Labor HW8

Week 8
Arellano University School of Law
LABOR STANDARDS Wages; Definition, Employee and Contractor; Distinguished
GR No. 146530

Chavez vs. NLRC
January 17, 2005
PEDRO CHAVEZ, petitioner NATIONAL LABOR RELATIONS COMMISSION, SUPREME

PACKAGING, INC. and ALVIN LEE, Plant Manager, respondents.
1. The fact that petitioner was paid on a per trip basis is not significant. This is merely a method of computing
compensation and not a basis for determining the existence or absence of an employer-employee relationship.
One may be paid on the basis of results or time expended on the work, and may or may not acquire an
employment status, depending on whether the elements of an employer-employee relationship are present or
not. Wages are defined as “remuneration or earnings, however designated, capable of being expressed in terms
of money, whether fixed or ascertained on a time, 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 service rendered or to be rendered.”
2. Compared to an employee, an independent contractor is one who carries on a distinct and independent
business and undertakes to perform the job, work, or service on its own account and under its own
responsibility according to its own manner and method, free from the control and direction of the principal in all
matters connected with the performance of the work except as to the results thereof. Hence, while an
independent contractor enjoys independence and freedom from the control and supervision of his principal, an
employee is subject to the employer’s power to control the means and methods by which the employee’s work
is to be performed and accomplished.
FACTS:
Respondent Supreme Packaging, Inc. is in the business of manufacturing cartons and other packaging materials for
export and distribution. It entered into a contract of service with petitioner Pedro Chavez as truck driver on 1984, paid on
a per trip basis and tasked to deliver respondent’s products from its factory in Bataan to its customers, mostly in Metro
Manila. Most of petitioner’s trips were made at nighttime, commencing at 6 pm from Bataan and returning thereto in the
afternoon two or three days after. The deliveries were made in accordance with routing slips issued by the respondent
indicating the order, time, and urgency of the delivery.
On 1995, petitioner filed a complaint for regularization with the Regional Arbitration Branch of the National Labor
Relations Commission (NLRC) in Pampanga. Before the case could be heard, respondent terminated his services.
Consequently, petitioner filed an amended complaint for illegal dismissal, unfair labor practice, and nonpayment of
overtime pay, nightshift differential pay, 13th month pay, among others. Respondent denied the existence of an
employer-employee relationship and insisted that petitioner was an independent contractor as he had sole control over
the means and methods by which his work was accomplished. Likewise, it maintained that petitioner was not dismissed,
but the severance of the contractual relation was due to his violation of the terms and conditions of their contract.
Petitioner allegedly abandoned his job when he filed a complaint for regularization, and allegedly failed to observe the
minimum degree of diligence in the proper maintenance of the truck he was using which was provided for by the
respondent.
Prior proceedings:
1. Labor Arbiter - declared that petitioner was a regular employee of the respondent as he was performing a service that
was necessary and desirable to the latter’s business. Additionally, the contract of service was declared null and void as it
constituted a circumvention of the constitutional provision affording full protection to labor and security of tenure. It was
found that petitioner’s dismissal was anchored on his insistent demand to be regularized. Hence, for a lack of valid and
just cause and for its failure to observe due process requirements, respondent was guilty of illegal dismissal.
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2. NLRC - initially affirmed the decision of the Labor Arbiter in toto. However, upon respondent’s motion for
reconsideration, it reversed its decision and ruled that there existed no employer-employee relationship between the
petitioner and the respondent as the latter did not exercise control over the means and methods by which petitioner
accomplished his delivery services. Additionally, the contract of service was declared valid and was not found to
circumvent Article 280 of the Labor Code.
3. Court of Appeals - initially reversed the decision of the NLRC and reinstated the decision of the Labor Arbiter.
However, upon respondent’s motion for reconsideration, the appellate court explained that the extent of control
exercised by respondent was only with respect to the result but not to the means and methods used by him as shown by
the following circumstances: (a) the respondent had no say on how the goods were to be delivered to the customers; (b)
the petitioner had the right to employ workers who would be under his direct control; and (c) the petitioner had no
working time. Additionally, the contract of service, not being contrary to morals, good customs, public order or public
policy, should be given the force and effect of law as between the petitioner and the respondent.
By way of a petition for review on certiorari, the petitioner contend that the appellate court committed grave abuse of
discretion amounting to excess of jurisdiction in giving more consideration to the contract of service than Article 280 of
the Labor Code which categorically defines a regular employee notwithstanding any written agreement to the contrary
and regardless of the oral agreement between the parties.
ISSUES:
1. WON there existed an employer-employee relationship (YES)

2. WON petitioner was validly dismissed (NO)
HELD:
1. Using the four-fold test, which are all present in this case, the Supreme Court observed that: (a) undeniably, it was
respondent who engaged the services of petitioner without the intervention of a third party; (b) it cannot be denied that
petitioner received compensation from the respondent for the services he rendered to the latter. The fact that petitioner
was paid on a per trip basis is not significant. This is merely a method of computing compensation and not a basis for
determining the existence or absence of an employer-employee relationship. One may be paid on the basis of results or
time expended on the work, and may or may not acquire an employment status, depending on whether the elements of
an employer-employee relationship are present or not. Wages are defined as “remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, 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 service rendered or to be rendered;” (c)
respondent’s power to dismiss was inherent in the fact that it engaged the services of petitioner as truck driver, which it
exercised by terminating his services albeit in the guise of “severance of contractual relation” due allegedly to the latter’s
breach of his contractual obligation; and (d) respondent’s right of control was manifested by the fact that: i. The truck
driven by petitioner belonged to the respondent; and ii. Respondent determined how, where, and when the petitioner
would perform his task by issuing him routing slips, which indicated the chronological order and priority of delivery.
Compared to an employee, an independent contractor is one who carries on a distinct and independent business and
undertakes to perform the job, work, or service on its own account and under its own responsibility according to its own
manner and method, free from the control and direction of the principal in all matters connected with the performance of
the work except as to the results thereof. Hence, while an independent contractor enjoys independence and freedom
from the control and supervision of his principal, an employee is subject to the employer’s power to control the means
and methods by which the employee’s work is to be performed and accomplished.
2. To constitute abandonment, these two factors must concur: (a) the failure to report for work or absence without valid
or justifiable reason; and (b) a clear intention to sever employer-employee relationship. Obviously, the petitioner did not
intend to sever his relationship with the respondent for at the time that he allegedly abandoned his job, the petitioner just
filed a complaint for regularization, which was forthwith amended to one for illegal dismissal. The Supreme Court found
that a charge of abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal, more so
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when it includes a prayer for reinstatement. Neither can the respondent’s claim that the petitioner was guilty of gross
negligence in the proper maintenance of the truck constitute a valid and just cause for his dismissal. Gross negligence
implies a want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a
thoughtless disregard of consequences without exerting any effort to avoid them. The negligence, to warrant removal
from service, should not merely be gross but also habitual. The single and isolated act of the petitioner’s negligence in
the proper maintenance of the truck alleged by the respondents does not amount to "gross and habitual neglect"
warranting his dismissal. Therefore, for a lack of a valid and just cause in terminating petitioner’s services, his dismissal
is illegal, entitling the petitioner to reinstatement, without loss of seniority rights and other privileges under Article 279 of
the Labor Code. However, following the strained relations doctrine, petitioner is entitled to an award of separation pay, in
addition to his full backwages, allowances and other benefits. The petition is granted and the decision of the Labor
Arbiter is reinstated.
LLAW1 FIRST SEM 2017-2018 (TAN)
LABOR STANDARDS Attorney’s Fees (Art. 111 in relation to Art. 228), Prohibitions
regarding Wages; Wage Deductions (Art. 113)
GR No. 77959

