FIRST DIVISION

[G.R. No. 94951. April 22, 1991.]

APEX MINING COMPANY, INC., Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION and
SINCLITICA CANDIDO, Respondents.

Bernabe B. Alabastro for Petitioner.

Angel Fernandez for Private Respondent.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; HOUSEHELPER; DEFINED. — The term `househelper’
as used herein is synonymous to the term `domestic servant’ and shall refer to any person, whether male or
female, who renders services in and about the employer’s home and which services are usually necessary or
desirable for the maintenance and enjoyment thereof, and ministers exclusively to the personal comfort and
enjoyment of the employer’s family.

2. ID.; ID.; ID.; PERSONS COVERED. — The foregoing definition clearly contemplates such househelper or
domestic servant who is employed in the employer’s home to minister exclusively to the personal comfort
and enjoyment of the employer’s family. Such definition covers family drivers, domestic servants, laundry
women, yayas, gardeners, houseboys and other similar househelps.

3. ID.; ID.; ID.; PERSONS WORKING IN STAFFHOUSES OF A COMPANY, BEYOND THE SCOPE. — The
definition cannot be interpreted to include househelp or laundrywoman working in staffhouses of a company,
like petitioner who attends to the needs of the company’s guests and other persons availing of said facilities.
By the same token, it cannot be considered to extend to the driver, houseboy, or gardener exclusively
working in the company, the staffhouses and its premises. They may not be considered as within the
meaning of a "househelper" or "domestic servant" as above-defined by law.

4. ID.; ID.; ID.; CRITERIA. — The criteria is the personal comfort and enjoyment of the family of the
employer in the home of said employer. While it may be true that the nature of the work of a househelper,
domestic servant or laundrywoman in a home or in a company staffhouse may be similar in nature, the
difference in their circumstances is that in the former instance they are actually serving the family while in
the latter case, whether it is a corporation or a single proprietorship engaged in business or industry or any
other agricultural or similar pursuit, service is being rendered in the staffhouses or within the premises of
the business of the employer. In such instance, they are employees of the company or employer in the
business concerned entitled to the privileges of a regular employee.

5. ID.; ID.; ID.; CONSIDERED A REGULAR EMPLOYEE WHEN WORKING WITHIN THE PREMISES OF THE
BUSINESS OF THE EMPLOYER AND IN RELATION TO OR IN CONNECTION WITH ITS BUSINESS. — The mere
fact that the househelper or domestic servant is working within the premises of the business of the employer
and in relation to or in connection with its business, as in its staffhouses for its guests or even for its officers
and employees, warrants the conclusion that such househelper or domestic servant is and should be
considered as a regular employee of the employer and not as a mere family househelper or domestic
servant as contemplated in Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended.

6. ID.; ID.; ID.; ID.; ENTITLED TO SEPARATION PAY WHEN ILLEGALLY DISMISSED; CASE AT BAR. —
Because of an accident which took place while private respondent was performing her laundry services, she
was not able to work and was ultimately separated from the service. She is, therefore entitled to appropriate
relief as a regular employee of petitioner. Inasmuch as private respondent appears not to be interested in
returning to her work for valid reasons, the payment of separation pay to her is in order.

DECISION

GANCAYCO, J.:

1
Is the househelper in the staff houses of an industrial company a domestic helper or a regular employee of
the said firm? This is the novel issue raised in this petition.

Private respondent Sinclitica Candido was employed by petitioner Apex Mining Company, Inc. on May 18,
1973 to perform laundry services at its staff house located at Masara, Maco, Davao del Norte. In the
beginning, she was paid on a piece rate basis. However, on January 17, 1982, she was paid on a monthly
basis at P250.00 a month which was ultimately increased to P575.00 a month.

On December 18, 1987, while she was attending to her assigned task and she was hanging her laundry, she
accidentally slipped and hit her back on a stone. She reported the accident to her immediate supervisor Mila
de la Rosa and to the personnel officer, Florendo D. Asirit. As a result of the accident she was not able to
continue with her work. She was permitted to go on leave for medication. De la Rosa offered her the amount
of P2,000.00 which was eventually increased to P5,000.00 to persuade her to quit her job, but she refused
the offer and preferred to return to work. Petitioner did not allow her to return to work and dismissed her on
February 4, 1988.

On March 11, 1988, private respondent filed a request for assistance with the Department of Labor and
Employment. After the parties submitted their position papers as required by the labor arbiter assigned to
the case on August 24, 1988 the latter rendered a decision, the dispositive part of which reads as follows: jgc:chan robles .com.p h

"WHEREFORE, Conformably With The Foregoing, judgment is hereby rendered ordering the respondent,
Apex Mining Company, Inc., Masara, Davao del Norte, to pay the complainant, to wit: chan rob1es v irt ual 1aw l ibra ry

1. Salary Differential — P16,289.20

2. Emergency Living Allowance — 12,430.00

3. 13th Month Pay Differential — 1,322.32.

4. Separation Pay

(One-month for every year of

service [1973-1988]) — 25,119.30

or in the total of FIFTY FIVE THOUSAND ONE HUNDRED SIXTY ONE PESOS AND 42/100 (P55,161.42).

SO ORDERED." 1

Not satisfied therewith, petitioner appealed to the public respondent National Labor Relations Commission
(NLRC), wherein in due course a decision was rendered by the Fifth Division thereof on July 20, 1989
dismissing the appeal for lack of merit and affirming the appealed decision. A motion for reconsideration
thereof was denied in a resolution of the NLRC dated June 29, 1990.

Hence, the herein petition for review by certiorari, which appropriately should be a special civil action
for certiorari, and which in the interest of justice, is hereby treated as such. 2 The main thrust of the petition
is that private respondent should be treated as a mere househelper or domestic servant and not as a regular
employee of petitioner. cha nrob les law l ibra ry

The petition is devoid of merit.

Under Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended, the terms "househelper" or "domestic
servant" are defined as follows: jgc:chan roble s.com.p h

"The term ‘househelper’ as used herein is synonymous to the term ‘domestic servant’ and shall refer to any
person, whether male or female, who renders services in and about the employer’s home and which services
are usually necessary or desirable for the maintenance and enjoyment thereof, and ministers exclusively to
the personal comfort and enjoyment of the employer’s family." 3

The foregoing definition clearly contemplates such househelper or domestic servant who is employed in the
employer’s home to minister exclusively to the personal comfort and enjoyment of the employer’s family.
Such definition covers family drivers, domestic servants, laundry women, yayas, gardeners, houseboys and
other similar househelps.

The definition cannot be interpreted to include househelp or laundry women working in staffhouses of a
company, like petitioner who attends to the needs of the company’s guest and other persons availing of said
facilities. By the same token, it cannot be considered to extend to the driver, houseboy, or gardener

2
exclusively working in the company, the staffhouses and its premises. They may not be considered as within
the meaning of a "househelper" or "domestic servant" as above-defined by law.

The criteria is the personal comfort and enjoyment of the family of the employer in the home of said
employer. While it may be true that the nature of the work of a househelper, domestic servant or
laundrywoman in a home or in a company staffhouse may be similar in nature, the difference in their
circumstances is that in the former instance they are actually serving the family while in the latter case,
whether it is a corporation or a single proprietorship engaged in business or industry or any other
agricultural or similar pursuit, service is being rendered in the staffhouses or within the premises of the
business of the employer. In such instance, they are employees of the company or employer in the business
concerned entitled to the privileges of a regular employee.

Petitioner contends that it is only when the househelper or domestic servant is assigned to certain aspects of
the business of the employer that such househelper or domestic servant may be considered as such as
employee. The Court finds no merit in making any such distinction. The mere fact that the househelper or
domestic servant is working within the premises of the business of the employer and in relation to or in
connection with its business, as in its staffhouses for its guest or even for its officers and employees,
warrants the conclusion that such househelper or domestic servant is and should be considered as a regular
employee of the employer and not as a mere family househelper or domestic servant as contemplated in
Rule XIII, Section l(b), Book 3 of the Labor Code, as amended. chan roble s virtual lawl ibra ry

Petitioner denies having illegally dismissed private respondent and maintains that respondent abandoned
her work. This argument notwithstanding, there is enough evidence to show that because of an accident
which took place while private respondent was performing her laundry services, she was not able to work
and was ultimately separated from the service. She is, therefore, entitled to appropriate relief as a regular
employee of petitioner. Inasmuch as private respondent appears not to be interested in returning to her
work for valid reasons, the payment of separation pay to her is in order.

WHEREFORE, the petition is DISMISSED and the appealed decision and resolution of public respondent NLRC
are hereby AFFIRMED. No pronouncement as to costs. SO ORDERED.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.

3
 FIRST DIVISION

[G.R. No. 87210. July 16, 1990.]

FILOMENA BARCENAS, Petitioner, v. THE NATIONAL LABOR RELATIONS COMMISSION (NLRC),

Rev. SIM DEE, the present Head Monk of the Manila Buddah Temple, MANUEL CHUA, in his
capacity as the President and Chairman of the Board of Directors of the Poh Toh Buddhist
Association of the Philippines, Inc., and in his private capacity, Respondents.

L.B. Camins for Petitioner.

Lino M. Patajo and Jose J. Torrefranca for Private Respondents.

DECISION

MEDIALDEA, J.:

This petition for review on certiorari (which We treat as a special civil action for certiorari) seeks to annul the
decision of the National Labor Relations Commission dated November 29, 1988, which reversed the decision
of the Labor Arbiter dated February 10, 1988 in NLRC-NCR Case No. 12-4861-86 (Filomena Barcenas v. Rev.
Sim See, etc., Et Al.) on the ground that no employer-employee relationship exists between the parties.

Petitioner alleged in her position paper the following facts: chanro bles vi rt ualawlib ra ry chan roble s.com:c hanrobles. com.ph

In 1978, Chua Se Su (Su, for short) in his capacity as the Head Monk of the Buddhist Temple of Manila and
Baguio City and as President and Chairman of the Board of Directors of the Poh Toh Buddhist Association of
the Phils. Inc. hired the petitioner who speaks the Chinese language as secretary and interpreter.
Petitioner’s position required her to receive and assist Chinese visitors to the temple, act as tourist guide for
foreign Chinese visitors, attend to the callers of the Head Monk as well as to the food for the temple visitors,
run errands for the Head Monk such as paying the Meralco, PLDT, MWSS bills and act as liaison in some
government offices. Aside from her pay and allowances under the law, she received an amount of P500.00
per month plus free board and lodging in the temple. In December, 1979, Su assumed the responsibility of
paying for the education of petitioner’s nephew. In 1981, Su and petitioner had amorous relations. In May,
1982, of five months before giving birth to the alleged son of Su on October 12, 1982, petitioner was sent
home to Bicol. Upon the death of Su in July, 1983, complainant remained and continued in her job. In 1985,
respondent Manuel Chua (Chua, for short) was elected President and Chairman of the Board of the Poh Toh
Buddhist Association of the Philippines, Inc. and Rev. Sim Dee (Dee, for short) was elected Head Buddhist
Priest. Thereafter, Chua and Dee discontinued payment of her monthly allowance and the additional P500.00
effective 1983. In addition, petitioner and her son were evicted forcibly from their quarters in the temple by
six police officers. She was brought first to the Police precinct in Tondo and then brought to Aloha Hotel
where she was compelled to sign a written undertaking not to return to the Buddhist temple in consideration
of the sum of P10,000.00. Petitioner refused and Chua shouted threats against her and her son. Her
personal belongings including assorted jewelries were never returned by respondent Chua. chanroble s.com.p h : virt ual law li bra ry

Chua and Dee, on the other hand, claimed that petitioner was never an employee of the Poh Toh Temple but
a servant who confined herself to the temple and to the personal needs of the late Chua Se Su and thus, her
position is co-terminous with that of her master.

On February 10, 1988, the Labor Arbiter rendered a decision, the dispositive portion of which states: jgc:chanroble s.com.p h

"WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant Filomena
Barcenas, and the respondent corporation is hereby ordered to pay her the following: jgc:chan roble s.com. ph

"1. P26,575.00 backwages from August 9, 1986 up to date hereof;

"2. P14,650.00 as separation pay;

"3. P18,000.00 as unpaid wages from August, 1983 up to August 8, 986; and

4
"4. P10,000.00 moral damages.

"Complainant’s charge of unfair labor practice is hereby dismissed for lack of merit.

"SO ORDERED." 1

Respondents appealed to the National Labor Relations Commission which, as earlier stated, reversed the
above decision of the Labor Arbiter. Hence, this instant petition.

A painstaking review of the records compels Us to dismiss the petition.

At the outset, however, We agree with the petitioner’s claim that she was a regular employee of the Manila
Buddhist Temple as secretary and interpreter of its Head Monk, Su. As Head Monk, President and Chairman
of the Board of Directors of the Poh Toh Buddhist Association of the Philippines, Su was empowered to hire
the petitioner under Article V of the By-laws of the Association which states: jgc:chanrob les.com. ph

". . . (T)he President or in his absence, the Vice President shall represent the Association in all its dealings
with the public, subject to the Board, shall have the power to enter into any contract or agreement in the
name of the Association, shall manage the active business operation of the Association, shall deal with the
bank or banks . . . ." 2

Respondent NLRC represented by its Legal Officer 3 argues that since petitioner was hired without the
approval of the Board of Directors of the Poh Toh Buddhist Association of the Philippines, Inc., she was not
an employee of respondents. This argument is specious. The required Board approval would appear to relate
to the acts of the President in representing the association "in all its dealings with the public." And, even
granting that prior Board approval is required to confirm the hiring of the petitioner, the same was already
granted, albeit, tacitly. It must be noted that petitioner was hired in 1978 and no whimper of protest was
raised until this present controversy. chan robles v irt ual lawl ibra ry

Moreover, the work that petitioner performed in the temple could not be categorized as mere domestic
work. Thus, We find that petitioner, being proficient in the Chinese language, attended to the visitors,
mostly Chinese, who came to pray or seek advice before Buddha for personal or business problems;
arranged meetings between these visitors and Su and supervised the preparation of the food for the temple
visitors; acted as tourist guide of foreign visitors; acted as liaison with some government offices; and made
the payment for the temple’s Meralco, MWSS and PLDT bills. Indeed, these tasks may not be deemed
activities of a household helper. They were essential and important to the operation and religious functions
of the temple.

In spite of this finding, her status as a regular employee ended upon her return to Bicol in May, 1982 to
await the birth of her lovechild allegedly by Su. The records do not show that petitioner filed any leave from
work or that a leave was granted her. Neither did she return to work after the birth of her child on October
12, 1982, whom she named Robert Chua alias Chua Sim Tiong. The NLRC found that it was only in July,
1983 after Su died that she went back to the Manila Buddhist Temple. Petitioner’s pleadings failed to rebut
this finding. Clearly, her return could not be deemed as a resumption of her old position which she had
already abandoned. Petitioner herself supplied the reason for her return. She stated: jgc:chan roble s.com.p h

". . . (I)t was the death-bed instruction to her by Chua Se Su to stay at the temple and to take care of the
two boys and to see to it that they finish their studies to become monks and when they are monks to
eventually take over the two temples as their inheritance from their father Chua Se Su." 4

Thus, her return to the temple was no longer as an employee but rather as Su’s mistress who is bent on
protecting the proprietary and hereditary rights of her son and nephew. In her pleadings, the petitioner
claims that they were forcefully evicted from the temple, harassed and threatened by respondents and that
the Poh Toh Buddhist Association is a trustee corporation with the children as cestui que trust. These claims
are not proper in this labor case. They should be appropriately threshed out in the complaints already filed
by the petitioner before the civil courts. Due to these claims, We view the respondents’ offer of P10,000.00
as indicative more of their desire to evict the petitioner and her son from the temple rather than an
admission of an employer-employee relations. chanro bles. com.ph : vi rtual law lib rary

Anent the petitioner’s claim for unpaid wages since May, 1982 which she filed only in 1986, We hold that the
same has already prescribed. Under Article 292 of the Labor Code, all money claims arising from employer-
employee relations must be filed within three years from the time the cause of action accrued, otherwise
they shall forever be barred.

Finally, while petitioner contends that she continued to work in the temple after Su died, there is, however,
no proof that she was re-hired by the new Head Monk. In fact, she herself manifested that respondents
made it clear to her in no uncertain terms that her services as well as her presence and that of her son were
no longer needed. 5 However, she persisted and continued to work in the temple without receiving her

5
salary because she expected Chua and Dee to relent and permit the studies of the two boys. 6
Consequently, under these circumstances, no employer-employee relationship could have arisen. chanroble s lawlib ra ry : rednad

ACCORDINGLY, the decision of the National Labor Relations Commission dated November 29, 1988 is hereby
AFFIRMED for the reasons aforestated. No costs.

SO ORDERED.

Narvasa, Cruz, Gancayco and Griño-Aquino, JJ., concur.

Endnotes:

1. Rollo, p. 20.

2. Rollo, p. 90.

3. In the resolution of August 9, 1989, the Office of the Solicitor General was granted leave to be excused
from representing NLRC as he maintains a position different from that taken by it. (Rollo, pp. 76 and 81).

4. Memorandum for the petitioner, Rollo, p. 114.

5. See petition, Rollo, p. 7.

6. Rollo, p. 114.

6
 EN BANC

[G.R. No. L-18938. August 31, 1964.]

NATIONAL WATERWORKS & SEWERAGE AUTHORITY, Petitioner, v. NWSA CONSOLIDATED

UNIONS, ET AL., Respondents.

Govt. Corp. Counsel Simeon M. Gopengco and Asst. Govt. Corp. Counsel Arturo B. Santos
for Petitioner.

Cipriano Cid & Associates and Israel Bocobo for Respondents.

Alfredo M. Montesa for intervenor-respondent.

SYLLABUS

1. PUBLIC CORPORATIONS; NAWASA DOES NOT PERFORM GOVERNMENTAL BUT ONLY PROPRIETARY
FUNCTION. — The National Waterworks and Sewerage Authority is a government corporation performing not
governmental but proprietary functions, and as such comes within the coverage of Commonwealth Act No.
444.

2. ID.; SUPPLY OF WATER AND SEWERAGE SERVICE ARE MINISTRANT FUNCTIONS. — The business of
providing water supply and sewerage service are but ministrant functions of government.

3. LABOR RELATIONS; PUBLIC UTILITY OBLIGED TO PAY DIFFERENTIAL SUM UNDER COLLECTIVE
BARGAINING AGREEMENT. — The NAWASA is a public utility. Although pursuant to Section 4 of
Commonwealth Act 444, it is not obliged to pay an additional sum of 25% to its laborers for work done on
Sundays and legal holidays, yet it must pay said additional compensation by virtue of the contractual
obligation it assumed under the collective bargaining agreement.

4. ID.; NON-MANAGERIAL EMPLOYEES COVERED BY COMMONWEALTH ACT NO. 444. — Employees who
have little freedom of action and whose main function is merely to carry out the company’s orders, plans
and policies, are not managerial employees and hence are covered by Commonwealth Act No. 444.

5. ID.; JURISDICTION OF COURT OF INDUSTRIAL RELATIONS DETERMINED AT TIME DISPUTE AROSE. —

The Court of Industrial Relations has jurisdiction to adjudicate overtime pay where there was employer-
employee relationship existing between the parties at the time the dispute arose.

6. ID.; EMPLOYEES OF OTHER OFFICES ASSIGNED TO NAWASA NOT EMPLOYEES OF LATTER. — The GAO
employees assigned to work in the NAWASA even if they were paid out of the latter’s funds cannot be
regarded as employees of the NAWASA on matters relating to compensation. They are employees of the
national government and are not covered by the Eight- Hour Labor Law. The same may be said of the
Bureau of Public Works assigned to work in the NAWASA.

7. ID.; OFFSETTING OVERTIME WITH UNDERTIME WHEN UNFAIR. — The method used by the NAWASA in
offsetting the overtime with the undertime and at the same time charging said undertime to the accrued
leave is unfair.

8. ID.; DIFFERENTIAL PAY FOR SUNDAYS IS PART OF LEGAL WAGE. — The differential pay for Sundays is a
part of the legal wage. Hence, it was correctly included in computing the weekly wages of those employees
and laborers who worked seven days a week and were regularly receiving the 25% salary differential for a
period of three months prior to the implementation of Republic Act 1880. This is so even if petitioner is a
public utility in view of the contractual obligation it has assumed on the matter.

9. ID.; DIFFERENT COMPUTATION OF DAILY WAGES OF GOVERNMENT AND NON-GOVERNMENT

EMPLOYEES. — In the computation of daily wages of employees paid by the month distinction should be
made between government employees like the GAO employees and those who are not. The computation for
government employees is governed by Section 254 of the Revised Administrative Code while for others the
correct computation is the monthly salary divided by the actual number of working hours in the month or
the regular monthly compensation divided by the number of working days in the month.

