28 SEVILLA TRADING CO vs. A.V.A. TOMAS E.

SEMANA

FACTS:
On appeal is the Decision of the Court of Appeals (CA) sustaining the Decision of
Accredited Voluntary Arbitrator Tomas E.Semana.
For two to three years prior to 1119, petitioner Sevilla Trading Company (petitioner), a
domestic corporation engaged in trading business, organized and existing under
Philippine laws, added to the base figure, in its computation of the 13th month pay of its
employees, the amount of other benefits received by the employees which are beyond
the basic pay.
Petitioner claimed that it entrusted the preparation of the payroll to its office staff,
including the computation and payment of the 13th month pay and other benefits. When
it changed its person in charge of the payroll in the process of computerizing its payroll,
and after audit was conducted, it allegedly discovered the error of including non-basic
pay or other benefits in the base figure used in the computation of the 13th month pay of
its employees. It cited the Rules and Regulations Implementing PD 851 which stated:
“Basic salary shall include all remunerations or earnings paid by an employer to
an employee for services rendered but may not include cost-of-living allowances
granted pursuant to PD 525 or Letter of Instruction No. 174, profit-sharing
payments, and all allowances and monetary benefits which are not considered or
integrated as part of the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975. “
Petitioner then effected a change in the computation of the thirteenth month pay, as
follows – 13th month pay = NET BASIC PAY
Hence, the new computation reduced the employees’ thirteenth month pay. The daily
piece-rate workers represented by private respondent Sevilla Trading Workers Union
Super (UNION, for short), a duly organized and registered union, through the Grievance
Machinery in their Collective Bargaining Agreement, contested the new computation
and reduction of their thirteenth month pay. The parties failed to resolve the issue.
The Union alleged that petitioner violated the rule prohibiting the elimination or
diminution of employees benefits as provided for in Art. 100 of the Labor Code, as
amended. They claimed that paid leaves, li<e sic< leave, vacation leave, paternity
leave, union leave, bereavement leave, holiday pay and other leaves with pay in the
C3A should be included in the base figure in the computation of their " th*month pay.
ISSUE:
WON a voluntary act of the employer which was favorable to the employees though not
conforming to law, has ripened into a practice and therefore can be withdrawn, reduced,
diminished, discontinued or eliminated.
Held:
NO. As such the SC affirms the decision of the Accredited Voluntary Arbitrator Tomas
E. Semana granting to pay corresponding bac< wages to all covered and entitled
employees arising from the ecclusion of said benefits in the computation of 13th-month
pay.
RATIO DECIDENDI:
With regard to the length of time the company practice should have been exercised to
constitute voluntary employer practice which cannot be unilaterally withdrawn by the
employer, we hold that jurisprudence has not laid down any rule requiring a specific
minimum number of years.
In the above-quoted case of Davao Fruits Corporation vs. Associated Labor Unions, the
company practice lasted for six (6) years. In another case, Davao Integrated Port
Stevedoring Services vs. Abarquez, the employer, for three years and nine months,
approved the commutation to cash of the un-enjoyed portion of the sick leave with pay
benefits of its intermittent workers. While in Tiangco vs. Leogardo, Jr. the employer
carried on the practice of giving a fixed monthly emergency allowance for three years
and four months
In all these case, this Court held that the grant of these benefits has ripened into
company practice or policy which cannot be peremptorily withdrawn.
In the case at bar, petitioner Sevilla Trading kept the practice of including non-basic
benefits such as paid leaves for un-used sick leave and vacation leave in the
computation of their 13th month pay for at least two years.
This, we rule likewise constitutes voluntary employer practice which cannot be
unilaterally withdrawn by the employer without violating Art. 100 of the Labor
Code
 30 DAVAO FRUITS vs ALU,

(Labor Standards – Fringe benefits not included in 13th month pay)

Facts:
Respondent ALU for and in behalf of all the rank-and-file workers and employees of
petitioner sought to recover from the latter the 13th month pay differential for 1,82 of
said employees, equivalent to their sick, vacation and maternity leaves, premium for
work done on rest days and special holidays, and pay for regular holidays which
petitioner, allegedly in disregard of company practice since 1,75, excluded from the
computation of the 13th month pay for 1,82.

Issue:
WON in the computation of the 13th month pay under PD No. 851, payments for sick,
vacation and maternity leaves, premiums for work done on rest days and special
holidays, and pay for regular holidays may be excluded in the computation and payment
thereof.

