incentive leave pay to petitioners.
ISSUES: whether P&G is the employer of petitioners.
SUPREME COURT DECISION: The petition has merit.
In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to first determine whether
Promm-Gem and SAPS are labor-only contractors or legitimate job contractors.
The pertinent Labor Code provision on the matter states:
ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.In the event that the contractor or subcontractor fails to pay the
wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.The Secretary of Labor may, by appropriate

regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code.
In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting
as well as differentiations within these types of contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this
Code. There is "labor-only" contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 1802,24 distinguishes between legitimate and labor-only contracting:
x x x x Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral
relationship under which there is a contract for a specific job, work or service between the principal and the contractor
or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there
are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor
or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance
of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the
job[,] work or service.x x x xSection 5. Prohibition against labor-only contracting. Labor-only contracting is hereby
declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the
following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; orii) [T]he contractor does not
exercise the right to control over the performance of the work of the contractual employee.The foregoing provisions
shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service contracted out.The "right to control" shall
refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine
not only the end to be achieved, but also the manner and means to be used in reaching that end.
xxxx
Clearly, the law and its implementing rules allow contracting arrangements for the performance of specific jobs, works
or services. Indeed, it is management prerogative to farm out any of its activities, regardless of whether such activity
is peripheral or core in nature. However, in order for such outsourcing to be valid, it must be made to an independent
contractor because the current labor rules expressly prohibit labor-only contracting. To emphasize, there is labor-only
contracting when the contractor or sub-contractor merely recruits, supplies or places workers to perform a job, work
or service for a principal25 and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the performance of the work of the contractual
employee.
In the instant case, the financial statements26 of Promm-Gem show that ithas authorized capital stock of P1 million and a
paid-in capital, or capital available for operations, of P500,000.00 as of 1990.27 It also has long term assets worth
P432,895.28 and current assets of P719,042.32. Promm-Gem has also proven that it maintained its own warehouse and
office space with a floor area of 870 square meters.28 It also had under its name three registered vehicles which were
used for its promotional/merchandising business.29 Promm-Gem also has other clients30 aside from P&G.31 Under the
circumstances, we find that Promm-Gem has substantial investment which relates to the work to be performed. These
factors negate the existence of the element specified in Section 5(i) of DOLE Department Order No. 18-02.
The records also show that Promm-Gem supplied its complainant-workers with the relevant materials, such as markers,
tapes, liners and cutters, necessary for them to perform their work. Promm-Gem also issued uniforms to them. It is also
relevant to mention that Promm-Gem already considered the complainants working under it as its regular, not merely
contractual or project, employees.32 This circumstance negates the existence of element (ii) as stated in Section 5 of
DOLE Department Order No. 18-02, which speaks of contractual employees. This, furthermore, negates on the part of
Promm-Gem bad faith and intent to circumvent labor laws which factors have often been tipping points that lead the
Court to strike down the employment practice or agreement concerned as contrary to public policy, morals, good
customs or public order.33

Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that it is a legitimate
independent contractor.
As to SAPS
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31,250.00. There is
no other evidence presented to show how much its working capital and assets are. Furthermore, there is no showing of
substantial investment in tools, equipment or other assets.
In Vinoya v. National Labor Relations Commission,34 the Court held that "[w]ith the current economic atmosphere in the
country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be considered as substantial capital and, as
such, PMCI cannot qualify as an independent contractor."35 Applying the same rationale to the present case, it is clear
that SAPS having a paid-in capital of only P31,250 - has no substantial capital. SAPS lack of substantial capital is
underlined by the records36 which show that its payroll for its merchandisers alone for one month would already total
P44,561.00. It had 6-month contracts with P&G.37 Yet SAPS failed to show that it could complete the 6-month contracts
using its own capital and investment. Its capital is not even sufficient for one months payroll. SAPS failed to show that
its paid-in capital of P31,250.00 is sufficient for the period required for it to generate its needed revenue to sustain its
operations independently. Substantial capital refers to capitalization used in the performance or completion of the job,
work or service contracted out. In the present case, SAPS has failed to show substantial capital.
Furthermore, the petitioners have been charged with the merchandising and promotion of the products of P&G, an
activity that has already been considered by the Court as doubtlessly directly related to the manufacturing business,38
which is the principal business of P&G. Considering that SAPS has no substantial capital or investment and the workers it
recruited are performing activities which are directly related to the principal business of P&G, we find that the former is
engaged in "labor-only contracting".
"Where labor-only contracting exists, the Labor Code itself establishes an employer-employee relationship between
the employer and the employees of the labor-only contractor."39 The statute establishes this relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the
principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had
been directly employed by the principal employer.40

Case no 11. Mandaue Galleon vs Andales, et. al

G.R. No. 159668, March 7, 2008
Justice Austria-Martinez

Facts:
Petitioner Mandaue Galleon Trace INC (MGTI), and Gamallosons Traders INC (GTI), are business entities engaged
in rattan furniture manufacturing for export. Respondents are were hired as weavers, granders, sanders and
finishers by petitioner. Respondent Andales filed a complaint with the LA against both the petitioners for illegal
dismissal and non-payment of 13th month pay and SIL pay. His coworkers also filed similar complaints. They allege
that MGTI hired them, and that sometime in August 1998 some were given visitor IDs while some were told to look
for work elsewhere as the company had no work for them. Eventually they were all dismissed without notice or just
cause. They allege that they were in fact regular employees because they performed the work inside the premises,
were issued uniforms; were under supervision of the MGTI's foremen, quality control personnel and checkers;
MGTI supplied the materials, designs, tools etc; MGTI conducts orientations on how the work was to be done and
the safe and efficient use of tools; MGTI issued memos regarding absences and waste of resources; and MGTI
exercised power to discipline them.
MGTI denied the existence of an employer-employee relationship, claiming that they were workers of independent
contractor whose services they temporarily engaged in when the demands for its products were high. LA ruled that
183 of the 260 complainants were indeed regular employees and ordered petitioner to pay. Both parties appealed.
CA ruled in favor of NLRC's decision.
ISSUE: WON respondents are labor-only contractors or independent contractors.
HELD:
The court held that they are LABOR-ONLY CONTRACTORS. Based on Art. 106 of the LC and Sec. 5 and 7 of the
IRR, labor-only contracting exists when :
(1) where the contractor or subcontractor supplying workers to an employer DOES NOT have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among other things; and the
workers recruited and placed by the contractor or subcontractor are performing activities which are directly related
to the principal business of such employer
(2) where the contractor does NOT exercise the right to control the performance of the work of the
employee.
Under the law, the principal employer is solidarily liable with the labor-only contractors for the rightful
claim of the employees. The latter are deemed AGENTS of the former, and the law makes the employer responsible
to the employees of the labor only contractors as if the principal itself directly hired or employed the employees.
Thus, an employer-employee relationship is created between the employer and the employee of the labor-only
contractor. The purpose of the law is to prevent the circumvention by the employers, of the labor laws that are
intended to protect employees.
MGTI cannot say that respondents are independent contractors because of the following criteria laid down in law.
First, respondents workers were directly related to MGTI's principal business of rattan furniture. Second, MGTI was
unable to present any proof that its contractors had substantial capital. Thus, the contractors are labor-only
contractors because of the absence of any substantial capital which relates to the service performed. The work of
respondents were directly related to MGTI's main business.