Radio Communications of the
January 9, 1989
Philippines vs. Secretary of Labor
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC., THE SECRETARY OF LABOR AND EMPLOYMENT, THE REGIONAL
petitioner DIRECTOR OF THE NATIONAL CAPITAL REGION, DEPARTMENT
OF LABOR AND EMPLOYMENT and UNITED RCPI
COMMUNICATIONS LABOR ASSOCIATION (URCPICLA)-FUR,
respondents.
[In] requiring an individual written authorization as a prerequisite to wage deductions, Article 222 (meaning Art.
113) seeks to protect the employee against unwarranted practices that would diminish his compensation
without his knowledge and consent. However, for all intents and purposes, the deductions required of the
petitioner and the employees do not run counter to the express mandate of the law since the same are not
unwarranted or without their knowledge and consent. Also, the deductions for the union service fee in question
are authorized by law and do not require individual check-off authorizations.
FACTS:
On May 4, 1981, petitioner Radio Communications of the Philippines, a domestic corporation engaged in the
telecommunications business, filed with the National Wages Council an application for exemption from the coverage of
Wage Order No. 1. The application was opposed by respondent-union United RCPI Communications Labor Association,
a labor organization affiliated with the Federation of Unions of Rizal. The National Wages Council disapproved said
application and ordered petitioner to pay its employees the mandatory living allowance of P2.00 daily effective March 22,
1981.
On appeal, respondent-union filed a motion for the issuance of a writ of execution, asserting therein its claim to 15% of
the total backpay due to all its members as "union service fee" for having successfully prosecuted the latter's claim for
payment of wages, among others. It later filed a subsequent motion, raising its claim of union service fee to 20% of the
total backpay. Petitioner opposed the said motion, asserting, among others, that there is no legal basis for
respondent-union to claim a union service fee. A alias writ of execution was issued on September 26, 1985. However,
on October 24, 1985, without the knowledge and consent of respondent-union, petitioner entered into a compromise
agreement with Buklod ng Manggagawa sa RCPI-NFL as the new bargaining agent of oppositors RCPI employees.
Consequently, the parties to the compromise agreement filed for the dismissal of the case on the ground that the
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decision of the National Wages Council had been novated by the compromise agreement which re-defined the rights
and obligations of the parties. Opposing to the said motion, respondent-union presented a resolution passed and
approved by the legislative board of respondent-union, entitling respondent-union 15% of the total backpay as union
service fee.
In an Order dated November 25, 1985, public respondent Regional Director awarded to respondent-union 15% of the
total backpay as its union service fee and directed petitioner to deposit said amount with the cashier of the Regional
Office for proper disposition. However, despite said order, petitioner paid in full the employees without deducting the
union service fee of 15%, prompting the respondent-union to file a petition for the garnishment of petitioner’s funds in its
depository banks to effect remittance of the 15% union service fee. The NCR officer-in-charge granted the petition and
ordered the petitioner and its employees jointly and severally liable for the payment of the 15% union service fee. It
likewise ordered the garnishment of petitioner’s bank account to enforce said claim.
On appeal, public respondent Secretary of Labor modified the decision of the NCR officer-in-charge and held petitioner
solely liable to respondent-union for 10% of the total backpay as union service fee. Citing Cristobal vs. ECC (103 SCRA
339), it ruled that the defaulting employer remains liable for attorney's fees because it compelled the complainant to
employ the services of counsel by unjustly refusing to recognize the validity of the claim. Attorney's fee due the
employees is, thus, chargeable against the petitioner. Furthermore, the Secretary of Labor also found that it was
respondent-union who was responsible for the successful prosecution of the case to its ultimate conclusion in behalf of
its members.
By way of a petition for certiorari, the petitioner contend that the public respondents acted with grave abuse of discretion
amounting to lack of jurisdiction when they imposed an additional obligation in the form of attorney’s fees which was not
contemplated in the decision of the National Wages Council. Petitioner also contend that respondent-union is not entitled
to attorney’s fee or union service fee as it is not a member of the Bar. Lastly, petitioner invoke the lack of an individual
written authorization from its employees, which is required by Article 222 (now Art. 113) of the Labor Code, as basis for
its refusal to pay respondent-union its union service fee.
ISSUE:
WON the public respondents acted with grave abuse of discretion amounting to lack of jurisdiction in holding petitioner
solely liable for the union service fee of respondent-union (NO)
HELD:
While it is true that the original decision of the National Wages Council did not expressly provide for payment of
attorney's fees, that particular aspect or deficiency is deemed to have been supplied, if not modified, by the compromise
agreement subsequently executed between the parties. A cursory perusal of said agreement shows an unqualified
admission by petitioner that "from the aforesaid total amount due every employee, 10% thereof shall be considered as
attorney's fee. Also, considering the Secretary of Labor’s finding that it was respondent-union who successfully
prosecuted the case to its ultimate conclusion, its right to fees for services rendered is indubitable/unquestionable
The further pretension of petitioner that respondent-union is not entitled to attorney's fee or union service fee because it
is not a member of the Bar is both untenable and in disregard of the liberalized scheme and theory of representation for
labor adopted in the Labor Code. The appearance of labor federations and local unions as counsel in labor proceedings
has been given legal sanction and we need only cite Art. 222 (now Art. 228) of the Labor Code which allows non-lawyers
to represent their organization or members thereof.
Finally, petitioner cannot invoke the lack of an individual written authorization from the employees as a shield for its
fraudulent refusal to pay the service fee of respondent-union. Prior to the payment made to its employees, petitioner was
ordered by the Regional Director to deduct the 15% attorney's fee from the total amount due its employees and to
deposit the same for proper disposition. Petitioner failed to do so allegedly because of the absence of individual written
authorizations. The lack thereof was remedied and supplied by the execution of the compromise agreement whereby the
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employees, expressly approved the 10% deduction and held petitioner free from any claim, suit or complaint arising from
the deduction thereof. When petitioner was thereafter again ordered to pay the 10% fees to respondent-union, it no
longer had any legal basis or subterfuge for refusing to pay the latter.
[In] requiring an individual written authorization as a prerequisite to wage deductions, Article 222 (meaning Art. 113)
seeks to protect the employee against unwarranted practices that would diminish his compensation without his
knowledge and consent. However, for all intents and purposes, the deductions required of the petitioner and the
employees do not run counter to the express mandate of the law since the same are not unwarranted or without their
knowledge and consent. Also, the deductions for the union service fee in question are authorized by law and do not
require individual check-off authorizations
LLAW1 FIRST SEM 2017-2018 (TAN)
LABOR STANDARDS Rule on deposits for loss or damage to tools, materials, or
equipment supplied by the employer; Reimbursement of car
wash payments made by the driver of the taxicab
GR No. 111474

Five J Taxi vs. NLRC
August 22, 1994
FIVE J TAXI and/or JUAN S. ARMAMENTO, petitioners NATIONAL LABOR RELATIONS COMMISSION, DOMINGO
MALDIGAN and GILBERTO SABSALON, respondents
Article 114. Deposits for loss or damage.—No employer shall require his worker to make deposits from which
deductions shall be made for the reimbursement of loss of or damage to tools, materials, or equipment supplied
by the employer, except when 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 and regulations
It can be deduced therefrom that the said article provides the rule on deposits for loss or damage to tools,
materials or equipment supplied by the employer. Clearly, the same does not apply to or permit deposits to
defray any deficiency which the taxi driver may incur in the remittance of his “boundary.”
FACTS:
Domingo Maldigan and Gilberto Sabsalon were hired by the Five J Taxi as taxi drivers and, as such, they worked for 4
days weekly on a 24-hour shifting schedule. Aside from the daily “boundary” of P700.00 for air-conditioned taxi or
P450.00 for non-air-conditioned taxi, 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.
In less than 4 months after Maldigan was hired as an extra driver by the taxi company, he already failed to report for
work for unknown reasons. Later, the company learned that he was working for “Mine of Gold” Taxi Company. With
respect to Sabsalon, while driving a taxicab of petitioners on September 6, 1983, he was held up by his armed
passenger who took all his money and thereafter stabbed him. He was hospitalized and after his discharge, he went to
his home province to recuperate.
In January, 1987, Sabsalon was re-admitted by petitioners as a taxi driver under the same terms and conditions as when
he was first employed, but his working schedule was made on an “alternative basis,” that is, he drove only every other
day. However, on several occasions, he failed to report for work during his schedule.
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On September 22, 1991, Sabsalon failed to remit his “boundary” of P700.00 for the previous day. Also, he
abandoned his taxicab in Makati without fuel refill worth P300.00. Despite repeated requests of petitioners for him
to report for work, he adamantly refused. Afterwards it was revealed that he was driving a taxi for “Bulaklak
Company.”
As for Maldigan, in 1989, he requested petitioners for the reimbursement of his daily cash deposits for 2 years,
but Five J Taxi told him that not a single centavo was left of his deposits as these were not even enough to cover
the amount spent for the repairs of the taxi he was driving. This was allegedly the practice adopted by them to
recoup the expenses incurred in the repair of their taxicab units. When Maldigan insisted on the refund of his deposit,
they terminated his services. Sabsalon, on his part, claimed that his termination from employment was effected when he
refused to pay for the washing of his taxi seat covers.
After two years, Maldigan and Sabsalon filed a complaint with the Manila Arbitration Office of the NLRC, charging Five
J Taxi with illegal dismissal and illegal deduction. The Labor Arbiter dismissed the case holding that it took them
two years to file the same, and that such unreasonable delay is inconsistent with the natural reaction of a person who
claimed to be unjustly treated, hence the filing of the case could be interpreted as a mere after-thought.
NLRC affirmed Labor Arbiter that Maldigan and Sabsalon were not illegally dismissed. It said that they failed to
controvert the evidence showing that Maldigan was employed by “Mine of Gold’ from Feb 10, 1987-Dec 10, 1990; that
Sabsalon abandoned his taxicab on Sep 1, 1990; and that they voluntarily left their jobs for similar employment ith other
taxi operators. However, it modified the decision of the Labor Arbiter by ordering Five J Taxi to pay Maldigan and
Sabsalon their accumulated deposits and car wash payments plus interest, and 10% of the total amount for attorney’s
fees.
ISSUE/S:
1. WON Five J Taxi should pay private respondents their accumulated deposits; (Y ES)
2. WON F ive J Taxi should pay private respondents their accumulated car wash payments; (N
O)
3. WON t hey are liable for the payment of attorney’s fees. (NO)
HELD:
1. NLRC held that the P15.00 daily deposits made by respondents to defray any shortage in their “boundary” is
covered by the general prohibition in Article 114 of the Labor Code against requiring employees to make
deposits, and that there is no showing that the Secretary of Labor has recognized the same as a
“practice” in the taxi industry. Consequently, the deposits made were illegal and the respondents must be
refunded therefor.
“Article 114. Deposits for loss or damage.—No employer shall require his worker to make
deposits from which deductions shall be made for the reimbursement of loss of or damage to tools,
materials, or equipment supplied by the employer, except when 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 and
regulations.”
It can be deduced therefrom that the said article provides the rule on deposits for loss or damage to tools,
materials or equipment supplied by the employer. Clearly the same does not apply to or permit deposits not
to defray any deficiency which the taxi driver may incur in the remittance of his “boundary.” Also, when
private respondents stopped working for petitioners, the alleged purpose for which petitioners required such
unauthorized deposits no longer existed. In other case, any balance due to private respondents after proper
accounting must be returned to them with legal interest.
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However, evidence show that from 1987-1991, Sabsalon was able to withdraw his deposits through vales
or he incurred shortages, such that he is even indebted to petitioners in the amount of P3,448.00. With
respect to Maldigan’s deposits, nothing was mentioned questioning the same even in the present petition.
We accordingly agree with the recommendation of the Solicitor General that since the evidence shows that he
had not withdrawn the same, he should be reimbursed the amount of his accumulated cash deposits.
2. The labor arbiter had this to say in his decision: “Anent the issue of illegal deductions, there is no dispute that as
a matter of practice in the taxi industry, 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, and as claimed by the respondents
(petitioners in the present case), complainant(s) (private respondents herein) were made to shoulder the
expenses for washing, the amount doled out was paid directly to the person who washed the unit, thus we find
nothing illegal in this practice, much more (sic) 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. Also, as the Solicitor General correctly noted, car washing
after a tour of duty is a practice in the taxi industry, and is, in fact, dictated by fair play.
3. Article 222 of the Labor Code, as amended by Section 3 of Presidential Decree No. 1691, states that
non-lawyers may appear before the NLRC or any labor arbiter only (1) if they represent themselves, or (2) if they
represent their organization or the members thereof. While it may be true that Guillermo H. Pulia was the
authorized representative of private respondents, he was a non-lawyer who did not fall in either of the
foregoing categories. Hence, by clear mandate of the law, he is not entitled to attorney’s fees.
Furthermore, the statutory rule that an attorney shall be entitled to have and recover from his client a reasonable
compensation for his services necessarily imports the existence of an attorney-client relationship as a
condition for the recovery of attorney’s fees, and such relationship cannot exist unless the client’s
representative is a lawyer.
WHEREFORE, the questioned judgment of respondent NLRC is hereby MODIFIED by deleting the awards for
reimbursement of car wash expenses and attorney’s fees and directing said public respondent to order and effect the
computation and payment by petitioners of the refund for private respondent Domingo Maldigan’s deposits, plus legal
interest thereon from the date of finality of this resolution up to the date of actual payment thereof.
LLAW1 FIRST SEM 2017-2018 (BUGTAS)
LABOR STANDARDS Entitlement of illegally dismissed employee to service charges
GR No. 123880