Held:
Yes.
Basic salary does not merely exclude the benefits expressly mentioned but all payments
which may be in the form of fringe benefits or allowances.
Sec. 4 of the Supplementary Rules and Regulations Implementing PD No. 851 provides
that “overtime pay, earnings and other remunerations which are not part of the basic
salary shall not be included in the computation of the 13th month pay.
Whatever compensation an employee receives for an 8 hour work daily or the daily
wage rate is the basic salary. Any compensation or remuneration other than the daily
wage rate is excluded. It follows therefore, that payments for sick, vacation and
maternity leaves, premiums for work done on rest days and special holidays, as well as
pay for regular holidays, are likewise excluded in computing the basic salary for the
purpose of determining the 13th month pay.
 31 VERGARA, JR. vs.COCA-COLA
Facts:
Vergara was an employee of Coca-Cola Bottlers Phils., Inc. from May 1968 until he
retired on Jan. 31, 2002 as district sales supervisor (DDS). It was stated in Coca-Cola’s
existing Retirement Plan Rules and regulations that the annual performance incentive
pay of RSMs, DDSs, and SSSs shall be considered in the computation of retirement
benefits as follows: Basic monthly salary + Monthly average performance Incentive
(which is the total performance incentive earned during the year immediately preceding
/ 12 months) x No. of Years in Service. Vergara claims that he is entitled to an additional
Php474,600.00 as Sales Management Incentives(SMI). So he filed a complaint before
the NLRC for the payment of his full retirement benefits and commission/incentives,
averring that many DSSs who retired without achieving the sales and collection targets
were given the average SMI in their retirement package.

Issue:
WON the SMI incentive should be included in the computation of his retirement benefits
on the ground of consistent company practice.

Ruling: NO.

Generally, employees have a vested right over existing benefits voluntarily granted to
them by their employer.

Thus, any benefit and supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer. The principle of non-diminution
of benefits is actually founded on the constitutional mandate to protect the rights of
workers, to promote their welfare and to afford them full protection. In turn, said
mandate is the basis of Article 4 of the labor code which states that all doubts in the
implementation and interpretation of this code, including its implementing rules and
regulations, shall be rendered in favor of labor.

Requisites where there is diminution of benefits:

1. The grant or benefit is founded on a policy or has ripened into a practice over a
long period of time;
2. The practice is consistent and deliberate;
3. The practice is not due to error in the construction or application of a doubtful or
difficult question of law; and
4. The diminution or discontinuance is done unilaterally by the employer.
There is no hard and fast rule as to the length of time that the company practice should
have been exercised in order to constitute voluntary employer practice.

To be considered as a regular company practice, the employee must prove by

substantial evidence that the giving of the benefit is done over a long period of time and
that it had been made consistently and deliberately. It requires an indubitable showing
that the employer agreed to continue giving the benefit knowingly fully well that the
employees are not covered by any provision of the law or agreement requiring payment
thereof. The benefit must be characterized by regularity, voluntary and deliberate intent
of the employer to grant the benefit over a considerable period of time.

However, in this case at bar, there is no proof that SMI has been consistently,
deliberately, and voluntarily granted to all retired regardless of whether or not they
qualify to the same had ripened into company practice.

Coca-Cola’s isolated act of including the SMI in the retirement package of two
employees could hardly be classified as a company practice that may be considered an
enforceable obligation. To repeat, the principle against diminution of benefits is
applicable only if the grant or benefit is founded on an express policy or has ripened into
a practice over a long period of time which is consistent and deliberate; it presupposes
that a company practice, policy and tradition favorable to the employees has ben clearly
established; and that the payments made by the company pursuant to it have ripened
into benefits enjoyed by them. Certainly, a practice or custom is, as a general rule is not
a source of a legally demandable or enforceable right. Company practice, just like any
other fact, habits, customs, usage or patterns or conduct, must be proven by the
offering party who must allege and establish specific, repetitive conduct that might
constitute evidence of habit or company practice.
 32 TRADERS ROYAL BANK vs NLRC,
G. R. No. 88168, August 30, 1,,0
18, SCRA 274;

(Labor Standards – bonus, diminution of benefits)

Facts:
Respondent union filed a letter-complaint against petitioner TRB for the diminution of
benefits being enjoyed by the employees since time immemorial, e.g. mid-year bonus,
from 2 months gross pay to 2 months basic and year-end bonus from 3 months gross to
only 2 months.
Petitioner insisted that it had paid the employees holiday pay. The practice of giving
them bonuses at yearzs end would depend on how profitable the operation of the bank
had been.
NLRC found TRB guilty of diminution of benefits due to the private respondents and
ordered it to pay the said employeesz claims for differentials in their holiday, mid-year,
and year-end bonuses.

Issue: Whether or not bonuses are part of labor standards.

