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UNIVERSITY OF SAN CARLOS

COLLEGE OF LAW

LABOR STANDARDS
(MIDTERMS CASE DIGEST COMPILATION)

Balahadia, Arrabelle Anne Carlene E.


LLB 2 EH 402

A.Y 2011-2012

ATTY. JEFFERSON MARQUEZ

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Table of Contents
1. APPLICABLE LAWS....................................................................
2. BASIC PRINCIPLES....................................................................
Singer Sewing Machine vs. NLRC................................................
Manila Golf Club vs. IAC..............................................................
Encyclopedia Britanica vs. NLRC.................................................
Carungcong vs. Sunlife...............................................................
Ramos vs. CA............................................................................ 10
Sonza vs. ABS-CBN...................................................................11
Lazaro vs. Social Security Commission.....................................13
Phil. Global Comm. vs. De Vera.................................................13
ABS-CBN vs. Nazareno..............................................................14
Francisco vs. NLRC....................................................................16
Nogales et. al. vs. Capitol Medical Center et. al........................17
Coca-Cola Bottlers Phils. vs. Dr. Climaco...................................18
Calamba Medical Center vs. NLRC et. al...................................19
Escasinas et. al. vs. Shangri-la..................................................21
Tongko vs. The Manufacturers Life Insurance Co., Inc.
November 7, 2008....................................................................22
3. HIRING OF EMPLOYEES...........................................................25
Ollendorf vs. Abrahanson..........................................................25
Del Castillo vs. Richmond.........................................................26
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PT & T vs. NLRC.......................................................................27


Duncan Asso. Of Detailman-PTGWO vs. Glaxo.........................29
City of Manila v. Laguio.............................................................30
Star Paper Corp. v. Simbol........................................................32
Del Monte Phils. V. Velasco.......................................................34
Yrasuegui vs. Philippine Airlines................................................35
4. WAGE AND WAGE RATIONALIZATION ACT...............................37
Ilaw at Buklod ng Manggagawa vs. NLRC..................................37
Employers Confederation of the Phils. vs. NWPC......................38
Mabeza vs. NLRC......................................................................39
Joy Brothers Inc. vs. NWPC........................................................41
Prubankers Assoc. vs. Prudential Bank......................................42
Millares et. al vs. NLRC.............................................................43
International School Alliance of Educators vs. Quisumbing.......45
Bankard Employees Union vs. NLRC.........................................46
Odango vs. NLRC......................................................................48
C. Planas Commercial vs. NLRC................................................49
EJR Crafts Corp. vs. CA..............................................................50
Pag Asa Steel Works vs. CA.......................................................51
Metropolitan Bank vs. NWPC.....................................................53
Equitable Bank vs. Sadac..........................................................54
S.I.P FOOD HOUSE ET. AL VS. BATOLINA...................................55
SLL INTERNATIONAL CABLE SPECIALIST VS. NLRC.....................57
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5. VIOLATION OF WAGE ORDERS................................................59


6. WAGE ENFORCEMENT AND RECOVERY...................................59
Rajah Humabon Hotel vs. Trajano.............................................59
Guico vs. Secretary of Labor.....................................................60
Ex-Bataan Veterans Security Agency vs. Secretary of Labor et.
al.............................................................................................. 61
Sapio vs. Undaloc Construction et. al........................................62
Secretary of Labor vs. Panay Veterans Security and
Investigation Agency................................................................63
National Mines and Allied Workers Union vs. Marcopper Mining
Corp.......................................................................................... 64
Jethro Intelligence and Security Corp. vs. SOLE........................65
Peoples Broadcasting (Bombo Radyo Phils.) vs. Secretary of
DOLE, et. al............................................................................... 66
PHIL. Hoteliers Inc. vs. National Union of Workers in Hotel,
Restaurant and Allied Industries- Dusit Hotel Nikko Chapter.....68
Tiger Construction and Development Corp. vs. Abay................72
7. WAGE PROTECTION PROVISIONS AND PROHIBITIONS
REGARDING WAGES....................................................................74
Gaa vs. CA................................................................................ 74
Nestle Phils. vs. NLRC...............................................................74
Five J Taxi vs. NLRC...................................................................75
Phil. Veterans Bank vs. NLRC....................................................75
Philippine Appliances Corp. vs. CA............................................76
Agabon vs. NLRC......................................................................77
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American Wire & Cable Daily Rated Employees vs. American


Wire.......................................................................................... 78
Honda Philippines vs. Samahang Malayang Manggagawa sa
Honda....................................................................................... 79
Producers Bank vs. NLRC..........................................................80
Jardin vs. NLRC.........................................................................80
Manila Jockeys Club Employees Labor Union vs. Manila Jockey
Club.......................................................................................... 81
San Miguel Corp. et. al vs. Layoc Jr. et. al.................................82
San Miguel Corp. vs. Pontillas...................................................83
Arco Metal Products vs. Samahan ng Manggagawa sa ArcoMetal-NAFLU.............................................................................84
Aguanza vs. Asian Terminal Inc.................................................85
Genesis Transport Service Inc. vs. Unyon ng Malatang
Manggagwa ng Genesis Transport............................................86
Central Azucarera de Tarlac vs. Central Azucarera de Tarlac
Labor Union-NLU.......................................................................88
SHS Perforated Materials Inc. et. al vs. Diaz..............................89
8. PAYMENT OF WAGES...............................................................91
Congson vs. NLRC.....................................................................91
North Davao Mining vs. NLRC...................................................91
National Federation of Labor vs. CA..........................................92
House of Sara Lee vs. Rey........................................................93
9. CONDITIONS OF EMPLOYMENT...............................................95
San Juan de Dios Hospital vs. NLRC..........................................95
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Sime Darby vs. NLRC................................................................95


PAL vs. NLRC............................................................................. 96
Linton Commercial Co., Inc. vs. Hellera.....................................97
Bisig Manggagawa sa Tryco vs. NLRC.......................................98
10. MINIMUM STANDARD BENEFITS..........................................100
Union of Filipino Employees vs. Vicar......................................100
National Sugar Refinery Corp. , vs. NLRC................................102
Salazar vs. NLRC.....................................................................106
Labor Congress of the Phils., vs. NLRC....................................107
Mercidar Fishing Corp., vs. NLRC.............................................109
San Miguel Corp., vs. CA.........................................................110
Tan vs. Lagrama...................................................................... 111
Lambo vs. NLRC......................................................................113
R&E Transport vs. Latag..........................................................114
Asian Transmission vs. CA.......................................................115
Autobus Transport System vs. Bautista...................................117
San Miguel Corp., vs. Del Rosario...........................................119
Penaranda vs. Baganga Plywood Corp....................................121
Leyte IV Electric Cooperative Inc. vs. LEYECO IV Employees
Union- ALU.............................................................................. 123
Bahia Shipping Services vs. Chua...........................................124
PNCC vs. Skyway Traffic Management and Security Division
Workers Organization..............................................................126
11. OTHER SPECIAL BENEFITS..................................................128
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Villuga vs. NLRC......................................................................128


CJC Trading vs. NLRC...............................................................129
Pantranco North Express vs. NLRC..........................................131
R&E Transport vs. Latag..........................................................133
Rufina Patis vs. Alusitain.........................................................134
Gerlach vs. Reuters Ltd., Phils.................................................135
Sta. Catalina College vs. NLRC................................................137
Honda Phils., vs. Samahan ng mga Manggagawa sa Honda. . .139
Jaculbe vs. Silliman University................................................140
Intercontinental Broadcasting Corp., vs. Amarilla...................142
Letran Calamba Faculty & Employees Association vs. NLRC et
al............................................................................................ 144
Reyes vs. NLRC et al...............................................................147
Arco Metal Products Co., Inc., et al. vs. Samahan ng Mga
Manggagawa sa Arco Metal NAFLU.........................................149
Universal Robina Sugar Milling Corp. vs. Caballeda................150
Cercado vs. Uniprom, Inc........................................................152

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1. APPLICABLE LAWS
2. BASIC PRINCIPLES

Singer Sewing Machine vs. NLRC


G.R. No. 91307 January 24, 1991
FACTS:
Singer Machine Collectors Union-Baguio (SIMACUBA), the
respondent union, filed a petition for direct certification as the
sole and exclusive bargaining agent of all collectors of the
Singer Sewing Machine Company, Baguio City branch
(hereinafter referred to as "the Company").
The Company opposed the petition mainly on the ground
that the union members are actually not employees but are
independent contractors as evidenced by the collection agency
agreement which they signed. The respondent Med-Arbiter,
finding that there exists an employer-employee relationship
between the union members and the Company, granted the
petition for certification election. On appeal, Secretary of Labor
Franklin M. Drilon affirmed it.
ISSUE:
Whether or not there exists an employee-employer
relationship between the parties.
RULING:
SC ruled in favor of petitioner. Private respondents are
independent contractors, not employees. As such, they cannot
enter into a collective bargaining agreement with the
petitioner.
The present case mainly calls for the application of the
control test, which if not satisfied, would lead us to conclude
that no employer-employee relationship exists. Hence, if the
union members are not employees, no right to organize for
purposes of bargaining, nor to be certified as such bargaining
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agent can ever be recognized. The following elements are


generally considered in the determination of the employeremployee relationship; "(1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employee's conduct
although the latter is the most important element".
The nature of the relationship between a company and its
collecting agents depends on the circumstances of each
particular relationship. Not all collecting agents are employees
and neither are all collecting agents independent contractors.
The collectors could fall under either category depending on
the facts of each case.
A thorough examination of the facts of the case leads us
to the conclusion that the existence of an employer-employee
relationship between the Company and the collection agents
cannot be sustained. The plain language of the agreement
reveals that the designation as collection agent does not create
an employment relationship and that the applicant is to be
considered at all times as an independent contractor.
The Court finds that since private respondents are not
employees of the Company, they are not entitled to the
constitutional right to join or form a labor organization for
purposes of collective bargaining. Accordingly, there is no
constitutional and legal basis for their "union" to be granted
their petition for direct certification.

Manila Golf Club vs. IAC


G.R. No. 64948 September 27, 1994
FACTS:
This is originally filed with the Social Security Commission
(SSC) via petition of 17 persons who styled themselves as
Caddies of Manila Golf and Country Club-PTCCEA for the
coverage and availment of benefits of the Social Security Act as
amended, PTCCEA (Philippine Technical, Clerical, Commercial

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Employees Association) a labor organization where which they


claim for membership.
The same time two other proceedings were filed and
pending. These are certification election case filed by PTCCEA
on behalf of the same caddies of Manila Golf and Country club
which was in favor of the caddies and compulsory arbitration
case involving PTCCEA and Manila Golf and Country Club which
was dismissed and ruled that there was no employer-employee
relationship between the caddies and the club.
ISSUE:
Whether or not persons rendering caddying services for
members of golf clubs and their guests in said clubs' courses or
premises are the employees of such clubs and therefore within
the compulsory coverage of the Social Security System (SSS).
RULING:
SC ruled in favor of the petitioner. Llamar is not an
employee of the Manila Golf and Country Club, Inc. The club is
under no obligation to report him for compulsory coverage to
the SSS.
In the very nature of things, caddies must submit to some
supervision of their conduct while enjoying the privilege of
pursuing their occupation within the premises and grounds of
whatever club they do work in. They work for the club to which
they attach themselves on sufferance but, on the other hand,
also without having to observe any working hours, free to leave
anytime they please, to stay away for as long they like.
These considerations clash frontally with the concept of
employment. It can happen that a caddy who has rendered
services to a player on one day may still find sufficient time to
work elsewhere. Under such circumstances, the caddy may
leave the premises and to go to such other place of work that
he wishes. These are things beyond the control of the
petitioner.

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Encyclopedia Britanica vs. NLRC


G.R. No. 87098 November 4, 1996
FACTS:
Private respondent Benjamin Limjoco was a Sales Division
Manager of petitioner Encyclopaedia Britannica and was in
charge of selling petitioner's products through some sales
representatives. As compensation, private respondent received
commissions from the products sold by his agents. He was also
allowed to use petitioner's name, goodwill and logo. It was,
however, agreed upon that office expenses would be deducted
from private respondent's commissions. Petitioner would also
be informed about appointments, promotions, and transfers of
employees in private respondent's district.
Limjoco resigned from office to pursue his private
business. Then on October 30, 1975, he filed a complaint
against
petitioner
Encyclopaedia
Britannica
with
the
Department of Labor and Employment, claiming for nonpayment of separation pay and other benefits, and also illegal
deduction from his sales commissions.
ISSUE:
Whether or not there exists an employer-employee
relationship between the parties.
RULING:
SC ruled that Limjoco was not an employee of the
petitioner company. He was merely an agent or an independent
dealer of the petitioner.
The records of the case at bar showed that there was no
such relationship. He was free to conduct his work and he was
free to engage in other means of livelihood. At the time he was
connected with the petitioner company, private respondent was
also a director and later the president of the Farmers' Rural
Bank. Had he been an employee of the company, he could not
be employed elsewhere and he would be required to devote full
time for petitioner. If private respondent was indeed an
employee, it was rather unusual for him to wait for more than a
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year from his separation from work before he decided to file his
claims.

Carungcong vs. Sunlife


G.R. No. 118086 December 15, 1997
FACTS:
Susan Carungcong began her career in the insurance
industry in 1974 as an agent of Sun Life Assurance Company of
Canada. She signed an Agent Agreement with Sun Life. In
virtue of which she was designated the latters agent to solicit
applications for its insurance and annuity policies.
This contract was superseded some five years later when
she signed two (2) new agreements. The first, denominated
Career Agents or Unit Managers Agreement, dealt with such
matters as the agents commissions, his obligations, limitations
on his authority, and termination of the agreement by death, or
by written notice with or without cause. The second was titled,
Managers Supplementary Agreement. It explicitly described as
a further agreement. Carungcong and Sun Life executed
another Agreement named New Business Manager with the
function generally to manage a New Business Office
established. This latest Agreement stressed that the New
Business Manager in performance of his duties defined herein,
shall be considered an independent contractor and not an
employee of Sun Life, and that under no circumstance shall the
New Business Manager and/or his employees be considered
employees of Sun Life.
Ms. Eleizer Sibayan, Manager of Sun Lifes Internal Audit
Department, commenced an inquiry into the special fund
availments of Carungcong and other New Business Managers.
Respondent Lance Kemp, had been receiving reports of
anomalies in relation thereto from unit managers and agents.
Thereafter, on January 1990, Carungcong was confronted with
and asked to explain the discrepancies set out in Sibayans
report. She was given a letter signed by Metron V. Deveza, CLU,
Director, Marketing, which advised of the termination of her
relationship with Sun Life.
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Carungcong
promptly
instituted
proceedings
for
vindication in the Arbitration Branch of the National Labor
Relations Commissions on January 16, 1990.
There she
succeeded in obtaining a favorable judgment. Labor Arbiter
found that there existed an employer-employee relationship
between her and Sun Life. On appeal, the National Labor
Relations Commission reversed the Arbiters judgment.
It
affirmed that no employment relationship existed between
Carungcong and Sun Life.
ISSUE:
Whether or not there exists an employer-employee
relationship between the parties.
RULING:
SC held that Carungcong is not an employee of Sun Life
Co. She was an independent contractor.
Noteworthy is that this last agreement which emphasized,
like the Career Agents or Unit Managers Agreement first
signed by her, that in performance of her duties defined herein.
Carungcong would be considered an independent contractor
and not an employee of Sun Life, and that under no
circumstance shall the New Business Manager and/or his
employees be considered employees of Sun Life.
Carungcong is an independent contractor. It was indicated
in the very face of the contract. The rules and regulations of the
company is not sufficient to establish an employer-employee
relationship. It does not necessarily create any employeremployee relationship where the employers controls have to
interfere in the methods and means by which employee would
like employ to arrive at the desired results.
Carungcong admitted that she was free to work as she
pleases, at the place and time she felt convenient for her to do
so. She was not paid to a fixed salary and was mainly paid by
commissions depending on the volume of her performance.

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Ramos vs. CA
G.R. No. 124354; April 11, 2002
FACTS:
Petitioner Erlinda Ramos, after seeking professional
medical help, was advised to undergo an operation for the
removal of a stone in her gall bladder (cholecystectomy).
She was referred to Dr. Hosaka, a surgeon, who agreed to
perform the operation on her. The operation was scheduled
for June 17, 1985 at 9:00 in the morning at private
respondent De Los Santos Medical Center (DLSMC). Since
neither petitioner Erlinda nor her husband, petitioner
Rogelio, knew of any anesthesiologist, Dr. Hosaka
recommended to them the services of Dr. Gutierrez. On the
following day, she was ready for operation as early as 7:30
am. Around 9:30, Dr. Hosaka has not yet arrived. By 10 am,
Rogelio wanted to pull out his wife from the operating room.
Dr. Hosaka finally arrived at 12:10 pm more than 3 hours of
the scheduled operation.
Dr. Guiterres tried to intubate Erlinda. The nail beds of
Erlinda were bluish discoloration in her left hand. At 3 pm,
Erlinda was being wheeled to the Intensive care Unit and
stayed there for a month. Since the ill-fated operation,
Erlinda remained in comatose condition until she died.
The family of Ramos sued them for damages.
ISSUE:
Whether or not there exists an employer-employee
relationship between the medical center and Drs. Hosaka and
Guiterrez.
RULING:
SC ruled that there was no employee-employer
relationship between de Los Santos Medical Center and Drs.
Hosaka and Gutierrez.
After a careful consideration of the arguments raised by
DLSMC, the Court finds that respondent hospitals position on
this issue is meritorious. There is no employer-employee
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relationship between DLSMC and Drs. Gutierrez and Hosaka


which would hold DLSMC solidarily liable for the injury suffered
by petitioner Erlinda under Article 2180 of the Civil Code.
As explained by respondent hospital, that the admission of
a physician to membership in DLSMCs medical staff as active
or visiting consultant is first decided upon by the Credentials
Committee. Neither is there any showing that it is DLSMC which
pays any of its consultants for medical services rendered by the
latter to their respective patients. Moreover, the contract
between the consultant in respondent hospital and his patient
is separate and distinct from the contract between respondent
hospital and said patient. The first has for its object the
rendition of medical services by the consultant to the patient,
while the second concerns the provision by the hospital of
facilities and services by its staff such as nurses and laboratory
personnel necessary for the proper treatment of the patient.
The hospital does not hire consultants but it accredits and
grants him the privilege of maintaining a clinic and/or admitting
patients. It is the patient who pays the consultants. The
hospital cannot dismiss the consultant but he may lose his
privileges granted by the hospital. The hospitals obligation is
limited to providing the patient with the preferred room
accommodation and other things that will ensure that the
doctors orders are carried out.

Sonza vs. ABS-CBN


G.R. No. 138051; June 10, 2004
FACTS:
Respondent ABS-CBN Broadcasting Corporation ("ABSCBN") signed an Agreement ("Agreement") with the Mel and Jay
Management and Development Corporation ("MJMDC"). ABSCBN was represented by its corporate officers while MJMDC was
represented by SONZA, as President and General Manager, and
Carmela Tiangco ("TIANGCO"), as EVP and Treasurer. Referred
to in the Agreement as "AGENT," MJMDC agreed to provide

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SONZAs services exclusively to ABS-CBN as talent for radio and


television.
ABS-CBN agreed to pay for SONZAs services a monthly
talent fee of P310,000 for the first year and P317,000 for the
second and third year of the Agreement. ABS-CBN would pay
the talent fees on the 10th and 25th days of the month. SONZA
filed a complaint against ABS-CBN before the Department of
Labor and Employment, National Capital Region in Quezon City.
SONZA complained that ABS-CBN did not pay his salaries,
separation pay, service incentive leave pay, 13th month pay,
signing bonus, travel allowance and amounts due under the
Employees Stock Option Plan ("ESOP").
ISSUE:
Whether Jay Sonza is an employee of ABS-CBN or an
independent contractor.
RULING:
SC ruled that Sonza is an independent contractor.
Selection and Engagement of Employees. Independent
contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary
employees. The specific selection and hiring of SONZA, because
of his unique skills, talent and celebrity status not possessed by
ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship. If
SONZA did not possess such unique skills, talent and celebrity
status, ABS-CBN would not have entered into the Agreement
with SONZA but would have hired him through its personnel
department just like any other employee.
Payment of Wages. All the talent fees and benefits paid to
SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBNs employee, there would
be no need for the parties to stipulate on benefits such as "SSS,
Medicare, x x x and 13th month pay"20 which the law
automatically incorporates into every employer-employee
contract. Whatever benefits SONZA enjoyed arose from
contract and not because of an employer-employee
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relationship. SONZAs talent fees, amounting to P317,000


monthly in the second and third year, are so huge and out of
the ordinary that they indicate more an independent
contractual relationship rather than an employer-employee
relationship.
Power of Dismissal. During the life of the Agreement, ABSCBN agreed to pay SONZAs talent fees as long as "AGENT and
Jay Sonza shall faithfully and completely perform each
condition of this Agreement."24 Even if it suffered severe
business losses, ABS-CBN could not retrench SONZA because
ABS-CBN remained obligated to pay SONZAs talent fees during
the life of the Agreement. This circumstance indicates an
independent contractual relationship between SONZA and ABSCBN.
Power of Control. Applying the control test to the present
case, we find that SONZA is not an employee but an
independent contractor. The control test is the most important
test our courts apply in distinguishing an employee from an
independent contractor.29 This test is based on the extent of
control the hirer exercises over a worker. The greater the
supervision and control the hirer exercises, the more likely the
worker is deemed an employee. The converse holds true as
well the less control the hirer exercises, the more likely the
worker is considered an independent contractor.30

Lazaro vs. Social Security Commission


G.R. No. 138254; July 30, 2004
FACTS:
Private respondent Rosalina M. Laudato ("Laudato") filed a
petition before the SSC for social security coverage and
remittance of unpaid monthly social security contributions
against her three (3) employers. Among the respondents was
herein petitioner Angelito L. Lazaro ("Lazaro"), proprietor of
Royal Star Marketing ("Royal Star"), which is engaged in the
business of selling home appliances. Laudato alleged that
despite her employment as sales supervisor of the sales agents
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for Royal Star from April of 1979 to March of 1986, Lazaro had
failed during the said period, to report her to the SSC for
compulsory coverage or remit Laudato's social security
contributions.
ISSUE:
Whether or not there exists an employee-employer
relationship between Laudato and Royal Star Marketing.
RULING:
SC ruled that there exists such relationship between the
parties.
It is an accepted doctrine that for the purposes of
coverage under the Social Security Act, the determination of
employer-employee relationship warrants the application of the
"control test," that is, whether the employer controls or has
reserved the right to control the employee, not only as to the
result of the work done, but also as to the means and methods
by which the same is accomplished.
Suffice it to say, the fact that Laudato was paid by way of
commission does not preclude the establishment of an
employer-employee relationship. The relevant factor remains,
as stated earlier, whether the "employer" controls or has
reserved the right to control the "employee" not only as to the
result of the work to be done but also as to the means and
methods by which the same is to be accomplished.

Phil. Global Comm. vs. De Vera


G.R. No. 157214; June 7, 2005
FACTS:
Philippine Global Communications inc. is a corporation
engaged in the business of communication services and allied
activities while Ricardo de Vera is a physician by profession
whom petitioner enlisted to attend to the medical needs of its
employees. The controversy rose when petitioner terminated
his engagement.
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In 1981, Dr. de Vera offered his services to petitioner. The


parties agreed and formalized the respondents proposal in a
document denominated as retainership contract which will be
for a period of one year, subject to renewal and clearly stated
that respondent will cover the retainership the company
previously with Dr. Eulau. The agreement went until 1994, in
the years 1995-1996, it was renewed verbally. The turning point
of the parties relationship was when petitioner, thru a letter
bearing the subject TERMINATION RETAINERSHIP CONTRACT,
informed Dr. de Vera of its decision to discontinue the latters
retainer contract because the management has decided that it
would be more practical to provide medical services to its
employees through accredited hospitals near the company
premises.
On January 1997, de Vera fileda complaint for illegal
dismissal before the NLRC, alleging that he had been actually
employed by the company as its company physician since
1991. The commission rendered decision in favor of Philcom
and dismissed the complaint saying that de Vera was an
independent contractor. On appeal to NLRC, it reversed the
decision of the Labor Arbiter stating that de Vera is a regular
employee and directed the company to reinstate him. Philcom
appealed to the CA where it rendered decision deleting the
award but reinstating de Vera. Philcom filed this petition
involving the difference of a job contracting agreements from
employee-employer relationship.
ISSUE:
Whether or not there exists an employee-employer
relationship between the parties.
RULING:
SC ruled that there was no such relationship existing
between Dr. de Vera and Phil. Com.
The elements of an employer-employee relationship are
wanting in this case. The record are replete with evidence
showing that respondent had to bill petitioner for his monthly
professional fees. It simply runs against the grain of common
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experience to imagine that an ordinary employee has yet to bill


his employer to receive his salary.
The power to terminate the parties relationship was
mutually vested on both. Either may terminate the
arrangement at will, with or without cause.
Remarkably absent is the element of control whereby the
employer has reserved the right to control the employee not
only as to the result of the work done but also as to the means
and methods by which the same is to be accomplished.
Petitioner had no control over the means and methods by
which respondent went about performing his work at the
company premises. In fine, the parties themselves practically
agreed on every terms and conditions of the engagement,
which thereby negates the element of control in their
relationship.
ABS-CBN vs. Nazareno
G.R. No. 164156; September 26, 2006
FACTS:
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is
engaged in the broadcasting business and owns a network of
television and radio stations, whose operations revolve around
the broadcast, transmission, and relay of telecommunication
signals. It sells and deals in or otherwise utilizes the airtime it
generates from its radio and television operations. It has a
franchise as a broadcasting company, and was likewise issued
a license and authority to operate by the National
Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon,
Deiparine, and Lerasan as production assistants (PAs) on
different dates. They were assigned at the news and public
affairs, for various radio programs in the Cebu Broadcasting
Station. On December 19, 1996, petitioner and the ABS-CBN
Rank-and-File Employees executed a Collective Bargaining
Agreement (CBA) to be effective during the period from
December 11, 1996 to December 11, 1999. However, since
Balahadia, A. (USC-LLB 2, EH402)
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petitioner refused to recognize PAs as part of the bargaining


unit, respondents were not included to the CBA.
In October 2000, respondents filed a Complaint for
Recognition of Regular Employment Status, Underpayment of
Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay,
Sick Leave Pay, and 13th Month Pay with Damages against the
petitioner before the NLRC. The Labor Arbiter rendered
judgment in favor of the respondents, and declared that they
were regular employees of petitioner as such, they were
awarded monetary benefits. NLRC affirmed the decision of the
Labor Arbiter. Petitioner filed a motion for reconsideration but
CA dismissed it.
ISSUE:
Whether or not the respondents were considered regular
employees of ABS-CBN.
RULING:
SC ruled that Production Assistants (Pas) are regular
workers. Thus, they are entitled to the benefits in the CBA
between ABS-CBN and its rank-and-file employees.
It was held that where a person has rendered at least one
year of service, regardless of the nature of the activity
performed, or where the work is continuous or intermittent, the
employment is considered regular as long as the activity exists,
the reason being that a customary appointment is not
indispensable before one may be formally declared as having
attained regular status.
The Court states that the primary standard, therefore, of
determining regular employment is the reasonable connection
between the particular activity performed by the employee in
relation to the usual trade or business of the employer. The test
is whether the former is usually necessary or desirable in the
usual business or trade of the employer. The connection can be
determined by considering the nature of work performed and
its relation to the scheme of the particular business or trade in
its entirety. Also, if the employee has been performing the job
for at least a year, even if the performance is not continuous
Balahadia, A. (USC-LLB 2, EH402)
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and merely intermittent, the law deems repeated and


continuing need for its performance as sufficient evidence of
the necessity if not indispensability of that activity to the
business. Hence, the employment is considered regular, but
only with respect to such activity and while such activity exists.
Additionally, respondents cannot be considered as project
or program employees because no evidence was presented to
show that the duration and scope of the project were
determined or specified at the time of their engagement. In the
case at bar, however, the employer-employee relationship
between petitioner and respondents has been proven. In the
selection and engagement of respondents, no peculiar or
unique skill, talent or celebrity status was required from them
because they were merely hired through petitioners personnel
department just like any ordinary employee. Respondents did
not have the power to bargain for huge talent fees, a
circumstance negating independent contractual relationship.
Respondents are highly dependent on the petitioner for
continued work. The degree of control and supervision
exercised by petitioner over respondents through its
supervisors negates the allegation that respondents are
independent contractors.
The presumption is that when the work done is an integral
part of the regular business of the employer and when the
worker, relative to the employer, does not furnish an
independent business or professional service, such work is a
regular employment of such employee and not an independent
contractor. As regular employees, respondents are entitled to
the benefits granted to
all other regular employees of
petitioner under the CBA . Besides, only talent-artists were
excluded from the CBA and not production assistants who are
regular employees of the respondents. Moreover, under Article
1702 of the New Civil Code: In case of doubt, all labor
legislation and all labor contracts shall be construed in favor of
the safety and decent living of the laborer.
Francisco vs. NLRC
G.R. No. 170087; August 31, 2006
Balahadia, A. (USC-LLB 2, EH402)
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FACTS:
Angelina Francisco was hired by Kasei Corporation during
the incorporation stage. She was designated as accountant and
corporate secretary and was assigned to handle all the
accounting needs of the company. She was also designated as
Liason Officer to the City of Manila to secure permits for the
operation of the company.
In 1996, Petitioner was designated as Acting Manager. She
was assigned to handle recruitment of all employees and
perform management administration functions. In 2001, she
was replaced by Liza Fuentes as Manager. Kasei Corporation
reduced her salary to P2,500 per month which was until
September. She asked for her salary but was informed that she
was no longer connected to the company. She did not anymore
report to work since she was not paid for her salary. She filed
an action for constructive dismissal with the Labor Arbiter.
ISSUE:
Whether
relationship.

or

not

there

was

an

employer-employee

RULING:
SC held that there was such relationship. Francisco was
constructively dismissed. To ascertain if such relationship
exists, the Court used two-tiered testcontrol test and
economic reality test.
The court held that in this jurisdiction, there has been no
uniform test to determine the existence of an employeremployee relation. Generally, courts have relied on the socalled right of control test where the person for whom the
services are performed reserves a right to control not only the
end to be achieved but also the means to be used in reaching
such end. In addition to the standard of right-of-control, the
existing economic conditions prevailing between the parties,
like the inclusion of the employee in the payrolls, can help in
determining
the
existence
of
an
employer-employee
relationship.

Balahadia, A. (USC-LLB 2, EH402)


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The better approach would therefore be to adopt a twotiered test involving: (1) the putative employers power to
control the employee with respect to the means and methods
by which the work is to be accomplished; and (2) the
underlying economic realities of the activity or relationship.
The court observed the need to consider the existing
economic conditions prevailing between the parties, in addition
to the standard of right-of-control like the inclusion of the
employee in the payrolls, to give a clearer picture in
determining
the
existence
of
an
employer-employee
relationship based on an analysis of the totality of economic
circumstances of the worker.
Thus, the determination of the relationship between
employer and employee depends upon the circumstances of
the whole economic activity, such as: (1) the extent to which
the services performed are an integral part of the employers
business; (2) the extent of the workers investment in
equipment and facilities; (3) the nature and degree of control
exercised by the employer; (4) the workers opportunity for
profit and loss; (5) the amount of initiative, skill, judgment or
foresight required for the success of the claimed independent
enterprise; (6) the permanency and duration of the relationship
between the worker and the employer; and (7) the degree of
dependency of the worker upon the employer for his continued
employment in that line of business. The proper standard of
economic dependence is whether the worker is dependent on
the alleged employer for his continued employment in that line
of business.
By applying the control test, there is no doubt that
petitioner is an employee of Kasei Corporation because she was
under the direct control and supervision of Seiji Kamura, the
corporations Technical Consultant. It is therefore apparent that
petitioner
is
economically
dependent
on
respondent
corporation for her continued employment in the latters line of
business.
There can be no other conclusion that petitioner is an
employee of respondent Kasei Corporation. She was selected
and engaged by the company for compensation, and is
Balahadia, A. (USC-LLB 2, EH402)
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economically dependent upon respondent for her continued


employment in that line of business. Her main job function
involved accounting and tax services rendered to Respondent
Corporation on a regular basis over an indefinite period of
engagement.
Respondent Corporation hired and engaged
petitioner for compensation, with the power to dismiss her for
cause. More importantly, Respondent Corporation had the
power to control petitioner with the means and methods by
which the work is to be accomplished.

Nogales et. al. vs. Capitol Medical Center et. al.


G.R. No. 142625; December 19, 2006
FACTS:
Pregnant with her fourth child, Corazon Nogales
("Corazon"), who was then 37 years old, was under the
exclusive prenatal care of Dr. Oscar Estrada ("Dr. Estrada")
beginning on her fourth month of pregnancy or as early as
December 1975. Around midnight of 25 May 1976, Corazon
started to experience mild labor pains prompting Corazon and
Rogelio Nogales ("Spouses Nogales") to see Dr. Estrada at his
home. After examining Corazon, Dr. Estrada advised her
immediate admission to the Capitol Medical Center ("CMC"). t
6:13 a.m., Corazon started to experience convulsionsAt 6:22
a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to
extract Corazon's baby. In the process, a 1.0 x 2.5 cm. piece of
cervical tissue was allegedly torn.At 6:27 a.m., Corazon began
to manifest moderate vaginal bleeding which rapidly became
profuse. Corazon died at 9:15 a.m. The cause of death was
"hemorrhage, post partum.
ISSUE:
Whether or not the Capitol Medical Center is solidarily
liable.
RULING:
SC held CMC solidarily liable together with Dr. Estrada. The
doctrine of apparent authority was used to make CMC
Balahadia, A. (USC-LLB 2, EH402)
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vicariously liable even if Dr. Estrada is an independent


contractor.
Private hospitals, hire, fire and exercise real control over
their attending and visiting "consultant" staff. The basis for
holding an employer solidarily responsible for the negligence of
its employee is found in Article 2180 of the Civil Code which
considers a person accountable not only for his own acts but
also for those of others based on the former's responsibility
under a relationship of patria potestas.
In general, a hospital is not liable for the negligence of an
independent contractor-physician. There is, however, an
exception to this principle. The hospital may be liable if the
physician is the "ostensible" agent of the hospital. This
exception is also known as the "doctrine of apparent authority.
For a hospital to be liable under the doctrine of apparent
authority, a plaintiff must show that: (1) the hospital, or its
agent, acted in a manner that would lead a reasonable person
to conclude that the individual who was alleged to be negligent
was an employee or agent of the hospital; (2) where the acts of
the agent create the appearance of authority, the plaintiff must
also prove that the hospital had knowledge of and acquiesced
in them; and (3) the plaintiff acted in reliance upon the conduct
of the hospital or its agent, consistent with ordinary care and
prudence. In the instant case, CMC impliedly held out Dr.
Estrada as a member of its medical staff. Through CMC's acts,
CMC clothed Dr. Estrada with apparent authority thereby
leading the Spouses Nogales to believe that Dr. Estrada was an
employee or agent of CMC.

Coca-Cola Bottlers Phils. vs. Dr. Climaco


G.R. No. 146881; February 5, 2007
FACTS:
Dr. Climaco is a medical doctor who was hired by the
petitioner by virtue of retainer agreement. The agreement
states that there is no employer-employee relationship between
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the parties. The retainer agreement was renewed annually. The


last one expired on Dec. 31, 1993. Despite of the non-renewal
of the agreement, respondent continued to perform his
functions as company doctor until he received a letter in March
1995 concluding their retainer agreement.
Respondent filed a complaint before the NLRC seeking
recognition as a regular employee of the petitioner company
and prayed for the payment of all benefits of a regular
employee. In the decision of the Labor Arbiter, the company
lacked control over the respondents performance of his duties.
Respondent appealed where it rendered that no employeremployee relationship existed between the parties.
The CA ruled that an employer-employee relationship
existed.
ISSUE:
Whether or not there exists an employer-employee
relationship between the parties.
RULING:
SC ruled that there is no such relationship between the
parties.
The Court, in determining the existence of an employeremployee relationship, has invariably adhered to the four-fold
test: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the
power to control the employees conduct, or the so-called
control test, considered to be the most important element.
The Court agrees with the finding of the Labor Arbiter and
the NLRC that the circumstances of this case show that no
employer-employee relationship exists between the parties.
The Comprehensive Medical Plan, provided guidelines merely to
ensure that the end result was achieved, but did not control the
means and methods by which respondent performed his
assigned tasks. In addition, the Court finds that the schedule of
work and the requirement to be on call for emergency cases do
not amount to such control, but are necessary incidents to the
Retainership Agreement.
Balahadia, A. (USC-LLB 2, EH402)
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Considering that there is no employer-employee


relationship between the parties, the termination of the
Retainership Agreement, which is in accordance with the
provisions of the Agreement, does not constitute illegal
dismissal of respondent.

Calamba Medical Center vs. NLRC et. al.


G.R. No. 176484; November 25, 2008
FACTS:
The Calamba Medical Center (petitioner), a privatelyowned hospital, engaged the services of medical doctorsspouses Ronaldo Lanzanas (Dr. Lanzanas) and Merceditha
Lanzanas (Dr. Merceditha) in March 1992 and August 1995,
respectively, as part of its team of resident physicians.
Reporting at the hospital twice-a-week on twenty-four-hour
shifts, respondents were paid a monthly "retainer" of P4,800.00
each. It appears that resident physicians were also given a
percentage share out of fees charged for out-patient
treatments, operating room assistance and discharge billings,
in addition to their fixed monthly retainer.
The work schedules of the members of the team of
resident physicians were fixed by petitioner's medical director
Dr. Raul Desipeda (Dr. Desipeda). And they were issued
identification cards by petitioner and were enrolled in the Social
Security System (SSS). Income taxes were withheld from them.
Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician
at the hospital, inadvertently overheard a telephone
conversation of respondent Dr. Lanzanas with a fellow
employee, Diosdado Miscala, through an extension telephone
line. Apparently, Dr. Lanzanas and Miscala were discussing the
low "census" or admission of patients to the hospital.
Dr. Trinidad issued to Dr. Lanzanas a memorandum asking
her to explain within 24 hours why no disciplinary action should
be taken against him. Pending investigation, he was placed
under a 30-day preventive suspension.
Balahadia, A. (USC-LLB 2, EH402)
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Inexplicably, petitioner did not give respondent Dr.


Merceditha, who was not involved in the said incident, any work
schedule after sending her husband Dr. Lanzanas the
memorandum, nor inform her the reason therefor, albeit she
was later informed by the Human Resource Department (HRD)
officer that that was part of petitioner's cost-cutting measures.
Dr. Lanzanas filed a complaint for illegal suspension before
the National Labor Relations Commission (NLRC)-Regional
Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a
complaint for illegal dismissal.
ISSUE:
Whether or not there exists an employer-employee
relationship between petitioner and the spousesrespondents.
Whether or not the spouses-respondents were legally
dismissed.
RULING:
SC held that there exists such relationship. The spousesrespondents were illegally dismissed.
On the first issue
Under the "control test," an employment relationship
exists between a physician and a hospital if the hospital
controls both the means and the details of the process by which
the physician is to accomplish his task.
As priorly stated, private respondents maintained specific
work-schedules, as determined by petitioner through its
medical director, which consisted of 24-hour shifts totaling
forty-eight hours each week and which were strictly to be
observed under pain of administrative sanctions.
That petitioner exercised control over respondents gains
light from the undisputed fact that in the emergency room, the
operating room, or any department or ward for that matter,
respondents' work is monitored through its nursing supervisors,
Balahadia, A. (USC-LLB 2, EH402)
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Page

charge nurses and orderlies. Without the approval or consent of


petitioner or its medical director, no operations can be
undertaken in those areas. For control test to apply, it is not
essential for the employer to actually supervise the
performance of duties of the employee, it being enough that it
has the right to wield the power.
On the second issue
Petitioner
thus
failed
to
observe
the
two
requirements,before dismissal can be effected notice and
hearing which constitute essential elements of the statutory
process; the first to apprise the employee of the particular acts
or omissions for which his dismissal is sought, and the second
to inform the employee of the employer's decision to dismiss
him. Non-observance of these requirements runs afoul of the
procedural mandate.
The termination notice sent to and received by Dr.
Lanzanas on April 25, 1998 was the first and only time that he
was apprised of the reason for his dismissal. He was not
afforded, however, even the slightest opportunity to explain his
side. His was a "termination upon receipt" situation. While he
was priorly made to explain on his telephone conversation with
Miscala, he was not with respect to his supposed participation
in the strike and failure to heed the return-to-work order.
As for the case of Dr. Merceditha, her dismissal was worse,
it having been effected without any just or authorized cause
and without observance of due process. In fact, petitioner never
proferred any valid cause for her dismissal except its view that
"her marriage to [Dr. Lanzanas] has given rise to the
presumption that her sympath[y] [is] with her husband; [and
that when [Dr. Lanzanas] declared that he was going to boycott
the scheduling of their workload by the medical doctor, he was
presumed to be speaking for himself [and] for his wife
Merceditha."

Escasinas et. al. vs. Shangri-la


G.R. No. 178827; March 4, 2009
Balahadia, A. (USC-LLB 2, EH402)
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Page

FACTS:
Registered nurses Jeromie D. Escasinas and Evan Rigor
Singco (petitioners) were engaged in 1999 and 1996,
respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor)
to work in her clinic at respondent Shangri-las Mactan Island
Resort (Shangri-la) in Cebu of which she was a retained
physician.
In late 2002, petitioners filed with the NLRC a complaint
for regularization, underpayment of wages, non-payment of
holiday pay, night shift differential and 13th month pay
differential against respondents, claiming that they are regular
employees of Shangri-la. Shangri-la claimed, however, that
petitioners were not its employees but of respondent doctor
whom it retained via Memorandum of Agreement (MOA)
pursuant to Article 157 of the Labor Code, as amended.
Respondent doctor for her part claimed that petitioners were
already working for the previous retained physicians of Shangrila before she was retained by Shangri-la; and that she
maintained petitioners services upon their request.
ISSUE:
Whether or not there was an employee-employer
relationship between Shangri-La and the petitioners.
Whether or not Dr. Pepito is an independent
contractor
RULING:
SC ruled that there no such relationship. The petitioners
are under the direct supervision of Dr. Pepito, an independent
contractor.

On the first issue


The resolution of the case hinges, in the main, on the
correct interpretation of Art. 157 vis a vis Art. 280 and the
provisions on permissible job contracting of the Labor Code, as
amended. Under the foregoing provision, Shangri-la, which
employs more than 200 workers, is mandated to furnish its
Balahadia, A. (USC-LLB 2, EH402)
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employees with the services of a full-time registered nurse, a


part-time physician and dentist, and an emergency clinic which
means that it should provide or make available such medical
and allied services to its employees, not necessarily to hire or
employ a service provider. The term full-time in Art. 157
cannot be construed as referring to the type of employment of
the person engaged to provide the services, for Article 157
must not be read alongside Art. 280[9] in order to vest
employer-employee relationship on the employer and the
person so engaged. The phrase services of a full-time
registered nurse should thus be taken to refer to the kind of
services that the nurse will render in the companys premises
and to its employees, not the manner of his engagement.
On the second issue
The existence of an independent and permissible
contractor relationship is generally established by considering
the following determinants: whether the contractor is carrying
on an independent business; the nature and extent of the work;
the skill required; the term and duration of the relationship; the
right to assign the performance of a specified piece of work; the
control and supervision of the work to another; the employer's
power with respect to the hiring, firing and payment of the
contractor's workers; the control of the premises; the duty to
supply the premises, tools, appliances, materials and labor; and
the mode, manner and terms of payment.
Against the above-listed determinants, the Court holds
that respondent doctor is a legitimate independent contractor.
That Shangri-la provides the clinic premises and medical
supplies for use of its employees and guests do not necessarily
prove that respondent doctor lacks substantial capital and
investment. Besides, the maintenance of a clinic and provision
of medical services to its employees is required under Art. 157,
which are not directly related to Shangri-las principal business
operation of hotels and restaurants.

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Tongko vs. The Manufacturers Life Insurance Co., Inc.