Maranaw Hotels vs. NLRC
February 23, 1999
MARANAW HOTELS AND RESORT CORPORATION, NATIONAL LABOR RELATIONS COMMISSION and EDDIE
(Owner of Century Park Sheraton Manila), petitioner DAMALERIO, respondents
An illegally dismissed employee is entitled not only to full backwages but also to other benefits, including a just
share in the service charges, to be computed from the start of his preventive suspension (if applicable) or
illegal dismissal until his reinstatement. However, should petitioner opt in favor of separation pay, the private
respondent shall no longer be entitled to share in the service charges collected during his preventive
suspension.
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FACTS:
Eddie Damalerio (Damalerio), a room attendant of the Century Park Sheraton Hotel, operated by Maranaw Hotel and
Resort Corporation, was seen by hotel guest Jamie Glaser (Glaser) with left hand inside the latter’s suitcase.
Confronted with what he was doing, Damalerio explained that he was trying to tidy up the room. Not satisfied with the
explanation of Damalerio, Glaser lodged a written complaint before William D. Despuig, shift-in-charge of security of the
hotel. Glaser also reported that Damalerio had previously asked from him souvenirs, cassettes, and other giveaways.
The complaint was later brought by Despuig to the attention of Major Eddie Buluran, chief of Security of the hotel.
Damalerio was given a Disciplinary Action Notice (DAN). The next day, an administrative hearing was conducted on the
matter. Damalerio denied the accusation against him, theorizing that when he found the room of Glaser in disarray, and
was about to make the bed, he noticed some belongings, such as socks and T-shirts of the said hotel guest scattered
around, so much so that he thought of placing the same in his luggage. While doing so, Glaser arrived. When asked by
the latter if something was wrong, he (Damalerio) said “I’m just cleaning your room,” and Glaser remarked, “Good work,”
and then, the two of them chatted about Glaser’s concert at the Araneta Coliseum.
Damalerio received a memorandum issued by the floor supervisor, bearing the approval of the executive housekeeper,
stating that he (Damalerio) was found to have committed qualified theft in violation of House Rule No. 1, Section 3 of
Hotel Rules and Regulations. The same memorandum served as a notice of termination of his employment.
Damalerio filed with the Labor Arbiter a Complaint for illegal dismissal against the petitioner. The Labor Arbiter ruled
that Damalerio’s dismissal was illegal and ordered his reinstatement to his former or equivalent position without loss
of seniority rights, with payment of backwages from the time when he was preventively suspended up to actual
reinstatement and other benefits, including but not limited to his share in the charges and/or tips which he failed to
receive, and all other CBA benefits that have accrued since his dismissal.
The NLRC modified the appealed decision by giving petitioner the option of paying Damalerio a separation pay
equivalent to one (1) month pay for every year of service, instead of reinstating him.
ISSUE:
1. WON Damalerio was illegal dismissed (YES)

2. WON Damalerio is entitled to the payment of service charges (YES)
HELD:
1. Although it was not completely proper for Damalerio to be touching the things of a hotel guest while cleaning the hotel
rooms, personal belongings of hotel guests being off-limits to roomboys, under the attendant facts and circumstances,
we believe that the dismissal of Damalerio was unwarranted. To be sure, the investigation held by the hotel security
people did not unearth enough evidence of culpability. It bears repeating that subject hotel guest lost nothing. Albeit
petitioner may have reasons to doubt the honesty and trustworthiness of Damalerio, as a result of what happened,
absent sufficient proof of guilt, he (Damalerio), who is a rank-and-file employee, cannot be legally dismissed.
Unsubstantiated suspicions and baseless conclusions by employers are not legal justification for dismissing employees.
The burden of proving the existence of a valid and authorized cause of termination is on the employer. Any
doubt should be resolved in favor of the employee, in keeping with the principle of social justice enshrined in
the Constitution.
2. As regards the share of Damalerio in the service charges collected during the period of his preventive suspension, the
same form part of his earnings, and his dismissal having been adjudged to be illegal, he is entitled not only to full
backwages but also to other benefits, including a just share in the service charges, to be computed from the
start of his preventive suspension until his reinstatement.
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However, mindful of the animosity and strained relations between the parties, emanating from this litigation, we
uphold the ruling a quo that in lieu of reinstatement, separation pay may be given to the private respondent, at
the rate of one (1) month pay for every year of service. Should petitioner opt in favor of separation pay, the
private respondent shall no longer be entitled to share in the service charges collected during his
preventive suspension.
WHEREFORE, the petition is hereby DISMISSED and the Court affirms the questioned Decision of the NLRC, to be
implemented according to law and this disposition. No pronouncement as to costs.
LLAW1 FIRST SEM 2017-2018 (BUGTAS)
LABOR STANDARDS Tip and Bonus; Difference
GR No. 140364