Held:
No. A bonus is a “gratuity or act of liberality of the giver which the recipient has no right
to demand as a matter of right”. It is something given in addition to what is ordinarily
received by or strictly due the recipient. The granting of a bonus is basically a
management prerogative which cannot be forced upon the employer “who may not be
obliged to assume the onerous burden of granting bonuses or other benefits aside from
the employeezs basic salaries or wages”.
 33 PHILIPPINE DUPLICATORS, INC. VS. NLRC,
(Labor Standards – Commissions included in the computation of 13th month pay)

Facts:
Petitioner Corporation pays its salesmen a small fixed or guaranteed wage; the greater
part of the latterzs wages or salaries being composed of the sales or incentive
commissions earned on actual sales of duplicating machines closed by them. Thus the
sales commissions received for every duplicating machine sold constituted part of the
basic compensation or remuneration of the salesmen of the Philippine Duplicators for
doing their job.

The Labor Arbiter directed Petitioner Duplicators to pay 13th month pay to private
respondent employees computed on the basis of their fixed wages plus sales
commission.

Sec. 4 of the Supplementary Rules and Regulations Implementing PD No. 851 (Revised
Guidelines Implementing 13th Month Pay) provides that overtime pay, earning and
other remuneration which are not part of the basic salary shall not be included in the
computation of the 13th month pay.

Petitioner Corporation contends that their sales commission should not be included in
the computation of the 13th month pay invoking the consolidated cases of Boie-Takeda
Chemicals, Inc. vs Hon. Dionisio dela Serna and Philippine Fuji Xerox Corp. vs Hon.
Crecencio Trajano, were the so-called commissions of medical representatives of Boie-
Takeda Chemicals and rank-and-file employees of Fuji Xerox Co. were not included in
the term “basic salary” in computing the 13th month pay.

Issue: WON sales commissions comprising a pre-determined percent of the selling

price of the goods are included in the computation of the 13th month pay.

Held: Yes. These commission which are an integral part of the basic salary structure of
the Philippine Duplicatorzs employees-salesmen, are not overtime payments, nor profit-
sharing payments nor any other fringe benefit. Thus, salesmenzs commissions
comprising a pre-determined percent of the selling price of the goods were properly
included in the term “basic salary” for purposes of computing the 13thmonth pay.
Commissions of medical representatives of Boie-Takeda Chemicals and rank-and-file
employees of Fuji Xerox Co. were not included in the term “basic salary” because these
were paid as “productivity bonuses” which is not included in the computation of 13th
month pay.
 34 BOIE-TAKEDA CHEMICALS, INC.,PETTONER, VS. HON.
DIONISIO DE LA SERNA, G.R. No. ,2174 December 10,
FACTS:

Presidental Decree No. 851, The 13Th Month Pay Law, defnes "Basic Salary" as which
shall include all remunerations or earnings paid by an employer to an employee for
services rendered but may not include cost of living allowances prof sharing payments,
and all allowances and monetary benefits which are not considered or integrated as part
of the regular or basic salary of the employee. While on the Revised Guidelines on the
Implementation of the 13th Month Pay Law promulgated by then Labor Secretary
Franklin Drilon included the these salary-related benefits as part of the basic salary in
the computation of the 13th month pay.

Petitioners in this case were ordered to pay their employees due to underpayment of
13th month pay pursuant to the Revised Guidelines. Petitioners contended however
under P.D. 851, the 13th month pay is based solely on basic salary. As defined by the
law itself and clarified by the implementing and supplementary Rules as well as by the
Supreme Court in a long line of decisions. Remunerations which do not Form part of the
basic or regular salary of an employee, such as commissions, should not be considered
in the computation of the 13th month pay.

This being the case, the Revised Guidelines on The Implementation of the 13th Month
Pay Law issued by then Secretary Drilon providing For the inclusion of commissions in
the 13th month pay, were issued in excess of the statutory authority conferred by P.D.
851.

ISSUE: Whether or not the Revised Guidelines on The Implementation of the 13th
month PayLaw issued by Then SecreTary Drilon providing For the inclusion of
commissions in the 13th month pay, were issued in excess of he statutory authority
conferred by P.D. 851.

DECISION: In including commissions in the computation of the 13th month pay, the
second paragraph of Section 5(a) of The Revised Guidelines on The Implementation of
the 13th month Pay Law unduly expanded the concept of "basic salary" as defined in
P.D. 851.

It is a fundamental rule that implementing rules cannot add to or detract from the
provisions of the law it is designed to implement. Administrative regulations adopted
under legislative authority by a particular department must be in harmony with the
provisions of the law they are intended to carry into elect. They cannot widen its scope.
An administrative agency cannot amend an act of Congress
 35 International Pharmaceuticals, Inc. v. NLRC
FACTS:
International Pharmaceuticals, Inc. (IPI) employed private respondent Virginia Quintia
as Medical Director of its RpD dept. replacing one Diana Villaraza.

Because that year, the government launched a program encouraging development of

herbal medicine, IPI decided to venture into that and hired private respondent as
pharmacologist only for this purpose. Hence, the contention that private respondent was
a project employee.