7
10. ID.; NIGHT COMPENSATION TO BE PAID FROM TIME SERVICES WERE RENDERED. — The laborers must
be compensated for nighttime work as of the date the same was rendered.

11. ID.; MINIMUM WAGES RATES APPLICABLE ALSO TO EMPLOYEES HIRED SUBSEQUENT TO DATE OF
DECISION. — The rates of minimum pay fixed in a CIR case are applicable not only to those who were
already in the service as of the date of the decision but also to those who were employed subsequent to said
date.

12. ID.; "DISTRESS PAY" APPLICABLE TO ALL EMPLOYEES WHOSE WORK HAVE TO DO WITH THE
SEWERAGE CHAMBERS. — All the laborers, whether assigned to the sewerage division or not who are
actually working inside or outside the sewerage chambers, are entitled to distress pay.

13. ID.; STAGGERING NOT REQUIRED WHERE WORK NOT CONTINUOUS. — Staggering of working hours is
not required where the evidence shows that the work is not continuous.

DECISION

BAUTISTA ANGELO, J.:

Petitioner National Waterworks & Sewerage Authority is a government-owned and controlled corporation
created under Republic Act No. 1383, while respondent NWSA Consolidated Unions are various labor
organizations composed of laborers and employees of the NAWASA. The other respondents are intervenors
Jesus Centeno, Et Al., hereinafter referred to as intervenors.

Acting on a certification of the President of the Philippines, the Court of Industrial Relations conducted a
hearing on December 5, 1957 on the controversy then existing between petitioner and respondent unions
which the latter embodied in a "Manifesto" dated December 5, 1957, namely: implementation of the 40-
Hour Week Law (Republic Act No. 1880); alleged violations of the collective bargaining agreement dated
December 28, 1956 concerning "distress pay" ; minimum wage of P5.25; promotional appointments and
filling of vacancies of newly created positions; additional compensation for night work; wage increases to
some laborers and employees; and strike duration pay. In addition, respondent unions raised the issue of
whether the 25% additional compensation for Sunday work should be included in computing the daily wage
and whether, in determining the daily wage of a monthly salaried employee, the salary should be divided by
30 days.

On December 13, 1957, petitioner and respondent unions, conformably to a suggestion of the Court of
Industrial Relations, submitted a joint stipulation of facts on the issues concerning the 40-Hour Week Law,
"distress pay," minimum wage of P5.25, filling of vacancies, night compensation, and salary adjustments,
reserving the right to present evidence on matters not covered therein. On December 4, 1957, respondent
intervenors filed a petition in intervention on the issue of additional compensation for night work. Later,
however, they amended their petition by including a new demand for overtime pay in favor of Jesus
Centeno, Cesar Cabrera, Feliciano Duiguan, Cecilio Remotigue, and other employees receiving P4,200.00 per
annum or more. chanrobles. com : virtual law l ibra ry

On February 5, 1958, petitioner filed a motion to dismiss the claim for overtime pay alleging that respondent
Court of Industrial Relations was without jurisdiction to pass upon the same because, as mere intervenors,
the latter cannot raise new issues not litigated in the principal case, the same not being the lis mota therein
involved. To this motion the intervenors filed an opposition. Thereafter, respondent court issued on order
allowing the issue to be litigated. Petitioner’s motion to reconsider having been denied, it filed its answer to
the petition for intervention. Finally, on January 16, 1961, respondent court rendered its decision stating
substantially as follows: chanro b1es vi rtua l 1aw lib ra ry

The NAWASA is an agency not performing governmental functions and, therefore, is liable to pay additional
compensation for work on Sundays and legal holidays conformably to Commonwealth Act No. 444, known as
the Eight-Hour Labor Law, even if said days should be within the staggered five-work days authorized by the
President; the intervenors do not fall within the category of "managerial employees" as contemplated in
Republic Act 2377 and so are not exempt from the coverage of the Eight-Hour Labor Law; even those
intervenors attached to the General Auditing Office and the Bureau of Public Works come within the purview
of Commonwealth Act No. 444; the computation followed by NAWASA in computing overtime compensation
is contrary to Commonwealth Act 444; the undertime of a worker should not be set-off against the worker in
determining whether the latter has rendered service in excess of eight hours for that day; in computing the
daily wages of those employed on daily basis, the additional 25% compensation for Sunday work should be
included; the computation used by the NAWASA for monthly salaried employees, to wit, dividing the
monthly basic pay by 30 is erroneous; the minimum wage awarded by respondent court wayback on

8
November 25, 1950 in Case No. 359-V entitled MWD Workers Union v. Metropolitan Water District, applies
even to those who were employed long after the promulgation of the award and even if the workers are
hired only as temporary, emergency and casual workers for a definite period and for a particular project; the
authority granted to NAWASA by the President to stagger the working days of its workers should be limited
exclusively to those specified in the authorization and should not be extended to others who are not therein
specified; and under the collective bargaining agreement entered into between the NAWASA and respondent
unions on December 28, 1956, as well as under Resolution No. 29, series of 1957 of the Grievance
Committee, even those who work outside the sewerage chambers should be paid 25% additional
compensation as "distress pay." cralaw virtua1aw l ibra ry

Its motion for reconsideration having been denied, NAWASA filed the present petition for review raising
merely questions of law. Succinctly, these questions are: chan rob1es v irt ual 1aw l ibra ry

1. Whether NAWASA is performing governmental functions and, therefore, essentially a service agency of
the government;

2. Whether NAWASA is a public utility and therefore, exempted from paying additional compensation for
work on Sundays and legal holidays;

3. Whether the intervenors are "managerial employees" within the meaning of Republic Act 2377 and,
therefore, not entitled to the benefits of Commonwealth Act No. 444, as amended;

4. Whether respondent Court of Industrial Relations has jurisdiction to adjudicate overtime pay considering
that this issue was not among the demands of respondent union in the principal case but was merely
dragged into the case by the intervenors;

5. Whether those attached to the General Auditing Office and the Bureau of Public Works come within the
purview of Commonwealth Act No. 444, as amended;

6. In determining whether one has worked in excess of eight hours, whether the undertime for that day
should be set-off;

7. In computing the daily wage, whether the additional compensation for Sunday work should be included;

8. What is the correct method to determine the equivalent daily wage of a monthly-salaried employee,
especially in a firm which is a public utility?;

9. Considering that the payment of night compensation is not by virtue of any statutory provision but
emanates only from an award of respondent Court of Industrial Relations, whether the same can be made
retroactive and cover a period prior to the promulgation of the award;

10. Whether the minimum wage fixed and awarded by respondent Court of Industrial Relations in another
case (MWD Workers Union v. MWD, CIR Case No. 359-V) applies to those employed long after the
promulgation thereof, whether hired as temporary, emergency and casual workers for a definite period and
for a specific project;

11. How should the collective bargaining agreement of December 28, 1956 and Resolution No. 29, series of
1957 of the Grievance Committee be interpreted and construed insofar as the stipulations therein contained
relative to "distress pay" is concerned?; and

12. Whether, under the first indorsement of the President of the Philippines dated August 12, 1957, which
authorizes herein petitioner to stagger the working days of its employees and laborers, those whose services
are indispensably continuous throughout the year may be staggered in the same manner as the pump,
valve, filter and chlorine operators, guards, watchman, medical services, and those attached to the
recreational facilities.

DISCUSSION OF THE ISSUES

1. Is NAWASA an agency that performs governmental functions and, therefore, essentially a service agency
of the government? Petitioner sustains the affirmative because, under Republic Act No. 1383, it is a public
corporation, and as such it exists as an agency independent of the Department of Public Works of our
government. It also contends that under the same Act the Public Service Commission does not have control,
supervision or jurisdiction over it in the fixing of rates concerning the operation of the service. It can also
incur indebtedness or issue bonds that are exempt from taxation which circumstance implies that it is
essentially a government-function corporation because it enjoys that attribute of sovereignty. Petitioner
likewise invokes the opinion of the Secretary of Justice which holds that the NAWASA being essentially a
service agency of the government can be classified as a corporation performing governmental function.

With this contention, we disagree. While under Republic Act No. 1383 the NAWASA is considered as a public

9
corporation it does not show that it was so created for the government of a portion of the State. It should be
borne in mind that there are two kinds of public corporations, namely, municipal and non-municipal. A
municipal corporation in its strict sense is the body politic constituted by the inhabitants of a city or town for
the purpose of local government thereof. It is the body politic established by law particularly as an agency of
the State to assist in the civil government of the country chiefly to regulate the local and internal affairs of
the city or town that is incorporated (62 C.J.S., p. 61). Non-municipal corporations, on the other hand, are
public corporations created as agencies of the State for limited purposes to take charge merely of some
public or state work other than community government (Elliot, Municipal Corporations, 3rd ed., p. 7;
McQuillin, Mun. Corp. 3rd ed., Vol. 1, p. 476).

The National Waterworks & Sewerage Authority was not created for purposes of local government. It is not a
municipal corporation. It was created "for the purpose of consolidating and centralizing all waterworks,
sewerage and drainage systems in the Philippines under one control and direction and general supervision.
"The NAWASA, therefore, though a public corporation, is not a municipal corporation, because it is not an
agency of the State to regulate or administer the local affairs of the town, city, or district which is
incorporated.

Moreover, the NAWASA, by its charter, has personality and power separate and distinct from the
government. It is an independent agency of the government although it is placed, for administrative
purposes, under the Department of Public Works and Communications. It has continuous succession under
its corporate name and may sue and be sued in court. It has corporate powers to be exercised by its board
of directors; it has its own assets and liabilities; and it may charge rates for its services.

In Bacani v. National Coconut Corporation, 53 O.G., 2798, we stated: "To recapitulate, we may mention that
the term ‘Government of the Republic of the Philippines’ . . . refers only to that government entity through
which the functions of the government are exercised as an attribute of sovereignty, and in this are included
those arms through which political authority is made effective whether they be provincial, municipal or other
form of local government. These are what we call municipal corporations. They do not include government
entities which are given a corporate personality separate and distinct from the government and which are
governed by the Corporation Law. Their powers, duties and liabilities have to be determined in the light of
that law and of their corporate charter."cralaw virtua 1aw lib rary

The same conclusion may be reached by considering the powers, functions and activities of the NAWASA
which are enumerated in Section 2, Republic Act No. 1383, among others, as follows: jgc:chan roble s.com.p h

"(e) To construct, maintain and operate mains, pipes, water reservoirs, machinery, and other waterworks
for the purpose of supplying water to the inhabitants of its zone, both domestic and other purposes; to
purify the source of supply, regulate the control and use, and prevent the waste of water; and to fix water
rates and provide for the collection of rents therefor;

"(f) To construct, maintain and operate such system of sanitary sewers as may be necessary for the proper
sanitation of the cities and towns comprising the Authority and to charge and collect such sums for
construction and rates for this service as may be determined by the Board to be equitable and just;

"(g) To acquire, purchase, hold, transfer, sell, lease, rent, mortgage, encumber, and otherwise dispose of
real and personal property, including rights and franchises, within the Philippines, as authorized by the
purposes for which the Authority was created and reasonably and necessarily required for the transaction of
the lawful business of the same, unless otherwise provided in this Act;"

The business of providing water supply and sewerage service, as this Court held, "may for all practical
purposes be likened to an industry engaged in by coal companies, gas companies, power plants, ice plants,
and the like" (Metropolitan Water District v. Court of Industrial Relations, Et Al., L-4488, August 27, 1952).
These are but mere ministrant functions of government which are aimed at advancing the general interest of
society. As such they are optional (Bacani v. National Coconut Corporation, supra). And it has been held that
"although the state may regulate the service and rates of water plants owned and operated by
municipalities, such property is not employed for governmental purposes and in the ownership operation
thereof the municipality acts in its proprietary capacity, free from legislative interference" (1 McQuillin, p.
683). In Mendoza v. De Leon, 33 Phil., 508, 509, this Court also held: jgc:cha nrob les.com. ph

"Municipalities of the Philippine Islands organized under the Municipal Code have both governmental and
corporate or business functions. Of the first class are the adoption of regulations against fire and disease,
preservation of the public peace, maintenance of municipal prisons, establishment of primary schools and
post-offices, etc. Of the latter class are the establishment of municipal waterworks for the use of the
inhabitants, the construction and maintenance of municipal slaughterhouses, markets, stables, bathing
establishments, wharves, ferries, and fisheries . . ." cralaw virtua1aw l ibra ry

On the strength of the foregoing considerations, our conclusion is that the NAWASA is not an agency
performing governmental functions. Rather, it performs proprietary functions, and as such comes within the
coverage of Commonwealth Act No. 444.

10
2. We agree with petitioner that the NAWASA is a public utility because its primary function is to construct,
maintain and operate water reservoirs and waterworks for the purpose of supplying water to the inhabitants,
as well as to consolidate and centralize all water supplies and drainage systems in the Philippines. We
likewise agree with petitioner that a public utility is exempt from paying additional compensation for work on
Sundays and legal holidays conformably to Section 4 of Commonwealth Act No. 444 which provides that the
prohibition regarding employment on Sundays and holidays unless an additional sum of 25% of the
employee’s regular remuneration is paid shall not apply to public utilities such as those supplying gas,
electricity, power, water or providing means of transportation or communication. In other words, the
employees and laborers of NAWASA can be made to work on Sundays and legal holidays without being
required to pay them an additional compensation of 25%.

It is to be noted, however, that in the case at bar it has been stipulated that prior to the enactment of
Republic Act No. 1880, providing for the implementation of the 40-Hour Week Law, the Metropolitan Water
District had been paying 25% additional compensation for work on Sundays and legal holidays to its
employees and laborers by virtue of Resolution No. 47, series of 1948, of its Board of Directors, which
practice was continued by the NAWASA when the latter took over the service. And in the collective
bargaining agreement entered into between the NAWASA and respondent unions it was agreed that all
existing benefits enjoyed by the employees and laborers prior to its effectivity shall remain in force and shall
form part of the agreement, among which certainly is the 25% additional compensation for work on Sundays
and legal holidays therefore enjoyed by said laborers and employees. It may, therefore, be said that while
under Commonwealth Act No. 444 a public utility is not required to pay additional compensation to its
employees and workers for work done on Sundays and legal holidays, there is, however, no prohibition for it
to pay such additional compensation if it voluntarily agrees to do so. The NAWASA committed itself to pay
this additional compensation. It must pay not because of compulsion of law but because of contractual
obligation.

3. This issue raises the question whether the intervenors are "managerial employees" within the meaning of
Republic Act 2377 and as such are not entitled to the benefits of Commonwealth Act No. 444, as amended.
Section 2 of Republic Act 2377 provides. cha nrob les vi rtua l lawlib rary

"Sec. 2. This Act shall apply to all persons employed in any industry or occupation, whether public or
private, with the exception of farm laborers, laborers who prefer to be paid on piece work basis, managerial
employees outside sales personnel, domestic servants — persons in the personal service of another and
members of the family of the employer working for him.

"The term ‘managerial employee’ in this Act shall mean either (a) any person whose primary duty consists of
the management of the establishment in which he is employed or of a customarily recognized department or
subdivision thereof, or (b) any officer or member of the managerial staff." cralaw virtua 1aw lib rary

One of the distinguishing characteristics by which a managerial employee may be known as expressed in the
explanatory note of Republic Act No. 2377 is that he is not subject to the rigid observance of regular office
hours. The true worth of his service does not depend so much on the time he spends in office but more on
the results he accomplishes. In fact, he is free to go out of office anytime.

On the other hand, in the Fair Labor Standards Act of the United States, which was taken into account by
the sponsors of the present Act in defining the degree of work of a managerial employee, we find interesting
the following dissertation of the nature of work of a managerial employee.

"Decisions have construed and applied a regulation in substance providing that the term ‘professional’
employee shall mean any employee . . . who is engaged in work predominantly intellectual and varied in
character, and requires the consistent exercise of discretion and judgment in its performance, and is of such
a character that the output produced or the result accomplished cannot be standardized in relation to a
given period of time, and whose hours of work of the same nature as that performed by nonexempt
employees, except where such work is necessarily incident to work of a professional nature; and which
requires, first, knowledge of an advanced type in a filed of science or learning customarily acquired by a
prolonged course or specialized intellectual acquired by a prolonged course or specialized intellectual
instruction and study, or, second, predominantly original and creative in character in a recognized filed of
artistic endeavor. Stranger v. Vocafilm Corp., C.C.A. N.Y., 151 F. 2d 894, 162 A.L.R. 216; Hofer v. Federal
Cartridge Corp., D.C. Minn 71 F. Supp. 243; Aulen v. Triumph Explosive, D.C. Md., 58 F. Supp. 4." (56
C.J.S., p. 666).

"Under the provisions of the Fair Labor Standards Act 29 U.S.C.A., Section 23 (a) (1), executive employees
are exempted from the statutory requirements as to minimum wages overtime pay . . .

"Thus the exemption attaches only where it appears that the employee’s primary duty consists of the
management of the establishment or of a customarily recognized department or subdivision thereof, that he
customarily and regularly directs the work of other employees therein, that he has the authority to hire or
discharge other employees or that his suggestions and recommendations as to the hiring or discharging and

11
as to the advancement and promotion or any other change of status of other employees are given particular
weight, that he customarily and regularly exercises discretionary powers, . . ." (56 C.J.S., pp. 666-668.)

"The term ‘administrative employee’ ordinarily applies only to an employee who is compensated for his
services at a salary or fee of not less than a prescribed sum per month, and who regularly and directly
assists an employee employed in a bona fide executive or administrative capacity, where such assistance is
nonmanual in nature and requires the exercise of discretion and independent judgment; or who performs
under only general supervision, responsible nonmanual office or filed work, directly related to management
policies or general business operations, along specialized or technical lines requiring special training
experience, or knowledge, and the exercise of discretion and independent judgment; . . ." (56 C.J.S., p.
671.)

"The reason underlying each exemption is in reality apparent. Executive, administrative and professional
workers are not usually employed at hourly wages nor is it feasible in the case of such employees to provide
a fixed hourly rate of pay nor maximum hours of labor, Helena Glendale Ferry Co. v. Walling, C.C.A. Ark.
132 F. 2d 616, 619," (56 C.J.S., p. 664.)

The philosophy behind the exemption of managerial employees from the 8-Hour Labor Law is that such
workers are not usually employed for every hour of work but their compensation is determined considering
their special training, experience or knowledge which requires the exercise of discretion and independent
judgment, or perform work related to management policies or general business operations along specialized
or technical lines. For these workers it is not feasible to provide a fixed hourly rate of pay or maximum hours
of labor.

The intervenors herein are holding position of responsibility. One of them is the Secretary of the Board of
Directors. Another is the private secretary of the general manager. Another is a public relations officer, and
many chiefs of divisions or sections and others are supervisors and overseers. Respondent court, however,
after examining carefully their respective functions, duties and responsibilities found that their primary
duties do not bear any direct relation with the management of the NAWASA, nor do they participate in the
formulation of its policies nor in the hiring and firing of its employees. The chiefs of divisions and sections
are given ready policies to execute and standard practices to observe for their execution. Hence, it
concludes, they have little freedom of action, as their main function is merely to carry out the company’s
orders, plans and policies.

To the foregoing comment, we agree. As a matter of fact, they are required to observe working hours and
record their time work and are not free to come and go to their offices, nor move about at their own
discretion. They do not, therefore, come within the category of "managerial employees" within the meaning
of the law.

4. Petitioner’s claim is that the issue of overtime compensation not having been raised in the original case
but merely dragged into it by intervenors, respondent court cannot take cognizance thereof under Section 1,
Rule 13, of the Rules of Court.

Intervenors filed a petition for intervention alleging that being employees of petitioner who have worked at
night since 1954 without having been fully compensated they desire to intervene insofar as the payment of
their night work is concerned. Petitioner opposed the petition on the ground that this matter was not in the
original case since it was not included in the dispute certified by the President of the Philippines to the Court
of Industrial Relations. The opposition was overruled. This is now assigned as error.

There is no dispute that the intervenors were in the employ of petitioner when they intervened and that
their claim refers to the 8- Hour Labor Law and since this Court has held time and again that disputes that
call for the application of the 8-Hour Labor Law are within the jurisdiction of the Court of Industrial Relations
if they arise while the employer-employee relationship still exists, it is clear that the matter subject of
intervention comes within the jurisdiction of respondent court. 1 The fact that the question of overtime
payment is not included in the principal case in the sense that it is not one of the items of dispute certified
to by the President is of no moment, for it comes within the sound discretion of the Court of Industrial
Relations. Moreover, in labor disputes technicalities of procedure should as much as possible be avoided not
only in the interest of labor but to avoid multiplicity of action. This claim has no merit.