November 7, 2008
G.R. No. 167622, November 07, 2008
FACTS:
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is
a
domestic
corporation
engaged
in
life
insurance
business.Renato A. Vergel De Dios was, during the period
material, its President and Chief Executive Officer. Gregorio
V. Tongko started his professional relationship with Manulife on
July
1, 1977 by virtue of a Career Agent's Agreement (Agreement)
he executed with Manulife. In the Agreement, it is provided
that: It is understood and agreed that the Agent is an
independent contractor and nothing contained herein shall be
construed or interpreted as creating an employer-employee
relationship between the Company and the Agent. The
Company may terminate this Agreement for any breach or
violation of any of the provisions hereof by the Agent by giving
written notice to the Agent within fifteen (15) days from the
time of the discovery of the breach. No waiver,
extinguishment, abandonment, withdrawal or cancellation of
the right to terminate this Agreement by the Company shall be
construed for any previous failure to exercise its right under
any provision of this Agreement.
Either of the parties hereto may likewise terminate his
Agreement at any time without cause, by giving to the other
party fifteen (15) days notice in writing. In 1983, Tongko was
named as a Unit Manager in Manulife's Sales Agency
Organization.In 1990, he became a Branch Manager. As the CA
found, Tongko's gross earnings from his work at Manulife,
consisting
of
commissions,
persistency
income,
and
management overrides. The problem started sometime in
2001, when Manulife instituted manpower development
programs in the regional sales management level. Relative
thereto, De Dios addressed a letter dated November 6, 2001
to Tongko regarding an October 18, 2001 Metro North Sales
Managers Meeting. Stating that Tongkos Region was the
Balahadia, A. (USC-LLB 2, EH402)
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Page

lowest performer (on a per Manager basis) in terms of


recruiting in 2000 and, as of today, continues to remain one of
the laggards in this area.
Other issues were:"Some Managers are unhappy with
their earnings and would want to revert to the position of
agents." And "Sales Managers are doing what the company
asks them to do but, in the process, they earn less."
Tongko was then terminated. Therefrom, Tongko filed a
Complaint dated November 25, 2002 with the NLRC against
Manulife for illegal dismissal in the Complaint. In a Decision
dated April 15, 2004, Labor Arbiter dismissed the complaint for
lack of an employer-employee relationship. The NLRC's First
Division, while finding an employer-employee relationship
between Manulife and Tongko applying the four-fold test, held
Manulife liable for illegal dismissal. Thus, Manulife filed an
appeal with the CA. Thereafter, the CA issued the assailed
Decision dated March 29, 2005, finding the absence of an
employer-employee relationship between the parties and
deeming
the
NLRC
with
no
jurisdiction
over
the
case.Hence, Tongko filed this petition.
ISSUES:
1.WON Tongko was an employee of Manulife
2.WON Tongko was illegally dismissed.
RULING:
1. Yes
In the instant case, Manulife had the power of control
over Tongko that would make him its employee. Several
factors contribute to this conclusion. In the Agreement dated
July 1, 1977 executed between Tongko and Manulife, it is
provided that: The Agent hereby agrees to comply with all
regulations and requirements of the Company as herein
provided as well as maintain a standard of
knowledge and competency in the sale of the Company's
products which satisfies those set by the Company and
sufficiently meets the volume of new business required of
Production Club membership.Under this provision, an agent of
Balahadia, A. (USC-LLB 2, EH402)
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Manulife must comply with three (3) requirements: (1)


compliance with the regulations and requirements of the
company; (2) maintenance of a level of knowledge of the
company's products that is satisfactory to the company; and
(3) compliance with a quota of new businesses. Among the
company regulations of Manulife are the different codes of
conduct such as the Agent Code of Conduct, Manulife Financial
Code of Conduct, and Manulife Financial Code of Conduct
Agreement, which demonstrate the power of control exercised
by the company over Tongko. The fact that Tongko was obliged
to obey and comply with the codes of
conduct was not disowned by respondents. Thus, with the
company regulations and requirements alone, the fact that
Tongko was an employee of Manulife may already be
established. Certainly, these requirements controlled the
means and methods by which Tongko was to achieve the
company's goals.
More importantly, Manulife's evidence establishes the fact
that Tongko was tasked to perform administrative duties that
establishes his employment with Manulife. Additionally, it must
be pointed out that the fact that Tongko was tasked with
recruiting a certain number of agents, in addition to his other
administrative functions, leads to no other conclusion that he
was an employee of Manulife.
2. Yes
In its Petition for Certiorari dated January 7,
2005[26] filed before the CA, Manulife argued that even
if Tongko is considered as its employee, his employment was
validly terminated on the ground of gross and habitual neglect
of duties, inefficiency, as well as willful disobedience of the
lawful orders of Manulife. Manulife stated: In the instant case,
private respondent, despite the written reminder from Mr. De
Dios refused to shape up and altogether disregarded the
latter's advice resulting in his laggard performance clearly
indicative of his willful disobedience of the lawful orders of his
superior. As private respondent has patently failed to perform
a very fundamental duty, and that is to yield obedience to all
reasonable rules, orders and instructions of the Company, as
Balahadia, A. (USC-LLB 2, EH402)
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well as gross failure to reach at least minimum quota, the


termination of his engagement from Manulife is highly
warranted and therefore, there is no illegal dismissal to speak
of. It is readily evident from the above-quoted portions of
Manulife's petition that it failed to cite a single iota of evidence
to support its claims. Manulife did not even point out which
order or rule that Tongko disobeyed. More importantly,
Manulife did not point out the specific acts that Tongko was
guilty of that would constitute gross and habitual neglect of
duty or disobedience. Manulife merely cited Tongko's alleged
"laggard performance," without substantiating such claim, and
equated the same to disobedience and neglect of duty.
Apropos thereto, Art. 277, par. (b), of the Labor Code
mandates in explicit terms that the burden of proving the
validity of the termination of employment rests on the
employer. Failure to discharge this evidential burden would
necessarily mean that the dismissal was not justified, and,
therefore, illegal. The Labor Code provides that an employer
may terminate the services of an employee for just cause and
this must be supported by substantial evidence. The settled
rule in administrative and quasi-judicial proceedings is that
proof beyond reasonable doubt is not required in determining
the legality of an employer's dismissal of an employee, and
not even a preponderance of evidence is necessary as
substantial evidence is considered sufficient. Substantial
evidence is more than a mere scintilla of evidence or relevant
evidence as a reasonable mind might accept as adequate to
support a conclusion, even if other minds, equally reasonable,
might conceivably opine otherwise. Here, Manulife failed to
overcome such burden of proof. It must be reiterated that
Manulife even failed to identify the specific acts by
which Tongko's employment was terminated much less support
the same with substantial evidence.To repeat, mere
conjectures cannot work to deprive employees of their means
of livelihood. Thus, it must be concluded that Tongko was
illegally dismissed. Moreover, as to Manulife's failure to comply
with the twin notice rule, it reasons that Tongko not being its
employee is not entitled to such notices. Since we have ruled
that Tongko is its employee, however, Manulife clearly failed to

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afford Tongko said notices. Thus, on this ground too, Manulife


is guilty of illegal dismissal.
CAONG, JR. V. AVELINO REGUALOS
GR No. 179428
January 26, 2011
FACTS:
Petitioners were hired by respondent under a boundary
agreement, as drivers of his jeepneys. Consequently,
petitioners were barred him from driving because of the
deficiency in the boundary payment. They pleaded with
respondent but to no avail.During the mandatory conference,
respondent manifested that petitioners were not dismissed and
that they could drive his jeepneys once they paid their arrears.
Petitioners, however, refused to do so and averred that they
were illegally dismissed by respondent without just cause.
They filed separate complaints for illegal dismissal against
respondent who barred them from driving the vehicles due to
deficiencies in their boundary payments. In his answer,
respondent alleged that petitioners were lessees of his vehicles
and not his employees; hence, the Labor Arbiter had no
jurisdiction.
ISSUE:
Whether or not the policy of suspending drivers pending
payment of arrears in their boundary obligations reasonable?
HELD:
It is already settled that the relationship between jeepney
owners/operators and jeepney drivers under the boundary
system is that of employer-employee and not of lessor-lessee.
The fact that the drivers do not receive fixed wages but only
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get the amount in excess of the so-called "boundary" that they


pay to the owner/operator is not sufficient to negate the
relationship between them as employer and employee.
Indeed, petitioners' suspension cannot be categorized as
dismissal, considering that there was no intent on the part of
respondent to sever the employer-employee relationship
between him and petitioners. In fact, it was made clear that
petitioners could put an end to the suspension if they only pay
their recent arrears. As it was, the suspension dragged on for
years because of petitioners' stubborn refusal to pay. It would
have been different if petitioners complied with the condition
and respondent still refused to readmit them to work. Then
there would have been a clear act of dismissal.
Respondent's policy of suspending drivers who fail to remit the
full amount of the boundary was fair and reasonable under the
circumstances.Under a boundary scheme, the driver remits the
"boundary," which is a fixed amount, to the owner/operator and
gets to earn the amount in excess thereof. Thus, on a day when
there are many passengers along the route, it is the driver who
actually benefits from it. It would be unfair then if, during the
times when passengers are scarce, the owner/operator will be
made to suffer by not getting the full amount of the boundary.
Unless clearly shown or explained by an event that irregularly
and negatively affected the usual number of passengers within
the route, the scarcity of passengers should not excuse the
driver from paying the full amount of the boundary.
The petition is denied for lack of merit.
ATOK BIG WEDGE COMPANY, INC. V JESUS P. GISON
GR. No. 169510
August 8,2011

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FACTS:
Respondent was engaged as part-time consultant on retainer
basis by petitioner. As a consultant on retainer basis,
respondent assisted petitioner's retained legal counsel with
matters pertaining to the prosecution of cases against illegal
surface occupants within the area covered by the company's
mineral claims. Respondent was likewise tasked to perform
liaison work with several government agencies, which he said
was his expertise.Petitioner did not require respondent to report
to its office on a regular basis, except when occasionally
requested by the management to discuss matters needing his
expertise as a consultant. As payment for his services,
respondent received a retainer fee of P3,000.00 a month. The
said arrangement continued for the next eleven years.
Sometime thereafter, since respondent was getting old, he
requested that petitioner cause his registration with the Social
Security System (SSS), but petitioner did not accede to his
request. He later reiterated his request but it was ignored by
petitioner considering that he was only a retainer/consultant.
On the same date petitioner, issued a memorandum advising
respondent that within 30 days from receipt thereof, petitioner
is terminating his retainer contract with the company since his
services are no longer necessary. Respondent filed a complaint
for illegal dismissal, unfair labor practice, underpayment of
wages, non-payment of 13th month pay, vacation pay, and sick
leave pay with the National Labor Relations Commission
(NLRC).
ISSUE:
Whether or not there existed an employer-employee
relationship between the petitioner and respondent.
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HELD:
To ascertain the existence of an employer-employee
relationship jurisprudence has invariably adhered to the fourfold test, to wit:
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power of dismissal; and
(4) the power to control the employee's conduct, or the
so-called "control test."
Of these four, the last one is the most important. The so-called
"control test" is commonly regarded as the most crucial and
determinative indicator of the presence or absence of an
employer-employee relationship. Under the control test, an
employer-employee relationship exists where the person for
whom the services are performed reserves the right to control
not only the end achieved, but also the manner and means to
be used in reaching that end. Applying the aforementioned
test, an employer-employee relationship is apparently absent in
the case at bar. Among other things, respondent was not
required to report everyday during regular office hours of
petitioner. Respondent's monthly retainer fees were paid to him
either at his residence or a local restaurant. More importantly,
petitioner did not prescribe the manner in which respondent
would accomplish any of the tasks in which his expertise as a
liaison officer was needed; respondent was left alone and given
the freedom to accomplish the tasks using his own means and
method. Respondent was assigned tasks to perform, but
petitioner did not control the manner and methods by which
respondent performed these tasks. Verily, the absence of the
element of control on the part of the petitioner engenders a
conclusion that he is not an employee of the petitioner.

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SEMBLANTE V. COURT OF APPEALS


GR No. 196426

August 15, 2011

FACTS:
Petitioners assert that they were hired by respondents, as the
official masiador and sentenciador, respectively, of the cockpit
sometime in 1993.
Amasiador calls and takes the bets from the gamecock owners
and other bettors and orders the start of the cockfight. He also
distributes the winnings after deducting the arriba, or the
commission for the cockpit. Meanwhile, as the sentenciador
oversees the proper gaffing of fighting cocks, determines the
fighting cocks' physical condition and capabilities to continue
the cockfight, and eventually declares the result of the
cockfight.
For their services as masiador and sentenciador, Semblante
receives PhP2,000 per week or a total of PhP8,000 per month,
while Pilar gets PhP3,500 a week or PhP14,000 per month. They
work every Tuesday, Wednesday, Saturday, and Sunday every
week, excluding monthly derbies and cockfights held on special
holidays. Their working days start at 1:00 p.m. and last until
12:00 midnight, or until the early hours of the morning
depending on the needs of the cockpit. Petitioners had both
been issued employees' identification cards that they wear
every time they report for duty. They alleged never having
incurred any infraction and/or violation of the cockpit rules and
regulations.
On November 14, 2003, however, petitioners were denied entry
into the cockpit upon the instructions of respondents, and were
informed of the termination of their services effective that date.
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This prompted petitioners to file a complaint for illegal


dismissal against respondents.
ISSUE:
Whether or not there existed an employer-employee
relationship between the petitioners and respondent.
HELD:
Petitioners are NOT employees of respondents, since their
relationship fails to pass muster the four-fold test of
employment We have repeatedly mentioned in countless
decisions: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4)
the power to control the employee's conduct, which is the most
important element.
As found by both the NLRC and the CA, respondents had no
part in petitioners' selection and management; petitioners'
compensation was paid out of the arriba(which is a percentage
deducted from the total bets), not by petitioners; and
petitioners performed their functions as masiador and
sentenciador free from the direction and control of respondents.
In the conduct of their work, petitioners relied mainly on their
"expertise that is characteristic of the cockfight gambling," and
were never given by respondents any tool needed for the
performance of their work.
Respondents, not being petitioners' employers, could never
have dismissed, legally or illegally, petitioners, since
respondents were without power or prerogative to do so in the
first place. The rule on the posting of an appeal bond cannot
defeat the substantive rights of respondents to be free from an
unwarranted burden of answering for an illegal dismissal for
which they were never responsible.
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JOSE MEL BERNARTE V. PHILIPPINE BASKETBALL


ASSOCIATION
G.R. No. 192084, September 14, 2011
FACTS:
Petitioner Bernarte was invited to join thePhilippine Basketball
Association (PBA) as areferee. Consequently, he was made to
signcontracts on a year-to-year basis. During the termof
Commissioner Eala, however, changes weremade on the terms
of their employment. Forinstance, he was not made to sign a
contract duringthe first conference of the All-Filipino Cup
whichwas from February 23, 2003 to June 2003. Itwas only
during the second conference when hewas made to sign a one
and a half month contractfor the period July 1 to August 5,
2003.On January 15, 2004, Bernarte received aletter from the
Office of the Commissioneradvising him that his contract would
not berenewed citing his unsatisfactory performanceon and off
the court. It was a total shock forBernarte who was awarded
Referee of the year in2003. He felt that the dismissal was
caused byhis refusal to fix a game upon order of Ernie
DeLeon.Respondents aver, on the other hand, thatBernarte was
not illegally dismissed because hewas not an employee of the
PBA. His contractof retainer was simply not renewed. PBA
hadthe prerogative of whether or not to renew hiscontract.
ISSUE:
Whether or not the repeated signing of acontract of retainer by
a basketball referee issufficient to make him a regular
employee

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HELD:
To determine the existence of an employer-employee
relationship, case law has consistentlyapplied the four-fold test,
to wit: (a) the selectionand engagement of the employee; (b)
the paymentof wages; (c) the power of dismissal; and (d)
theemployer's power to control the employee onthe means and
methods by which the work isaccomplished. The so-called
"control test" is themost important indicator of the presence
orabsence of an employer-employee relationship.
In the case at bar, the petitioner, a basketballreferee of the
PBA, is an independent contractor.There was no control over
the means and methodsby which petitioner performs his work
as a refereeofficiating a PBA basketball game. The
contractualstipulations in the retainer contracts do notpertain
to, much less dictate, how and whenpetitioner will blow the
whistle and make calls.On the contrary, they merely serve as
rules ofconduct or guidelines in order to maintain theintegrity
of the professional basketball league.Moreover, the following
circumstances indicatethat petitioner is an independent
contractor: (1)the referees are required to report for work
onlywhen PBA games are scheduled, which is threetimes a
week spread over an average of only 105playing days a year,
and they officiate games atan average of two hours per game;
and (2) theonly deductions from the fees received by
thereferees are withholding taxes. In other words,unlike regular
employees who ordinarily reportfor work eight hours per day for
five days aweek, petitioner is required to report for workonly
when PBA games are scheduled or threetimes a week. In
addition, there are no deductionsfor contributions to the Social
Security System,Philhealth or Pag-Ibig, which are the
usualdeductions from employees' salaries. Theseundisputed
circumstances buttress the fact thatpetitioner is an
independent contractor, and notan employee of respondents.
Furthermore, theapplicable foreign case law declares that a
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refereeis an independent contractor, whose special skillsand


independent judgment are requiredspecifically for such position
and cannot possiblybe controlled by the hiring party.

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LIRIO V. GENOVIA
GR No. 169757

November 23, 2011

Respondent Wilmer D. Genovia was hired on Aug. 15, 2001 as


studio manager by petitioner Cesar C. Lirio, owner of Celkor Ad
Sonicmix Recording Studio, to promote and sell the studios
services to music enthusiasts and other prospective clients. He
received a monthly salary of P7,000.00 and additional
commission of P100 per hour as recording technician.
Respondent was made to report for work from Monday to Friday
from 9:00 a.m. to 6 p.m. On Saturdays, he was required to work
half-day only, but most of the time, he still rendered eight hours
of work or more. All the employees of petitioner, including
respondent, rendered overtime work almost everyday, but
petitioner never kept a daily time record to avoid paying the
employees overtime pay.
In a complaint for illegal dismissal, petitioner invoked the
defense that no employer-employee relationship exists
between him and respondent. Theirs is one of an informal
partnership since they agreed to contribute money, property or
industry to a common fund with the intention of dividing the
profits among themselves.
ISSUE:
Whether or not there existed an employer-employee
relationship between the petitioners and respondent.
Ruling:
The elements to determine the existence of an employment
relationship are: (a) the selection and engagement of the
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employee; (b) the payment of wages; (c) the power of


dismissal; and (d) the employers power to control the
employees conduct. The most important element is the
employers control of the employees conduct, not only as to
the result of the work to be done, but also as to the means and
methods to accomplish it.
It is settled that no particular form of evidence is required to
prove the existence of an employer-employee relationship. Any
competent and relevant evidence to prove the relationship may
be admitted.
In this case, the documentary evidence presented by
respondent to prove that he was an employee of petitioner are
as follows: (a) a document denominated as payroll (dated July
31, 2001 to March 15, 2002) certified correct by petitioner,
which showed that respondent received a monthly salary of
P7,000, with the corresponding deductions due to absences
incurred by respondent; and two copies of petty cash vouchers,
showing the amounts he received and signed for in the payrolls.
The said documents showed that petitioner hired respondent as
an employee and he was paid monthly wages of P7,000.
Petitioner wielded the power to dismiss as respondent stated
that he was verbally dismissed by petitioner, and respondent,
thereafter, filed an action for illegal dismissal against petitioner.
The power of control refers merely to the existence of the
power. It is not essential for the employer to actually supervise
the performance of duties of the employee, as it is sufficient
that the former has a right to wield the power.
On the other hand, petitioner failed to prove that his
relationship with respondent was one of partnership. Such
claim was not supported by any written agreement.

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CHARLIE JAO V. BCC PRODUCTS SALES, INC.


GR No. 163700
April 18, 2012
FACTS:
Petitioner maintained that respondent BCC Product Sales, Inc.
(BCC) and its President, respondent Terrance Ty (Ty), employed
him as comptroller starting from September 1995 with a
monthly salary of P20,000.00 to handle the financial aspect of
BCC's business; 2 that on October 19, 1995, the security guards
of BCC, acting upon the instruction of Ty, barred him from
entering the premises of BCC where he then worked; that his
attempts to report to work in November and December 12,
1995 were frustrated because he continued to be barred from
entering the premises of BCC; and that he filed a complaint
dated December 28, 1995 for illegal dismissal, reinstatement
with full backwages, non-payment of wages, damages and
attorney's fees. 4
Respondents countered that petitioner was not their employee
but the employee of Sobien Food Corporation (SFC), the major
creditor and supplier of BCC; and that SFC had posted him as
its comptroller in BCC to oversee BCC's finances and business
operations and to look after SFC's interests or investments in
BCC.; that their issuance of the ID to petitioner was only for the
purpose of facilitating his entry into the BCC premises in
relation to his work of overseeing the financial operations of
BCC for SFC; that the ID should not be considered as evidence
of petitioner's employment in BCC; that petitioner executed an
affidavit in March 1996, 20 stating, among others, as follows:
1.I am a CPA (Certified Public Accountant) by profession
but presently associated with, or employed by, Sobien Food
Corporation with the same business address as abovestated;
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2.In the course of my association with, or employment by,


Sobien Food Corporation (SFC, for short), I have been entrusted
by my employer to oversee and supervise collections on
account of receivables due SFC from its customers or clients;
for instance, certain checks due and turned over by one of
SFC's customers is BCC Product Sales, Inc., operated or run by
one Terrance L. Ty, (President and General manager),
Petitioner counters, however, that the affidavit did not establish
the absence of an employer-employee relationship between
him and respondents because it had been executed in March
1996, or after his employment with respondents had been
terminated on December 12, 1995; and that the affidavit
referred to his subsequent employment by SFC following the
termination of his employment by BCC.
ISSUE:
The sole issue is whether or not an employer-employee
relationship existed between petitioner and BCC. A finding on
the existence of an employer-employee relationship will
automatically warrant a finding of illegal dismissal, considering
that respondents did not state any valid grounds to dismiss
petitioner.
HELD:
In determining the presence or absence of an employeremployee relationship, the Court has consistently looked for the
following incidents, to wit: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the
employee on the means and methods by which the work is
accomplished. The last element, the so-called control test, is
the most important element.
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Petitioner presented no document setting forth the terms of his


employment by BCC. The failure to present such agreement on
terms of employment may be understandable and expected if
he was a common or ordinary laborer who would not jeopardize
his employment by demanding such document from the
employer, but may not square well with his actual status as a
highly educated professional.
Petitioner's admission that he did not receive his salary for the
three months of his employment by BCC, as his complaint for
illegal dismissal and non-payment of wages and the criminal
case for estafa he later filed against the respondents for nonpayment of wages indicated, further raised grave doubts about
his assertion of employment by BCC. If the assertion was true,
we are puzzled how he could have remained in BCC's employ in
that period of time despite not being paid the first salary of
P20,000.00/month. Moreover, his name did not appear in the
payroll of BCC despite him having approved the payroll as
comptroller.
Lastly, the confusion about the date of his alleged illegal
dismissal provides another indicium of the insincerity of
petitioner's assertion of employment by BCC. In the petition for
review on certiorari, he averred that he had been barred from
entering the premises of BCC on October 19, 1995, 27 and thus
was illegally dismissed. Yet, his complaint for illegal dismissal
stated that he had been illegally dismissed on December 12,
1995 when respondents' security guards barred him from
entering the premises of BCC, 28 causing him to bring his
complaint only on December 29, 1995, and after BCC had
already filed the criminal complaint against him. The wide gap
between October 19, 1995 and December 12, 1995 cannot be
dismissed as a trivial inconsistency considering that the several

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incidents affecting the veracity of his assertion of employment


by BCC earlier noted herein transpired in that interval.
With all the grave doubts thus raised against petitioner's claim,
we need not dwell at length on the other proofs he presented,
like the affidavits of some of the employees of BCC, the ID, and
the signed checks, bills and receipts. Suffice it to be stated that
such other proofs were easily explainable by respondents and
by the aforestated circumstances showing him to be the
employee of SFC, not of BCC.

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3. HIRING OF EMPLOYEES
Ollendorf vs. Abrahanson
G.R. No. 13228; September 13, 1918
FACTS:
The record discloses that Ollendorf is and for a long time
past has been engaged in the city of Manila and elsewhere in
the Philippines in the business of manufacturing ladies'
embroidered underwear for export. Ollendorf imports the
material from which this underwear is made and adopts
decorative designs which are embroidered upon it by Filipino
needle workers from patterns selected and supplied by him.
Most of the embroidery work is done in the homes of the
workers. The embroiderers employed by plaintiff are under
contract to work for plaintiff exclusively.
On September 1915, plaintiff and defendant entered into a
contract. Under the terms of this, agreement defendant entered
the employ of plaintiff and worked for him until April 1916,
when defendant, on account of ill health, left plaintiff's employ
and went to the United States. While in plaintiff's employ
defendant had access to all parts of plaintiff's establishment,
and had full opportunity to acquaint himself with plaintiff's
business methods and business connections. The duties
performed by him were such as to make it necessary that he
should have this knowledge of plaintiff s business. Defendant
had a general knowledge of the Philippine embroidery business
before his employment by plaintiff, having been engaged in
similar work for several years.
Some months after his departure, defendant returned to
Manila as the manager of the Philippine Underwear Company, a
corporation. This corporation does not maintain a factory in the
Philippine Islands, but sends material and embroidery designs
from New York to its local representative here who employs
Filipino needle workers to embroider the designs and make up
the garments in their homes. The only difference between
plaintiff's business and that of the firm by which the defendant
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is employed, is the method of doing the finishing work the


manufacture of the embroidered material into finished
garments.
Shortly after defendant's return to Manila and the
commencement by him of the discharge of the duties of his
position as local manager of the Philippine Embroidery
Company, plaintiff commenced this action, the principal
purpose of which is to prevent, by injunction, any further
breach of that part of defendant's contract of employment by
plaintiff, by which he agreed that he would not "enter into or
engage himself directly or indirectly . . . in a similar or
competitive business to that of (plaintiff) anywhere within the
Philippine Islands for a period of five years . . ." from the date of
the agreement.
ISSUE:
Whether or not the contract is valid.
RULING:
SC ruled that the contract is valid.
The only limitation upon the freedom of contractual
agreement is that the pacts established shall not be contrary to
"law, morals or public order." (Civil Code, art. 1255.)
Public welfare is first considered, and if it be not involved,
and the restraint upon one party is not greater than protection
to the other party requires, the contract may be sustained. The
question is whether, under the particular circumstances of the
case and the nature of the particular contract involved in it the
contract is, or is not, unreasonable.
The Courts adopt the modern rule that the validity of
restraints upon trade or employment is to be determined by the
intrinsic reasonableness of the restriction in each case, rather
than by any fixed rule, and that such restrictions may be
upheld when not contrary to the public welfare and not greater
than is necessary to afford a fair and reasonable protection to
the party in whose favor it is imposed.
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A business enterprise may and often does depend for its


success upon the owner's relations with other dealers, his skill
in establishing favorable connections, his methods of buying
and selling a multitude of details, none vital if considered
alone, but which in the aggregate constitute the sum total of
the advantages which are the result of the experience or
individual aptitude and ability of the man or men by whom the
business has been built up. Failure or success may depend
upon the possession of these intangible but all-important
assets, and it is natural that their possessor should seek to
keep them from falling into the hands of his competitors.
It is with this object in view that such restrictions as that
now under consideration are written into contracts of
employment. Their purpose is the protection of the employer,
and if they do not go beyond what is reasonably necessary to
effectuate this purpose they should be upheld. We are of the
opinion, and so hold, that in the light of the established facts
the restraint imposed upon defendant by his contract is not
unreasonable.

Del Castillo vs. Richmond


G.R. No. L-21127; February 9, 1924
FACTS:
The case was instituted to declare the contract of services
entered into by Alfonso del Castillo as null and void. Del Castillo
alleges that the provisions and conditions contained in the third
paragraph of said contract constitute an illegal and
unreasonable restriction upon his liberty to contract, are
contrary to public policy, and are unnecessary in order to
constitute a just and reasonable protection to the defendant;
and asked that the same be declared null and void and of no
effect.
The said contract constituted an illegal and unreasonable
restriction upon the right of the plaintiff to contract and was
contrary to public policy. It will be noted that the restrictions
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placed upon the plaintiff are strictly limited (a) to a limited


district or districts, and (b) during the time while the defendant
or his heirs may own or have open a drugstore, or have an
interest in any other one within said limited district.
ISSUE:
Whether or not the said restraint is reasonable.
RULING:
SC ruled that the restriction is reasonable and not contrary
to public policy.
The law concerning contracts which tend to restrain
business or trade has gone through a long series of changes
from time to time with the changing conditions of trade and
commerce. With trifling exceptions, said changes have been a
continuous development of a general rule.
The early cases show plainly a disposition to avoid and
annul all contract which prohibited or restrained any one from
using lawful trade " at any time or at any place," as being
against the benefit of the state. Later, however, the rule
became well established that if the restraint was limited to "a
certain time" and within "a certain place", such contracts were
valid and not "against the benefit of the state." Later cases,
and we think the rule is now well established, have held that
contract in restraint of trade is valid providing there is a
limitation upon either time or place. A contract, however, which
restrains a man entering into a business or trade without either
a limitation as to time or place, will be held in valid.
As stated in the case of Ollendorf vs. Abrahamson, The
public welfare of course must always be considered, and if it be
not involved and the restraint upon one party is not greater
than protection to the other requires, contracts like the one we
are discussing will be sustained. The general tendency, we
believe, of modern authority, is to make the test whether the
restraint is reasonably necessary for the protection of the
contracting parties. If the contract is reasonably necessary to
protect the interest of the parties, it will be upheld.
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In that case we held that a contract by which an employee


agrees refrain a given length of time, after the expiration of the
term of his employment, from engaging in business,
competitive with that of his employer, is not void as being in
restraint of trade if the restraint imposed is not greater than
that which is necessary to afford a reasonable protection.
PT & T vs. NLRC
G.R. No. 118978; May 23, 1997
FACTS:
Grace de Guzman was initially hired by petitioner as a
reliever for a fixed period from November 21, 1990 until April
20, 1991 vice one C.F. Tenorio who went on maternity leave.
Under the Reliever Agreement which she signed with Petitioner
Company, her employment was to be immediately terminated
upon expiration of the agreed period. Thereafter, from June 10,
1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991,
private respondents services as reliever were again engaged
by petitioner, this time in replacement of one Erlinda F. Dizon
who went on leave during both periods. After August 8, 1991,
and pursuant to their Reliever Agreement, her services were
terminated.
It now appears that private respondent had made the s
representation, that she was single eventhough she contracted
marriage months before, in the two successive reliever
agreements which she signed on June 10, 1991 and July 8,
1991. When petitioner supposedly learned about the same
later, its branch supervisor sent to private respondent a
memorandum requiring her to explain the discrepancy. In that
memorandum, she was reminded about the companys policy
of not accepting married women for employment.
Private respondent was dismissed from the company
effective January 29, 1992, which she readily contested by
initiating a complaint for illegal dismissal. Labor Arbiter handed
down a decision declaring that private respondent, who had
already gained the status of a regular employee, was illegally
dismissed by petitioner. On appeal to the National Labor
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Relations Commission (NLRC), said public respondent upheld


the labor arbiter and it ruled that private respondent had
indeed been the subject of an unjust and unlawful
discrimination by her employer, PT&T.
ISSUE:
Whether or not discrimination merely by reason of the
marriage of a female employee is expressly prohibited by
Article 136.
RULING:
SC ruled that the stipulation is violative of Art. 136 of the
Labor Code.
An employer is free to regulate, according to his discretion
and best business judgment, all aspects of employment, from
hiring to firing, except in cases of unlawful discrimination or
those which may be provided by law. Petitioners policy of not
accepting or considering as disqualified from work any woman
worker who contracts marriage runs afoul of the test of, and the
right against, discrimination, afforded all women workers by our
labor laws and by no less than the Constitution.
Respondents act of concealing the true nature of her
status from PT&T could not be properly characterized as willful
or in bad faith as she was moved to act the way she did mainly
because she wanted to retain a permanent job in a stable
company. In other words, she was practically forced by that
very same illegal company policy into misrepresenting her civil
status for fear of being disqualified from work.
The government, to repeat, abhors any stipulation or
policy in the nature of that adopted by petitioner PT&T. The
Labor Code states, in no uncertain terms, as follows:
ART. 136. Stipulation against marriage. - It shall be
unlawful for an employer to require as a condition of
employment or continuation of employment that a
woman shall not get married, or to stipulate expressly
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or tacitly that upon getting married, a woman


employee shall be deemed resigned or separated, or to
actually dismiss, discharge, discriminate or otherwise
prejudice a woman employee merely by reason of
marriage.
Under American jurisprudence, job requirements which
establish employer preference or conditions relating to the
marital status of an employee are categorized as a sex-plus
discrimination where it is imposed on one sex and not on the
other. Further, the same should be evenly applied and must
not inflict adverse effects on a racial or sexual group which is
protected by federal job discrimination laws.
Petitioners policy is not only in derogation of the
provisions of Article 136 of the Labor Code on the right of a
woman to be free from any kind of stipulation against marriage
in connection with her employment, but it likewise assaults
good morals and public policy, tending as it does to deprive a
woman of the freedom to choose her status, a privilege that by
all accounts inheres in the individual as an intangible and
inalienable right.
Hence, while it is true that the parties to a contract may
establish any agreements, terms, and conditions that they may
deem convenient, the same should not be contrary to law,
morals, good customs, public order, or public policy. Carried to
its logical consequences, it may even be said that petitioners
policy against legitimate marital bonds would encourage illicit
or common-law relations and subvert the sacrament of
marriage.
Duncan Asso. Of Detailman-PTGWO vs. Glaxo
G.R. No. 162994; September 17, 2004
FACTS:
Petitioner Pedro A. Tecson was hired by respondent Glaxo
Wellcome Philippines, Inc.) as medical representative on
October 1995, after Tecson had undergone training and
orientation. Tecson signed a contract of employment which
stipulates, among others, that he agrees to study and abide by
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existing company rules; to disclose to management any


existing or future relationship by consanguinity or affinity with
co-employees or employees of competing drug companies and
should management find that such relationship poses a
possible conflict of interest, to resign from the company.
The Employee Code of Conduct of Glaxo similarly
provides that an employee is expected to inform management
of any existing or future relationship by consanguinity or
affinity with co-employees or employees of competing drug
companies. If management perceives a conflict of interest or a
potential conflict between such relationship and the employees
employment with the company, the management and the
employee will explore the possibility of a transfer to another
department in a non-counterchecking position or preparation
for employment outside the company after six months.
Tecson was initially assigned to market Glaxos products
in
the
Camarines
Sur-Camarines
Norte
sales
area.
Subsequently, Tecson entered into a romantic relationship with
Bettsy, an employee of Astra Pharmaceuticals (Astra), a
competitor of Glaxo. Bettsy was Astras Branch Coordinator in
Albay. Despite of warnings, Tecson married Bettsy. The
superiors of Tecson reminded him of the company policy and
suggested that either him or Bettsy shall resign from their
respective companies. Tecson requested more time to resolve
the issue. In November of 1999, Glaxo transferred Tecson to
Mindanao area involving the provinces of Butuan, Surigao and
Agusan del Sur. Tecson did not agree to the reassignment and
referred this matter to the grievance committee. It was
resolved and was submitted to voluntary arbitration.
The NCMB rendered decision that Glaxos policy was a
valid one. Aggrieved, Tecson filed a petition to the CA where CA
held that Glaxos policy prohibiting its employees from having
personal relationships with employees of competitor companies
is a valid exercise of its management prerogatives. Hence, this
petition.
ISSUE:
Whether or not the policy of a pharmaceutical company
prohibiting its employees from marrying employees of any
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competitor company is valid.


RULING:
SC ruled that the prohibition is valid. It is an exercise of
the companys management prerogative.
There is no error to the Court of Appeals when it ruled that
Glaxos policy prohibiting an employee from having a
relationship with an employee of a competitor company is a
valid exercise of management prerogative. Glaxo has a right to
guard its trade secrets, manufacturing formulas, marketing
strategies and other confidential programs and information
from competitors, especially so that it and Astra are rival
companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships
with employees of competitor companies upon Glaxos
employees is reasonable under the circumstances because
relationships of that nature might compromise the interests of
the company. In laying down the assailed company policy,
Glaxo only aims to protect its interests against the possibility
that a competitor company will gain access to its secrets and
procedures. That Glaxo possesses the right to protect its
economic interests cannot be denied.
No less than the Constitution recognizes the right of
enterprises to adopt and enforce such a policy to protect its
right to reasonable returns on investments and to expansion
and growth. Indeed, while our laws endeavor to give life to the
constitutional policy on social justice and the protection of
labor, it does not mean that every labor dispute will be decided
in favor of the workers.
The law also recognizes that
management has rights which are also entitled to respect and
enforcement in the interest of fair play.
City of Manila v. Laguio
G.R. No. 118127; April 12, 2005
FACTS:
Private
respondent
Malate
Tourist
Development
Corporation (MTDC) is a corporation engaged in the business of
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operating hotels, motels, hostels and lodging houses. It built


and opened Victoria Court in Malate which was licensed as a
motel although duly accredited with the Department of Tourism
as a hotel.
On June 1993, MTDC filed a Petition for Declaratory Relief
with Prayer for a Writ of Preliminary Injunction and/or
Temporary Restraining Order with the lower court impleading as
defendants, herein petitioners City of Manila, Hon. Alfredo S.
Lim, Hon. Joselito L. Atienza, and the members of the City
Council of Manila. MTDC prayed that the Ordinance, insofar as
it includes motels and inns as among its prohibited
establishments, be declared invalid and unconstitutional.
Enacted by the City Council on 9 March 1993 and
approved by petitioner City Mayor on 30 March 1993, the said
Ordinance is entitled AN ORDINANCE PROHIBITING THE
ESTABLISHMENT OR OPERATION OF BUSINESSES PROVIDING
CERTAIN FORMS OF AMUSEMENT, ENTERTAINMENT, SERVICES
AND FACILITIES IN THE ERMITA-MALATE AREA, PRESCRIBING
PENALTIES FOR VIOLATION THEREOF, AND FOR OTHER
PURPOSES.
MTDC argued that the Ordinance erroneously and
improperly included in its enumeration of prohibited
establishments, motels and inns such as MTDCs Victoria Court
considering that these were not establishments for
amusement or entertainment and they were not services
or facilities for entertainment, nor did they use women as
tools for entertainment, and neither did they disturb the
community, annoy the inhabitants or adversely affect the
social and moral welfare of the community.
ISSUE:
Whether or not the aforementioned Ordinance is valid and
constitutional.
RULING:
SC ruled that the ordinance is null and void. Said
ordinance is ultra vires, thus, unconstitutional.

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The Court is of the opinion, and so holds, that the lower


court did not err in declaring the Ordinance, as it did, ultra vires
and therefore null and void. The Ordinance is so replete with
constitutional infirmities that almost every sentence thereof
violates a constitutional provision. The prohibitions and
sanctions therein transgress the cardinal rights of persons
enshrined by the Constitution. The Court is called upon to
shelter these rights from attempts at rendering them worthless.
A long line of decisions has held that for an ordinance to
be valid, it must not only be within the corporate powers of the
local government unit to enact and must be passed according
to the procedure prescribed by law, it must also conform to the
following substantive requirements: (1) must not contravene
the Constitution or any statute; (2) must not be unfair or
oppressive; (3) must not be partial or discriminatory; (4) must
not prohibit but may regulate trade; (5) must be general and
consistent with public policy; and (6) must not be
unreasonable.
Ordinances shall only be valid when they are not contrary
to the Constitution and to the laws. The Ordinance must satisfy
two requirements: it must pass muster under the test of
constitutionality and the test of consistency with the prevailing
laws. That ordinances should be constitutional uphold the
principle of the supremacy of the Constitution. The requirement
that the enactment must not violate existing law gives stress to
the precept that local government units are able to legislate
only by virtue of their derivative legislative power, a delegation
of legislative power from the national legislature. The delegate
cannot be superior to the principal or exercise powers higher
than those of the latter.
The prohibition of the enumerated establishments will not
per se protect and promote the social and moral welfare of the
community; it will not in itself eradicate the alluded social ills of
prostitution, adultery, fornication nor will it arrest the spread of
sexual disease in Manila.
Conceding for the nonce that the Ermita-Malate area
teems with houses of ill-repute and establishments of the like
which the City Council may lawfully prohibit, it is baseless and
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insupportable to bring within that classification sauna parlors,


massage parlors, karaoke bars, night clubs, day clubs, super
clubs, discotheques, cabarets, dance halls, motels and inns.
This is not warranted under the accepted definitions of these
terms. The enumerated establishments are lawful pursuits
which are not per se offensive to the moral welfare of the
community.
That these are used as arenas to consummate illicit sexual
affairs and as venues to further the illegal prostitution is of no
moment. We lay stress on the acrid truth that sexual
immorality, being a human frailty, may take place in the most
innocent of places that it may even take place in the substitute
establishments enumerated under Section 3 of the Ordinance.
The problem, it needs to be pointed out, is not the
establishment, which by its nature cannot be said to be
injurious to the health or comfort of the community and which
in itself is amoral, but the deplorable human activity that may
occur within its premises. While a motel may be used as a
venue for immoral sexual activity, it cannot for that reason
alone be punished. It cannot be classified as a house of illrepute or as a nuisance per se on a mere likelihood or a naked
assumption. If that were so and if that were allowed, then the
Ermita-Malate area would not only be purged of its supposed
social ills, it would be extinguished of its soul as well as every
human activity, reprehensible or not, in its every nook and
cranny would be laid bare to the estimation of the authorities.
The Ordinance seeks to legislate morality but fails to
address the core issues of morality. Try as the Ordinance may
to shape morality, it should not foster the illusion that it can
make a moral man out of it because immorality is not a thing, a
building or establishment; it is in the hearts of men. The City
Council instead should regulate human conduct that occurs
inside the establishments, but not to the detriment of liberty
and privacy which are covenants, premiums and blessings of
democracy.
In the instant case, there is a clear invasion of personal or
property rights, personal in the case of those individuals
desirous of owning, operating and patronizing those motels and
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property in terms of the investments made and the salaries to


be paid to those therein employed. If the City of Manila so
desires to put an end to prostitution, fornication and other
social ills, it can instead impose reasonable regulations such as
daily inspections of the establishments for any violation of the
conditions of their licenses or permits; it may exercise its
authority to suspend or revoke their licenses for these
violations; and it may even impose increased license fees. In
other words, there are other means to reasonably accomplish
the desired end.
Star Paper Corp. v. Simbol
G.R. No. 164774; April 12, 2006
FACTS:
Petitioner Star Paper Corporation is a corporation engaged
in trading, principally of paper products. Josephine Ongsitco is
its Manager of the Personnel and Administration Department
while Sebastian Chua is its Managing Director.
Respondents Ronaldo D. Simbol (Simbol), Wilfreda N.
Comia (Comia) and Lorna E. Estrella (Estrella) were all regular
employees of the company. Simbol was employed by the
company on October 1993 and met Alma Dayrit, also an
employee of the company, whom he married on June 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.
Simbol resigned on June 20, 1998
pursuant to the company policy.
Comia was hired by the company on February 1997. She
met Howard Comia, a co-employee, whom she married on June
1, 2000. Ongsitco likewise reminded them that pursuant to
company policy, one must resign should they decide to get
married. Comia resigned on June 30, 2000.
Estrella was hired on July 29, 1994. She met Luisito Zuiga
(Zuiga), also a co-worker. Petitioners stated that Zuiga, a
married man, got Estrella pregnant. The company allegedly
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could have terminated her services due to immorality but she


opted to resign on December 21, 1999.
The respondents signed a Release and Confirmation
Agreement and stated therein that they have no money and
property accountabilities in the company. Respondents offer a
different version of their dismissal. Respondents later filed a
complaint for unfair labor practice, constructive dismissal,
separation pay and attorneys fees. They averred that the
aforementioned company policy is illegal and contravenes
Article 136 of the Labor Code.
Labor Arbiter dismissed the complaint and states that the
company policy was decreed pursuant to what the respondent
corporation perceived as management prerogative. On appeal
to the NLRC, the Commission affirmed the decision of the Labor
Arbiter. In its assailed Decision dated August 3, 2004, the Court
of Appeals reversed the NLRC decision.
ISSUE:
Whether or not the said policy is a valid exercise of the
companys management prerogative.
RULING:
SC ruled that it not a valid exercise of its management
prerogative. There is no reasonable business necessity of the
policy.
The case at bar involves Article 136 of the Labor Code
which provides: It shall be unlawful for an employer to require
as a condition of employment or continuation of employment
that a woman employee shall not get married, or to stipulate
expressly or tacitly that upon getting married a woman
employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a
woman employee merely by reason of her marriage.
With more women entering the workforce, employers are
also enacting employment policies specifically prohibiting
spouses from working for the same company. We note that two
types of employment policies involve spouses: policies banning
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only spouses from working in the same company (no-spouse


employment policies), and those banning all immediate family
members, including spouses, from working in the same
company (anti-nepotism employment policies).
It utilizes two theories of employment discrimination: the
disparate treatment and the disparate impact. Under the
disparate treatment analysis, the plaintiff must prove that an
employment policy is discriminatory on its face. No-spouse
employment policies requiring an employee of a particular sex
to either quit, transfer, or be fired are facially discriminatory. On
the other hand, to establish disparate impact, the complainants
must prove that a facially neutral policy has a disproportionate
effect on a particular class.
The courts that have broadly construed the term marital
status rule that it encompassed the identity, occupation and
employment of one's spouse. They hold that the absence of
such a bona fide occupational qualification invalidates a rule
denying employment to one spouse due to the current
employment of the other spouse in the same office. Thus, they
rule that unless the employer can prove that the reasonable
demands of the business require a distinction based on marital
status and there is no better available or acceptable policy
which would better accomplish the business purpose, an
employer may not discriminate against an employee based on
the identity of the employees spouse. This is known as the
bona fide occupational qualification exception.
We note that since the finding of a bona fide occupational
qualification justifies an employers no-spouse rule, the
exception is interpreted strictly and narrowly by these state
courts. There must be a compelling business necessity for
which no alternative exists other than the discriminatory
practice. To justify a bona fide occupational qualification, the
employer must prove two factors: (1) that the employment
qualification is reasonably related to the essential operation of
the job involved; and, (2) that there is a factual basis for
believing that all or substantially all persons meeting the
qualification would be unable to properly perform the duties of
the job.
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The court does not find a reasonable business necessity in


the case at bar. The protection given to labor in our jurisdiction
is vast and extensive that we cannot prudently draw inferences
from the legislatures silence that married persons are not
protected under our Constitution and declare valid a policy
based on a prejudice or stereotype. Thus, for failure of
petitioners to present undisputed proof of a reasonable
business necessity, we rule that the questioned policy is an
invalid exercise of management prerogative.
Del Monte Phils. V. Velasco
G.R. No. 153477; March 6, 2007
FACTS:
Lolita Velasco was hired by Del Monte as seasonal
employee and was subsequently regularized by Del Monte. On
June 1987, petitioner warned Velasco of its absences and was
repeatedly reminded that her absence without permission may
result to forfeiture of her vacation leave.
Another warning was sent due to her absences without
permission which eventually led to the forfeiture of her vacation
entitlement. On September 1994, a notice of hearing was sent
to Velasco informing her of the charges filed against her foe
violating the Absence without leave rule. On January 1995,
after the hearing, Del Monte terminated the services of Velasco
due to excessive absence without leave. Feeling aggrieved,
Velasco filed a case for illegal dismissal. She asserted that she
was absent since she was suffering urinary tract infection and
she was pregnant.
She sent an application for leave to the supervisor. Upon
check up of the company doctor, Velasco was advised to rest.
On the following check-ups, she was again advised to rest
where this time, she was not able to get secure a leave.
The Labor Arbiter rendered decision that she was an
incorrigible absentee. Respondent appealed to the NLRC. NLRC
vacated the decision of the Labor Arbiter. It decided that
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respondent was illegally dismissed and was entitled to


reinstatement. Petitioner appealed to CA where it dismissed its
claim and affirmed NLRC. Thus, this petition.
ISSUE:
Whether or not the dismissal was legal on account of
absences made due to Velascos pregnancy.
RULING:
SC ruled that the termination was illegal.
The termination was illegal since it comes within the
purview of the prohibited acts provided in Article 137 of the
Labor Code. Based on Art. 137, it shall be unlawful for any
employer (1) to deny any woman employee the benefits
provided for in this Chapter or to discharge any woman
employed by him for the purpose of preventing her from
enjoying any of the benefits provided under this Code; (2) to
discharge such woman on account of her pregnancy, or while
on leave or in confinement due to her pregnancy; and (3) to
discharge or refuse the admission of such woman upon
returning to her work for fear that she may again be pregnant.
The respondent was illegally dismissed by the petitioner
on account of her pregnancy. The act of the employer is
unlawful, it being contrary to law.
Yrasuegui vs. Philippine Airlines
G.R. No. ; October 17, 2008
FACTS:
This case portrays the peculiar story of an international
flight steward who was dismissed because of his failure to
adhere to the weight standards of the airline company.
Petitioner Armando G. Yrasuegui
was
a
former
international flight steward of Philippine Airlines, Inc. (PAL). He
stands five feet and eight inches (58) with a large body frame.
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The proper weight for a man of his height and body structure is
from 147 to 166 pounds, the ideal weight being 166 pounds, as
mandated by the Cabin and Crew Administration Manual of PAL.
The weight problem of petitioner dates back to 1984.
Back then, PAL advised him to go on an extended vacation
leave from December 29, 1984 to March 4, 1985 to address his
weight concerns. Apparently, petitioner failed to meet the
companys weight standards, prompting another leave
without pay from March 5, 1985 to November 1985.
After meeting the required weight, petitioner was allowed
to return to work. But petitioners weight problem recurred. He
again went on leave without pay from October 17, 1988 to
February 1989.
On April 26, 1989, petitioner weighed 209 pounds, 43
pounds over his ideal weight. In line with company policy, he
was removed from flight duty effective May 6, 1989 to July 3,
1989. He was formally requested to trim down to his ideal
weight and report for weight checks on several dates. He was
also told that he may avail of the services of the company
physician should he wish to do so. He was advised that his
case will be evaluated on July 3, 1989.
On February 25, 1989, petitioner underwent weight check.
It was discovered that he gained, instead of losing, weight. He
was overweight at 215 pounds, which is 49 pounds beyond the
limit. Consequently, his off-duty status was retained.
Despite efforts, he remained to be overweight based on
the companys weight standards. He was served Notice of
Administrative Charge for violation of company standards on
weight requirements. He did not deny his being overweight.
What he claimed, instead, is that his violation, if any, had
already been condoned by PAL since no action has been taken
by the company regarding his case since 1988. He also
claimed that PAL discriminated against him because the
company has not been fair in treating the cabin crew members
who are similarly situated.