Case no. 12. spic n span services corp vs paje et al

FACTS: Swift Foods, Inc. (Swift) is a subsidiary of RFM Corporation that manufactures
and processes meat products and other food products. SNSs business is to supply
manpower services to its clients for a fee. Swift and SNS have a contract to promote
Swift products. complainants worked as Deli/Promo Girls of Swift products in various
supermarkets in Tarlac and Pampanga. They were all dismissed from their
employment. the complainants alleged that they were employees of Swift and SNS, and
their services were terminated without cause and without due process. The termination
came on the day they received their notices; thus, they were denied the procedural due
process requirements of notice and hearing prior to their termination of
employment.5 Swift, in its position paper, moved to dismiss the complaints on the ground
that it entered into an independent labor contract with SNS for the promotion of its
products; it alleged that the complainants were the employees of SNS, not of Swift.
ISSUE: Whether or not SNS is Swifts agent
RULING: Yes. In order that a labor relationship can be categorized as
legitimate/permissible job contracting or as prohibited labor-only contracting, the totality
of the facts and the surrounding circumstances of the relationship ought to be considered.
To be legitimate, contracting or subcontracting must satisfy the following requirements:
1) The contractor or subcontractor carries on a distinct and independent business and
undertakes to perform the job, work or service on its own account and under its own
responsibility, according to its own manners and methods, and free from the control and
direction of the principal in all matters connected with the performance of the work
except as to the results thereof; 2) the contractor or subcontractor has substantial capital
or investment; and 3) the agreement between the principal and contractor or
subcontractor assures the contractual employees entitlement to all labor and occupational
safety and health standards, free exercise of right to self-organization, security of tenure,
and social and welfare benefit
The Labor Arbiter, in finding that SNS was merely a labor-only contractor, cited the
following reasons: First, the agreement between SNS and Swift shows that the latter
exercised control over the promo girls and/or merchandisers through the services of
coordinators. Second, it cannot be said that SNS has substantial capital. Third, the duties
of the petitioners were directly related, necessary and vital to the day-to-day operations of
Swift. Lastly, the uniform and identification cards used by the petitioners were subject to
the approval of Swift.
Hence, SNS is considered merely an agent of Swift which does not exempt the latter from
liability. therefore, is a case of illegal dismissal perpetrated by a principal and its illegal
contractor-agent.

Case No 13 - DBP vs. NLRC

FACTS: On 21 March 1977 private respondent Leonor A. Ang started employment as Executive Secretary with Tropical
Philippines Wood Industries, Inc. (TPWII), a corporation engaged in the manufacture and sale of veneer, plywood and
sawdust panel boards. In September 1983 petitioner Development Bank of the Philippines, as mortgagee of TPWII,
foreclosed its plant facilities and equipment. In January 1986 petitioner took possession of the foreclosed properties.
From then on the company ceased its operations. As a consequence, private respondent was on 15 April 1986 verbally
terminated from the service. Aggrieved by the termination of her employment, private respondent filed with the Labor
Arbiter a complaint for separation pay, 13th month pay, vacation and sick leave pay, salaries and allowances against
TPWII, its General Manager, and petitioner. Labor Arbiter: TPWII primarily liable; General Manager subsidiarily liable
NLRC: affirmed NLRC's decision
ISSUE: Did the NLRC commit grave a buse of discretion in holding that Art. 110 is applicable in the case at bar
notwithstanding the absence of formal declaration of bankruptcy or judicial liquidation of TPWII? / Is declaration of
bankruptcy or judicial liquidation required before the worker's preference may be invoked under Art. 110 of the Labor
Code? RULING: YES. The decision of NLRC runs counter to the consistent rulings of this Court emphasizing that Art. 110
of the Labor Code is contingent upon the institution of bankruptcy or judicial liquidation proceedings against the
employer.
1. Art. 110 should not be treated apart from other laws but applied in conjunction with the pertinent provisions of the
Civil Code and the Insolvency Law to the extent that piece-meal distribution of the assets of the debtor is avoided. The
Court had interpreted this provision in the case of Development Bank of the Philippines v . Santos in this manner, " . . . a
declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be enforced. Thus,
Article 110 of the Labor Code and its implementing rule cannot be invoked by the respondents in this case absent a
formal decl aration of bankruptcy or a liquidation order..." Rationale: To hold Art. 110 applicable also to extrajudicial
proceedings would be putting the worker in a better position than the State which could only assert its own prior
preference in case of a judicial proceeding.
2. What is the effect of the amendment by RA 6715 of Art. 110? 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
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. (as
amended) *It expanded the concept of worker preference not only in unpaid wages but also to other monetary claims
*The words "declaration" (of bankruptcy) or "judicial" (liquidation) have been notably eliminated EFFECT? Wala. Hahaha.
Ganun pa rin. In the case of DBP vs. NLRC (ibang kaso to ha), Court did not alter its original position that the right to
preference given to workers under Art. 110 cannot exist in any effective way prior to the time of its presentation in
distribution proceedings. Why oh why? Here. In the event of insolvency, a principal objective should be to effect an
equitable distribution of the insolvent's property among his creditors. To accomplish this there must first be some
proceeding where notice to all of the insolvent's creditors may be given and where the claims of preferred creditors may
be bindingly adjudicated. (This next one makes a very good point.) "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 s 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." In the case at bar, since
there is still no declaration of insolvency nor a judicial liquidation of TPWII, it would be PREMATURE to enforce the
workers preference.
3. The NLRC also held that the complainant enjoys a preference of credit over the properties of TPWII being held in
possession by DBP. Wrong.
The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the proper ty
of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application.Article
110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either upon all
of the properties or upon any particular property owned by their employer. Claims for unpaid wages do not therefore fall
at all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil Code (claims
for laborers' wage on goods manufactured or the work done; claims of other workers engaged in the construction,
reconstruction or repair of buildings, canals and other works, upon said buildings, canals and other works). The DBP
anchors its claims on a mortgage credit. It creates a real right which is enforceable against the whole world. It is a lien on
an identified immovable property, which a preference is not. A recorded mortgage credit is a special preferred credit
under Article 2242 (5) of the Civil Code on classification of credits.

Case No. 14- SHS perforated materials vs Diaz

Facts: Petitioner SHS Perforated Materials Ins (SHS ) is a start up corporation organized under the republic of the
Philippines and registered under the PEZA, Petitioner Winfried Hartmannshen and Hinrich Johann Schumacher is its
president and treasurer respectively. Respondent Manuel Diaz was hired as manager for business development on
probationary status from july 18, 2005 to January 18, 2006 with a monthly salary of P100,000.00 who is to directly
report to Mr. Hartmannshen. his duties includes representing the company in PEZAs events and performing sales and
marketing function also The latter required him to report to the SHS plant at least 2 days every work week and to
observe technical process involved in the manufacturing of perforated material.
During his employment Hartmannshen is always abroad and because of business exigencies, his instructions to
respondent were either sent by electronic mail or through telephone or mobile phone. As to respondents work there is
no close supervision by him. During meetings with the respondent Hartmannshen expressed his dissatisfaction over
respondents poor performance. In numerous e-mails respondent acknowledges his poor performance and offered to
resign for the company.
On nov 16, 2005 in preparation for his trip to the Philippines, Hartmannshen tried to call respondent on his mobile
phone, but the latter failed to answer. On November 18, 2005 Hartmannshen arrived in the Philippines form Germany
and on November 22 and 24, 2005 notified the respondent of his arrival through e-mail and advised him to get in touch
with him. Respondent claimed that he nev3r received the messages.
On November 29, Hartmannshen instructed not to release respondents salary. He was informed that it was being
withheld and to contact Hartmannshen immediately. The next day respondent served on SHS a demand letter and
resignation letter. Demanding his salary for the period of November 16-30 and the basis for his resignation is illegal an
unfair labor practices
In the evening of the same day, respondent met with Hartmannshen, the latter told him that he was extremely
disappointed and that he accepted respondents resignation and informed him that his salary would be released upon
explanation of his failure to report to work and proof that he did, in fact work for the period in question. He demanded
that respondent surrender all company property and information in his possession. Respondent agreed to these exit
conditions through email. But instead of complying respondent sent another letter appealing for the released of his
salary. To settle the issue amicably petitioners counsel advised respondents counsel that a check had been prepared in
the amount of 50,000.00 but responded never picked up the check on December 9, respondent filed a complaint for
illegal dismissal, non-payment of salaries and wages and 13th month pay, with the prayer for reinstatement and full
backwages, exemplary damages and attorneys fees and legal interest
LA: there was illegal dismissal, the respondent was constructively dismissed because the withholding of his salary was
contrary to art 116 or LC as it was not one of the exceptions for allowable wage deduction by the employer under art
113 of LC. That he had no alternative but to resign because he could not be expected to continue working for an
employer who withheld wages without valid cause
NLRC: reversed the ruling of LA, on the ground that withholding of respondents salary was a valid exercise of
management prerogative. The act was justified as it was reasonable to demand an explanation for failure to report to
work and to account for this work accomplishment.
CA: reversed NLRC, it held that withholding of respondents salary was not a valid exercise of management prerogative as
there is no such thing as management prerogative to withhold wages temporarily. Petitioners averments of respondents
failure to report to work were found to be unsubstantiated allegations not corroborated by any other evidence,
insufficient to justify the withholding and lacking in probative value
ISSUE: 1. WON the temporary withholding of respondents salary was a valid exercise of management prerogative
2. WON respondent voluntary resigned
Held: 1. NO, Management Prerogative refers to the right of an employer to regulate all aspects of employment, such as
freedom to prescribe work assignments, working methods, processes to be followed, regulation regarding transfer of
employees, supervision of their work, lay off and discipline and dismissal and recall of work. It cannot be understood to
include the right to temporary withhold salary/wages without consent of the employee. To sanction such interpretation
would be contrary to art 116 of LC