5. It is claimed that some intervenors are occupying positions in the General Auditing Office and in the
Bureau of Public Works for they are appointed either by the Auditor General or by the Secretary of Public
Works and, consequently, they are not officers of the NAWASA but of the insular government, and as such
are not covered by the Eight-Hour Labor Law.

The status of the GAO employees assigned to, and working in, government-controlled corporations has
already been decided by this Court in National Marketing Corporation, Et. Al. v. Court of Industrial Relations,
Et Al., L-17804, January 31, 1963. In said case, this Court said: jgc:chan roble s.com.p h

"We agree with appellants that members of the auditing force can not be regarded as employees of the

12
PRISCO in matters relating to their compensation. They are appointed and supervised by the Auditor
General, have an independent tenure, and work subject to his orders and instructions, and not to those of
the management of appellants. Above all, the nature of their functions and duties, for the purpose of fiscal
control of appellant’s operations, imperatively demands, as a matter of policy, that their positions be
completely independent from interference or inducement on the part of the supervised management, in
order to assure a maximum of impartiality require that the employees in question be utterly free from
apprehension as to their tenure and from expectancy of benefits resulting from any action of the
management, since in either case there would be an influence at work that could possibly lead, if not to
positive malfeasance, to laxity and indifference that would gradually erode and endanger the critical
supervision entrusted to these auditing employees.

"The inclusion of their items in the PRISCO budget should be viewed as no more than a designation by the
national government of the fund or source from which their emoluments are to be drawn, and does not
signify that they are thereby made PRISCO employees." cralaw virtua 1aw lib rary

The GAO employees assigned to the NAWASA are exactly in the same position regarding their status,
compensation and right to overtime pay as the rest of the GAO employees assigned to the defunct PRISCO,
and following our ruling in the PRISCO case, we hold that the GAO employees herein are not covered by the
8-Hour Labor Law, but by other pertinent laws on the matter.

The same thing may be said with regard to the employees of the Bureau of Public Works assigned to, and
working in, the NAWASA. Their position is the same as that of the GAO employees. Therefore, they are not
also covered by the 8-Hour Labor Law.

The respondent court, therefore, erred in considering them as employees of the NAWASA for the mere
reason that they are paid out of its fund and are subject to its administration and supervision.

6. A worker is entitled to overtime pay only for work in actual service beyond eight hours. If a worker should
incur in undertime during his regular daily work, should said undertime be deducted in computing his
overtime work? Petitioner sustains the affirmative, while respondent unions the negative, and respondent
court decided the dispute in favor of the latter. hence this error.

There is merit in the decision of respondent court that the method used by petitioner in offsetting the
overtime with the undertime and at the same time charging said undertime to the accrued leave of the
employee is unfair, for under such method the employee is made to pay twice for his undertime because his
leave is reduced to that extent while he was made to pay for it with work beyond the regular working hours.
The proper method should be to deduct the undertime from the accrued leave but pay the employee the
overtime to which he is entitled. This method also obviates the irregular schedule that would result if the
overtime should be set off against the undertime for that would place the schedule for working hours
dependent on the employee.

7. and 8. How is a daily wage of a weekly employee computed in the light of Republic Act 1880?

According to petitioner, the daily wage should be computed exclusively on the basic wage without including
the automatic increase of 25% corresponding to the Sunday differential. To include said Sunday differential
would be to increase the basic pay which is not contemplated by said Act. Respondent court disagrees with
this manner of computation. It holds that Republic Act 1880 requires that the basic weekly wage and the
basic monthly salary should not be diminished notwithstanding the reduction in the number of working days
a week. If the automatic increase corresponding to the salary differential should not be included there would
be a diminution of the weekly wage of the laborer concerned. Of course, this should only benefit those who
have been working seven days a week and had been regularly receiving 25% additional compensation for
Sunday work before the effectivity of the Act.

It is evident that Republic Act 1880 does not intend to raise the wages of the employees over what they are
actually receiving. Rather, its purpose is to limit the working days in a week to five days, or to 40 hours
without however permitting any reduction in the weekly or daily wage of the compensation which was
previously received. The question then to be determined is: What is meant by weekly or daily wage? Does
the regular wage include differential payments for work on Sundays or at nights, or is it the total amount
received by the laborer for whatever nature or concept?

It has been held that for purposes of computing overtime compensation a regular wage includes all
payments which the parties have agreed shall be received during the work week, including piece- work
wages, differential payments for working at undesirable times, such as at night or on Sundays and holidays,
and the cost of board and lodging customarily furnished the employee (Walling v. Yangerman-Reynolds
Hardwook Co., 325 U. S. 419, Walling v. Harischfeger Corp., 325 U.S. 427). The "regular rate" of pay also
ordinarily includes incentives bonus or profit-sharing payments made in addition to the normal basic pay (56
C.J.S., pp. 704-705), and it was also held that the higher rate for night, Sunday and holiday work is just as
much a regular rate as the lower rate for daytime work. The higher rate is merely an inducement to accept
employment at times which are not as desirable from a workman’s standpoint (International L. Ass’n. v.

13
National Terminals Corp. C. C. Wisc. 50 F. Supp. 26, affirmed C.C.A. Carbunao v. National Terminals Corp.
139 F. 2d 853).

Respondent court, therefore, correctly included such differential pay in computing the weekly wages of those
employees and laborers who worked seven days a week and were continuously receiving 25% Sunday
differential for a period of three months immediately preceding the implementation of Republic Act 1880.

The next issue refers to the method of computing the daily rate of a monthly salaried employee. Petitioner in
computing this daily rate divides the monthly basic pay of the employee by 30 in accordance with Section
254 of the Revised Administrative Code which in part provides that "In making payment for part of a month,
the amount to be paid for each day shall be determined by dividing the monthly pay into as many parts as
there are days in the particular month." The respondent court disagrees with this method and holds that the
way to determine the daily rate of a monthly employee is to divide the monthly salary by the actual number
of working hours in the month. Thus, according to respondent court, Section 8(g) of Republic Act No. 1161,
as amended by Republic Act 1792, provides that the daily rate of compensation is the total regular
compensation for the customary number of hours worked each day. In other words, according to respondent
court, the correct computation shall be (a) the monthly salary divided by the actual number of working
hours in a month or (b) the regular monthly compensation divided by the number of working days in a
month.

This finding of respondent court should be modified insofar as the employees of the General Auditing Office
and of the Bureau of Public Works assigned to work in the NAWASA are concerned for, as already stated,
they are government employees and should be governed by Section 254 of the Revised Administrative
Code. This section provides that in making payment for part of a month, the amount to be paid for each day
shall be determined by dividing the monthly pay into as many parts as there are days in the particular
month. With this modification we find correct the finding of the respondent court on this issue.

9. The Court of Industrial Relations awarded an additional 25% night compensation to some workers with
retroactive effect, that is, effective even before the presentation of the claim, provided that they had been
given authorization by the general manager to perform night work. It is petitioner’s theory that since there
is no statute requiring payment of additional compensation for night work but it can only be granted either
by the voluntary act of the employer or by an award of the industrial court under its compulsory arbitration
power, such grant should only be prospective in operation, and not retroactive, as authorized by the court.

It is of common occurrence that a working man who has already rendered night time service takes him a
long time before he can muster enough courage to confront his employer with the demand for payment for
it for fear of possible reprisal. It happens that many months or years are allowed to pass by before he could
be made to present such claim against his employer, and so it is neither fair nor just that he be deprived of
what is due him simply because of his silence for fear of losing the means of his livelihood. Hence, it is not
erroneous for the Court of Industrial Relations to make the payment of such night compensation retroactive
to the date when the work was actually performed.

The power of the Court of Industrial Relations to order the payment of compensation for overtime service
prior to the date of the filing of the claim has been recognized by this Court (Luzon Stevedoring Co., Inc. v.
Luzon Marine Department Union, Et Al., L-9265, April 29, 1957). The same reasons given therein for the
retroactivity of overtime compensation may also be given for the retroactivity of payment of night
compensation, as such reasoning runs along the line already abovestated.

10. The Court of Industrial Relations in its resolution dated November 25, 1950 issued in Case No. 359-V
entitled MWD Workers Union, Et. Al. v. Metropolitan Water District, fixed the following rates of minimum
daily wage: P5.25 for those working in Manila and suburbs; P4.50 for those working in Quezon City; and
P4.00, for those working in Ipo, Montalban and Balara. It appears that in spite of the notice to terminate
said award filed with the court on December 29, 1953, the Metropolitan Water District continued paying the
above wages and the NAWASA which succeeded it adopted the same rates for sometime. In September,
1955, the NAWASA hired the claimants as temporary workers and it is now contended that said rates cannot
apply to these workers.

The Court of Industrial Relations, however, held that the discontinuance of this minimum wage rates was
improper and ordered the payment of the difference to said workers from the date the payment of said rates
was discontinued, advancing, among others, the following reasons: that the resolution of November 25,
1950 is applicable not only to those laborers already in the service but also to those who may be employed
thereafter; the notice of termination of said award given on December 29, 1953 is not legally effective
because the same was given without hearing and the employer continued paying the minimum wages even
after the notice of termination; and there is no showing that the minimum wages violate Civil Service Law or
the principles underlying the WAPCO.

We find no valid reason to disagree with the foregoing finding of the Court of Industrial Relations considering
that the award continued to be valid and effective in spite of the notice of termination given by the
employer. No good reason is seen why such award should not apply to those who may be employed after its

14
approval by the court there being nothing therein that may prevent its extension to them. Moreover, the
industrial court can at any time during the effectiveness of an award alter and modify in whole or in part
said award or reopen any question involved therein under Section 17 of Commonwealth Act No. 103, and
such is what said court has done when it made the award extensive to the new employees, more so when
they are similarly situated. To do otherwise would be to foster discrimination.

11. This issue has to do with the meaning of "distress pay." Paragraph 3, Article VIII, of the collective
bargaining agreement entered into between the employer and respondent unions, provides: jgc: chan robles .com.p h

"Because of the peculiar nature of the function of those employees and laborers of the Sewerage Division
who actually work in the sewerage chambers, causing ‘Unusual distress’ to them, they shall receive extra
compensation equivalent to twenty-five percent (25%) of their basic wage." cralaw virt ua1aw lib ra ry

Pursuant to said agreement, a grievance committee was executed composed of representatives of

management and labor which adopted the following resolution: jgc:cha nrob les.c om.ph

"Resolution No. 9

Series of 1957

BE IT RESOLVED, That the employees and laborers of the Sewerage Division who actually work in the
sewerage chambers causing unusual distress to them, be paid extra compensation equivalent to 25% of
their basic wage, as embodied in Article VIII, Paragraph 3 of the Collective Bargaining Agreement;
PROVIDED, however, that any employee who may be required to work actually in the sewerage chambers
shall also be paid 25% extra compensation and, PROVIDED FURTHER, that the term ‘sewerage chamber’
shall include pits, trenches, and other excavations that are necessary to tap the sewer line, and PROVIDED
FINALLY that this will not prejudice any laborer or employee who may be included in one way or another in
the term ‘unusual distress’ within the purview of Paragraph 3 of Article VIII, of the Collective Bargaining
Agreement." cralaw virt ua1aw lib ra ry

And in a conference held between management and labor on November 25, 1957, the following was agreed
upon "Distress-Management agreed to pay effective October 1, 1956 25% additional compensation for those
who actually work in and outside sewerage chamber in accordance with Resolution No. 9 of the Grievance
Committee." cralaw virtua 1aw lib rary

The question that arose in connection with this distress pay is with regard to the meaning of the phrase
"who actually work in and outside sewerage chambers." Petitioner contends that the distress pay should be
given only to those who actually work inside the sewerage chambers while the union maintains that such
pay should be given to all those whose work have to do with the sewerage chambers, whether inside or
outside. The Court of Industrial Relations sustained the latter view holding that the distress pay should be
given to those who actually work in and outside the sewerage chambers effective October 1, 1956. This view
is now disputed by petitioner. chanrobles vi rt ual lawli bra ry

The solution of the present issue hinges upon the interpretation of paragraph 3, Article VIII of the collective
bargaining agreement, copied above, as explained by Resolution No. 9, and the agreement of November 25,
1975, also copied above, which stipulation has to be interpreted as a whole pursuant to Article 1374 of the
Civil Code. As thus interpreted, we find that those who are entitled to the distress pay are those employees
and laborers who work in the sewerage chambers whether they belong to the sewerage division or not, and
by sewerage chambers should be understood to mean as the surroundings where the work is actually done,
not necessarily "inside the sewerage chambers." This is clearly inferred from the conference held in the
Department of Labor on November 25, 1957 where it was agreed that the compensation should be paid to
those who work "in and outside" the sewerage chambers in accordance with the terms of Resolution No. 9 of
the Grievance Committee. It should be noted that, according to said resolution, sewerage chambers include
"pits, trenches, and other excavations that are necessary to tap the sewer lines." And the reason given for
this extra compensation is the "unusual distress" that is caused to the laborers by working in the sewerage
chambers in the form and extent abovementioned.

It is clear then that all the laborers whether of the sewerage division or not assigned to work in and outside
the sewerage chambers and suffering unusual distress because of the nature of their work are entitled to the
extra compensation. And this conclusion is further bolstered by the findings of the industrial court regarding
the main activities of the sewerage division.

Thus, the Court of Industrial Relations found that the sewerage division has three main activities, to wit: (a)
cooperation of the sewerage pumping stations; (b) cleaning and maintenance of sewer mains; and (c)
installation and repairs of house sewer connections.

The pump operators and the sewer attendants in the seven pumping stations in Manila, according to the
industrial court, suffer unusual distress. The pump operators have to go to the wet pit to see how the
cleaning of the screen protecting the pump is being performed, and go also to the dry pit abutting the wet

15
pit to make repairs in the breakdown of the pumps. Although the operators used to stay near the motor
which is but a few meters from the pump, they unavoidably smell the foul odor emitting from the pit. The
sewerage attendants go down and work in the wet pit containing sewerage materials in order to clean the
screen.

A group assigned to the cleaning and maintenance of the sewer mains which are located in the middle of the
streets of Manila is usually composed of a capataz and four sewerage attendants. These attendants are
rotated in going inside the manholes, operation of the window glass, bailing out from the main to the
manhole and in supplying the water service as necessity demands. These attendants come into contact with
dirt, stink and smell, darkness and heat inside and near the sewage pipes. The capataz goes from one
manhole to another seeing to it that the work is properly performed and as such also suffers unusual
distress although to a lesser degree.

The group assigned to the third kind of activity is also usually composed of a capataz and four attendants.
Their work is to connect sewer pipes from houses to the sewer mains and to do this they excavate the
trench across the street from the proper line to the sewer main and then they install the pipe after tapping
the sewer main. In the tapping, the sewer pipe is opened and so the sewerage gets out and fills up the
trench and the men have to wade in and work with the sewerage water. The capataz has to go near the
filthy excavations or trenches full of filthy sewerage matter to aid the attendants in making pipe
connections, especially when these are complicated.

It cannot therefore be gainsaid that all these laborers suffer unusual distress. The wet pits, trenches,
manholes, which are full of sewage matters, are filthy sources of germs and different diseases. They emit
foul and filthy odor dangerous to health. Those working in such places are exposed directly to the distress of
contamination.

Premises considered, the decision of the Court of Industrial Relations in this respect should be modified in
the sense that all employees and laborers, whether or not they belong to the sewerage division, who
actually work in and outside the sewerage chambers, should be paid the distress pay or the extra
compensation equivalent to 25% of their basic wage effective October 1, 1956.

12. On August 6, 1957, the NAWASA requested the President of the Philippines for exemption from
Executive Order No. 251 which prescribes the office hours to be observed in government and government-
owned or controlled corporations in order that it could stagger the working hours of its employees and
laborers. The request is based on the fact that there are essential and indispensable phases in the operation
of the NAWASA that are required to be attended to continuously for twenty-four hours for the entire seven
days of the week without interruption some of which being the work performed by pump operators, valve
operators, filter operators, chlorine operators, watchmen and guards, and medical personnel. This request
was granted and, accordingly, the NAWASA staggered the work schedule of the employees and laborers
performing the activities abovementioned. Respondent unions protested against this staggering schedule of
work and this protest having been unheeded, they brought the matter to the Court of Industrial Relations.

In resolving this issue, the industrial court justified the staggering of the work days of those holding
positions as pump operators, valve operators, filter operators, chlorine operators, watchmen and guards,
and those in the medical service for the reason that the same was made pursuant to the authority granted
by the President who in the valid exercise of the powers conferred upon him by Republic Act No. 1880 could
prescribe the working days of employees and laborers in government-owned and controlled corporations
depending upon the exigencies of the service. The court, however, stated that the staggering should not
apply to the personnel in the construction, sewerage, maintenance, machineries and shops because they
work below 365 days a year and their services are not continuous to require staggering. From this portion of
the decision, the petitioner appeals.

Considering that respondent court found that the workers in question work less than 365 days a year and
their service are not continuous to require staggering, we see no reason to disturb this finding. This is
contrary to the very essence of the request that the staggering should be made only with regard to those
phases of the operation of the NAWASA that have to be attended to continuously for twenty-four hours
without interruption which certainly cannot apply to the workers mentioned in the last part of the decision of
the respondent court on the matter.

RECAPITULATION

In resumé, this Court holds: chanrob1e s virtual 1aw lib rary

(1) The NAWASA, though a public corporation, does not perform governmental functions. It performs
proprietary functions, and hence, it is covered by Commonwealth Act No. 444;

(2) The NAWASA is a public utility. Although pursuant to Section 4 of Commonwealth Act 444 it is not
obliged to pay an additional sum of 25% to its laborers for work done on Sundays and legal holidays, yet it
must pay said additional compensation by virtue of the contractual obligation it assumed under the

16
collective bargaining agreement;

(3) The intervenors are not "managerial employees" as defined in Republic Act No. 2377, hence they are
covered by Commonwealth Act No. 444, as amended;

(4) The Court of Industrial Relations has jurisdiction to adjudicate overtime pay in the case at bar there
being an employer- employee relationship existing between intervenors and petitioner;

(5) The GAO employees assigned to work in the NAWASA cannot be regarded as employees of the NAWASA
on matters relating to compensation. They are employees of the national government and are not covered
by the Eight-Hour Labor Law. The same may be said of the employees of the Bureau of Public Works
assigned to work in the NAWASA;

(6) The method used by the NAWASA in offsetting the overtime with the undertime and at the same time
charging said undertime to the accrued leave is unfair;

(7) The differential pay of Sundays is a part of the legal wage. Hence, it was correctly included in computing
the weekly wages of those employees and laborers who worked seven days a week and were regularly
receiving the 25% salary differential for a period of three months prior to the implementation of Republic Act
1880. This is so even if petitioner is a public utility in view of the contractual obligation it has assumed on
the matter;

(8) In the computation of the daily wages of employees paid by the month distinction should be made
between government employees like the GAO employees and those who are not. The computation for
government employees is governed by Section 254 of the Revised Administrative Code while for others the
correct computation is the monthly salary divided by the actual number of working hours in the month or
the regular monthly compensation divided by the number of working days in the month;

(9) The Court of Industrial Relations did not err in ordering the payment of night compensation from the
time such services were rendered. The laborer must be compensated for nighttime work as of the date the
same was rendered;

(10) The rates of minimum pay fixed in a CIR Case No. 359-V are applicable not only to those who were
already in the service as of the date of the decision but also to those who were employed subsequent to said
date;

(11) All the laborers, whether assigned to the sewerage division or not who are actually working inside or
outside the sewerage chambers, are entitled to distress pay; and

(12) There is no valid reason to disturb the finding of the Court of Industrial Relations that the work of the
personnel in the construction, sewerage, maintenance, machineries and shops of petitioner is not continuous
as to require staggering.

CONCLUSION

With the modification indicated in the above resumé as elaborated in this decision, we hereby affirm the
decision of respondent court in all other respects, without pronouncement as to costs.

Bengzon, C.J., Concepcion, Reyes, J.B.

17
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

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

ELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES ABAD, BENJAMIN

BRIZUELA, NORLITO LADIA, MARCELO AGUILAN, DAVID ORO, NELIA BRIZUELA, FLORA
ESCOBIDO, JUSTILITA CABANIG, and DOMINGO SAGUIT, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) and BROAD STREET
TAILORING and/or RODOLFO ZAPANTA, respondents.

Balguma, Macasaet & Associates for petitioners.

Teresita Gandionco Oledan for private respondents.

NOCON, J.:

A basic factor underlying the exercise of rights and the filing of claims for benefits under the Labor
Code and other presidential issuances or labor legislations is the status and nature of one's
employment. Whether an employer-employee relationship exist and whether such employment is
managerial in character or that of a rank and file employee are primordial considerations before
extending labor benefits. Thus, petitioners in this case seek a definitive ruling on the status and
nature of their employment with Broad Street Tailoring and pray for the nullification of the resolution
dated May 12, 1986 of the National Labor Relations Commissions in NLRC Case No. RB-IV- 21558-
78-T affirming the decision of Labor Arbiter Ernilo V. Peñalosa dated May 28, 1979, which held
eleven of them as independent contractors and the remaining one as employee but of managerial
rank.