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On June 15, 1993, petitioner was formally informed by PAL


that due to his inability to attain his ideal weight, and
considering the utmost leniency extended to him which
spanned a period covering a total of almost five (5) years, his
services were considered terminated effective immediately.
His motion for reconsideration having been denied,
petitioner filed a complaint for illegal dismissal against PAL.
ISSUE:
Whether or not the dismissal of Yrasuegui was a valid
exercise of management prerogative.
RULING:
SC ruled that the dismissal of Yrasuegui was a valid
exercise of management prerogative. The weight standard is
considered a continuing qualification for an employees
position.
The obesity of petitioner is a ground for dismissal under
Article 282(e) of the Labor Code.
A reading of the weight standards of PAL would lead
to no other conclusion than that they constitute a continuing
qualification of an employee in order to keep the job. Tersely
put, an employee may be dismissed the moment he is unable
to comply with his ideal weight as prescribed by the weight
standards. The dismissal of the employee would thus fall under
Article 282(e) of the Labor Code. As explained by the CA:
x x x [T]he standards violated in this case
were not mere orders of the employer; they were
the prescribed weights that a cabin crew must
maintain in order to qualify for and keep his or
her position in the company. In other words, they
were
standards
that
establish
continuing
qualifications for an employees position. In this
sense, the failure to maintain these standards does
not fall under Article 282(a) whose express terms
require the element of willfulness in order to be a
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ground for dismissal. The failure to meet the


employers qualifying standards is in fact a ground
that does not squarely fall under grounds (a) to (d)
and is therefore one that falls under Article 282(e)
the other causes analogous to the foregoing.
By its nature, these qualifying standards are
norms that apply prior to and after an employee is
hired. They apply prior to employment because
these are the standards a job applicant must initially
meet in order to be hired. They apply after hiring
because an employee must continue to meet these
standards while on the job in order to keep his job.
Under this perspective, a violation is not one of the
faults for which an employee can be dismissed
pursuant to pars. (a) to (d) of Article 282; the
employee can be dismissed simply because he no
longer qualifies for his job irrespective of whether
or not the failure to qualify was willful or intentional.
xxx
After a meticulous consideration of all arguments pro and
con, We uphold the legality of dismissal. Separation pay,
however, should be awarded in favor of the employee as an act
of social justice or based on equity. This is so because his
dismissal is not for serious misconduct. Neither is it reflective
of his moral character.

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4. WAGE AND WAGE RATIONALIZATION ACT


Ilaw at Buklod ng Manggagawa vs. NLRC
G.R. No. 91980; June 27, 1991
FACTS:
The controversy at bar had its origin in the wage
distortions affecting the employees of respondent San Miguel
Corporation allegedly caused by RA 6727, otherwise known as
Wage Rationalization Act.
Upon the effectivity of the said Act, the union known as
Ilaw at Buklod ng Mangagawasaid to represent more or less
4, 500 employees of San Miguel Corporation who are working at
various plants, offices and warehouses located at the National
Capital Regionpresented to the Company a demand for the
correction of the significant distortion in the workers wages.
In that demand, the Union invoked Section 4(d) of RA 6727.
The provision provided that should there be any dispute
regarding wage distortions, shall first be settled voluntarily
between the parties and in the event of a deadlock, the same
shall be finally resolved through compulsory arbitration such
disputes by the regional branches of the NLRC having
jurisdiction over the workplace. But the demand according
to the Union has been ignored by the company. The Union
averred that the company offered a measly across-the board
wage increase of P7.00 per day, per employee, as against the
proposal of the Union of P25.00 per day, per employee. Later,
the Union reduced its proposal to P15.00 per day, per employee
by way of amicable settlement. When the company rejected the
reduced proposal of the Union the members thereof in their
own accord, the workers refused to render overtime services,
most especially at the Beer Bottling Plans at Polo. The work
schedule of the workers constitutes a built-in automatic
overtime. They work 10 hours for the first shift and 10 to 14
hours for the second shift, from Mondays to Fridays and on
Saturdays, 8 hours for both shifts. The refusal of the workers to
work more than 8-hours caused substantial losses to the
company. This led SMC to file a complaint before NLRC against
the Union. It sought to declare the strike or slowdown illegal
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and to terminate the employment of the union officers and


shop stewards.
ISSUE:
Whether or not the partial or limited strike, with the
purpose of correction of the wage distortion, of the Union is
valid .
RULING:
SC ruled that the concerted activity of the Union is illegal.
The partial strike or concerted refusal by the Union
members to follow the five-year-old work schedule which they
had therefore been observing, resorted to as a means of
coercing correction of "wage distortions," was therefore
forbidden by law and contract and, on this account, illegal.
Awareness by the Union of the proscribed character of its
members' collective activities, is clearly connoted by its
attempt to justify those activities as a means of protesting and
obtaining redress against said members working overtime
every day from Monday to Friday (on an average of 12 hours),
and every Saturday (on 8 hour shifts), rather than as a measure
to bring about rectification of the wage distortions caused by
RA 6727 which was the real cause of its differences with
SMC. By concealing the real cause of their dispute with
management (alleged failure of correction of wage distortion),
and trying to make it appear that the controversy involved
application of the eight-hour labor law, they obviously hoped to
remove their case from the operation of the rules implementing
RA 6727 that "Any issue involving wage distortion shall not be
a ground for a strike/lockout." The stratagem cannot succeed.
In view of the foregoing factual and legal considerations, it
leads to the basic conclusion that the concerted acts of the
members of petitioner Union in question are violative of the law
and their formal agreement with the employer.

Employers Confederation of the Phils. vs. NWPC


Balahadia, A. (USC-LLB 2, EH402)
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G.R. No. 96169; September 24, 1991


FACTS:
On October 17, 1995, the Regional Tripartite Wages and
Productivity Board, Region II, Tuguegarao, Cagayan (RTWPB), by
virtue of Republic Act No. 6727 (R.A. No. 6727), otherwise
known as the Wage Rationalization Act, issued Wage Order No.
R02-03 (Wage Order), as follows: Section 1. Upon effectivity of
this Wage Order, all employees/workers in the private sector
throughout Region II, regardless of the status of employment
are granted an across-the-board increase of P15.00 daily.
The Wage Order was published in a newspaper of general
circulation on December 2, 1995 and took effect on January 1,
1996. Its Implementing Rules were approved on February 14,
1996. Per Section 13 of the Wage Order, any party aggrieved by
the Wage Order may file an appeal with the National Wages and
Productivity Commission (NWPC) through the RTWPB within 10
calendar days from the publication of the Wage Order.
Bankers Council in a letter inquiry to NWPC requested for
ruling to seek exemption from coverage of the wage order since
the members bank are paying more than the regular wage.
NWPC replied that the member banks are covered by the wage
order and does not fall with the exemptible categories.
In another letter inquiry, Metrobank asked for the
interpretation of the applicability of the wage order. NWPC
referred it to RTWPB. RTWPB in return clarified that
establishments in Region 2 are covered by the wage order.
Petitioner filed a petition with the CA and denied the petition.
ISSUE:
Whether or not the wage order is void thus it has no legal
effect and the RTWPB acted in excess of its jurisdiction.
RULING:
SC finds that Section 1, Wage Order No. R02-03 is void
insofar as it grants a wage increase to employees earning more
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than the minimum wage rate; and pursuant to the separability


clause of the Wage Order, Section 1 is declared valid with
respect to employees earning the prevailing minimum wage
rate.
The powers of NWPC are enumerated in ART. 121. Powers
and Functions of the Commission. - The Commission shall have
the following powers and functions: (d) To review regional wage
levels set by the Regional Tripartite Wages and Productivity
Boards to determine if these are in accordance with prescribed
guidelines and national development plans; (f) To review plans
and programs of the Regional Tripartite Wages and Productivity
Boards to determine whether these are consistent with national
development plans; (g) To exercise technical and administrative
supervision over the Regional Tripartite Wages and Productivity
Boards.
R.A. No. 6727 declared it a policy of the State to
rationalize the fixing of minimum wages and to promote
productivity-improvement and gain-sharing measures to ensure
a decent standard of living for the workers and their families; to
guarantee the rights of labor to its just share in the fruits of
production; to enhance employment generation in the
countryside through industrial dispersal; and to allow business
and industry reasonable returns on investment, expansion and
growth.
In line with its declared policy, R.A. No. 6727 created the
NWPC, vested with the power to prescribe rules and guidelines
for the determination of appropriate minimum wage and
productivity measures at the regional, provincial or industry
levels; and authorized the RTWPB to determine and fix the
minimum wage rates applicable in their respective regions,
provinces, or industries therein and issue the corresponding
wage orders, subject to the guidelines issued by the NWPC.
Pursuant to its wage fixing authority, the RTWPB may issue
wage orders which set the daily minimum wage rates, based on
the standards or criteria set by Article 124 of the Labor Code.
The Court declared that there are two ways of fixing the
minimum wage: the "floor-wage" method and the "salaryBalahadia, A. (USC-LLB 2, EH402)
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ceiling" method. The "floor-wage" method involves the fixing of


a determinate amount to be added to the prevailing statutory
minimum wage rates. On the other hand, in the "salary-ceiling"
method, the wage adjustment was to be applied to employees
receiving a certain denominated salary ceiling. In other words,
workers already being paid more than the existing minimum
wage (up to a certain amount stated in the Wage Order) are
also to be given a wage increase.
In the present case, the RTWPB did not determine or fix
the minimum wage rate by the "floor-wage method" or the
"salary-ceiling method" in issuing the Wage Order. The RTWPB
did not set a wage level nor a range to which a wage
adjustment or increase shall be added. Instead, it granted an
across-the-board wage increase of P15.00 to all employees and
workers of Region 2. In doing so, the RTWPB exceeded its
authority by extending the coverage of the Wage Order to wage
earners receiving more than the prevailing minimum wage rate,
without a denominated salary ceiling. As correctly pointed out
by the OSG, the Wage Order granted additional benefits not
contemplated by R.A. No. 6727.

Mabeza vs. NLRC


G.R. No. 118506; April 18, 1997
FACTS:
Petitioner Norma Mabeza contends that on the first week
of May 1991, she and her co-employees at the Hotel Supreme
in Baguio City were asked by the hotel's management to sign
an instrument attesting to the latter's compliance with
minimum wage and other labor standard provisions of law.
Petitioner signed the affidavit but refused to go to the City
Prosecutor's Office to swear to the veracity and contents of the
affidavit as instructed by management. The affidavit was
nevertheless submitted on the same day to the Regional Office
of the Department of Labor and Employment in Baguio City.

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The affidavit was drawn by management for the sole


purpose of refuting findings of the Labor Inspector of DOLE
apparently adverse to the private respondent. After she refused
to proceed to the City Prosecutor's Office, petitioner states that
she was ordered by the hotel management to turn over the
keys to her living quarters and to remove her belongings from
the hotel premises. According to her, respondent strongly
chided her for refusing to proceed to the City Prosecutor's
Office to attest to the affidavit. She thereafter reluctantly filed a
leave of absence from her job which was denied by
management. When she attempted to return to work on May
1991, the hotel's cashier informed her that she should not
report to work and, instead, continue with her unofficial leave
of absence.
Consequently, three days after her attempt to return to
work, petitioner filed a complaint for illegal dismissal before the
Arbitration Branch of the National Labor Relations Commission
CAR Baguio City. In addition to her complaint for illegal
dismissal, she alleged underpayment of wages, non-payment of
holiday pay, service incentive leave pay, 13th month pay, night
differential and other benefits.
Responding to the allegations for illegal dismissal, private
respondent Peter Ng alleged before Labor Arbiter that
petitioner surreptitiously left her job without notice to the
management and that she actually abandoned her work. He
maintained that there was no basis for the money claims for
underpayment and other benefits as these were paid in the
form of facilities to petitioner and the hotel's other employees.
Labor Arbiter dismissed the complaint. On April 1994,
respondent NLRC promulgated its assailed Resolution affirming
the Labor Arbiter's decision.
ISSUE:
Whether or not the employer has exerted pressure, in the
form of restraint, interference or coercion, against his
employee's right to institute concerted action for better terms
and conditions of employment constitutes unfair labor practice.
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RULING:
SC ruled that there was unfair labor practice.
Without doubt, the act of compelling employees to sign an
instrument indicating that the employer observed labor
standards provisions of law when he might have not, together
with the act of terminating or coercing those who refuse to
cooperate with the employer's scheme constitutes unfair labor
practice. The first act clearly preempts the right of the hotel's
workers to seek better terms and conditions of employment
through concerted action. For refusing to cooperate with the
private respondent's scheme, petitioner was obviously held up
as an example to all of the hotel's employees, that they could
only cause trouble to management at great personal
inconvenience. Implicit in the act of petitioner's termination and
the subsequent filing of charges against her was the warning
that they would not only be deprived of their means of
livelihood, but also possibly, their personal liberty.
Granting that meals and lodging were provided and indeed
constituted facilities, such facilities could not be deducted
without the employer complying first with certain legal
requirements. Without satisfying these requirements, the
employer simply cannot deduct the value from the employee's
wages. 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. Finally, facilities must be charged at fair and
reasonable value. These requirements were not met in the
instant case.
More significantly, the food and lodging, or the electricity
and water consumed by the petitioner were not facilities but
supplements. A benefit or privilege granted to an employee for
the convenience of the employer is not a facility. The criterion
in making a distinction between the two not so much lies in the
kind (food, lodging) but the purpose. Considering that hotel
workers are required to work different shifts and are expected
to be available at various odd hours, their ready availability is a

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necessary matter in the operations of a small hotel, such as the


private respondent's hotel.
Joy Brothers Inc. vs. NWPC
G.R. No. 122932; June 17, 1991
FACTS:
Wage Order No. NCR-03, providing for a twenty-seven
peso wage increase for all private sector workers and
employees in the National Capital Region receiving one
hundred fifty-four pesos (P154.00) and below daily, was
approved November 29, 1993.
On February 1994, petitioner applied for exemption from
said wage order on the ground that it was a distressed
establishment. The RTWPB denied petitioner's application for
exemption after holding that the corporation accumulated
profits amounting to P38,381.80 for the period under review.
Petitioner's motion for reconsideration was likewise denied by
the Wages and Productivity Board on January 5, 1995. On
appeal to the National Wages and Productivity Commission,
petitioner was again denied relief.
More specifically, petitioner contends that the interim
period to be reckoned with is from January 1, 1993 to
December 15, 1993 and not merely up to September 30, 1993
as held by respondent Commission. Significantly, the period up
to December 31, 1993 will reflect losses in petitioner
corporation's books, but not if the covered interim period is
only up to September 30, 1993.
ISSUE:
Whether or not Petitioner Corporation falls within the
exemption for distressed establishments.
RULING:
SC ruled that petitioner company does not fall under the
exemptions given to distressed establishments.

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The petitioner company is not entitled to exemption of


the wage order since it is not a distressed establishment.
Under Section 5 of Wage Order No. NCR-03, distressed firms
may be exempted from the provisions of the Order upon
application with and due determination of the Board. NWPC
Guidelines No. 01, Series of 1992, providing for the Revised
Guidelines on Exemption indicate the criteria to qualify for
exemption as follows:
For Distressed Establishments: In the case of a stock
corporation, partnership, single proprietorship, non-stock, nonprofit organization or cooperative engaged in a business
activity or charging fees for its services When accumulated
losses for the last 2 full accounting periods and interim period,
if any, immediately preceding the effectivity of the Order have
impaired by at least 25 percent the: Paid-up capital at the end
of the last full accounting period preceding the effectivity of the
Order, in the case of corporations: Total invested capital at the
beginning of the last full accounting period preceding the
effectivity of the Order in the case of partnerships and single
proprietorships. Establishments operating for less than two (2)
years may be granted exemption when accumulated losses for
said period have impaired by at least 25% the paid-up capital
or total invested capital, as the case may be."
Section 8, paragraph a, of the Rules Implementing Wage
Order No. NCR-03 provides that exemption from compliance
with the wage increase may be granted to distressed
establishments whose paid-up capital has been impaired by at
least twenty-five percent (25%) or which registers capital
deficiency or negative net worth.
The Guidelines expressly require interim quarterly
financial statements for the period immediately preceding
December 16, 1993. The last two full accounting periods here
are 1991 and 1992, for which years petitioner incurred net
profits of P53,607.00 and P60,188.00, respectively.
Prubankers Assoc. vs. Prudential Bank
G.R. No. 131247; January 25, 1999
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FACTS:
On November, the RTWPB Region V issued Wage Order No.
RB 05-03 which provided for a Cost of Living Allowance (COLA)
to workers in the private sector who had rendered service for at
least three (3) months before its effectivity, and for the same
period thereafter, in the following categories: P17.50 in the
cities of Naga and Legaspi; P15.50 in the municipalities of
Tabaco, Daraga, Pili and the city of Iriga; and P10.00 for all
other areas in the Bicol Region.
On November 1993, RTWPB Region VII issued Wage Order
No. RB VII-03, which directed the integration of the COLA
mandated pursuant to Wage Order No. RO VII-02-A into the
basic pay of all workers. It also established an increase in the
minimum wage rates for all workers and employees in the
private sector as follows: by Ten Pesos (P10.00) in the cities of
Cebu, Mandaue and Lapulapu; Five Pesos (P5.00) in the
municipalities of Compostela, Liloan, Consolacion, Cordova,
Talisay, Minglanilla, Naga and the cities of Davao, Toledo,
Dumaguete, Bais, Canlaon, and Tagbilaran. The bank granted a
COLA of P17.50 to its employees at its Naga Branch, the only
branch covered by Wage Order No. RB 5-03, and integrated the
P150.00 per month COLA into the basic pay of its rank-and-file
employees at its Cebu, Mabolo and P. del Rosario branches, the
branches covered by Wage Order No. RB VII-03.
On June 7, 1994, Prubankers Association wrote the
petitioner requesting that the Labor Management Committee
be immediately convened to discuss and resolve the alleged
wage distortion created in the salary structure upon the
implementation of the said wage orders. It demanded in the
Labor Management Committee meetings that the petitioner
extend the application of the wage orders to its employees
outside Regions V and VII, claiming that the regional
implementation of the said orders created a wage distortion in
the wage rates of petitioner's employees nationwide. As the
grievance could not be settled in the said meetings, the parties
agreed to submit the matter to voluntary arbitration.
ISSUE:
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Whether or not a wage distortion resulted


respondent's implementation of the Wage Orders.

from

RULING:
SC ruled that there is no wage distortion since the wage
order implementation covers all the branches of the bank.
The hierarchy of positions was still preserved. The levels of
different pay classes was not eliminated. The statutory
definition of wage distortion is found in Article 124 of the Labor
Code, as amended by Republic Act No. 6727, which reads:
Standards/Criteria for Minimum Wage Fixing . . ."As used
herein, a wage distortion shall mean a situation where an
increase in prescribed wage results in the elimination or severe
contraction of intentional quantitative differences in wage or
salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation."
Wage distortion involves four elements: (1) An existing
hierarchy of positions with corresponding salary rates; (2) A
significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher
one; (3)The elimination of the distinction between the two
levels and (4) The existence of the distortion in the same region
of the country.
A disparity in wages between employees holding similar
positions but in different regions does not constitute wage
distortion as contemplated by law. As stated, it is the hierarchy
of positions and the disparity of their corresponding wages and
other emoluments that are sought to be preserved by the
concept of wage distortion.
Millares et. al vs. NLRC
G.R. No. 122827; March 29, 1999
FACTS:

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Petitioners numbering one hundred sixteen 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.
ISSUE:
Whether the allowances are included in the definition of
"facilities" in Art. 97, par. (f), of the Labor Code, being
necessary and indispensable for their existence and
subsistence.
RULING:
SC ruled that allowances are not part of the wages of the
employees.
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.

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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." 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.
The court agrees with the observation of the Office of the
Solicitor General that the subject allowances were temporarily,
not regularly, received by petitioners. 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.
In determining whether a privilege is a facility, the
criterion is not so much its kind but its purpose. Revenue Audit
Memo
Order
No.
1-87
pertinently
provides
3.2
transportation, representation or entertainment expenses shall
not constitute taxable compensation if: (a)
It is for necessary
travelling and representation or entertainment expenses paid
or incurred by the employee in the pursuit of the trade or
business of the employer, and (b) The employee is required to,
and does, make an accounting/liquidation for such expense in
accordance with the specific requirements of substantiation for
such category or expense.Board and lodging allowances
furnished to an employee not in excess of the latter's needs
and given free of charge, constitute income to the latter except
if such allowances or benefits are furnished to the employee for
the convenience of the employer and as necessary incident to
proper performance of his duties in which case such benefits or
allowances do not constitute taxable income.
The Secretary of Labor and Employment under Sec. 6,
Rule VII, Book III, of the Rules Implementing the Labor Code
may from time to time fix in appropriate issuances the "fair and
reasonable value of board, lodging and other facilities
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customarily furnished by an employer to his employees."


Petitioners' allowances do not represent such fair and
reasonable value as determined by the proper authority simply
because the Staff/Manager's allowance and transportation
allowance were amounts given by respondent company in lieu
of actual provisions for housing and transportation needs
whereas the Bislig allowance was given in consideration of
being assigned to the hostile environment then prevailing in
Bislig. The inevitable conclusion is that subject allowances did
not form part of petitioners' wages.
International
School
Alliance
Quisumbing
G.R. No. 128845; June 1, 2000

of

Educators

vs.

FACTS:
International School, Inc., pursuant to Presidential Decree
732, is a domestic educational institution established primarily
for dependents of foreign diplomatic personnel and other
temporary residents. To enable the School to continue carrying
out its educational program and improve its standard of
instruction, Section 2(c) of the same decree authorizes the
School to employ its own teaching and management personnel
selected by it either locally or abroad, from Philippine or other
nationalities, such personnel being exempt from otherwise
applicable laws and regulations attending their employment,
except laws that have been or will be enacted for the protection
of employees.
The School hires both foreign and local teachers as
members of its faculty, classifying the same into two: (1)
foreign-hires and (2) local-hires. The School employs four tests
to determine whether a faculty member should be classified as
a foreign-hire or a local hire: (a) What is one's domicile? (b)
Where is one's home economy? (c) To which country does one
owe economic allegiance? (d) Was the individual hired abroad
specifically to work in the School and was the School
responsible for bringing that individual to the Philippines?
Should the answer to any of these queries point to the
Philippines, the faculty member is classified as a local hire;
otherwise, he or she is deemed a foreign-hire.
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The School grants foreign-hires certain benefits not


accorded local- hires. These include housing, transportation,
shipping costs, taxes, and home leave travel allowance.
Foreign-hires are also paid a salary rate twenty-five percent
(25%) more than local-hires. The School justifies the difference
on two "significant economic disadvantages" foreign-hires have
to endure, namely: (a) the "dislocation factor" and (b) limited
tenure. The compensation scheme is simply the School's
adaptive measure to remain competitive on an international
level in terms of attracting competent professionals in the field
of international education.
ISSUE:
Whether or not local hire teachers should be granted the
same salary as foreign hire teachers
RULING:
SC ruled that local hire teachers should be granted the
same salary as that of foreign hire teachers.
Notably, the International Covenant on Economic, Social,
and Cultural Rights, supra, in Article 7 thereof, provides: The
States Parties to the present Covenant recognize the right of
everyone to the enjoyment of just and favorable conditions of
work, which ensure, in particular: ( a) Remuneration which
provides all workers, as a minimum, with: (i) Fair wages and
equal remuneration for work of equal value without distinction
of any kind, in particular women being guaranteed conditions of
work not inferior to those enjoyed by men, with equal pay for
equal work;
The foregoing provisions impregnably institutionalize in
this jurisdiction the long honored legal truism of "equal pay for
equal work." Persons who work with substantially equal
qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries. This rule applies to
the School.
The School contends that petitioner has not adduced
evidence that local-hires perform work equal to that of foreignhires. The Court finds this argument a little inconsiderate. If an
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employer accords employees the same position and rank, the


presumption is that these employees perform equal work. If the
employer pays one employee less than the rest, it is not for
that employee to explain why he receives less or why the
others receive more. The employer has discriminated against
that employee; it is for the employer to explain why the
employee is treated unfairly.
In this case, the employer has failed to discharge this
burden. There is no evidence here that foreign-hires perform
25% more efficiently or effectively than the local-hires. Both
groups have similar functions and responsibilities, which they
perform under similar working conditions. Thus the employees
are entitled to same salary for performance of equal work.
Bankard Employees Union vs. NLRC
G.R. No. 140689; February 17, 2004
FACTS:
Bankard, Inc. classifies its employees by levels: Level I,
Level II, Level III, Level IV, and Level V. On May 1993, its Board
of Directors approved a New Salary Scale, made retroactive to
April 1, 1993, for the purpose of making its hiring rate
competitive in the industrys labor market. The New Salary
Scale increased the hiring rates of new employees, to wit:
Levels I and V by one thousand pesos (P1,000.00), and Levels
II, III and IV by nine hundred pesos (P900.00). Accordingly, the
salaries of employees who fell below the new minimum rates
were also adjusted to reach such rates under their levels.
This made Bankard Employees Union-WATU (petitioner),
the duly certified exclusive bargaining agent of the regular rank
and file employees of Bankard, to request for the increase in
the salary of its old, regular employees. Bankard insisted that
there was no obligation on the part of the management to
grant to all its employees the same increase in an across-theboard manner.

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Petioner filed a notice of strike. The strike was averted


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. Petitioners
motion for reconsideration of the dismissal of the case was
denied.
ISSUE:
Whether the unilateral adoption by an employer of an
upgraded salary scale that increased the hiring rates of new
employees without increasing the salary rates of old employees
resulted in wage distortion within the contemplation of Article
124 of the Labor Code.
RULING:
The Court will not interfere in the management
prerogative of the petitioner. The employees are not precluded
to negotiate through the provisions of the CBA.
Upon the enactment of R.A. No. 6727 (WAGE
RATIONALIZATION ACT, amending, among others, Article 124 of
the Labor Code), the term "wage distortion" was explicitly
defined as... a situation where an increase in prescribed wage
rates results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as
to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other logical
bases of differentiation.
In the case of Prubankers Association v. Prudential Bank
and Trust Company, it laid down the four elements of wage
distortion, to wit: (1.) An existing hierarchy of positions with
corresponding salary rates; (2) A significant change in the
salary rate of a lower pay class without a concomitant increase
in the salary rate of a higher one; (3) The elimination of the
distinction between the two levels; and (4) The existence of the
distortion in the same region of the country.

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Normally, a company has a wage structure or method of


determining the wages of its employees. In a problem dealing
with "wage distortion," the basic assumption is that there exists
a grouping or classification of employees that establishes
distinctions among them on some relevant or legitimate bases.
Involved in the classification of employees are various factors
such as the degrees of responsibility, the skills and knowledge
required, the complexity of the job, or other logical basis of
differentiation. The differing wage rate for each of the existing
classes of employees reflects this classification.
Put differently, the entry of new employees to the
company ipso facto places them under any of the levels
mentioned in the new salary scale which private respondent
adopted retroactive to April 1, 1993. 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.
The wordings of Article 124 are clear. If it was the intention
of the legislators to cover all kinds of wage adjustments, then
the language of the law should have been broad, not restrictive
as it is currently phrased:
Article 124. Standards/Criteria for Minimum Wage Fixing.
Where the application of any prescribed wage increase by
virtue of a law or Wage Order issued by any Regional Board
results in distortions of the wage structure within an
establishment, the employer and the union shall negotiate to
correct the distortions. Any dispute arising from the wage
distortions shall be resolved through the grievance procedure
under their collective bargaining agreement and, if it remains
unresolved, through voluntary arbitration.
Article 124 is entitled "Standards/Criteria for Minimum
Wage Fixing." It is found in CHAPTER V on "WAGE STUDIES,
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WAGE AGREEMENTS AND WAGE DETERMINATION" which


principally deals with the fixing of minimum wage. Article 124
should thus be construed and correlated in relation to minimum
wage fixing, the intention of the law being that in the event of
an increase in minimum wage, the distinctions embodied in the
wage structure based on skills, length of service, or other
logical bases of differentiation will be preserved.
If the compulsory mandate under Article 124 to correct
"wage distortion" is applied to voluntary and unilateral
increases by the employer in fixing hiring rates which is
inherently a business judgment prerogative, then the hands of
the employer would be completely tied even in cases where an
increase in wages of a particular group is justified due to a reevaluation of the high productivity of a particular group, or as in
the present case, the need to increase the competitiveness of
Bankards hiring rate. An employer would be discouraged from
adjusting the salary rates of a particular group of employees for
fear that it would result to a demand by all employees for a
similar increase, especially if the financial conditions of the
business cannot address an across-the-board increase.
Wage distortion is a factual and economic condition that
may be brought about by different causes. The mere factual
existence of wage distortion does not, however, ipso facto
result to an obligation to rectify it, absent a law or other source
of obligation which requires its rectification.

Odango vs. NLRC


G.R. No. 147420; June 10, 2004
FACTS:
Petitioners are monthly-paid employees of ANTECO whose
workdays are from Monday to Friday and half of Saturday. After
a routine inspection, the Regional Branch of the Department of
Labor and Employment found ANTECO liable for underpayment
of the monthly salaries of its employees. On September 1989,
the DOLE directed ANTECO to pay its employees wage
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differentials amounting to P1,427,412.75. ANTECO failed to pay.


On various dates in 1995, thirty-three (33) monthly-paid
employees filed complaints with the NLRC praying for payment
of wage differentials, damages and attorneys fees.
On November 1996, the Labor Arbiter rendered a Decision
in favor of petitioners granting them wage differentials
amounting to P1,017,507.73 and attorneys fees of 10%.
ANTECO appealed the Decision to the NLRC where it reversed
the Labor Arbiters Decision. The NLRC denied petitioners
motion for reconsideration. Petitioners then elevated the case
to CA where it dismissed the petition for failure to comply with
Section 3, Rule 46 of the Rules of Court. The Court of Appeals
explained that petitioners failed to allege the specific instances
where the NLRC abused its discretion. The appellate court
denied petitioners motion for reconsideration. Hence, this
petition.
ISSUE:
Whether or not the petitioners are entitled to money
claims.
RULING:
SC ruled that the petitioners are not entitled to money
claims or wage differentials.
The petitioners claim is based on Section 2, Rule IV, Book
III of the Implementing Rules and Policy Instructions No. 9
issued by the Secretary of Labor which was declared null and
void since in the guise of clarifying the Labor Codes provisions
on holiday pay, they in effect amended them by enlarging the
scope of their exclusion.
Even assuming that Section 2, Rule IV of Book III is valid,
their claim will still fail. The basic rule in this jurisdiction is "no
work, no pay." The right to be paid for un-worked days is
generally limited to the ten legal holidays in a year. Petitioners
claim is based on a mistaken notion that Section 2, Rule IV of
Book III gave rise to a right to be paid for un-worked days
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beyond the ten legal holidays. Petitioners line of reasoning is


not only a violation of the "no work, no pay" principle, it also
gives rise to an invidious classification, a violation of the equal
protection clause.

C. Planas Commercial vs. NLRC


G.R. No. 144619; November 11, 2005
FACTS:
In September 1993, Morente, Allauigan and Ofialda and
others filed a complaint for underpayment of wages, non
payment of overtime pay, holiday pay, service incentive leave
pay, and premium pay for rest day and holiday and night shift
differential against petitioners in the Arbitration Branch of
NLRC. It alleged that Cohu is engaged in the business of
wholesale of plastic products and fruits of different kinds with
more than 24 employees. Respondents were hired on January
1990, May 1990 and July 19991 as laborers and were paid
below the minimum wage for the past 3 years. They were
required to work for more than 8 hours a day and never
enjoyed the minimum benefits. Petitioners filed their comment
stating that the respondents were their helpers.
The Labor Arbiter rendered a decision dismissing the
money claims. Respondents filed an appeal with the NLRC
where it granted the money claims of Ofialda, Morente and
Allaguian. Petitioners appealed with the CA but it was denied. It
said that the company having claimed of exemption of the
coverage of the minimum wage shall have the burden of proof
to the claim.
In the present petition, the Petitioners insist that C. Planas
Commercial is a retail establishment principally engaged in the
sale of plastic products and fruits to the customers for personal
use, thus exempted from the application of the minimum wage
law; that it merely leases and occupies a stall in the Divisoria
Market and the level of its business activity requires and
sustains only less than ten employees at a time. Petitioners
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contend that private respondents were paid over and above the
minimum wage required for a retail establishment, thus the
Labor Arbiter is correct in ruling that private respondents claim
for underpayment has no factual and legal basis. Petitioners
claim that since private respondents alleged that petitioners
employed 24 workers, it was incumbent upon them to prove
such allegation which private respondents failed to do.
ISSUE:
Whether or not petitioner
application of minimum wage law.

is

exempted

from

the

RULING:
The contention of the petitioners that they are exempted
by the law must be proven. The petitioners have not
successfully shown that they had applied for the exemption.
R.A. No. 6727 known as the Wage Rationalization Act
provides for the statutory minimum wage rate of all workers
and employees in the private sector. Section 4 of the Act
provides for exemption from the coverage, thus: Sec. 4. (c)
Exempted from the provisions of this Act are household or
domestic helpers and persons employed in the personal service
of another, including family drivers. Also, retail/service
establishments regularly employing not more than ten (10)
workers may be exempted from the applicability of this Act
upon application with and as determined by the appropriate
Regional Board in accordance with the applicable rules and
regulations issued by the Commission.
Whenever an
application for exemption has been duly filed with the
appropriate Regional Board, action on any complaint for alleged
non-compliance with this Act shall be deferred pending
resolution of the application for exemption by the appropriate
Regional Board.
In the event that applications for exemptions are not
granted, employees shall receive the appropriate compensation
due them as provided for by this Act plus interest of one
percent (1%) per month retroactive to the effectivity of this Act.

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Clearly, for a retail/service establishment to be exempted


from the coverage of the minimum wage law, it must be shown
that the establishment is regularly employing not more than
ten (10) workers and had applied for exemptions with and as
determined by the appropriate Regional Board in accordance
with the applicable rules and regulations issued by the
Commission.

EJR Crafts Corp. vs. CA


G.R. No. 154101; March 10, 2006
FACTS:
In 1997, private respondents filed a complaint for
underpayment of wages, regular holiday pay, overtime pay,
nonpayment of 13th month pay and service incentive leave pay
against petitioner before the Regional Office, NCR of the
Department of Labor and Employment (DOLE). Acting on the
complaint, Regional Director issued an inspection authority to
Senior Labor Enforcement Officer.
On 22 August 1997, an inspection was conducted on the
premises of petitioners offices wherein the following violations
of labor standards law were discovered, to wit: nonpresentation of employment records (payrolls and daily time
records); underpayment of wages, regular holiday pay, and
overtime pay; and nonpayment of 13th month pay and service
incentive leave pay. On the same day, the Notice of Inspection
Result was received by and explained to the manager of
petitioner corporation Mr. Jae Kwan Lee, with the corresponding
directive that necessary restitution be effected within five days
from said receipt.
As no restitution was made, the Regional Office thereafter
conducted summary investigations. However, despite due
notice, petitioner failed to appear for two consecutive
scheduled hearings. Petitioner failed to question the findings of
the Labor Inspector received by and explained to the
corporations manager. Petitioner then filed a Motion for
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Reconsideration of said Order arguing that the Regional


Director has no jurisdiction over the case as private
respondents were allegedly no longer connected with petitioner
corporation at the time of the filing of the complaint and when
the inspection was conducted, and that private respondents
claims are within the exclusive and original jurisdiction of the
Labor Arbiters.
ISSUE:
Whether or not the Regional Director has jurisdiction over
the claims of herein private respondents.
RULING:
The Court favors the respondents in the money claims
against the petitioner company. It is admitted that for the
Regional Director to exercise the power to order compliance, or
the so-called "enforcement power" under Article 128(b) of P.D.
No. 442 as amended, it is necessary that the employeremployee relationship still exists.
In support of its contention that it is the Labor Arbiter and
not the Regional Director who has jurisdiction over the claims of
herein private respondents, petitioner contends that at the time
the complaint was filed, the private respondents were no longer
its employees. Considering thus that there still exists an
employer-employee relationship between petitioner and private
respondents and that the case involves violations of labor
standard provisions of the Labor Code, we agree with the
Undersecretary of Labor and the appellate court that the
Regional Director has jurisdiction to hear and decide the instant
case in conformity with Article 128(b) of the Labor Code which
states: Art. 128. Visitorial and Enforcement Power. (b)
Notwithstanding the provisions of Articles 129 and 217 of this
Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have
the power to issue compliance orders to give effect to the labor
standards provisions of this Code and other labor legislation
based on the findings of labor employment and enforcement
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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.

Pag Asa Steel Works vs. CA


G.R. No. 166647; March 31, 2006
FACTS:
Petitioner Pag-Asa Steel Works, Inc. is a corporation duly
organized and existing under Philippine laws and is engaged in
the manufacture of steel bars and wire rods. Pag-Asa Steel
Workers Union is the duly authorized bargaining agent of the
rank-and-file employees.
RTWPB of NCR issued a wage order which provided for a P
13.00 increase of the salaries receiving minimum wages. The
Petitioner and the union negotiated on the increase. Petitioner
forwarded a letter to the union with the list of adjustments
involving rank and file employees. In September 1999, the
petitioner and union entered into an collective bargaining
agreement where it provided wage adjustments namely P15,
P25, P30 for three succeeding year. On the first year, the
increase provided were followed until RTWPB issued another
wage order where it provided for a P25.50 per day increase in
the salary of employees receiving the minimum wage and
increased the minimum wage to P223.50 per day. Petitioner
paid the P25.50 per day increase to all of its rank-and-file
employees.
On November 2000, Wage Order No. NCR-08 was issued
where it provided the increase of P26.50 per day. The union
president asked that the wage order be implemented where
petitioner rejected the request claiming that there was no wage
distortion and it was not obliged to grant the wage increase.
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The union submitted the matter for voluntary arbitration where


it favored the position of the company and dismissed the
complaint. The matter was elevated to CA where it favored the
respondents. Hence, this petition.
ISSUE:
Whether or not the company was obliged to grant the
wage increase under Wage Order No. NCR-08 as a matter of
practice.
RULING:
The Court favors the petitioner that wage increase shall
not be granted by virtue of CBA or matter of practice by the
company. It is submitted that employers unless exempt are
mandated to implement the said wage order but limited to
those entitled thereto. There is no legal basis to implement the
same across-the-board. A perusal of the record shows that the
lowest paid employee before the implementation of Wage
Order #8 is P250.00/day and none was receiving below P223.50
minimum. This could only mean that the union can no longer
demand for any wage distortion adjustment. The provision of
wage order #8 and its implementing rules are very clear as to
who are entitled to the P26.50/day increase, i.e., "private sector
workers and employees in the National Capital Region receiving
the prescribed daily minimum wage rate of P223.50 shall
receive an increase of Twenty-Six Pesos and Fifty Centavos
(P26.50) per day," and since the lowest paid is P250.00/day the
company is not obliged to adjust the wages of the workers.
The provision in the CBA that "Any Wage Order to be
implemented by the Regional Tripartite Wage and Productivity
Board shall be in addition to the wage increase adverted
above" cannot be interpreted in support of an across-the-board
increase. If such were the intentions of this provision, then the
company could have simply accepted the original demand of
the union for such across-the-board implementation, as set
forth in their original proposal. The fact that the company
rejected this proposal can only mean that it was never its
intention to agree, to such across-the-board implementation.
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Wage Order No. NCR-08 clearly states that only those


employees receiving salaries below the prescribed minimum
wage are entitled to the wage increase provided therein, and
not all employees across-the-board as respondent Union would
want petitioner to do. Considering therefore that none of the
members of respondent Union are receiving salaries below the
P250.00 minimum wage, petitioner is not obliged to grant the
wage increase to them.
Moreover, to ripen into a company practice that is
demandable as a matter of right, the giving of the increase
should not be by reason of a strict legal or contractual
obligation, but by reason of an act of liberality on the part of
the employer. Hence, even if the company continuously grants
a wage increase as mandated by a wage order or pursuant to a
CBA, the same would not automatically ripen into a company
practice.
Metropolitan Bank vs. NWPC
G.R. No. 144322; February 6, 2007
FACTS:
On October 17, 1995, the Regional Tripartite Wages and
Productivity Board, Region II, Tuguegarao, Cagayan (RTWPB), by
virtue of Republic Act No. 6727 (R.A. No. 6727), otherwise
known as the Wage Rationalization Act, issued Wage Order No.
R02-03 (Wage Order), as follows: Section 1. Upon effectivity of
this Wage Order, all employees/workers in the private sector
throughout Region II, regardless of the status of employment
are granted an across-the-board increase of P15.00 daily.
The Wage Order was published in a newspaper of general
circulation on December 2, 1995 and took effect on January 1,
1996. Its Implementing Rules were approved on February 14,
1996. Per Section 13 of the Wage Order, any party aggrieved by
the Wage Order may file an appeal with the National Wages and
Productivity Commission (NWPC) through the RTWPB within 10
calendar days from the publication of the Wage Order.