ART. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly or indirectly, to
withhold any amount from the wages of a worker or induce him to give up any part of his wages by force, stealth,
intimidation, threat or by any other means whatsoever without the worker's consent.
Any withholding of an employee's wages by an employer may only be allowed in the form of wage deductions under the
circumstances provided in Article 113 of the Labor Code, as set forth below:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person, shall make any deduction from
the wages of his employees, except: DEaHT
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the
employer for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has been recognized by the employer
or authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.
Absent a showing that the withholding of complainants wages falls under the exception provided in article 113, the
withholding thereof is unlawful
2. NO, the court agrees that respondent was forced to resign and was thus constructively dismissed. In the case of
Duldulao vs CA:
There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes
so unbearable on the part of the employee that it would foreclose any choice by him except to forego his continued
employment. It exists where there is cessation of work because continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay.
What made it impossible, unreasonable or unlikely for respondent to continue working for SHS was the unlawful
withholding of his salary. For said reason, he was forced to resign. It is of no moment that he served his resignation
letter on November 30, 2005, the last day of payroll period and a non-working holiday sinc4e his salary was already due
him on Nov 29, 2005, being the last working day of the said period. In fact, he was then informed that the wages of all
other SHS employees were already released, and only his was withheld. What is significant is that respondent prepared
and served his resignation letter right after he was informed that his salary was being withheld? The petitioners claim
that they prepared the check ready for pick-up cannot undo the unlawful withholding.

Case o 15. P.I. Manufacturing Inc. v P.I. Manufacturing Supervisors and Foremen Association

Facts:

Petitioner is a domestic corporation engaged in the manufacture and sale of household appliances
Respondent is an organization of petitioners supervisors and foremen
On December 10, 1987 RA 6640 was passed providing for an increase in the minimum wage and salary rates of
employees
Among others, it provides:
1. A P10.00 increase per day for employees in the private sector
2. An P11.00 increase per day for workers outside metro manila
3. A P10.00 increase per day for those already receiving above the minimum wage up to P100.00
(Note: At that time minimum wage was P54.00, number 3 means that for those receiving more than P54 up to
P100 they shall also be entitled to receive an increase of P10.00; hence, if receiving >P100 not entitled)

Meanwhile, a Collective Bargaining Agreement was agreed upon between petitioner and respondent providing
an increase of:
1. P625/mo. for Supervisors
2. P475/mo. for Foremen and;
3. That they absolverelease the COMPANY for any
monetary claim they have, if any there might be or there might have been
previous to the signing of this agreement."

Respondent filed a complaint with NLRC for violation of RA 6640 claiming wage distortion due to
implementation of the law
Wage distortion, a situation where an increase in prescribed wage rates results in the elimination or severe
contraction of intentional quantitative difference between lower and higher positions because of compliance
with wage order.
(Translation: it eliminates the gap or difference of wage rates based on skills, length of service, or other logical
bases between employers, so that all employees would virtually receive the same wage, regardless of their skills,
length of service, position etc. )

Labor Arbiter favored respondent; granted 13.5% increase; because according to this math genius the increase
of P10 from the P54 minimum (making the minimum now at P64) is 13.5% increase.
CA - affirmed LA but with modification, the court showing off its math prowess, modified the computation
saying that the increase of P10 from the minimum of P54 is 18.5% not 13.5%
So company appealed to SC

Issue: WON there is wage distortion

WON the Collective Bargaining Agreement violates RA 6640
Held:
There was wage distortion.

Out of all of the members of respondent, only 3 were receiving wage rate of P100 and below, so only those 3 were
entitled to the P10 increase pursuant to RA 6640. The rest are not entitled to the increase. The effect is 2 foremen
exceeded the wage rate of a supervisor, another supervisor who used to have a P9 gap or difference with another
supervisor, now receives less than that supervisor. Thus, gaps or differences between and among the wage rates of the
employees have been substantially altered and reduced.
However, the CBA re-established this gap. The agreement provided rate increases, as follows:
Supervisors P625/mo or P24.03 increase per day
Foremen- P475/mo or P18.26 increase per day
The above increase was much more than P10, so, much more than substantial compliance with RA6640.
CA requiring an increase of 18.5% over and above the negotiated wage increase is highly unfair and oppressive.
Another, CBA is the law between the parties when freely and voluntarily entered into. Respondents cannot disregard the
concessions it voluntarily extended to petitioner.
(Note: The concession mentioned here is that part of the CBA releasing the Company from any monetary claims; so
Court ruled that that part of CBA is valid)
CBA not a violation of RA 6640. CA reversed.

Case no 16. BANKARD EMPLOYEES UNION V NLRC (BANKARD INC)

423 SCRA 148 February 17, 2004
Carpio-Morales, J.
FACTS:
Bankard, Inc. (Bankard) classifies its employees by levels. On May 28, 1993, its Board of Directors
approved a "New Salary Scale" for the purpose of making its hiring rate competitive in the industrys labor
market. The "New Salary Scale" increased the hiring rates of new employees. Accordingly, the salaries of
employees who fell below the new minimum rates were also adjusted to reach such rates under their levels.
Bankards move drew the Bankard Employees Union-WATU (petitioner), the duly certified exclusive
bargaining agent of the regular rank and file employees of Bankard, to press for the increase in the salary of its
old, regular employees. Bankard took the position, however, that there was no obligation on the part of the
management to grant to all its employees the same increase in an across-the-board manner.
Petitioners filed Notices of Strike on the ground of discrimination and other acts of Unfair Labor
Practice. The strike was averted, however, when the dispute was certified by the Secretary of Labor and
Employment for compulsory arbitration. NLRC, finding no wage distortion, dismissed the case for lack of
merit. MFR was denied. Hence, this petition for certiorari.
ISSUE:
WON the unilateral adoption by an employer of an upgraded salary scale that increased the hiring rates of new
employees without increasing the salary rates of old employees resulted in wage distortion within the
contemplation of Article 124 of the Labor Code
HELD:
NO. The present petition is hereby DENIED.
Petitioner cannot make a contrary classification of private respondents employees without encroaching
upon recognized management prerogative of formulating a wage structure, in this case, one based on level.
While seniority may be a factor in determining the wages of employees, it cannot be made the sole basis
in cases where the nature of their work differs. Moreover, for purposes of determining the existence of wage
distortion, employees cannot create their own independent classification and use it as a basis to demand an
across-the-board increase in salary. Apart from the findings of fact of the NLRC and the Court of Appeals that
some of the elements of wage distortion are absent, petitioner cannot legally obligate Bankard to correct the
alleged "wage distortion" as the increase in the wages
and salaries of the newly-hired was not due to a prescribed law or wage order. The wordings of Article 124 are
clear. If it was the intention of the legislators to cover all kinds of wage adjustments, then the language of the
law should have been broad, not restrictive as it is currently phrased.
Moreover, Bankards right to increase its hiring rate, to establish minimum salaries for specific jobs, and
to adjust the rates of employees affected thereby is embodied under Section 2, Article V (Salary and Cost of
Living Allowance) of the parties Collective Bargaining Agreement (CBA).