The facts of the case shows that petitioner Elias Villuga was employed as cutter in the tailoring shop
owned by private respondent Rodolfo Zapanta and known as Broad Street Tailoring located at Shaw
Boulevard, Mandaluyong, Metro Manila. As cutter, he was paid a fixed monthly salary of P840.00
and a monthly transportation allowance of P40.00. In addition to his work as cutter, Villuga was
assigned the chore of distributing work to the shop's tailors or sewers when both the shop's manager
and assistant manager would be absent. He saw to it that their work conformed with the pattern he
had prepared and if not, he had them redone, repaired or resewn.

The other petitioners were either ironers, repairmen and sewers. They were paid a fixed amount for
every item ironed, repaired or sewn, regardless of the time consumed in accomplishing the task.
Petitioners did not fill up any time record since they did not observe regular or fixed hours of work.
They were allowed to perform their work at home especially when the volume of work, which
depended on the number of job orders, could no longer be coped up with.

From February 17 to 22, 1978, petitioner Villuga failed to report for work allegedly due to illness. For
not properly notifying his employer, he was considered to have abandoned his work.

In a complaint dated March 27, 1978, filed with the Regional Office of the Department of Labor,
Villuga claimed that he was refused admittance when he reported for work after his absence,
allegedly due to his active participation in the union organized by private respondent's tailors. He

18
further claimed that he was not paid overtime pay, holiday pay, premium pay for work done on rest
days and holidays, service incentive leave pay and 13th month pay.

Petitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and David Oro also claimed that they
were dismissed from their employment because they joined the Philippine Social Security Labor
Union (PSSLU). Petitioners Andres Abad, Norlito Ladia, Marcelo Aguilan, Nelia Brizuela, Flora
Escobido, Justilita Cabaneg and Domingo Saguit claimed that they stopped working because private
respondents gave them few pieces of work to do after learning of their membership with PSSLU. All
the petitioners laid claims under the different labor standard laws which private respondent allegedly
violated.

On May 28, 1979, Labor Arbiter Ernilo V. Peñalosa rendered a decision ordering the dismissal of the
complaint for unfair labor practices, illegal dismissal and other money claims except petitioner
Villuga's claim for 13th month pay for the years 1976, 1977 and 1980. The dispositive portion of the
decision states as follows:

WHEREFORE, premises considered, the respondent Broad Street Tailoring and/or

Rodolfo Zapanta are hereby ordered to pay complainant Elias Villuga the sum of
ONE THOUSAND TWO HUNDRED FORTY-EIGHT PESOS AND SIXTY-SIX
CENTAVOS (P1,248.66) representing his 13th month pay for the years 1976, 1977
and 1978. His other claims in this case are hereby denied for lack of merit.

The complaint insofar as the other eleven (11) complainants are concerned should
be, as it is hereby dismissed for want of jurisdiction.1

On appeal, the National Labor Relations Commission affirmed the questioned decision in a
resolution dated May 12, 1986, the dispositive portion of which states as follows:

WHEREFORE, premises considered, the decision appealed from is, as it is hereby

AFFIRMED, and the appeal dismissed. 2

Presiding Commissioner Guillermo C. Medina merely concurred in the result while Commissioner
Gabriel M. Gatchalian rendered a dissenting opinion which states as follows:

I am for upholding employer-employee relationship as argued by the complainants

before the Labor Arbiter and on appeal. The further fact that the proposed decision
recognizes complainant's status as piece-rate worker all the more crystallizes
employer-employee relationship the benefits prayed for must be granted. 3

Hence, petitioners filed this instant certiorari case on the following grounds:

1. That the respondent National Labor Relations Commission abused its discretion
when it ruled that petitioner/complainant, Elias Villuga falls within the category of a
managerial employee;

2. . . . when it ruled that the herein petitioners were not dismissed by reason of their
union activities;

3. . . . when it ruled that petitioners Andres Abad, Benjamin Brizuela, Norlito Ladia,
Marcelo Aguilan, David Oro, Nelia Brizuela, Flora Escobido, Justilita Cabaneg and
Domingo Saguit were not employees of private respondents but were contractors.

4. . . . when it ruled that petitioner Elias Villuga is not entitled to overtime pay and
services for Sundays and Legal Holidays; and

5. . . . when it failed to grant petitioners their respective claims under the provisions
of P.D. Nos. 925, 1123 and 851.4

19
Under Rule 1, Section 2(c), Book III of the Implementing Rules of Labor Code, to be a member of a
managerial staff, the following elements must concur or co-exist, to wit: (1) that his primary duty
consists of the performance of work directly related to management policies; (2) that he customarily
and regularly exercises discretion and independent judgment in the performance of his functions; (3)
that he regularly and directly assists in the management of the establishment; and (4) that he does
not devote his twenty per cent of his time to work other than those described above.

Applying the above criteria to petitioner Elias Villuga's case, it is undisputed that his primary work or
duty is to cut or prepare patterns for items to be sewn, not to lay down or implement any of the
management policies, as there is a manager and an assistant manager who perform said functions.
It is true that in the absence of the manager the assistant manager, he distributes and assigns work
to employees but such duty, though involving discretion, is occasional and not regular or customary.
He had also the authority to order the repair or resewing of defective item but such authority is part
and parcel of his function as cutter to see to it that the items cut are sewn correctly lest the defective
nature of the workmanship be attributed to his "poor cutting." Elias Villuga does not participate in
policy-making. Rather, the functions of his position involve execution of approved and established
policies. In Franklin Baker Company of the Philippines v. Trajano, 5 it was held that employees who
do not participate in policy-making but are given ready policies to execute and standard practices to
observe are not managerial employees. The test of "supervisory or managerial status" depends on
whether a person possesses authority that is not merely routinary or clerical in nature but one that
requires use of independent judgment. In other words, the functions of the position are not
managerial in nature if they only execute approved and established policies leaving little or no
discretion at all whether to implement said policies or not. 6

Consequently, the exclusion of Villuga from the benefits claimed under Article 87 (overtime pay and
premium pay for holiday and rest day work), Article 94, (holiday pay), and Article 95 (service
incentive leave pay) of the Labor Code, on the ground that he is a managerial employee is
unwarranted. He is definitely a rank and file employee hired to perform the work of the cutter and not
hired to perform supervisory or managerial functions. The fact that he is uniformly paid by the month
does not exclude him from the benefits of holiday pay as held in the case of Insular Bank of America
Employees Union v. Inciong.7 He should therefore be paid in addition to the 13th month pay, his
overtime pay, holiday pay, premium pay for holiday and rest day, and service incentive leave pay.

As to the dismissal of the charge for unfair labor practices of private respondent consisting of
termination of employment of petitioners and acts of discrimination against members of the labor
union, the respondent Commission correctly held the absence of evidence that Mr. Zapanta was
aware of petitioners' alleged union membership on February 22, 1978 as the notice of union
existence in the establishment with proposal for recognition and collective bargaining negotiation
was received by management only an March 3, 1978. Indeed, self-serving allegations without
concrete proof that the private respondent knew of their membership in the union and accordingly
reacted against their membership do not suffice.

Nor is private respondent's claim that petitioner Villuga abandoned his work acceptable. For
abandonment to constitute a valid cause for dismissal, there must be a deliberate and unjustified
refusal of the employee to resume his employment. Mere absence is not sufficient, it must be
accompanied by overt acts unerringly pointing to the fact that the employee simply does not want to
work anymore.8 At any rate, dismissal of an employee due to his prolonged absence without leave by
reason of illness duly established by the presentation of a medical certificate is not justified.9 In the
case at bar, however, considering that petitioner Villuga absented himself for four (4) days without
leave and without submitting a medical certificate to support his claim of illness, the imposition of a
sanction is justified, but surely, not dismissal, in the light of the fact that this is petitioner's first
offense. In lieu of reinstatement, petitioner Villuga should be paid separation pay where
reinstatement can no longer be effected in view of the long passage of time or because of the
realities of the situation. 10 But petitioner should not be granted backwages in addition to
reinstatement as the same is not just and equitable under the circumstances considering that he was
not entirely free from blame. 11

20
As to the other eleven petitioners, there is no clear showing that they were dismissed because the
circumstances surrounding their dismissal were not even alleged. However, we disagree with the
finding of respondent Commission that the eleven petitioners are independent contractors.

For an employer-employee relationship to exist, the following elements are generally considered:
"(1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal and (4) the power to control the employee's
conduct." 12

Noting that the herein petitioners were oftentimes allowed to perform their work at home and were
paid wages on a piece-rate basis, the respondent Commission apparently found the second and
fourth elements lacking and ruled that "there is no employer-employee relationship, for it is clear that
respondents are interested only in the result and not in the means and manner and how the result is
obtained."

Respondent Commission is in error. The mere fact that petitioners were paid on a piece-rate basis is
no argument that herein petitioners were not employees. The term "wage" has been broadly defined
in Article 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of
money whether fixed or ascertained on a time, task, piece or commission
basis. . . ." The facts of this case indicate that payment by the piece is just a method of
compensation and does not define the essence of the
relation. 13 The petitioners were allowed to perform their work at home does not likewise imply
absence of control and supervision. The control test calls merely for the existence of a right to
control the manner of doing the work, not the actual exercise of the right. 14

In determining whether the relationship is that of employer and employee or one of an independent
contractor, "each case must be determined on its own facts and all the features of the relationship
are to be considered." 15Considering that petitioners who are either sewers, repairmen or ironer, have
been in the employ of private respondent as early as 1972 or at the latest in 1976, faithfully
rendering services which are desirable or necessary for the business of private respondent, and
observing management's approved standards set for their respective lines of work as well as the
customers' specifications, petitioners should be considered employees, not independent contractors.

Independent contractors are those who exercise independent employment, contracting to do a piece
of work according to their own methods and without being subjected to control of their employer
except as to the result of their work. By the nature of the different phases of work in a tailoring shop
where the customers' specifications must be followed to the letter, it is inconceivable that the
workers therein would not be subjected to control.

In Rosario Brothers, Inc. v. Ople, 16 this Court ruled that tailors and similar workers hired in the
tailoring department, although paid weekly wages on piece work basis, are employees not
independent contractors. Accordingly, as regular employees, paid on a piece-rate basis, petitioners
are not entitled to overtime pay, holiday pay, premium pay for holiday/rest day and service incentive
leave pay. Their claim for separation pay should also be defined for lack of evidence that they were
in fact dismissed by private respondent. They should be paid, however, their 13th month pay under
P.D. 851, since they are employees not independent contractors.

WHEREFORE, in view of the foregoing reasons, the assailed decision of respondent National Labor
Relations Commission is hereby MODIFIED by awarding —

(a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay for holiday and rest day,
service incentive leave pay and separation pay, in addition to his 13th month pay; and

(b) in favor of the rest of the petitioners, their respective 13th month pay.

The case is hereby REMANDED to the National Labor Relations Commission for the computation of
the claims herein-above mentioned.

21
SO ORDERED.

Narvasa C.J., Padilla, Regalado and Puno, JJ., concur.

# Footnotes

1 Rollo, pp. 12-13.

2 Ibid, p. 17.

3 Ibid.

4 Rollo, pp. 5-9.

5 G.R. No. 75039, 157 SCRA 416 (1988).

6 Southern Philippines Federation of Labor (SPFL) v. Calleja, G.R. No. 80882, 172
SCRA 676 (1989).

7 G.R. No. 52415, 132 SCRA 663 (1984).

8 Flexo Manufacturing Corporation v. NLRC, et al. G.R. No. 55971, 135 SCRA 145
(1985); Nueva Ecija Electric Cooperative, Inc. v. Minister of Labor, et al., G.R. No.
61965, 184 SCRA 25 (1990).

9 Atlas Consolidated Mining and Development Corporation v. NLRC, et al., G.R. No.
75751, 190 SCRA 505 (1990).

10 Esmalin v. NLRC, G.R. No. 67880, 177 SCRA 537 (1989).

11 See San Miguel Corporation v. NLRC, G.R. No. 60067, 115 SCRA 907 (1982).

12 Singer Sewing Machine Co. v. Drilon, G.R. No. 91307, 193 SCRA 270 (1991);
Deferia v. National Labor Relations Commission, G.R. Nos. 92777-78, 195 SCRA
224 (1991); Hijos de F. Escaño, Inc. v. NLRC, G.R. No. 59229, 201 SCRA 63 (1991).

13 Dy Keh Beng v. International Labor and Marine Union of the Philippines, et al.,
G.R. No. L-32245, 90 SCRA 161 (1979).

14 Feati University v. Bautista, et al., G.R. No. 21500, 18 SCRA 1191 (1966).

15 56 CJS 45.

16 G.R. No. 53590, 131 SCRA 72 (1984).

22
 THIRD DIVISION

[G.R. No. 126383. November 28, 1997]

SAN JUAN DE DIOS HOSPITAL EMPLOYEES ASSOCIATION-AFW/MA.

CONSUELO MAQUILING, LEONARDO MARTINEZ, DOMINGO
ELA, JR., RODOLFO CALUCIN, JR., PERLA MENDOZA, REX
RAPHAEL REYES, ROGELIO BELMONTE, AND 375 OTHER
EMPLOYEE-UNION MEMBERS, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION, AND SAN JUAN DE DIOS
HOSPITAL, respondents.

DECISION
FRANCISCO, J.:

Petitioners, the rank-and-file employee-union officers and members of San Juan De

Dios Hospital Employees Association, sent on July 08, 1991, a four (4)-page letter with
attached support signatures x x x requesting and pleading for the expeditious
implementation and payment by respondent Juan De Dios Hospital "of the 40 HOURS/5-
DAY WORKWEEK with compensable weekly two (2) days off provided for by Republic
Act 5901 as clarified for enforcement by the Secretary of Labors Policy Instructions No.
54 dated April 12, 1988.[1]Respondent hospital failed to give a favorable response; thus,
petitioners filed a complaint regarding their claims for statutory benefits under the above-
cited law and policy issuance[2], docketed as NLRC NCR Case No. 00-08-04815-91. On
February 26, 1992, the Labor Arbiter[3] dismissed the complaint. Petitioners appealed
before public respondent National Labor Relations Commission[4] (NLRC), docketed as
NLRC NCR CA 003028-92, which affirmed the Labor Arbiters decision. Petitioners
subsequent motion for reconsideration was denied; hence, this petition under Rule 65 of
the Rules of Court ascribing grave abuse of discretion on the part of NLRC in concluding
that Policy Instructions No. 54 proceeds from a wrong interpretation of RA 5901 [5] and
Article 83 of the Labor Code.
As the Court sees it, the core issue is whether Policy Instructions No. 54 issued by
then Labor Secretary (now Senator) Franklin M. Drilon is valid or not.
The policy instruction in question provides in full as follows:

Policy Instruction No. 54

To: All Concerned

Subject: Working Hours and Compensation of Hospital/Clinic Personnel

This issuance clarifies the enforcement policy of this Department on the working
hours and compensation of personnel employed by hospital/clinics with a bed
capacity of 100 or more and those located in cities and municipalities with a
population of one million or more.
23
Republic Act 5901 took effect on 21 June 1969 prescribes a 40-hour/5 day work week
for hospital/clinic personnel. At the same time, the Act prohibits the diminution of the
compensation of these workers who would suffer a reduction in their weekly wage by
reason of the shortened workweek prescribed by the Act. In effect, RA 5901 requires
that the covered hospital workers who used to work seven (7) days a week should be
paid for such number of days for working only 5 days or 40 hours a week.

The evident intention of RA 5901 is to reduce the number of hospital personnel,

considering the nature of their work, and at the same time guarantee the payment to
them of a full weekly wage for seven (7) days. This is quite clear in the Exemplary
Note of RA 5901 which states:

As compared with the other employees and laborers, these hospital and health clinic
personnel are over-worked despite the fact that their duties are more delicate in
nature. If we offer them better working conditions, it is believed that the brain drain,
that our country suffers nowadays as far as these personnel are concerned will be
considerably lessened. The fact that these hospitals and health clinics personnel
perform duties which are directly concerned with the health and lives of our people
does not mean that they should work for a longer period than most employees and
laborers. They are also entitled to as much rest as other workers. Making them work
longer than is necessary may endanger, rather than protect the health of their
patients. Besides, they are not receiving better pay than the other workers.Therefore, it
is just and fair that they may be made to enjoy the privileges of equal working hours
with other workers except those excepted by law. (Sixth Congress of the Republic of
the Philippines, Third Session, House of Representatives, H. No. 16630)

The Labor Code in its Article 83 adopts and incorporates the basic provisions of RA
5901 and retains its spirit and intent which is to shorten the workweek of covered
hospital personnel and at the same time assure them of a full weekly wage.

Consistent with such spirit and intent, it is the position of the Department that
personnel in subject hospital and clinics are entitled to a full weekly wage for seven
(7) days it they have completed the 40-hours/5-day workweek in any given
workweek.

All enforcement and adjudicatory agencies of this Department shall be guided by this
issuance in the disposition of cases involving the personnel of covered hospitals and
clinics.

Done in the City of Manila, this 12th day of April, 1988.

(Sgd.) FRANKLIN M. DRILON

Secretary

(Emphasis Added)

24
 We note that Policy Instruction No. 54 relies and purports to implement Republic Act
No. 5901, otherwise known as An Act Prescribing Forty Hours A Week Of Labor For
Government and Private Hospitals Or Clinic Personnel, enacted on June 21,
1969. Reliance on Republic Act No. 5901, however, is misplaced for the said statute, as
correctly ruled by respondent NLRC, has long been repealed with the passage of the
Labor Code on May 1, 1974, Article 302 of which explicitly provides: All labor laws not
adopted as part of this Code either directly or by reference are hereby repealed. All
provisions of existing laws, orders, decrees, rules and regulations inconsistent herewith
are likewise repealed. Accordingly, only Article 83 of the Labor Code which appears to
have substantially incorporated or reproduced the basic provisions of Republic Act No.
5901 may support Policy Instructions No. 54 on which the latters validity may be
gauged. Article 83 of the Labor Code states:

Art. 83. Normal Hours of Work. -- The normal hours of work of any employee shall
not exceed eight (8) hours a day.

Health personnel in cities and municipalities with a population of at least one million
(1,000,000) or in hospitals and clinics with a bed capacity of at least one hundred
(100) shall hold regular office hours for eight (8) hours a day, for five (5) days a
week, exclusive of time for meals, except where the exigencies of the service require
that such personnel work for six (6) days or forty-eight (48) hours, in which case they
shall be entitled to an additional compensation of at least thirty per cent (30%) of their
regular wage for work on the sixth day. For purposes of this Article, health personnel
shall include: resident physicians, nurses, nutritionists, dietitians, pharmacists, social
workers, laboratory technicians, paramedical technicians, psychologists, midwives,
attendants and all other hospital or clinic personnel. (Underscoring supplied)

A cursory reading of Article 83 of the Labor Code betrays petitioners position that
hospital employees are entitled to a full weekly salary with paid two (2) days off if they
have completed the 40-hour/5-day workweek.[6] What Article 83 merely provides are: (1)
the regular office hour of eight hours a day, five days per week for health personnel, and
(2) where the exigencies of service require that health personnel work for six days or
forty-eight hours then such health personnel shall be entitled to an additional
compensation of at least thirty percent of their regular wage for work on the sixth
day. There is nothing in the law that supports then Secretary of Labors assertion that
personnel in subject hospitals and clinics are entitled to a full weekly wage for seven (7)
days if they have completed the 40-hour/5-day workweek in any given
workweek. Needless to say, the Secretary of Labor exceeded his authority by including a
two days off with pay in contravention of the clear mandate of the statute. Such act the
Court shall not countenance. Administrative interpretation of the law, we reiterate, is at
best merely advisory,[7]and the Court will not hesitate to strike down an administrative
interpretation that deviates from the provision of the statute.
Indeed, even if we were to subscribe with petitioners erroneous assertion that
Republic Act No. 5901 has neither been amended nor repealed by the Labor Code, we
nevertheless find Policy Instructions No. 54 invalid. A perusal of Republic Act No.
5901[8] reveals nothing therein that gives two days off with pay for health personnel who
complete a 40-hour work or 5-day workweek. In fact, the Explanatory Note of House Bill
No. 16630 (later passed into law as Republic Act No. 5901) explicitly states that the bills
sole purpose is to shorten the working hours of health personnel and not to dole out a
two days off with pay.

25
 Hence:

The accompanying bill seeks to grant resident physicians, staff nurses, nutritionists,
midwives, attendants and other hospital and health clinic personnel of public and
private hospitals and clinics, the privilege of enjoying the eight hours a week
exclusive of time for lunch granted by law to all government employees and workers
except those employed in schools and in courts. At present those hospitals and health
clinic personnel including those employed in private hospitals and clinics, work six
days a week, 8 hours a day or 48 hours a week.