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Bankers Council in a letter inquiry to NWPC requested for


ruling to seek exemption from coverage of the wage order since
the members bank are paying more than the regular wage.
NWPC replied that the member banks are covered by the wage
order and does not fall with the exemptible categories.
In another letter inquiry, Metrobank asked for the
interpretation of the applicability of the wage order. NWPC
referred it to RTWPB. RTWPB in return clarified that
establishments in Region 2 are covered by the wage order.
Petitioner filed a petition with the CA and denied the petition.
ISSUE:
Whether or not the wage order is void thus it has no legal
effect and the RTWPB acted in excess of its jurisdiction.
RULING:
The Court finds that Section 1, Wage Order No. R02-03 is
void insofar as it grants a wage increase to employees earning
more than the minimum wage rate; and pursuant to the
separability clause of the Wage Order, Section 1 is declared
valid with respect to employees earning the prevailing
minimum wage rate.
The powers of NWPC are enumerated in ART. 121. Powers
and Functions of the Commission. - The Commission shall have
the following powers and functions: (d) To review regional wage
levels set by the Regional Tripartite Wages and Productivity
Boards to determine if these are in accordance with prescribed
guidelines and national development plans; (f) To review plans
and programs of the Regional Tripartite Wages and Productivity
Boards to determine whether these are consistent with national
development plans; (g) To exercise technical and administrative
supervision over the Regional Tripartite Wages and Productivity
Boards.
R.A. No. 6727 declared it a policy of the State to
rationalize the fixing of minimum wages and to promote
productivity-improvement and gain-sharing measures to ensure
a decent standard of living for the workers and their families; to
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guarantee the rights of labor to its just share in the fruits of


production; to enhance employment generation in the
countryside through industrial dispersal; and to allow business
and industry reasonable returns on investment, expansion and
growth.
In line with its declared policy, R.A. No. 6727 created the
NWPC, vested with the power to prescribe rules and guidelines
for the determination of appropriate minimum wage and
productivity measures at the regional, provincial or industry
levels; and authorized the RTWPB to determine and fix the
minimum wage rates applicable in their respective regions,
provinces, or industries therein and issue the corresponding
wage orders, subject to the guidelines issued by the NWPC.
Pursuant to its wage fixing authority, the RTWPB may issue
wage orders which set the daily minimum wage rates, based on
the standards or criteria set by Article 124 of the Labor Code.
The Court declared that there are two ways of fixing the
minimum wage: the "floor-wage" method and the "salaryceiling" method. The "floor-wage" method involves the fixing of
a determinate amount to be added to the prevailing statutory
minimum wage rates. On the other hand, in the "salary-ceiling"
method, the wage adjustment was to be applied to employees
receiving a certain denominated salary ceiling. In other words,
workers already being paid more than the existing minimum
wage (up to a certain amount stated in the Wage Order) are
also to be given a wage increase.
In the present case, the RTWPB did not determine or fix
the minimum wage rate by the "floor-wage method" or the
"salary-ceiling method" in issuing the Wage Order. The RTWPB
did not set a wage level nor a range to which a wage
adjustment or increase shall be added. Instead, it granted an
across-the-board wage increase of P15.00 to all employees and
workers of Region 2. In doing so, the RTWPB exceeded its
authority by extending the coverage of the Wage Order to wage
earners receiving more than the prevailing minimum wage rate,
without a denominated salary ceiling. As correctly pointed out
by the OSG, the Wage Order granted additional benefits not
contemplated by R.A. No. 6727.
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Equitable Bank vs. Sadac


G.R. No. 164772; June 8, 2006
FACTS:
Ricardo Sadac was appointed Vice President of the Legal
Department of petitioner Bank effective 1 August 1981, and
subsequently General Counsel thereof on 8 December 1981. On
June 1989, nine lawyers of petitioner Banks Legal Department,
in a letter-petition to the Chairman of the Board of Directors,
accused respondent Sadac of abusive conduct and ultimately,
petitioned for a change in leadership of the department. On the
ground of lack of confidence in Sadac, under the rules of client
and lawyer relationship, petitioner Bank instructed respondent
Sadac to deliver all materials in his custody in all cases in which
the latter was appearing as its counsel of record. In reaction
thereto, Sadac requested for a full hearing and formal
investigation but the same remained unheeded. On 9
November 1989, respondent Sadac filed a complaint for illegal
dismissal with damages against petitioner Bank and individual
members of the Board of Directors thereof. After learning of the
filing of the complaint, petitioner Bank terminated the services
of respondent Sadac. Finally, on 10 August 1989, Sadac was
removed from his office
Labor Arbiter rendered decision that Sadacs termination
was illegal and entitled to reinstatement and payment of full
back wages. NLRC affirmed the decision upon appeal by the
Bank. Sadac filed for execution of judgment where it gave its
computation which amounted to P 6.03 M representing his
back wages and the increases he should have received during
the time he was illegally dismissed. The Bank opposed to
Sadacs computation. The Labor Arbiter favor Sadacs
computation. NLRC, upon appeal by the bank, reversed the
decision. CA reversed the decision of NLRC. Hence, this
petition.
ISSUE:

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Whether or not the computation of back wages shall


include the general increases.
RULING:
To resolve the issue, the court revisits its pronouncements
on the interpretation of the term backwages. Backwages in
general are granted on grounds of equity for earnings which a
worker or employee has lost due to his illegal dismissal. It is
not private compensation or damages but is awarded in
furtherance and effectuation of the public objective of the
Labor Code. Nor is it a redress of a private right but rather in
the nature of a command to the employer to make public
reparation for dismissing an employee either due to the
formers unlawful act or bad faith.
In the case of Bustamante v. National Labor Relations
Commission, It said that the Court deems it appropriate to
reconsider such earlier ruling on the computation of back
wages by now holding that conformably with the evident
legislative intent as expressed in Rep. Act No. 6715, back
wages to be awarded to an illegally dismissed employee,
should not, as a general rule, be diminished or reduced by the
earnings derived by him elsewhere during the period of his
illegal dismissal. The underlying reason for this ruling is that
the employee, while litigating the legality (illegality) of his
dismissal, must still earn a living to support himself and family,
while full backwages have to be paid by the employer as part
of the price or penalty he has to pay for illegally dismissing his
employee. The clear legislative intent of the amendment in
Rep. Act No. 6715 is to give more benefits to workers than was
previously given them. Thus, a closer adherence to the
legislative policy behind Rep. Act No. 6715 points to "full
backwages" as meaning exactly that, i.e., without deducting
from backwages the earnings derived elsewhere by the
concerned employee during the period of his illegal dismissal.
There is no vested right to salary increases. Sadac may
have received salary increases in the past only proves fact of
receipt but does not establish a degree of assuredness that is
inherent in backwages. The conclusion is that Sadacs
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computation of his full backwages which includes


prospective salary increases cannot be permitted.

his

S.I.P FOOD HOUSE ET. AL VS. BATOLINA


GR NO. 192473 OCT. 11, 2010
FACTS:
The GSIS Multi-Purpose Cooperative (GMPC) is an entity
organized by the employees of the Government Service
Insurance System (GSIS). Incidental to its purpose, GMPC
wanted to operate a canteen in the new GSIS Building, but had
no capability and expertise in this area. Thus, it engaged the
services of the petitioner S.I.P. Food House (SIP), owned by the
spouses Alejandro and Esther Pablo, as concessionaire. The
respondents Restituto Batolina and nine (9) others (the
respondents) worked as waiters and waitresses in the canteen
In February 2004, GMPC terminated SIPs contract as GMPC
concessionaire, because of GMPCs decision to take direct
investment in and management of the GMPC canteen; SIPs
continued refusal to heed GMPCs directives for service
improvement; and the alleged interference of the Pablos two
sons with the operation of the canteen. The termination of the
concession contract caused the termination of the
respondents employment, prompting them to file a complaint
for illegal dismissal, with money claims, against SIP and the
spouses Pablo.
The employer of the respondents claimed that it was merely a
labor-only contractor of GMPC. Hence, it could not be liable.
ISSUE:
WON there exist an employer-employee relationship
RULING:
We affirm the CA ruling that SIP was the respondents
employer. The NLRC decision, which the CA affirmed, states:
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Respondents have been the concessionaire of


GMPC canteen for nine (9) years. During this period,
complainants
were
employed
at
the
said
canteen. On February
29,
2004,
respondents
concession with GMPC was terminated. When
respondents were prevented from entering the
premises as a result of the termination of their
concession, they sent a protest letter dated April 14,
2004 to GMPC thru their counsel. Pertinent portion of
the letter:

We write this letter in behalf of our


client Mr. & Mrs. Alejandro C. Pablo, the
concessionaires who used to occupy and/or
rent the area for a cafeteria/canteen at the
2nd Floor of the GSIS Building for the past
several years.

Last March 12, 2004, without any


court writ or order, and with the aid of your
armed agents, you physically barred our
clients & their employees/helpers from
entering the said premises and from
performing their usual duties of serving the
food requirements of GSIS personnel and
others.

Clearly, no less than respondents, thru their


counsel, admitted that complainants herein were
their employees.

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That complainants were employees of


respondents is further bolstered by the fact that
respondents do not deny that they were the ones
who paid complainants salary. When complainants
charged them of underpayment, respondents even
interposed the defense of file (sic) board and lodging
given to complainants.

The CA ruled out SIPs claim that it was a labor-only


contractor or a mere agent of GMPC. We agree with the CA; SIP
and its proprietors could not be considered as mere agents of
GMPC because they exercised the essential elements of an
employment relationship with the respondents such as hiring,
payment of wages and the power of control, not to mention
that SIP operated the canteen on its own account as it paid a
fee for the use of the building and for the privilege of running
the canteen. The fact that the respondents applied with GMPC
in February 2004 when it terminated its contract with SIP, is
another clear indication that the two entities were separate and
distinct from each other. We thus see no reason to disturb the
CAs findings.

SLL INTERNATIONAL CABLE SPECIALIST VS. NLRC


FACTS:
Sometime in 1996, and January 1997, private respondents
Roldan Lopez (Lopez for brevity) and Danilo Caete (Caete
for brevity), and Edgardo Zuiga (Zuiga for brevity)
respectively, were hired by petitioner Lagon as apprentice or
trainee cable/lineman. The three were paid the full minimum
wage and other benefits but since they were only trainees, they
did not report for work regularly but came in as substitutes to
the regular workers or in undertakings that needed extra
workers to expedite completion of work. After their training,
Zuiga, Caete and Lopez were engaged as project
employees by the petitioners in their Islacom project in Bohol.
Private respondents started on March 15, 1997 until December
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1997. Upon the completion of their project, their employment


was also terminated. Private respondents received the amount
of P145.00, the minimum prescribed daily wage for Region VII.
In July 1997, the amount of P145 was increased to P150.00 by
the Regional Wage Board (RWB) and in October of the same
year, the latter was increased to P155.00. Sometime in March
1998, Zuiga and Caete were engaged again by Lagon as
project employees for its PLDT Antipolo, Rizal project, which
ended sometime in (sic) the late September 1998. As a
consequence, Zuiga and Caete's employment was
terminated. For this project, Zuiga and Caete received
only the wage of P145.00 daily. The minimum prescribed wage
for Rizal at that time was P160.00.
Sometime in late November 1998, private respondents reapplied in the Racitelcom project of Lagon in Bulacan. Zuiga
and Caete were re-employed. Lopez was also hired for the
said specific project. For this, private respondents received the
wage of P145.00. Again, after the completion of their project in
March 1999, private respondents went home to Cebu City.
On May 21, 1999, private respondents for the 4th time worked
with 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
project. From May 21, 1997-December 1999, private
respondents received the wage of P145.00. At this time, the
minimum prescribed rate for Manila was P198.00. In January to
February 28, the three received the wage of P165.00. The
existing rate at that time was P213.00.
For reasons of delay on the delivery of imported materials from
Furukawa Corporation, the Camarin project was not completed
on the scheduled date of completion. Face[d] with economic
problem[s], Lagon was constrained to cut down the overtime
work of its worker[s][,] including private respondents. Thus,
when requested by private respondents on February 28, 2000
to work overtime, Lagon refused and told private respondents
that if they insist, they would have to go home at their own
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expense and that they would not be given anymore time nor
allowed to stay in the quarters. This prompted private
respondents to leave their work and went home to Cebu. On
March 3, 2000, private respondents filed a complaint for illegal
dismissal, non-payment of wages, holiday pay, 13th month pay
for 1997 and 1998 and service incentive leave pay as well as
damages and attorney's fees.
In their answers, petitioners admit employment of private
respondents but claimed that the latter were only project
employees[,] for their services were merely engaged for a
specific project or undertaking and the same were covered by
contracts duly signed by private respondents. Petitioners
further alleged that the food allowance of P63.00 per day as
well as private respondents allowance for lodging house,
transportation, electricity, water and snacks allowance should
be added to their basic pay. With these, petitioners claimed that
private respondents received higher wage rate than that
prescribed in Rizal and Manila.
Lastly, petitioners alleged that since the workplaces of private
respondents were all in Manila, the complaint should be filed
there. Thus, petitioners prayed for the dismissal of the
complaint for lack of jurisdiction and utter lack of merit.
LA ruled that the respondents were regular employees and
were underpaid. However, the LA found that petitioners were
not liable for illegal dismissal. The LA viewed private
respondents' act of going home as an act of indifference when
petitioners decided to prohibit overtime work. These decisions
of the LA were affirmed by the NLRC, and subsequently by the
CA, on appeal. Hence, this petition.
ISSUE:
WON respondents were underpaid
WON the allowances should be added to their basic pay
HELD:
The petition is bereft of merit.

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As a general rule, on payment of wages, a party who alleges


payment as a defense has the burden of proving it. xxx
Moreover, before the value of facilities can be deducted from
the employees' wages, the following requisites must all be
attendant: first, proof must be shown that such facilities are
customarily furnished by the trade; second, the provision of
deductible facilities must be voluntarily accepted in writing by
the employee; and finally, facilities must be charged at
reasonable value.[20] Mere availment is not sufficient to allow
deductions from employees' wages.[21]
These requirements, however, have not been met in this case.
SLL failed to present any company policy or guideline showing
that provisions for meals and lodging were part of the
employee's salaries. It also failed to provide proof of the
employees' written authorization, much less show how they
arrived at their valuations. At any rate, it is not even clear
whether private respondents actually enjoyed said facilities.
"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.
While the general rule is that any decision rendered without
jurisdiction is a total nullity and may be struck down at any
time, the party that asserts it must be in good faith and not
evidently availing thereof simply to thwart the execution of an
award that has long become final and executory.

5. VIOLATION OF WAGE ORDERS


6. WAGE ENFORCEMENT AND RECOVERY
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Rajah Humabon Hotel vs. Trajano


G.R. Nos. 100222-23 September 14, 1993
FACTS:
For redress in regard to underpaid wages and nonpayment of benefits, the herein respondent-employees turned
to the regional director of the Department of Labor and
Employment. The jurisdictional competence of such official is,
however, disputed and challenged by the employers in the
instant petition who contend that it is the labor arbiter who may
properly entertain the grievance. The aggregate claims of each
of the twenty-five employees of petitioner are above the
amount of P5,000.00 fixed by Republic Act No. 6715.
ISSUE:
Who between the Regional Director of the Department of
Labor and Employment and the Labor Arbiter has jurisdiction
over the complaint of private respondents.
RULING:
The Labor Arbiter has exclusive jurisdiction over the
complaint of private respondents which involves a money claim
exceeding P5,000.
The principle of continuous jurisdiction of the regional
director, as applied by the Secretary of Labor to the suit filed by
herein private respondents on March 14, 1989 prior to the
effectivity of Republic Act No. 6715, is therefore incorrect. To
sustain otherwise would sanction a situation where all
employees' claims, regardless of amount, can be heard and
determined by the Secretary of Labor under his visitorial power.
This does not, however, appear to be the legislative intent. The
Secretary of Labor should be held as possessed of his plenary
visitorial powers to order the inspection of all establishments
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where labor is employed, to look into all possible violations of


labor laws and regulations but the power to hear and decide
employees' claims exceeding P5,000.00 for each employee
should be left to the Labor Arbiter as the exclusive repository of
the power to hear and decide such claims.
Regional directors under Republic Act No. 6715, can try
money claims only if the following requisites concur:

The claim is presented by an


employee or person employed in domestic or
household service, or househelper under the
code;

the claimant, no longer being


employed, does not seek reinstatement; and,

The aggregate money claim of the


employee or housekeeper does not exceed five
thousand pesos (P5,000.00).

Guico vs. Secretary of Labor


G.R. No. 131750; November 16, 1998
FACTS:
The Secretary of Labor received a letter-complaint
requesting for an investigation of petitioner's establishment,
Copylandia Services & Trading, for violation of labor standards
laws. Pursuant to the visitorial and enforcement powers of the
Secretary of Labor and Employment or his duly authorized
representative under Article 128 of the Labor Code, as
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amended, inspections were conducted at Copylandia's outlets.


The inspections yielded the following violations involving
twenty-one (21) employees who are copier operators: (1)
underpayment of wages; (2) underpayment of 13th month pay;
and (3) no service incentive leave with pay. Thus, the Secretary
of Labor ordered petitioner to pay the respondents. Petitioner
questioned the jurisdiction of the Regional Director 6715. He
argued that the Regional Director has no jurisdiction over the
complaint of the 21 employees since their individual monetary
claims exceed the P5,000.00 limit. On the other hand, the
respondent Secretary held that the jurisdictional limitation
imposed by Article 129 on his visitorial and enforcement power
under Article 128 (b) of the Labor Code, as amended, has been
repealed by Republic Act No. 7730. He pointed out that the
amendment "notwithstanding the provisions of Article 129 and
217 of the Labor Code to the contrary" erased all doubts as to
the amendatory nature of the new law.
ISSUE:
Whether or not the Secretary of Labor has jurisdiction take
cognizance of the instant labor case.
RULING:
SC ruled in favor of the Secretary of Labor. It overruled its
previous ruling on the matter.
SC sustained the jurisdiction of the respondent Secretary.
As the respondent correctly pointed out, this Court's ruling in
Servando that the visitorial power of the Secretary of Labor
to order and enforce compliance with labor standard laws
cannot be exercised where the individual claim exceeds
P5,000.00, can no longer be applied in view of the enactment
of R.A. No. 7730 amending Article 128(b) of the Labor Code.

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Ex-Bataan Veterans Security Agency vs. Secretary of


Labor et. al.
G.R. No. 152396; January 14, 2005
FACTS:
Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in
the business of providing security services while private
respondents are EBVSAI's employees assigned to the National
Power Corporation at Ambuklao Hydro Electric Plant, Bokod,
Benguet (Ambuklao Plant). Private respondents led by
Alexander Pocding (Pocding) instituted a complaint for
underpayment of wages against EBVSAI before the Regional
Office of the Department of Labor and Employment (DOLE). The
money claims exceeded P5,000.
ISSUE:
Whether the Secretary of Labor or his duly authorized
representatives acquired jurisdiction over EBVSAI
Whether or not the Director of DOLE has jurisdiction over
the labor dispute o money claims exceeding P5,000.
RULING:
Anent the first issue, EBVSAI does not deny having
received the notices of hearing. Evidence shows that
petitioners received notices of hearing. The notices of hearing
were sent to the petitioners Manila office. They were also
informed of EBVSAI's violations and were asked to present the
employment records of the private respondents for verification.
They were, moreover, asked to submit, within 10 days, proof of
compliance or their position paper. The Regional Director
validly acquired jurisdiction over EBVSAI. EBVSAI can no longer
question the jurisdiction of the Regional Director after receiving
the notices of hearing and after appearing before the Regional
Director.

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Anent the second issue, the Regional Director validly


assumed jurisdiction over the money claims of private
respondents even if the claims exceeded P5,000 because such
jurisdiction was exercised in accordance with Article 128(b) of
the Labor Code and the case does not fall under the exception
clause.
In order to divest the Regional Director or his
representatives of jurisdiction, the following elements must be
present: (a) that the employer contests the findings of the labor
regulations officer and raises issues thereon; (b) that in order to
resolve such issues, there is a need to examine evidentiary
matters; and (c) that such matters are not verifiable in the
normal course of inspection. The rules also provide that the
employer shall raise such objections during the hearing of the
case or at any time after receipt of the notice of inspection
results.
Sapio vs. Undaloc Construction et. al.
G.R. No. 155034; May 22, 2008
FACTS:
The controversy started with a complaint filed by
petitioner against Undaloc Construction and/or Engineer Cirilo
Undaloc for illegal dismissal, underpayment of wages and
nonpayment of statutory benefits. Respondent Undaloc
Construction, a single proprietorship owned by Cirilo Undaloc, is
engaged in road construction business in Cebu City. Petitioner
avers that he was paid a daily salary way below the minimum
wage provided for by law. His claim of salary differential
represents the difference between the daily wage he actually
received and the statutory minimum wage.
ISSUE:
Whether or not petitioner is entitled to salary differential
after his termination.
RULING:

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The total salary differential that petitioner is lawfully


entitled to amounts to P6,578.00 However, pursuant to Section
12 of Republic Act (R.A.) No. 6727, as amended by R.A. No.
8188. Respondents are required to pay double the amount
owed to petitioner, bringing their total liability to P13,156.00.
The employer concerned shall be ordered to pay an amount
equivalent to double the unpaid benefits owing to the
employees: Provided, That payment of indemnity shall not
absolve the employer from the criminal liability imposable
under this Act.

Secretary of Labor vs. Panay Veterans Security and


Investigation Agency
G.R. No. 167708; August 22, 2008
FACTS:
Petitioners Edgardo M. Agapay and Samillano A. Alonso, Jr.
were hired by respondent Panay Veterans Security and
Investigation Agency, Inc. as security guards sometime in 1988.
They were stationed at the plant site of Food Industries, Inc.
(FII) in Sta. Rosa, Laguna until FII terminated its contract with
respondent security agency on July 6, 2000. They were not
given new assignments and their benefits (including 13 th month
pay, overtime pay and holiday pay as well as wage differentials
due to underpayment of wages) were withheld by respondent
security agency. This prompted them to file a complaint for
violation of labor standards in the regional office of the
Department of Labor and Employment in the National Capital
Region (DOLE-NCR).
Acting on the complaint, Manuel M. Cayabyab, a labor
employment officer of the DOLE-NCR, conducted an inspection
of respondent security agency on October 30, 2000. During the
inspection, respondent security agency failed to present its
payroll as well as the daily time records submitted by
petitioners Agapay and Alonso, Jr. Such failure was noted as a
violation.
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Respondents neither paid the claims of petitioners Agapay


and Alonso, Jr. nor questioned the labor employment officers
findings. Thus, in his May 10, 2001 order, the Regional Director
of the DOLE-NCR adopted the findings and computation of
Cayabyab as to the unpaid benefits due to petitioners Agapay
and Alonso, Jr. Respondents filed an appeal for the reduction of
the surety/ cash bond.
ISSUE:
Whether or not there has been a perfected appeal
made by the respondents.
Whether or not a motion to reduce bond is allowed in
appeals to the Secretary of Labor.
RULING:
SC held that there has been no perfected appeal. SC also
ruled that reduction of the bond is not allowed in appeals
before the Secretary of Labor.
On the first issueRESPONDENTS FAILED TO PERFECT THEIR
APPEAL
The rule is that, to perfect an appeal of the Regional
Directors order involving a monetary award in cases which
concern the visitorial and enforcement powers of the Secretary
of Labor and Employment, the appeal must be filed and the
cash or surety bond equivalent to the monetary award must be
posted within ten calendar days from receipt of the order.
Failure either to file the appeal or post the bond within the
prescribed period renders the order final and executory.
The legislative intent to make the bond an indispensable
requisite for the perfection of an appeal by the employer is
underscored by the provision that an appeal by the employer
may be perfected only upon the posting of a cash or surety
bond. The word only makes it clear that the lawmakers
intended the posting of a cash or surety bond by the employer
to be the exclusive means by which an employers appeal may
be perfected.

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In this case, respondents admit that they failed to post the


required bond when they filed their appeal to the Secretary of
Labor and Employment. Because of such failure, the appeal was
never perfected and the May 10, 2001 order of the DOLE-NCR
Regional Director attained finality.
On the second issueMOTION TO REDUCE APPEAL BOND IS
NOT ALLOWED IN APPEALS TO THE SECRETARY OF LABOR
The jurisdiction of the NLRC is separate and distinct from
that of the Secretary of Labor and Employment. In the exercise
of their respective jurisdictions, each agency is governed by its
own rules of procedure. In other words, the rules of procedure
of the NLRC are different from (and do not apply in) cases
cognizable by the Secretary of Labor and Employment.
Unlike the New Rules of Procedure of the NLRC, no
provision in the Rules on the Disposition of Labor Standards
Cases governs the filing of a motion for the reduction of the
amount of the bond. However, on matters that are not covered
by the Rules on the Disposition of Labor Standards Cases, the
suppletory application of the Rules of Court is authorized. In
other words, the Rules on the Disposition of Labor Standards
Cases does not sanction the suppletory resort to the rules of
procedure of the NLRC.
By ruling that the rules of procedure of the NLRC should
be applied suppletorily to respondents appeal to the Secretary
of Labor of Employment, the CA effectively amended the Rules
on the Disposition of Labor Standards Cases. In the process, it
encroached on the rule-making power of the Secretary of Labor
and Employment.
The posting of a cash or surety bond to perfect an appeal
of an order involving a monetary award has a two-fold purpose:
(1) to assure the employee that, if he finally prevails in the
case, the monetary award will be given to him upon dismissal
of the employers appeal and (2) to discourage the employer
from using the appeal to delay or evade payment of his
obligations to the employee.

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National Mines and Allied Workers Union vs. Marcopper


Mining Corp.
G.R. No. 174641; November 11, 2008
FACTS:
DENR ordered the indefinite suspension of MARCOPPER's
operations for causing damage to the environment of the
Province of Marinduque by spilling the company's mine waste
or tailings from an old underground impounding area into the
Boac River, in violation of its ECC. NAMAWU was the exclusive
bargaining representative of the rank-and-file workers of
MARCOPPER. It filed a complaint with the NLRC against
MARCOPPER for nonpayment of wages, separation pay,
damages, and attorney's fees.
NAMAWU claimed that due to the indefinite suspension of
MARCOPPER's operations, its members were not paid the wages
due them for six months. It further claimed that its members
are also entitled to be paid their separation pay pursuant to
their collective bargaining agreement with MARCOPPER and
under existing implementing rules of the Labor Code. There
had been an illegal strike which occurred.
ISSUE:
Whether or not it is necessary that MARCOPPER file an
appeal bond
RULING:
In the context of the NLRC appeal bond that is directly at
issue, MARCOPPER had every reason to claim in its April 10,
2000 appeal to the NLRC that it should be excused from filing
an appeal bond with respect to the NAMAWU members who
were no longer company employees. The CA decision decreeing
the termination of employment of those involved in the illegal
strike case had already been issued at that time. We
subsequently ruled on the same issue during the time the
environmental incident case was pending before the NLRC.
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Thus, when the NLRC dismissed MARCOPPER's appeal for failure


to file the requisite appeal bond corresponding to the 615
NAMAWU members, the termination of employment of these
NAMAWU members was already a settled matter that the NLRC
was in no position to disregard. In this light, the CA was correct
in reversing the dismissal of MARCOPPER's appeal for failure to
file an appeal bond. Pursued to its logical end, the CA
conclusions should lead to the dismissal of NAMAWU's
complaint with respect to its 615 previously dismissed
members.
Jethro Intelligence and Security Corp. vs. SOLE
GR NO. 172537, Aug. 14, 2009
FACTS:
Jethro is a security service contractor with a security service
contract agreement with co-petitioner Yakult Phils. Respondent
Frederick Garcia (Garcia), one of the security guards deployed
by Jethro, file a complaint for underpayment of wages,
legal/special holiday pay, premium pay for rest day, 13th
month pay, and night shift differential, the Department of Labor
and Employment (DOLE)-Regional Office No. IV conducted an
inspection at Yakults premises in Calamba, Laguna in the
course of which several labor standards violations were noted,
including keeping of payrolls and daily time records in the main
office, underpayment of wages, overtime pay and other
benefits, and non-registration with the DOLE as required under
Department Order No. 18-02.
Petitioners attribute grave abuse of discretion on the part of the
DOLE Regional Director and the SOLE in this wise: (1) the SOLE
has no jurisdiction over the case because, following Article 129
of the Labor Code, the aggregate money claim of each
employee exceeded P5,000.00
ISSUE:
WON the SOLE has the power to determine the violations of
Labor Standards.
RULING:
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While it is true that under Articles 129 and 217 of the Labor
Code, the Labor Arbiter has jurisdiction to hear and decide
cases where the aggregate money claims of each employee
exceeds P5,000.00, said provisions do not contemplate nor
cover the visitorial and enforcement powers of the Secretary of
Labor or his duly authorized representatives.
The Secretary of Labor, under Art. 106, LC, exercises quasijudicial power, at least to the extent necessary to determine
violations of labor standards provisions of the Code. He, or the
regional directors, can issue compliance orders and writs of
execution for the execution thereof. 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 finding of the
labor employment and enforcement officer and raises issues
supported by documentary proofs which were not considered in
the course of inspection.

Peoples Broadcasting (Bombo


Secretary of DOLE, et. al.

Radyo

Phils.)

vs.

G.R. No. 179652; May 8, 2009


FACTS:
The petition traces its origins to a complaint filed by
Jandeleon Juezan (respondent) against Peoples Broadcasting
Service, Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal
deduction, non-payment of service incentive leave, 13 th month
pay, premium pay for holiday and rest day and illegal
diminution of benefits, delayed payment of wages and noncoverage of SSS, PAG-IBIG and Philhealth before the
Department of Labor and Employment (DOLE) Regional. On the
basis of the complaint, the DOLE conducted a plant level
inspection. In the findings of the Labor Inspector, Bombo Radyo
denies that there exists an employer-employee relationship
between the parties. DOLE Regional Director ruled that there
exists an employer-employee relationship. Thus, Bombo Radyo
is asked to pay the money claims of Juezan. On appeal to the
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DOLE Secretary, petitioner denied once more the existence of


employer-employee relationship. In its Order, the Acting DOLE
Secretary dismissed the appeal on the ground that petitioner
did not post a cash or surety bond and instead submitted a
Deed of Assignment of Bank Deposit.
ISSUE:
Whether or not he Secretary of Labor in the exercise of its
visitorial and enforcement powers has the power to determine
the existence of an employer-employee relationship.
RULING:
SC ruled that the Secretary of Labor in the exercise of its
visitorial and enforcement powers cannot determine the
existence of an employee-employer relationship.
Under Art. 128(b), the provision is quite explicit that the
visitorial and enforcement power of the DOLE comes into play
only in cases when the relationship of employer-employee still
exists. It also underscores the avowed objective underlying
the grant of power to the DOLE which is to give effect to the
labor standard provision of this Code and other labor
legislation. Of course, a persons entitlement to labor standard
benefits under the labor laws presupposes the existence of
employer-employee relationship in the first place.
The clause in cases where the relationship of employeremployee still exists signifies that the employer-employee
relationship must have existed even before the emergence of
the controversy. Necessarily, the DOLEs power does not
apply in two instances, namely: (a) where the employeremployee relationship has ceased; and (b) where no
such relationship has ever existed.
In the first situation, the claim has to be referred to the NLRC
because it is the NLRC which has jurisdiction in view of the
termination of the employer-employee relationship. The same
procedure has to be followed in the second situation since it is
the NLRC that has jurisdiction in view of the absence of
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employer-employee relationship
parties from the start.

between

the

evidentiary

Clearly the law accords a prerogative to the NLRC over


the claim when the employer-employee relationship has
terminated or such relationship has not arisen at all. The
reason is obvious. In the second situation especially, the
existence of an employer-employee relationship is a matter
which is not easily determinable from an ordinary inspection,
necessarily so, because the elements of such a relationship are
not verifiable from a mere ocular examination. The intricacies
and implications of an employer-employee relationship
demand that the level of scrutiny should be far above the
cursory and the mechanical. While documents, particularly
documents found in the employers office are the primary
source materials, what may prove decisive are factors related
to the history of the employers business operations, its current
state as well as accepted contemporary practices in the
industry. More often than not, the question of employeremployee relationship becomes a battle of evidence, the
determination of which should be comprehensive and
intensive and therefore best left to the specialized quasijudicial body that is the NLRC.
It can be assumed that the DOLE in the exercise of
its visitorial and enforcement power somehow has to
make a determination of the existence of an employeremployee
relationship.
Such
prerogatival
determination, however, cannot be coextensive with the
visitorial and enforcement power itself. Indeed, such
determination is merely preliminary, incidental and
collateral to the DOLEs primary function of enforcing
labor standards provisions.
The determination of the
existence of employer-employee relationship is still
primarily lodged with the NLRC. This is the meaning of
the clause in cases where the relationship of employeremployee still exists in Art. 128 (b).
The existence of an employer-employee relationship is a
statutory prerequisite to and a limitation on the power
of the Secretary of Labor, one which the legislative
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branch is entitled to impose. The rationale underlying this


limitation is to eliminate the prospect of competing conclusions
of the Secretary of Labor and the NLRC, on a matter fraught
with questions of fact and law, which is best resolved by the
quasi-judicial body, which is the NRLC, rather than an
administrative official of the executive branch of the
government. If the Secretary of Labor proceeds to exercise
his visitorial and enforcement powers absent the first requisite,
as the dissent proposes, his office confers jurisdiction on itself
which it cannot otherwise acquire.

PHIL. Hoteliers Inc. vs. National Union of Workers in


Hotel, Restaurant and Allied Industries- Dusit Hotel
Nikko Chapter
GR NO. 181972, AUGUST 25, 2009
FACTS:
RTWPB issued Wage Order No. 9 that took effect on November
5, 2001. It grants P30.00 ECOLA to particular employees and
workers of all private sectors, identified as follows in Section 1
thereof:
Section 1. Upon the effectivity of this Wage Order, all private
sector workers and employees in the National Capital Region
receiving daily wage rates of TWO HUNDRED FIFTY PESOS
(P250.00) up to TWO HUNDRED NINETY PESOS (P290.00) shall
receive an emergency cost of living allowance in the amount of
THIRTY PESOS (P30.00) per day payable in two tranches as
follows:
Amount of ECOLA Effectivity
P15.00
5 November 2001
P15.00
1 February 2002
Respondent National Union of Workers in Hotel, Restaurant and
Allied Industries-Dusit Hotel Nikko Chapter (Union), through its
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President, Reynaldo C. Rasing (Rasing), sent a letter to Director


Alex Maraan (Dir. Maraan) of the Department of Labor and
Employment-National Capital Region (DOLE-NCR), reporting the
non-compliance of Dusit Hotel with WO No. 9, while there was
an on-going compulsory arbitration before the National Labor
Relations Commission (NLRC) due to a bargaining deadlock
between the Union and Dusit Hotel; and requesting immediate
assistance on this matter. Rasing sent Dir. Maraan another
letter following-up his previous request for assistance.
Acting on Rasings letters, the DOLE-NCR sent Labor Standards
Officer Estrellita Natividad (LSO Natividad) to conduct an
inspection of Dusit Hotel premises on 24 April 2002. LSO
Natividads Inspection Results Report dated 2 May 2002 stated:
Based on interviews/affidavits of employees, they are receiving
more than P290.00 average daily rate which is exempted in the
compliance of Wage Order NCR-09;
Remarks: There is an ongoing negotiation under Case # NCMBNCR-NS-12-369-01 & NCMB-NCR-NS-01-019-02 now forwarded
to the NLRC office for the compulsory arbitration.
NOTE: Payrolls to follow later upon request including position
paper of [Dusit Hotel].
By virtue of Rasings request for another inspection, LSO
Natividad conducted a second inspection of Dusit Hotel
premises on 29 May 2002. In her Inspection Results Report
dated 29 May 2002, LSO Natividad noted:
*Non-presentation of records/payrolls
*Based on submitted payrolls & list of union members by
NUWHRAIN-DUSIT HOTEL NIKKO Chapter, there are one
hundred forty-four (144) affected in the implementation of
Wage Order No. NCR-09-> ECOLA covering the periods from
Nov.5/01 to present.

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Accordingly, the DOLE-NCR issued a Notice of Inspection Result


directing Dusit Hotel to effect restitution and/or correction of
the noted violations within five days from receipt of the Notice,
and to submit any question on the findings of the labor
inspector within the same period, otherwise, an order of
compliance would be issued. The Notice of Inspection Result
was duly received by Dusit Hotel Assistant Personnel Manager
Rogelio Santos.
In the meantime, the NLRC rendered a Decision dated 9
October 2002 in NLRC-NCR-CC No. 000215-02 the compulsory
arbitration involving the Collective Bargaining Agreement (CBA)
deadlock between Dusit Hotel and the Union granting the
hotel employees the following wage increases, in accord with
the CBA:
Effective January 1, 2001- P500.00/month
Effective January 1, 2002- P550.00/month
Effective January 1, 2003- P600.00/month
On 22 October 2002, based on the results of the second
inspection of Dusit Hotel premises, DOLE-NCR, through Dir.
Maraan, issued the Order directing Dusit Hotel to pay 144 of its
employees the total amount of P1,218,240.00, corresponding to
their unpaid ECOLA under WO No. 9; plus, the penalty of double
indemnity, pursuant to Section 12 of Republic Act No. 6727,11
as amended by Republic Act No. 8188.
The employer concerned shall be ordered to pay an amount
equivalent to double the unpaid benefits owing to the
employees: Provided, that payment of indemnity shall not
absolve the employer from the criminal liability under this Act.
If the violation is committed by a corporation, trust or firm,
partnership, association or any other entity, the penalty of
imprisonment shall be imposed upon the entitys responsible
officers including but not limited to the president, vice

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president, chief executive officer, general manager, managing


director or partner.
Dusit Hotel filed a Motion for Reconsideration of the DOLE-NCR
Order dated 22 October 2002, arguing that the NLRC Decision
dated 9 October 2002, resolving the bargaining deadlock
between Dusit Hotel and the Union, and awarding salary
increases under the CBA to hotel employees retroactive to 1
January 2001, already rendered the DOLE-NCR Order moot and
academic. With the increase in the salaries of the hotel
employees ordered by the NLRC Decision of 9 October 2002,
along with the hotel employees share in the service charges,
the 144 hotel employees, covered by the DOLE-NCR Order of
22 October 2002, would already be receiving salaries beyond
the coverage of WO No. 9.
Acting on the Motion, DOLE-NCR issued a Resolution setting
aside its earlier Order for being moot and academic, in
consideration of the NLRC decision and dismissing the
complaint of the Union against Dusit Hotel, for non-compliance
with WO No. 9, for lack of merit.
The Union appealed before the DOLE Secretary maintaining
that the wage increases granted by the NLRC Decision of 9
October 2002 should not be deemed as compliance by Dusit
Hotel with WO No. 9. The DOLE, through Acting Secretary
Manuel G. Imson, issued an Order granting the appeal of the
Union. The DOLE Secretary reasoned that the NLRC Decision
dated 9 October 2002 categorically declared that the wage
increase under the CBA finalized between Dusit Hotel and the
Union shall not be credited as compliance with WOs No. 8 and
No. 9. Furthermore, Section 1 of Rule IV of the Rules
Implementing WO No. 9, which provides that wage increases
granted by an employer in an organized establishment within
three months prior to the effectivity of said Wage Order shall be
credited as compliance with the ECOLA prescribed therein,
applies only when an agreement to this effect has been forged
between the parties or a provision in the CBA allowing such
crediting exists.

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Expectedly, Dusit Hotel sought reconsideration of the Order of


the DOLE Secretary. In an Order, the DOLE Secretary granted
the Motion for Reconsideration of Dusit Hotel and reversed his
Order dated 22 July 2004. The DOLE Secretary, in reversing his
earlier Order, admitted that he had disregarded therein that the
wage increase granted by the NLRC in the latters Decision
dated 9 October 2002 retroacted to 1 January 2001. The said
wage increase, taken together with the hotel employees share
in the service charges of Dusit Hotel, already constituted
compliance with the WO No. 9.
It was then the turn of the Union to file a Motion for
Reconsideration, but it was denied by the DOLE Secretary. The
DOLE Secretary found that it would be unjust on the part of
Dusit Hotel if the hotel employees were to enjoy salary
increases retroactive to 1 January 2001, pursuant to the NLRC
Decision dated 9 October 2002, and yet said salary increases
would be disregarded in determining compliance by the hotel
with WO No. 9.
The Union appealed the Orders dated 16 December 2004 and
13 October 2005 of the DOLE Secretary with the Court of
Appeals, the Court of Appeals promulgated its Decision ruling in
favor of the Union. Referring to Section 13 of WO No. 9, the
Court of Appeals declared that wage increases/allowances
granted by the employer shall not be credited as compliance
with the prescribed increase in the same Wage Order, unless so
provided in the law or the CBA itself; and there was no such
provision in the case at bar. The appellate court also found that
Dusit Hotel failed to substantiate its position that receipt by its
employees of shares in the service charges collected by the
hotel was to be deemed substantial compliance by said hotel
with the payment of ECOLA required by WO No. 9. The Court of
Appeals adjudged that Dusit Hotel should be liable for double
indemnity for its failure to comply with WO No. 9 within five
days from receipt of notice. The appellate court stressed that
ECOLA is among the laborers financial gratifications under the
law, and is distinct and separate from benefits derived from
negotiation or agreement with their employer.

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The Motion for Reconsideration of Dusit Hotel was denied for


lack of merit by the Court of Appeals.
ISSUE:
Whether the 144 hotel employees were still entitled to ECOLA
granted by WO No. 9 despite the increases in their salaries,
retroactive to 1 January 2001, ordered by NLRC in the latters
Decision dated 9 October 2002.
RULING:
The reliance of the Union on Section 13 of WO No. 9 in this case
is misplaced. Dusit Hotel is not contending creditability of the
hotel employees salary increases as compliance with the
ECOLA mandated by WO No. 9. Creditability means that Dusit
Hotel would have been allowed to pay its employees the salary
increases in place of the ECOLA required by WO No. 9. This,
however, is not what Dusit Hotel is after. The position of Dusit
Hotel is merely that the salary increases should be taken into
account in determining the employees entitlement to ECOLA.
The retroactive increases could raise the hotel employees daily
salary rates above P290.00, consequently, placing said
employees beyond the coverage of WO No. 9. Evidently,
Section 13 of WO No. 9 on creditability is irrelevant and
inapplicable herein.
The Court agrees with Dusit Hotel that the increased salaries of
the employees should be used as bases for determining
whether they were entitled to ECOLA under WO No. 9. The very
fact that the NLRC decreed that the salary increases of the
Dusit Hotel employees shall be retroactive to 1 January 2001
and 1 January 2002, means that said employees were already
supposed to receive the said salary increases beginning on
these dates. The increased salaries were the rightful salaries of
the hotel employees by 1 January 2001, then again by 1
January 2002. Although belatedly paid, the hotel employees still
received their salary increases.

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It is only fair and just, therefore, that in determining


entitlement of the hotel employees to ECOLA, their increased
salaries by 1 January 2001 and 1 January 2002 shall be made
the bases. There is no logic in recognizing the salary increases
for one purpose (i.e., to recover the unpaid amounts thereof)
but not for the other (i.e., to determine entitlement to ECOLA).
For the Court to rule otherwise would be to sanction unjust
enrichment on the part of the hotel employees, who would be
receiving increases in their salaries, which would place them
beyond the coverage of Section 1 of WO No. 9, yet still be paid
ECOLA under the very same provision.
The NLRC, in its Decision dated 9 October 2002, directed Dusit
Hotel to increase the salaries of its employees by P500.00 per
month, retroactive to 1 January 2001. After applying the said
salary increase, only 82 hotel employees would have had daily
salary rates falling within the range of P250.00 to P290.00.
Thus, upon the effectivity of WO No. 9 on 5 November 2001,
only the said 82 employees were entitled to receive the first
tranch of ECOLA, equivalent to P15.00 per day.
The NLRC Decision also ordered Dusit Hotel to effect a second
round of increase in its employees salaries, equivalent to
P550.00 per month, retroactive to 1 January 2002. As a result of
this increase, the daily salary rates of all hotel employees were
already above P290.00. Consequently, by 1 January 2002, no
more hotel employee was qualified to receive ECOLA.
The assertion of Dusit Hotel that the receipt by said hotel
employees of their shares in the service charges already
constituted substantial compliance with the prescribed
payment of ECOLA under WO No. 9.
It must be noted that the hotel employees have a right to their
share in the service charges collected by Dusit Hotel, pursuant
to Article 96 of the Labor Code of 1991, to wit:
Article 96. Service charges. All service charges collected by
hotels, restaurants and similar establishments shall be
distributed at the rate of eighty-five percent (85%) for all
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covered employees and fifteen percent (15%) for management.


The share of employees shall be equally distributed among
them. In case the service charge is abolished, the share of the
covered employees shall be considered integrated in their
wages.
Since Dusit Hotel is explicitly mandated by the afore-quoted
statutory provision to pay its employees and management their
respective shares in the service charges collected, the hotel
cannot claim that payment thereof to its 82 employees
constitute substantial compliance with the payment of ECOLA
under WO No. 9. Undoubtedly, the hotel employees right to
their shares in the service charges collected by Dusit Hotel is
distinct and separate from their right to ECOLA; gratification by
the hotel of one does not result in the satisfaction of the other.
SC finds no basis to hold Dusit Hotel liable for double indemnity
Under Section 2(m) of DOLE Department Order No. 10, Series of
1998, the Notice of Inspection Result "shall specify the
violations discovered, if any, together with the officers
recommendation and computation of the unpaid benefits due
each worker with an advice that the employer shall be liable for
double indemnity in case of refusal or failure to correct the
violation within five calendar days from receipt of notice." A
careful review of the Notice of Inspection Result dated 29 May
2002, issued herein by the DOLE-NCR to Dusit Hotel, reveals
that the said Notice did not contain such an advice. Although
the Notice directed Dusit Hotel to correct its noted violations
within five days from receipt thereof, it was not sufficiently
apprised that failure to do so within the given period would
already result in its liability for double indemnity. The lack of
advice deprived Dusit Hotel of the opportunity to decide and
act accordingly within the five-day period, as to avoid the
penalty of double indemnity. By 22 October 2002, the DOLENCR, through Dir. Maraan, already issued its Order directing
Dusit Hotel to pay 144 of its employees the total amount of
P1,218,240.00, corresponding to their unpaid ECOLA under WO
No. 9; plus the penalty of double indemnity, pursuant to Section
12 of Republic Act No. 6727, as amended by Republic Act No.
8188.
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SC AFFIRMED WITH THE FOLLOWING MODIFICATIONS: (1)


Dusit Hotel Nikko is ORDERED to pay its 82 employees who,
after applying the salary increases for 1 January 2001, had daily
salaries of P250.00 to P290.00 the first tranch of Emergency
Cost of Living Allowance, equivalent to P15.00 per day, from 5
November 2001 to 31 December 2001, within ten (10) days
from finality of this Decision; and (2) the penalty for double
indemnity is DELETED. No costs.
Although the Court is mindful of the fact that labor embraces
individuals with a weaker and unlettered position as against
capital, it is equally mindful of the protection that the law
accords to capital. While the Constitution is committed to the
policy of social justice and the protection of the working class, it
should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also has
its own rights which, as such, are entitled to respect and
enforcement in the interest of simple fair play.
Tiger Construction and Development Corp. vs. Abay
GR NO. 164141 February 26, 2010
FACTS:
On the basis of a complaint filed by respondents Reynaldo Abay
and fifty-nine (59) others before the Regional Office of the
Department of Labor and Employment (DOLE), an inspection
was conducted by DOLE officials at the premises of petitioner
TCDC. Several labor standard violations were noted, such as
deficiencies in record keeping, non-compliance with various
wage orders, non-payment of holiday pay, and underpayment
of 13th month pay. The case was then set for summary hearing.
However, before the hearing could take place, the Director of
Regional Office No. V, Ma. Glenda A. Manalo (Director Manalo),
issued an Order on July 25, 2002, which reads:
XXX in view of the foregoing, this case falls under the original
and exclusive jurisdiction of the National Labor Relations
Commission as provided under Article 217 of the Labor Code of
the Philippines.5
On September 30, 2002, Director Manalo issued an Order
directing TCDC to pay P2,123,235.90 to its employees
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representing underpayment of salaries, 13th month pay, and


underpayment of service incentive leave pay and regular
holiday pay. TCDC filed a Motion for Reconsideration on October
17, 2002 and a Supplemental Pleading to the Motion for
Reconsideration on November 21, 2002, reiterating the
argument that Director Manalo had lost jurisdiction over the
matter.
Apparently convinced by petitioners arguments, Director
Manalo again endorsed the case to the NLRC Regional
Arbitration Branch V (Legaspi City). On January 27, 2003, the
NLRC returned the entire records of the case to Director Manalo
on the ground that the NLRC does not have jurisdiction over the
complaint.
Having the case in her office once more, Director Manalo finally
issued an Order dated January 29, 2003 denying petitioners
motion for reconsideration for lack of merit.
Since TCDC did not interpose an appeal within the prescribed
period, Director Manalo issued forthwith a Writ of Execution on
February 12, 2003.
ISSUE:
The issue in the case is whether petitioner can still assail the
January 29, 2003 Order of Director Manalo allegedly on the
ground of lack of jurisdiction, after said Order has attained
finality and is already in the execution stage.
RULING:
The petition lacks merit.
Petitioner admits that it failed to appeal the January 29, 2003
Order within the period prescribed by law. It likewise admits
that the case was already in the execution process when it
resorted to a belated appeal to the DOLE Secretary. Petitioner,
however, excuses itself from the effects of the finality of the
Order by arguing that it was allegedly issued without
jurisdiction and may be assailed at any time.
While it is true that orders issued without jurisdiction are
considered null and void and, as a general rule, may be
assailed at any time, the fact of the matter is that in this case,
Director Manalo acted within her jurisdiction. Under Article
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128 (b) of the Labor Code,14 as amended by Republic Act (RA)


No. 7730,15 the DOLE Secretary and her representatives, the
regional directors, have jurisdiction over labor standards
violations based on findings made in the course of inspection of
an employers premises. The said jurisdiction is not affected by
the amount of claim involved, as RA 7730 had effectively
removed the jurisdictional limitations found in Articles 129 and
217 of the Labor Code insofar as inspection cases, pursuant to
the visitorial and enforcement powers of the DOLE Secretary,
are concerned.16 The last sentence of Article 128(b) of the
Labor Code recognizes an exception 17 to the jurisdiction of the
DOLE Secretary and her representatives, but such exception is
neither an issue nor applicable here.