Case no. 17. central azucarera de tarlac vs central azucarera de tarlac labor union
FACTS: Petitioner is a domestic corporation engaged in the business of sugar manufacturing, while
respondent is a legitimate labor organization which serves as the exclusive bargaining representative of
petitioners rank-and-file employees.
petitioner granted its employees the mandatory thirteenth (13th) - month pay since 1975. The formula
used by petitioner in computing the 13th-month pay was: Total Basic Annual Salary divided by twelve
(12). Included in petitioners computation of the Total Basic Annual Salary were the following: basic
monthly salary; first eight (8) hours overtime pay on Sunday and legal/special holiday; night premium
pay; and vacation and sick leaves for each year. Throughout the years, petitioner used this computation
until 2006.
On Nov 2004, respondent staged a strike. petitioner declared a temporary cessation of operations. In
Dec 2005, all the striking union members were allowed to return to work. Subsequently, petitioner
declared another temporary cessation of operations for the months of April and May 2006. The
suspension of operation was lifted on June 2006, but the rank-and-file employees were allowed to
report for work on a fifteen (15) day-per-month rotation basis that lasted until Sept 2006. In Dec 2006,
petitioner gave the employees their 13th-month pay based on the employees total earnings during the
year divided by 12.
Respondent objected to this computation. It claimed that the divisor should have been eight (8) instead
of 12, because the employees worked for only 8 months in 2006. It likewise asserted that petitioner did
not observe the company practice of giving its employees the guaranteed amount equivalent to their
one month pay, in instances where the computed 13th-month pay was less than their basic monthly
pay.[5]
petitioner explained that the change in the computation of the 13th-month pay was intended to rectify an
error in the computation, particularly the concept of basic pay which should have included only the
basic monthly pay of the employees.
ISSUE: The controversy stems from the interpretation of the term basic pay, essential in the
computation of the 13th-month pay.
RULING:
Revised Guidelines on the Implementation of the 13th-Month Pay Law: the minimum 13th-month pay
required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee
within a calendar year. The term basic salary of an employee for the purpose of computing the 13thmonth pay was interpreted to include all remuneration or earnings paid by the employer for services
rendered, but does not include allowances and monetary benefits which are not 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. However, these salaryrelated benefits should be included as part of the basic salary in the computation of the 13th-month pay
if, by individual or collective agreement, company practice or policy, the same are treated as part of the
basic salary of the employees.
the practice of petitioner in giving 13th-month pay based on the employees gross annual earnings
which included the basic monthly salary, premium pay for work on rest days and special holidays,
night shift differential pay and holiday pay continued for almost thirty (30) years and has ripened into a
company policy or practice which cannot be unilaterally withdrawn.
Petitioner only changed the formula in the computation of the 13th-month pay after almost 30 years and
only after the dispute between the management and employees erupted. This act of petitioner in
changing the formula at this time cannot be sanctioned, as it indicates a badge of bad faith.

Case no 18. PEOPLES BROADCASTING SERVICE vs SEC.OF LABOR

FACTS:
Jendeleon Juezan filed a complaint against Peoples Broadcasting Service Inc. For illegal deduction, nonpayment of service incentive leave, 13th month pay, premium pay for holiday and rest day and illegal
diminution of benefits, delayed payment of wages and non-coverage of SSS, PAG-IBIG and Philhealth before
the Department of Labor and Employment (DOLE) Regional Office No. VII, Cebu City.
DOLE conducted a plant level inspection on 23 September 2003. In the Inspection Report Form, Petitioner was
required to rectify/restitute the violations within five (5) days from receipt. No rectification was effected.
Thereafter, DOLE Regional Director, in an ORDER dated Feb 27, 2004, Atty. Rodolfo M. Sabulao (Regional
Director) ruled that respondent is an employee of petitioner, and that the former is entitled to his money
claim. Petitioner sought reconsideration of the Order, claiming that the Regional Director gave credence to
the documents offered by respondent without examining the originals, but at the same time he missed or
failed to consider petitioners evidence. It was , however, denied. It was appealed to the Secretary of Labor
but was also dismissed.
Petitioner elevated the case to the Court of Appeals, claiming that it was denied due process when the DOLE
Secretary disregarded the evidence it presented and failed to give it the opportunity to refute the claims of
respondent. Petitioner maintained that there is no employer-employee relationship had ever existed
between it and respondent because it was the drama directors and producers who paid, supervised and
disciplined respondent. It also added that the case was beyond the jurisdiction of the DOLE and should have
been considered by the labor arbiter because respondents claim exceeded P5,000.00.
The Court of Appeals held that petitioner was not deprived of due process as the essence thereof is only an
opportunity to be heard, which petitioner had when it filed a motion for reconsideration with the DOLE
Secretary. It further ruled that the latter had the power to order and enforce compliance with labor standard
laws irrespective of the amount of individual claims because the limitation imposed by Article 29 of the Labor
Code had been repealed by Republic Act No. 7730. Petitioner sought reconsideration of the decision but its
motion was denied.
Hence, it was raised before the Supreme Court. Petitioner argues that the
1. National Labor Relations Commission (NLRC), and not the DOLE Secretary, has jurisdiction over
respondents claim, in view of Articles 217 and 128 of the Labor Code.
2. Court of Appeals committed grave abuse of discretion when it dismissed petitioners appeal without
delving on the issues raised therein, particularly the claim that no employer-employee relationship had
ever existed between petitioner and respondent.
3. Finally, petitioner avers that there is no appeal, or any plain, speedy and adequate remedy in the
ordinary course of law available to it.
Respondent claims that petitioner was not denied due process since even when the case was with the
Regional Director, a hearing was conducted and pieces of evidence were presented. Respondent stands by
the propriety of the Court of Appeals ruling that there exists an employer-employee relationship between
him and petitioner.
ISSUE:
does the Secretary of Labor have the power to determine the existence of an employer-employee
relationship?
RULING:
Under the 2006 Decision:

The Court found that there was no employer-employee relationship between petitioner and private
respondent. It was held that while the DOLE may make a determination of the existence of an employeremployee relationship, this function could not be co-extensive with the visitorial and enforcement power
provided in Art. 128(b) of the Labor Code, as amended by RA 7730.
The National Labor Relations Commission (NLRC) was held to be the primary agency in determining
the existence of an employer-employee relationship, since it is an Administrative Agency whose expertise in the
matter must be given accord. This was the interpretation of the Court of the clause in cases where the
relationship of employer-employee still exists in Art. 128(b)
From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of Decision.
The PAO sought to clarify as to when the visitorial and enforcement power of the DOLE be not considered as
co-extensive with the power to determine the existence of an employer-employee relationship. DOLE sought
clarification as well. The Court treated the Motion for Clarification as a second motion for reconsideration,
granting said motion and reinstating the petition.
Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized hearing officers to
hear and decide any matter involving the recovery of wages and other monetary claims and benefits was
qualified by the proviso that the complaint not include a claim for reinstatement, or that the aggregate money
claims not exceed PhP 5,000. RA 7730, or an Act Further Strengthening the Visitorial and Enforcement Powers
of the Secretary of Labor, did away with the PhP 5,000 limitation, allowing the DOLE Secretary to exercise its
visitorial and enforcement power for claims beyond PhP 5,000. The only qualification to this expanded
power of the DOLE was only that there still be an existing employer-employee relationship. Hence if no
employer employee relationship exists or has already terminated, DOLE has no jurisdiction. It is clear and
beyond debate that an employer-employee relationship must exist for the exercise of the visitorial and
enforcement power of the DOLE, Uner Article 128(b) of the Labor Code.
The question now arises, may the DOLE make a determination of whether or not an employer-employee
relationship exists, and if so, to what extent?
The first portion of the question must be answered in the affirmative.
_______________________
The prior decision of this Court in the present case accepts such answer, but places a limitation upon the power
of the DOLE, that is, the determination of the existence of an employer-employee relationship cannot be coextensive with the visitorial and enforcement power of the DOLE. But even in conceding the power of the
DOLE to determine the existence of an employer-employee relationship, the Court held that the determination
of the existence of an employer-employee relationship is still primarily within the power of the NLRC, that any
finding by the DOLE is merely preliminary.
2012, SC: This conclusion must be revisited.
No limitation in the law was placed upon the power of the DOLE to determine the existence of an employeremployee relationship. No procedure was laid down where the DOLE would only make a preliminary finding,
that the power was primarily held by the NLRC. The law did not say that the DOLE would first seek the
NLRCs determination of the existence of an employer-employee relationship, or that should the existence of
the employer-employee relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE

must have the power to determine whether or not an employer-employee relationship exists, and from there to
decide whether or not to issue compliance orders in accordance with Art. 128(b) of the Labor Code, as amended
by RA 7730.
Therefore in order to give full effect to the laws and not render one or the othe nugatory, The Supreme Court
Rules that: If a complaint is brought before the DOLE to give effect to the labor standards provisions of the
Labor Code or other labor legislation, and there is a finding by the DOLE that there is an existing employeremployee relationship, the DOLE exercises jurisdiction to the exclusion of the NLRC. If the DOLE finds that
there is no employer-employee relationship, the jurisdiction is properly with the NLRC. If a complaint is filed
with the DOLE, and it is accompanied by a claim for reinstatement, the jurisdiction is properly with the Labor
Arbiter, under Art. 217(3) of the Labor Code, which provides that the Labor Arbiter has original and exclusive
jurisdiction over those cases involving wages, rates of pay, hours of work, and other terms and conditions of
employment, if accompanied by a claim for reinstatement. If a complaint is filed with the NLRC, and there is
still an existing employer-employee relationship, the jurisdiction is properly with the DOLE. The findings of
the DOLE, however, may still be questioned through a petition for certiorari under Rule 65 of the Rules of
Court.

In the present case, the finding of the DOLE Regional Director that there was an employer-employee
relationship has been subjected to review by this Court, with the finding being that there was no employeremployee relationship between petitioner and private respondent, based on the evidence presented. Private
respondent presented self-serving allegations as well as self-defeating evidence. It was not Based on
Substatntial Evidence. Since the Respondent having failed to prove the existence of an employer-employee
relationship, The DOLE did not acquire jurisdiction. The dismissal of the complaint was proper.
In conclusion, the decision in the 2006 case was affirmed with the modification that in the exercise of the
DOLEs visitorial and enforcement power, the Labor Secretary or the latters authorized representative shall
have the power to determine the existence of an employer-employee relationship, to the exclusion of the NLRC.

Case no 19. Yanson vs Sec of Labor

*appeal is perfected pursuant to a posting of a monetary bond equivalent to the amount of the monetary claims
to be paid. Without the posting of such bond, the appeal is to be dismissed.
Facts:
On March 27, 1998, Mardy Cabigo and 40 other workers (private respondents) filed with the
Department of Labor and Employment-Bacolod District Office (DOLE Bacolod) a request for payroll
inspection of Hacienda Valentin Balabag owned by Alberta Yanson (petitioner). DOLE Bacolod conducted an
inspection of petitioners establishment. They found petitioner liable for the following:
1. Underpayment of salaries and wages (workers being paid a daily rate of Ninety Pesos [P90.00] since 1997
and Seventy Five Pesos [P75.00] prior to such year);
2. Non-payment of 13th month pay for two (2) years;
3. Non-payment of Social Amelioration Bonus (SAB) for two (2) years;
4. Non-payment of employers 1/3 carabao share
In addition, DOLE Bacolod scheduled a summary investigation and issued, by registered mail, notices
of hearing as well as a subpoena duces tecum to the parties. Petitioner did not appear in any of the scheduled
hearings, or present any pleading or document. In a Compliance Order dated August 12, 1998, DOLE Bacolod
directed petitioner to pay, within five (5) days, P9,084.00 to each of the 41 respondents or a total of
P372,444.00, and to submit proof of payment thereof. It also required petitioner to correct existing violations of
occupational safety and health standards.
Petitioner filed with DOLE Bacolod a Double Verified Special Appearance to Oppose Writ of
Execution For Being a Blatant and Dangerous Violation of Due Process, claiming that she did not receive any
form of communication, or participate in any proceeding relative to the subject matter of the writ of execution.
Petitioner also impugned the validity of the August 12, 1998 Compliance Order subject of the writ of execution
on the ground of lack of employment relationship between her and private respondents. DOLE Bacolod denied
said motion. Petitioner then filed with public respondent a Verified Appeal and Supplement to the Verified
Appeal, posting therewith an appeal bond of P1,000.00 in money order and attaching thereto a Motion to be
Allowed to Post Minimal Bond with Motion for Reduction of Bond. Public respondent dismissed her appeal in
an Order dated September 21, 2001.
Issue:
WON petitioner was denied free access to the courts because of the dismissal of her
appeal;
WON she was denied of her right to appeal.
RULING:
Petition lacks merit. DOLE Bacolod, in the exercise of its visitorial and enforcement power, awarded
private respondents P9,084.00 each in labor standard benefits or the aggregate sum of P377,444.00. For its
perfection, the appeal was therefore subject to the requirements prescribed under Article 128 of the Labor Code,
as amended by Republic Act No. 7730.
Art 128: "...In case said order involves a monetary award, an appeal by the employer may be perfected
only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the
Secretary of Labor and Employment in the amount equivalent to the monetary award in the order appealed
from."
When petitioner filed her Verified Appeal and Supplement to the Verified Appeal, she posted a mere
P1,000.00-appeal bond and attached a Motion to be Allowed to Post Minimal Bond with Motion for Reduction
of Bond. Public respondent rejected said appeal for insufficiency of the appeal bond. She argues that her appeal
bond should instead be based on her capacity to pay; otherwise, her right to free access to the courts as
guaranteed under Article III, Section 2 of the Constitution would be set to naught merely because of her
diminished financial capacity.
However, in previous jurisprudence, the Court has held that the posting of the proper amount of the
appeal bond under Article 128 (b) is mandatory for the perfection of an appeal from a monetary award in labor
standard cases.
Moreover, Article 128(b) deliberately employed the word only in reference to the requirements for
perfection of an appeal in labor standards cases. Only commands a restrictive application, giving no room for
modification of said requirements.