As compared with the other employees and laborers, these hospital and health clinic
personnel are over-worked despite the fact that their duties are more delicate in
nature. If we offer them better working conditions, it is believed that the brain drain,
that our country suffers nowadays as far as these personnel are concerned will be
considerably lessened. The fact that these hospitals and health clinic personnel
perform duties which are directly concerned with the health and lives of our people
does not mean that they should work for a longer period than most employees and
laborers. They are also entitled to as much rest as other workers. Making them work
longer than is necessary may endanger, rather than protect, the health of their
patients. Besides, they are not receiving better pay than the other workers.Therefore, it
is just and fair that they be made to enjoy the privileges of equal working hours with
other workers except those excepted by law.

In the light of the foregoing, approval of this bill is strongly recommended.

(SGD.) SERGIO H. LOYOLA

Congressman, 3rd District Manila

(Annex F of petition,
underscoring supplied)

Further, petitioners' position is also negated by the very rules and regulations
promulgated by the Bureau of Labor Standards which implement Republic Act No.
5901. Pertinent portions of the implementing rules provide:

RULES AND REGULATIONS IMPLEMENTING REPUBLIC ACT NO. 5901

By virtue of Section 79 of the Revised Administrative Code, as modified by section

18 of Implementation Report for Reorganization Plan No. 20-A on Labor, vesting in
the Bureau of Labor Standards the authority to promulgate rules and regulations to
implement wage and hour laws, the following rules and regulations are hereby issued
for the implementation of Republic Act No. 5901.

CHAPTER I Coverage

26
Section 1. General Statement on Coverage. Republic Act No. 5901, hereinafter
referred to as the Act, shall apply to:

(a) All hospitals and clinics, including those with a bed capacity of less than one
hundred, which are situated in cities or municipalities with a population of one million
or more; and to

(b) All hospitals and clinics with a bed capacity of at least one hundred, irrespective of
the size of population of the city or municipality where they may be situated.

xxx xxx xxx

Section 7. Regular Working Day. The regular working days of covered employees
shall be not more than five days in a workweek. The workweek may begin at any hour
and on any day, including Saturday or Sunday, designated by the employer.

Employers are not precluded from changing the time at which the workday or
workweek begins, provided that the change is not intended to evade the requirements
of these regulations on the payment of additional compensation.

xxx xxx xxx

Section 15. Additional Pay Under the Act and C.A. No. 444. (a) Employees of
covered hospitals and clinics who are entitled to the benefits provided under the
Eight-Hour Labor Law, as amended, shall be paid an additional compensation
equivalent to their regular rate plus at least twenty-five percent thereof for work
performed on Sunday and Holidays, not exceeding eight hours, such employees shall
be entitled to an additional compensation of at least 25% of their regular rate.

(b) For work performed in excess of forty hours a week, excluding those rendered in
excess of eight hours a day during the week, employees covered by the Eight-Hour
Labor Law shall be entitled to an additional straight-time pay which must be
equivalent at least to their regular rate.

If petitioners are entitled to two days off with pay, then there appears to be no sense
at all why Section 15 of the implementing rules grants additional compensation equivalent
to the regular rate plus at least twenty-five percent thereof for work performed on Sunday
to health personnel, or an additional straight-time pay which must be equivalent at least
to the regular rate [f]or work performed in excess of forty hours a week xxx. Policy
Instructions No. 54 to our mind unduly extended the statute. The Secretary of Labor
moreover erred in invoking the spirit and intent of Republic Act No. 5901 and Article 83
of the Labor Code for it is an elementary rule of statutory construction that when the
language of the law is clear and unequivocal, the law must be taken to mean exactly what
it says.[9] No additions or revisions may be permitted. Policy Instructions No. 54 being
inconsistent with and repugnant to the provision of Article 83 of the Labor Code, as well
as to Republic Act No. 5901, should be, as it is hereby, declared void.
WHEREFORE, the decision appealed from is AFFIRMED. No costs.
SO ORDERED.

27
 Narvasa, C.J., (Chairman), Romero, Melo, and Panganiban, JJ., concur.

[1] Petition, p. 4; Rollo, p. 9.

[2] Id.
[3] Labor Arbiter Edilberto Pangan.
[4] Second Division: Calaycay, V.R. Comm., Ponente; Aquino, R.T., Pres. Comm.; and Rayala, R.I.,
Comm., Concurring.
[5] NLRC Decision, p. 18; Rollo, p. 70.
[6] Petition, p. 14; Rollo, p. 19.
[7] Philippine Apparel Workers Union v. NLRC, 106 SCRA 444, 464.
[8] Pertinent provisions of Republic Act No. 5901 provides as follows:
AN ACT PRESCRIBING FORTY HOURS A WEEK OF LABOR FOR GOVERNMENT AND PRIVATE
HOSPITALS OR CLINIC PERSONNEL
Be in enacted by the Senate and House of Representatives of the Philippines in Congress assembled
Section 1. Government and private resident physicians, nurses, nutritionists, dietetians, (sic) pharmacists,
social workers, laboratory technicians, psychologists, midwives, attendants and all other hospitals
or clinic personnel shall hold regular office hours for eight hours a day, for five days a week, or a
total of forty hours a week, exclusive of time for lunch: Provided, That any of such employees or
laborers who shall suffer a reduction of his weekly or daily wage or compensation because of a
reduction of the number of days or hours of labor in a week, as provided, herein, subject to the
minimum daily or hourly wage or compensation already fixed by existing law, shall be given an
automatic increase in his daily or hourly or per piece wage shall be equal to the diminution which
his daily or hourly or per piece wage shall suffer on account of the reduction of days of labor to five
days a week. And provided further, That the salaries of employees received on monthly basis shall
not suffer any diminution on account of the reduction of the number of days of labor a week.
Sec. 2. This Act shall apply only to cities and municipalities with a population of one million or more and to
hospitals and clinics with a bed capacity of at least one hundred. (Emphasis added).
[9] Insular Bank of Asia and America Employees Union v. Inciong, 132 SCRA 663, 673.

28
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 78210 February 28, 1989

TEOFILO ARICA, DANILO BERNABE, MELQUIADES DOHINO, ABONDIO OMERTA, GIL

TANGIHAN, SAMUEL LABAJO, NESTOR NORBE, RODOLFO CONCEPCION, RICARDO
RICHA, RODOLFO NENO, ALBERTO BALATRO, BENJAMIN JUMAMOY, FERMIN DAAROL,
JOVENAL ENRIQUEZ, OSCAR BASAL, RAMON ACENA, JAIME BUGTAY, and 561 OTHERS,
HEREIN REPRESENTED BY KORONADO B. APUZEN, petitioners
vs.
NATIONAL LABOR RELATIONS COMMISSION, HONORABLE FRANKLIN DRILON,
HONORABLE CONRADO B. MAGLAYA, HONORABLE ROSARIO B. ENCARNACION, and
STANDARD (PHILIPPINES) FRUIT CORPORATION, respondents.

Koronado B. Apuzen and Jose C. Espinas for petitioners.

The Solicitor General for public respondent.

Dominguez & Paderna Law Offices Co. for private respondent.

PARAS, J.:

This is a petition for review on certiorari of the decision of the National Labor Relations Commission
dated December 12, 1986 in NLRC Case No. 2327 MC-XI-84 entitled Teofilo Arica et al. vs.
Standard (Phil.) Fruits Corporation (STANFILCO) which affirmed the decision of Labor Arbiter Pedro
C. Ramos, NLRC, Special Task Force, Regional Arbitration Branch No. XI, Davao City dismissing
the claim of petitioners.

This case stemmed from a complaint filed on April 9, 1984 against private respondent Stanfilco for
assembly time, moral damages and attorney's fees, with the aforementioned Regional Arbitration
Branch No. XI, Davao City.

After the submission by the parties of their respective position papers (Annex "C", pp. 30-40; Annex
"D", Rollo, pp. 41-50), Labor Arbiter Pedro C. Ramos rendered a decision dated October 9, 1985
(Annex 'E', Rollo, pp. 51-58) in favor of private respondent STANFILCO, holding that:

Given these facts and circumstances, we cannot but agree with respondent that the
pronouncement in that earlier case, i.e. the thirty-minute assembly time long
practiced cannot be considered waiting time or work time and, therefore, not
compensable, has become the law of the case which can no longer be disturbed
without doing violence to the time- honored principle of res-judicata.

WHEREFORE, in view of the foregoing considerations, the instant complaint should

therefore be, as it is hereby, DISMISSED.

SO ORDERED. (Rollo, p. 58)

On December 12, 1986, after considering the appeal memorandum of complainant and the
opposition of respondents, the First Division of public respondent NLRC composed of Acting
Presiding Commissioner Franklin Drilon, Commissioner Conrado Maglaya, Commissioner Rosario

29
D. Encarnacion as Members, promulgated its Resolution, upholding the Labor Arbiters' decision. The
Resolution's dispositive portion reads:

'Surely, the customary functions referred to in the above- quoted provision of the
agreement includes the long-standing practice and institutionalized non-
compensable assembly time. This, in effect, estopped complainants from pursuing
this case.

The Commission cannot ignore these hard facts, and we are constrained to uphold
the dismissal and closure of the case.

WHEREFORE, let the appeal be, as it is hereby dismissed, for lack of merit.

SO ORDERED. (Annex "H", Rollo, pp. 86-89).

On January 15, 1987, petitioners filed a Motion for Reconsideration which was opposed by private
respondent (Annex "I", Rollo, pp. 90-91; Annex J Rollo, pp. 92-96).

Public respondent NLRC, on January 30, 1987, issued a resolution denying for lack of merit
petitioners' motion for reconsideration (Annex "K", Rollo, p. 97).

Hence this petition for review on certiorari filed on May 7, 1987.

The Court in the resolution of May 4, 1988 gave due course to this petition.

Petitioners assign the following issues:

1) Whether or not the 30-minute activity of the petitioners before the scheduled
working time is compensable under the Labor Code.

2) Whether or not res judicata applies when the facts obtaining in the prior case and
in the case at bar are significantly different from each other in that there is merit in
the case at bar.

3) Whether or not there is finality in the decision of Secretary Ople in view of the
compromise agreement novating it and the withdrawal of the appeal.

4) Whether or not estoppel and laches lie in decisions for the enforcement of labor
standards (Rollo, p. 10).

Petitioners contend that the preliminary activities as workers of respondents STANFILCO in the
assembly area is compensable as working time (from 5:30 to 6:00 o'clock in the morning) since
these preliminary activities are necessarily and primarily for private respondent's benefit.

These preliminary activities of the workers are as follows:

(a) First there is the roll call. This is followed by getting their individual work
assignments from the foreman.

(b) Thereafter, they are individually required to accomplish the Laborer's Daily
Accomplishment Report during which they are often made to explain about their
reported accomplishment the following day.

(c) Then they go to the stockroom to get the working materials, tools and equipment.

30
 (d) Lastly, they travel to the field bringing with them their tools, equipment and
materials.

All these activities take 30 minutes to accomplish (Rollo, Petition, p. 11).

Contrary to this contention, respondent avers that the instant complaint is not new, the very same
claim having been brought against herein respondent by the same group of rank and file employees
in the case of Associated Labor Union and Standard Fruit Corporation, NLRC Case No. 26-LS-XI-76
which was filed way back April 27, 1976 when ALU was the bargaining agent of respondent's rank
and file workers. The said case involved a claim for "waiting time", as the complainants purportedly
were required to assemble at a designated area at least 30 minutes prior to the start of their
scheduled working hours "to ascertain the work force available for the day by means of a roll call, for
the purpose of assignment or reassignment of employees to such areas in the plantation where they
are most needed." (Rollo, pp. 64- 65)

Noteworthy is the decision of the Minister of Labor, on May 12, 1978 in the aforecited case
(Associated Labor Union vs. Standard (Phil.) Fruit Corporation, NLRC Case No. 26-LS-XI-76 where
significant findings of facts and conclusions had already been made on the matter.

The Minister of Labor held:

The thirty (30)-minute assembly time long practiced and institutionalized by mutual
consent of the parties under Article IV, Section 3, of the Collective Bargaining
Agreement cannot be considered as waiting time within the purview of Section 5,
Rule I, Book III of the Rules and Regulations Implementing the Labor Code. ...

Furthermore, the thirty (30)-minute assembly is a deeply- rooted, routinary practice of

the employees, and the proceedings attendant thereto are not infected with
complexities as to deprive the workers the time to attend to other personal pursuits.
They are not new employees as to require the company to deliver long briefings
regarding their respective work assignments. Their houses are situated right on the
area where the farm are located, such that after the roll call, which does not
necessarily require the personal presence, they can go back to their houses to attend
to some chores. In short, they are not subject to the absolute control of the company
during this period, otherwise, their failure to report in the assembly time would justify
the company to impose disciplinary measures. The CBA does not contain any
provision to this effect; the record is also bare of any proof on this point. This,
therefore, demonstrates the indubitable fact that the thirty (30)-minute assembly time
was not primarily intended for the interests of the employer, but ultimately for the
employees to indicate their availability or non-availability for work during every
working day. (Annex "E", Rollo, p. 57).

Accordingly, the issues are reduced to the sole question as to whether public respondent National
Labor Relations Commission committed a grave abuse of discretion in its resolution of December
17, 1986.

The facts on which this decision was predicated continue to be the facts of the case in this
questioned resolution of the National Labor Relations Commission.

It is clear that herein petitioners are merely reiterating the very same claim which they filed through
the ALU and which records show had already long been considered terminated and closed by this
Court in G.R. No. L-48510. Therefore, the NLRC can not be faulted for ruling that petitioners' claim is
already barred by res-judicata.

Be that as it may, petitioners' claim that there was a change in the factual scenario which are
"substantial changes in the facts" makes respondent firm now liable for the same claim they earlier
filed against respondent which was dismissed. It is thus axiomatic that the non-compensability of the

31
claim having been earlier established, constitute the controlling legal rule or decision between the
parties and remains to be the law of the case making this petition without merit.

As aptly observed by the Solicitor General that this petition is "clearly violative of the familiar
principle of res judicata.There will be no end to this controversy if the light of the Minister of Labor's
decision dated May 12, 1979 that had long acquired the character of finality and which already
resolved that petitioners' thirty (30)-minute assembly time is not compensable, the same issue can
be re-litigated again." (Rollo, p. 183)

This Court has held:

In this connection account should be taken of the cognate principle that res
judicata operates to bar not only the relitigation in a subsequent action of the issues
squarely raised, passed upon and adjudicated in the first suit, but also the ventilation
in said subsequent suit of any other issue which could have been raised in the first
but was not. The law provides that 'the judgment or order is, with respect to the
matter directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors in interest by
title subsequent to the commencement of the action .. litigating for the same thing
and in the same capacity.' So, even if new causes of action are asserted in the
second action (e.g. fraud, deceit, undue machinations in connection with their
execution of the convenio de transaccion), this would not preclude the operation of
the doctrine of res judicata. Those issues are also barred, even if not passed upon in
the first. They could have been, but were not, there raised. (Vda. de Buncio v. Estate
of the late Anita de Leon, 156 SCRA 352 [1987]).

Moreover, as a rule, the findings of facts of quasi-judicial agencies which have acquired expertise
because their jurisdiction is confined to specific matters are accorded not only respect but at times
even finality if such findings are supported by substantial evidence (Special Events & Central
Shipping Office Workers Union v. San Miguel Corporation, 122 SCRA 557 [1983]; Dangan v. NLRC,
127 SCRA 706 [1984]; Phil. Labor Alliance Council v. Bureau of Labor Relations, 75 SCRA 162
[1977]; Mamerto v. Inciong, 118 SCRA 265 (1982]; National Federation of Labor Union (NAFLU) v.
Ople, 143 SCRA 124 [1986]; Edi-Staff Builders International, Inc. v. Leogardo, Jr., 152 SCRA 453
[1987]; Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]).

The records show that the Labor Arbiters' decision dated October 9, 1985 (Annex "E", Petition)
pointed out in detail the basis of his findings and conclusions, and no cogent reason can be found to
disturb these findings nor of those of the National Labor Relations Commission which affirmed the
same.

PREMISES CONSIDERED, the petition is DISMISSED for lack of merit and the decision of the
National Labor Relations Commission is AFFIRMED.

SO ORDERED.

Melencio-Herrera (Chairperson), Padilla and Regalado, JJ., concur.

Separate Opinions

SARMIENTO, J., Dissenting:

32
It is my opinion that res judicata is not a bar.

The decision penned by then Minister Blas Ople in ALU v. STANFILCO (NLRC Case No. 26-LS-XI-
76) relied upon by the respondents as basis for claims of res judicata, is not, to my mind, a
controlling precedent. In that case, it was held that the thirty-minute "waiting time" complained of was
a mere "assembly time" and not a waiting time as the term is known in law, and hence, a
compensable hour of work. Thus:

The thirty (30)-minute assembly time long practiced and institutionalized by mutual
consent of the parties under Article IV, Section 3, of the Collective Bargaining
Agreement cannot be considered as 'waiting time' within the purview of Section 5,
Rule 1, Book III of the Rules and Regulations Implementing the Labor Code. ...

Furthermore, the thirty (30)-minute assembly is a deeply- rooted, routinary practice of

the employees, and the proceedings attendant thereto are not infected with
complexities as to deprive the workers the time to attend to other personal pursuits.
They are not new employees as to require the company to deliver long briefings
regarding their respective work assignments. Their houses are situated right on the
area where the farms are located, such that after the roll call, which does not
necessarily require the personal presence, they can go back to their houses to attend
to some chores.

In short, they are not subject to the absolute control of the company during this
period, otherwise, their failure to report in the assembly time would justify the
company to impose disciplinary measures. The CBA does not contain any provision
to this effect; the record is also bare of any proof on this point. This, therefore,
demonstrates the indubitable fact that the thirty (30)-minute assembly time was not
primarily intended for the interests of the employer, but ultimately for the employees
to indicate their availability or non-availability for work during every working day.
(Decision, 6.)

Precisely, it is the petitioners' contention that the assembly time in question had since undergone
dramatic changes, thus:

(a) First there is the roll call. This is followed by getting their individual work
assignments from the foreman.

(b) Thereafter,they are individually required to accomplish the Laborer's Daily

Accomplishment Report during which they are often made to explain about their
reported accomplishment the following day.

(c) Then they go to the stockroom to get the working materials, tools and equipment.

(d) Lastly, they travel to the field bringing with them their tools, equipment and
materials. (Supra, 4-5.)

The petitioners have vehemently maintained that in view thereof, the instant case should be
distinguished from the first case. And I do not believe that the respondents have successfully
rebutted these allegations. The Solicitor General relies solely on the decision of then Minister Ople,
the decision the petitioners precisely reject in view of the changes in the conditions of the parties.
The private respondent on the other hand insists that these practices were the same practices taken
into account in ALU v. STANFILCO. If this were so, the Ople decision was silent thereon.

It is evident that the Ople decision was predicated on the absence of any insinuation of
obligatoriness in the course or after the assembly activities on the part of the employees.(" . . [T]hey
are not subject to the absolute control of the company during this period, otherwise, their failure to
report in the assembly time would justify the company to impose disciplinary measures;" supra, 6.)

33
As indicated, however, by the petitioners, things had since changed, and remarkably so, and the
latter had since been placed under a number of restrictions. My considered opinion is that the thirty-
minute assembly time had become, in truth and fact, a "waiting time" as contemplated by the Labor
Code.

I vote, then, to grant the petition.

Separate Opinions

SARMIENTO, J., Dissenting:

It is my opinion that res judicata is not a bar.

The decision penned by then Minister Blas Ople in ALU v. STANFILCO (NLRC Case No. 26-LS-XI-
76) relied upon by the respondents as basis for claims of res judicata, is not, to my mind, a
controlling precedent. In that case, it was held that the thirty-minute "waiting time" complained of was
a mere "assembly time" and not a waiting time as the term is known in law, and hence, a
compensable hour of work. Thus:

The thirty (30)-minute assembly time long practiced and institutionalized by mutual
consent of the parties under Article IV, Section 3, of the Collective Bargaining
Agreement cannot be considered as 'waiting time' within the purview of Section 5,
Rule 1, Book III of the Rules and Regulations Implementing the Labor Code. ...

Furthermore, the thirty (30)-minute assembly is a deeply- rooted, routinary practice of

the employees, and the proceedings attendant thereto are not infected with
complexities as to deprive the workers the time to attend to other personal pursuits.
They are not new employees as to require the company to deliver long briefings
regarding their respective work assignments. Their houses are situated right on the
area where the farms are located, such that after the roll call, which does not
necessarily require the personal presence, they can go back to their houses to attend
to some chores.