The contract of employment provided for a term of one year subject to renewal by
mutual consent at least 30 days before expiration. It was also agreed that Quintia can
continue teaching as a full-time faculty member at Cebu Doctors Hospital.

Quintia claimed that when her contract was about to expire, she was invited by Xavier
University to be chairperson of its pharmacology dept. But Castillo, present and gen
manager of IPI asked her to stay and assured her of security of tenure. Hence, she
declined the offer of Xavier and remained an employ and as company physician of IPI
after her contract expired. This continued until her termination on July 12, 1,86.

She alleges that her reason for her termination was because she led the rank and file
employees in the demand for a full disclosure of the Savings and Loan Associations
financial status. Her participation was resented by association officers.

On July 10, 1,86, Quintia was replaced as head of the RpD dept by Paz Wong. Two
days later, she received a memorandum officially terminating her services.

Quintia filed a complaint for illegal dismissal praying for reinstatement and payment of
full backwages and moral damages.

LA found private respondent to have been illegally dismissed. He held that private
respondent was a regular employee and not a project employee and could not be
dismissed without just causes. NLRC affirmed ruling and asked LA to determine
whether reinstatement is possible.

ISSUE: WON reinstatement is feasible

HELD: Petition DISMISSED.

Art. 280. Regular and casual employment. - The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or
trade of the employer except where the employment has been fixed for a specific
project or undertaking, the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or service to be
performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such activity exists.

In Brent School, Inc. v. Zamora, it was held that although work done under a contract is
necessary and desirable in relation to the usual business of the employer, a contract for
a fixed period may nonetheless be made so long as it is entered into freely, voluntarily
and knowingly by the parties.

When complainant was allowed to continue working without the benefit of a contract
after the expiration of the one year period provided in their written contract, that act
completely changed the complexion of the relationship between the parties.

Quintiazs status as an employee is not disputed in this case. Therefore, in determining

whether she was a project employee or a regular employee, the question is whether
her work was “necessary and desirable to the main business of the employer.” It is true
that, as held in Singer, parties can enter into an agreement for the rendering of services
by one to the other and that however necessary such services may be to the latterzs
business the contract will not necessarily give rise to an employer-employee
relationship if the elements of such relationship are not present. But that is not the
question in this case. Quintia was an employee. The question is whether, given the fact
that she was an employee, she was a regular or a project employee, considering that
she had been continued in the service of petitioner for more than two years following the
expiration of her written contract.

Petitionerzs allegations are contrary to the factual findings of both the NLRC and the
Labor Arbiter, particularly their findings that she was the head of petitionerzs Research
and Development department; that in addition, she performed the function of company
physician; and that she undertook various civic activities in behalf of petitioner and that
this engagement lasted for more than three years (1,83 - 1,86). Certainly, as the NLRC
observed, these facts show complainant working “not as zconsultantz but as a regular
employee albeit a managerial one.” It should be added that Quintia was
hired to replace one Diana Villaraza, which suggests that the position to which she
was appointed by petitioner was an existing one, so much so that after the
termination of Quintiazs employment, somebody else (Paz Wong) was appointed in
her place. If private respondentzs employment was for a particular project which had
allegedly been terminated, why would there be a need to replace her?

There is no mention whatsoever of any project or of any consultancy in the contract. As

aptly observed by the Solicitor General, the duties of Quintia as provided for in the
contract reject any notion of consultancy. Clearly, she was hired as Medical Director of
the Research and Development department of petitioner company and not as
consultant nor for any particular project. The work she performed was manifestly
necessary and desirable to the usual business of petitioner, considering that it is
engaged in the manufacture and production of medicinal preparations.
We agree with the Labor Arbiter that the fact that she was not required to report at a
fixed hour or to keep fixed hours of work does not detract from her status as a regular
employee. As petitioner itself admits, Quintia was a managerial employee and therefore
not covered by the Labor Code provisions on hours of work. What this Court said in
once case is apropos:

The primary standard of determining a regular employment is the reasonable

connection between the particular activity performed by the employee in relation to the
usual business or trade 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 the 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 one year, even if the performance is not continuous
or merely intermittent, the law deems the 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 also considered regular, but only with
respect to such activity and while such activity exists

2. WON after petitioner discontinued its herbal medicine project after it had been shown
not to be viable, private respondentzs employment had to be terminated, too

As this Court has held in Western Shipping Agency, Inc. v. NLRC:

Loss of confidence is a valid ground for the dismissal of managerial employees . . . But
even managerial employees enjoy security of tenure, . . . and, . . . can only be
dismissed after cause is shown in an appropriate proceeding. The loss of confidence
must be substantiated by evidence. The burden of proof is on the employer to show
grounds justifying the loss of confidence.

3. WON reinstatement of private respondent is not feasible because the position which
she held was abolished on account of its decision to discontinue its herbal medicine
development project and that, in any event, because the position is a sensitive one
which needs an employee in whom the petitioner has full faith and confidence.