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7. WAGE PROTECTION PROVISIONS AND PROHIBITIONS


REGARDING WAGES
Gaa vs. CA
G.R. No. L-44169; December 3, 1985
FACTS:
Rosario Gaa is occupying a managerial/ supervisory
position in El Grande Hotel. A Notice of Garnishment upon El
Grande Hotel, where petitioner was then employed, garnishing
her "salary, commission and/or remuneration." Petitioner then
filed with the Court of First Instance of Manila a motion to lift
said garnishment on the ground that her "salaries, commission
and, or remuneration are exempted from execution under
Article 1708 of the New Civil Code.
ISSUE:
Whether or not the renumeration of Gaa are exempted
from execution or attachment pursuant to Art. 1708 of the Civil
Code.
RULING:
SC held that, We do not think that the legislature
intended the exemption in Article 1708 of the New Civil Code to
operate in favor of any but those who are laboring men or
women in the sense that their work is manual. Persons
belonging to this class usually look to the reward of a day's
labor for immediate or present support, and such persons are
more in need of the exemption than any others. Petitioner
Rosario A. Gaa is definitely not within that class.

Nestle Phils. vs. NLRC


G.R. No. 85197 March 18, 1991
FACTS:
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The private respondents were employed by the petitioner


either as sales representatives or medical representatives. By
reason of the nature of their work they were each allowed to
avail of the company's car loan policy. Under that policy, the
company advances the purchase price of a car to be paid back
by the employee through monthly deductions from his salary,
the company retaining the ownership of the motor vehicle until
it shall have been fully paid for. All of the private respondents
availed of the petitioner's car loan policy.
Respondents were dismissed from service because of their
participation in the strike/ certain irregularities. As such, they
filed a case of illegal dismissal before the NLRC. In the Notices
of Dismissal, they were asked by the Company to settle the
accounts payable of their car loans or return the car for proper
disposition. The Company filed a civil suit to recover possession
of the cars. Private respondents sought a temporary restraining
order in the NLRC to stop the company from cancelling their car
loans and collecting their monthly amortizations pending the
final resolution of their appeals in the illegal dismissal case.
NLRC granted the TRO.
ISSUE:
Whether or not NLRC is correct in granting the TRO in
favor of the respondents pending the case of illegal dismissal.
RULING:
Nestl's demand for payment of the private respondents'
amortizations on their car loans, or, in the alternative, the
return of the cars to the company, is not a labor, but a civil,
dispute. It involves debtor-creditor relations, rather than
employee-employer relations. The NLRC gravely abused its
discretion and exceeded its jurisdiction by issuing the writ of
injunction to stop the company from enforcing the civil
obligation of the private respondents under the car loan
agreements and from protecting its interest in the cars which,
by the terms of those agreements, belong to it (the company)
until their purchase price shall have been fully paid by the
employee. The terms of the car loan agreements are not in
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issue in the labor case. The rights and obligations of the parties
under those contracts may be enforced by a separate civil
action in the regular courts, not in the NLRC.
Five J Taxi vs. NLRC
G.R. No. 111474 August 22, 1994
FACTS:
Private respondents Domingo Maldigan and Gilberto
Sabsalon were hired by the petitioners as taxi drivers. Aside
from the daily "boundary", they were also required to pay
P20.00 for car washing, and to further make a P15.00 deposit to
answer for any deficiency in their "boundary," for every actual
working day.
ISSUE:
Whether or not the car wash payment is an illegal
deduction as contemplated in the Labor Code.
RULING:
SC held that the amount doled out was paid directly to the
person who washed the unit, thus we find nothing illegal in this
practice, much more to consider the amount paid by the driver
as illegal deduction in the context of the law. Consequently,
private respondents are not entitled to the refund of the P20.00
car wash payments they made. It will be noted that there was
nothing to prevent private respondents from cleaning the taxi
units themselves, if they wanted to save their P20.00.Car
washing after a tour of duty is a practice in the taxi industry,
and is, in fact, dictated by fair play.
Phil. Veterans Bank vs. NLRC
G.R. No. 130439 October 26, 1999
FACTS:
Due to financial losses, the Philippine Veterans Bank was
placed in receivership pursuant to the order of the Central Bank
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of the Philippines. Consequently, its employees, including


private respondent Dr. Jose Teodorico V. Molina, were
terminated from work and given their respective separation pay
and other benefits. Dr. Molina filed a complaint before NLRC. He
demanded the implementation of the Wage Orders No. 1 and 2.
Both the Labor Arbiter and NLRC granted the petition of Molina.
ISSUE:
Whether or not Molina is entitled to the increase of his
salary pursuant to Wage Orders No. 1 and 2.
RULING:
SC held that Molinas salary is within the coverage of the
said wage orders. W.O. 1 expressly states that employees
having a monthly salary of not more than P3,802.08 are
entitled to receive the mandated wage increase. Undeniably,
MOLINA was receiving a monthly salary of P3,754.60. This fact
alone leaves no doubt that he should benefit from said wage
order. On the other hand, W.O. 2 raised the ceiling for
entitlement to the wage increase. If MOLINA was covered by
the earlier wage order, with more reason should the later wage
order apply to him.
Philippine Appliances Corp. vs. CA
G.R. No. 149434; June 3, 2004
FACTS:
Petitioner is a domestic corporation engaged in the
business of manufacturing refrigerators, freezers and washing
machines. Respondent United Philacor Workers Union-NAFLU is
the duly elected collective bargaining representative of the
rank-and-file employees of petitioner. During the collective
bargaining negotiations between petitioner and respondent
union in 1997 (for the last two years of the collective
bargaining agreement covering the period of July 1, 1997 to
August 31, 1999), petitioner offered the amount of four
thousand pesos (P4,000.00) to each employee as an "early
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conclusion bonus". Upon conclusion of the CBA negotiations,


petitioner accordingly gave this early signing bonus. After the
expiration of the CBA, both parties negotiated for a new CBA.
However, it resulted to a deadlock. The respondent union filed
before the NCMB a notice of strike due to bargaining deadlock.
The Department of Labor and Employment took cognizance of
the case and ordered, among other things, herein petitioner to
award signing bonus. Petitioner argued that the award of the
signing bonus was patently erroneous since it was not part of
the employees salaries or benefits or of the collective
bargaining agreement. It is not demandable or enforceable
since it is in the nature of an incentive.
ISSUE:
Whether or not the award of a signing bonus by the
Secretary of Labor is correct.
RULING:
SC held that the signing bonus must not be awarded.
The CBA negotiation between petitioner and respondent
union failed notwithstanding the intervention of the NCMB.
Respondent union went on strike for eleven days and blocked
the ingress to and egress from petitioners two work plants. The
labor dispute had to be referred to the Secretary of Labor and
Employment because neither of the parties was willing to
compromise their respective positions regarding the four
remaining items which stood unresolved. While we do not fault
any one party for the failure of the negotiations, it is apparent
that there was no more goodwill between the parties and that
the CBA was clearly not signed through their mutual efforts
alone. Hence, the payment of the signing bonus is no longer
justified and to order such payment would be unfair and
unreasonable for petitioner.
Furthermore, we have consistently ruled that a bonus is
not a demandable and enforceable obligation.
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Agabon vs. NLRC


G.R. No. 158693; November 17, 2004
FACTS:
Private respondent Riviera Home Improvements, Inc. is
engaged in the business of selling and installing ornamental
and construction materials. It employed petitioners Virgilio
Agabon and Jenny Agabon as gypsum board and cornice
installers. Private respondents were terminated due to
abandonment of work. Virgilios wage was deducted for SSS
loan and the value of the shoes from petitioner Virgilio
Agabon's 13th month pay.
ISSUE:
Whether or not the employer can deduct from its
employees wage.
Who will prove payment of wagesemployee or employer.
RULING:
SC held employers cannot deduct any amount from the
wage of its employees without their consent. Under Article 113
of the Labor Code, employers are prohibited from making any
deductions without the employee's knowledge and consent. In
the instant case, private respondent failed to show that the
deduction of the SSS loan and the value of the shoes from
petitioner Virgilio Agabon's 13th month pay was authorized by
the latter. The lack of authority to deduct is further bolstered by
the fact that petitioner Virgilio Agabon included the same as
one of his money claims against private respondent.
As a general rule, one who pleads payment has the
burden of proving it. Even where the employee must allege
non-payment, the general rule is that the burden rests on the
employer to prove payment, rather than on the employee to
prove non-payment. The reason for the rule is that the
pertinent personnel files, payrolls, records, remittances and
other similar documents which will show that overtime,
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differentials, service incentive leave and other claims of


workers have been paid are not in the possession of the
worker but in the custody and absolute control of the
employer.In the case at bar, if private respondent indeed paid
petitioners' holiday pay and service incentive leave pay, it
could have easily presented documentary proofs of such
monetary benefits to disprove the claims of the petitioners. But
it did not, except with respect to the 13th month pay wherein it
presented cash vouchers showing payments of the benefit in
the years disputed.

American Wire & Cable Daily Rated Employees vs.


American Wire
G.R. No. 155059; April 29, 2005
FACTS:
American Wire and Cable Co., Inc., is a corporation
engaged in the manufacture of wires and cables. There are two
unions in this company, the American Wire and Cable MonthlyRated Employees Union (Monthly-Rated Union) and the
American Wire and Cable Daily-Rated Employees Union (DailyRated 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. These are service award, 35%
premium of an employees basic pay rendered during special
days, Christmas party and promotional increase.
ISSUE:
Whether or not the benefits/entitlements are in the nature
of a bonus, and assuming they are so, whether they are
demandable and enforceable obligations.
RULING:
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SC held that in order to resolve the issue. The said


benefits must be considered whether these are considered
bonus or not.
A bonus is an act of generosity granted by an enlightened
employer to spur the employee to greater efforts for the
success of the business and realization of bigger profits. The
granting of a bonus is a management prerogative, something
given in addition to what is ordinarily received by or strictly due
the recipient. Thus, a bonus is not a demandable and
enforceable obligation, except when it is made part of the
wage, salary or compensation of the employee.
Based on the foregoing pronouncement, it is obvious that
the benefits/entitlements subjects of the instant case are all
bonuses which were given by the private respondent out of its
generosity and munificence. The benefits given 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).
Honda Philippines vs. Samahang Malayang Manggagawa
sa Honda
G.R. No. 145561; June 15, 2005
FACTS:
The Collective Bargaining Agreement (CBA) of the parties
contains stipulation regarding 13th and 14th month pay. The CBA
which contained such stipulation is effective until 2000. In the
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latter part of 1998, the parties started negotiations for the 4 th


and 5th year of their CBA. However, efforts failed which lead to
the unions submission of a Notice of Strike on the ground of
bargaining deadlock. Thereafter, Honda filed a Notice of
Lockout. It sought the intervention of Secretary of DOLE. The
Secretary ordered the striking workers to cease and desist from
the strike and to return back to work. After the strike, the
Management issued a memorandum stating that the pro-rated
computation of the bonuses. Its new computation of the 13th
and 14th month pay to be granted to all its employees whereby
the thirty-one (31)-day long strike shall be considered
unworked days for purposes of computing said benefits. As per
the companys new formula, the amount equivalent to 1/12 of
the employees basic salary shall be deducted from these
bonuses, with a commitment however that in the event that the
strike is declared legal, Honda shall pay the amount deducted.
Aggrieved, the union filed a complaint against Honda.
ISSUE:
Whether the pro-rated computation of the 13th month pay
and the other bonuses in question is valid and lawful.
RULING:
It is not valid and lawful because it violates Article 100 of
the Labor Code. This Court held that the grant of these benefits
has ripened into company practice or policy which cannot be
peremptorily withdrawn.
A cursory reading of the provisions will show that they did
not state categorically whether the computation of the 13th
month pay, 14th month pay and the financial assistance would
be based on one full months basic salary of the employees, or
pro-rated based on the compensation actually received. The
arbitrator thus properly resolved the ambiguity in favor of labor
as mandated by Article 1702 of the Civil Code. The Court of
Appeals affirmed the arbitrators finding and added that the
computation of the 13th month pay should be based on the
length of service and not on the actual wage earned by the
worker.
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Producers Bank vs. NLRC


G.R. No. 100701; March 28, 2001
FACTS:
Private respondents charge petitioners for diminution of
benefits, non-compliance with Wage Order No. 6 and nonpayment of holiday pay. It has been placed under
conservatorship by the Central Bank to recover to revitalize
from its nets losses. As a result, there has been a reduction
and/or continuance of the said benefits to its employers.
ISSUE:
Whether or not the removal/ and or discontinuance of the
benefits is justified and valid.
RULING:
With regards the bonuses given to its employees, SC ruled
that the bank is justified in withdrawing the said bonus. It
ratiocinated that the bank was not only experiencing a decline
in its profits, but was reeling from tremendous losses triggered
by a bank-run which began in 1983. In such a depressed
financial condition, petitioner cannot be legally compelled to
continue paying the same amount of bonuses to its employees.
Thus, the conservator was justified in reducing the mid-year
and Christmas bonuses of petitioner's employees. To hold
otherwise would be to defeat the reason for the
conservatorship which is to preserve the assets and restore the
viability of the financially precarious bank. These bonuses
credited for the mid-year bonus and Christmas bonus as part of
the 13th month pay by the bank is justified.
It is worth noting that a bonus is an amount granted and
paid to an employee for his industry and loyalty which
contributed to the success of the employer's business and
made possible the realization of profits. It is an act of
generosity granted by an enlightened employer to spur the
employee to greater efforts for the success of the business and
realization of bigger profits. The granting of a bonus is a
management prerogative, something given in addition to what
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is ordinarily received by or strictly due the recipient. Thus, a


bonus is not a demandable and enforceable obligation, except
when it is made part of the wage, salary or compensation of the
employee. However, an employer cannot be forced to distribute
bonuses which it can no longer afford to pay. To hold otherwise
would be to penalize the employer for his past generosity.

Jardin vs. NLRC


G.R. No. 119268; February 23, 2000
FACTS:
Petitioners were drivers of private respondent, Philjama
International Inc., a domestic corporation engaged in the
operation of "Goodman Taxi." Petitioners used to drive private
respondent's taxicabs every other day on a 24-hour work
schedule under the boundary system. Under this arrangement,
the petitioners earned an average of P400.00 daily.
Nevertheless, private respondent admittedly regularly deducts
from petitioners, daily earnings the amount of P30.00
supposedly for the washing of the taxi units. Believing that the
deduction is illegal, petitioners decided to form a labor union to
protect their rights and interests.
Upon learning about the plan of petitioners, private
respondent refused to let petitioners drive their taxicabs when
they reported for work on August 6, 1991, and on succeeding
days. Petitioners suspected that they were singled out because
they were the leaders and active members of the proposed
union. Aggrieved, petitioners filed with the labor arbiter a
complaint against private respondent for unfair labor practice,
illegal dismissal and illegal deduction of washing fees.
ISSUE:
Whether or not the taxi drivers are considered employees
of the Goodman Taxi entitling them to full backwages.
RULING:
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SC ruled that the taxi drivers are employees of the


company. Thus, they are entitled to full backwages.
Applying the 4-fold test, the owner exercise supervision
and control over drivers. The management of the business is in
the owner's hands. Hence, petitioners are undoubtedly
employees of private respondent because as taxi drivers they
perform activities which are usually necessary or desirable in
the usual business or trade of their employer. With regard to
the amount deducted daily by private respondent from
petitioners for washing of the taxi units, we view the same as
not illegal in the context of the law. We note that after a tour of
duty, it is incumbent upon the driver to restore the unit he has
driven to the same clean condition when he took it out. Car
washing after a tour of duty is indeed a practice in the taxi
industry and is in fact dictated by fair play. Hence, the drivers
are not entitled to reimbursement of washing charges.

Manila Jockeys Club Employees Labor Union vs. Manila


Jockey Club
G.R. No. 167601; March 7, 2007

FACTS:
Petitioner Manila Jockey Club Employees Labor UnionPTGWO and respondent Manila Jockey Club, Inc., a corporation
with a legislative franchise to conduct, operate and maintain
horse races, entered into a Collective Bargaining Agreement
(CBA). The CBA governed the economic rights and obligations
of respondents regular monthly paid rank-and-file employees.
In the CBA, the parties agreed to a 7-hour work schedule from
9:00 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. on a
work week of Monday to Saturday, as contained under Section
1, Article IV, of the same CBA. All work performed in excess of
seven (7) hours work schedule and on days not included within
the work week shall be considered overtime and paid as such.
Except those monthly compensation which includes work
performed during Saturday, Sunday, and Holiday when races
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are held at the Club. An inter-office memorandum was issued


declaring that the hours of work of regular monthly-paid
employees shall be from 1:00 p.m. to 8:00 p.m. when horse
races are held, that is, every Tuesday and Thursday. The
memorandum, however, maintained the 9:00 a.m. to 5:00 p.m.
schedule for non-race days. Petitioners questioned the above
office memorandum as violative of the prohibition against nondiminution of wages and benefits guaranteed the CBA which
specified the work schedule of respondent's employees to be
from 9:00 a.m. to 5:00 p.m. Petitioner claimed that as a result
of the memorandum, the employees are precluded from
rendering their usual overtime work from 5:00 p.m. to 9:00
p.m.

ISSUE:
Whether or not the change in the work schedule violated
Article 100 of the Labor Code on the non-diminution of wages
and benefits guaranteed under the parties CBA.
RULING:
SC held in favor of Manila Jockey Club. It stated that the
work schedule is justified, it being a management prerogative.
Respondent, as employer, cites the change in the program
of horse races as reason for the adjustment of the employees
work schedule. It rationalizes that when the CBA was signed,
the horse races started at 10:00 a.m. When the races were
moved to 2:00 p.m., there was no other choice for
management but to change the employees' work schedule as
there was no work to be done in the morning. Evidently, the
adjustment in the work schedule of the employees is justified.
While it is true that Section 1, Article IV of the CBA provides for
a 7-hour work schedule from 9:00 a.m. to 12:00 noon and from
1:00 p.m. to 5:00 p.m. from Mondays to Saturdays, Section 2,
Article XI, however, expressly reserves on respondent the
prerogative to change existing methods or facilities to change
the schedules of work.

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Manila Jockey Club was not obliged to allow all its


employees to render overtime work everyday for the whole
year, but only those employees whose services were needed
after their regular working hours and only upon the instructions
of management. The overtime pay was not given to each
employee consistently, deliberately and unconditionally, but as
a compensation for additional services rendered. Thus,
overtime pay does not fall within the definition of benefits
under Article 100 of the Labor Code on prohibition against
elimination or diminution of benefits.
San Miguel Corp. et. al vs. Layoc Jr. et. al.
G.R. No. 149640; October 19, 2007
FACTS:
Respondents were among the Supervisory Security
Guards of the Beer Division of the San Miguel Corporation.
From the commencement of their employment, the private
respondents were required to punch their time cards for
purposes of determining the time they would come in and out
of the companys work place. As such, the private respondents
were availing the benefits for overtime, holiday and night
premium duty through time card punching. However, in the
early 1990s, the San Miguel Corporation embarked on a
Decentralization Program. The Beer Division of the San Miguel
Corporation implemented no time card policy whereby the
supervising security guards of the Beer Division were no longer
required to punch their time cards. However, in lieu of the
overtime pay and the premium pay, the personnel of the Beer
Division of the petitioner San Miguel Corporation affected by
the No Time Card Policy were given a 10% across-the-board
increase on their basic pay while the supervisors who were
assigned in the night shift (6:00 p.m. to 6:00 a.m.) were given
night shift allowance ranging from P2,000.00 to P2,500.00 a
month. Aggrieved, respondents filed a complaint for unfair
labor practice, violation of Article 100 of the Labor Code of the
Philippines, and violation of the equal protection clause and due
process of law in relation to paragraphs 6 and 8 of Article 32 of
the New Civil Code of the Philippines.
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ISSUE:
Whether or not the No Time Card Policy constitutes a
violation of Article 100 of the Labor Code.
RULING:
SC ruled in favor of the petitioners. Petitioners exercised
management prerogative in the implementation of the No
Time Card Policy.
As a general rule, managerial employees are not entitled
to overtime pay for services rendered in excess of eight hours a
day. Respondents failed to show that the circumstances of the
present case constitute an exception to this general rule.
Respondents assert that Article 100 of the Labor Code
prohibits the elimination or diminution of benefits. However,
contrary to the nature of benefits, petitioners did not freely give
the payment for overtime work to respondents. Petitioners
paid respondents overtime pay as compensation for services
rendered in addition to the regular work hours. Respondents
rendered overtime work only when their services were needed
after their regular working hours and only upon the instructions
of their superiors. Respondents even differ as to the amount of
overtime pay received on account of the difference in the
additional hours of services rendered.
Aside from their allegations, respondents were not able to
present anything to prove that petitioners were obliged to
permit respondents to render overtime work and give them the
corresponding overtime pay. Even if petitioners did not
institute a no time card policy, respondents could not demand
overtime pay from petitioners if respondents did not render
overtime work. The requirement of rendering additional service
differentiates overtime pay from benefits such as thirteenth
month pay or yearly merit increase. These benefits do not
require any additional service from their beneficiaries. Thus,
overtime pay does not fall within the definition of benefits
under Article 100 of the Labor Code.

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San Miguel Corp. vs. Pontillas


G.R. No. 155178; May 7, 2008
FACTS:
San Miguel Corporation (petitioner) employed Angel C.
Pontillas (respondent) as a daily wage company guard. In
1984, respondent became a monthly-paid employee which
entitled him to yearly increases in salary. Respondent alleged
that his yearly salary increases were only a percentage of what
the other security guards received. On 19 October 1993,
respondent filed an action for recovery of damages due to
discrimination under Article 100 of the Labor Code of the
Philippines (Labor Code), as amended, as well as for recovery of
salary differential and backwages. Pending the complaint of
herein petitioner, a memorandum was sent out by the
Management stating that there will be a transfer from OroVerde
Warehouse, where respondent is stationed, to VisMin Logistics
Operations. Claiming that he is waiting for the directive of his
supervisor, respondent continued reporting in the OroVerde
Warehouse. For alleged insubordination of the order,
respondent was terminated. Thus, he filed an amended
complaint.
ISSUE:
Whether or not the directive of transfer was valid and
reasonable.
RULING:
SC held that the petitioner exercised management
prerogative in its directive of transfer from the OroVerde
Warehouse to VisMin Logistics Operation.
The employer exercises the prerogative to transfer an
employee for valid reasons and according to the requirements
of its business, provided the transfer does not result in
demotion in rank or diminution of the employees salary,
benefits, and other privileges. In this case, we found that the
order of transfer was reasonable and lawful considering the
integration of Oro Verde Warehouse with VisMin Logistics
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Operations. Respondent was properly informed of the transfer


but he refused to receive the notices on the pretext that he was
wary because of his pending case against petitioner.
Respondent failed to prove that petitioner was acting in bad
faith in effecting the transfer. There was no demotion involved,
or even a diminution of his salary, benefits, and other
privileges. Respondents persistent refusal to obey petitioners
lawful order amounts to willful disobedience under Article 282
of the Labor Code.
Arco Metal Products vs. Samahan ng Manggagawa sa
Arco-Metal-NAFLU
G.R. No. 170734; May 14, 2008
FACTS:
Petitioner is a company engaged in the manufacture of
metal products, whereas respondent is the labor union of
petitioners rank and file employees. Sometime in December
2003, petitioner paid the 13 th month pay, bonus, and leave
encashment of three union members in amounts proportional
to the service they actually rendered in a year, which is less
than a full twelve (12) months. Respondent protested the
prorated scheme, claiming that on several occasions petitioner
did not prorate the payment of the same benefits to seven (7)
employees who had not served for the full 12 months.
According to respondent, the prorated payment violates the
rule against diminution of benefits under Article 100 of the
Labor Code. Thus, they filed a complaint before the National
Conciliation and Mediation Board (NCMB). The parties
submitted the case for voluntary arbitration.
ISSUE:
Whether or not the prorated payment of the benefits
constitute a violation under Art. 100 of the Labor Code.

RULING:
SC ruled in favor of the respondents. The voluntary grant
of the benefits has been an established company practice. It
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has been a company practice which grants full benefits to its


employees regardless of the length of service rendered.
There is no doubt that in order to be entitled to the full
monetization of sixteen (16) days of vacation and sick leave,
one must have rendered at least one year of service. The clear
wording of the provisions does not allow any other
interpretation. Anent the 13th month pay and bonus, we agree
with the findings of Labor Arbiter Mangabat that the CBA
provisions did not give any meaning different from that given
by the law, thus it should be computed at 1/12 of the total
compensation which an employee receives for the whole
calendar year. The bonus is also equivalent to the amount of
the 13th month pay given, or in proportion to the actual service
rendered by an employee within the year.
Any benefit and supplement being enjoyed by employees
cannot be reduced, diminished, discontinued or eliminated by
the employer. The principle of non-diminution of benefits is
founded on the Constitutional mandate to "protect the rights of
workers and promote their welfare, and to afford labor full
protection. Said mandate in turn is the basis of Article 4 of the
Labor Code which states that all doubts in the implementation
and interpretation of this Code, including its implementing rules
and regulations shall be rendered in favor of labor.
Jurisprudence is replete with cases which recognize the right of
employees to benefits which were voluntarily given by the
employer and which ripened into company practice. Thus in
Davao Fruits Corporation v. Associated Labor Unions, et al.
where an employer had freely and continuously included in the
computation of the 13th month pay those items that were
expressly excluded by the law, we held that the act which was
favorable to the employees though not conforming to law had
thus ripened into a practice and could not be withdrawn,
reduced, diminished, discontinued or eliminated. In Sevilla
Trading Company v. Semana, we ruled that the employers act
of including non-basic benefits in the computation of the 13 th
month pay was a voluntary act and had ripened into a company
practice which cannot be peremptorily withdrawn. Meanwhile
in Davao Integrated Port Stevedoring Services v. Abarquez, the
Court ordered the payment of the cash equivalent of the
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unenjoyed sick leave benefits to its intermittent workers after


finding that said workers had received these benefits for almost
four years until the grant was stopped due to a different
interpretation of the CBA provisions. We held that the
employer cannot unilaterally withdraw the existing privilege
of commutation or conversion to cash given to said workers,
and as also noted that the employer had in fact granted and
paid said cash equivalent of the unenjoyed portion of the sick
leave benefits to some intermittent workers.

Aguanza vs. Asian Terminal Inc.


GR NO. 163505 August 14, 2009

FACTS:
Petitioner Gualberto Aguanza was employed with respondent
company Asian Terminal, Inc. from April 15, 1989 to October
1997. He was initially employed as Derickman or Crane
Operator and was assigned as such aboard Bismark IV, a
floating crane barge owned by Asian Terminals, Inc. based at
the port of Manila. Aside from his basic pay, he received meal
allowance, fixed overtime pay and out-of port allowance [when
the barge is assigned outside Metro Manila].
Sometime in September 1997, the Bismark IV, together with its
crew, was temporarily assigned at the Mariveles Grains
Terminal in Mariveles, Bataan. Then, on October 20, 1997,
respondent James Keith issued a memo to the crew of Bismark
IV stating that the barge had been permanently transferred to
the Mariveles Grains terminal beginning October 1, 1997 and
because of that, its crew would no longer be entitled to out of
port benefits of 16 hours overtime and P200 a day out-of port
allowance.
Because of the said development, Aguanza questioned the
diminution of his benefits. Aguanza insisted on reporting to
work in Manila although his barge, Bismark IV, and its other
crew were already permanently based in Mariveles, Bataan.
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[Aguanza] was not allowed to time in in Manila because his


work was in Mariveles, Bataan. He therefore was not able to
render his services, and was accordingly not paid for doing
nothing.
ISSUE:
Was Aguanza constructively dismissed?
RULING:
No. The transfer of operations is a valid exercise of
management prerogative. Aguanza asserts that his transfer
constituted constructive dismissal, while ATI asserts that
Aguanzas transfer was a valid exercise of management
prerogative.
ATIs transfer of Bismark IVs base from Manila to Bataan was,
contrary to Aguanzas assertions, a valid exercise of
management prerogative. The transfer of employees has been
traditionally among the acts identified as a management
prerogative subject only to limitations found in law, collective
bargaining agreement, and general principles of fair play and
justice. Even as the law is solicitous of the welfare of
employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. The free
will of management to conduct its own business affairs to
achieve its purpose cannot be denied.
On the other hand, the transfer of an employee may constitute
constructive dismissal "when continued employment is
rendered impossible, unreasonable or unlikely; when there is a
demotion in rank and/or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes
unbearable to the employee." Aguanzas situation is not within
the purview of this discussion.

Genesis Transport Service Inc. vs. Unyon ng Malatang


Manggagwa ng Genesis Transport
GR No. 182114; April 5, 2010

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FACTS:
Respondent Juan Taroy was hired by petitioner Genesis
Transport Service, Inc. (Genesis Transport) as driver on
commission basis at 9% of the gross revenue per trip.
On May 10, 2002, Taroy was, after due notice and hearing,
terminated from employment after an accident on April 20,
2002 where he was deemed to have been driving recklessly.
Taroy thus filed a complaint for illegal dismissal and payment of
service incentive leave pay, claiming that he was singled out
for termination because of his union activities, other drivers
who had met accidents not having been dismissed from
employment. Taroy later amended his complaint to implead his
herein co-respondent Unyon ng Malayang Manggagawa ng
Genesis Transport (the union) as complainant and add as
grounds of his cause of action unfair labor practice (ULP),
reimbursement of illegal deductions on tollgate fees, and
payment of service incentive leave pay.
Respecting the claim for refund of illegal deductions, Taroy
alleged that in 1997, petitioner started deducting from his
weekly earnings an amount ranging from P160 to P900
representing toll fees, without his consent and written
authorization as required under Article 113 of the Labor Code
and contrary to company practice; and that deductions were
also taken from the bus conductors earnings to thus result to
double deduction.
Genesis Transport countered that Taroy committed several
violations of company rules for which he was given warnings or
disciplined accordingly; that those violations, the last of which
was the April 20, 2002 incident, included poor driving skills,
tardiness, gambling inside the premises, use of shabu, smoking
while driving, insubordination and reckless driving; and that
Taroys dismissal was on a valid cause and after affording him
due process.
The Labor Arbiter rendered dismissing instant complaint for
illegal dismissal for lack of merit and was ordered to refund to
complainant the underpayment/differential due him as a result
of the deduction of the tollgate fees from the gross receipts.
The NLRC affirmed the Labor Arbiters decision with
modification. It deleted the award to Taroy of attorneys fees.

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The respondent challenged the decision on the CA questioning


the Labor Arbiters failure to pass on the propriety of his
preventive suspension, dismissal of his complaint for
constructive dismissal and ULP, and failure to award him
service incentive leave pay. The petitioners questioned the
order for them to refund "underpayment" and pay attorneys
fees.
ISSUE:
Whether or not the respondent is entitled for a refund
underpayment for the toll fees deducted from his weekly
earnings.
Whether or not the issue of preventive suspension violated
Taroys right to due process.
HELD:
The Supreme Court affirmed CA decision with the refund of
underpayment with the modification that the award of nominal
damages to respondent Juan Taroy is deleted.
First Issue:
The Court take judicial notice of petitioners claim that the
deduction of tollgate fees from the gross earnings of drivers is
an accepted and long-standing practice in the transportation
industry. Expertravel & Tours, Inc. v. Court of Appeals 10
instructs:
Generally speaking, matters of judicial notice have three
material requisites: (1) the matter must be one of common and
general knowledge; (2) it must be well and authoritatively
settled and not doubtful or uncertain; and (3) it must be known
to be within the limits of the jurisdiction of the court. The
principal guide in determining what facts may be assumed to
be judicially known is that of notoriety. Hence, it can be said
that judicial notice is limited to facts evidenced by public
records and facts of general notoriety. Moreover, a judicially
noticed fact must be one not subject to a reasonable dispute in
that it is either: (1) generally known within the territorial
jurisdiction of the trial court; or (2) capable of accurate and
ready determination by resorting to sources whose accuracy
cannot reasonably be questionable.
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None of the material requisites for the Court to take judicial


notice of a particular matter was established by petitioners.
Albeit the amounts representing tollgate fees were deducted
from gross revenues and not directly from Taroys commissions,
the labor tribunal and the appellate court correctly held that
the withholding of those amounts reduced the amount from
which Taroys 9% commission would be computed. Such a
computation not only marks a change in the method of
payment of wages, resulting in a diminution of Taroys wages in
violation of Article 113 vis--vis Article 100 of the Labor Code,
as amended. It need not be underlined that without Taroys
written consent or authorization, the deduction is considered
illegal.
The invocation of the rule on "company practice" is generally
used with respect to the grant of additional benefits to
employees, not on issues involving diminution of benefits.
Second Issue:
Respecting the issue of statutory due process, the Court holds
that Taroys right thereto was not violated.
In any event, what the Rules require is that the employer act on
the suspended workers status of employment within the 30day period by concluding the investigation either by absolving
him of the charges, or meting the corresponding penalty if
liable, or ultimately dismissing him. If the suspension exceeds
the 30-day period without any corresponding action on the part
of the employer, the employer must reinstate the employee or
extend the period of suspension, provided the employees
wages and benefits are paid in the interim.
In the present case, petitioner company had until May 20, 2002
to act on Taroys case. It did by terminating him through a
notice dated May 10, 2002, hence, the 30-day requirement was
not violated even if the termination notice was received only on
June 4, 2002, absent any showing that the delayed service of
the notice on Taroy was attributable to Genesis Transport.
Taroys statutory due process not having been violated, he is
not entitled to the award of nominal damages.
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Central Azucarera de Tarlac vs. Central Azucarera de


Tarlac Labor Union-NLU
GR NO 188949 July 26, 2010
FACTS:
The facts of this case are not in dispute. In compliance with
Presidential Decree (P.D.) No. 851, petitioner granted its
employees the mandatory thirteenth (13th) - month pay since
1975. The formula used by petitioner in computing the 13thmonth 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.
ISSUE:
WON the petitioners computation of the 13 th Month Pay use for
almost thirty (30) years has ripened into a company policy or
practice.
RULING:
The 13th-month pay mandated by Presidential Decree (P.D.) No.
851 represents an additional income based on wage but not
part of the wage. It is equivalent to one-twelfth (1/12) of the
total basic salary earned by an employee within a calendar
year. All rank-and-file employees, regardless of their
designation or employment status and irrespective of the
method by which their wages are paid, are entitled to this
benefit, provided that they have worked for at least one month
during the calendar year. If the employee worked for only a
portion of the year, the 13th-month pay is computed pro rata.
x x x 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
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company policy or practice which cannot be unilaterally


withdrawn.

SHS Perforated Materials Inc. et. al vs. Diaz


GR NO. 185814 Oct. 13, 2010
FACTS:
Manuel F. Diaz (respondent) was hired by petitioner SHS as
Manager for Business Development on probationary status from
July 18, 2005 to January 18, 2006, with a monthly salary of
P100,000.00. Respondents duties, responsibilities, and work
hours were described in the Contract of Probationary
Employment.
During
meetings
with
the
respondent,
Hartmannshenn expressed his dissatisfaction over respondents
poor performance. Respondent allegedly failed to make any
concrete business proposal or implement any specific measure
to improve the productivity of the SHS office and plant or
deliver sales except for a meagre P2,500.00 for a sample
product. In numerous electronic mail messages, respondent
acknowledged his poor performance and offered to resign from
the company.
On November 29, 2005, Hartmannshenn instructed Taguiang
not to release respondents salary. Later that afternoon,
respondent called and inquired about his salary. Taguiang
informed him that it was being withheld and that he had to
immediately communicate with Hartmannshenn. Again,
respondent denied having received such directive.
The next day, on November 30, 2005, respondent served on
SHS a demand letter and a resignation letter.
On December 9, 2005, respondent filed a Complaint against the
petitioners for illegal dismissal; non-payment of salaries/wages
and 13th month pay with prayer for reinstatement and full
backwages; exemplary damages, and attorneys fees, costs of
suit, and legal interest. The Labor Arbiter and the CA, on
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appeal, rendered a decision in favour of the respondent. Hence,


this petition.
ISSUE:
WON the CA erred in affirming the Labor Arbiters finding that
respondent had been constructively dismissed.
RULING:
Petitioners contend that respondent could not have been
constructively dismissed because he voluntarily resigned as
evidenced by his resignation letter. They assert that respondent
was not forced to draft the letter and his intention to resign is
clear from the contents and terms used, and that given
respondents professional and educational background, he was
fully aware of the import and consequences of the said letter.
They maintain that respondent resigned to save face and avoid
disciplinary measures due to his allegedly dismal work
performance and failure to report to work.
The Court, however, agrees with the LA and the CA that
respondent was forced to resign and was, thus, constructively
dismissed. In Duldulao v. Court of Appeals, it was
written:chanroblesvirtualawlibrary
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.

NIA JEWELRY MANUFACTURING OF METAL


ARTS, INC. (otherwise known as NIA
MANUFACTURING AND METAL ARTS, INC.) and
ELISEA B. ABELLA, petitioners, vs. MADELINE C.
MONTECILLO and LIZA M.
TRINIDAD, respondents.
Balahadia, A. (USC-LLB 2, EH402)
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G.R. No. 188169. November 28, 2011.


FACTS:
Madeline Montecillo and Liza Trinidad were first employed as
goldsmiths by the petitioner Nia Jewelry Manufacturing of
Metal Arts, Inc. in 1996 and 1994, respectively. Madeline's
weekly rate was P1,500.00 while Liza's was P2,500.00. Taking
into consideration the incidents of theft involving goldsmiths in
Nia Jewelry's employ, it imposed a policy for goldsmiths
requiring them to post cash bonds or deposits in varying
amounts but in no case exceeding 15% of the latter's salaries
per week. The deposits were intended to answer for any loss or
damage which Nia Jewelry may sustain by reason of the
goldsmiths' fault or negligence in handling the gold entrusted
to them. Nia Jewelry alleged that the goldsmiths were given
the option not to post deposits, but to sign authorizations
allowing the former to deduct from the latter's salaries amounts
not exceeding 15% of their take home pay should it be found
that they lost the gold entrusted to them. The respondents
claimed otherwise insisting that Nia Jewelry left the goldsmiths
with no option but to post the deposits. The respondents
alleged that they were constructively dismissed by Nia Jewelry
as their continued employments were made dependent on their
readiness to post the required deposits. Nia Jewelry averred
that on August 14, 2004, the respondents no longer reported
for work and signified their defiance against the new policy
which at that point had not even been implemented yet.The
respondents filed against Nia Jewelry complaints for illegal
dismissal seeking reinstatement and payment of backwages,
attorney's fees and 13th month pay.
Labor Arbiter Jose Gutierrez (LA Gutierrez) dismissed the
respondents' complaints for lack of merit but ordered Nia
Jewelry to pay Madeline the sum of P3,750.00, and Liza,
P6,250.00, representing their proportionate entitlements to
13th month pay for the year 2004. The respondents filed an
appeal before the NLRC which affirmed LA Gutierrez's dismissal
of the amended complaints but deleted the award of 13th
month pay based on findings that the former had contracted
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unpaid individual loans from Nia Jewelry. The respondents then


filed a Petition for Certiorari before the CA where the appellate
court reversed the findings of the LA and the NLRC.
ISSUE:
Whether or not the petitioners policy of requiring its employeegoldsmiths to post cash bonds or deposits is valid

SC RULING:

The petition is partly meritorious.


In view of the foregoing, we hold that no dismissal, constructive
or otherwise, occurred. The findings of the NLRC and the LA
that it was the respondents who stopped reporting for work are
supported by substantial evidence. Hence, the CA erred when it
re-evaluated the parties' respective evidence and granted the
petition filed before it. However, we agree with the CA that it is
baseless for Nia Jewelry to impose its new policy upon the
goldsmiths under its employ without first complying with the
strict requirements of the law.
It was the respondents who merely stopped reporting for work.
While it is conceded that the new policy will impose an
additional burden on the part of the respondents, it was not
intended to result in their demotion.
On the other hand, it is important to note that Article 113 of the
Labor Code is clear that there are only three exceptions to the
general rule that no deductions from the employees' salaries
can be made. The exception which finds application in the
instant petition is in cases where the employer is authorized by
law or regulations issued by the Secretary of Labor to effect the
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deductions. On the other hand, Article 114 states that


generally, deposits for loss or damages are not allowed except
in cases where the employer is engaged in such trades,
occupations or business where the practice of making deposits
is a recognized one, or is necessary or desirable as determined
by the Secretary of Labor in appropriate rules or regulations.
While the petitioners are not absolutely precluded from
imposing the new policy, they can only do so upon compliance
with the requirements of the law. In other words, the
petitioners should first establish that the making of deductions
from the salaries is authorized by law, or regulations issued by
the Secretary of Labor. Further, the posting of cash bonds
should be proven as a recognized practice in the jewelry
manufacturing business, or alternatively, the petitioners should
seek for the determination by the Secretary of Labor through
the issuance of appropriate rules and regulations that the policy
the former seeks to implement is necessary or desirable in the
conduct of business. The petitioners failed in this respect. It
bears stressing that without proofs that requiring deposits and
effecting deductions are recognized practices, or without
securing the Secretary of Labor's determination of the
necessity or desirability of the same, the imposition of new
policies relative to deductions and deposits can be made
subject to abuse by the employers. This is not what the law
intends.

Balahadia, A. (USC-LLB 2, EH402)


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Page

8. PAYMENT OF WAGES
Congson vs. NLRC
G.R. No. 114250; April 5, 1995
FACTS:
Dominico C. Congson is the registered owner of Southern
Fishing Industry. Respondents were hired as piece-rate
employees uniformly paid at a rate of P1.00 per tuna weighing
thirty (30) to eighty (80) kilos per movement. They work for 7
days a week. Due to alleged scarcity of tuna, Congson notified
his proposal to reduce the rate-per-tuna movement. When they
reported the following day, they found out that they were
already replaced with new set of workers. They wanted to have
a dialogue with the management, but they waited in vain. Thus,
they filed a case before NLRC for underpayment of wages
(violation of the minimum wage law) and non-payment of
overtime pay, 13th month pay, holiday pay, rest day pay, and
five (5)-day service incentive leave pay; and for constructive
dismissal.
Petitioner conceded that his payment of wages falls below
the minimum wage law. He averred that NLRC should have
considered as forming a substantial part of private respondents'
total wages the cash value of the tuna liver and intestines
private respondents were entitled to retrieve. He argued that
the combined value of the cash wage and monetary value of
the tuna liver and intestines clearly exceeded the minimum
wage fixed by law.
Both the Labor Arbiter and the NLRC ruled in favor of the
respondents.
ISSUE:
Whether or not the form of payment by Congson is valid
pursuant to Article 102 of the Labor Code.
RULING:
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Petitioner's practice of paying the private respondents the


minimum wage by means of legal tender combined with tuna
liver and intestines runs counter to the above cited provision of
the Labor Code. The fact that said method of paying the
minimum wage was not only agreed upon by both parties in the
employment agreement but even expressly requested by
private respondents, does not shield petitioner. Article 102 of
the Labor Code is clear. Wages shall be paid only by means of
legal tender. The only instance when an employer is permitted
to pay wages informs other than legal tender, that is, by checks
or money order, is when the circumstances prescribed in the
second paragraph of Article 102 are present.