In short, they are not subject to the absolute control of the company during this
period, otherwise, their failure to report in the assembly time would justify the
company to impose disciplinary measures. The CBA does not contain any provision
to this effect; the record is also bare of any proof on this point. This, therefore,
demonstrates the indubitable fact that the thirty (30)-minute assembly time was not
primarily intended for the interests of the employer, but ultimately for the employees
to indicate their availability or non-availability for work during every working day.
(Decision, 6.)

Precisely, it is the petitioners' contention that the assembly time in question had since undergone
dramatic changes, thus:

(a) First there is the roll call. This is followed by getting their individual work
assignments from the foreman.

(b) Thereafter,they are individually required to accomplish the Laborer's Daily

Accomplishment Report during which they are often made to explain about their
reported accomplishment the following day.

(c) Then they go to the stockroom to get the working materials, tools and equipment.

34
 (d) Lastly, they travel to the field bringing with them their tools, equipment and
materials. (Supra, 4-5.)

The petitioners have vehemently maintained that in view thereof, the instant case should be
distinguished from the first case. And I do not believe that the respondents have successfully
rebutted these allegations. The Solicitor General relies solely on the decision of then Minister Ople,
the decision the petitioners precisely reject in view of the changes in the conditions of the parties.
The private respondent on the other hand insists that these practices were the same practices taken
into account in ALU v. STANFILCO. If this were so, the Ople decision was silent thereon.

It is evident that the Ople decision was predicated on the absence of any insinuation of
obligatoriness in the course or after the assembly activities on the part of the employees.(" . . [T]hey
are not subject to the absolute control of the company during this period, otherwise, their failure to
report in the assembly time would justify the company to impose disciplinary measures;" supra, 6.)
As indicated, however, by the petitioners, things had since changed, and remarkably so, and the
latter had since been placed under a number of restrictions. My considered opinion is that the thirty-
minute assembly time had become, in truth and fact, a "waiting time" as contemplated by the Labor
Code.

I vote, then, to grant the petition.

35
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. Nos. 64821-23 January 29, 1993

UNIVERSITY OF PANGASINAN FACULTY UNION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and UNIVERSITY OF
PANGASINAN, respondents.

Tanopo & Serafica for petitioner.

Hermogenes S. Decano for private respondents.

ROMERO, J.:

In the instant petition for mandamus and certiorari, petitioner union seeks to enjoin the respondent
National Labor Relations Commission (NLRC) to resolve, or direct the Labor Arbiter to hear and
decide, the merits of three of petitioner's unresolved complaints, and to annul and set aside the
resolution of the NLRC affirming the decision of the Executive Labor Arbiter dismissing the
petitioner's complaints for violation of certain labor standards laws but requiring respondent
university to integrate the cost of living allowance into the basic pay of the covered employees and
reminding it to pay its employees at intervals not exceeding sixteen (16) days.

The uncontroverted facts show that on various dates, petitioner filed the following complaints against
the University of Pangasinan (University for brevity) before the Arbitration Branch of the NLRC in
Dagupan City:

1. October 14, 1980: for nonpayment of benefits under P.D. No. 1713 and
emergency cost of living allowance (ecola) to part-time teachers, and for prompt and
accurate computation of benefits under P.D. No. 451 and the payment of ecolas;

2. November 7, 1980: for nonpayment of all ecolas to instructors from October 18-31,
1980;

3. November 20, 1980: for nonpayment of ecolas under P.D. Nos. 525, 1123, 1614,
1634, 1678 and 1713 for November 1-15, 1980, and extra loads during typhoons
"Nitang" and "Osang" on July 21 and 25, 1980, respectively;

4. April 13, 1981: for violation of P.D. No. 1751 and nonpayment of extra loads on
February 12-13, 1980 (Anniversary celebration);

5. April 27, 1981: for nonpayment of all ecolas for April 1-15, 1981 to faculty
members who were also members of the union;

6. May 21, 1981: for violation of Wage Order No. 1 and delayed payment of salaries;
and

7. June 17, 1981: for nonpayment of salary differentials for summer under P.D. No.
451.1

36
The Regional Director in San Fernando, La Union certified six (6) of these complaints to Labor
Arbiter Pedro Fernandez of the Dagupan City District Office of the then Ministry of Labor and
Employment for compulsory arbitration. 2 According to the petitioner, it was made to understand by
Fernandez that the seventh complaint should also be discussed in its position paper. Accordingly,
petitioner filed a position paper discussing the merits of all the seven complaints. On the other hand,
the University limited its discussion to only four: the complaints filed on April 13, 1981, April 27,
1981, May 21, 1981 and June 17, 1981. Petitioner was of the view that Executive Labor Arbiter
Sotero L. Tumang adopted the stand of the University on the four complaints and accordingly
dismissed them in his decision of January 25, 1982.3

Observing that in its position paper, the petitioner included matters which were "beyond the scope of
the issues alleged in the complaints," said Labor Arbiter discussed the four complaints individually.
On the April 13, 1981 complaint, he ruled that because at the time P.D. No. 1123 took effect on May
1, 1977, the University had not increased its tuition fees, there was of "nothing to
integrate."4 However, from June 16, 1979 when the University increased its tuition fees, it was
obligated to cause the integration of the across-the-board increase of P60.00 in emergency
allowance into the basic pay as mandated by P.D. Nos. 1123 and 1751.

On the alleged nonpayment of extra loads handled by the employees on February 12 and 13, 1981
when classes were suspended, Tumang stated that Consuelo Abad, the petitioner's president, had
no cause to complain because her salary was fully paid and that, since there were "no complainants
for the alleged nonpayment of extra loads for two days," the issue had become academic.

With respect to the April 27, 1981 complaint, Tumang said that since the salary paid to Consuelo
Abad and other faculty members for the April 1-15, 1981 period had been earned "as part of their
salary for the ten-month period," she was no longer entitled to an emergency cost of living
allowance. He added that "payment of emergency cost of living allowance is based on actual work
performed except when they (employees) are on leave with pay." Hence, because classes ended in
March 1981, the teachers who did not report for work could not be considered on leave with pay
and, therefore, they were not entitled to an emergency cost of living allowance.

As regards the May 21, 1981 complaint alleging violation of Wage Order No. 1, Tumang found that
the University had actually implemented the additional living allowance of P2.00 a day required
therein. On the alleged delay in the payment of salaries of the employees, he rationalized that delays
could not be avoided but he reminded the University to pay its employees on time.

The June 17, 1981 complaint was also resolved in favor of the University. Stating that P.D. No. 451
which mandates salary increases is dependent on enrollment and allowable deductions, Tumang
ruled that, again, Consuelo Abad had no cause to complain as she had been paid out of the
allowable 12.74% for distribution which was a "substantial compliance with P.D. No. 451." 5 The
dispositive portion of the decision states:

IN THE LIGHT OF THE FOREGOING CONSIDERATION, the above-entitled cases

are dismissed for lack of merit. Respondent however, is required to integrate the
allowance of P60.00 under P.D. 1123 into the basic pay of the covered employees if
the same has not as yet been complied with. Respondent is also reminded to pay the
employees at intervals not exceeding sixteen (16) days pursuant to Article 102 of the
Labor Code.

SO ORDERED.

The petitioner appealed the said decision to the NLRC. In its resolution of June 20, 1993, the NLRC
affirmed the decision of Executive Labor Article Tumang. Hence, the instant petition
for mandamus and certiorari with the following prayer:

WHEREFORE, the foregoing premises considered, it is respectfully prayed that this

petition be given due course and that judgment issue:

37
 1. Declaring petitioner as possessed with capacity to represent its members in the
complaints it filed thru its president, Miss Consuelo Abad, against private respondent,
and the complaints are pertaining to the members who are entitled under the law to
the claims sought herein, not to Miss Abad alone;

2. Annulling and setting aside the appealed resolution insofar as the issues of
nonpayment of Ecola for April 1-15, 1981 and nonpayment of salary differentials for
summer of 1981 under P.D. No. 451 are concerned;

3. Ordering private respondent to pay covered members of petitioner their Ecola for
April 1-15, 1981 and their salary differentials for summer of 1981 pursuant to the
mandate of P.D. 451;

4. Enjoining public respondent to resolve on the merits the issues of nonpayment of

extra loads of February 12-13, 1980 and violation of Wage Order No. 1 which were
properly brought on appeal to said office;

5. Enjoining public respondent to resolve on the merits the issues or grievances

alleged in the complaints filed on October 14, November 7 and November 20, all in
1980, which were not resolved by the labor arbiter but nonetheless appealed to
public respondents, or

6. Enjoining public respondent to order or direct the labor arbiter to resolve on the
merits the said issues or grievances alleged in the complaints mentioned in the next
preceding paragraph;

7. Attorney's fee in such amount as this Honorable Tribunal may deem just and
reasonable in the premises;

8. Ordering private respondent to pay costs of suit, including this appeal.

Petitioner further prays for safeguards and/or measures to insure the correct
computation of the amount of claims herein sought due to each covered member of
petitioner, and for such other reliefs just and equitable in the premises.6

We shall first deal with the propriety of the special civil action of mandamus. In this regard, petitioner
contends that the NLRC should have, in the exercise of its appellate jurisdiction, resolved the issues
raised in the three (3) complaints filed on October 14, November 7 and November 20, 1980 or, in the
alternative, ordered the Labor Arbiter to hear and decide the aforementioned three (3) complaints, it
having the power of supervision over Labor Arbiters.

Sec. 3, Rule 65 of the Rules of Court provides:

Sec. 3. Petition for Mandamus. — When any tribunal, corporation, board, or person
unlawfully neglects the performance of an act which the law specifically enjoins as a
duty resulting from an office, trust, or station, or unlawfully excludes another from the
use and enjoyment of a right or office to which such other is entitled, and there is no
other plain, speedy and adequate remedy in the ordinary course of law, the person
aggrieved thereby may file a verified petition in the proper court alleging the facts
with certainty and praying that judgment be rendered commanding the defendant,
immediately or at some other specified time, to do the act required to be done to
protect the rights of the petitioner, and to pay the damages sustained by the
petitioner by reason of the wrongful acts of the defendant.

As succinctly provided in this section, anyone who wishes to avail of the remedy of mandamus must
state in a verified petition "the facts with certainty." On account of this requirement, mandamus is
never issued in doubtful cases and showing of a clear and certain right on the part of the petitioner is

38
required. 7 Indeed, while the labor arbiter is duty bound to resolve all complaints referred to him for
arbitration and, therefore, he may be compelled by mandamus to decide them (although not in any
particular way or in favor of anyone),8 we find that the peculiar circumstances in this case do not
merit the issuance of the writ of mandamus.

Petitioner admits that only six of the complaints were certified to Labor Arbiter Fernandez for
compulsory arbitration. It failed, however, to allege why this was the case or whether it had exerted
any effort to include the remaining complaint in the certification. What it stresses is the alleged
assurance of Labor Arbiter Fernandez that the seventh complaint may be discussed in its position
paper. It turned out, however, that, according to the unrebutted allegation of the Solicitor General,
Labor Arbiter Fernandez inhibited himself from handling the cases referred to him as he was
teaching at the University. Hence, Labor Arbiter Fernandez forwarded the complaints to the
Assistant Director for Arbitration in Regional Office No. 1 in San Fernando, La Union for appropriate
action. He should have forwarded all of the complaints to the said Assistant Director, but it appears
that Fernandez turned over only four of them. In turn, the Assistant Director referred only complaints
Nos. 5, 6 and 7, which had been docketed as RBI-C-24-81, LS-42-81 and LS-43-81, to Executive
Labor Arbiter Sotero L. Tumang for compulsory arbitration. However, while only these three docket
numbers appear on the caption of the decision, the same actually resolved four complaints, as
earlier mentioned. 9

From these facts, one may infer that there must have been a mishandling of the complaints and/or
the records of the cases. However, the petitioner failed to substantiate by evidence such negligence
on the part of the public respondents as to warrant the issuance of a writ of mandamus. 10 Its officials
even neglected the simple act of verifying from the MOLE office in Dagupan City whether the
records of all the cases filed had been forwarded to the proper official who should resolve
them. 11 Infact, nowhere in its pleadings 12 is there an allegation to that effect.

On the contrary, the petitioner took Fernandez' words seriously and allowed the proceedings to
reach its inevitable conclusion. When it received a copy of the decision, the petitioner should have
taken note of Executive Labor Arbiter Tumang's observation therein that it had discussed matters
"beyond the scope of the issues alleged in the complaints." In its memorandum of appeal, it should
have prayed for the inclusion of the three complaints inasmuch as in labor cases, an appeal may be
treated as a motion for reconsideration or
vice-versa. 13 The fact that three complaints had been omitted did not escape the attention of the
NLRC which stated in its resolution that "since those cases were not consolidated it is now too late
to consolidate them" with the four decided cases. 14 We agree with the NLRC that the said
complaints should proceed separately as long as their resolution would not conflict with the resolved
cases.15 It should be added that under Art. 217(b) of the Labor Code, the NLRC has "exclusive
appellate jurisdiction over all cases decided by the Labor Arbiters." Needless to say, the NLRC could
not have acted on matters outside of the cases appealed to it.

Petitioner's contention that the cases filed by Consuelo Abad as its president should affect, not only
herself, but all the other union members similarly situated as she was, is well taken. The
uncontroverted allegation of the petitioner is that it is the holder of Registration Certificate No. 9865-
C, having been registered with the then Ministry of Labor and Employment on February 16, 1978. As
such, petitioner possessed the legal personality to sue and be sued under its registered
name.16 Corollarily, its president, Consuelo Abad, correctly filed the complaints even if some of them
involved rights and interest purely or exclusively appertaining to individual employees, it appearing
that she signed the complaints "for and in behalf of the University of Pangasinan Faculty Union."17

The University's contention that petitioner had no legal personality to institute and prosecute money
claims must, therefore, fail. To quote then Associate Justice Teehankee in Heirs of Teodelo M. Cruz
v. CIR,18 "[w]hat should be borne in mind is that the interest of the individual worker can be better
protected on the whole by a strong union aware of its moral and legal obligations to represent the
rank and file faithfully and secure for them the best wages and working terms and conditions. . . .
Although this was stated within the context of collective bargaining, it applies equally well to cases,
such as the present wherein the union, through its president, presented its individual members'
grievances through proper proceedings. While the complaints might not

39
have disclosed the identities of the individual employees claiming monetary benefits,19 such technical
defect should not be taken against the claimants, especially because the University appears to have
failed to demand a bill of particulars during the proceedings before the Labor Arbiter.

On the merits of the petition, the NLRC did not abuse its discretion in resolving the appeal from the
decision of Executive Labor Arbiter Tumang except for the disallowance of the emergency cost of
living allowance to members of the petitioner. The Rules Implementing P.D. No. 1713 which took
effect on August 18, 1980 provide:

Sec. 6. Allowances of full-time and part-time employees. — Employees shall be paid

in full the monthly allowance on the basis of the scales provided in Section 3 hereof,
regardless of the number of their regular working days if they incur no absences
during the month. If they incur absences without pay, the amounts corresponding to
the absences may be deducted from the monthly allowance provided that in
determining the equivalent daily allowance of such deduction, the applicable monthly
allowance shall be divided by thirty (30) days.

xxx xxx xxx

(Emphasis supplied).

This Section, which is a virtual reproduction of Section 12 of the old Rules Implementing P.D. No.
1123, has been interpreted by this Court as requiring that the full amount of the cost of living
allowance mandated by law should be given monthly to each employee if the latter has worked
continuously for each month, regardless of the number of the regular working days.20 But
more apropos is the ruling of this Court in University of Pangasinan Faculty Union v. University of
Pangasinan and NLRC,21 a case involving the same parties as in the instant petition and dealing with
a complaint filed by the petitioner on December 18, 1981 seeking, among others, the payment of
emergency cost of living allowances for November 7 to December 5, 1981, a semestral break. The
Court held therein:

. . . The "No work, no pay" principle does not apply in the instant case. The
petitioner's members received their regular salaries during this period. It is clear from
the . . . law that it contemplates a "no work" situation where the employees voluntarily
absent themselves. Petitioners, in the case at bar, certainly do not, ad
voluntatem absent themselves during semestral breaks. Rather, they are constrained
to take mandatory leave from work. For this, they cannot be faulted nor can they be
begrudged that which is due them under the law. To a certain extent, the private
respondent can specify dates when no classes would be held. Surely, it was not the
intention of the framers of the law to allow employers to withhold employee benefits
by the simple expedient of unilaterally imposing "no work" days and consequently
avoiding compliance with the mandate of the law for those days.

As interpreted and emphasized in the same case, the law granting emergency cost of living
allowances was designed to augment the income of the employees to enable them to cope with the
rising cost of living and inflation. Clearly, it was enacted in pursuance of the State's duty to protect
labor and to alleviate the plight of the workers. To uphold private respondent's interpretation of the
law would be running counter to the intent of the law and the Constitution.

WHEREFORE, the petition for mandamus is hereby DISMISSED. The decision of the NLRC is
AFFIRMED subject to the MODIFICATION that private respondent University of Pangasinan shall
pay its regular and fulltime teachers and employees emergency cost of living allowance for the
period April 1-15, 1981. Costs against private respondent.

SO ORDERED.

Gutierrez, Jr., Bidin, Davide, Jr. and Melo, JJ., concur.

40
# Footnotes

1 Petition, pp. 3-4; Rollo, pp. 4-5.

2 Rollo, p. 42.

3 Petition, pp. 4-5; Rollo, pp. 5-6.

4 P.D. No. 1751 increased "the statutory daily minimum wage at all levels by P4.00
after integrating the mandatory emergency living allowances under Presidential
Decrees 525 and 1123 into the basic pay of all covered workers."

5 Decision, Rollo, pp. 62-67.

6 Petition, pp. 35-36; Rollo, pp. 36-37.

7 Marcelo v. Tantuico, Jr., G.R. No. 60074, July 7, 1986, 142 SCRA 439,
445 citing Taboy v. Court of Appeals, L-47472, July 24, 1981, 105 SCRA 758.

8 Per Kant Kwong v. PCGG (G.R. No. 79484, December 7, 1987, 156 SCRA 222),
the writ of mandamus may be issued to direct an official with discretionary powers "to
act but not to act one way or the other."

9 Comment, pp. 2-3; Rollo, pp. 126-127.

10 See: Taboy v. Court of Appeals, supra.

11 In Perez v. City Mayor of Cabanatuan (L-16786, October 31, 1961, 3 SCRA 431),
the Court held that special civil actions like mandamus are not entertainable if a
superior administrative officer could grant a relief.

12 See: Tangonon v. Paño, L-45157, June 27, 1985, 137 SCRA 245 where the Court
held that a petition for mandamus, which demands expeditious determination, may
be decided on the pleadings filed.

13 While in its memorandum of appeal, petitioner revealed the fact that three
complaints had been disregarded by Labor Arbiter Tumang and alleged that "the
same ought to have been considered, passed upon and decided on their merits," it
merely prayed for the reversal and setting aside of the decision and that "a new one
be entered in accordance with the prayers in the various complaints filed." Rollo, pp.
68-84.

14 NLRC Resolution, p. 39.

15 Ibid., pp. 38-39.

16 Art. 242(e), Labor Code, as amended.

17 Solicitor General's Comment, p. 9, Rollo, p. 133.

18 G.R. No. L-23331-32, December 27, 1969, 30 SCRA 817, 946.

19 Private Respondent's Comment, p. 1; Rollo, p. 103.

41
20 Needle Queen Corporation v. Nicolas, G.R. Nos. 60741-43, December 22, 1989,
180 SCRA 568.

21 G.R. No. 63122, February 20, 1984, 127 SCRA 691.

42
 FIRST DIVISION

[G.R. No. 119205. April 15, 1998]

SIME DARBY PILIPINAS, INC., petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION (2ND DIVISION) and SIME DARBY
SALARIED EMPLOYEES ASSOCIATION (ALU-
TUCP), respondents.

DECISION
BELLOSILLO, J.:

Is the act of management in revising the work schedule of its employees and
discarding their paid lunch break constitutive of unfair labor practice?
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive
tires, tubes and other rubber products. Sime Darby Salaried Employees Association
(ALU-TUCP), private respondent, is an association of monthly salaried employees of
petitioner at its Marikina factory. Prior to the present controversy, all company factory
workers in Marikina including members of private respondent union worked from 7:45
a.m. to 3:45 p.m. with a 30 minute paid on call lunch break.
On 14 August 1992 petitioner issued a memorandum to all factory-based employees
advising all its monthly salaried employees in its Marikina Tire Plant, except those in the
Warehouse and Quality Assurance Department working on shifts, a change in work
schedule effective 14 September 1992 thus

TO: ALL FACTORY-BASED EMPLOYEES

RE: NEW WORK SCHEDULE

Effective Monday, September 14, 1992, the new work schedule factory
office will be as follows:

7:45 A.M. 4:45 P.M. (Monday to Friday)

7:45 A.M. 11:45 P.M. (Saturday).