Ace Navigation Co. vs. CA
August 15, 2000
ACE NAVIGATION CO., INC. and/or CONNING SHIPPING COURT OF APPEALS (THIRTEENTH DIVISION), NATIONAL LABOR
LTD., petitioners RELATIONS COMMISSION (FIRST DIVISION) and ORLANDO
ALONSAGAY, respondents.
Since a tip is considered a pure gift out of benevolence or friendship, it cannot be demanded from the
customer. Whether or not tips will be given is dependent on the will and generosity of the giver. Although a
customer may give a tip as a consideration for services rendered, its value still depends on the giver. They are
given in addition to the compensation by the employer. A gratuity given by an employer in order to inspire the
employee to exert more effort in his work is more appropriately called a bonus.
FACTS:
Ace Navigation Co., Inc. (Ace Nav) recruited Orlando Alonsagay to work as a bartender on board the vessel M/V “Orient
Express” owned by its principal, Conning Shipping Ltd. (Conning). Under their contract, Orlando shall receive a monthly
basic salary of U.S. $450.00, flat rate, including overtime pay for 12 hours of work daily plus tips of U.S. $2.00 per
passenger per day. He was also entitled to 2.5 days of vacation leave with pay each month. The contract was to last for
one (1) year. After the expiration of the contract, Orlando returned to the Philippines and demanded from Ace Nav his
vacation leave pay. Ace Nav did not pay him immediately. Moreover, Conning did not remit any amount for his vacation
leave pay. Ace Nav, however, promised to verify the matter and asked Orlando to return after a few days. Orlando never
returned.
Orlando filed a complaint before the LA for vacation leave pay of U.S. $450.00 and unpaid tips amounting to U.S.
$36,000.00. The LA ordered Ace Nav and Conning to pay jointly and severally Orlando his vacation leave pay of
US$450.00, but dismissed the claim for tips for lack of merit. Upon appeal by Orlando, the NLRC ordered Ace Nav and
Conning to pay Orlando’s unpaid tips, in addition to his vacation leave pay Ace Nav and Conning filed a petition for
certiorari before the CA to annul the decision of the NLRC, but the CA dismissed the petition.
The petitioners contend that if tips will be considered as part of the salary of Orlando, it will make him the highest paid
employee. The ship captain, the highest ranking officer, receives U.S.$3,000.00 per month without tips. Orlando, who is
a bartender, will receive U.S.$3,450.00 per month. It will create an unfavorable precedent detrimental to the future
recruitment, hiring and deployment of Filipino overseas workers especially in service oriented businesses. It will also be
a case of double compensation that will unjustly enrich Orlando at the expense of petitioners.
ISSUE:
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WON petitioners are liable to pay the tips to Orlando (NO)
HELD:
The contract of employment between petitioners and Orlando is categorical that the monthly salary of Orlando is
US$450.00 flat rate. This already included his overtime pay which is integrated in his 12 hours of work. The words "plus
tips of US$2.00 per passenger per day" were written at the line for overtime. Since payment for overtime was included in
the monthly salary of Orlando, the supposed tips mentioned in the contract should be deemed included thereat.
The actuations of Orlando during his employment also show that he was aware his monthly salary is only US$450.00, no
more no less. He did not raise any complaint about the non-payment of his tips during the entire duration of his
employment. After the expiration of his contract, he demanded payment only of his vacation leave pay. This shows that
the alleged non-payment of tips was a mere afterthought to bloat up his claim. The records of the case do not show that
Orlando was deprived of any monthly salary. It will now be unjust to impose a burden on the employer who performed
the contract in good faith.
Furthermore, it is presumed that the parties were aware of the plain, ordinary and common meaning of the word "tip." As
a bartender, Orlando cannot feign ignorance on the practice of tipping and that tips are normally paid by customers and
not by the employer. The word “tip” has several meanings, with origins more or less obscure. It is suggested that [the
word] is formed from the practice, in early 18th c. London coffeehouses, of having a box in which persons in a hurry
would drop a small coin, to gain immediate attention. The box was labelled To Insure Promptness; then just with the
initials T.I.P.
Tipping is done to get the attention and secure the immediate services of a waiter, porter or others for their services.
Since a tip is considered a pure gift out of benevolence or friendship, it cannot be demanded from the customer.
Whether or not tips will be given is dependent on the will and generosity of the giver. Although a customer may give a tip
as a consideration for services rendered, its value still depends on the giver. They are given in addition to the
compensation by the employer. A gratuity given by an employer in order to inspire the employee to exert more effort in
his work is more appropriately called a bonus.
It is also absurd that petitioners intended to give Orlando a salary higher than that of the ship captain. As petitioners
point out, the captain of M/V "Orient Princess" receives US$3,000.00 per month while Orlando will receive US$3,450.00
per month if the tip of US$2.00 per passenger per day will be given in addition to his US$450.00 monthly salary. It will be
against common sense for an employer to give a lower ranked employee a higher compensation than an employee who
holds the highest position in an enterprise.
However, Orlando should be paid his vacation leave pay. Petitioners denied this liability by raising the defense that the
usual practice is that vacation leave pay is given before repatriation. But, petitioners did not present any evidence to
prove that they already paid the amount. The burden of proving payment was not discharged by the petitioners.
LLAW1 FIRST SEM 2017-2018 (MIJARES)
LABOR STANDARDS Computation of 13th Month Pay
GR Nos. 92174 and 102552

Boie-Takeda Chemicals Inc vs. De
December 10, 1993
la Serna
BOIE-TAKEDA CHEMICALS, INC. and PHILIPPINE FUJI HON. DIONISIO DE LA SERNA, Acting Secretary of the Department
XEROX CORP., petitioner of Labor and Employment, respondent.
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In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or guaranteed
wage is patently the “basic salary” for this is what the employee receives for a standard work period.
Commissions are given for extra efforts exerted in consummating sales or other related transactions. They are,
as such, additional pay, which this Court has made clear do not form part of the “basic salary.”
FACTS:
Then Labor Secretary Franklin M. Drilon issued the Revised Guidelines on the Implementation of the 13th Month Pay
Law. The second paragraph of Section 5(a) of the guidelines included commissions in the computation of the 13th
month pay. As a result, petitioners Boie-Takeda Chemicals, Inc. (Boie-Takeda) and Philippine Fuji Xerox Corporation
(Fuji Xerox) were required to include the commissions in the computation of the 13th month pay of its respective
employees. In due course, petitioners Boie-Takeda and Fuji Xerox contend that under PD No. 852, the 13th month pay
is based solely on basic salary. As defined by the law itself, 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. In
effect, the guidelines issued by then Labor Secretary were issued in excess of the statutory authority conferred by P.D.
851.
ISSUE:
WON the commissions are included in the computation of the 13th month pay (NO)
HELD:
The term "basic salary" is to be understood in its common, generally-accepted meaning, i.e., as a rate of pay for a
standard work period exclusive of such additional payments as bonuses and overtime.
Contrary to respondents' contention, Memorandum Order No. 28 did not repeal, supersede or abrogate P.D. 851. As
may be gleaned from the language of the Memorandum Order No. 28, it merely "modified" Section 1 of the decree by
removing the P1,000.00 salary ceiling. The concept of 13th Month Pay as envisioned, defined and implemented under
P.D. 851 remained unaltered, and while entitlement to said benefit was no longer limited to employees receiving a
monthly basic salary of not more than P1,000.00, said benefit was, and still is, to be computed on the basic salary of the
employee-recipient as provided under P.D. 851. Thus, the interpretation given to the term "basic salary" as defined in
P.D. 851 applies equally to "basic salary" under Memorandum Order No. 28.
In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or guaranteed wage is
patently the "basic salary" for this is what the employee receives for a standard work period. Commissions are given for
extra efforts exerted in consummating sales or other related transactions. They are, as such, additional pay, which does
not form part of the "basic salary."
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 effect. They cannot widen its scope. An
administrative agency cannot amend an act of Congress. Hence, the second paragraph of Section 5 (a) of the Revised
Guidelines on the Implementation of the 13th Month Pay Law issued on November 26, 1987 by then Labor Secretary
Franklin M. Drilon is declared null and void as being violative of the law as being issued with grave abuse of discretion.
LLAW1 FIRST SEM 2017-2018 (MIJARES)
LABOR STANDARDS Article 100; Explained, 14th Month Pay

Week 8
GR No. 75289

Kamayan Point Hotel vs. NLRC
August 31, 1989
KAMAYA POINT HOTEL, petitioner NATIONAL LABOR RELATIONS COMMISSION, FEDERATION OF
FREE WORKERS and MEMIA QUIAMBAO, respondents
Verily, a 14th month pay is a misnomer because it is basically a bonus and, therefore, gratuitous in nature. The
granting of the 14th month pay is a management prerogative which cannot be forced upon the employer. It is
something given in addition to what is ordinarily received by or strictly due the recipient. It is a gratuity to which
the recipient has no right to make a demand.
FACTS:
Respondent Memia Quiambao with thirty others who are members of private respondent Federation of Free Workers
(FFW), a legitimate labor organization, were employed by petitioner Kamaya Point Hotel (Kamaya) as hotel crew. The
management granted a 14th month pay to its employees starting in 1979.
In January 1982, operations ceased to give way to the Kamaya’s conversion into a training center for Libyan scholars.
However, due to technical and financing problems, the Libyans pre-terminated the program on July 1982 and Kamaya
was not paid for the use of the hotel premises. Thus, it had to undertake repairs of the premises damaged by the Libyan
students, which allegedly amounted to P2 million.
Although Kamaya re-opened the hotel premises to the public, it was not able to pick-up its lost patronage. Soon after
re-opening, it effected a retrenchment program until finally on January 1984, it totally closed its business.
Respondent FFW filed a complaint in the Ministry of Labor and Employment against petitioner for illegal suspension,
violation of the CBA, and non-payment of the 14th month pay. Records however show that the case was submitted for
decision on the sole issue of the alleged non-payment of the 14th month pay for the year 1982.
The LA rendered a decision ordering Kamaya to pay the 14th month pay of all its rank and file employees as well as the
monetary equivalent of the benefits of the CBA. On appeal, the NLRC set aside the award of monetary benefits under
the CBA but affirmed the grant of the 14th month pay. It reasoned as follows: “The granting of this 14th month pay has
already ripened into a company practice which respondent company cannot withdraw unilaterally. This 14th month pay
is now an existing benefit which cannot be withdrawn without violating Article 100 of the Labor Code. To allow its
withdrawal now would certainly amount to a diminution of existing benefits which complainants are presently enjoying.”
In due course, Kamaya seeks the reversal of the decision of the NLRC.
ISSUE:
WON respondents are entitled to 14th month pay (NO)
HELD:
Article 100 of the Labor Code states:
ART. 100. Prohibition against elimination or diminution of benefits. - Nothing in this Book shall be construed to
eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.
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It is patently obvious that Article 100 is clearly without applicability. The date of effectivity of the Labor Code is May 1,
1974. In the case at bar, petitioner extended its 14th month pay beginning 1979 until 1981. What is demanded is
payment of the 14th month pay for 1982. Indubitably, Article 100 of the Labor Code cannot apply.
Having enjoyed the additional income in the form of the 13th month pay, private respondents' insistence on the 14th
month pay for 1982 is already an unwarranted expansion of the liberality of the law.
Also, as gleaned from the collective bargaining agreement between management and the union, there is no stipulation
as to such extra remuneration. Evidently, this omission is an acknowledgment that such benefit is entirely dependent on
the profitability of the company's operations.
Verily, a 14th month pay is a misnomer because it is basically a bonus and, therefore, gratuitous in nature. The granting
of the 14th month pay is a management prerogative which cannot be forced upon the employer. It is something given in
addition to what is ordinarily received by or strictly due the recipient. It is a gratuity to which the recipient has no right to
make a demand.
This SC cannot compel Kamaya to grant the 14th month pay solely because it has allegedly ripened into a company
practice. Having lost its business, Kamaya should not be penalized for its previous liberality.
An employer may not be obliged to assume a "double burden" of paying the 13th month pay in addition to bonuses or
other benefits aside from the employee's basic salaries or wages. Restated, an employer may not be obliged to assume
the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or wages in addition
to the required 13th month pay.
LLAW1 FIRST SEM 2017-2018 (MENDOZA)
LABOR STANDARDS Article 100 and Bonus; Explained
GR No. 155059