As regards the claim that the position has already been abolished and,
therefore, reinstatement is impossible, suffice it to state that the factual findings of the
Labor Arbiter belie this. A replacement for private respondent was appointed two (2)
days prior to her termination. If the position had been abolished, there would have been
no necessity for a replacement.

But we agree that because of antagonism generated by this case and the private
respondentzs own preference for separation pay, reinstatement would no longer
be feasible.
 36 GOODYEAR PHILS., INC. V. ANGUS

12 November 2014 | Del Castillo, J. |

Retirement > Collection of both retirement benefits and separation pay (Two are
mutually exclusive)

PETITIONERS: Goodyear Philippines, Inc.; Remegio M. Ramos

RESPONDENT: Marina L. Angus
SUMMARY: When Goodyear experienced economic reversals, it resorted to the
retrenchment of certain employees in order to continue its operations. One such
employee is Marina, and she was granted an early retirement benefit, as per company
practice.
However, she claimed entitled to separation pay in addition to the retirement benefits
already received.

DOCTRINE: Retirement benefits and separation pay are not mutually exclusive.
Retirement benefits are a form of reward for an employeezs loyalty and service to an
employer, whereas separation pay is that amount which an employee receives at the
time of his severance from employment, designed to provide the employee with the
wherewithal during the period that he is looking for another employment

FACTS:
1. 1, November 1,66: Marina was employed by Goodyear on November 1,, 1,66 as the
secretary to the Manager of Quality and Technology.
2. Goodyear experienced economic reversals. To continue its operations, it resorted to
retrenchment.
3. 18 September 2001: Marina received a letter from Remegio Ramos, HR Director,
stating that management considered her position redundant and no longer necessary
and is to be abolished on the same day, with her services to be terminated after a
month. Per company practice, the company only granted her an early retirement benefit.
4. Marina claims that she is entitled to separation pay in addition to retirement benefits.
5. Goodyear points to a provision in their CBA stating that the availment of retirement
benefits therein shall exclude entitlement to any separation pay, termination pay,
redundancy pay, retrenchment pay, or any other severance pay.
6. The parties finally agreed that an employee shall be entitled to the higher of either
benefit. However, Marina later contested this.

ISSUE: WON Marina is entitled to both retirement benefits and separation pay.

RATIO:
Labor Law; Retirement Benefits; Separation Pay; Retirement benefits and separation
pay are not mutually exclusive.—It is worthy to mention at this point that retirement
benefits and separation pay are not mutually exclusive. Retirement benefits are a form
of reward for an employeezs loyalty and service to an employer and are earned under
existing laws, CBAs, employment contracts and company policies. On the other hand,
separation pay is that amount which an employee receives at the time of his severance
from employment, designed to provide the employee with the wherewithal during the
period that he is looking for another employment and is recoverable only in instances
enumerated under Articles 283 and 284 of the Labor Code or in illegal dismissal cases
when reinstatement is not feasible. In the case at bar, Article 283 clearly entitles Angus
to separation pay apart from the retirement benefits she received from petitioners.
 37 GENERAL MILLING vs. VIAJAR
FACTS: Violeta Viajar received a Letter-Memorandum from General Milling Corporation
(GMC) informing her that her services are no longer needed because her position as
Purchasing Staff was deemed redundant. When Viajar reported for work on October 31,
2003, a month prior the effectivity from her severance from GMC, the guard on duty
prevented her from entering the companys premises. She was also asked to sign an
Application for Retirement and Benefits. Viajar refused to sign. Thus, she filed a
complaint for illegal dismissal.

The Labor Arbiter ruled in favor of GMC and held that the latter acted in good faith in
terminating Viajar. On appeal, the NLRC affirmed LAs decision.

Viajar filed a petition before the Court of Appeals. The CA granted the petition. Thus,
GMC filed this instant petition for review before the Supreme Court.

ISSUE: Whether or not Viajar was validly terminated from GMC?

HELD: The petition is denied.

LABOR LAW: redundancy; retirement; termination

Art. 283 of the Labor Code provides that redundancy is one of the authorized causes for
dismissal. It is imperative that the employer must comply with the requirements for a
valid implementation of the companys redundancy program, to wit: (a) the employer
must serve a written notice to the affected employees and the DOLE at least one (1)
month before the intended date of retrenchment; (b) the employer must pay the
employees a separation pay equivalent to at least one month pay or at least one month
pay for every year of service, whichever is higher; (c) the employer must abolish the
redundant positions in good faith; and (d) the employer must set fair and reasonable
criteria in ascertaining which positions are redundant and may be abolished.

In the case of Wiltshire File Co., Inc. v. NLRC, the Court ruled that redundancy in an
employers personnel force necessarily or even ordinarily refers to duplication of work.
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.