North Davao Mining vs. NLRC


G.R. No. 112546; March 13, 1996
FACTS:
Due to financial losses, North Davao Mining Corporation
laid off workers. Respondent Wilfredo Guillema is one among
several employees of North Davao who were separated by
reason of the companys closure on May 31, 1992. It appears
that, during the life of the petitioner corporation, from the
beginning of its operations in 1981 until its closure in 1992, it
had been giving separation pay equivalent to thirty (30) days
pay for every year of service. Moreover, inasmuch as the
region where North Davao operated was plagued by insurgency
and other peace and order problems, the employees had to
collect their salaries at a bank in Tagum, Davao del Norte, some
58 kilometers from their workplace and about 2 hours travel
time by public transportation; this arrangement lasted from
1981 up to 1990.
ISSUE:

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Whether or not time spent in collecting wages in a place


other than the place of employment is compensable
notwithstanding that the same is done during official time.
RULING:
SC, affirming the decision of the Labor Arbiter, finds that
the hours spent by complainants in collecting salaries at a bank
in Tagum, Davao del Norte shall be considered compensable
hours worked. Considering further the distance between
Amacan, Maco to Tagum which is 2 hours by travel and the
risks in commuting all the time in collecting complainants
salaries, would justify the granting of backwages equivalent to
two (2) days in a month as prayed for. Corollary, we likewise
hold respondents liable for the transportation expenses
incurred by complainants at P40.00 round trip fare during pay
days.
National Federation of Labor vs. CA
G.R. No. 149464; October 19, 2004
FACTS:
National Federation of Labor (NFL) was the duly registered
bargaining agent of the daily-and-monthly-paid rank-and-file
employees of SDPI in the Latuan rubber plantation. SDPI and
NFL executed a collective bargaining agreement (CBA) in which
they agreed that in case of permanent or temporary lay-off,
workers affected would be entitled to termination pay as
provided by the Labor Code. The 150 petitioners were dailyand-monthly paid employees of SDPI in the Latuan plantation
and were, likewise, members of NFL. The termination of the
petitioners employment was based on the closure of SDPI,
Latuan rubber plantation, as a consequence of the
implementation of CARL, which set the deadline for the
compulsory distribution of agricultural, including agro-industrial
lands ten years after the effectivity of the law. As a result, each
of the petitioners received his separation pay equivalent to
one-half month pay for every year of service, and other
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Page

benefits which were all lumped in one Metrobank check. The


petitioners simultaneously executed individual Released and
Quitclaim following the explanation to them by Executive
Labor Arbiter (ELA) Rhett Julius J. Plagata of the nature and
legal effects of the said quitclaims.
ISSUE:
Whether or not the check is a valid form of payment for
wages.
RULING:
SC held that the payments of separation pay and other
benefits in check are not in violation of Article 102 of the Labor
Code.
Payment by check- payment of wages by bank
checks, postal checks or money orders is allowed where
such manner of wage payment is customary on the date
of the effectivity of the Code, where it is stipulated in a
collective bargaining agreement, or where all of the
following conditions are met:
There is a bank or other facility for encashment
within a radius of one (1) kilometer from the
workplace;
The employer, or any of his agents or
representatives, does not receive any pecuniary
benefit
directly
or
indirectly
from
the
arrangement;
The employee are given reasonable time during
banking hours to withdraw their wages from the
bank which time shall be considered as
compensable hours worked if done during the
working hours; and
The payment by check is with the written
consent of the employees concerned if there is
Balahadia, A. (USC-LLB 2, EH402)
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Page

no collective agreement authorizing


payment of wages by bank checks.

the

In the present case, the petitioners separation pay, other


benefits, and the wages from January 1 to 17 were paid in
check. Strictly speaking, SDPI violated the Labor Code when it
included wages from January 1 to 17, 1998 in the check.
Considering, however, the amount of other monetary benefits
to be paid, payment in check was the most convenient form for
both the petitioners and the respondent.
House of Sara Lee vs. Rey
G.R. No. 149013; August 31, 2006
FACTS:
The House of Sara Lee (petitioner) is engaged in the direct
selling of a variety of product lines for men and women,
including cosmetics, intimate apparels, perfumes, ready to
wear clothes and other novelty items, through its various
outlets
nationwide.
It
employs
Credit
Administration
Supervisors (CAS) to supervise and monitor the credit collection
of the Independent Business Managers (IBMs) and Independent
Group Supervisors (IGSs). A 38- or 52-day rolling due date is
given to each of its IBMs and IGSs. CAS is under the direct
control and supervision of Branch Operations Manager (BOM).
Cynthia Rey was a CAS at the Cagayan de Oro Branch of the
petitioner. She was later transferred to Butuan City. While
respondent was still working in Butuan City, she allegedly
instructed the Accounts Receivable Clerk of the Cagayan de Oro
outlet, a certain Ms. Magi Caroline Mendoza, to change the
credit term of one of the IBMs of the petitioner, a certain Ms.
Mariam Rey-Petilla, who happens to be respondents sister-inlaw, from the 52-day limit to an unauthorized term of 60
days. Ms. Mendoza reported the matter to the BOM Villagracia.
Villagracia discreetly investigated the matter and found out
that it was not only Ms. Petilla who was given extensions to the
rolling due dates but other IBMs as well.
Balahadia, A. (USC-LLB 2, EH402)
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Page

On the basis of the hearing, the alleged voluntary


admissions of respondent, and the findings of the auditors
report, the petitioner formally dismissed the respondent for
breach of trust and confidence. The dismissal lead to
respondents filing of her Complaint for illegal dismissal,
backwages and damages, with the Labor Arbiter.
Both Labor Arbiter and the NLRC ruled in favor the
respondent.
ISSUE:
Whether or not respondent was dismissed for just cause.
RULING:
SC held that respondent was dismissed for just cause. In
the present case, the respondent is not an ordinary rank-andfile employee. The nature of her work requires a substantial
amount of trust and confidence on the part of the employer.
Being the Credit Administration Supervisor of the Cagayan de
Oro and Butuan City branches of the petitioner, respondent
occupied a highly sensitive and critical position and may thus
be dismissed on the ground of loss of trust and confidence.

Balahadia, A. (USC-LLB 2, EH402)


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Page

9. CONDITIONS OF EMPLOYMENT
San Juan de Dios Hospital vs. NLRC
G.R. No. 126383; November 28, 1997
FACTS:
Petitioners, the rank-and-file employee-union officers and
members of San Juan De Dios Hospital Employees Association
sent a letter requesting and pleading for the expeditious
implementation and payment by respondent Juan De Dios
Hospital of the 40 HOURS/5-DAY WORKWEEK with
compensable weekly two (2) days off provided for by Republic
Act 5901 as clarified for enforcement by the Secretary of
Labors Policy Instructions No. 54. RA 5901 seeks to reduce the
number of hospital personnel, considering the nature of their
work, and at the same time guarantee the payment to them of
a full weekly wage for seven (7) days. Respondent hospital
failed to give a favorable response; thus, petitioners filed a
complaint regarding their claims for statutory benefits under
the above-cited law and policy issuance. Both Labor Arbiter and
NLRC dismissed the complaint.
ISSUE:
Whether or not the Policy Instructions No. 54 issued by
then Labor Secretary (now Senator) Franklin M. Drilon is valid.
RULING:
The interpretation of Labor Secretary Drilon is not valid.
A cursory reading of Article 83 of the Labor Code betrays
petitioners position that hospital employees are entitled to
a full weekly salary with paid two (2) days off if they have
completed the 40-hour/5-day workweek. What Article 83
merely provides are: (1) the regular office hour of eight hours a
day, five days per week for health personnel, and (2) where the
exigencies of service require that health personnel work for six
days or forty-eight hours then such health personnel shall be
entitled to an additional compensation of at least thirty percent
of their regular wage for work on the sixth day. There is
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nothing in the law that supports then Secretary of Labors


assertion that personnel in subject hospitals and clinics are
entitled to a full weekly wage for seven (7) days if they have
completed the 40-hour/5-day workweek in any given
workweek. Needless to say, the Secretary of Labor exceeded
his authority by including a two days off with pay in
contravention of the clear mandate of the statute. Such act the
Court shall not countenance. Administrative interpretation of
the law, we reiterate, is at best merely advisory, and the Court
will not hesitate to strike down an administrative interpretation
that deviates from the provision of the statute.

Sime Darby vs. NLRC


G.R. No. 119205. April 15, 1998
FACTS:
Sime Darby Pilipinas, Inc., petitioner, is engaged in the
manufacture of automotive tires, tubes and other rubber
products. Sime Darby Salaried Employees Association (ALUTUCP), private respondent, is an association of monthly salaried
employees of petitioner at its Marikina factory. Prior to the
present controversy, all company factory workers in Marikina
including members of private respondent union worked from
7:45 a.m. to 3:45 p.m. with a 30 minute paid on call lunch
break. Petitioner issued a memorandum to all factory-based
employees advising all its monthly salaried employees in its
Marikina Tire Plant a change in work schedule and elimination
of the 30 minute paid on call lunch break. Private respondent
felt affected adversely by the change in the work schedule and
discontinuance of the 30-minute paid on call lunch break, it
filed on behalf of its members a complaint with the Labor
Arbiter for unfair labor practice, discrimination and evasion of
liability. Labor Arbiter and NLRC dismissed the complaint of the
union ratiocinating that the actuation of Sime Derby is an
exercise of management prerogative. Upon motion for
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reconsideration, NLRC reversed its decision and declared that


declared that the new work schedule deprived the employees
of the benefits of time-honored company practice of providing
its employees a 30-minute paid lunch break resulting in an
unjust diminution of company privileges prohibited by Art. 100
of the Labor Code.
ISSUE:
Whether or not the act of management in revising the
work schedule of its employees and discarding their paid lunch
break constitutive of unfair labor practice.
RULING:
SC ruled in favor the of the petitioners.
The right to fix the work schedules of the employees rests
principally on their employer. In the instant case petitioner, as
the employer, cites as reason for the adjustment the efficient
conduct of its business operations and its improved production.
It rationalizes that while the old work schedule included a 30minute paid lunch break, the employees could be called upon
to do jobs during that period as they were on call. Even if
denominated as lunch break, this period could very well be
considered as working time because the factory employees
were required to work if necessary and were paid accordingly
for working. With the new work schedule, the employees are
now given a one-hour lunch break without any interruption from
their employer. For a full one-hour undisturbed lunch break,
the employees can freely and effectively use this hour not only
for eating but also for their rest and comfort which are
conducive to more efficiency and better performance in their
work. Since the employees are no longer required to work
during this one-hour lunch break, there is no more need for
them to be compensated for this period. We agree with the
Labor Arbiter that the new work schedule fully complies with
the daily work period of eight (8) hours without violating the
Labor Code. Besides, the new schedule applies to all employees
in the factory similarly situated whether they are union
members or not.
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PAL vs. NLRC


G.R. No. 132805; February 2, 1999
FACTS:
Dr. Herminio A. Fabros was employed as flight surgeon at
petitioner company. He was assigned at the PAL Medical Clinic
at Nichols and was on duty from 4:00 in the afternoon until
12:00 midnight. While on meal break, an employee of the PAL
Cargo Services died due to a heart attack. PAL Medical Director
Dr. Godofredo B. Banzon ordered the Chief Flight Surgeon to
conduct an investigation. The Chief Flight Surgeon, in turn,
required private respondent to explain why no disciplinary
sanction should be taken against him. In his explanation,
private respondent asserted that he was entitled to a thirtyminute meal break; that he immediately left his residence upon
being informed by Mr. Eusebio, nurse, about the emergency
and he arrived at the clinic a few minutes later; that Mr.
Eusebio panicked and brought the patient to the hospital
without waiting for him. Finding private respondents
explanation unacceptable, the management charged private
respondent with abandonment of post while on duty. He was
given ten days to submit a written answer to the administrative
charge. In his answer, private respondent reiterated the
assertions in his previous explanation. He further denied that
he abandoned his post. After evaluating the charge as well as
the answer of private respondent, petitioner company decided
to suspend private respondent for three months. Private
respondent filed a complaint for illegal suspension against
petitioner.
Both Labor Arbiter and NLRC declared the suspension
illegal.
ISSUE:
Whether or not Dr. Herminio Fabros act of leaving the
company premises during his break constitutes abandonment
of post which warrants suspension.
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RULING:
The eight-hour work period does not include the meal
break. Nowhere in the law may it be inferred that employees
must take their meals within the company premises.
Employees are not prohibited from going out of the premises as
long as they return to their posts on time. Private respondents
act, therefore, of going home to take his dinner does not
constitute abandonment.

Linton Commercial Co., Inc. vs. Hellera


G.R. No. 163147; October 10, 2007
FACTS:
Linton is a domestic corporation engaged in the business
of importation, wholesale, retail and fabrication of steel and its
by-products. Due to the Asian Financial Crisis, it decided to
suspend its operations from 18 December 1997 to 5 January
1998 and submitted it to DOLE. It submitted another
memorandum informing them that effective 12 January 1998, it
would implement a new compressed workweek of three (3)
days on a rotation basis. In other words, each worker would be
working on a rotation basis for three working days only instead
for six days a week. On the same day, Linton submitted an
establishment termination report concerning the rotation of its
workers. Linton proceeded with the implementation of the new
policy without waiting for its approval by DOLE. Aggrieved,
sixty-eight (68) workers (workers) filed a Complaint for illegal
reduction of workdays with the NLRC. The workers pointed out
that Linton implemented the reduction of work hours without
observing Article 283 of the Labor Code, which required
submission of notice thereof to DOLE one month prior to the
implementation of reduction of personnel, since Linton filed
only the establishment termination report enacting the
compressed workweek on the very date of its implementation.
Petitioner claimed that due to the currency crisis it suffered

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considerable losses and the reduction of the working hours was


instituted as a cost-cutting measure.
ISSUE:
Whether or not there was an illegal reduction of work
when Linton implemented a compressed workweek by reducing
from six to three the number of working days with the
employees working on a rotation basis.
RULING:
The compressed workweek arrangement was unjustified
and illegal. Petitioners committed illegal reduction of work
hours.
For the reduction of working hours to be valid, it must take
into consideration the following: the arrangement was
temporary, it was a more humane solution instead of a
retrenchment of personnel, there was notice and consultations
with the workers and supervisors, a consensus were reached on
how to deal with deteriorating economic conditions and it was
sufficiently proven that the company was suffering from losses.
This case was done through a reduced workweek that
resulted in an unsettling diminution of the periodic pay for a
protracted period. Permitting reduction of work and pay at the
slightest indication of losses would be contrary to the States
policy to afford protection to labor and provide full employment.
Certainly, management has the prerogative to come up with
measures to ensure profitability or loss minimization. However,
such privilege is not absolute. Management prerogative must
be exercised in good faith and with due regard to the rights of
labor.

Bisig Manggagawa sa Tryco vs. NLRC


G.R. No. 151309; October 15, 2008
FACTS:

Balahadia, A. (USC-LLB 2, EH402)


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Tryco Pharma Corporation (Tryco) is a manufacturer of


veterinary medicines and its principal office is located in
Caloocan City. Petitioners Joselito Lario, Vivencio Barte,
Saturnino Egera and Simplicio Aya-ay are its regular employees,
occupying the positions of helper, shipment helper and factory
workers, respectively, assigned to the Production Department.
They are members of Bisig Manggagawa sa Tryco (BMT), the
exclusive bargaining representative of the rank-and-file
employees. Tryco and the petitioners signed separate
Memoranda of Agreement (MOA), providing for a compressed
workweek schedule to be implemented in the company
effective May 20, 1996. As provided in the MOA, 8:00 a.m. to
6:12 p.m., from Monday to Friday, shall be considered as the
regular working hours, and no overtime pay shall be due and
payable to the employee for work rendered during those hours.
ISSUE:
Whether or not the MOA is valid and enforceable.
RULING:
SC held that the MOA is enforceable and valid. We do not
agree with the petitioners' assertion that the MOA is not
enforceable as it is contrary to law. The MOA is enforceable and
binding against the petitioners. Where it is shown that the
person making the waiver did so voluntarily, with full
understanding of what he was doing, and the consideration for
the quitclaim is credible and reasonable, the transaction must
be recognized as a valid and binding undertaking.
Notably, the MOA complied with the following conditions set by
the DOLE, under D.O. No. 21, to protect the interest of the
employees in the implementation of a compressed workweek
scheme:
The employees voluntarily agree to work more than
eight (8) hours a day the total in a week of which
shall not exceed their normal weekly hours of work
prior to adoption of the compressed workweek
arrangement;
Balahadia, A. (USC-LLB 2, EH402)
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There will not be any diminution whatsoever in the


weekly or monthly take-home pay and fringe benefits
of the employees;
If an employee is permitted or required to work in
excess of his normal weekly hours of work prior to
the adoption of the compressed workweek scheme,
all such excess hours shall be considered overtime
work and shall be compensated in accordance with
the provisions of the Labor Code or applicable
Collective Bargaining Agreement (CBA);
Appropriate waivers with respect to overtime
premium pay for work performed in excess of eight
(8) hours a day may be devised by the parties to the
agreement.
The effectivity and implementation of the new
working time arrangement shall be by agreement of
the parties.

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10.

MINIMUM STANDARD BENEFITS

Union of Filipino Employees vs. Vicar


G.R. No. 79255; January 20, 1992
FACTS:
On November 8, 1985, respondent Filipro, Inc. (now Nestle
Philippines, Inc.) filed with the National Labor Relations
Commission a petition for declaratory relief seeking a ruling on
its rights and obligations respecting claims of its monthly paid
employees for holiday pay.
Both Filipro and the Union of Filipro Employees (UFE)
agreed to submit the case for voluntary arbitration and
appointed respondent Benigno Vivar, Jr. as voluntary arbitrator.
Arbitrator Vivar rendered a decision directing Filipro to pay its
monthly paid employees holiday pay pursuant to Article 94 of
the Code, subject only to the exclusions and limitations
specified in Article 82 and such other legal restrictions as are
provided for in the Code.
However, the respondent arbitrator refused to take
cognizance of the case reasoning that he had no more
jurisdiction to continue as arbitrator because he had resigned
from service effective May 1, 1986.
ISSUE:
Whether or not sales personnel are excluded in the
payment of holiday pay.
RULING:
The Court ruled that field personnel are not entitled to
such pay.
Under Article 82, field personnel are not entitled to holiday
pay. Said article defines field personnel as "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."
Balahadia, A. (USC-LLB 2, EH402)
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The controversy centers on the interpretation of the clause


"whose actual hours of work in the field cannot be determined
with reasonable certainty." It is undisputed that these sales
personnel start their field work at 8:00 a.m. after having
reported to the office and come back to the office at 4:00 p.m.
or 4:30 p.m. if they are Makati-based.
The petitioner maintains that the period between 8:00
a.m. to 4:00 or 4:30 p.m. comprises the sales personnel's
working hours which can be determined with reasonable
certainty.
The Court does not agree. The law requires that the actual
hours of work in the field be reasonably ascertained. The
company has no way of determining whether or not these sales
personnel, even if they report to the office before 8:00 a.m.
prior to field work and come back at 4:30 p.m., really spend the
hours in between in actual field work.
The Court concurs with the arbitrator when it disposed
that the requirement for the salesmen and other similarly
situated employees to report for work at the office at 8:00 a.m.
and return at 4:00 or 4:30 p.m. is not within the realm of work
in the field as defined in the Code but an exercise of purely
management prerogative of providing administrative control
over such personnel. This does not in any manner provide a
reasonable level of determination on the actual field work of
the employees which can be reasonably ascertained. Actual
field work begins after 8:00 a.m. when the sales personnel
follow their field itinerary, and ends immediately before 4:00 or
4:30 p.m. when they report back to their office. The period
between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours
of work in the field, the extent or scope and result of which are
subject to their individual capacity and industry and which
'cannot be determined with reasonable certainty.' This is the
reason why effective supervision over field work of salesmen
and medical representatives, truck drivers and merchandisers
is practically a physical impossibility. Consequently, they are
excluded from the ten holidays with pay.
Moreover, the requirement that "actual hours of work in
the field cannot be determined with reasonable certainty" must
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be read in conjunction with Rule


Implementing Rules which provides:

IV,

Book

III

of

the

"Rule IV Holidays with Pay. SECTION 1. Coverage. This


rule shall apply to all employees except: (e) Field
personnel and other employees whose time and
performance is unsupervised by the employer.
The Court finds that the rule did not add another element
to the Labor Code definition of field personnel. The clause
"whose time and performance is unsupervised by the
employer" did not amplify but merely interpreted and
expounded the clause "whose actual hours of work in the field
cannot be determined with reasonable certainty." The former
clause is still within the scope and purview of Article 82 which
defines field personnel. Hence, in deciding whether or not an
employee's actual working hours in the field can be determined
with reasonable certainty, query must be made as to whether
or not such employee's time and performance is constantly
supervised by the employer.
The petitioner claims that the fact that these sales
personnel are given incentive bonus every quarter based on
their performance is proof that their actual hours of work in the
field can be determined with reasonable certainty. The Court
thinks otherwise.
The criteria for granting incentive bonus are:
(1) attaining or exceeding sales volume based on
sales target;
(2) good collection performance;
(3) proper compliance with good market hygiene;
(4) good merchandising work;
(5) minimal market returns and
(6) proper truck maintenance.

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The above criteria indicate that these sales personnel are


given incentive bonuses precisely because of the difficulty in
measuring their actual hours of field work. These employees
are evaluated by the result of their work and not by the actual
hours of field work which are hardly susceptible to
determination.
In San Miguel Brewery, Inc. v. Democratic Labor
Organization, the Court had occasion to discuss the nature of
the job of a salesman. It states that:
"The reasons for excluding an outside salesman are fairly
apparent. Such a salesman, to a greater extent, works
individually. There are no restrictions respecting the time he
shall work and he can earn as much or as little, within the
range of his ability, as his ambition dictates. In lieu of overtime
he ordinarily receives commissions as extra compensation. He
works away from his employer's place of business, is not
subject to the personal supervision of his employer, and his
employer has no way of knowing the number of hours he works
per day."

National Sugar Refinery Corp. , vs. NLRC


G.R. No. 101761 March 24, 1993
FACTS:
Petitioner
National
Sugar
Refineries
Corporation
(NASUREFCO), a corporation which is fully owned and controlled
by the Government, operates three (3) sugar refineries located
at Bukidnon, Iloilo and Batangas. The Batangas refinery was
privatized on April 11, 1992 pursuant to Proclamation No. 50.
Private respondent union represents the former
supervisors of the NASUREFCO Batangas Sugar Refinery,
namely, the Technical Assistant to the Refinery Operations
Manager,
Shift
Sugar
Warehouse
Supervisor,
Senior
Financial/Budget Analyst, General Accountant, Cost Accountant,
Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler
Supervisor,, Shift Operations Chemist, Shift Electrical
Supervisor, General Services Supervisor, Instrumentation
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Supervisor, Community Development Officer, Employment and


Training Supervisor, Assistant Safety and Security Officer, Head
and Personnel Services, Head Nurse, Property Warehouse
Supervisor, Head of Inventory Control Section, Shift Process
Supervisor, Day Maintenance Supervisor and Motorpool
Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation
(JE) Program affecting all employees, from rank-and-file to
department heads which was designed to rationalized the
duties and functions of all positions, reestablish levels of
responsibility, and recognize both wage and operational
structures. Jobs were ranked according to effort, responsibility,
training and working conditions and relative worth of the job. As
a result, all positions were re-evaluated, and all employees
including the members of respondent union were granted
salary adjustments and increases in benefits commensurate to
their actual duties and functions.
The Courts glean from the records that for about ten years
prior to the JE Program, the members of respondent union were
treated in the same manner as rank-and file employees. As
such, they used to be paid overtime, rest day and holiday pay
pursuant to the provisions of Articles 87, 93 and 94 of the Labor
Code as amended. On May 11, 1990, petitioner NASUREFCO
recognized herein respondent union, which was organized
pursuant to Republic Act NO. 6715 allowing supervisory
employees to form their own unions, as the bargaining
representative of all the supervisory employees at the
NASUREFCO Batangas Sugar Refinery. Two years after the
implementation of the JE Program, specifically on June 20,
1990, the members of herein respondent union filed a
complainant with the executive labor arbiter for non-payment
of overtime, rest day and holiday pay allegedly in violation of
Article 100 of the Labor Code.
ISSUE:
Whether or not the members of respondent union are
entitled to overtime, rest day and holiday pay.
RULING:
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The members of the union are not entitled to overtime,


rest and holiday pay since they fall within the classification of
managerial employees which makes them a part of the
exempted employees.
It must of necessity be ascertained first whether or not the
union members, as supervisory employees, are to be
considered as officers or members of the managerial staff who
are exempt from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union
are supervisory employees, as defined employees, as defined
under Article 212(m), Book V of the Labor Code on Labor
Relations, which reads: 'Managerial employee' is one who is
vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off,
recall, discharged, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer
effectively recommend such managerial actions if the exercise
of such authority is not merely routinary or clerical in nature
but requires the use of independent judgment. All employees
not falling within any of those above definitions are considered
rank-and-file employees of this Book."
Article 82 of the Labor Code states: The provisions of this
title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members
of the family of the employer who are dependent on him for
support, domestic helpers, persons in the personal service of
another, and workers who are paid by results as determined by
the Secretary of Labor in Appropriate regulations.
As used herein, 'managerial employees' refer to those
whose primary duty consists of the management of the
establishment in which they are employed or of a department
or subdivision thereof, and to other officers or members of the
managerial staff.
'Sec. 2. Exemption. The provisions of this rule shall
not apply to the following persons if they qualify for exemption
under the condition set forth herein:
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(b) Managerial employees, if they meet all of the


following conditions, namely:

(c)

(1)

Their primary duty consists of the management


of the establishment in which they are
employed or of a department or subdivision
thereof:

(2)

They customarily and regularly direct the work


of two or more employees therein:

(3)

They have the authority to hire or fire other


employees of lower rank; or their suggestions
and recommendations as to the hiring and firing
and as to the promotion or any other change of
status of other employees are given particular
weight.

Officers or members of a managerial staff if they


perform the following duties and responsibilities:
(1)

The primary duty consists of the performance of


work directly related to management policies of
their employer;

(2)

Customarily and regularly exercise discretion


and independent judgment;

(3)

(i) Regularly and directly assist a proprietor or a


managerial employee whose primary duty
consists
of
the
management
of
the
establishment in which he is employed or
subdivision thereof; or
(ii) execute under general supervision work
along specialized or technical lines requiring
special training, experience, or knowledge; or

(iii) execute under general supervision special


assignments and tasks;
(4)

Who do not devote more 20 percent of their


hours worked in a work-week to activities which
are not directly and closely related to the

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performance of the work


paragraphs (1), (2), and above."

described

in

They are clearly officers or members of the managerial


staff because they meet all the conditions prescribed by law
and, hence, they are not entitled to overtime, rest day and
supervisory employees under Article 212 (m) should be made
to apply only to the provisions on Labor Relations, while the
right of said employees to the questioned benefits should be
considered in the light of the meaning of a managerial
employee and of the officers or members of the managerial
staff, as contemplated under Article 82 of the Code and Section
2, Rule I Book III of the implementing rules.
In other words, for purposes of forming and joining unions,
certification elections, collective bargaining, and so forth, the
union members are supervisory employees. In terms of working
conditions and rest periods and entitlement to the questioned
benefits, however, they are officers or members of the
managerial staff, hence they are not entitled thereto.
The union members will readily show that these
supervisory employees are under the direct supervision of their
respective department superintendents and that generally they
assist the latter in planning, organizing, staffing, directing,
controlling communicating and in making decisions in attaining
the company's set goals and objectives. These supervisory
employees are likewise responsible for the effective and
efficient operation of their respective departments.
More specifically, their duties and functions include,
among others, the following operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to
department activities;
b) organizing and scheduling of work activities of the
department, which
includes employee shifting scheduled and manning
complement;
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c) decision making by providing relevant information


data and other inputs;
d) attaining the company's set goals and objectives
by giving his full support;
e) selecting the appropriate man to handle the job in
the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at
all times and recommends disciplinary action on erring
subordinates;
3) trains and guides subordinates on how to assume
responsibilities and become more productive;
4) conducts semi-annual performance evaluation of his
subordinates and recommends necessary action for their
development/advancement;
5) represents the superintendent or the department when
appointed and authorized by the former;
6) coordinates and communicates with other inter and
intra department supervisors when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods,
equipment performance, quality of service and working
conditions;
9) sees to it that safety rules and regulations and
procedure and are implemented and followed by all
NASUREFCO employees, recommends revisions or
modifications to said rules when deemed necessary, and
initiates and prepares reports for any observed
abnormality within the refinery;
10) supervises the activities of all personnel under him
and goes to it that instructions to subordinates are
properly implemented; and

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11) performs other related tasks as may be assigned by


his immediate superior.

From the foregoing, it is apparent that the members of


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

Under the facts obtaining in this case, The Court is


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

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Salazar vs. NLRC


G.R. No. 109210; April 17, 1996
FACTS:
On April 1990, private respondent employed petitioner as
construction/project engineer for the construction of the Monte
de Piedad building in Cubao, Quezon City. Allegedly, by virtue of
an oral contract, petitioner would also receive a share in the
profits after completion of the project and that petitioner's
services in excess of eight (8) hours on regular days and
services rendered on weekends and legal holidays shall be
compensable overtime at the rate of P27.85 per hour.
On 16 April 1991, petitioner received a memorandum
issued by private respondent's project manager, Engr. Nestor A.
Delantar informing him of the termination of his services
effective on 30 April 1991.
On 13 September 1991, petitioner filed a complaint
against private respondent for illegal dismissal, unfair labor
practice, illegal deduction, non-payment of wages, overtime
rendered, service incentive leave pay, commission, allowances,
profit-sharing and separation pay with the NLRC-NCR
Arbitration Branch, Manila.
ISSUE:
Whether or not petitioner is entitled to separation pay.
RULING:
The petitioner is not entitled to separation pay. Petitioner
admitted that his job was to supervise the laborers in the
construction project. Hence, although petitioner cannot strictly
be classified as a managerial employee under Art. 82 of the
Labor Code, and sec. 2(b), Rule 1, Book III of the Omnibus Rules
Implementing the Labor Code, nonetheless he is still not
entitled to payment of the aforestated benefits because he falls
squarely under another exempt category "officers or
members of a managerial staff" as defined under sec. 2(c) of
the abovementioned implementing rules:

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SECTION 2.
Exemption. The provisions of this Rule
shall not apply to the following persons if they qualify for
exemption under the condition set forth herein:
(c) Officers or members of a managerial staff if they
perform the following duties and responsibilities:
(1) The primary duty consists of the performance of
work directly related to management policies of their
employer;
(2) Customarily and regularly exercise discretion and
independent judgment;
(3) [i] Regularly and directly assist a proprietor or a
managerial employee whose primary duty consists of
the management of the establishment in which he is
employed or subdivision thereof; or
[ii] execute under general supervision work along
specialized or technical lines requiring special
training, experience, or knowledge; or
[iii] execute under general supervision special
assignments and tasks; and
(4) who do not devote more than 20 percent of their
hours worked in a work-week to activities which are
not directly and closely related to the performance of
the work described in paragraphs (1), (2), and (3)
above.

The petitioner was paid overtime benefits does not


automatically and necessarily denote that petitioner is entitled
to such benefits. Art. 82 of the Labor Code specifically
delineates who are entitled to the overtime premiums and
service incentive leave pay provided under Art. 87, 93, 94 and
95 of the Labor Code and the exemptions thereto.

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As previously determined petitioner falls under the


exemptions and therefore has no legal claim to the said
benefits. It is well and good that petitioner was compensated
for his overtime services. However, this does not translate into
a right on the part of petitioner to demand additional payment
when, under the law, petitioner is clearly exempted there from.
Labor Congress of the Phils., vs. NLRC
G.R. No. 1239381; May 21, 1998
FACTS:
The 99 persons named as petitioners in this proceeding
were rank-and-file employees of respondent Empire Food
Products, which hired them on various dates. Petitioners filed
against private respondents a complaint for payment of money
claims and for violation of labor standards laws They also filed
a petition for direct certification of petitioner Labor Congress of
the Philippines as their bargaining representative. In an Order
dated October 24, 1990, Mediator Arbiter approved the
memorandum of agreement and certified LCP "as the sole and
exclusive bargaining agent among the rank-and-file employees
of Empire Food Products for purposes of collective bargaining
with respect to wages, hours of work and other terms and
conditions of employment".
On November 1990, petitioners through LCP President
Navarro submitted to private respondents a proposal for
collective bargaining. On January 1991, petitioners filed a
complaint against private respondents for Unfair Labor Practice
by way of Illegal Lockout and/or Dismissal; Union busting thru
Harassments [sic], threats, and interfering with the rights of
employees to self-organization; Violation of the Memorandum of
Agreement dated October 23, 1990; Underpayment of Wages in
violation of R.A. No. 6640 and R.A. No. 6727, such as Wages
promulgated by the Regional Wage Board; Actual, Moral and
Exemplary Damages."
ISSUE:

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Whether or not the petitioners are entitled to labor


standard benefits considering they are paid by piece rate
worker.
RULING:
The petitioners are so entitled to these benefits namely,
holiday pay, premium pay, 13th month pay and service
incentive leave. Three (3) factors lead us to conclude that
petitioners, although piece-rate workers, were regular
employees of private respondents. First, as to the nature of
petitioners' tasks were necessary or desirable in the usual
business of private respondents, who were engaged in the
manufacture and selling of such food products; second,
petitioners worked for private respondents throughout the year,
and third, the length of time that petitioners worked for private
respondents. Thus, while petitioners' mode of compensation
was on a "per piece basis," the status and nature of their
employment was that of regular employees.

The Rules Implementing the Labor Code exclude certain


employees from receiving benefits such as nighttime pay,
holiday pay, service incentive leave and 13th month pay, "field
personnel and other employees whose time and performance is
unsupervised by the employer, including those who are
engaged on task or contract basis, purely commission basis, or
those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof."
Plainly, petitioners as piece-rate workers do not fall within
this group. As mentioned earlier, not only did petitioners labor
under the control of private respondents as their employer,
likewise did petitioners toil throughout the year with the
fulfillment of their quota as supposed basis for compensation.
Further, in Section 8(b), Rule IV, Book III which we quote
hereunder, piece workers are specifically mentioned as being
entitled to holiday pay.
SEC. 8. Holiday pay of certain employees.

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(b) Where a covered employee is paid by results or


output, such as payment on piece work, his holiday pay
shall not be less than his average daily earnings for the
last seven (7) actual working days preceding the regular
holiday: Provided, however, that in no case shall the
holiday pay be less than the applicable statutory minimum
wage rate.
In addition, the Revised Guidelines on the Implementation
of the 13th Month Pay Law, in view of the modifications to P.D.
No. 851 19 by Memorandum Order No. 28, clearly exclude the
employer of piece rate workers from those exempted from
paying 13th month pay, to wit:

EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:
d.

Employers of those who are paid on purely commission,


boundary or task basis, and those who are paid a fixed
amount for performing specific work, irrespective of the
time consumed in the performance thereof, except
where the workers are paid on piece-rate basis in which
case the employer shall grant the required 13th month
pay to such workers.

The Revised Guidelines as well as the Rules and


Regulations identify those workers who fall under the piece-rate
category as those who are paid a standard amount for every
piece or unit of work produced that is more or less regularly
replicated, without regard to the time spent in producing the
same.
As to overtime pay, the rules, however, are different.
According to Sec 2(e), Rule I, Book III of the Implementing
Rules, workers who are paid by results including those who are
paid on piece-work, takay, pakiao, or task basis, if their output
rates are in accordance with the standards prescribed under
Sec. 8, Rule VII, Book III, of these regulations, or where such
rates have been fixed by the Secretary of Labor in accordance
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with the aforesaid section, are not entitled to receive overtime


pay. As such, petitioners are beyond the ambit of exempted
persons and are therefore entitled to overtime pay.

Mercidar Fishing Corp., vs. NLRC


G.R. No. 112574; October 8, 1998
FACTS:
This case originated from a complaint filed on September
20, 1990 by private respondent Fermin Agao, Jr. against
petitioner for illegal dismissal, violation of P.D. No. 851, and
non-payment of five days service incentive leave for 1990.
Private respondent had been employed as a "bodegero" or
ship's quartermaster on February 12, 1988. He complained that
he had been constructively dismissed by petitioner when the
latter refused him assignments aboard its boats after he had
reported to work on May 28, 1990.
Private respondent alleged that he had been sick and thus
allowed to go on leave without pay for one month from April 28,
1990 but that when he reported to work at the end of such
period with a health clearance, he was told to come back
another time as he could not be reinstated immediately.
Thereafter, petitioner refused to give him work. For this reason,
private respondent asked for a certificate of employment from
petitioner on September 6, 1990. However, when he came back
for the certificate on September 10, petitioner refused to issue
the certificate unless he submitted his resignation. Since
private respondent refused to submit such letter unless he was
given separation pay, petitioner prevented him from entering
the premises.
Petitioner, on the other hand, alleged that it was private
respondent who actually abandoned his work.
ISSUE:
Whether or not the fishing crew members are considered
field personnel as classified in Art. 82 of the Labor Code.
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Page

RULING:
Art. 82 of the Labor Code provides: The provisions of this
title [Working Conditions and Rest Periods] shall apply to
employees in all establishments and undertakings whether for
profit or not, but not to government employees, field personnel,
members of the family of the employer who are dependent on
him for support, domestic helpers, persons in the personal
service of another, and workers who are paid by results as
determined by the Secretary of Labor in appropriate
regulations.
"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.
In contrast, in the case at bar, during the entire course of
their fishing voyage, fishermen employed by petitioner have no
choice but to remain on board its vessel. Although they perform
non-agricultural work away from petitioner's business offices,
the fact remains that throughout the duration of their work they
are under the effective control and supervision of petitioner
through the vessel's patron or master.
San Miguel Corp., vs. CA
G.R. No. 146775; Jan. 30, 2000
FACTS:
On 17 October 1992, the Department of Labor and
Employment conducted a routine inspection in the premises of
San Miguel Corporation in Sta. Filomena, Iligan City. In the
course of the inspection, it was discovered that there was
underpayment by SMC of regular Muslim holiday pay to its
employees. DOLE sent a copy of the inspection result to SMC
and it was received by and explained to its personnel officer
Elena dela Puerta.
SMC contested the findings and DOLE conducted summary
hearings on 19 November 1992, 28 May 1993 and 4 and 5
October 1993. Still, SMC failed to submit proof that it was
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paying regular Muslim holiday pay to its employees. Hence,


Director IV of DOLE Iligan District Office issued a compliance
order directing SMC to consider Muslim holidays as regular
holidays and to pay both its Muslim and non-Muslim employees
holiday pay within thirty (30) days from the receipt of the order.
SMC appealed but it was dismissed.
ISSUE:
Whether or not the employees are entitled with regular
Muslim holiday pay.
RULING:
The employees are entitled to regular Muslim holiday pay.
Muslim holidays are provided under Articles 169 and 170, Title
I, Book V, of Presidential Decree No. 1083, otherwise known as
the Code of Muslim Personal Laws, which states: Official Muslim
holidays. The following are hereby recognized as legal
Muslim holidays:
(a) 'Amun Jadd (New Year), which falls on the first day of
the first lunar month of Muharram;
(b) Maulid-un-Nab (Birthday of the Prophet Muhammad),
which falls on the twelfth day of the third lunar month of
Rabi-ul-Awwal,
(c) Lailatul Isr Wal Mi'rj (Nocturnal Journey and
Ascension of the Prophet Muhammad), which falls on the
twenty-seventh day of the seventh lunar month of Rajab:
(d) 'd-ul-Fitr (Hari Raya Puasa), which falls on the first day
of the tenth lunar month of Shawwal, commemorating the
end of the fasting season; and
(e) 'd-ul-Adh (Hari Raya Haji),which falls on the tenth day
of the twelfth lunar month of Dh'l-Hijja.

Art. 170 provides the provinces and cities where officially


observed. (1) Muslim holidays shall be officially observed in
the Provinces of Basilan, Lanao del Norte, Lanao del Sur,
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Maguindanao, North Cotabato, Iligan, Marawi, Pagadian, and


Zamboanga and in such other Muslim provinces and cities as
may hereafter be created; (2) Upon
proclamation
by
the
President of the Philippines, Muslim holidays may also be
officially observed in other provinces and cities.
The foregoing provisions should be read in conjunction
with Article 94 of the Labor Code, which provides: Right to
holiday pay. (a) Every worker shall be paid his regular daily
wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any
holiday but such employee shall be paid a compensation
equivalent to twice his regular rate.
However, there should be no distinction between Muslims
and non-Muslims as regards payment of benefits for Muslim
holidays. The Court reminds the respondent-appellant that
wages and other emoluments granted by law to the working
man are determined on the basis of the criteria laid down by
laws and certainly not on the basis of the worker's faith or
religion.
At any rate, Article 3(3) of Presidential Decree No. 1083
also declares that ". . . nothing herein shall be construed to
operate to the prejudice of a non-Muslim." In addition, the 1999
Handbook on Workers' Statutory Benefits states considering
that all private corporations, offices, agencies, and entities or
establishments operating within the designated Muslim
provinces and cities are required to observe Muslim holidays,
both Muslim and Christians working within the Muslim areas
may not report for work on the days designated by law as
Muslim holidays.

Tan vs. Lagrama


G.R. No. 151228; August 15, 2002
FACTS:

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Petitioner Rolando Tan is the president of Supreme Theater


Corporation and the general manager of Crown and Empire
Theaters in Butuan City. Private respondent Leovigildo Lagrama
is a painter, making ad billboards and murals for the motion
pictures shown at the Empress, Supreme, and Crown Theaters
for more than 10 years, from September 1, 1988 to October 17,
1998.
On October 17, 1998, private respondent Lagrama was
summoned by Tan and upbraided: "Nangihi na naman ka sulod
sa imong drawinganan." ("You again urinated inside your work
area.") When Lagrama asked what Tan was saying, Tan told
him, "Ayaw daghang estorya. Dili ko gusto nga mo-drawing ka
pa. Guikan karon, wala nay drawing. Gawas." ("Don't say
anything further. I don't want you to draw anymore. From now
on, no more drawing. Get out.")
Lagrama denied the charge against him. He claimed that
he was not the only one who entered the drawing area and
that, even if the charge was true, it was a minor infraction to
warrant his dismissal. However, everytime he spoke, Tan
shouted "Gawas" ("Get out"), leaving him with no other choice
but to leave the premises. Lagrama filed a complaint with the
National Labor Relations Commission (NLRC) in Butuan City. He
alleged that he had been illegally dismissed and sought
reinvestigation and payment of 13th month pay, service
incentive leave pay, salary differential, and damages.
As no amicable settlement had been reached, Labor
Arbiter Rogelio P. Legaspi directed the parties to file their
position papers. It declared that the dismissal illegal and order
the payment of monetary benefits. Tan appealed to the NLRC
and reversing the decision of the Labor Arbiter.
ISSUE:
Whether or not the respondent was illegally dismissed and
thus entitled to payment of benefits provided by law.
RULING:
The respondent was illegally dismissed and entitled to
benefits. The Implementing Rules of the Labor Code provide
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that no worker shall be dismissed except for a just or


authorized cause provided by law and after due process. This
provision has two aspects: (1) the legality of the act of
dismissal, that is, dismissal under the grounds provided for
under Article 282 of the Labor Code and (2) the legality in the
manner of dismissal. The illegality of the act of dismissal
constitutes discharge without just cause, while illegality in the
manner of dismissal is dismissal without due process.
In this case, by his refusal to give Lagrama work to do and
ordering Lagrama to get out of his sight as the latter tried to
explain his side, petitioner made it plain that Lagrama was
dismissed. Urinating in a work place other than the one
designated for the purpose by the employer constitutes
violation of reasonable regulations intended to promote a
healthy environment under Art. 282(1) of the Labor Code for
purposes of terminating employment, but the same must be
shown by evidence. Here there is no evidence that Lagrama did
urinate in a place other than a rest room in the premises of his
work.
Instead of ordering his reinstatement as provided in Art.
279 of the Labor Code, the Labor Arbiter found that the
relationship between the employer and employee has been so
strained that the latter's reinstatement would no longer serve
any purpose. The parties do not dispute this finding. Hence, the
grant of separation pay in lieu of reinstatement is appropriate.
This is of course in addition to the payment of backwages
which, in accordance with the ruling in Bustamante v. NLRC
should be computed from the time of Lagrama's dismissal up to
the time of the finality of this decision, without any deduction
or qualification.
The Bureau of Working Conditions 32 classifies workers
paid by results into two groups, namely; (1) those whose time
and performance is supervised by the employer, and (2) those
whose time and performance is unsupervised by the employer.
The first involves an element of control and supervision over
the manner the work is to be performed, while the second does
not. If a piece worker is supervised, there is an employeremployee relationship, as in this case. However, such an
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employee is not entitled to service incentive leave pay since, as


pointed out in Makati Haberdashery v. NLRC 33 and Mark Roche
International v. NLRC, 34 he is paid a fixed amount for work
done, regardless of the time he spent in accomplishing such
work.
Lambo vs. NLRC
G.R. No. 111042; October 26, 1999
FACTS:
Petitioners Avelino Lambo and Vicente Belocura were
employed as tailors by private respondents J.C. Tailor Shop
and/or Johnny Co on September 10, 1985 and March 3, 1985,
respectively. They worked from 8:00 a.m. to 7:00 p.m. daily,
including Sundays and holidays. As in the case of the other 100
employees of private respondents, petitioners were paid on a
piece-work basis, according to the style of suits they made.
Regardless of the number of pieces they finished in a day, they
were each given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against
private respondents for illegal dismissal and sought recovery of
overtime pay, holiday pay, premium pay on holiday and rest
day, service incentive leave pay, separation pay, 13th month
pay, and attorneys fees. After hearing, Labor Arbiter found
private respondents guilty of illegal dismissal and accordingly
ordered them to pay petitioners claims. On appeal, the NLRC
reversed the decision of the Labor Arbiter. The NLRC held
petitioners guilty of abandonment of work and accordingly
dismissed their claims except that for 13th month pay.
Petitioners allege that they were dismissed by private
respondents as they were about to file a petition with the
Department of Labor and Employment (DOLE) for the payment
of benefits such as Social Security System (SSS) coverage, sick
leave and vacation leave. They deny that they abandoned their
work.
ISSUE:

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Whether or not the petitioners are entitled to the


minimum benefits provided by law.
RULING:
The petitioners are entitled to the minimum benefits
provided by law. There is no dispute that petitioners were
employees of private respondents although they were paid not
on the basis of time spent on the job but according to the
quantity and the quality of work produced by them. There are
two categories of employees paid by results: (1) those whose
time and performance are supervised by the employer. (Here,
there is an element of control and supervision over the manner
as to how the work is to be performed. A piece-rate worker
belongs to this category especially if he performs his work in
the company premises.); and
(2) those whose time and
performance are unsupervised. (Here, the employers control is
over the result of the work. Workers on pakyao and takay basis
belong to this group.) Both classes of workers are paid per unit
accomplished.
Piece-rate payment is generally practiced in garment
factories where work is done in the company premises, while
payment on pakyao and takay basis is commonly observed in
the agricultural industry, such as in sugar plantations where the
work is performed in bulk or in volumes difficult to quantify. 4
Petitioners belong to the first category, i.e., supervised
employees.
In this case, private respondents exercised control over
the work of petitioners. As tailors, petitioners worked in the
companys premises from 8:00 a.m. to 7:00 p.m. daily,
including Sundays and holidays. The mere fact that they were
paid on a piece-rate basis does not negate their status as
regular employees of private respondents. The term "wage" is
broadly defined in Art. 97 of the Labor Code as remuneration or
earnings, capable of being expressed in terms of money
whether fixed or ascertained on a time, task, piece or
commission basis. Payment by the piece is just a method of
compensation and does not define the essence of the relations.
Nor does the fact that petitioners are not covered by the SSS
affect the employer-employee relationship.
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As petitioners were illegally dismissed, they are entitled to


reinstatement with back wages. The Arbiter applied the rule in
the Mercury Drug case, according to which the recovery of back
wages should be limited to three years without qualifications or
deductions. Any award in excess of three years is null and void
as to the excess. The Labor Arbiter correctly ordered private
respondents to give separation pay.
Considerable time has lapsed since petitioners dismissal,
so that reinstatement would now be impractical and hardly in
the best interest of the parties. In lieu of reinstatement,
separation pay should be awarded to petitioners at the rate of
one month salary for every year of service, with a fraction of at
least six (6) months of service being considered as one (1) year.
The awards for overtime pay, holiday pay and 13th month pay
are in accordance with our finding that petitioners are regular
employees, although paid on a piece-rate basis.
R&E Transport vs. Latag
G.R. No. 155214; Feb. 13, 2004
FACTS:
Pedro Latag was a regular employee of La Mallorca Taxi
since March 1, 1961. When La Mallorca ceased from business
operations, Latag transferred to R & E Transport, Inc. He was
receiving an average daily salary of five hundred pesos
(P500.00) as a taxi driver. Latag got sick in January 1995 and
was forced to apply for partial disability with the SSS, which
was granted. When he recovered, he reported for work in
September 1998 but was no longer allowed to continue working
on account of his old age. Latag thus asked Felix Fabros, the
administrative officer of [petitioners], for his retirement pay
pursuant to Republic Act 7641 but he was ignored.
Thus, on December 21, 1998, Latagfiled a case for
payment of his retirement pay before the NLRC. Latag however
died on April 30, 1999. Subsequently, his wife, Avelina Latag,
substituted him. On January 10, 2000, the Labor Arbiter
rendered a decision in favor of Latag.
ISSUE:
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Whether or not Latag is entitled to retirement benefits


considering she signed a waiver of quitclaim.
RULING:
The respondent is entitled to retirement benefits despite
of the waiver of quitclaims. There is no dispute the fact that the
late Pedro M. Latag is entitled to retirement benefits. Rather,
the bone of contention is the number of years that he should be
credited with in computing those benefits. The findings of the
NLRC that Pedro must be credited only with his service to R & E
Transport, Inc., because the evidence shows that the
aforementioned companies are two different entities. After a
careful and painstaking review of the evidence on record, the
court supports the NLRC's findings.
As to the Quitclaim and Waiver signed by Respondent
Latag, the CA committed no error when it ruled that the
document was invalid and could not bar her from demanding
the benefits legally due her husband. This is not say that all
quitclaims are invalid per se. Courts, however, are wary of
schemes that frustrate workers' rights and benefits, and look
with disfavor upon quitclaims and waivers that bargain these
away.
Undisputably, Pedro M. Latag was credited with 14 years
of service with R & E Transport, Inc. Article 287 of the Labor
Code, as amended by Republic Act No. 7641, 30 provides:
Retirement. In the absence of a retirement plan or
agreement providing for retirement benefits of employees in
the establishment, an employee upon reaching the age of sixty
(60) years or more, but not beyond sixty-five (65) years which
is hereby declared the compulsory retirement age, who has
served at least five (5) years in said establishment, may retire
and shall be entitled to retirement pay equivalent to at least
one-half (1/2) month salary for every year of service, a fraction
of at least six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one
half-month salary shall mean fifteen (15) days plus one-twelfth
(1/12) of the 13th month pay and the cash equivalent of not
more than five (5) days of service incentive leaves

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The rules implementing the New Retirement Law similarly


provide the above-mentioned formula for computing the onehalf month salary. Since Pedro was paid according to the
"boundary" system, he is not entitled to the 13th month 32 and
the service incentive pay; hence, his retirement pay should be
computed on the sole basis of his salary.
It is accepted that taxi drivers do not receive fixed wages,
but retain only those sums in excess of the "boundary" or fee
they pay to the owners or operators of their vehicles. Thus, the
basis for computing their benefits should be the average daily
income. In this case, the CA found that Pedro was earning an
average of five hundred pesos (P500) per day. We thus
compute his retirement pay as follows: P500 x 15 days x 14
years of service equals P105,000.