American Wire and Cable Union vs.
April 29, 2005
American Wire and Cable Co
AMERICAN WIRE AND CABLE DAILY RATED AMERICAN WIRE AND CABLE CO., INC. and THE COURT OF
EMPLOYEES UNION, petitioner APPEALS, respondents.
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.
FACTS:
Private respondent 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 Monthly-Rated Employees Union
(Monthly-Rated Union) and the American Wire and Cable Daily-Rated Employees Union (Daily-Rated Union).
An original action was filed before the NCMB of the Department of Labor and Employment (DOLE) by the two unions for
voluntary arbitration. They alleged that the private respondent, without valid cause, suddenly and unilaterally withdrew
and denied certain benefits and entitlements which they have long enjoyed, in violation of Article 100 of the Labor Code.
These are the following: a. Service Award; b. 35% premium pay of an employee’s basic pay for the work rendered
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during Holy Monday, Holy Tuesday, Holy Wednesday, December 23, 26, 27, 28 and 29; c. Christmas Party; and d.
Promotional Increase.
A promotional increase was asked by the petitioner for fifteen (15) of its members who were given or assigned new job
classifications. According to the petitioner, the new job classifications were in the nature of a promotion, necessitating
the grant of an increase in the salaries of the said 15 members.
The Voluntary Arbitrator decided in favor of the private respondent. In due course, the petitioner appealed to the CA and
contended that the private respondent violated Article 100 of the Labor Code. The CA affirmed the decision of the
Voluntary Arbitrator.
ISSUE:
WON private respondent is guilty of violating Article 100 of the Labor Code, as amended, when the benefits/entitlements
given to the members of the petitioner were withdrawn (NO)
HELD:
The SC ruled in the negative by answering these 2 questions:
I. Are the benefits/entitlements in the nature of a bonus or not, and assuming they are so, whether they are demandable
and enforceable obligations?
In the case of Producers Bank of the Philippines v. NLRC we have characterized what a bonus is, viz:
A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of
the employers business and made possible the realization of profits. 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 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.
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 additional 35% premium pay for work done during selected days
of the Holy Week and Christmas season, the holding of Christmas parties with raffle, and the cash incentives given
together with the service awards are all in excess of what the law requires each employer to give its employees. Since
they are above what is strictly due to the members of petitioner-union, the granting of the same was a management
prerogative, which, whenever management sees necessary, may be withdrawn, unless they have been made a part of
the wage or salary or compensation of the employees.
II. Can these bonuses be considered part of the wage or salary or compensation making them enforceable obligations?
For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by the parties,
or it must have had a fixed amount and had been a long and regular practice on the part of the employer.
The benefits/entitlements in question were never subjects of any express agreement between the parties. They were
never incorporated in the Collective Bargaining Agreement (CBA). As observed by the Voluntary Arbitrator, the records
reveal that these benefits/entitlements have not been subjects of any express agreement between the union and the
company, and have not yet been incorporated in the CBA. In fact, the petitioner has not denied having made proposals
with the private respondent for the service award and the additional 35% premium pay to be made part of the CBA.
The Christmas parties and its incidental benefits, and the giving of cash incentive together with the service award
cannot be said to have fixed amounts. What is clear from the records is that over the years, there had been a downtrend
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in the amount given as service award. There was also a downtrend with respect to the holding of the Christmas parties
in the sense that its location changed from paid venues to one which was free of charge, evidently to cut costs. Also, the
grant of these two aforementioned bonuses cannot be considered to have been the private respondents long and
regular practice. To be considered a regular practice, the giving of the bonus should have been done over a long period
of time, and must be shown to have been consistent and deliberate. The downtrend in the grant of these two bonuses
over the years demonstrates that there is nothing consistent about it.
LLAW1 FIRST SEM 2017-2018 (NICOLAS)
LABOR STANDARDS Labor-Only Contracting and Job Contracting; Distinguished,