While it is true that the characterization of an employees services as superfluous or no

longer necessary and, therefore, properly terminable, is an exercise of business
judgment on the part of the employer, the exercise of such judgment, however, must not
be in violation of the law, and must not be arbitrary or malicious.
To exhibit its good faith and that there was a fair and reasonable criteria in ascertaining
redundant positions, a company claiming to be over manned must produce adequate
proof of the same. Here, GMC failed to present substantial proof to support its general
allegations of redundancy. It must, however, be pointed out that in termination cases,
like the one before us, the burden of proving that the dismissal of the employees was for
a valid and authorized cause rests on the employer.

In Quevedo v. Benguet Electric Cooperative, Inc., the Court explained the difference
between retirement and termination due to redundancy. Retirement from service is
contractual (i.e. based on the bilateral agreement of the employer and employee), while
termination of employment is statutory (i.e. governed by the Labor Code and other
related laws as to its grounds, benefits and procedure).

Voluntary retirement cuts employment ties leaving no residual employer liability;

involuntary retirement amounts to a discharge, rendering the employer liable for
termination without cause.

DENIED.
 38 ZENAIDA PAZ vs NORTHERN TOBACCO
Facts:
Northern Tobacco Redrying Co., Inc. (NTRCI), a flue-curing and redrying of tobacco
leaves business, hired Zenaida Paz (Paz) sometime in 1974 as a seasonal sorter, paid
P185.00 daily. NTRCI regularly re-hired her every tobacco season since then.
On May 18, 2003,6 Paz was 63 years old when NTRCI informed her that she was
considered retired under company policy.7 A year later, NTRCI told her she would
receive P12,000.00 as retirement pay.8
Paz, with two other complainants, filed a Complaint for illegal dismissal against NTRCI
on March 4, 2004.9 She amended her Complaint on April 27, 2004 into a Complaint for
payment of retirement benefits, damages, and attorney’s fees10 as P12,000.00 seemed
inadequate for her 29 years of service.
NTRCI countered that no Collective Bargaining Agreement (CBA) existed between
NTRCI and its workers. Thus, it computed the retirement pay of its seasonal workers
based on Article 287 of the Labor Code.14
NTRCI raised the requirement of at least six months of service a year for that year to be
considered in the retirement pay computation. It claimed that Paz only worked for at
least six months in 1995, 1999, and 2000 out of the 29 years she rendered service.
Thus, Paz’s retirement pay amounted to P12,487.50 after multiplying her P185.00 daily
salary by 221/2 working days in a month, for three years.15
Labor Arbiter – confirmed the 12,487.00 computation.
NLRC – modified LA’s decision
Zenaida Paz[’s] retirement pay should be computed pursuant to RA 7641 and that all
the months she was engaged to work for respondent for the last twenty eight (28) years
should be added and divide[d] by six (for a fraction of six months is considered as one
year) to get the number of years [for] her retirement pay[
Court of Appeals - modified the National Labor Relations Commission’s Decision in that
"financial assistance is awarded to . . . Zenaida Paz in the amount of P60,356.25
It discussed jurisprudence on financial assistance and deemed it appropriate to apply
the formula: One half-month pay multiplied by 29 years of service divided by two yielded
P60,356.25 as Paz’s retirement pay.24
Issues/Ruling:
1. It first ruled WON Paz, a season employee, is considered as a regular seasonal
employee.
The Court said that it may appear that the work of the petitioners is seasonal but she
was regularly rehired as a sorter during tobacco seasons for 29 years since 1974.
Further, her services as a sorter was necessary and indispensable to respondent;s
business of flue-curing and redrying tobacco leaves.
In a litany of cases this Court has already settled that seasonal workers who are called
to work from time to time and are temporarily laid off during off-season are not
separated from service in said period, but are merely considered on leave until re-
employed
Moreover, for respondents to be excluded from those classified as regular employees, it
is not enough that they perform work or services that are seasonal in nature. They must
have also been employed only for the duration of one season. . . . Evidently, petitioners
employed respondents for more than one season. Therefore, the general rule of regular
employment is applicable.
Since he was considered as a regular seasonal employee, she is entitled to rights under
Art. 279 of the Labor Code:
Art. 279. Security of Tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.
2. Illegal dismissal and backwages
Petitioner Paz initially filed a Complaint for illegal dismissal seeking separation pay, but
later amended her Complaint into one for payment of retirement pay.54 Despite the
amendment, she maintained in her subsequent pleadings that she had been made to
retire even before she reached the compulsory retirement age of 65 under Article 287,
as amended.55
Since petitioner Paz was "unlearned and not knowledgeable in law, [she] just accepted
such fact and waited to be paid her separation/retirement benefit as promised by . . .
NTRCI."57 Unfortunately, after a year of waiting, respondent NTRCI only offered her
around P12,000.00 for all her services since 1974.58
Petitioner Paz’s amendment of her Complaint was not fatal to her cause of action for
illegal dismissal.
First, petitioner Paz never abandoned her argument that she had not reached the
compulsory retirement age of 65 pursuant to Article 287, as amended, when respondent
NTRCI made her retire on May 18, 2003. EMMANUEL G. BACCAY, MBA, CPA 3
Second, the National Labor Relations Commission found that respondent NTRCI failed