Asian Transmission vs. CA


G.R. No. 144664; March 15, 2004
FACTS:
The Department of Labor and Employment (DOLE) issued
an Explanatory Bulletin dated March 11, 1993 wherein it
clarified that employees are entitled to 200% of their basic
wage on April 9, 1993, whether unworked, which apart from
being Good Friday is also Araw ng Kagitingan, both legal
holidays.
The bulletin reads: "On the correct payment of holiday
compensation on April 9, 1993 which apart from being Good
Friday is also Araw ng Kagitingan, i.e., two regular holidays
falling on the same day, this Department is of the view that the
covered employees are entitled to at least two hundred percent
(200%) of their basic wage even if said holiday is unworked.
The first 100% represents the payment of holiday pay on April
9, 1993 as Good Friday and the second 100% is the payment of
holiday pay for the same date as Araw ng Kagitingan.
Said bulletin was reproduced on January 23, 1998, when
April 9, 1998 was both Maundy Thursday and Araw ng
Kagitingan.
Despite the explanatory bulletin, [Asian
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Transmission Corporation opted to pay its daily paid employees


only 100% of their basic pay on April 9, 1998. Respondent Bisig
ng Asian Transmission Labor Union (BATLU) protested.
In accordance with Step 6 of the grievance procedure of
the Collective Bargaining Agreement (CBA) existing between
petitioner and BATLU, the controversy was submitted for
voluntary arbitration. On July 31, 1998, the Office of the
Voluntary Arbitrator rendered a decision directing petitioner to
pay its covered employees "200% and not just 100% of their
regular daily wages for the unworked April 9, 1998 which
covers two regular holidays, namely, Araw ng Kagitingan and
Maundy Thursday."
ISSUE:
Whether or not the employees are entitled to the
computation embodied in the bulletin clarification.
RULING:
The employees are entitled to the computation given in
the bulletin clarification.
Subject of interpretation in the case at bar is Article 94 of
the Labor Code which reads: Right to holiday pay. (a) Every
worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly
employing less than ten (10) workers; (b) The employer may
require an employee to work on any holiday but such employee
shall be paid a compensation equivalent to twice his regular
rate; and (c) As used in this Article, "holiday" includes: New
Year's Day, Maundy Thursday, Good Friday, the ninth of April,
the first of May, the twelfth of June, the fourth of July, the
thirtieth of November, the twenty-fifth and thirtieth of
December and the day designated by law for holding a general
election, which was amended by Executive Order No. 203
issued on June 30, 1987, such that the regular holidays are
now:
1.

New Year's DayJanuary 1

2.

Maundy Thursday

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Page

3.

Good Friday

Movable Date

4.

Araw ng Kagitingan April 9 (Bataan and Corregidor

5.

Labor Day

6.

Independence Day June 12

7.

National Heroes Day

8.

Bonifacio Day

November 30

9.

Christmas Day

December 25

Day)

10. Rizal Day

May 1

Last Sunday of August

December 30

The Court agrees with the voluntary arbitrator.


The
Voluntary Arbitrator held that Article 94 of the Labor Code
provides for holiday pay for every regular holiday, the
computation of which is determined by a legal formula which is
not changed by the fact that there are two holidays falling on
one day, like on April 9, 1998 when it was Araw ng Kagitingan
and at the same time was Maundy Thursday; and that that the
law, as amended, enumerates ten regular holidays for every
year should not be interpreted as authorizing a reduction to
nine the number of paid regular holidays "just because April 9
(Araw ng Kagitingan) in certain years, like 1993 and 1998, is
also Holy Friday or Maundy Thursday."
Holiday pay is a legislated benefit enacted as part of the
Constitutional imperative that the State shall afford protection
to labor. Its purpose is not merely "to prevent diminution of the
monthly income of the workers on account of work
interruptions. In other words, although the worker is forced to
take a rest, he earns what he should earn, that is, his holiday
pay." 8 It is also intended to enable the worker to participate in
the national celebrations held during the days identified as with
great historical and cultural significance.
Independence Day (June 12), Araw ng Kagitingan (April 9),
National Heroes Day (last Sunday of August), Bonifacio Day
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(November 30) and Rizal Day (December 30) were declared


national holidays to afford Filipinos with a recurring opportunity
to commemorate the heroism of the Filipino people, promote
national identity, and deepen the spirit of patriotism.
Labor Day (May 1) is a day traditionally reserved to
celebrate the contributions of the working class to the
development of the nation, while the religious holidays
designated in Executive Order No. 203 allow the worker to
celebrate his faith with his family.
As reflected above, Art. 94 of the Labor Code, as
amended, afford a worker the enjoyment of ten paid regular
holidays. The provision is mandatory, regardless of whether an
employee is paid on a monthly or daily basis. Unlike a bonus,
which is a management prerogative, holiday pay is a statutory
benefit demandable under the law. Since a worker is entitled to
the enjoyment of ten paid regular holidays, the fact that two
holidays fall on the same date should not operate to reduce to
nine the ten holiday pay benefits a worker is entitled to receive.
Autobus Transport System vs. Bautista
G.R. No. 156364; May 16, 2005
FACTS:
Respondent Antonio Bautista has been employed by
petitioner Auto Bus Transport Systems, Inc., since May 1995,
as driver-conductor with travel routes Manila-Tuguegarao via
Baguio, Baguio-Tuguegarao 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 January 2000, while respondent was driving Autobus
No. 114 along Sta. Fe, Nueva Vizcaya, the bus he was driving
accidentally bumped the rear portion of Autobus No. 124, as
the latter vehicle suddenly stopped at a sharp curve without
giving any warning. Respondent averred that the accident
happened because he was compelled by the management to
go back to Roxas, Isabela, although he had not slept for almost
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twenty-four (24) hours, as he had just arrived in Manila from


Roxas, Isabela.
Respondent further 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 respondent's 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.
On 29 September 2000, based on the pleadings and
supporting evidence presented by the parties, Labor Arbiter
decided that the complaint be dismissed where the respondent
must pay to the complainant.
ISSUE:
Whether or not respondent is entitled to service incentive
leave.
RULING:
The respondent is entitled to service incentive leave.
The disposition of the issue revolves around the proper
interpretation of Article 95 of the Labor Code vis--vis Section
1(D), Rule V, Book III of the Implementing Rules and
Regulations of the Labor Code which provides: 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.
Moreover, Book III, Rule V: SERVICE INCENTIVE LEAVE also
states that 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;

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A careful examination of said provisions of law will result in


the conclusion that the grant of service incentive leave has
been delimited by the Implementing Rules and Regulations of
the Labor Code to apply only to those employees not explicitly
excluded by Section 1 of Rule V. According to the Implementing
Rules, Service Incentive Leave shall not apply to employees
classified as "field personnel."
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."
The same is true with respect to the phrase "those who
are engaged on task or contract basis, purely commission
basis." Said phrase should be related with "field personnel,"
applying the rule on ejusdem generis that general and
unlimited terms are restrained and limited by the particular
terms that they follow. Hence, employees engaged on task or
contract basis or paid on purely commission basis are not
automatically exempted from the grant of service incentive
leave, unless, they fall under the classification of field
personnel.
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. This
definition is further elaborated in the Bureau of Working
Conditions (BWC), Advisory Opinion to Philippine TechnicalClerical Commercial Employees Association 10 which states
that:

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As a general rule, field personnel are those whose


performance of their job/service is not supervised by the
employer or his representative, the workplace being away from
the principal office and whose hours and days of work cannot
be determined with reasonable certainty; hence, they are paid
specific amount for rendering specific service or performing
specific work. If required to be at specific places at specific
times, employees including drivers cannot be said to be field
personnel despite the fact that they are performing work away
from the principal office of the employee.
At this point, it is necessary to stress that the definition of
a "field personnel" is not merely concerned with the location
where the employee regularly performs his duties but also with
the fact that the employee's performance is unsupervised by
the employer. As discussed above, field personnel are those
who regularly perform their duties away from the principal
place of business of the employer and whose actual hours of
work in the field cannot be determined with reasonable
certainty. Thus, in order to conclude whether an employee is a
field employee, it is also necessary to ascertain if actual hours
of work in the field can be determined with reasonable certainty
by the employer. In so doing, an inquiry must be made as to
whether or not the employee's time and performance are
constantly supervised by the employer. Respondent is not a
field personnel but a regular employee who performs tasks
usually necessary and desirable to the usual trade of
petitioner's business. Accordingly, respondent is entitled to the
grant of service incentive leave.
The clear policy of the Labor Code is to grant service
incentive leave pay to workers in all establishments, subject to
a few exceptions. Section 2, Rule V, Book III of the
Implementing Rules and Regulations provides that "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."

Service incentive leave is a right which accrues to every


employee who has served "within 12 months, whether
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continuous or broken reckoned from the date the employee


started working, including authorized absences and paid
regular holidays unless the working days in the establishment
as a matter of practice or policy, or that provided in the
employment contracts, is less than 12 months, in which case
said period shall be considered as one year." It is also
"commutable to its money equivalent if not used or exhausted
at the end of the year." In other words, an employee who has
served for one year is entitled to it. He may use it as leave days
or he may collect its monetary value. To limit the award to
three years, as the solicitor general recommends, is to unduly
restrict such right.
San Miguel Corp., vs. Del Rosario
G.R. No. 168194; Dec. 13, 2005
FACTS:
On April 17, 2000, respondent was employed by petitioner
as key account specialist. On March 9, 2001, petitioner
informed respondent that her probationary employment will be
severed at the close of the business hours of March 12, 2001.
On March 13, 2001, respondent was refused entry to
petitioner's premises. On June 24, 2002, respondent filed a
complaint against petitioner for illegal dismissal and
underpayment/non-payment of monetary benefits. Respondent
alleged that petitioner feigned an excess in manpower because
after her dismissal, it hired new recruits and re-employed two of
her batch mates. On the other hand, petitioner claimed that
respondent was a probationary employee whose services were
terminated as a result of the excess manpower that could no
longer be accommodated by the company.
The Labor Arbiter declared respondent a regular employee
because her employment exceeded six months and holding
that she was illegally dismissed as there was no authorized
cause to terminate her employment. On appeal to NLRC, it
modified the previous decision.
ISSUE:

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Whether or not the respondent was an employee and was


illegally terminated. If so, is she entitled to monetary benefits?
RULING:
In termination cases, the burden of proving the
circumstances that would justify the employee's dismissal rests
with the employer. The best proof that petitioner should have
presented to prove the probationary status of respondent is her
employment contract. None, having been presented, the
continuous employment of respondent as an account specialist
for almost 11 months, from April 17, 2000 to March 12, 2001,
means that she was a regular employee and not a temporary
reliever or a probationary employee. And while it is true that by
way of exception, the period of probationary employment may
exceed six months when the parties so agree, such as when the
same is established by company policy, or when it is required
by the nature of the work,
none of these exceptional
circumstance were proven in the present case. Thus,
respondent whose employment exceeded six months is
undoubtedly a regular employee of petitioner.
Her termination from employment must be for a just or
authorized cause, otherwise, her dismissal would be illegal.
Petitioner tried to justify the dismissal of respondent under the
authorized cause of redundancy. It thus argued in the
alternative that even assuming that respondent qualified for
regular employment, her services still had to be terminated
because there are no more regular positions in the company.
Undoubtedly, petitioner is invoking a redundancy which
allegedly resulted in the termination not only of the trainees,
probationers but also of some of its regular employees.
Redundancy, for purposes of the Labor Code, exists where
the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous,
and superfluity of a position or positions may be the outcome of
a number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the
enterprise. The criteria in implementing a redundancy are: (a)
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less preferred status, e.g. temporary employee; (b) efficiency;


and (c) seniority. What further militated against the alleged
redundancy advanced by petitioner is their failure to refute
respondent's assertion that after her dismissal, it hired new
recruits and re-employed two of her batch mates. The Court
finds that petitioner was not able to discharge the burden of
proving that the dismissal of respondent was valid.
Considering that respondent was illegally dismissed, she is
entitled not only to reinstatement but also to payment of full
back wages, computed from the time her compensation was
actually withheld from her on March 13, 2001, up to her actual
reinstatement. She is likewise entitled to other benefits, i.e.,
service incentive leave pay and 13th month pay computed from
such date also up to her actual reinstatement. Respondent is
not entitled to holiday pay because the records reveal that she
is a monthly paid regular employee. Under Section 2, Rule IV,
Book III of the Omnibus Rules Implementing the Labor Code,
employees who are uniformly paid by the month, irrespective of
the number of working days therein, shall be presumed to be
paid for all the days in the month whether worked or not.
Penaranda vs. Baganga Plywood Corp.
G.R. No. 159577; May 3, 2006
FACTS:
Sometime in June 1999, Petitioner Charlito Pearanda was
hired as an employee of Baganga Plywood Corporation (BPC) to
take charge of the operations and maintenance of its steam
plant boiler. In May 2001, Pearanda filed a Complaint for illegal
dismissal with money claims against BPC and its general
manager, Hudson Chua, before the NLRC.
After the parties failed to settle amicably, the labor arbiter
directed the parties to file their position papers and submit
supporting documents.
Pearanda alleges that he was employed by respondent
Banganga on March 15, 1999 with a monthly salary of
P5,000.00 as Foreman/Boiler Head/Shift Engineer until he was
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illegally terminated on December 19, 2000. he alleges that his


services were terminated without the benefit of due process
and valid grounds in accordance with law. Furthermore, he was
not paid his overtime pay, premium pay for working during
holidays/rest days, night shift differentials and finally claimed
for payment of damages and attorney's fees having been
forced to litigate the present complaint.
Respondent BPC is a domestic corporation duly organized
and existing under Philippine laws and is represented herein by
its General Manager HUDSON CHUA, the individual respondent.
Respondents allege that complainant's separation from service
was done pursuant to Art. 283 of the Labor Code. The
respondent BPC was on temporary closure due to repair and
general maintenance and it applied for clearance with the
Department of Labor and Employment, Regional Office No. XI,
to shut down and to dismiss employees. And due to the
insistence of herein complainant he was paid his separation
benefits.
Consequently, when respondent BPC partially reopened in
January 2001, Pearanda failed to reapply.
The labor arbiter ruled that there was no illegal dismissal
and that petitioner's Complaint was premature because he was
still employed by BPC. Petitioners money claims for illegal
dismissal was also weakened by his quitclaim and admission
during the clarificatory conference that he accepted separation
benefits, sick and vacation leave conversions and thirteenth
month pay.
ISSUE:
Whether or not Pearanda is a regular, common employee
entitled to monetary benefits under Art. 82 of the Labor Code
and is entitled to the payment of overtime pay and other
monetary benefits.
RULING:
The petitioner is not entitled to overtime pay and other
monetary benefits.

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The Court disagrees with the NLRC's finding that petitioner


was a managerial employee. However, petitioner was a
member of the managerial staff, which also takes him out of
the coverage of labor standards. Like managerial employees,
officers and member of the managerial staff are not entitled to
the provisions of law on labor standards.
The Implementing Rules of the Labor Code define
members of a managerial staff as those with the following
duties and responsibilities:
(1)

The primary duty consists of the performance of work


directly related to management policies of the
employer;

(2) Customarily and regularly exercise discretion and


independent judgment;
(3)

(i) Regularly and directly assist a proprietor or a


managerial employee whose primary duty consists of
the management of the establishment in which he is
employed or subdivision thereof; or (ii) execute under
general supervision work along specialized or
technical lines requiring special training, experience,
or knowledge; or (iii) execute under general
supervision special assignments and tasks; and

(4)

who do not devote more than 20 percent of their


hours worked in a workweek to activities which are
not directly and closely related to the performance of
the work described in paragraphs (1), (2), and (3)
above."

The petitioners work involves:


1.

To supply the required and continuous steam to all


consuming units at minimum cost.

2.

To supervise, check and monitor manpower


workmanship as well as operation of boiler and
accessories.

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3.
To
manpower.
4.

evaluate

performance

of

machinery

and

To follow-up supply of waste and other materials for

fuel.
5.
To train new employees for effective and safety white
working.
6.

Recommend parts and suppliers purchases. acEHSI

7.
To recommend personnel actions such as: promotion,
or disciplinary action.
8.

To check water from the boiler, feedwater and


softener, regenerate softener if beyond hardness
limit.

9.

Implement Chemical Dosing.

10. Perform other task as required by the superior from


time to time." 34

The foregoing enumeration, particularly items, 1, 2, 3, 5


and 7 illustrates that petitioner was a member of the
managerial staff. His duties and responsibilities conform to the
definition of a member of a managerial staff under the
Implementing Rules.
Petitioner supervised the engineering section of the steam
plant boiler. His work involved overseeing the operation of the
machines and the performance of the workers in the
engineering section. This work necessarily required the use of
discretion and independent judgment to ensure the proper
functioning of the steam plant boiler. As supervisor, petitioner is
deemed a member of the managerial staff.
Noteworthy, even petitioner admitted that he was a
supervisor. In his Position Paper, he stated that he was the
foreman responsible for the operation of the boiler. The term
foreman implies that he was the representative of management
over the workers and the operation of the department.
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Petitioner's evidence also showed that he was the supervisor of


the steam plant. His classification as supervisors is further
evident from the manner his salary was paid. He belonged to
the 10% of respondent's 354 employees who were paid on a
monthly basis; the others were paid only on a daily basis.
Leyte IV Electric Cooperative Inc. vs.
Employees Union- ALU
G.R. No. 1577745; October 19, 2007

LEYECO

IV

FACTS:
On April 6, 1998, Leyte IV Electric Cooperative, Inc.
(petitioner) and Leyeco IV Employees Union-ALU (respondent)
entered into a Collective Bargaining Agreement (CBA) covering
petitioner rank-and-file employees, for a period of five (5) years
effective January 1, 1998. On June 7, 2000, respondent, through
its Regional Vice-President, Vicente P. Casilan, sent a letter to
petitioner demanding holiday pay for all employees, as
provided for in the CBA.
Petitioner, on the other hand, in its Position Paper, insisted
payment of the holiday pay in compliance with the CBA
provisions, stating that payment was presumed since the
formula used in determining the daily rate of pay of the
covered employees is Basic Monthly Salary divided by 30 days
or Basic Monthly Salary multiplied by 12 divided by 360 days,
thus with said formula, the employees are already paid their
regular and special days, the days when no work is done, the
51 un-worked Sundays and the 51 un-worked Saturdays.
ISSUE:
Whether or not Leyte IV Electric Cooperative is liable for
underpayment of holiday pay.
RULING:
The Voluntary Arbitrator gravely abused its discretion in
giving a strict or literal interpretation of the CBA provisions that
the holiday pay be reflected in the payroll slips. Such literal
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interpretation ignores the admission of respondent in its


Position Paper that the employees were paid all the days of the
month even if not worked. In light of such admission,
petitioner's submission of its 360 divisor in the computation of
employees' salaries gains significance.
This ruling was applied in Wellington Investment and
Manufacturing Corporation v. Trajano, 43 Producers Bank of the
Philippines v. National Labor Relations Commission. In this case,
the monthly salary was fixed by Wellington to provide for
compensation for every working day of the year including the
holidays specified by law and excluding only Sundays. In
fixing the salary, Wellington used what it called the "314
factor"; that is, it simply deducted 51 Sundays from the 365
days normally comprising a year and used the difference, 314,
as basis for determining the monthly salary. The monthly salary
thus fixed actually covered payment for 314 days of the year,
including regular and special holidays, as well as days when no
work was done by reason of fortuitous cause, such as
transportation strike, riot, or typhoon or other natural calamity,
or cause not attributable to the employees.
It was also applied in Odango v. National Labor Relations
Commission, where Court ruled that the use of a divisor that
was less than 365 days cannot make the employer
automatically liable for underpayment of holiday pay. In said
case, the employees were required to work only from Monday
to Friday and half of Saturday. Thus, the minimum allowable
divisor is 287, which is the result of 365 days, less 52 Sundays
and less 26 Saturdays (or 52 half Saturdays). Any divisor below
287 days meant that the employees were deprived of their
holiday pay for some or all of the ten legal holidays. The 304day divisor used by the employer was clearly above the
minimum of 287 days.
In this case, the employees are required to work only from
Monday to Friday. Thus, the minimum allowable divisor is 263,
which is arrived at by deducting 51 un-worked Sundays and 51
un-worked Saturdays from 365 days. Considering that
petitioner used the 360-day divisor, which is clearly above the
minimum, indubitably, petitioner's employees are being given
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their holiday pay. Thus, the Voluntary Arbitrator should not have
simply brushed aside petitioner's divisor formula. In granting
respondent's claim of non-payment of holiday pay, a "double
burden" was imposed upon petitioner because it was being
made to pay twice for its employees' holiday pay when
payment thereof had already been included in the computation
of their monthly salaries. Hence, the petition is granted.
Bahia Shipping Services vs. Chua
G.R. No. 162195; April 8, 2008
FACTS:
Private respondent Reynaldo Chua was hired by the
petitioner shipping company, Bahia Shipping Services, Inc., as a
restaurant waiter on board a luxury cruise ship liner M/S Black
Watch pursuant to a Philippine Overseas Employment
Administration (POEA) approved employment contract dated
October 9, 1996 for a period of nine (9) months from October
18, 1996 to July 17, 1997. On October 18, 1996, the private
respondent left Manila for Heathrow, England to board the said
sea vessel where he will be assigned to work. On February 15,
1997, the private respondent reported for his working station
one and one-half hours late. On February 17, 1997, the master
of the vessel served to the private respondent an official
warning-termination form pertaining to the said incident. On
March 8, 1997, the vessel's master, ship captain Thor Fleten
conducted an inquisitorial hearing to investigate the said
incident. Thereafter, on March 9, 1997, private respondent was
dismissed from the service on the strength of an unsigned and
undated notice of dismissal. An alleged record or minutes of the
said investigation was attached to the said dismissal notice.
On March 24, 1997, the private respondent filed a
complaint for illegal dismissal and other monetary claims. The
private respondent alleged that he was paid only US$300.00
per month as monthly salary for five (5) months instead of
US$410.00 as stipulated in his employment contract. Thus, he
claimed that he was underpaid in the amount of US$110.00 per
month for that same period of five (5) months. He further
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asserted that his salaries were also deducted US$20.00 per


month by the petitioner for alleged union dues. Private
respondent argued that it was his first offense committed on
board the vessel. He adverted further that the petitioner has no
proof of being a member of the AMOSUP or the ITF to justify its
claim to deduct the said union dues [from] his monthly salary.
ISSUE:
Whether or not reporting for work one and one-half hours
late and abandoning his work are valid grounds for dismissal.
RULING:
It being settled that the dismissal of respondent was illegal,
it follows that the latter is entitled to payment of his salary for
the unexpired portion of his contract, as provided under
Republic Act (R.A.) No. 8042, considering that his employment
was pre-terminated on March 9, 1997 or four months prior to
the expiration of his employment contract on July 17, 1997.
Article 279 of the Labor Code, as amended, mandates that
an illegally dismissed employee is entitled to the twin reliefs of
(a) either reinstatement or separation pay, if reinstatement is
no longer viable, and (b) backwages. Both are distinct reliefs
given to alleviate the economic damage suffered by an illegally
dismissed employee and, thus, the award of one does not bar
the other. Both reliefs are rights granted by substantive law
which cannot be defeated by mere procedural lapses.
Substantive rights like the award of backwages resulting from
illegal dismissal must not be prejudiced by a rigid and technical
application of the rules. The order of the Court of Appeals to
award backwages being a mere legal consequence of the
finding that respondents were illegally dismissed by petitioners,
there was no error in awarding the same.
The Court has consistently applied the foregoing exception
to the general rule. It does so yet again in the present case.
Section 10 of R.A. No. 8042, entitles an overseas worker who
has been illegally dismissed to "his salaries for the unexpired
portion of the employment contract or for three (3) months for
every year of the unexpired term, whichever is less." The CA
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correctly applied the interpretation of the Court in Marsaman


Manning Agency, Inc. v. National Labor Relations Commission
that the second option which imposes a three months salary
cap applies only when the term of the overseas contract is fixed
at one year or longer; otherwise, the first option applies in that
the overseas worker shall be entitled payment of all his salaries
for the entire unexpired period of his contract.
PNCC vs. Skyway Traffic Management and Security
Division Workers Organization
GR NO. 171231 Feb 17, 2010
FACTS:
Petitioner PNCC Skyway Corporation Traffic Management and
Security Division Workers' Organization (PSTMSDWO) is a labor
union duly registered with the Department of Labor and
Employment (DOLE). Respondent PNCC Skyway Corporation is a
corporation duly organized and operating under and by virtue
of the laws of the Philippines. They entered into CBA. Pertinent
provisions are as follows:
ARTICLE VIII VACATION LEAVE AND SICK LEAVE
Section 1. Vacation Leave.
[b]The company shall schedule the vacation leave of
employees during the year taking into consideration the
request of preference of the employees.
PNCC then created a schedule of leaves for their employees.
Petitioner objected to the
implementation of the said memorandum. It insisted that the
individual members of the union have the right to schedule
their vacation leave. It opined that the unilateral scheduling of
the employees' vacation leave was done to avoid the
monetization of their vacation leave in December 2004.
ISSUE:
WON the PNCC has the sole discretion to schedule the vacation
leaves of its employees.
HELD:

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PNCC has the sole discretion to schedule the vacation leaves of


its employees.
The rule is that where the language of a contract is plain and
unambiguous, its
meaning should be determined without
reference to extrinsic facts or aids. The intention of the parties
must be gathered from that language, and from that language
alone. Stated differently, where the language of a written
contract is clear and unambiguous, the contract must be taken
to mean that which, on its face, it purports to mean, unless
some good reason can be assigned to show that the words
used should be understood in a different sense.
In the case at bar, the contested provision of the CBA is clear
and unequivocal. Article VIII, Section 1 (b) of the CBA
categorically provides that the scheduling of vacation leaves ha
ll be under the option of the employer. Thus, if the terms of a
CBA are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall
prevail. In fine, the CBA must be strictly adhered to and
respected if its ends have to be achieved, being the law
between the parties. In Faculty Association of Mapua Institute of
Technology (FAMIT) v. Court of Appeals, this Court held that the
CBA during its life time binds all the parties. The provisions of
the CBA must be respected since its terms and conditions
constitute the law between the parties. The parties cannot be
allowed to change the terms they agreed upon on the ground
that the same are not favorable to them.
The purpose of a vacation leave is to afford a laborer a chance
to get a much-needed rest to replenish his worn-out energy and
acquire a new vitality to enable him to efficiently perform his
duties, and not merely to give him additional salary and bounty.
Accordingly, the vacation leave privilege was not intended to
serve as additional salary, but as a non-monetary benefit. To
give the employees the option not to consume it with the aim
of converting it to cash at the end of the year would defeat the
very purpose of vacation leave.

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11.

OTHER SPECIAL BENEFITS

Villuga vs. NLRC


G.R. No. L-75038; August 23, 1993
FACTS:
A basic factor underlying the exercise of rights and the
filing of claims for benefits under the Labor Code and other
presidential issuances or labor legislations is the status and
nature of one's employment.
Petitioner Elias Villuga was employed as cutter in the
tailoring shop owned by private respondent Rodolfo Zapanta
and known as Broad Street Tailoring located at Shaw Boulevard,
Mandaluyong, Metro Manila. As cutter, he was paid a fixed
monthly salary of P840.00 and a monthly transportation
allowance of P40.00. In addition to his work as cutter, Villuga
was assigned the chore of distributing work to the shop's tailors
or sewers when both the shop's manager and assistant
manager would be absent. He saw to it that their work
conformed with the pattern he had prepared and if not, he had
them redone, repaired or re-sewn.
The other petitioners were ironers, repairmen and sewers.
They were paid a fixed amount for every item ironed, repaired
or sewn, regardless of the time consumed in accomplishing the
task. Petitioners did not fill up any time record since they did
not observe regular or fixed hours of work. They were allowed
to perform their work at home especially when the volume of
work, which depended on the number of job orders, could no
longer be coped up with.
From February 17 to 22, 1978, petitioner Villuga failed to
report for work allegedly due to illness. For not properly
notifying his employer, he was considered to have abandoned
his work.
In a complaint filed with the Regional Office of the
Department of Labor, Villuga claimed that he was refused
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admittance when he reported for work after his absence,


allegedly due to his active participation in the union organized
by private respondent's tailors. He further claimed that he was
not paid overtime pay, holiday pay, premium pay for work done
on rest days and holidays, service incentive leave pay and 13th
month pay.
On May 1979, Labor Arbiter rendered a decision ordering
the dismissal of the complaint for unfair labor practices, illegal
dismissal and other money claims except petitioner Villuga's
claim for 13th month pay for the years 1976, 1977 and 1980.
ISSUE:
Whether or not such employment is managerial in
character or that of a rank and file employee are primordial
considerations before extending labor benefits.
RULING:
The Court ruled that the characterization of such
employment is important in the determination of benefits since
some employees are exempted to such benefits.
Under Rule I, Section 2(c), Book III of the Implementing
Rules of the Labor Code, to be a member of a managerial staff,
the following elements must concur or co-exist, to wit:
(1) that his primary duty consists of the performance of
work directly related to management policies;
(2) that he customarily and regularly exercises discretion
and independent judgment in the performance of his
functions;
(3) that he regularly and directly
management of the establishment; and

assists

in

the

(4) that he does not devote twenty per cent of his time to
work other than those described above.

Applying the above criteria to petitioner Villuga's case, it is


undisputed that his primary work or duty is to cut or prepare
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patterns for items to be sewn, not to lay down or implement


any of the management policies, as there is a manager and an
assistant manager who perform said functions.
It is true that in the absence of the manager and assistant
manager, he distributes and assigns work to employees but
such duty, though involving discretion, is occasional and not
regular or customary. He had also the authority to order the
repair or resewing of defective items but such authority is part
and parcel of his function as cutter to see to it that the items
cut are sewn correctly lest the defective nature of the
workmanship be attributed to his "poor cutting." Villuga does
not participate in policy-making. Rather, the functions of his
position involve execution of approved and established policies.
In Franklin Baker Company of the Philippines v. Trajano, it
was held that employees who do not participate in policymaking but are given ready policies to execute and standard
practices to observe are not managerial employees. The test of
"supervisory or managerial status" depends on whether a
person possesses authority that is not merely routinary or
clerical in nature but one that requires use of independent
judgment. In other words, the functions of the position are not
managerial in nature if they only execute approved and
established policies leaving little or no discretion at all whether
to implement said policies or not.
Consequently, the exclusion of Villuga from the benefits
claimed under Article 87 (overtime pay and premium pay for
holiday and rest day work), Article 94, (holiday pay), and Article
95 (service incentive leave pay) of the Labor Code, on the
ground that he is a managerial employee is unwarranted. He is
definitely a rank and file employee hired to perform the work of
a cutter and not hired to perform supervisory or managerial
functions. The fact that he is uniformly paid by the month does
not exclude him from the benefits of holiday pay. He should
therefore be paid in addition to the 13th month pay, his
overtime pay, holiday pay, premium pay for holiday and rest
day, and service incentive leave pay.
CJC Trading vs. NLRC
Balahadia, A. (USC-LLB 2, EH402)
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Page

G.R. No. 115884; July 20, 1995


FACTS:
Private respondents Ricardo Ausan, Jr. and Ernesto Alanan
were employed by petitioner since 1983 and 1978 as truck
drivers and were paid on a "per trip or task basis." They filed
separate complaints on against petitioner CJC Trading,
Incorporated and/or Ms. Celia J. Carlos for illegal dismissal and
non-payment of premium pay for holiday and rest day, service
incentive leave pay and thirteenth month pay. These cases
were consolidated.
On 22 July 1993, a decision was rendered by the Labor
Arbiter dismissing the complaints and were not entitled to the
labor standards benefits claimed by them because they were
paid on a "per trip or per task basis.
On appeal, NLRC affirmed in toto the decision of the Labor
Arbiter.
ISSUE:
Whether or not the respondents are entitled to the
benefits provided by law.
RULING:
The employees are granted to retirement benefits. An
employee who voluntarily resigns is not entitled to separation
pay unless otherwise stipulated in an employment contract or
collective bargaining agreement, or sanctioned by established
employer practice or policy. The Labor Code is devoid of any
provision which grants separation pay to employees who
voluntarily resign. Neither was there anything in the record that
shows that, in the instant case, there is a collective bargaining
agreement or any other agreement or established company
policy concerning the payment of separation pay to employees
who resign.
Considering that private respondents were close to the
age of sixty (60) at the time they stopped working for petitioner
and that they had been in the employ of petitioner for several
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years, the Court, considers that this could be deemed to be in


effect a prayer for the grant of retirement benefits.
The pertinent law is Article 287 of the Labor Code, as
amended by R.A. No. 7641, which reads: Retirement. Any
employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other
applicable employment contract.
In case of retirement, the employee shall be entitled to
receive such retirement benefits as he may have earned under
existing laws and any collective bargaining agreement and
other agreements: Provided, however, That an employee's
retirement benefits under any collective bargaining and other
agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement
providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60)
years or more, but not beyond sixty-five (65) years which is
hereby declared the compulsory retirement age, who has
served at least five (5) years in the said establishment, may
retire and shall be entitled to retirement pay equivalent to at
least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one
whole year.
R.A. No. 7641 may be given effect where (1) the claimant
for retirement benefits was still the employee of the employer
at the time the statute took effect; and (2) the claimant was in
compliance with the requirements for eligibility under the
statute for such retirement benefits. It appears that private
respondents did not qualify for the benefits of R.A. No. 7641
under the terms of this law itself. Since the record does not
show any retirement plan or collective bargaining agreement
providing for retirement benefits to petitioner's employees, the
applicable retirement benefits to petitioner's employees, the
applicable retirement age is the optional retirement age of sixty
(60) years according to Article 287, which would qualify the
retiree to retirement benefits equivalent to one-half (1/2)
month's salary for every year of service. Unfortunately, at the
time private respondent stopped working for petitioner, they
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had not yet reached the age of sixty (60) years. The Court
stresses that there is nothing to prevent petitioners from
voluntarily giving private respondents some financial assistance
on an ex gratia basis.

Pantranco North Express vs. NLRC


G.R. No. 95940; July 24, 1996
FACTS:
Private respondent was hired by petitioner in 1964 as a
bus conductor. He eventually joined the Pantranco Employees
Association-PTGWO. He continued in petitioner's employ until
August 12, 1989, when he was retired at the age of fifty-two
(52) after having rendered twenty five years' service. The basis
of his retirement was the compulsory retirement provision of
the collective bargaining agreement between the petitioner and
the aforenamed union. On February 1990, private respondent
filed a complaint for illegal dismissal against petitioner with
NLRC. The complaint was consolidated with two other cases of
illegal dismissal having similar facts and issues, filed by other
employees, non-union members.
Labor Arbiter rendered his decision finding that the three
complainants were illegally and unjustly dismissed and order
the respondent to reinstate them to their former or
substantially equivalent positions without loss of seniority rights
with full back wages and other benefits. Petitioner appealed to
public respondent, which issued the questioned Resolution
affirming the labor arbiter's decision in toto.
ISSUE:
Whether or not the CBA stipulation on compulsory
retirement after twenty-five years of service is legal and
enforceable.
RULING:
The Court ruled that the CBA stipulation is legal and
enforceable.
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The bone of contention in this case is the provision on


compulsory retirement after 25 years of service.
Article XI, Section 1 (e) (5) of the May 2, 1989 Collective
Bargaining Agreement 8 between petitioner company and the
union states:
Section 1. The COMPANY shall formulate a retirement plan
with the following main features:
(e) The COMPANY agrees to grant the retirement
benefits herein provided to regular employees who may
be separated from the COMPANY for any of the following
reasons:
(5) Upon reaching the age of sixty (60) years or
upon completing twenty-five (25) years of service to
the COMPANY, whichever comes first, and the
employee shall be compulsory retired and paid the
retirement benefits herein provided."

The said Code provides: Art. 287. Retirement. Any


employee may be retired upon reaching the retirement age
established in the Collective Bargaining Agreement or other
applicable employment contract. In case of retirement, the
employee shall be entitled to receive such retirement benefits
as he may have earned under existing laws and any collective
bargaining or other agreement."
The Court agrees with petitioner and the Solicitor General.
Art. 287 of the Labor Code as worded permits employers and
employees to fix the applicable retirement age at below 60
years. Moreover, providing for early retirement does not
constitute diminution of benefits. In almost all countries today,
early retirement, i.e., before age 60, is considered a reward for
services rendered since it enables an employee to reap the
fruits of his labor particularly retirement benefits, whether
lump-sum or otherwise at an earlier age, when said
employee, in presumably better physical and mental condition,
can enjoy them better and longer.

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As a matter of fact, one of the advantages of early


retirement is that the corresponding retirement benefits,
usually consisting of a substantial cash windfall, can early on be
put to productive and profitable uses by way of incomegenerating investments, thereby affording a more significant
measure of financial security and independence for the retiree
who, up till then, had to contend with life's vicissitudes within
the parameters of his fortnightly or weekly wages. Thus we are
now seeing many CBAs with such early retirement provisions.
And the same cannot be considered a diminution of
employment benefits.
Being a product of negotiation, the CBA between the
petitioner and the union intended the provision on compulsory
retirement to be beneficial to the employees-union members,
including herein private respondent. When private respondent
ratified the CBA with the union, he not only agreed to the CBA
but also agreed to conform to and abide by its provisions. Thus,
it cannot be said that he was illegally dismissed when the CBA
provision on compulsory retirement was applied to his case.
Incidentally, we call attention to Republic Act No. 7641,
known as "The Retirement Pay Law", which went into effect on
January 7, 1993. Although passed many years after the
compulsory retirement of herein private respondent,
nevertheless, the said statute sheds light on the present
discussion when it amended
Art. 287 of the Labor Code, to make it read as follows:
Retirement. Any employee may be retired upon reaching the
retirement age establish in the collective bargaining agreement
or other applicable employment contract.
In the absence of a retirement plan or agreement
providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60)
years or more, but not beyond sixty-five (65) years which is
hereby declared the compulsory retirement age, who has
served at least five (5) years in the said establishment may
retire . . ."

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The aforequoted provision makes clear the intention and


spirit of the law to give employers and employees a free hand
to determine and agree upon the terms and conditions of
retirement. Providing in a CBA for compulsory retirement of
employees after twenty-five (25) years of service is legal and
enforceable so long as the parties agree to be governed by
such CBA. The law presumes that employees know what they
want and what is good for them absent any showing that fraud
or intimidation was employed to secure their consent thereto.

R&E Transport vs. Latag


G.R. No. 155214; Feb. 13, 2004
FACTS:
Pedro Latag was a regular employee of La Mallorca Taxi
since March 1, 1961. When La Mallorca ceased from business
operations, Latag transferred to R & E Transport, Inc. He was
receiving an average daily salary of five hundred pesos
(P500.00) as a taxi driver.
Latag got sick in January 1995 and was forced to apply for
partial disability with the SSS, which was granted. When he
recovered, he reported for work in September 1998 but was no
longer allowed to continue working on account of his old age.
Latag thus asked Felix Fabros, the administrative officer of
[petitioners], for his retirement pay pursuant to Republic Act
7641 but he was ignored.
Thus, on December 21, 1998, Latagfiled a case for
payment of his retirement pay before the NLRC. Latag however
died on April 30, 1999. Subsequently, his wife, Avelina Latag,
substituted him. On January 10, 2000, the Labor Arbiter
rendered a decision in favor of Latag.
ISSUE:
Whether or not Latag is entitled to retirement benefits
considering she signed a waiver of quitclaim.
RULING:

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The respondent is entitled to retirement benefits despite


of the waiver of quitclaims.
There is no dispute the fact that the late Pedro M. Latag is
entitled to retirement benefits. Rather, the bone of contention
is the number of years that he should be credited with in
computing those benefits. The findings of the NLRC that Pedro
must be credited only with his service to R & E Transport, Inc.,
because the evidence shows that the aforementioned
companies are two different entities. After a careful and
painstaking review of the evidence on record, the court
supports the NLRC's findings.
As to the Quitclaim and Waiver signed by Respondent
Latag, the CA committed no error when it ruled that the
document was invalid and could not bar her from demanding
the benefits legally due her husband. This is not say that all
quitclaims are invalid per se. Courts, however, are wary of
schemes that frustrate workers' rights and benefits, and look
with disfavor upon quitclaims and waivers that bargain these
away.
Undisputably, Pedro M. Latag was credited with 14 years
of service with R & E Transport, Inc. Article 287 of the Labor
Code, as amended by Republic Act No. 7641, 30 provides:
Retirement. In the absence of a retirement plan or
agreement providing for retirement benefits of employees in
the establishment, an employee upon reaching the age of sixty
(60) years or more, but not beyond sixty-five (65) years which
is hereby declared the compulsory retirement age, who has
served at least five (5) years in said establishment, may retire
and shall be entitled to retirement pay equivalent to at least
one-half (1/2) month salary for every year of service, a fraction
of at least six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one
half-month salary shall mean fifteen (15) days plus one-twelfth
(1/12) of the 13th month pay and the cash equivalent of not
more than five (5) days of service incentive leaves.
The rules implementing the New Retirement Law similarly
provide the above-mentioned formula for computing the onehalf month salary. Since Pedro was paid according to the
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"boundary" system, he is not entitled to the 13th month 32 and


the service incentive pay; hence, his retirement pay should be
computed on the sole basis of his salary.
It is accepted that taxi drivers do not receive fixed wages,
but retain only those sums in excess of the "boundary" or fee
they pay to the owners or operators of their vehicles. Thus, the
basis for computing their benefits should be the average daily
income. In this case, the CA found that Pedro was earning an
average of five hundred pesos (P500) per day. We thus
compute his retirement pay as follows: P500 x 15 days x 14
years of service equals P105,000.

Rufina Patis vs. Alusitain


G.R. No. 146202; July 14, 2004
FACTS:
On March 1948, Alusitain was hired as a laborer at the
Rufina Patis Factory owned and operated by petitioner Lucas.
After close to forty three years, Alusitain admittedly tendered
his letter of resignation. On May 22, 1991, Alusitain executed a
duly notarized affidavit of separation from employment and
submitted the same on even date to the Pensions Department
of the Social Security System (SSS).
On January 7, 1993, Republic Act No. 7641 (R.A. 7641)
Sometime in 1995, Alusitain, claiming that he retired from the
company on January 31, 1995, having reached the age of 65
and due to poor health, verbally demanded from petitioner
Lucas for the payment of his retirement benefits. By his
computation, he claimed that he was entitled to P86,710.00.
Petitioner Lucas, however, refused to pay the retirement
benefits of Alusitain, prompting the latter to make a written
demand on September 20, 1995. Lucas, however, remained
adamant in his refusal to give in to Alusitain's demands. Having
failed to arrive at an amicable settlement, Alusitain filed on
November 17, 1995 a complaint before the NLRC against
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petitioners Rufina Patis Factory and Lucas for non-payment of


retirement benefits.
ISSUE:
Whether or not the respondent is entitled to the benefits
granted by the amendment of the law.
RULING:
The respondent is entitled to the retirement benefits.
Republic Act No. 7641 (R.A. 7641), "AN ACT AMENDING
ARTICLE 287 OF PRESIDENTIAL DECREE NO. 442, AS AMENDED
OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES,
BY PROVIDING FOR RETIREMENT PAY TO QUALIFIED PRIVATE
SECTOR EMPLOYEES IN THE ABSENCE OF ANY RETIREMENT
PLAN IN THE ESTABLISHMENT," took effect providing, among
other things, thusly:
Art. 287. Retirement. Any employee may be retired
upon reaching the retirement age established in the
collective bargaining agreement or other applicable
employment contract.