Indirect Employer; Liability and Reimbursement
GR No. 145271

Manila Electric Company vs.
July 14, 2005
Benamira
MANILA ELECTRIC COMPANY, p
etitioner ROGELIO BENAMIRA, ET AL, respondents
1. There is labor-only contract when the person acting as contractor is considered merely as an agent or
intermediary of the principal who is responsible to the workers in the same manner and to the same extent as if
they had been directly employed by him. On the other hand, job (independent) contracting is present if the
following conditions are met: (a) the contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all matters connected with the performance of the
work except to the result thereof; and (b) the contractor has substantial capital or investments in the form of
tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his
business. Given the above distinction and the provisions of the security service agreements entered into by
MERALCO with ASDAI and AFSISI, ASDAI and AFSISI were engaged in job contracting.
2. When MERALCO contracted for security services with ASDAI as the security agency that hired respondents
to work as guards for it, MERALCO became an indirect employer of the respondents pursuant to Article 107 of
the Labor Code. Additionally, when ASDAI as contractor failed to pay the respondents, MERALCO as principal
becomes jointly and severally liable for the individual respondents wages, under Articles 106 and 109 of the
Labor Code. Nonetheless, the solidary liability of MERALCO with that of ASDAI does not preclude the
application of Article 1217 of the Civil Code on the right of reimbursement from his co-debtor by the one who
paid.
FACTS:
Benamira and the other respondents are security guards were formerly employed by the People’s Security, Inc. (PSI),
and were deployed at the MERALCO main office in Ortigas. In 1990, the contract between PSI and MERALCO
terminated and immediately thereafter, the respondents filed a complaint for unpaid monetary benefits against PSI and
MERALCO.
MERALCO and Armed Security and Detective, Inc. (ASDAI) executed a security service agreement which took effect on
December 1990. Among other things, it was stipulated, among others, that:
7. Discipline and Administration of the security guards shall conform with the rules and regulations of the
AGENCY, and the COMPANY reserves the right to require without explanation the replacement of any guard
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whose behavior, conduct or appearance is not satisfactory to the COMPANY and that the AGENCY cannot
pull-out any security guard from the COMPANY without the consent of the latter.
8. The AGENCY shall conduct inspections through its duly authorized inspector at least two (2) times a week
of guards assigned to all COMPANY installations secured by the AGENCY located in the Metropolitan Manila
area and at least once a week of the COMPANY’s installations located outside of the Metropolitan Manila
area and to further submit its inspection reports to the COMPANY. Likewise, the COMPANY shall have the
right at all times to inspect the guards of the AGENCY assigned to the COMPANY x x x
10. Nothing herein contained shall be understood to make the security guards under this Agreement,
employees of the COMPANY, it being clearly understood that such security guards shall be considered as
they are, employees of the AGENCY alone, so that the AGENCY shall be responsible for compliance with all
pertinent labor laws and regulations included but not limited to the Labor Code, Social Security Act, and all
other applicable laws and regulations including that providing for a withholding tax on income.
Subsequently, the respondents were absorbed by ASDAI. On June 1992, the LA issued a decision in favor of the former
PSI guards, including the respondents. Thereafter, the respondents filed a new complaint for unpaid monetary benefits
against MERALCO and ASDAI. Meanwhile, the security service agreement between MERALCO and AFSISI took effect,
terminating the agreement with ASDAI. The contract entered into by MERALCO with AFSISI contained similar provisions
aforecited. The respondents amended their complaint to include AFSISI as a party to the case, and alleged that the
latter illegally dismissed them.
The respondents alleged that: First, MERALCO and ASDAI never paid their overtime pay, service incentive leave pay,
premium pay for Sundays and Holidays, P50.00 monthly uniform allowance and underpaid their 13th month pay. Second,
when the security service agreement of ASDAI was terminated and AFSISI took over the security functions of the
former, respondent security guard Benamira was no longer given any work assignment when AFSISI learned that the
former has a pending case against PSI, in effect, dismissing him from the service without just cause. Lastly, the rest of
the individual respondents were absorbed by AFSISI but were not given any assignments, thereby dismissing them from
the service without just cause.
ASDAI denied in general terms any liability for the claims of the respondents, claiming that there is nothing due them in
connection with their services. On the other hand, MERALCO denied liability on the ground of lack of
employer-employee relationship with the respondents. It averred that the respondents are the employees of the security
agencies it contracted for security services; and that it has no existing liability for the respondents’ claims since said
security agencies have been fully paid for their services per their respective security service agreement. For its part,
AFSISI asserted that it is not liable for illegal dismissal since it did not absorb or hire the respondents, the latter were
merely hold-over guards from ASDAI. It further alleged that it is not obliged to employ or absorb the security guards of
the agency it replaced since there is no provision in its security service agreement with MERALCO or in law requiring it
to absorb and hire the guards of ASDAI as it has its own guards duly trained to service its various clients.
The LA held that MERALCO and ASDAI are jointly and solidarily liable to the monetary claims of the guards, and
dismissed the complaint against AFSISI. All the parties, except AFSISI, appealed to the NLRC, as follows:
1. The respondents assailed the LA’s declaration that ASDAI is their employer. They insisted that AFSISI is the party
liable for their illegal dismissal and should be the party directed to reinstate them.
2. MERALCO attributed grave abuse of discretion on the part of the LA in failing to consider the absence of
employer-employee relationship between MERALCO and the respondents.
3. ASDAI took exception from the LA’s finding that it is the employer of he respondents and therefore liable for the
latter’s unpaid monetary benefits.
The NLRC affirmed the decision of the LA. In due course, the CA ruled for the respondents. It observed that: (1)
MERALCO changed the security agency manning its premises three times while engaging the services of the same
people; (2) MERALCO employed a scheme of hiring guards through an agency and periodically entering into service
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contract with one agency after another in order to evade the security of tenure of the respondents; (3) the respondents
are regular employees of MERALCO since their services as security guards are usually necessary or desirable in the
usual business or trade of MERALCO and they have been in the service of MERALCO for no less than six years; (4) an
employer-employee relationship exists between MERALCO and the respondents; and (5) a labor-only contract existed
between ASDAI and AFSISI and MERALCO, such that MERALCO is guilty of illegal dismissal without just cause and
liable for reinstatement of the respondents to its workforce.
Petitioner MERALCO filed a petition for certiorari and principally asserted that there is no employer-employee
relationship between them. Respondents averred that they were absorbed by AFSISI when the contract between
MERALCO and ASDAI was terminated, and that they should be reinstated.
ISSUES:
1. WON there existed an employer-employee relationship between MERALCO and the respondents (NO)
2. WON respondents were regular employees of MERALCO (NO)
3. WON ASDAI and AFSISI are labor-only contractors (NO)
4. WON AFSISI absorbed the respondents (NO)
5. WON respondents are entitled to reinstatement ( YES)
6. WON MERALCO is the direct employer of the respondents ( NO)
7. WON MERALCO has a right to reimbursement from ASDAI for the full amount it may pay to respondents under Arts.
106 and 107 of the Labor Code (YES)
HELD:
1. The terms and conditions of the service agreement clearly recognizes ADAI as the employer of the guards. The
agreement even explicitly provided that nothing therein shall be understood to make the security guards employees of
MERALCO. Clearly, the respondents are the employees of ASDAI.
As to the provision in the agreement that MERALCO reserved the right to seek replacement of any guard whose
behavior, conduct or appearance is not satisfactory, such merely confirms that the power to discipline lies with the
agency. It is a standard stipulation in security service agreements that the client may request the replacement of the
guards to it. Service-oriented enterprises, such as the business of providing security services, generally adhere to the
business adage that the customer or client is always right and, thus, must satisfy the interests, conform to the needs,
and cater to the reasonable impositions of its clients.
Neither is the stipulation that the agency cannot pull out any security guard from MERALCO without its consent an
indication of control. It is simply a security clause designed to prevent the agency from unilaterally removing its security
guards from their assigned posts at MERALCO’s premises to the latter’s detriment.
The clause that MERALCO has the right at all times to inspect the guards of the agency detailed in its premises is
likewise not indicative of control as it is not a unilateral right. The agreement provides that the agency is principally
mandated to conduct inspections, without prejudice to MERALCO’s right to conduct its own inspections.
Needless to stress, for the power of control to be present, the person for whom the services are rendered must reserve
the right to direct not only the end to be achieved but also the means for reaching such end. Not all rules imposed by the
hiring party on the hired party indicate that the latter is an employee of the former. Rules which serve as general
guidelines towards the achievement of the mutually desired result are not indicative of the power of control. Verily, the
respondents failed to show that the rules of MERALCO controlled their performance.
2. The respondents cannot be considered as regular employees of the MERALCO for, although security services are
necessary and desirable to the business of MERALCO, it is not directly related to its principal business and may even be
considered unnecessary in the conduct of MERALCO’s principal business, which is the distribution of electricity.
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Furthermore, the fact that the individual respondents filed their claim for unpaid monetary benefits against ASDAI is a
clear indication that the individual respondents acknowledge that ASDAI is their employer.
3. Moreover, ASDAI and AFSISI are not labor-only contractors. There is labor-only contract when the person acting as
contractor is considered merely as an agent or intermediary of the principal who is responsible to the workers in the
same manner and to the same extent as if they had been directly employed by him. On the other hand, job
(independent) contracting is present if the following conditions are met: (a) the contractor carries on an independent
business and undertakes the contract work on his own account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or principal in all matters connected with the
performance of the work except to the result thereof; and (b) the contractor has substantial capital or investments in the
form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his
business. Given the above distinction and the provisions of the security service agreements entered into by MERALCO
with ASDAI and AFSISI, ASDAI and AFSISI were engaged in job contracting.
4. Respondents’ insistence that they were absorbed by AFSISI when MERALCO’s security service agreement with
ASDAI was terminated is devoid of merit. The respondents failed to present any evidence to confirm the same. Thus,
respondent Benamira was not retained in his post at MERALCO since July 25, 1992 due to the termination of the
security service agreement of MERALCO with ASDAI. As for the rest of the respondents, they retained their post only as
hold-over guards until the security guards of AFSISI took over their post on August 6, 1992.
5. Respondent Benamira has been off-detail for seventeen days while the rest of the individual respondents have only
been off-detail for five days when they amended their complaint on August 11, 1992 to include the charge of illegal
dismissal. The inclusion of the charge of illegal dismissal then was premature. Nonetheless, bearing in mind that ASDAI
simply stopped giving the respondents any assignment and their inactivity clearly persisted beyond the six-month period
allowed by Article 286 of the Labor Code, the respondents were, in effect, constructively dismissed by ASDAI from
employment, hence, they should be reinstated.
6. When MERALCO contracted for security services with ASDAI as the security agency that hired respondents to work
as guards for it, MERALCO became an indirect employer of the respondents pursuant to Article 107 of the Labor Code,
which reads:
ART. 107. Indirect employer - The provisions of the immediately preceding Article shall likewise apply to any
person, partnership, association or corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project.
When ASDAI as contractor failed to pay the respondents, MERALCO as principal becomes jointly and severally liable for
the individual respondents wages, under Articles 106 and 109 of the Labor Code, which provide:
ART. 106. Contractor or subcontractor. - Whenever an employer enters into a contract with another person for
the performance of the former’s] work, the employees of the contractor and of the latter’s subcontractor, if
any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him. xxx
ART. 109. Solidary liability - The provisions of existing laws to the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his contractor or subcontractor for any violation of any
provision of this Code. For purpose of determining the extent of their civil liability under this Chapter, they
shall be considered as direct employers.
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ASDAI is held liable by virtue of its status as direct employer, while MERALCO is deemed the indirect employer of the
individual respondents for the purpose of paying their wages in the event of failure of ASDAI to pay them. This statutory
scheme gives the workers the ample protection consonant with labor and social justice provisions of the 1987
Constitution.
7. However, as held in Mariveles Shipyard Corp. vs. Court of Appeals (415 SCRA 573), the solidary liability of
MERALCO with that of ASDAI does not preclude the application of Article 1217 of the Civil Code on the right of
reimbursement from his co-debtor by the one who paid, which provides:
ART. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary
debtors offer to pay, the creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors only the share which corresponds to each, with the
interest for the payment already made. If the payment is made before the debt is due, no interest for the
intervening period may be demanded.
When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying
the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each.
ASDAI may not seek exculpation by claiming that MERALCO’s payments to it were inadequate for the respondent’s
lawful compensation. As an employer, ASDAI is charged with knowledge of labor laws and the adequacy of the
compensation that it demands for contractual services is its principal concern and not any others.
LLAW1 FIRST SEM 2017-2018 (JAAFAR)
LABOR STANDARDS Exemption from Liability; Exceptions
GR No. 160073