Case no 20. Balladares vs. Peak Ventures Corporation

Facts:

Nestor Balladares et al, are employed by Peak Ventures Corp. as security guards
They were assigned at the premises of Yangco Market Owners and Administrators Assoc. ( YMOAA)
They filed complaint against Peak Ventures for underpayment of wages
Acting on the complaint, DOLE conducted an inspection of Peak Ventures and found violations:
1. underpayment of the minimum wage and other auxiliary benefits;
2. Pertinent employment records (payrolls, daily time records, contract of employment) were not available
at the time of inspection.
A Notice of Inspection Result was issued to and received by the Human Resource Department Manager of Peak
Ventures; instructed to either effect restitution or file its objections within five days; Respondent failed to
correct violations or contest the findings hence, parties were summoned for hearing
Respondent ,as a defense, alleged that the cause of the underpayment of wages, if any, arose from the failure of
the YMOAA
Regional Director rendered judgment in favor of petitioners and ruled that the contractor was jointly and
severally liable with the principal
MR denied; appeal to Secretary of Labor also denied; elevated it to CA
The CA granted the petition, ruling that the Regional Director had no jurisdiction to hear and decide the case,
because the claims of each of the petitioners exceeded P5,000.00, and power to adjudicate belonged to Labor
Arbiter applying Art. 129 and Art. 217 of Labor Code
Hence, this petition questioning the CA ruling

Issue: WON the DOLE Regional Director has jurisdiction over the case
Held: It should be noted that petitioners' complaint involved underpayment of wages and other benefits. In order to
verify the allegations in the complaint, DOLE conducted an inspection, which yielded proof of violations of labor
standards. By the nature of the complaint and from the result of the inspection, the authority of the DOLE, under
Article 128, came into play regardless of the monetary value of the claims involved. The extent of this authority and
the powers flowing therefrom are defined and set forth in Article 128 of the Labor Code. In view of the enactment of
R.A. No. 7730, the Secretary of Labor or his duly authorized representatives is now empowered to hear and decide,
in a summary proceeding, any matter involving the recovery of any amount of wages and other monetary claims
arising out of employer-employee relations at the time of the inspection, even if the amount of the money claim
exceeds P5,000.00.
However, if the Labor standards case is covered by the exception clause of Art.128(b) then the Regional Director
would have to endorse it to the Labor Arbiter. In order to divest the Regional Director of his jurisdiction the ff should
be present:
1. Employer contests the findings of labor regulations officer and raises issues thereon;
2. That in order to resolve such issues there is a need to examine evidentiary matters:
3. That such matter are not verifiable by the normal course of inspection
Respondent did not contest the findings of the labor regulations officer during the hearing or after receipt of the result
of the inspection. Respondent never denied that the petitions were not paid correct wages. This was in fact admitted by
respondent, claiming that YMOAA was the one who failed to pay the correct wages.
This petition clearly involves a labor standards case, and it is in keeping with the law that: the worker need not litigate
what legally belongs to him, for the whole enforcement machinery of DOLE exists to insure its expeditious delivery to
him free of charge.
Petition granted.

Case no 21. Allied Investigation Bureau vs Sec of Labor and Employment

Facts: Petitioner Allied investigation Bureau is a security agency, it entered into a security contact with Novelty
Philippines (NPI). Melvin Pelayo and Samuel Sucanel, two of the security guards assigned by petitioner to NPI filed a
complaint with the office of respondent regional director Romeo A. Young charging the petitioner non compliance3 with
Wage order NCR-03 which increased the minimum daily pay of workers from 118 to 135.00 effective December 16, 1993
and further by 10.00 or form 135.00 to 145.00 daily beginning april 1, 1994. Private respondents sought the recovery of
wage differentials.
On February 9 and 14, the office of regional director young conducted inspection visits at petitioner establishment and
found out:
- Non-implementation under W.O. # NCR-03 from Dec. 16, 1993 to Dec. 15. 1994 to security guards assigned at Novelty
Phils., Inc. However, their prime client has been granted an exemption by the Wage Board under W.O. # NCR-03 with
Case No. NCRO-W.O. # 3-E (9) dated June 7, 1994. Please see attached xerox copy.
Non-remittance of SSS Premiums
Excessive deduction or Bayanihan System (P20.00) every pay day instead of P5.00 only.
The regional director required the petitioner to effect restitution and correction of the foregoing at the company or
plant level within 5 calendar days thereof. Thereafter, in order to facilitate amicable settlement between the parties, a
series of conference and hearings were scheduled by the office of the regional director, however despite due notice,
petitioner failed to appear in any of the said hearings.
On May 9, 1995 respondent regional director issued an order, ordering allied investigation bureau to pay to 92
employees the total amount of 807,570.36. Otherwise a writ of execution shall be issued to enforce this order.
Petitioner appealed the above order to secretary of labor and employment without however posting case or surety
bond equivalent to the monetary award in the said order. The latter dismissed the appeal for failure to perfect said
appeal .
Hence this Petition for certiorari, with a prayer for issuance of TRO, petitioner argues that the power to adjudicate
money claims belongs to the LA who has exclusive jurisdiction over employees claims where the aggregate amount of
the claims of each employee exceeds 5,000.00. petitioner cites Art 129 and 127 respectively, that the power of the
Regional Director to adjudicate employees' money claims is subject to the condition that the aggregate money claims of
each employee does not exceed P5,000.00; and, that the Labor Arbiter has jurisdiction over all other claims arising from
employer-employee relations, including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00), whether or not accompanied with a claim for reinstatement. It further
contends that since the order appealed from is void and without legal effect the order never assumed finality and
therefore it was improper for the secretary of labor and employment to out rightly dismiss the appeal on the ground
that petitioner failed to post cash and surety bond
Issue: 1. WON the regional director acted without jurisdiction
2. WON the secretary of labor and employment acted with grave abuse of discretion in dismissing the appeal
Held: 1. The contention of the petitioner is untenable. The said provisions of law do not contemplate nor cover the
visitorial and enforcement powers of the secretary of labor or his duly authorized representative, said powers are
defined and set for in arti 128 of LC:
Art. 128. Visitorial and enforcement power.
(a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers, shall have access to
employer's records and premises at any time of the day or night whenever work is being undertaken therein, and the
right to copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary
to determine violations or which may aid in the enforcement of this Code and of any labor law, wage order or rules and
regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee exists, the Secretary of Labor and Employment or his duly authorized
Representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this
Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The Secretary or his duly authorized representatives shall issue writs
of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer
contests the findings of the labor employment and enforcement officer and raises issues supported by documentary
proofs which were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may
be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected
only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary
of Labor and Employment in the amount equivalent to the monetary award in the order appealed from.
The aforequoted provision explicitly excludes from its coverage Articles 129 and 217 of the Labor Code by the phrase
"notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary . . ." thereby retaining and further
strengthening the power of the Secretary of Labor or his duly authorized representative to issue compliance orders to
give effect to the labor standards provisions of said Code and other labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers made in the course of inspection.
In the case at bar, the Office of respondent Regional Director conducted inspection visits at petitioner's establishment
on February 9 and 14, 1995 in accordance with the above-mentioned provision of law. In the course of said inspection,
several violations of the labor standard provisions of the Labor Code were discovered and reported. It was on the bases
of the aforesaid findings (which petitioner did not contest), that respondent Regional Director issued the assailed Order
for petitioner to pay private respondents the respective wage differentials due them. l
Clearly, as the duly authorized representative of respondent Secretary of Labor, and in the lawful exercise of the
Secretary's visitorial and enforcement powers under Article 128 of the Labor Code, respondent Regional Director had
jurisdiction to issue his impugned Order.
2. no, Article 128 of the Labor Code likewise explicitly provides that in case an order issued by the duly authorized
representative of the Secretary of Labor and Employment involves a monetary award, an appeal by the employer may
be perfected only upon posting of a cash or surety bond in an amount equivalent to the monetary award in the order
appealed from.
It is undisputed that petitioner herein did not post a cash or surety bond when it filed its appeal with the Office of
respondent Secretary of Labor. Consequently, petitioner failed to perfect its appeal on time and the Order of
respondent Regional Director became final and executory.