In the absence of a retirement plan or agreement


providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60)
years or more, but not beyond sixty five (65) years which is
hereby declared the compulsory retirement age, who has
served at least five (5) years in the said establishment, may
retire and shall be entitled to retirement pay equivalent to at
least one half () month salary for every year of service, a
fraction of at least six (6) months being considered as one
whole year.
Unless the parties provide for broader inclusions, the term one
half () month salary shall mean fifteen (15) days plus one
twelfth (1/12) of the 13th month pay and the cash equivalent of
not more than five (5) days of service incentive leaves.

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Violation of this provision is hereby declared unlawful and


subject to the penal provisions under Article 288 of this Code.
The Court believes that the respondent nevertheless
maintained that he continued working for petitioners until
January 1995, the date of actual retirement, due to illness and
old age, and that he merely accomplished the foregoing
documents in compliance with the requirements of the SSS in
order to avail of his retirement benefits.

Gerlach vs. Reuters Ltd., Phils.


G.R. No. 148542; January 17, 2005
FACTS:
On February 15, 1982, respondent Reuters Limited, Phils.
(Reuters), a company engaged in news dissemination with
offices worldwide, hired Marilyn Odchimar Gerlach as its local
correspondent. On October 1983, respondent Reuters
implemented a local Retirement Benefit Plan (Plan) for its
Philippine-hired employees. The Plan is funded by the company,
but an employee-participant may volunteer to contribute a
percentage of his basic monthly salary to the fund. Petitioner
was automatically covered by the Plan by reason of her age
and length of service. However, she opted not to contribute to
the fund. She worked in Reuters Philippines up to December 23,
1983. On October 12, 1988, she was directed to return to
Manila and resume her post by December 15, 1988.
On March 1, 1991, petitioner received her retirement
benefits under the Plan in the amount of P79,228.04, which
amount was determined by the trustee bank (Bank of the
Philippine Island) in accordance with the provisions of the Plan.
The computation was based on her notional salary. However,
she questioned the amount she received as well as her
entitlement to a disturbance grant, contending that her
retirement benefits must be computed on the basis of her
actual salary abroad, not on her notional salary.
Eventually, petitioner filed with the Office of the Labor
Arbiter, NCR, a money claim against respondent, docketed. On
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March 1994, the Labor Arbiter rendered its first Decision


ordering respondent to pay petitioner additional retirement
benefits in the sum of P436,000.00, which amount was based
on her actual salary abroad, not on her notional salary; a
disturbance grant in the sum of Stg 1,750 or its equivalent in
pesos; and attorney's fees. On appeal, the National Labor
Relations Commission (NLRC), rendered its Decision setting
aside the appealed Decision and remanding the case to the
Labor Arbiter for trial on the merits.
ISSUE:
Whether or not petitioner is allowed to claim for additional
retirement benefits.
RULING:
The petitioner is not entitled to the additional retirement
benefits.
There are three kinds of retirement schemes. The first
type is compulsory and contributory in character. The second
type is one set up by agreement between the employer and the
employees in collective bargaining agreements or other
agreements between them. The third type is one that is
voluntarily given by the employer, expressly as in an
announced company policy or impliedly as in a failure to
contest the employee's claim for retirement benefits. 28 It is
this third type of retirement scheme which covers respondent's
Plan.
Article 287 of the Labor Code reads:
Article 287.

Retirement.

Any employee may be retired upon reaching the


retirement age established in the collective bargaining
agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled
to receive such retirement benefits as he may have
earned under existing laws and any collective bargaining
agreement and other agreements."
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The first paragraph of the above provisions deals with the


retirement age of an employee established in (a) a collective
bargaining agreement or (b) other applicable employment
contract. The second paragraph deals with the retirement
benefits to be received by a retiring employee which he may
have earned under (a) an existing law, (b) a collective
bargaining or (c) other agreements.

Nonetheless, Section 14(a), Rule 1 of the Rules and


Regulations Implementing Book VI of the Labor Code, provides:

"Sec. 14. Retirement benefits. (a) An employee who is


retired pursuant to a bona fide retirement plan or in
accordance with the applicable individual or collective
agreement or established employer policy shall be entitled
to all the retirement benefits provided therein . "

Thus, in the instant case, respondent based petitioner's


retirement benefits on its Plan and established policy, which is
in accord with the above provision. Consequently, petitioner's
theory that the computation of her retirement benefits should
be based on her basic annual salary while stationed abroad is
untenable.
The Court ruled that petitioner's retirement benefits must
be based on her notional Philippine salary. It is very clear that
from the very start of her first assignment overseas,
respondent apprised her that the company's contribution to the
Plan is based on her notional Philippine salary.
In fact, under the Plan, the company's contribution to the
fund is 10% of the basic monthly salary of each participant.
Respondent also informed petitioner of the amount of her
notional Philippine salary whenever she was transferred to her
next overseas assignment or when there were increases in her
salary, both actual and notional. Significantly, respondent was
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able to prove that it has been its practice worldwide that the
notional salary of an employee is its basis in computing its
contribution to the retirement plan for a local employee
detailed abroad. It follows that the amount of retirement
benefits of a retiring employee assigned abroad is based on his
notional salary.
Sta. Catalina College vs. NLRC
G.R. No. 144483; November 19, 2003
FACTS:
In June 1955, Hilaria was hired as an elementary school
teacher at the Sta. Catalina College. In 1970, she applied for
and was granted a one year leave of absence without pay on
account of the illness of her mother. After the expiration in
1971 of her leave of absence, she had not been heard from by
Sta. Catalina College. In the meantime, she was employed as a
teacher at the San Pedro Parochial School during school year
1980-1981 and at the Liceo de San Pedro, Bian, Laguna during
school year 1981-1982.
In 1982, she applied anew at petitioner school which hired
her. On March 1997, during the 51st Commencement Exercises
of petitioner school, Hilaria was awarded a Plaque of
Appreciation for thirty years of service and P12,000.00 as
gratuity pay. On May 1997, Hilaria reached the compulsory
retirement age of 65. Retiring pursuant to Article 287 of the
Labor Code, as amended by Republic Act 7641, petitioner
school pegged her retirement benefits at P59,038.35,
computed on the basis of fifteen years of service from 1982 to
1997. Her service from 1955 to 1970 was excluded in the
computation, petitioner school having asserted that she had, in
1971, abandoned her employment. Hilaria insisted, that her
retirement benefits should be computed on the basis of her
thirty years of service, inclusive of the period from 1955 to
1970 and that the gratuity pay earlier given to her should not
be deducted there from.

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The parties having failed to agree on how the retirement


benefits should be computed, Hilaria filed a complaint before
the NLRC for non-payment of retirement benefits. Labor Arbiter
rendered ordering the respondents to pay the complainant the
amount of P18,185.26 only as the differential of her retirement
benefits.
ISSUE:
Whether or not Hilaria's services for the school during the
period from 1955 to 1970 should be factored in the
computation of her retirement benefits.
RULING:
Hilaria cannot be credited for her services in 1955-1970 in
the determination of her retirement benefits. This Court is not
unmindful of Hilaria's rendition of a total of thirty years of
teaching in petitioner school and should be accorded ample
support in her twilight years. Petitioner school in fact
acknowledges her dedicated service to its students. She can,
however, only be awarded with what she is rightfully entitled to
under the law.

Retirement benefits, on the other hand, are intended to


help the employee enjoy the remaining years of his life,
releasing him from the burden of worrying for his financial
support, and are a form of reward for his loyalty to the
employer.

In Hilaria's case, her retirement pay as computed by


petitioners amounts to P59,038.35, P28,853.09 of which had
already been given to her under the PERAA. Since the
computed amount of her retirement pay is much lower than
that provided under the law, she is entitled to receive the
difference between the actual amount of her retirement
benefits as required by law and that provided for under the
PERAA.

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Article 287 of the Labor Code, as amended by Republic Act


7641 or the New Retirement Law, provides: Retirement. Any
employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other
applicable employment contract. In case of retirement, the
employee shall be entitled to receive such retirement benefits
as he may have earned under existing laws and any collective
bargaining agreement and other agreements: Provided,
however, That an employee's retirement benefits under any
collective bargaining and other agreements shall not be less
than those provided herein.
In the absence of a retirement plan or agreement
providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60)
years or more, but not beyond sixty-five (65) years which is
hereby declared the compulsory retirement age, who has
served at least five (5) years in the said establishment, may
retire and shall be entitled to retirement pay equivalent to at
least one-half () month salary for every year of service, a
fraction of at least six (6) months being considered as one
whole year.
Unless the parties provide for broader inclusions, the term
one half () month salary shall mean fifteen (15) days plus
one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive
leaves.
Likewise, Section 3.3, Rule II of the Rules Implementing
R.A. 7641 provides: 3.3. Where both the employer and the
employee contribute to a retirement fund in accordance with an
individual or collective agreement or other applicable
employment contract, the employer's total contribution thereto
shall not be less than the total retirement benefits to which the
employee would have been entitled had there been no such
retirement fund. In case the employer's contribution is less than
the retirement benefits provided under this Rule, the employer
shall pay the difference.

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Hence, Hilaria is entitled to receive P98,706.45 computed


as follows:
One-half month salary
= (15 days x latest salary
per day) + (5 days leave x latest salary per day)
+ (1/12 of 13th month pay)
= P4,512.30 + P1,504.10 + P547.33
= P6,563.73
Retirement Pay = number of years in service x onehalf month salary
= 5 years x P6,580.43
= P98,455.95
Since petitioner school had already paid Hilaria
P28,853.09 representing employer contributions under the
PERAA, the same should be deducted from the retirement pay
due her, to thereby leave a balance of P69,602.86 still due her.
Honda Phils., vs. Samahan ng mga Manggagawa sa
Honda
G.R. No. 145561; June 15, 2005
FACTS:
The case stems from the collective bargaining agreement
between Honda and the respondent union that it granted the
computation of 14th month pay as the same as 13 th month pay.
Honda continues the practice of granting financial assistance
covered every December each year of not less than 100% of
the basic salary. In the latter part of 1998, the parties started to
re-negotiate for the fourth and fifth years of the CBA. The union
filed a notice of strike on the ground of unfair labor practice for
deadlock.
DOLE assumed jurisdiction over the case and certified it to
the NLRC for compulsory arbitration. The striking employees
were ordered to return to work and management to accept
them back under the same terms prior to the strike staged.
Honda issued a memorandum of the new computation of the
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13th month and 14th month pay to be granted to all its


employees whereby the 31 long strikes shall be considered
unworked days for purpose of computing the said benefits. The
amount equivalent to of the employees basic salary shall be
deducted from these bonuses, with a commitment that in the
event that the strike is declared legal, Honda shall pay the
amount.
The respondent union opposed the pro-rated computation
of bonuses. This issue was submitted to voluntary arbitration
where it ruled that the companys implementation of the prorated computation is invalid.
ISSUE:
Whether or not the pro-rated computation of the 13 th and
14th month pays and other bonuses in question is valid and
lawful.
RULING:
The Court ruled that the pro-rated computation is invalid.
The pro-rated computation of Honda as a company policy
has not ripened into a company practice and it was the first
time they implemented such practice.
The payment of the 13th month pay in full month payment
by Honda has become an established practice. The length of
time where it should be considered in practice is not being laid
down by jurisprudence. The voluntary act of the employer
cannot be unilaterally withdrawn without violating Article 100 of
the Labor Code.
The court also rules that the withdrawal of the benefit of
paying a full month salary for 13 th month pay shall constitute a
violation of Article 100 of the Labor Code.
Jaculbe vs. Silliman University
G.R. No. 156934; March 16, 2007
FACTS:

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Sometime in 1958, petitioner began working for


respondents university medical center as a nurse. In a letter in
December 1992, respondent, through its Human Resources
Development Office, informed petitioner that she was
approaching her 35th year of service with the university and
was due for automatic retirement on November 18, 1993, at
which time she would be 57 years old. This was pursuant to
respondents retirement plan for its employees which provided
that its members could be automatically retired upon reaching
the age of 65 or after 35 years of uninterrupted service to the
university.
Respondent required certain documents in
connection with petitioners impending retirement.
A brief exchange of letters between petitioner and
respondent followed. Petitioner emphatically insisted that the
compulsory retirement under the plan was tantamount to a
dismissal and pleaded with respondent to be allowed to work
until the age of 60 because this was the minimum age at which
she could qualify for SSS pension. But respondent stood pat on
its decision to retire her, citing company policy.
On November 15, 1993, petitioner filed a complaint in the
National Labor Relations Commission (NLRC) for termination of
service with preliminary injunction and/or restraining order. On
November 18, 1993, respondent compulsorily retired petitioner.
The labor arbiter rendered a decision finding respondent guilty
of illegal dismissal and ordered that petitioner be reinstated
and paid full back wages. On appeal, the NLRC reversed the
labor arbiters decision and dismissed the complaint. the CA
affirmed the NLRC.
ISSUE:
Whether or not the respondents retirement plan imposing
automatic retirement after 35 years of service contravenes the
security of tenure clause in the 1987 Constitution and the Labor
Code.
RULING:
Retirement plans allowing employers to retire employees
who are less than the compulsory retirement age of 65 are not
per se repugnant to the constitutional guaranty of security of
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tenure. Article 287 of the Labor Code provides: Retirement Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other
applicable employment contract. By its express language, the
Labor Code permits employers and employees to fix the
applicable retirement age at below 60 years.
The rules and regulations of the plan show that
participation therein was not voluntary at all. Rule III of the
plan, on membership, stated:
SECTION 1 MEMBERSHIP, All full-time Filipino employees
of the University will automatically become members of
the Plan, provided, however, that those who have retired
from the University, even if rehired, are no longer eligible
for membership in the Plan. A member who continues to
serve the University cannot withdraw from the Plan.
SECTION 2 EFFECTIVITY OF MEMBERSHIP, Membership in
the Plan starts on the day a person is hired on a full-time
basis by the University.
SECTION 3 TERMINATION OF MEMBERSHIP, Termination
of membership in the Plan shall be upon the death of the
member, resignation or termination of employees
contract by the University, or retirement from the
University.

Meanwhile, Rule IV, on contributions, stated:


The Plan is contributory. The University shall set aside an
amount equivalent to 3% of the basic salaries of the faculty
and staff. To this shall be added a 5% deduction from the basic
salaries of the faculty and staff.
A member on leave with the University approval shall
continue paying, based on his pay while on leave, his leave
without pay should pay his contributions to the Plan. However,
a member, who has been on leave without pay should pay his
contributions based on his salary plus the Universitys
contributions while on leave or the full amount within one
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month immediately after the date of his reinstatement.


Provided, further that if a member has no sufficient source of
income while on leave may pay within six months after his
reinstatement.
It was through no voluntary act of her own that petitioner
became a member of the plan. In fact, the only way she could
have ceased to be a member thereof was if she stopped
working for respondent altogether. Furthermore, in the rule on
contributions, the repeated use of the word shall ineluctably
pointed to the conclusion that employees had no choice but to
contribute to the plan (even when they were on leave).
Retirement is the result of a bilateral act of the parties, a
voluntary agreement between the employer and the employee
whereby the latter, after reaching a certain age agrees to sever
his or her employment with the former. The truth was that
petitioner had no choice but to participate in the plan, given
that the only way she could refrain from doing so was to resign
or lose her job. It is axiomatic that employer and employee do
not stand on equal footing, a situation which often causes an
employee to act out of need instead of any genuine
acquiescence to the employer. This was clearly just such an
instance.
An employer is free to impose a retirement age less than
65 for as long as it has the employees consent. Stated
conversely, employees are free to accept the employers offer
to lower the retirement age if they feel they can get a better
deal with the retirement plan presented by the employer. Thus,
having terminated petitioner solely on the basis of a provision
of a retirement plan which was not freely assented to by her,
respondent was guilty of illegal dismissal.
Intercontinental Broadcasting Corp., vs. Amarilla
G.R. No. 162775; October 27, 2006
FACTS:
On various dates, petitioner employed the following
persons at its Cebu station: Candido C. Quiones, Jr, Corsini R.
Lagahit, as Studio Technician, Anatolio G. Otadoy, as Collector
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and Noemi Amarilla, as Traffic Clerk. On March 1986, the


government sequestered the station, including its properties,
funds and other assets, and took over its management and
operations from its owner, Roberto Benedicto. However, in
December 1986, the government and Benedicto entered into a
temporary agreement under which the latter would retain its
management and operation. On November 1990, the
Presidential Commission on Good Government (PCGG) and
Benedicto executed a Compromise Agreement, where
Benedicto transferred and assigned all his rights, shares and
interests in petitioner station to the government.
In the meantime, the four employees retired from the
company and received, on staggered basis, their retirement
benefits under the 1993 Collective Bargaining Agreement
between petitioner and the bargaining unit of its employees. In
the meantime, a P1,500.00 salary increase was given to all
employees of the company, current and retired, effective July
1994. However, when the four retirees demanded theirs,
petitioner refused and instead informed them via a letter that
their differentials would be used to offset the tax due on their
retirement benefits in accordance with the National Internal
Revenue Code (NIRC).
The four retirees filed separate complaints against IBC TV13 Cebu and Station Manager Louella F. Cabaero for unfair
labor practice and non-payment of backwages before the NLRC.
ISSUE:
Whether or not the retirement benefits of respondents are
part of their gross income.
RULING:
The Court agrees with petitioner that under the CBA, it is
not obliged to pay for the taxes on the respondents' retirement
benefits. CBA did not provide a provision where petitioner
obliged itself to pay the taxes on the retirement benefits of its
employees. The Court also agrees with petitioner that, under
the NIRC, the retirement benefits of respondents are part of
their gross income subject to taxes.
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Section 28 (b) (7) (A) of the NIRC of 1986 23 provides:


Gross Income. (b) Exclusions from gross income. The
following items shall not be included in gross income and shall
be exempt from taxation under this Title: (7) Retirement
benefits, pensions, gratuities, etc. A.) Retirement benefits
received by officials and employees of private firms whether
individuals or corporate, in accordance with a reasonable
private benefit plan maintained by the employer: Provided,
That the retiring official or employee has been in the service of
the same employer for at least ten (10) years and is not less
than fifty years of age at the time of his retirement: Provided,
further, That the benefits granted under this subparagraph
shall be availed of by an official or employee only once. For
purposes of this subsection, the term "reasonable private
benefit plan" means a pension, gratuity, stock bonus or profitsharing plan maintained by an employer for the benefit of some
or all of his officials or employees, where contributions are
made by such employer for officials or employees, or both, for
the purpose of distributing to such officials and employees the
earnings and principal of the fund thus accumulated, and
wherein it is provided in said plan that at no time shall any part
of the corpus or income of the fund be used for, or be diverted
to, any purpose other than for the exclusive benefit of the said
official and employees.
Revenue Regulation No. 12-86, the implementing rules of
the foregoing provisions, provides: (b) Pensions, retirements
and separation pay. Pensions, retirement and separation pay
constitute compensation subject to withholding tax, except the
following: (1) Retirement benefit received by official and
employees of private firms under a reasonable private benefit
plan maintained by the employer, if the following requirements
are met: (i) The retirement plan must be approved by the
Bureau of Internal Revenue; (ii) The retiring official or
employees must have been in the service of the same
employer for at least ten (10) years and is not less than fifty
(50) years of age at the time of retirement; and (iii) The retiring
official or employee shall not have previously availed of the
privilege under the retirement benefit plan of the same or
another employer.
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Thus, for the retirement benefits to be exempt from the


withholding tax, the taxpayer is burdened to prove the
concurrence of the following elements: (1) a reasonable private
benefit plan is maintained by the employer; (2) the retiring
official or employee has been in the service of the same
employer for at least 10 years; (3) the retiring official or
employee is not less than 50 years of age at the time of his
retirement; and (4) the benefit had been availed of only once.
Article VIII of the 1993 CBA provides for two kinds of
retirement plans - compulsory and optional. Thus: ARTICLE VIII
RETIREMENT
Section 1: Compulsory Retirement Any employee who has
reached the age of Fifty Five (55) years shall be retired from the
COMPANY and shall be paid a retirement pay in accordance
with the following schedule:
LENGTH OF SERVICERETIREMENT BENEFITS=
1 year-below 5 yrs. 15 days for every year of service
5 years-9 years

30 days for every year of service

10 years-14 years

50 days for every year of service

15 years-19 years

65 days for every year of service

20 years or more

80 days for every year of service

A supervisor who reached the age of Fifty (50) may at his/her


option retire with the same retirement benefits provided above.
Section 2: Optional Retirement Any covered employee,
regardless of age, who has rendered at least five (5) years of
service to the COMPANY may voluntarily retire and the
COMPANY agrees to pay Long Service Pay to said covered
employee in accordance with the following schedule:
LENGTH OF SERVICERETIREMENT BENEFITS
5-9 years 15 days for every year of service
10-14 years

30 days for every year of service

15-19 years

50 days for every year of service

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20 years or more

60 days for every year of service

Section 3: Fraction of a Year In computing the retirement


under Section 1 and 2 of this Article, a fraction of at least six (6)
months shall be considered as one whole year. Moreover, the
COMPANY may exercise the option of extending the
employment of an employee.
Section 4: Severance of Employment Due to Illness When a
supervisor suffers from disease and/or permanent disability and
her/his continued employment is prohibited by law or
prejudicial to her/his health of the health of his co-employees,
the COMPANY shall not terminate the employment of the
subject supervisor unless there is a certification by a competent
public health authority that the disease is of such a nature or at
such stage that it can not be cured within a period of six (6)
months even with proper medical treatment. The supervisor
may be separated upon payment by the COMPANY of
separation pay pursuant to law, unless the supervisor falls
within the purview of either Sections 1 or 2 hereof. In which
case, the retirement benefits indicated therein shall apply,
whichever is higher.
Section 5: Loyalty Recognition The COMPANY shall recognize
the services of the supervisor/director who have reached the
following number of years upon retirement by granting him/her
a plaque of appreciation and any lasting gift: 10 years but
below 15 years (P3,000.00) worth; 15 years but below 20 year
(P7,000.00) worth; 20 years and more (P10,000.00) worth.
Respondents were qualified to retire optionally from their
employment with petitioner. there is no record that the 1993
CBA had been approved or was ever presented to the BIR.
Hence, the retirement benefits of respondents are taxable.
Under Section 80 of the NIRC, petitioner, as employer, was
obliged to withhold the taxes on said benefits and remit the
same to the BIR. Section 80. Liability for Tax. (A) Employer.
The employer shall be liable for the withholding and remittance
of the correct amount of tax required to be deducted and
withheld under this Chapter. If the employer fails to withhold
and remit the correct amount of tax as required to be withheld
Balahadia, A. (USC-LLB 2, EH402)
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under the provision of this Chapter, such tax shall be collected


from the employer together with the penalties or additions to
the tax otherwise applicable in respect to such failure to
withhold and remit.

Letran Calamba Faculty & Employees Association vs.


NLRC et al.
G.R. No. 156225; January 29, 2008
FACTS:
On October 8, 1992, the Letran Calamba Faculty and
Employees Association (petitioner) filed with Regional
Arbitration Branch No. IV of the National Labor Relations
Commission (NLRC) a Complaint against Colegio de San Juan de
Letran, Calamba, Inc. (respondent) for collection of various
monetary claims due to its members. Some of the allegations
of the petitioners in its Position Paper are: (1) In the
computation of the thirteenth month pay of its academic
personnel, respondent does not include as basis therefor their
compensation for overloads. It only takes into account the pay
the faculty members receive for their teaching loads not
exceeding eighteen (18) units; (2) respondent has not paid the
wage increases required by Wage Order No. 5 to its employees
who qualify thereunder; (3) respondent has not also paid its
employees the holiday pay for the ten (10) regular holidays as
provided for in Article 94 of the Labor Code. Respondent has
refused without justifiable reasons and despite demands to pay
its obligations.
As to the inclusion of the overloads of respondent's faculty
members in the computation of their 13th-month pay,
petitioner argues that under the Revised Guidelines on the
Implementation of the 13th-Month Pay Law, promulgated by the
Secretary of Labor on November 16, 1987, the basic pay of an
employee includes remunerations or earnings paid by his
employer for services rendered, and that excluded therefrom
are the cash equivalents of unused vacation and sick leave
credits, overtime, premium, night differential, holiday pay and
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cost-of-living allowances. Petitioner claims that since the pay


for excess loads or overloads does not fall under any of the
enumerated exclusions and considering that the said overloads
are being performed within the normal working period of eight
hours a day, it only follows that the overloads should be
included in the computation of the faculty members' 13thmonth pay.
ISSUE:
Whether or not a teacher's overload pay should be
considered in the computation of his or her 13th-month pay.
RULING:
It is a settled rule that when an administrative or
executive agency renders an opinion or issues a statement of
policy, it merely interprets a pre-existing law and the
administrative interpretation is at best advisory for it is the
courts that finally determine what the law means. In the
present case, while the DOLE Order may not be applicable, the
Court finds that overload pay should be excluded from the
computation of the 13th-month pay of petitioner's members.
In resolving the issue of the inclusion or exclusion of
overload pay in the computation of a teacher's 13th-month pay,
it is decisive to determine what "basic salary" includes and
excludes. In this respect, the Court's disquisition in San Miguel
Corporation v. Inciong is instructive, to wit: Under Presidential
Decree 851 and its implementing rules, the basic salary of an
employee is used as the basis in the determination of his 13th
month pay. Any compensations or remunerations which are
deemed not part of the basic pay is excluded as basis in the
computation of the mandatory bonus. Under the Rules and
Regulations Implementing Presidential Decree 851, the
following compensations are deemed not part of the basic
salary: a) Cost-of-living allowances granted pursuant to
Presidential Decree 525 and Letter of Instruction No. 174; b)
Profit sharing payments; c) All allowances and monetary
benefits which are not considered or integrated as part of the
regular basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.
Balahadia, A. (USC-LLB 2, EH402)
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Under a later set of Supplementary Rules and Regulations


Implementing Presidential Decree 851 issued by the then Labor
Secretary Blas Ople, overtime pay, earnings and other
remunerations are excluded as part of the basic salary and in
the computation of the 13th-month pay. The exclusion of costof-living allowances under Presidential Decree 525 and Letter of
Instruction No. 174 and profit sharing payments indicate the
intention to strip basic salary of other payments which are
properly considered as "fringe" benefits. Likewise, the catch-all
exclusionary phrase "all allowances and monetary benefits
which are not considered or integrated as part of the basic
salary" shows also the intention to strip basic salary of any and
all additions which may be in the form of allowances or "fringe"
benefits. Moreover, the Supplementary Rules and Regulations
Implementing Presidential Decree 851 is even more emphatic
in declaring that earnings and other remunerations which are
not part of the basic salary shall not be included in the
computation of the 13th-month pay.
While doubt may have been created by the prior Rules and
Regulations Implementing Presidential Decree 851 which
defines basic salary to include all remunerations or earnings
paid by an employer to an employee, this cloud is dissipated in
the later and more controlling Supplementary Rules and
Regulations which categorically, exclude from the definition of
basic salary earnings and other remunerations paid by
employer to an employee. A cursory perusal of the two sets of
Rules indicates that what has hitherto been the subject of a
broad inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the seeming
tendency of the former rules to include all remunerations and
earnings within the definition of basic salary.
The
all-embracing
phrase
"earnings
and
other
remunerations" which are deemed not part of the basic salary
includes within its meaning payments for sick, vacation, or
maternity leaves, premium for works performed on rest days
and special holidays, pay for regular holidays and night
differentials. As such they are deemed not part of the basic
salary and shall not be considered in the computation of the
13th-month pay. If they were not so excluded, it is hard to find
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Page

any "earnings and other remunerations" expressly excluded in


the computation of the 13th-month pay. Then the exclusionary
provision would prove to be idle and with no purpose.
This conclusion finds strong support under the Labor Code
of the Philippines. To cite a few provisions: Art. 87. Overtime
work. Work may be performed beyond eight (8) hours a day
provided that the employee is paid for the overtime work,
additional compensation equivalent to his regular wage plus at
least twenty-five (25%) percent thereof. It is clear that
overtime pay is an additional compensation other than and
added to the regular wage or basic salary, for reason of which
such is categorically excluded from the definition of basic salary
under the Supplementary Rules and Regulations Implementing
Presidential Decree 851. In Article 93 of the same Code,
paragraph c.) work performed on any special holiday shall be
paid an additional compensation of at least thirty percent (30%)
of the regular wage of the employee."
It is likewise clear that premium for special holiday which
is at least 30% of the regular wage is an additional
compensation other than and added to the regular wage or
basic salary. For similar reason it shall not be considered in the
computation of the 13th-month pay. In the same manner that
payment for overtime work and work performed during special
holidays is considered as additional compensation apart and
distinct from an employee's regular wage or basic salary, an
overload pay, owing to its very nature and definition, may not
be considered as part of a teacher's regular or basic salary,
because it is being paid for additional work performed in excess
of the regular teaching load.
Moreover, petitioner failed to refute private respondent's
contention that excess teaching load is paid by the hour, while
the regular teaching load is being paid on a monthly basis; and
that the assignment of overload is subject to the availability of
teaching loads. This only goes to show that overload pay is not
integrated with a teacher's basic salary for his or her regular
teaching load. In addition, overload varies from one semester
to another, as it is dependent upon the availability of extra
teaching loads. As such, it is not legally feasible to consider
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payments for such overload as part of a teacher's regular or


basic salary. Verily, overload pay may not be included as basis
for determining a teacher's 13th-month pay.

Reyes vs. NLRC et al.


G.R. No. 160233; August 8, 2007
FACTS:
Petitioner was employed as a salesman at private
respondent's Grocery Division in Davao City on August 12,
1977. He was eventually appointed as unit manager of Sales
Department-South Mindanao District, a position he held until
his retirement on November 30, 1997. Thereafter, he received a
letter regarding the computation of his separation pay. Insisting
that his retirement benefits and 13th month pay must be based
on the average monthly salary of P42,766.19, which consists of
P10,919.22 basic salary and P31,846.97 average monthly
commission, petitioner refused to accept the check issued by
private respondent in the amount of P200,322.21. Instead, he
filed a complaint before the arbitration branch of the NLRC for
retirement benefits, 13th month pay, tax refund, earned sick
and vacation leaves, financial assistance, service incentive
leave pay, damages and attorney's fees.
Petitioner contends that the commissions form part of the
basic salary, citing the case of Philippine Duplicators, Inc. v.
National Labor Relations Commission, wherein the Court held
that commissions earned by salesmen form part of their basic
salary. Private respondent counters that petitioner knew that
the overriding commission is not included in the basic salary
because it had not been considered as such for a long time in
the computation of the 13th month pay, leave commissions,
absences and tardiness.
ISSUE:
Whether or not the average monthly sales commission of
thirty one thousand eight hundred forty six and 97/100
(Php31,846.97) should be included in the computation of his
retirement benefits and 13th month pay.
Balahadia, A. (USC-LLB 2, EH402)
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Page

RULING:
This Court has held, in Philippine Duplicators that, the
salesmen's commissions, comprising a pre-determined
percentage of the selling price of the goods sold by each
salesman, were properly included in the term basic salary for
purposes of computing the 13th month pay. The salesmen's
commission are not overtime payments, nor profit-sharing
payments nor any other fringe benefit but a portion of the
salary structure which represents an automatic increment to
the monetary value initially assigned to each unit of work
rendered by a salesman.
Contrarily, in Boie-Takeda, the so-called commissions paid
to or received by medical representatives of Boie-Takeda
Chemicals or by the rank and file employees of Philippine Fuji
Xerox Co., were excluded from the term basic salary because
these were paid to the medical representatives and rank-andfile employees as productivity bonuses, which are generally
tied to the productivity, or capacity for revenue production, of a
corporation and such bonuses closely resemble profit-sharing
payments and have no clear direct or necessary relation to the
amount of work actually done by each individual employee.
Further, commissions paid by the Boie-Takeda Company to its
medical representatives could not have been sales
commissions in the same sense that Philippine Duplicators paid
the salesmen their sales commissions. Medical representatives
are not salesmen; they do not effect any sale of any article at
all.
In fine, whether or not a commission forms part of the
basic salary depends upon the circumstances or conditions for
its payment, which indubitably are factual in nature for they will
require a re-examination and calibration of the evidence on
record.
As to the main issue whether petitioner's commissions be
considered in the computation of his retirement benefits and
13th month pay, we rule in the negative. Article 287 of the
Labor Code, as amended by Republic Act No. 7641, otherwise
known as The New Retirement Law, 22 provides: Retirement.
Any employee may be retired upon reaching the retirement age
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Page

established in the collective bargaining agreement or other


applicable employment contract In the absence of a
retirement plan or agreement providing for retirement benefits
of employees in the establishment, an employee upon reaching
the age of sixty (60) years or more, but not beyond sixty five
(65) years which is hereby declared the compulsory retirement
age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement
pay equivalent to at least one half (1/2) month salary for every
year of service, a fraction of at least six (6) months being
considered as one whole year. Unless the parties provide for
broader inclusions, the term one half (1/2) month salary shall
mean fifteen (15) days plus one twelfth (1/12) of the 13th
month pay and the cash equivalent of not more than five (5)
days of service incentive leaves.
Petitioner filed for optional retirement upon reaching the
age of 60. However, the basis in computing his retirement
benefits is his latest salary rate of P10,919.22 as the
commissions he received are in the form of profit-sharing
payments specifically excluded by the foregoing rules. Case law
has it that when these earnings and remuneration are closely
akin to fringe benefits, overtime pay or profit-sharing
statements, they are properly excluded in computing
retirement pay. However, sales commissions which are
effectively an integral portion of the basic salary structure of an
employee, shall be included in determining the retirement pay.
At bar, petitioner Rogelio J. Reyes was receiving a monthly
sum of P10,919.22 as salary corresponding to his position as
Unit Manager. Thus, as correctly ruled by public respondent
NLRC, the "overriding commissions" paid to him by Universal
Robina Corp. could not have been 'sales commissions' in the
same sense that Philippine Duplicators paid its salesmen sales
commissions. Unit Managers are not salesmen; they do not
effect any sale of article at all. Therefore, any commission
which they receive is certainly not the basic salary which
measures the standard or amount of work of complainant as
Unit Manager. Accordingly, the additional payments made to
petitioner were not in fact sales commissions but rather partook
of the nature of profit-sharing business. Certainly, from the
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Page

foregoing, the doctrine in Boie-Takeda Chemicals and Philippine


Fuji Xerox Corporation, which pronounced that commissions are
additional pay that does not form part of the basic salary,
applies to the present case. Aside from the fact that as unit
manager petitioner did not enter into actual sale transactions,
but merely supervised the salesmen under his control, the
disputed commissions were not regularly received by him. Only
when the salesmen were able to collect from the sale
transactions can petitioner receive the commissions.
Conversely, if no collections were made by the salesmen, then
petitioner would receive no commissions at all. In fine, the
commissions which petitioner received were not part of his
salary structure but were profit-sharing payments and had no
clear, direct or necessary relation to the amount of work he
actually performed. The collection made by the salesmen from
the sale transactions was the profit of private respondent from
which petitioner had a share in the form of a commission.
Hence, petition is denied.
Arco Metal Products Co., Inc., et al. vs. Samahan ng Mga
Manggagawa sa Arco Metal NAFLU
G.R. No. 170734; May 14, 2008
FACTS:
Petitioner is a company engaged in the manufacture of
metal products, whereas respondent is the labor union of
petitioners rank and file employees. Sometime in December
2003, petitioner paid the 13 th month pay, bonus, and leave
encashment of three union members in amounts proportional
to the service they actually rendered in a year, which is less
than a full twelve (12) months. Respondent protested the
prorated scheme, claiming that on several occasions petitioner
did not prorate the payment of the same benefits to seven (7)
employees who had not served for the full 12 months.
According to respondent, the prorated payment violates the
rule against diminution of benefits under Article 100 of the
Labor Code. Thus, they filed a complaint before the National
Conciliation and Mediation Board (NCMB).
Balahadia, A. (USC-LLB 2, EH402)
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Page

ISSUE:
Whether or not the grant of 13 th month pay, bonus, and
leave encashment in full regardless of actual service rendered
constitutes voluntary employer practice and, consequently,
whether or not the prorated payment of the said benefits
constitute diminution of benefits under Article 100 of the Labor
Code.
RULING:
Any benefit and supplement being enjoyed by employees
cannot be reduced, diminished, discontinued or eliminated by
the employer. The principle of non-diminution of benefits is
founded on the Constitutional mandate to "protect the rights of
workers and promote their welfare and to afford labor full
protection. Said mandate in turn is the basis of Article 4 of the
Labor Code which states that all doubts in the implementation
and interpretation of this Code, including its implementing rules
and regulations shall be rendered in favor of labor.
Jurisprudence is replete with cases which recognize the
right of employees to benefits which were voluntarily given by
the employer and which ripened into company practice. Thus in
DavaoFruits Corporation v. Associated Labor Unions, et al.
where an employer had freely and continuously included in the
computation of the 13th month pay those items that were
expressly excluded by the law, we held that the act which was
favorable to the employees though not conforming to law had
thus ripened into a practice and could not be withdrawn,
reduced, diminished, discontinued or eliminated. In Sevilla
Trading Company v. Semana, we ruled that the employers act
of including non-basic benefits in the computation of the 13 th
month pay was a voluntary act and had ripened into a company
practice which cannot be peremptorily withdrawn.
In the years 1992, 1993, 1994, 1999, 2002 and 2003,
petitioner had adopted a policy of freely, voluntarily and
consistently granting full benefits to its employees regardless of
the length of service rendered. True, there were only a total of
seven employees who benefited from such a practice, but it
was an established practice nonetheless. Jurisprudence has not
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Page

laid down any rule specifying a minimum number of years


within which a company practice must be exercised in order to
constitute voluntary company practice. Thus, it can be six (6)
years, three (3) years, or even as short as two (2) years.
Petitioner cannot shirk away from its responsibility by merely
claiming that it was a mistake or an error, supported only by an
affidavit of its manufacturing group head. Hence, petition was
denied.
Universal Robina Sugar Milling Corp. vs. Caballeda
G.R. No. 156644; July 28, 2008
FACTS:
Petitioner Universal Robina Sugar Milling Corporation
(URSUMCO) is a domestic corporation engaged in the sugar
milling business and petitioner Renato Cabati is URSUMCO's
manager. Respondent Agripino Caballeda (Agripino) worked as
welder for URSUMCO from March 1989 until June 23, 1997 with
a salary of P124.00 per day, while respondent Alejandro Cadalin
(Alejandro) worked for URSUMCO as crane operator from 1976
up to June 15, 1997 with a salary of P209.30 per day.
On April 24, 1991, John Gokongwei, Jr., President of
URSUMCO, issued a Memorandum establishing the company
policy on Compulsory Retirement (Memorandum) of its
employees. The memorandum provides that all employees
corporate-wide who attain 60 years of age on or before April
30, 1991 shall be considered retired on May 31, 1991.
On April 29, 1993, URSUMCO and the National Federation
of Labor (NFL), a legitimate labor organization and the
recognized sole and exclusive bargaining representative of all
the monthly and daily paid employees of URSUMCO, of which
Alejandro was a member, entered into a Collective Bargaining
Agreement (CBA). Article XV of the said CBA particularly
provided that the retirement benefits of the members of the
collective bargaining unit shall be in accordance with law.

Balahadia, A. (USC-LLB 2, EH402)


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Page

Agripino and Alejandro (respondents), having reached the


age of 60, were allegedly forced to retire by URSUMCO. Agripino
averred that URSUMCO illegally dismissed him from
employment on June 24, 1997 when he was forced to retire
upon reaching the age of sixty (60) years old. Upon the
termination of his employment, he accepted his separation pay
and applied for retirement benefits with the Social Security
System (SSS). Earlier, on April 15, 1997, Alejandro turned 60
years old. On May 28, 1997, he filed his application for
retirement with URSUMCO, attaching his birth and baptismal
certificates. On July 23, 1997, he accepted his retirement
benefits and executed a quitclaim in favor of URSUMCO.
Thereafter, on August 6, 1997, Agripino filed a Complaint
for illegal dismissal, damages and attorneys fees before the
Labor Arbiter (LA) of Dumaguete City. He alleged that his
compulsory retirement was in violation of the provisions of
Republic Act (R.A.) 7641 and, was in effect, a form of illegal
dismissal.
On August 26, 1997, Alejandro likewise filed a Complaint
for illegal dismissal, underpayment of retirement benefits,
damages and attorneys fees before the LA, alleging that he
was given only 15 days per year of service by way of
retirement
benefits
and
further
assails
that
his
compulsory retirement was discriminatory considering that
there were other workers over sixty (60) years of age who were
allowed to continuously report for work.
ISSUES:
Whether respondents were illegally
account of compulsory retirement
voluntarily retired.

terminated on
or the same

RULING:
SC ruled in favor of the respondents.
Retirement is the result of a bilateral act of the parties, a
voluntary agreement between the employer and the employee
whereby the latter, after reaching a certain age, agrees to
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Page

sever his or her employment with the former. The age of


retirement is primarily determined by the existing agreement
between the employer and the employees. However, in the
absence of such agreement, the retirement age shall be fixed
by law. Under Art. 287 of the Labor Code as amended, the
legally mandated age for compulsory retirement is 65 years,
while the set minimum age for optional retirement is 60 years.
In this case, it may be stressed that the CBA does not per
se specifically provide for the compulsory retirement age nor
does it provide for an optional retirement plan. It merely
provides that the retirement benefits accorded to an employee
shall be in accordance with law. Thus, we must apply Art. 287
of the Labor Code which provides for two types of retirement:
(a) compulsory and (b) optional. The first takes place at age 65,
while the second is primarily determined by the collective
bargaining agreement or other employment contract or
employer's retirement plan. In the absence of any provision on
optional retirement in a collective bargaining agreement, other
employment contract, or employer's retirement plan, an
employee may optionally retire upon reaching the age of 60
years or more, but not beyond 65 years, provided he has
served at least five years in the establishment concerned. That
prerogative is exclusively lodged in the employee.
Indubitably, the voluntariness of the respondents'
retirement is the meat of the instant controversy. Petitioners
postulate that respondents voluntarily retired particularly when
Alejandro filed his application for retirement, submitted all the
documentary requirements, accepted the retirement benefits
and executed a quitclaim in favor of URSUMCO. Respondents
claim otherwise, contending that they were merely forced to
comply as they were no longer given any work assignment and
considering that the severance of their employment with
URSUMCO is a condition precedent for them to receive their
retirement benefits.
Generally, the law looks with disfavor on quitclaims and
releases by employees who have been inveigled or pressured
into signing them by unscrupulous employers seeking to evade
their legal responsibilities and frustrate just claims of
Balahadia, A. (USC-LLB 2, EH402)
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Page

employees. They are frowned upon as contrary to public policy.


A quitclaim is ineffective in barring recovery of the full measure
of a worker's rights, and the acceptance of benefits therefrom
does not amount to estoppels.
To be precise, only Alejandro was able to claim a partial
amount of his retirement benefit. Thus, it is clear from the
decisions of the LA, NLRC and CA that petitioners are still liable
to pay Alejandro the differential on his retirement benefits. On
the other hand, Agripino was actually and totally deprived of
his retirement benefit.
Moreover, the petitioners, not the respondents, have the
burden of proving that the quitclaim was voluntarily entered
into. In previous cases, we have considered, among others, the
educational attainment of the employees concerned in
upholding the validity of the quitclaims which they have
executed in favor of their employers.

Cercado vs. Uniprom, Inc.


GR NO. 188154 October 13, 2010
FACTS:
Petitioner Lourdes A. Cercado (Cercado) started working for
respondent UNIPROM, Inc. (UNIPROM) on December 15, 1978
as a ticket seller assigned at Fiesta Carnival, Araneta Center,
Quezon City. Later on, she was promoted as cashier and then as
clerk typist.
On April 1, 1980, UNIPROM instituted an
Employees Non-Contributory Retirement Plan 4 which provides
that any participant with twenty (20) years of service,
regardless of age, may be retired at his option or at the option
of the company. UNIPROM exercised its option under the
retirement plan, and decided to retire Cercado effective at the
end of business hours on February 15, 2001. A check of even
date in the amount of P100,811.70, representing her retirement
benefits under the regular retirement package, was issued to
her. Cercado refused to accept the check.
The CA, however, ruled that UNIPROMs retirement plan was
consistent with Article 287 of the Labor Code, which provides
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Page

that "any employee may be retired upon reaching the


retirement age established in the collective bargaining
agreement or other applicable employment contract."
ISSUE:
WON UNIPROM has a bona fide retirement plan.
HELD:
The petition is meritorious.
x x x We reiterate the well-established meaning of retirement in
this jurisdiction: Retirement is the result of a bilateral act of the
parties, a voluntary agreement between the employer and the
employee whereby the latter, after reaching a certain age,
agrees to sever his or her employment with the former.
Acceptance by the employees of an early retirement age option
must be explicit, voluntary, free, and uncompelled. While an
employer may unilaterally retire an employee earlier than the
legally permissible ages under the Labor Code, this prerogative
must be exercised pursuant to a mutually instituted early
retirement plan. In other words, only the implementation and
execution of the option may be unilateral, but not the adoption
and institution of the retirement plan containing such option.
For the option to be valid, the retirement plan containing it
must be voluntarily assented to by the employees or at least by
a majority of them through a bargaining representative.
The following pronouncements in Jaculbe v. Silliman University
are elucidating:
An employer is free to impose a retirement age less than 65 for
as long as it has the employees consent. Stated conversely,
employees are free to accept the employers offer to lower the
retirement age if they feel they can get a better deal with the
retirement plan presented by the employer.
We disagree with the CAs conclusion that the retirement plan
is part of petitioners employment contract with respondent. It
must be underscored that petitioner was hired in 1978 or 2
years before the institution of UNIPROMs retirement plan in
Balahadia, A. (USC-LLB 2, EH402)
260 of 261

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1980. Logically, her employment contract did not include the


retirement plan, much less the early retirement age option
contained therein

Balahadia, A. (USC-LLB 2, EH402)


261 of 261

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