Coffee break time will be ten minutes only anytime between:

9:30 A.M. 10:30 A.M. and

2:30 P.M. 3:30 P.M.

Lunch break will be between:

12:00 NN 1:00 P.M. (Monday to Friday).

43
 Excluded from the above schedule are the Warehouse and QA
employees who are on shifting. Their work and break time schedules
will be maintained as it is now.[1]
Since private respondent felt affected adversely by the change in the work schedule
and discontinuance of the 30-minute paid on call lunch break, it filed on behalf of its
members a complaint with the Labor Arbiter for unfair labor practice, discrimination and
evasion of liability pursuant to the resolution of this Court in Sime Darby International Tire
Co., Inc. v. NLRC.[2]However, the Labor Arbiter dismissed the complaint on the ground
that the change in the work schedule and the elimination of the 30-minute paid lunch
break of the factory workers constituted a valid exercise of management prerogative and
that the new work schedule, break time and one-hour lunch break did not have the effect
of diminishing the benefits granted to factory workers as the working time did not exceed
eight (8) hours.
The Labor Arbiter further held that the factory workers would be justly enriched if they
continued to be paid during their lunch break even if they were no longer on call or
required to work during the break. He also ruled that the decision in the earlier Sime
Darby case[3] was not applicable to the instant case because the former involved
discrimination of certain employees who were not paid for their 30-minute lunch break
while the rest of the factory workers were paid; hence, this Court ordered that the
discriminated employees be similarly paid the additional compensation for their lunch
break.
Private respondent appealed to respondent National Labor Relations Commission
(NLRC) which sustained the Labor Arbiter and dismissed the appeal. [4] However, upon
motion for reconsideration by private respondent, the NLRC, this time with two (2) new
commissioners replacing those who earlier retired, reversed its arlier decision of 20 April
1994 as well as the decision of the Labor Arbiter.[5] The NLRC considered the decision of
this Court in the Sime Darby case of 1990 as the law of the case wherein petitioner was
ordered to pay the money value of these covered employees deprived of lunch and/or
working time breaks. The public respondent declared that the new work schedule
deprived the employees of the benefits of time-honored company practice of providing its
employees a 30-minute paid lunch break resulting in an unjust diminution of company
privileges prohibited by Art. 100 of the Labor Code, as amended. Hence, this petition
alleging that public respondent committed grave abuse of discretion amounting to lack or
excess of jurisdiction: (a) in ruling that petitioner committed unfair labor practice in the
implementation of the change in the work schedule of its employees from 7:45 a.m. 3:45
p.m. to 7:45 a.m. 4:45 p.m. with one-hour lunch break from 12:00 nn to 1:00 p.m.; (b) in
holding that there was diminution of benefits when the 30-minute paid lunch break was
eliminated; (c) in failing to consider that in the earlier Sime Darby case affirming the
decision of the NLRC, petitioner was authorized to discontinue the practice of having a
30-minute paid lunch break should it decide to do so; and (d) in ignoring petitioners
inherent management prerogative of determining and fixing the work schedule of its
employees which is expressly recognized in the collective bargaining agreement between
petitioner and private respondent.
The Office of the Solicitor General filed in lieu of comment a manifestation and motion
recommending that the petition be granted, alleging that the 14 August 1992
memorandum which contained the new work schedule was not discriminatory of the union
members nor did it constitute unfair labor practice on the part of petitioner.
We agree, hence, we sustain petitioner. The right to fix the work schedules of the
employees rests principally on their employer. In the instant case petitioner, as the

44
employer, cites as reason for the adjustment the efficient conduct of its business
operations and its improved production.[6] It rationalizes that while the old work schedule
included a 30-minute paid lunch break, the employees could be called upon to do jobs
during that period as they were on call. Even if denominated as lunch break, this period
could very well be considered as working time because the factory employees were
required to work if necessary and were paid accordingly for working. With the new work
schedule, the employees are now given a one-hour lunch break without any interruption
from their employer. For a full one-hour undisturbed lunch break, the employees can
freely and effectively use this hour not only for eating but also for their rest and comfort
which are conducive to more efficiency and better performance in their work. Since the
employees are no longer required to work during this one-hour lunch break, there is no
more need for them to be compensated for this period. We agree with the Labor Arbiter
that the new work schedule fully complies with the daily work period of eight (8) hours
without violating the Labor Code.[7] Besides, the new schedule applies to all employees in
the factory similarly situated whether they are union members or not. [8]
Consequently, it was grave abuse of discretion for public respondent to equate the
earlier Sime Darby case[9] with the facts obtaining in this case. That ruling in the former
case is not applicable here. The issue in that case involved the matter of granting lunch
breaks to certain employees while depriving the other employees of such breaks. This
Court affirmed in that case the NLRCs finding that such act of management was
discriminatory and constituted unfair labor practice.
The case before us does not pertain to any controversy involving discrimination of
employees but only the issue of whether the change of work schedule, which
management deems necessary to increase production, constitutes unfair labor
practice. As shown by the records, the change effected by management with regard to
working time is made to apply to all factory employees engaged in the same line of work
whether or not they are members of private respondent union. Hence, it cannot be said
that the new scheme adopted by management prejudices the right of private respondent
to self-organization.
Every business enterprise endeavors to increase its profits. In the process, it may
devise means to attain that goal. Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer to exercise what are clearly
management prerogatives.[10] Thus, management is free to regulate, according to its own
discretion and judgment, all aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, processes to be followed, supervision
of workers, working regulations, transfer of employees, work supervision, lay off of
workers and discipline, dismissal and recall of workers.[11] Further, management retains
the prerogative, whenever exigencies of the service so require, to change the working
hours of its employees. So long as such prerogative is exercised in good faith for the
advancement of the employers interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements,
this Court will uphold such exercise.[12]
While the Constitution is committed to the policy of social justice and the protection
of the working class, it should not be supposed that every dispute will be automatically
decided in favor of labor. Management also has right which, as such, are entitled to
respect and enforcement in the interest of simple fair play. Although this Court has
inclined more often than not toward the worker and has upheld his cause in his conflicts
with the employer, such as favoritism has not blinded the Court to the rule that justice is
in every case for the deserving, to be dispensed in the light of the established facts and
the applicable law and doctrine.[13]

45
 WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor
Relations Commission dated 29 November 1994 is SET ASIDE and the decision of the
Labor Arbiter dated 26 November 1993 dismissing the complaint against petitioner for
unfair labor practice is AFFIRMED.
SO ORDERED.
Davide, Jr., (Chairman), Vitug, Panganiban, and Quisumbing, JJ., concur.

[1] Rollo, p. 34.

[2] G.R. No. 87838, 26 February 1990.
[3] Id.
[4] Rollo, p. 70.
[5] Rollo, p. 26.
[6] Rollo, p. 11.
[7] Rollo, p. 36.
[8] Rollo, p. 42.
[9] See Note 2.
[10] San Miguel Brewery Sales Force v. Ople, G.R. No. 53515. 8 February 1989, 170 SCRA 25; Abbot

Laboratories v. NLRC, 154 S 713.

[11] NLU v. Insular Yebana Co., L-15363, 31 July 1961, 2 SCRA 924.
[12] Union Carbide Labor Union v. Union Carbide Phils., Inc., G.R. No. 41314, 13 November 1992, 215

SCRA 554.
[13] Cruz v. Medina, G.R. No. 73053, 15 September 1989, 177 SCRA 565.

46
 THIRD DIVISION

[G.R. No. 105963. August 22, 1996.]

PAL EMPLOYEES SAVINGS AND LOAN ASSOCIATION, INC. (PESALA), Petitioner, v. NATIONAL
LABOR RELATIONS COMMISSION and ANGEL V. ESQUEJO, Respondent.

SYLLABUS

1. CIVIL LAW; CONTRACTS; CONTRACTS OF LABOR; NOT ORDINARY CONTRACTS. — Generally speaking,
contracts are respected as the law between the contracting parties, and they may establish such
stipulations, clauses, terms and conditions as they may see fit; and for as long as such agreements are not
contrary to law, morals, good customs, public policy or public order, they shall have the force of law
between them. However,." . ., while it is the inherent and inalienable right of every man to have the utmost
liberty of contracting, and agreements voluntarily and fairly made will be held valid and enforced in the
courts, the general right to contract is subject to the limitation that the agreement must not be in violation
of the Constitution, the statute or some rule of law (12 Am. Jur. pp. 641-642)." And under the Civil Code,
contracts of labor are explicitly but are impressed with public interest. Inasmuch as in this particular
instance the contract is question would have been deemed in violation of pertinent labor laws, the provisions
of said laws would prevail over the terms of the contract, and private respondent would still be entitled to
overtime pay.

2. ID.; ID.; INTERPRETATION OF CONTRACTS; IN ORDER TO JUDGE THE INTENTION OF THE CONTRACTING
PARTIES, THEIR CONTEMPORANEOUS AND SUBSEQUENT ACTS SHALL BE PRINCIPALLY CONSIDERED;
APPLICATION OF THE RULE IN CASE AT BAR. — We cannot agree with petitioner’s assertion that by judging
the intention of the parties from their contemporaneous acts it would appear that the "failure of respondent
Esquejo to claim such alleged overtime pay since 1986 clearly demonstrate(s) that the agreement on his
gross salary as contained in his appointment paper is conclusive on the matter of the inclusion of overtime
pay." This is simply not the case here. "The interpretation of the provision in question having been put in
issue, the Court is constrained to determine which interpretation is more in accord with the intent of the
parties. To ascertain the intent of the parties, the Court is bound to look at their contemporaneous and
subsequent acts. Private respondent’s silence and failure to claim his overtime pay since 1986 cannot be
considered as proving the understanding on his part that the rate provided in his employment contract
covers overtime pay. Precisely, that is the very question raised by private respondent with the arbiter,
because contrary to the claim of petitioner, private respondent believed that he was not paid his overtime
pay and that such pay is not covered by the rate agreed upon and stated in his Appointment Memorandum.
The subsequent act of private respondent in filing money claims negates the theory that there was clear
agreement as to the inclusion of his overtime pay in the contracted salary rate.

3. ID.; ID.; FAILURE OF AN EMPLOYEE TO ASSERT HIS RIGHT IMMEDIATELY UPON VIOLATION THEREOF;
CANNOT IPSO FACTO BE DEEMED A WAIVER OF THE OPPRESSION; REASONS. — When an employee fails to
assert his right immediately upon violation thereof, such failure cannot ipso facto be deemed as a waiver of
the oppression. We must recognize that the worker and his employer are not equally situated. When a
worker keeps silent inspite of flagrant violations of his rights, it may be because he is seriously fearful of
losing his job. And the dire consequences thereof on his family and his dependents prevent him from
complaining. In short, his thoughts of sheer survival weigh heavily against launching an attack upon his
more powerful employer.

4. ID.; ID.; ID.; EQUITABLE DOCTRINE OF LACHES; CANNOT BE CHARGED AGAINST A PARTY WHO HAS
NOT INCURRED UNDUE DELAY IN THE ASSERTION OF HIS RIGHTS. — Petitioner’s allegation that private
respondent is guilty of laches is likewise devoid of merit. Laches is defined as failure or neglect for an
unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should
have been done earlier. It is negligence or omission to assert a right within an unreasonable time,
warranting the presumption that the party entitled to assert it has either abandoned or declined to assert it.
The question of laches is addressed to the sound discretion of the court, and since it is an equitable doctrine,
its application is controlled by equitable considerations. It cannot work to defeat justice or to perpetrate
fraud and injustice. Laches cannot be charged against any worker when he has not incurred undue delay in
the assertion of his rights. Private respondent filed his complaint within the three-year reglementary period.
He did not sleep on his rights for an unreasonable length of time.

47
 DECISION

PANGANIBAN, J.:

Is an employee entitled to overtime pay for work rendered in excess of eight hours a day, given the fact that
his employment contract specifies a twelve-hour workday at a fixed monthly salary rate that is above the
legal minimum wage? This is the principal question answered by this Court in resolving this petition which
challenges the validity and legality of the Decision 1 of public respondent National Labor Relations
Commission 2 promulgated on April 23, 1992 in NLRC NCR CA No. 002522-91 entitled "Angel V. Esquejo v.
PAL Employees Savings and Loan Association" which Decision modified (slightly as to amount) the earlier
decision 3 dated November 11, 1991 of the labor arbiter granting private respondent’s claim for overtime
pay.

The Facts and the Case Below

On October 10, 1990, private respondent with public respondent a complaint docketed as NLRC NCR Case
No. 10-05457-90 for non-payment of overtime pay and non-payment of the P25.00 statutory minimum
wage increase mandated by Republic Act No. 6727.

Subsequently, private respondent filed a supplemental complaint for illegal suspension with prayer for
reinstatement and payment of backwages. However, before the case was submitted for resolution, private
respondent filed a "Motion to Withdraw Supplemental Complaint" on the ground that a separate action for
illegal suspension, illegal dismissal, etc. had been filed and was pending before another labor arbiter. Hence,
the issue decided by public respondent and which is under review by this Court in this petition involves only
his claim for overtime pay. On November 26, 1990, private respondent filed his position paper 4 with the
labor arbiter alleging the following facts constituting his cause of action:
jgc:chan robles. com.ph

"Complainant (herein private respondent) started working with respondent (PESALA) sometime last March 1,
1986 as a company guard and was receiving a monthly basic salary of P1,990.00 plus an emergency
allowance in the amount of P510.00. He was required to work a (sic) twelve (12) hours a day, a (sic) xerox
copies of his appointment are hereto attached and marked as Annexes ‘C’ and ‘D’ of this position paper;

That on December 10, 1986, respondent Board of Directors in its board meeting held on November 21, 1986
approved a salary adjustment for the complainant increasing his monthly basic salary to P2,310.00 and an
emergency allowance of P510.00, a xerox copy of the salary adjustment is hereto attached and marked as
Annex ‘E’ hereof;

That on August 25, 1987, because of his impressive performance on his assigned job, another adjustment
was approved by the President of the association increasing his monthly basic salary to P2,880.00, a xerox
copy of the salary adjustment is hereto attached and marked as Annex ‘ F’ hereof;

That from January 4, 1988 up to June 1990, several salary adjustments were made by the respondent on
the monthly basic salary of the complainant including a letter of appreciation for being as (sic) one of the
outstanding performers during the first half of 1988, the latest salary prior to the filing of the complaint was
P3,720.00, a (sic) xerox copies of all the documents relative to the salary adjustments are hereto attached
and marked as annexes ‘G’, ‘H’, ‘I’, ‘J’ and ‘K’ of this position paper;

That during his entire period of employment with respondent, the former was required to perform overtime
work without any additional compensation from the latter. It was also at this point wherein the respondent
refused to give the P25.00 increase on the minimum wage rates as provided for by law. On October 12,
1990, complainant was suspended for the period of thirty seven (37) days for an offense allegedly
committed by the respondent sometime last August 1989.’

On December 13, 1990, petitioner PESALA filed its position paper 5 alleging among other things: jgc:chan roble s.com. ph

"On 01 March, 1986, complainant was appointed in a permanent status as the company guard
of Respondent. In the Appointment Memorandum dated February 24, 1986 which has the conformity of
complainant, it is expressly stipulated therein that complainant is to receive a monthly salary of P1,900.00
plus P510.00 emergency allowance for a twelve (12) hours work per day with one (1) day off. A copy of said
appointment memorandum is hereto attached as Annex ‘A’ and made an integral part hereof.

On 01 December, 1986, the monthly salary of complainant was increased to P2,310.00 plus P510.00
emergency allowance. Later, or on 01 January, 1988, the monthly salary of complainant was again
increased to P3,420.00. And still later, or on 01 February, 1989, complainant’s monthly salary was increased

48
to P3,720.00. Copies of the memoranda evidencing said increase are hereto attached as Annexes ‘ B’, ‘B-1’
and ‘B-2’ and are made integral parts hereof.

On 29 November, 1989, the manager of respondent in the person of Sulpicio Jornales wrote to complainant
informing the latter that the position of a guard will be abolished effective November 30, 1989, and that
complainant will be re-assigned to the position of a ledger custodian effective December 1, 1989.

Pursuant to the above-mentioned letter-agreement of Mr. Jornales, complainant was formally appointed by
respondent as its ledger custodian on December 1, 1989. The monthly salary of complainant as ledger
custodian starting on December 1, 1989 was P3,720.00 for forty (40) working hours a week or eight (8)
working hours a day. A copy of said Appointment memorandum is hereto attached as Annex ‘C’ and made
an integral part hereof.

On 29 August, 1990, complainant was administratively charged with serious misconduct or disobedience of
the lawful orders of respondent or its officers, and gross and habitual neglect of his duties, committed as
follows:
cha nro b1es vi rtua l 1aw lib ra ry

‘1. Sometime in August, 1989, you (referring to complainant Esquejo) forwarded the checks corresponding
to the withdrawals of Mr. Jose Jimenez and Mr. Anselmo dela Banda of Davao and Iloilo Station,
respectively, without the signature of the Treasurer and the President of PESALA, in violation of your duty
and function that you should see to it that the said checks should be properly signed by the two PESALA
officials before you send out said checks of their addresses. As a result of which, there was a substantial
delay in the transmission of the checks to its owners resulting to an embarrassment on the part of the
PESALA officers and damage and injury to the receipients (sic) of the checks since they needed the money
badly.

2. Sometime in August, 1989, before you (complainant) went on your vacation, you failed to leave or
surrender the keys of the office, especially the keys to the main and back doors which resulted to damage,
injury and embarrassment to PESALA. This is a gross violation of your assigned duties and you disobeyed
the instruction of your Superior.’

x x x

Herein complainant was informed of the aforequoted charges against him and was given the opportunity to
be heard and present evidence in his behalf as shown by the Notice of Hearing (Annex ‘D’ hereof) sent to
him. Complainant did in fact appeared (sic) at the hearing, assisted by his counsel, Atty. Mahinardo G.
Mailig, and presented his evidence in the form of a Counter-Affidavit. A copy of said Counter-Affidavit is
hereto attached as Annex ‘E’ and made an integral part hereof.

On 12 October, 1990, after due deliberation on the merits of the administrative charges filed against herein
complainant, the Investigating Officer in the person of Capt. Rogelio Enverga resolved the same imposing a
penalty of suspension of herein complainant, thus: chanrob1es v irt ual 1aw l ibra ry

‘PENALTY: 1. For the first offense, you (referring to complainant Esquejo) are suspended for a period of
thirty (30) working days without pay effective October 15, 1990.

2. For the second offense, your (sic) are suspended for a period of seven (7) working days without pay
effective from the date the first suspension will expire’." crala w virtua1aw l ibra ry

On March 7, 1991, private respondent filed a detailed and itemized computation of his money claims totaling
P107,495.90, to which petitioner filed its comment on April 28, 1991. The computation filed on March 7,
1991 was later reduced to P65,302.80. To such revised computation, the petitioner submitted its comment
on April 28, 1991.

Thereafter, labor arbiter Cornelio L. Linsangan rendered a decision dated November 11, 1991 granting
overtime pay as follows: jgc:chan rob les.com. ph

"WHEREFORE, judgment is hereby rendered: cha nrob 1es vi rtua l 1aw lib rary

1. Granting the claim for overtime pay covering the period October 10, 1987 to November 30, 1989 in the
amount of P28,344.55.

2. The claim for non-payment of P25.00 salary increase pursuant to Republic Act No. 6727 is dismissed for
lack of merit." cralaw virt ua1aw li bra ry

Aggrieved by the aforesaid decision, petitioner appealed to public respondent NLRC only to be rejected on
April 23, 1992 via the herein assailed Decision, the dispositive portion of which reads as follows: jgc:chan robles .com.p h

49
"WHEREFORE, premises considered, the award is reduced to an amount of TWENTY EIGHT THOUSAND
SIXTY-SIX PESOS AND 45/100 (P28,066.45). In all other respects, the Decision under review is hereby
AFFIRMED and the appeal DISMISSED for lack of merit." cralaw virtua1aw l ibra ry

No motion for reconsideration of the Decision was filed by the petitioner. 6

What transpired afterwards is narrated by the Solicitor General in his memorandum, 7 which we presume to
be correct since petitioner did not contradict the same in its memorandum: jgc:chanro bles. com.ph

". . . Petitioner did not appeal the Decision of respondent NLRC. When it became final, the parties were
called to a conference on June 29, 1992 to determine the possibility of the parties’ voluntary compliance
with the Decision (Order of Labor Arbiter Linsangan. dated July 23, 1992).