to prove a valid company retirement policy, yet it required its workers to retire after they
had reached the age of 60.60
Petitioner Paz was only 63 years old on May 18, 2003 with two more years remaining
before she would reach the compulsory retirement age of 65.
Consequently, if "the intent to retire is not clearly established or if the retirement is
involuntary, it is to be treated as a discharge."63
Again, petitioner Paz never abandoned her argument of illegal dismissal despite the
amendment of her Complaint. This implied lack of intent to retire until she reached the
compulsory age of 65. Thus, she should be considered as illegally dismissed from May
18, 2003 until she reached the compulsory retirement age of 65 in 2005 and should be
entitled to full backwages for this period. An award of full backwages is "inclusive of
allowances and other benefits or their monetary equivalent, from the time their actual
compensation was withheld. . . ."65
Backwages, considered as actual damages,66 requires proof of the loss suffered. The
Court of Appeals found "no positive proof of the total number of months that she actually
rendered work."67 Nevertheless, petitioner Paz’s daily pay of 185.00 was established.
She also alleged that her employment periods ranged from three to seven months.68
Since the exact number of days petitioner Paz would have worked between May 18,
2003 until she would turn 65 in 2005 could not be determined with specificity, this court
thus awards full backwages in the amount of P22,200.00 computed by multiplying
185.00 by 20 days, then by three months, then by two years.
3. Due process and nominal damages
The Labor Code requires employers to comply with both procedural and substantive
due process in dismissing employees. Hence, the rule on two (2) notices and hearing
must be followed.
There was no showing that respondent NTRCI complied with these due process
requisites. Thus, consistent with jurisprudence,80 petitioner Paz should be awarded
P30,000.00as nominal damages.
4. Retirement pay
An employer may provide for retirement benefits in an agreement with its employees
such as in a Collective Bargaining Agreement. Otherwise, Article 287 of the Labor
Code, as amended, governs.
Since respondent NTRCI failed to present a copy of a Collective Bargaining Agreement
on the alleged retirement policy,81 we apply Article 287 of the Labor Code, as amended
by Republic Act No. 7641. This provides for the proper computation of retirement
benefits in the absence of a retirement plan or agreement:82
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. EMMANUEL G. BACCAY, MBA, CPA 4
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.83 (Emphasis
supplied)
While the present case involves retirement pay and not separation pay, Article 287 of
the Labor Code on retirement pay similarly provides that "a fraction of at least six (6)
months being considered as one whole year."
Thus, this court’s reading of this proviso in the Labor Code in Philippine Tobacco
applies in this case. An employee must have rendered at least six months in a year for
said year to be considered in the computation.
The Court of Appeals found "no positive proof o[n] the total number of months [petitioner
Paz] actually rendered work [for respondent NTRCI]."95 On the other hand, both the
Labor Arbiter and the Court of Appeals established from the records that she rendered
at least six months of service for 1995, 1999, and 2000 only.96
Based on these factual findings, retirement pay pursuant to Article 287 of the Labor
Code was correctly computed at 12,487.50 and was awarded to petitioner Paz.
5. Financial assistance
In addition, this court agrees with the Court of Appeals’ award of financial assistance in
the amount of 60,356.2597by applying the following formula: one-half-month pay98
multiplied by 29 years in service and then divided by 2.99
The amount of P12,487.50 is indeed too meager to support petitioner Paz who has
become old, weak, and unable to find employment.100
Republic Act No. 7641 is a social legislation101 with the purpose of "provid[ing] for the
retiree’s sustenance and hopefully even comfort, when he [or she] no longer has the
stamina to continue earning his [or her] livelihood."102
Private respondent Paz rendered almost three decades of dedicated service to
petitioner, and to that, she gave away the prime of her life. In those long years of hard
work, not a single transgression or malfeasance of any company rule or regulation was
ever reported against her.
In awarding retirement benefits, the NLRC deemed it proper to add all the months of
service rendered by private respondent Paz, then divide it by six to arrive at the number
of years of service. We cannot, however, subscribe to this computation because there is
no positive proof of the total number of months that she actually rendered
work.103(Emphasis supplied, citations omitted)
At most, the Petition alleges that "[p]etitioner [was] regularly hired every season by
respondents, her employment periods ranging from three (3) to seven (7) months."104
None of the lower courts, not even the National Labor Relations Commission that
proposed the formula, made a factual determination on the total number of months
petitioner Paz rendered actual service.
In any event, this court has awarded financial assistance "as a measure of social justice
[in] exceptional circumstances, and as an equitable concession."105 EMMANUEL G.
BACCAY, MBA, CPA 5
 41 – ELEGIR vs. PHILIPPINE AIRLINES, INC.
FACTS:
Petitioner Bibiano C. Elegir (petitioner) was hired by (PAL) as a commercial
pilot.The petitioner, together with seven (7) other pilots, was sent for
training at Boeing in Seattle, Washington, United States of America on May 8,
1,,5, to acquire the necessary skills and knowledge in handling the new aircraft. He
completed his training on September 1,, 1,,5.