Case no.22 URBANES, (doing business under the name and style of CATALINA SECURITY AGENCY)
vs SEC. OF LABOR
FACTS:
Petitioner Placido O. Urbanes, Jr., doing business under the name and style of Catalina Security Agency,
entered into an agreement to provide security services to respondent Social Security System SSS. During its
effectivity petitioner requested the SSS for the upward adjustment of their contract rate in view of Wage Order
No. NCR-03 which was issued by the Regional Tripartite Wages and Productivity Board-NCR pursuant to
Republic Act 6727 otherwise known as the Wage Rationalization Act. It reads:
Section 9. In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed
amount set forth herein for covered workers shall be borne by the principals or the clients of the construction/service
contractors and the contract shall be deemed amended accordingly. In the event, however, that the principal or client failed to pay
the prescribed increase, the construction/service contractors shall be jointly and severally liable with the principal or client.

Since his letter to the SSS remained unheeded, petitioner sent another letter reiterating the same.
Thereafter, petitioner pulled out his agencys services from the premises of the SSS and another security
agency, Jaguar, took over. Thus Petitioner filed a complaint with the DOLE-NCR against the SSS seeking the
implementation of Wage Order No. NCR-03. Petitioner however, contends that the security guards assigned to
the SSS do not have any legal basis to file a complaint against it for lack of contractual privity. Acting on the
complaint, Regional Director of the DOLE-NCR issued an Order, ordering SSS to pay the wages of the 148
security guards of the agency. SSS appealed to the Labor Secretary, but was denied, although in each appeal the
computation of payment of wages were modified repeatedly.
Hence this Petition before the Supreme Court. Petitioner asserts that the Secretary of Labor does not have
jurisdiction to review appeals from decisions of the Regional Directors in complaints filed under Article 129 of
the Labor Code, under ART. 129 Petitioner thus contends that as the appeal of SSS was filed with the wrong
forum, it should have been dismissed. The SSS, on the other hand, contends that Article 128, not Article 129, is
applicable to the case. Article 128 provides for Visitorial and Enforcement Powers of the Sec.of Labor.

RULING: Petition was Dismissed.

Neither the petitioners contention nor the SSSs is impressed with merit. Citing the a recent case where
the security agency filed a complaint before the Regional Trial Court (RTC) against the principal or client
Lapanday for the upward adjustment of the contract rate in accordance with Wage Order Nos. 5 and 6.
Lapanday argued that it is the National Labor Relations Commission, not the civil courts, which has jurisdiction
to resolve the issue in the case, it involving the enforcement of wage adjustment and other benefits due the
agencys security guards as mandated by several wage orders. Holding that the RTC has jurisdiction over the
controversy, this Court ruled:
We agree with the respondent that the RTC has jurisdiction over the subject matter of the present case. It is well settled in law and
jurisprudence that where no employer-employee relationship exists between the parties and no issue is involved which may be
resolved by reference to the Labor Code, other labor statutes or any collective bargaining agreement, it is the Regional Trial Court that
has jurisdiction.

In this case, even if petitioner filed the complaint on his and also on behalf of the security guards, the relief
sought has to do with the enforcement of the contract between him and the SSS which was deemed amended by
virtue of Wage Order No. NCR-03. The controversy subject of the case at bar is thus a civil dispute, the proper
forum for the resolution of which is the civil courts.
But even assuming arguendo that petitioners complaint were filed with the proper forum, for lack of cause of
action it must be dismissed. The security guards' immediate recourse for the payment of the increases is with
their direct employer. However, in order for the security agency to comply with the new wage and allowance
rates it has to pay the security guards, the Wage Orders made specific provision to amend existing contracts for
security services by allowing the adjustment of the consideration paid by the principal to the security agency
concerned. What the Wage Orders require, therefore, is the amendment of the contract as to the consideration to
cover the service contractor's payment of the increases mandated. In the end, therefore, ultimate liability for the
payment of the increases rests with the principal.

Case no. 23. zialcita vs PAL

FACTS: Complainant Zialcita, an international flight stewardess of PAL, was discharged from the
service on account of her marriage. PAL invoked its policy: Flight attendants must be single. Flight
attendants will be automatically separated from employment in the event they subsequently get
married. PAL contends that Article 136 [134] of the Labor Code applies only to women employed un
ordinary occupations, like flight attendants, is fair and reasonable, considering the peculiarities of their
chosen profession.
ISSUE: Is the policy of PAL against marriage legal?
RULING: No. PAL even invoked Articles 52 and 216 of the NCC 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 non-marriage. PAL predicates absence of a flight attendant from her home for long periods of
time as contributory to an unhappy married life. This is not based on actual conditions, considering
that, in this modern world, sophisticated technology has narrowed the distance from one place to
another. PAL overlooked the fact that married flight attendants can program there lives to adapt to
prevailing circumstances and events. Therefore, Article 136 [134] is not intended to apply only to
women employed in ordinary occupations, or it should have categorically expressed so.

Case #24 STAR PAPER CORPORATION vs. SIMBOL

Petitioners:

Star Paper Corporation

Josephine Ongsitco (Manager of Personnel and Administration Dept., Star Paper Corp.)
Sebastian Chua (Managing Director, Star Paper Corp.)

Respondents: Ronaldo Simbol

Wilfreda Comia
Lorna Estrella
FACTS:
The three respondents were regular employees of Star Paper Corporation. On October 27, 1993, Ronaldo Simbol was
hired by Star Paper Corp. 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.
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.

Simbol resigned on June 20, 1998 pursuant to the company policy.

Wilfreda 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 the company policy, one must resign should
they decide to get married. Wilfreda Comia resigned on June 30, 2000.
Lorna Estrella was hired on July 29, 1994. She met Luisito 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.
The respondents each signed a Release and Confirmation Agreement where they stated that they have no money and
property accountabilities in the company and that they release the letter of any claim or demand of whatever nature.
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. Estrella alleges that she had a relationship with coworker 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 Nov. 30, 1999, she met an accident and was advised by the doctor at Orthopedic Hospital to recuperate for 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 she was handed a memorandum stating that she was
dismissed for immoral conduct. She refused to sign the memorandum because she was on leave for 21 days and has not
been given the chance to explain. The management asked her to write an explanation but was nonetheless dismissed by
the company. Due to her urgent need for money, she later submitted a letter of resignation in exchange for her 13th
month pay.
Respondents filed a complaint for unfair labor practice, constructive dismissal, separation pay, and attorney's fees.
LABOR ARBITER: Dismissed the complaint

Company policy was decreed pursuant to what the corporation perceived as management prerogative .

NLRC: Affirmed decision of LA

CA: Reversed and set aside NLRC's decision
- Declared illegal the dismissal of the three from employment, ordering reinstatement to their former positions
without loss of seniority rights with full backwages from the time of their dismissal until actual reinstatement
- Company policy is violative of the constitutional right towards marriage and the family of employees and of Art.
136 of the Labor Code.
- Resignations of respondents were far from voluntary.
ISSUE:
Whether or not 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.
HELD:
Yes. 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" is lame. That the second paragraph was meant to give teeth
to the first paragraph of the questioned rule 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.
DECISION OF CA IS AFFIRMED.