Barayoga vs. Asset Privatization
October 24, 2005
Trust
ABUNDIO BARAYOGA and BISUDECO-PHILSUCOR ASSET PRIVATIZATION TRUST, respondents
CORFARM WORKERS UNION, petitioner
The liabilities of the previous owner to its employees are not enforceable against the buyer or transferee, unless
(1) the latter unequivocally assumes them; or (2) the sale or transfer was made in bad faith. Thus, APT cannot
be held responsible for the monetary claims of petitioners who had been dismissed even before it actually took
over BISUDECO’s assets.
FACTS:
On December 1986, respondent Asset Privatization Trust (APT) is mandated under Proclamation No. 50 to take title to
and possession of, conserve, provisionally manage and dispose of non-performing assets of the Philippine government
identified for privatization or disposition. Pursuant to Administrative Order No. 14, Series of 1987, Philippine National
Bank or PNB’s assets, loans and receivables from its borrowers were transferred to APT as trustee of the national
government. Among those transferred to APT was PNB’s financial claim against Bicolandia Sugar Development
Corporation (BISUDECO). Consequently, on February 1987, by virtue of a Deed of Transfer between the national
government and APT, the latter was constituted as trustee over BISUDECO’s account with PNB.
Week 8
Sometime later or on August 1988, BISUDECO contracted the services of Philippine Sugar Corporation (PHILSUCOR)
to take over the management of its sugar plantation and milling operations until August 1992. Meanwhile, in April 1991,
because of the continued failure of BISUDECO to pay its outstanding loan with PNB/APT, its mortgaged properties were
foreclosed and subsequently sold in a public auction to the highest bidder, APT.
On July 1991, petitioner Bisudeco-Philsucor Corfarm Workers (Union) filed a complaint for unfair labor practice, illegal
dismissal, illegal deduction and underpayment of wages and other labor standard benefits plus damages. The Union
alleged that when PHILSUCOR initially took over the operations of BISUDECO, it retained BISUDECO’s existing
personnel under the same terms and conditions of employment. It was further alleged that in May 1991, PHILSUCOR
started recalling workers back to work to the exception of the Union’s members.
In the meantime, or on July 1992, APT authorized in a resolution the payment of separation benefits to BISUDECO’s
employees in the event of the company’s privatization. Not included in the resolution were the Union’s members who
had not been recalled to work in May 1991. In September 1992 or after the contract between BISUDECO and
PHILSUCOR expired in August 1992, APT took over BISUDECO’s assets, preparatory to the latter’s privatization. Later,
or on October 1992, Bicol-Agro Industrial Cooperative (BAPCI) purchased the foreclosed assets of BISUDECO from
APT and took over its sugar milling operations under the trade name Peñafrancia Sugar Mill (PENSUMIL).
The Union filed a similar complaint against BISUDECO on December 1992 and impleaded APT and PENSUMIL as
additional respondents. This was consolidated in its first complaint. BISUDECO, APT, and PENSUMIL interposed the
defense of lack of employer-employee relationship.
The LA ordered ATP to pay the complainants the mandated employment benefits under Proclamation No. 50. The
NLRC affirmed ATP’s liability for petitioner’s money claims, but it ruled that there exists no employer-employee
relationship. The CA ruled that APT should not be held liable for the Union’s claims for unfair labor practice, illegal
dismissal, illegal deduction and underpayment of wages, as well as other labor-standard benefits plus damages. It
concluded that the Union’s claims cannot be enforced against APT as mortgagee of the foreclosed properties of
BISUDECO.
ISSUE:
WON APT is liable to pay the Union’s monetary claims against their former employer ( NO)
HELD:
Contrary to Union’s assertions, BISUDECO remained the owner of the mortgaged properties in August 1988, when the
Philippine Sugar Corporation (Philsucor) undertook the operation and management of the sugar plantation until August
1992. At the time, APT was merely a secured creditor of BISUDECO.
The duties and liabilities of BISUDECO, including its monetary liabilities to its employees, were not all automatically
assumed by APT as purchaser of the foreclosed properties at the auction sale. Any assumption of liability must be
specifically and categorically agreed upon. In Sundowner Development Corp. v. Drilon, it was ruled that, unless
expressly assumed, labor contracts like collective bargaining agreements are not enforceable against the transferee of
an enterprise. Labor contracts are in personam and thus binding only between the parties.
Therefore, as between the employees of BISUDECO and APT, there is no privity of contract that would make the latter a
substitute employer that should be burdened with the obligations of BISUDECO. Furthermore, under the principle of
absorption, a bona fide buyer or transferee of all, or substantially all, the properties of the seller or transferor is not
obliged to absorb the latter’s employees. The most that the purchasing company may do, for reasons of public policy
and social justice, is to give preference of re-employment to the selling company’s qualified separated employees, who
in its judgment are necessary to the continued operation of the business establishment.
In any event, the national government (in whose trust APT previously held the mortgage credits of BISUDECO) is not
Week 8
the employer of the Union’s members, who had been dismissed sometime in May 1991, even before APT took over the
assets of BISUDECO. Even the NLRC found that no employer-employee relationship existed between APT and
petitioners. Thus, the NLRC gravely abused its discretion in nevertheless holding that APT, as the transferee of the
assets of BISUDECO, was liable to petitioners.
The case of Central Azucarera del Danao v. Court of Appeals is instructive. It was held that:
"There can be no controversy for it is a principle well-recognized, that it is within the employer’s legitimate sphere of
management control of the business to adopt economic policies or make some changes or adjustments in their
organization or operations that would insure profit to itself or protect the investment of its stockholders. As in the
exercise of such management prerogative, the employer may merge or consolidate its business with another, or sell or
dispose all or substantially all of its assets and properties which may bring about the dismissal or termination of its
employees in the process. Such dismissal or termination should not however be interpreted in such a manner as to
permit the employer to escape payment of termination pay.”
"In a number of cases on this point, the rule has been laid down that the sale or disposition must be motivated by good
faith as an element of exemption from liability. Indeed, an innocent transferee of a business establishment has no liability
to the employees of the transferor to continue employing them. Nor is the transferee liable for past unfair labor practices
of the previous owner, except, when the liability therefor is assumed by the new employer under the contract of sale, or
when liability arises because of the new owner’s participation in thwarting or defeating the rights of the employees.”
In other words, the liabilities of the previous owner to its employees are not enforceable against the buyer or transferee,
unless (1) the latter unequivocally assumes them; or (2) the sale or transfer was made in bad faith. Thus, APT cannot be
held responsible for the monetary claims of petitioners who had been dismissed even before it actually took over
BISUDECO’s assets.
Moreover, it should be remembered that APT merely became a transferee of BISUDECO’s assets for purposes of
conservation because of its lien on those assets -- a lien it assumed as assignee of the loan secured by the BISUDECO
from PNB. Subsequently, APT, as the highest bidder in the auction sale, acquired ownership of the foreclosed
properties.
Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by Republic Act No. 6715, which reads:
"Article 110. Worker’s preference in case of bankruptcy. – In the event of bankruptcy or liquidation of the employer’s
business, his workers shall enjoy first preference as regards their unpaid wages and other monetary claims shall be paid
in full before the claims of the Government and other creditors may be paid."
Under Articles 2241 and 2242 of the Civil Code, a mortgage credit is a special preferred credit that enjoys preference
with respect to a specific/determinate property of the debtor. On the other hand, the worker’s preference under Article
110 of the Labor Code is an ordinary preferred credit. While this provision raises the worker’s money claim to first priority
in the order of preference established under Article 2244 of the Civil Code, the claim has no preference over special
preferred credits.
Thus, the right of employees to be paid benefits due them from the properties of their employer cannot have any
preference over the latter’s mortgage credit. In other words, being a mortgage credit, APT’s lien on BISUDECO’s
mortgaged assets is a special preferred lien that must be satisfied first before the claims of the workers.
The case of Development Bank of the Philippines v. NLRC explains that:
"A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a particular
property. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on
the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in
application. It is a method adopted to determine and specify the order in which credits should be paid in the final
Week 8
distribution of the proceeds of the insolvent’s assets. It is a right to a first preference in the discharge of the funds of the
judgment debtor."
Furthermore, workers’ claims for unpaid wages and monetary benefits cannot be paid outside of a bankruptcy or judicial
liquidation proceedings against the employer. It is settled that the application of Article 110 of the Labor Code is
contingent upon the institution of those proceedings, during which all creditors are convened, their claims ascertained
and inventoried, and their preferences determined. Assured thereby is an orderly determination of the preference given
to creditors’ claims; and preserved in harmony is the legal scheme of classification, concurrence and preference of
credits in the Civil Code, the Insolvency Law, and the Labor Code.
As a mere transferee of the mortgage credit and later as the purchaser in a public auction of BISUDECO’s foreclosed
properties, APT cannot be held liable for petitioners’ claims against BISUDECO for illegal dismissal, unpaid back wages
and other monetary benefits.
LLAW1 FIRST SEM 2017-2018 (MENDOZA)
LABOR STANDARDS Wage Order; Exemption; Purpose of Exemption

NWCP; Powers and Functions
GR No. 128296

Nasipit Lumber Company vs. NWCP
September 8, 2003
NASIPIT LUMBER COMPANY, PHILIPPINE WALLBOARD NATIONAL WAGES AND PRODUCTIVITY COMMISSION, UNITED LUMBER
CORPORATION AND ANAKAN LUMBER COMPANY, petitioners AND GENERAL WORKERS OF THE PHILIPPINES and WESTERN AGUSAN
WORKERS UNION, respondents.
A distressed company may be granted exemption from compliance with the payment of wage increases to its
workers to assist it in maintaining its financial viability for a period of one year without any extension since the
above-quoted rule provides for a one-year period without any extension. Such exemption is non-extendible.
FACTS:
The Regional Tripartite Wages and Productivity Board (RTWPB) of Region X, Northern Mindanao, Cagayan de Oro City,
issued Wage Order No. RX-03. This Wage Order mandated a P7.00 increase in the minimum daily wage of all workers
and employees in the private sector in Region X receiving a daily wage of not more than P130.00 per day and an
additional P10.00 allowance per day.
Petitioners Nasipit Lumber Company, Philippine Wallboard Corporation and Anakan Lumber Company filed their
separate application for exemption from compliance with Wage Order No. RX-03, claiming they are distressed
establishments whose paid-up capital has been impaired by at least twenty-five percent (25%). Upon review, the
RTWPB granted petitioners a full exemption from compliance with the said Wage Order for a period of one (1) year.
After the expiration of one year, petitioners filed for an extension of their full exemption for another year. However,
RTWPB denied the extension, relying on Section 7 of the NWPC Revised Guidelines which only provides for a one year
exemption.
Petitioners appealed to respondent National Wages and Productivity Commission (NWPC). NWPC affirmed the decision
of the RTWPB, as follows:
Week 8
As set forth by Section 7 of the NWPC Revised Guidelines, the maximum period of exemption that can be
accorded to a qualified applicant is only for one (1) year from the effectivity of the Wage Order. This
non-extendable one year period of exemption, which had been consistently applied to all analogous cases in the
past involving companies seeking extension of the period of their exemption, remains and continues to be the
existing policy on the matter.
Precisely, the rationale behind this policy is to afford protection to workers who may be unfairly affected by the
deleterious effect of a prolonged exemption which is not in accord with the very purpose of the issuance of a
Wage Order.
By way of a petition for certiorari, petitioners contend, among others, that NWPC exceeded its jurisdiction in applying
Section 7 of the NWPC Revised Guidelines, limiting the duration of exemption to one (1) year, contrary to Republic Act
No. 6727.
ISSUE:
WON NWPC exceeded its jurisdiction in applying Section 7 of the NWPC Revised Guidelines (NO)
HELD:
Article 121, paragraphs (c) and (d), clearly grants NWPC the power to prescribe the rules and guidelines for the
determination of minimum wage and productivity measures. It also has the power to prescribe guidelines to govern wage
orders, and to issue exemptions therefrom. The NWPC lays down the guidelines which the RTWPB implements. In
affirming RTWPB’s decision in denying petitioners’ application for an extension for another year, the NWPC did not act
with grave abuse of discretion. It merely applied its own guideline, which the RTWPB implemented to the letter.
LLAW1 FIRST SEM 2017-2018 (ZABALA)
LABOR STANDARDS Wage Distortion; Explained
GR No. 140689