On November 5, 1,,6, after rendering twenty- five (25) years, eight (8) months and
twenty (20) days of continuous service, the petitioner applied for optional
retirement authorized under the Collective Bargaining Agreement (CBA) between PAL
and the Airline Pilots Association of the Philippines (ALPAP), in which he was a member
of good standing. In response, PAL asked him to reconsider his decision, asseverating
that the company has yet to recover the full value of the costs of his training. It
warned him that if he leaves PAL before he has rendered service for at least
three (3) years, it shall be constrained to deduct the costs of his training from his
retirement pay.

On November 6, 1,,6, the petitioner went on terminal leave for thirty (30) days and
thereafter made effective his retirement from service. Upon securing his
clearance, however, he was informed that the costs of his training will be deducted from
his retirement pay, which will be computed at the rate of P 5,000.00 per year of
service. The petitioner, through his counsel, sent PAL a correspondence, asserting
that his retirement benefits should be based on the computation stated in Article 287
of the Labor Code, as amended by Republic Act (R.A.) No. 7641, and that the costs of
his training should not be deducted therefrom. In its Reply dated August 4, 1,,7,
PAL refused to yield to the petitionerzs demand and maintained that his
retirement pay should be based on PAL-ALPAP Retirement Plan of 1,67
(PAL-ALPAP Retirement Plan) and that he should reimburse the company with
the proportionate costs of his training. Thus, on August 27, 1,,7, the petitioner
filed a complaint for non-payment of retirement pay, moral damages, exemplary
damages and attorneyzs fees against PAL.
PAL invested for the training of Almario to enable him to acquire a higher level
of skill, proficiency, or technical competence so that he could efficiently discharge the
position of A-300 First Officer. Given that, PAL expected to recover the training costs by
availing of Almariozs services for at least three years. The expectation of PAL was not
fully realized, however, due to Almariozs resignation after only eight months of
service following the completion of his training course. He cannot therefore, refuse
to reimburse the costs of training without violating the principle of unjust enrichment.
ISSUE: Whether or not there is unjust enrichment on the part of the petitioner by leaving
the company.

RULING: Yes.
To allow the petitioner to leave the company before it has fulfilled the reasonable
expectation of service on his part will amount to unjust enrichment. Pertinently,
Article 22 of the New Civil Code states:
Art. 22. Every person who through an act of performance by another, or any
other means, acquires or comes into possession of something at the expense of the
latter without just or legal ground, shall return the same to him.

There is unjust enrichment when a person unjustly retains a benefit at the loss
of another, or when a person retains the money or property of another
against the fundamental principles of justice, equity and good conscience. Two
conditions must concur:
(1) a person is unjustly benefited; and (2) suchbenefit is derived at the expense of or
with damages to another. The main objective of the principle of unjust enrichment is to
prevent one from enriching oneself at the expense of another. It is commonly
accepted that this doctrine simply means that a person shall not be allowed to
profit or enrich himself inequitably at anotherzs expense. The enrichment may consist
of a patrimonial, physical, or moral advantage, so long as it is appreciable in money.
It must have a correlative prejudice, disadvantage or injury to the plaintiff which may
consist, not only of the loss of the property or the deprivation of its enjoyment, but
also of the non-payment of compensation for a prestation or service rendered to
the defendant without intent to donate on the part of the plaintiff, or the failure
toacquire something what the latter would have obtained.
As can be gathered from the facts, PAL invested a considerable amount of money in
sending the petitioner abroad to undergo training to prepare him for his new
appointment as B747-400 Captain. In the process, the petitioner acquired new
knowledge and skills which effectively enriched his technical know-how. As all other
investors, PAL expects a return on
investment in the form of service by the petitioner for a period of 3 years,
which is the estimated length of time within which the costs of the latterzs training can
be fully recovered.
The petitioner is, thus, expected to work for PAL and utilize whatever knowledge
he had learned from the training for the benefit of the company. However, after only
one (1) year of
service, the petitioner opted to retire from service, leaving PAL stripped of a
necessary manpower.