CASE NUMBER 25 DOMINGO vs. RAYALA

FACTS: On November 16, 1998, Ma. Lourdes T. Domingo (Domingo), then Stenographic Reporter III at the NLRC, filed a
Complaint for sexual harassment against then National Labor Relations Commission (NLRC) Chairman Rogelio I. Rayala
(Rayala) before Secretary Bienvenido Laguesma of the Department of Labor and Employment (DOLE).
In an affidavit executed by Domingo, she alleged that Rayala would whisper to her that she's becoming more beautiful
everyday; that he would put her hands on her shoulders while she was typing making her nervous for there were rumors
that his previous secretaries had resigned due to Rayala's lascivious gestures and advances; that he inquired of her
personal life on whether he has a boyfriend or a live-in partner; that she was given P3,000 by Rayala but she returned
the same after immediately consulting with her officemates; that she was told to pursue law and promised that she will
be taken cared of as long as Rayala was still Chairman; and the final straw was when she was summoned Rayala's office
to get his dictation wherein Rayala allegedly placed his hands on Domingo's shoulders, while the latter was typing, and
his hands moved up to her neck and her ear and tickled her there. Domingo removed Rayala's hands and after the last
incident, Domingo filed a 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. The case was referred to the Office of
the President (OP) because Rayala was a presidential appointee. A Committee on Decorum and Investigation
(Committee) in accordance with Republic Act (RA) 7877, the Anti-Sexual Harassment Act of 1995, was constituted. After
the Committee heard and received evidence, it found Rayala guilty of the offense and recommended 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 which rejected the imposition of the said penalty of suspension and ordered
the dismissal of Rayala in view of his position and the abuse of his authority. Rayala filed a MFR with the CA.
CA: There was sufficient evidence on record to create moral certainty that Rayala committed the acts he was charged;
affirmed AO 119 MFR in CA: Modified CA decision by reverting back the penalty to suspension, albeit this time, imposing
the maximum penalty in RA 7877 for the first offense, that is 1 year suspension from service *Rayala, Domingo and the
Republic filed separate petitions for review on the abovesaid decision which was consolidated by the Supreme Court in
this case
ARGUMENTS (you may/may not read this kung nagmamadali na): (Domingo) -President has the prerogative to determine
the proper penalty to be imposed on an erring Presidential appointee -AO 250 is not intended to cover cases against
presidential appointees hence its inapplicability to Rayala (Rayala) -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 pre-condition to
hiring, re-employment, or continued employment; or (c) the denial thereof results in discrimination against the employee
-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 -CA erred in ruling that sexual harassment is malum prohibitum as it is
considered an offense against a particular person -AO 250 expanded the definition of sexual harassment and thus, he
may not be convicted under it (Republic) -Power to remove the NLRC Chairman solely rests upon the President, limited
only by the requirements under the law and the due process clause -Article 215 of the Labor Code states that the
Chairman of the NLRC holds office until he reaches the age of 65 only during good behavior; since Rayala's 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 -Although EO 250 provides the penalty of suspension for 1 year, Rayala is still not exempt under the Civil
Service Law which provide for the penalty of dismissal in case of disgraceful and immoral conduct
ISSUES: 1. Did Rayala commit sexual harassment? 2. If he did, what is the applicable penalty?
RULING: 1. YES. That Rayala committed the acts complained of and was guilty of sexual harassment is, 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. The principle, therefore, dictates that such findings are
binding to this court. Rayala's insistence 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, was unconvincing.

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 ot This rule applies with full force to sexual harassment. The law penalizing sexual harassment in this jurisdiction is
RA 7877, which defines work-related sexual harassment as: 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 o ther 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 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 employee's rights or privileges under existing labor laws; or (3) The
above acts would result in an intimidating, hostile, or offensive environment for the employee
Sec. 4 governs the procedure in administrative cases and states that it is 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.
Since Rayala was charged with an administrative offense, the CA correctly ruled that Rayala's culpability is not to be
determined solely by Sec. 3 of RA 7877. Yet, even if we were to test Rayala's acts strictly by the standards set in Section
3 of 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. All the inappropriate acts of Rayala resound with deafening clarity the unspoken request for a sexual favor.
It is also 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 respondent's acts result in creating an intimidating, hostile or
offensive environment for the employee. This 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.
*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 and that jurisdiction was properly
acquired by the OP. *What is before us is an administrative case of sexual harassment. Thus, whether the crime of
administrative of sexual harassment is malum in se or malum prohibitum is immaterial.
2. Under the Labor Code, the Chairman of the NLRC shall hold office good behavior until he or she reaches the age of
sixty-five, during good behavior unless sooner removed for cause as provided by law or becomes incapacitated to
discharge the duties of such office.
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 Chairma. 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. The imposable penalty for the first offense of either the administrative offense of sexual harassment (AO 250) or
for disgraceful and immoral conduct (Civil Service Law) 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, under the
Revised Uniform Rules on Administrative Cases in the Civil Service, taking undue advantage of a subordinate may be
considered as an aggravating circumstance and where only aggravating and no mitigating circumstance is present, the
maximum penalty shall be imposed. Hence, the maximum penalty that can be imposed on Rayala is suspension for one
(1) year.

Case no. 26 Philippine Aeolus Automotive United Corp (PAAUC) and/or Francis Chua vs. NLRC, Rosalinda
Cortez
April 28, 2000,
Justice Bellosillo
Facts:
Respondent Rosalinda Cortes, the Company Nurse of petitioner PAAUC, was dismissed on the grounds of
gross and habitual neglect of duties, serious misconduct and fraud or willful breach of trust. These grounds are based
on the following charges which respondent failed to explain to petitioner:
1.
2.
3.
4.

That respondent threw a stapler against her Plant Manager William Chua
That respondent lost an amount of P1,488 that was entrusted to her by Chua
That respondent asked another employee to punch-in her time card
That respondent failed to process the ATM application of 9 of her co-employees.

Respondent filed a complaint before the Labor Arbiter for illegal dismissal and payment of back
wages/damages. On the first charge, she explained that she did so because for the first four years of her employment,
she did NOT reciprocate the sexual advances and special favors of William Chua, when suddenly, the latter
threatened of her of the termination of her employment if she will not accede to his sexual advances. The stapler was
thrown during an argument when Chua caused the transfer of her work table equipped with telecom and intercom
units to another to a place without such equipment. On the second charge, she said that the money was properly
delivered to the Company. On the third charge, she admitted that she did so since she was doing an errand for
another Company Officer and that this was with the consent of Chua. On the fourth charge, she denied any
knowledge of the ATM application, since it not among those included in her job as a company nurse. The Labor
Arbiter denied the complaint but its decision was reversed by the NLRC.
ISSUE: Whether respondent was illegally dismissed and whether she is entitled to damages if she really was
illegally dismissed.
HELD:
Yes, the Court held that there was illegal dismissal. On the ground of serious misconduct, the cause of
dismissal must be serious; must relate to the performance of employees duties; and must show that employee is unfit
to continue working for the employer. In the instant case, the acts complained of do not pertain to her duties as a
nurse. It is not her primary duty as a nurse to open ATM accounts for employees.
The Court also held that for negligence to warrant dismissal, it must not merely be gross, but also habitual.
In the instant case, when she asked another to punch-in her time card, she did so in good faith since he was asked by
another officer to perform a task outside of office. She did so for the first time in her five year of service for the
company. There was also no finding of willful breach of trust.
The Court also dismissed the view of petitioner that she is not entitled of payment of damages since she
failed to prove the existence of bad faith and for her failure to complain the alleged sexual harassment in her 1st four
years of employment. The Court ruled that the gravamen of the offense of sexual harassment is NOT the
violation of sexuality but the abuse of power by the employer. Any employee, male or female may rightfully cry
foul provided the claim is well substantiated. There is no time period within which the employee is to complain
through the proper channels. In the instant case, the court explained that respondents anxiety was building up over
the four years of her employment, which she finally vented up her anger when the petitioner found a way to
terminate her. Chua must have thought that since he had no place in private respondents heart, then she have no
place in his office. The anxiety caused by the sexual harassment and the oppressive manner of her dismissal entitle
private respondent to moral and exemplary damages.