Bankard Employees vs. NLRC
February 17, 2004
BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE NATIONAL LABOR RELATIONS COMMISSION and BANKARD, INC.,
UNIONS, petitioner respondents
Elements of Wage Distortion:
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.
FACTS:
Private respondent Bankard Inc. (Bankard), classifies its employees by levels, i.e from level I to V. In May 1993, the
directors of Bankcard approved new salary scale to make its hiring rate competitive in the labor market. The new salary
scale increased the hiring rates of new employees, to wit: Levels I and V were increased by 1K while levels II, III, IV
were increased by P900. The salaries of employees who fell below the new minimum rates were also adjusted
Week 8
accordingly to reach such rates under their levels. As a result, Petitioner Bankard Employees Union-Workers Alliance
Trade Unions (Bankard Union) demanded for salary increase of its old regular employees. Bankard refused on the
ground that it had no obligation to grant all its employees the same increase.
Bankard Union filed a Notice of Strike on the ground of discrimination and other acts of Unfair Labor Practice. This was
initially treated as a preventive mediation case on the ground that the issues raised were “not strikeable”. Upon the
second notice of strike, the dispute was certified for compulsory arbitration. Bankard Union argued that for the purposes
of wage distortion, the classification is not one based on “levels” or “ranks” but on two groups of employees, the newly
hired and the old, in each and every level, and not between and among the different levels or ranks in the salary
structure. The NLRC dismissed the case for lack of merit, finding no wage distortion and argued that to determine the
existence of wage distortion, the historical classification of the employees prior to the wage increase must be
established. Likewise it must be shown that as between the different classification of employees there exists a historical
gap or difference. On appeal, the CA dismissed the case for lack of merit.
ISSUE:
WON the unilateral adoption by an employer of an upgraded salary scale that increased the hiring rates of new
employees without increasing the salary rates of old employees resulted in wage distortion within the contemplation of
Art. 124, LC (NO)
HELD:
The SC held that wage distortion does not exist in this case as all the elements laid down in Prubankers (302 SCRA 74)
were not met. The elements of wage distortion are:
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 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.
First, the employees of Bankard have been historically classified into levels, i.e. I to V and not on the basis of their length
of service. The entry of new employees to the company ipso facto places them under any of the levels mentioned.
Clearly, there is no hierarchy of positions between the newly hired and regular employees of Bankard, hence, the first
element of wage distortion is wanting. The employees of Bankard cannot create their own independent classification and
use it as a basis to demand an across-the-board increase in salary.
As held in National Federation of Labor (234 SCRA 311), the formulation of a wage structure through the classification of
employees is a matter of management judgment and discretion and ultimately, perhaps, a subject matter for bargaining
negotiations between employer and employees. It is assuredly something that falls outside the concept of wage
distortion.
Second, even if there was indeed a resulting decrease in the wage gap between the salary of the old and new
employees (referring to the second element), the gap was held to be insignificant as to result in severe contraction of the
international quantitative differences in the salary rates between the employee group as the classification under the
wage structure is based on rank, not seniority. Also, the third element of wage distortion, i.e the elimination of the
distinction between the two levels, is also missing.
Third, Bankard Union cannot legally obligate Bankard to correct the alleged wage distortion as the increase in the wages
and salaries of the newly-hired was not due to a prescribed law or wage order. Article 124, Labor Code, is restrictive. It
does not intend to cover all kinds of wage adjustments.
Week 8
Wage distortion, defined by Art. 124, LC as amended by RA No. 6727, is 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. Art. 124 is 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
re-evaluation of the high productivity of a particular group, or as in the present case, the need to increase the
competitiveness of Bankard’s hiring rate. Bankard Union cannot make a contrary classification of Bankard’s employees
without encroaching upon recognized management prerogative of formulating a wage structure, in this case, one based
on level.”
Fourth, Bankard’s right to increase its hiring rate, to establish minimum salaries for specific jobs, and to adjust the rates
of employees affected thereby is embodied in the parties’ Collective Bargaining Agreement (CBA). The said CBA is a
valid and legally enforceable source of rights between the parties.
Lastly, the SC will not step in to interfere with the management prerogative absent any indication that the voluntary
increase of salary rates was done arbitrarily and illegally for the purpose of circumventing the laws or was devoid of any
legitimate purpose.
LLAW1 FIRST SEM 2017-2018 (LANZARROTE)

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Week​ ​8

Arellano​ ​University​ ​School​ ​of​ ​Law

LABOR​ ​STANDARDS Wages;​ ​Definition,​ ​Employee​ ​and​ ​Contractor;​ ​Distinguished

GR​ ​No.​ ​146530

PEDRO​ ​CHAVEZ,​ ​petitioner NATIONAL​ ​LABOR​ ​RELATIONS​ ​COMMISSION,​ ​SUPREME

1.​ ​WON​ ​there​ ​existed​ ​an​ ​employer-employee​ ​relationship​ ​(YES)

LLAW1​ ​FIRST​ ​SEM​ ​2017-2018​ ​(​TAN​)

GR​ ​No.​ ​77959

LLAW1​ ​FIRST​ ​SEM​ ​2017-2018​ ​(​TAN​)

GR​ ​No.​ ​111474

LLAW1​ ​FIRST​ ​SEM​ ​2017-2018​ ​(​BUGTAS​)

GR​ ​No.​ ​123880

1.​ ​WON​ ​Damalerio​ ​was​ ​illegal​ ​dismissed​ ​(​YES​)

LLAW1​ ​FIRST​ ​SEM​ ​2017-2018​ ​(​BUGTAS​)

LABOR​ ​STANDARDS Tip​ ​and​ ​Bonus;​ ​Difference

GR​ ​No.​ ​140364

LLAW1​ ​FIRST​ ​SEM​ ​2017-2018​ ​(​MIJARES​)

LABOR​ ​STANDARDS Computation​ ​of​ ​13th​ ​Month​ ​Pay

GR​ ​Nos.​ ​92174​ ​and​ ​102552

LLAW1​ ​FIRST​ ​SEM​ ​2017-2018​ ​(​MIJARES​)

LABOR​ ​STANDARDS Article​ ​100;​ ​Explained,​ ​14th​ ​Month​ ​Pay

GR​ ​No.​ ​75289

WON​ ​respondents​ ​are​ ​entitled​ ​to​ ​14​th​​ ​month​ ​pay​ ​(NO)

Article​ ​100​ ​of​ ​the​ ​Labor​ ​Code​ ​states:

LLAW1​ ​FIRST​ ​SEM​ ​2017-2018​ ​(​MENDOZA​)

LABOR​ ​STANDARDS Article​ ​100​ ​and​ ​Bonus;​ ​Explained

GR​ ​No.​ ​155059

LLAW1​ ​FIRST​ ​SEM​ ​2017-2018​ ​(​NICOLAS​)

LABOR​ ​STANDARDS Labor-Only​ ​Contracting​ ​and​ ​Job​ ​Contracting;​ ​Distinguished,

GR​ ​No.​ ​145271

LLAW1​ ​FIRST​ ​SEM​ ​2017-2018​ ​(​JAAFAR​)

LABOR​ ​STANDARDS Exemption​ ​from​ ​Liability;​ ​Exceptions

GR​ ​No.​ ​160073

LLAW1​ ​FIRST​ ​SEM​ ​2017-2018​ ​(​MENDOZA​)

LABOR​ ​STANDARDS Wage​ ​Order;​ ​Exemption;​ ​Purpose​ ​of​ ​Exemption

GR​ ​No.​ ​128296

LLAW1​ ​FIRST​ ​SEM​ ​2017-2018​ ​(​ZABALA​)

LABOR​ ​STANDARDS Wage​ ​Distortion;​ ​Explained

GR​ ​No.​ ​140689

Elements​ ​of​ ​Wage​ ​Distortion:

LLAW1​ ​FIRST​ ​SEM​ ​2017-2018​ ​(​LANZARROTE​)

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LLAW1 FIRST SEM 2017-2018 (LANZARROTE)