. . . In their second conference, held on July 15, 1992, petitioner proposed to private respondent a package
compromise agreement in settlement of all pending claims. Private respondent for his part demanded
P150,000.00 as settlement of his complaint which was turned down by petitioner as too excessive.
Unfortunately, no positive results were achieved.

As a result, a pleading was filed by petitioner captioned: Motion to Defer Execution and Motion to Re-
Compute alleged overtime pay. Petitioner states that ‘quite recently, the Employee Payroll Sheets pertaining
to the salaries, overtime pay, vacation and sick leave of Angel Esquejo were located’.

. . . Petitioner’s Motion to Defer Execution and Motion to Re-Compute respondent’s overtime pay was denied
in an Order dated July 23, 1992.

. . . Petitioner moved to reconsider the Denial Order on July 27, 1992. Private respondent opposed." cralaw virtua1aw l ibra ry

In the meantime, petitioner filed the instant special civil action for certiorari before this Court on July 10,
1992. Later, on July 17, 1992, citing as reason that." . . quite recently, the Employee Payroll Sheets which
contained the salaries and overtime pay received by respondent Esquejo were located in the bodega of the
petitioner and based on said Payroll Sheets, it appears that substantial overtime pay have been paid to
respondent Esquejo in the amount of P24,283.22 for the period starting January 1987 up to November
1989", petitioner asked this Court for the issuance of a temporary restraining order or writ of preliminary
injunction. On the same date of July 17, 1992, a "Supplemental Petition Based On Newly Discovered
Evidence" was filed by petitioner to which was attached photocopies of payroll sheets of the aforestated
period.

On July 29, 1992, this Court issued a temporary restraining order enjoining the respondents from enforcing
the Decision dated April 23, 1992 issued in NLRC NCR CA No. 002522-91, the case below subject of the
instant petition.

The Issues

For issues have been raised by the petitioner in its effort to obtain a reversal of the assailed Decision, to
wit:chan rob1e s vi rtual 1aw lib rary

"I

THE RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION WHEN IT RULED THAT PRIVATE
RESPONDENT IS ENTITLED TO OVERTIME PAY WHEN THE SAME IS A GROSS CONTRAVENTION OF THE
CONTRACT OF EMPLOYMENT BETWEEN PETITIONER AND RESPONDENT ESQUEJO AND A PATENT
VIOLATION OF ARTICLES 1305, 1306 AND 1159 OF THE CIVIL CODE.

II

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

III

THE RESPONDENT NLRC COMMITTED A GRAVE ABUSED OF DISCRETION WHEN IT RULED THAT PRIVATE
RESPONDENT WAS NOT PAID THE OVERTIME PAY BASED ON THE COMPUTATION OF LABOR ARBITER
CORNELIO LINSANGAN WHICH WAS AFFIRMED BY SAID RESPONDENT NLRC WHEN THE SAME IS NOT

50
SUPPORTED BY SUBSTANTIAL EVIDENCE AND IT, THEREFORE, VIOLATED THE CARDINAL PRIMARY RIGHTS
OF PETITIONER AS PRESCRIBED IN ‘ANG TIBAY VS. CIR’ 69 PHIL. 635.

IV

WHETHER OR NOT THE PETITIONER’S SUPPLEMENTAL PETITION BASED ON NEWLY DISCOVERED EVIDENCE
MAY BE ADMITTED AS PART OF ITS EVIDENCE IT BEING VERY VITAL TO THE JUDICIOUS DETERMINATION
OF THE CASE." (Rollo, p. 367)

In essence the above issues boil down to this query: Is an employee entitled to overtime pay for work
rendered in excess of the regular eight hour day given the fact that he entered into a contract of labor
specifying a work-day of twelve hours at a fixed monthly rate above the legislative minimum wage?

The Court’s Ruling

At the outset, we would like to rectify the statement made by the Solicitor General that the "petitioner did
not appeal from the Decision of (public) respondent NLRC." The elevation of the said case by appeal is not
possible. The only remedy available from an order or decision of the NLRC is a petition for certiorariunder
Rule 65 of the Rules of Court alleging lack or excess of jurisdiction or grave abuse of discretion. 8 The
general rule now is that the special civil action of certiorari should be instituted within a period of three
months. 9 Hence, when the petition was filed on July 10, 1992, three months had not yet elapsed from
petitioner’s receipt of the assailed Decision (should really be from receipt of the order denying the motion for
reconsideration).

However, aside from failing to show clearly grave abuse of discretion on the part of respondent NLRC, which
we shall discuss shortly, the petitioner also failed to comply with the mandatory requirement of filing a
motion for reconsideration from the Decision of the Public respondent before resorting to the remedy
of certiorari. We have previously held that:jgc:chan robles. com.ph

". . . .The implementing rules of respondent NLRC are unequivocal in requiring that a motion for
reconsideration of the order, resolution, or decision of respondent commission should be seasonably filed as
a precondition for pursuing any further or subsequent remedy, otherwise the said order, resolution, or
decision shall become final and executory after ten calendar days from receipts thereof. Obviously, the
rationale therefor is that the law intends to afford the NLRC an opportunity to rectify such errors or mistakes
it may have lapsed into before resort to the courts of justice can be had. This merely adopts the rule that
the function of a motion for reconsideration is to point to the court the error that it may have committed and
to give it a chance to correct itself." 10

"Additionally, the allegations in the petition clearly show that petitioner failed to file a motion for
reconsideration of the assailed Resolution before filing the instant petition. As correctly argued by private
respondent Rolando Tan, such failure constitutes a fatal infirmity . . . . The unquestioned rule in his
jurisdiction is that certiorari will lie only if there is no appeal or any other plain, speedy and adequate
remedy in the ordinary course of law against the acts of public Respondent. In the instant case, the plain
and adequate remedy expressly provided by law was a motion for reconsideration of the assailed decision,
based on palpable or patent errors, to be made under oath and filed within ten (10) calendar days from
receipt of the questioned decision. And for failure to avail of the correct remedy expressly provided by law,
petitioner has permitted the subject Resolution to become final and executory after the lapse of the ten day
period within which to file such motion for reconsideration." 11

In brief, the filing of the instant petition was premature and did not toll the running of the 3 month period.
Thus, the assailed Decision became final and executory. On this ground alone, this petition must therefore
be dismissed.

However, in view of the importance of the substantial query raised in the petition, we have resolved to
decide the case on the merits also.

The First Issue: Was Overtime Pay Included?

The main disagreement between the parties centers on how the contract of employment of the private
respondent should be interpreted. The terms and conditions thereof read as follows:

"Date: February 24, 1986

NAME :ESQUEJO, ANGEL

NATURE OF ACTION :APPOINTMENT

51
FROM : chanrob1e s vi rtual 1aw lib rary

POSITION TITLE :COMPANY GUARD

TO :chanrob1e s virtual 1aw lib rary

STATUS :PERMANENT

EFFECTIVE DATE :MARCH 1, 1986

FROM :P1,990.00 per month

plus P510.00 emergency

allowance: chanrob1es vi rt ual 1aw li bra ry

SALARY : chanrob 1es vi rtual 1aw lib rary

TO :chanrob1e s virtual 1aw lib rary

REMARKS :To confirm permanent

appointment as company

guard who will render 12

hours a day with one (1)

day off

RECOMMENDED BY: APPROVED BY: chanrob1es vi rt ual 1aw li bra ry

(Signed) (Signed)

SULPICIO B. JORNALES CATALINO F. BANEZ

(Signed)

ANGEL V. ESQUEJO" 12

Petitioner faults the public respondent when it said that there was "no meeting of minds between the
parties," since the employment contract "explicitly states without any equivocation" that the overtime pay
for work rendered for four (4) hours in excess of the eight (8) hour regular working period is already
included in the P1,990.00 basic salary. "This is very clear from the fact that the appointment states 12 hours
a day work." 13 By its computations, 14 petitioner tried to illustrate that private respondent was paid more
than the legally required minimum salary then prevailing.

To prove its contention, petitioner argues that: jgc:chanro bles.c om.ph

"The legal minimum wage prescribed by our statutes, the legally computed overtime pay and the monthly
salaries being paid by petitioner to respondent Esquejo would show that indeed, the overtime pay has
always been absorbed and included in the said agreed monthly salaries.

In 1986, the legal minimum salary of Esquejo is computed as follows (per Appointment Memoranda dated
February 4, 1986 and June 6, 1986 [Annex ‘C’ and ‘D’ of Annex ‘B’ of this Petition]): chanrob1es vi rt ual 1aw li bra ry

54 x 314 days

————

12 months = P1,413.00 monthly salary

The hourly overtime pay is computed as follows: chan rob1es v irt ual 1aw l ibra ry

54/8 hours = P6.75 x 4 hrs. = P27.00

P27.00 x 1.25 = P33.75 x 20 (should be 26)days = P887.50

52
(should be P877.50)

P1,413.00 — legal minimum wage

+ 887.50(877.50) — legal overtime pay

————

P2,290.50 — amount due to respondent

Esquejo under the law

P2,500.00 — gross salary of Esquejo per contract

-2,290.50

————

P 209.50 — Difference" (Rollo, p. 371).

On the other hand, private respondent in his position paper claims that overtime pay is not so incorporated
and should be considered apart from the P1,990.00 basic salary. 15

We find for the private respondent and uphold the respondent NLRC’s ruling that he is entitled to overtime
pay.

Based on petitioner’s own computations, it appears that the basic salary plus emergency allowance given to
private respondent did not actually include the overtime pay claimed by private Respondent. Following the
computations it would appear that by adding the legal minimum monthly salary which at the time was
P1,413.00 and the legal overtime pay P877.50, the total amount due the private respondent as basic salary
should have been P2,290.50. By adding the emergency cost of living allowance (ECOLA) of P510.00 as
provided by the employment contract, the total basic salary plus emergency allowance should have
amounted to P2,800.50. However, petitioner admitted that it actually paid private respondent P1,990.00 as
basic salary plus P510.00 emergency allowance or a total of only P2,500.00. Undoubtedly, private
respondent was shortchanged in the amount of P300.50. Petitioner’s own computations thus clearly
establish that private respondent’s claim for overtime pay is valid.

Side Issue: Meeting of the Minds?

The petitioner contends that the employment contract between itself and the private respondent "perfectly
satisfies" the requirements of Article 1305 of the Civil Code as to the "meeting of the minds" such that there
was a "legal and valid contract" entered into by the parties. Thus, private respondent "cannot be allowed to
question the said salary arrangements for the extra 4 ours overtime pay after the lapse of 4 years and claim
only now that the same is not included in the terms of the employment contract." 16

We disagree. Public respondent correctly found no such agreement as to overtime pay. In fact, the contract
was definite only as to the number of hours of work to be rendered but vague as to what is covered by the
salary stipulated. Such ambiguity was resolved by the public respondent, thus: jgc:chan rob les.com. ph

"In resolving the issue of whether or not complainant’s overtime pay for the four (4) hours of work rendered
in excess of the normal eight hour work period is incorporated in the computation of his monthly salary,
respondent invokes its contract of employment with the complainant. Said contract appears to be in the
nature of a document identifiable as an appointment memorandum which took effect on March 1, 1986
(Records, p. 56) by virtue of which complainant expressed conformity to his appointment as company guard
with a work period of twelve (12) hours a day with one (1) day off. Attached to this post is a basic salary of
P1,990.00 plus P510.00 emergency allowance. It is (a) cardinal rule in the interpretation of a contract that if
the terms thereof are clear and leave no doubt upon the intention of the contracting parties, then the literal
meaning of its stipulations shall control. (Art. 1370, Civil Code of the Philippines). To this, respondent seeks
refuge. Circumstances, however, do not allow us to consider this rule in the light of complainant’s claim for
overtime pay which is an evident indication that as to this matter, it cannot be said that there was a meeting
of the minds between the parties, it appearing that respondent considered the four (4) hours work in excess
of the eight hours as overtime work and compensated by way of complainant’s monthly salary while on the
latter’s part, said work rendered is likewise claimed as overtime work but yet unpaid in view of
complainant’s being given only his basic salary. Complainant claims that the basic salary could not possibly
include therein the overtime pay for his work rendered in excess of eight hours. Hence, respondent’s
Appointment Memorandum cannot be taken and accorded credit as it is so worded in view of this ambiguity.
We therefore proceed to determine the issue in the light of existing law related thereto. While it is true that
the complainant received a salary rate which is higher that the minimum provided by law, it does not
however follow that any additional compensation due the complainant can be offset by his salary in excess

53
of the minimum, especially in the absence of an express agreement to that effect. To consider otherwise
would be in disregard of the rule of nondiminution of benefits which are above the minimum being extended
to the employees. Furthermore, such arrangement is likewise in disregard of the manner required by the law
on how overtime compensation must be determined. There is further the possibility that in view of
subsequent increases in the minimum wage, the existing salary for twelve (12) hours could no longer
account for the increased wage level together with the overtime rate for work rendered in excess of eight
hours. This fertile ground for a violation of a labor standards provision can be effectively thwarted if there is
a clear and definite delineation between an employee’s regular and overtime compensation. It is, further
noted that a reading of respondent’s Appointment Memoranda issued to the complainant on different dates
(Records, pp. 56-60) shows that the salary being referred to by the respondent which allegedly included
complainant’s overtime pay, partakes of the nature of a basic salary and as such, does not contemplate any
other compensation above thereof including complainant’s overtime pay. We therefore affirm complainant’s
entitlement to the latter benefit." 17

Petitioner also insists that private respondent’s delay in asserting his right/claim demonstrates his
agreement to the inclusion of overtime pay in his monthly salary rate. This argument is specious. First of all,
delay cannot be attributed to the private Respondent. He was hired on March 1, 1986. His twelve-hour work
periods continued until November 30, 1989. On October 10, 1990 (just before he was suspended) he filed
his money claims with the labor arbiter. Thus, the public respondent in upholding the decision of the arbiter
computed the money claims for the three year period from the date the claims were filed, with the
computation starting as of October 10, 1987 onwards.

In connection with the foregoing, we should add that even if there had been a meeting of the minds in the
instant case, the employment contract could not have effectively shielded petitioner from the just and valid
claims of private Respondent. Generally speaking, contracts are respected as the law between the
contracting parties, and they may establish such stipulations, clauses, terms and conditions as they may see
fit; and for as long as such agreements are not contrary to law, morals, good customs, public policy or
public order, they shall have the force of law between them. 18 However,." . ., while it is the inherent and
inalienable right of every man to have the utmost liberty of contracting, and agreements voluntarily and
fairly made will be held valid and enforced in the courts, the general right to contract is subject to the
limitation that the agreement must not be in violation of the Constitution, the statute or some rule of law
(12 Am. Jur. pp. 641-642)." 19 And under the Civil Code, contracts of labor are explicitly subject to the
police power of the State because they are not ordinary contracts but are impressed with public interest. 20
Inasmuch as in this particular instance the contract is question would have been deemed in violation of
pertinent labor laws, the provisions of said laws would prevail over the terms of the contract, and private
respondent would still be entitled to overtime pay.

Moreover, we cannot agree with petitioner’s assertion that by judging the intention of the parties from their
contemporaneous acts it would appear that the "failure of respondent Esquejo to claim such alleged
overtime pay since 1986 clearly demonstrate(s) that the agreement on his gross salary as contained in his
appointment paper is conclusive on the matter of the inclusion of overtime pay." (Rollo, pp. 13-15; also,
Rollo, pp. 378-380). This is simply not the case here. "The interpretation of the provision in question having
been put in issue, the Court is constrained to determine which interpretation is more in accord with the
intent of the parties. 21 To ascertain the intent of the parties, the Court is bound to look at their
contemporaneous and subsequent acts. 22 Private respondent’s silence and failure to claim his overtime pay
since 1986 cannot be considered as proving the understanding on his part that the rate provided in his
employment contract covers overtime pay. Precisely, that is the very question raised by private respondent
with the arbiter, because contrary to the claim of petitioner, private respondent believed that he was not
paid his overtime pay and that such pay is not covered by the rate agreed upon and stated in his
Appointment Memorandum. The subsequent act of private respondent in filing money claims negates the
theory that there was clear agreement as to the inclusion of his overtime pay in the contracted salary rate.
When an employee fails to assert his right immediately upon violation thereof, such failure cannot ipso facto
be deemed as a waiver of the oppression. We must recognize that the worker and his employer are not
equally situated. When a worker keeps silent inspite of flagrant violations of his rights, it may be because he
is seriously fearful of losing his job. And the dire consequences thereof on his family and his dependents
prevent him from complaining. In short, his thoughts of sheer survival weigh heavily against launching an
attack upon his more powerful employer.

The petitioner contends that the agreed salary rate in the employment contract should be deemed to cover
overtime pay, otherwise serious distortions in wages would result "since a mere company guard will be
receiving a salary much more that the salaries of other employees who are much higher in rank and position
than him in the company." (Rollo, p. 16) We find this argument flimsy and undeserving of consideration.
How can paying an employee the overtime pay due him cause serious distortions in salary rates or scales?
And how can "other employees" be aggrieved when they did not render any overtime service?

Petitioner’s allegation that private respondent is guilty of laches is likewise devoid of merit. Laches is defined
as failure or neglect for an unreasonable and unexplained length of time to do that which, by exercising due
diligence, could or should have been done earlier. It is negligence or omission to assert a right within an
unreasonable time, warranting the presumption that the party entitled to assert it has either abandoned or

54
declined to assert it. 23 The question of laches is addressed to the sound discretion of the court, and since it
is an equitable doctrine, its application is controlled by equitable considerations. It cannot work to defeat
justice or to perpetrate fraud and injustice. 24 Laches cannot be charged against any worker when he has
not incurred undue delay in the assertion of his rights. Private respondent filed his complaint within the
three-year reglementary period. He did not sleep on his rights for an unreasonable length of time.25 cralaw:red

Second issue: Unjust Enrichment?

Petitioner contends that the award of overtime pay is "plain and simple unjust and illegal enrichment." Such
award "in effect sanctioned and approved the grant of payment to respondent Esquejo which will result in
double payment for the overtime work rendered by paid employee." 26 Also, per petitioner," (n)othing in
the Labor Code nor in the Rules and Regulations issued in the implementation thereof prohibits the manner
of paying the overtime pay (by) including the same in the salary." 27

This is begging the issue. To reiterate, the main question raised before the labor tribunals is whether the
provision on wages in the contract of employment already included the overtime pay for four (4) working
hours rendered six days a week in excess of the regular eight-hour work. And we hold that the tribunals
below were correct in ruling that the stipulated pay did not include overtime. Hence, there can be no undue
enrichment in claiming what legally belongs to private Respondent.

Third Issue: Basis of NLRC’s Decision?

Petitioner assails respondent NLRC for adopting that portion of the decision of the labor arbiter, which reads
as follows:
jgc:chan roble s.com.p h

". . . Our conclusion is quite clear considering the fact that at the time of his employment in March 1986,
during which the minimum wage was P37.00 a day for 8 hours work, complainant’s total take-home-pay
working 12 hours a day including ECOLA, was only P2,500.00 a month. And immediately prior to his
appointment as Ledger Custodian effective December 1, 1989, with the working hours reduced to 8 hours or
40 hours a week, complainant’s monthly salary was P3,420.00 (instead of P5,161.01 minimum monthly with
4 hours overtime work everyday, or a difference of P1,741.01 a month).

"Accordingly, the claim for overtime pay reckoned from October 10, 1987 up to November 30, 1989 should
be, as it is hereby, granted." 28 (Rollo, p. 201).

Petitioner believes that by adopting the above-quoted portion of the arbiter’s decision, respondent NLRC
violated the cardinal rule that its decisions must be supported by substantial evidence. In doing so,
petitioner claims that the NLRC violated its primary rights as enunciated in the case of Ang Tibay v. CIR. 29
In other words, petitioner holds the view that the arbiter’s decision failed to explain how the amount of
P5,161.01 was arrived at. 30

Petitioner is in error. The public respondent did not adopt in toto the aforequoted portion of the arbiter’s
decision. It made its own computations and arrived at a slightly different amount, with a difference of
P278.10 from the award granted by the labor arbiter. The refute petitioner’s claim, public respondent
attached (as Annexes "1", "1-A" "1-B" and "1-C") to its Comment, the computations made by the labor
arbiter in arriving at the sum of P5,161.00. On the other hand, public respondent made its own computation
in its assailed Decision and arrived at a slightly different figure from that computed by the labor arbiter: jgc:c han robles. com.ph

"Respondent claims that the award of P28,344.55 is bereft of any factual basis. Records show that as per
computation of the office of the Fiscal Examiner, (Records, p. 116) the said amount was arrived at. The
computation was however based on the assumption that the complainant regularly reported for work.
Records however show that the complainant absented himself from work for one day in August 1989.
(Records, p. 63) For this unworked day, no overtime pay must be due. As to the rest of his period of
employment subject to the three year limitation rule which dates from October 10, 1987 up to his
appointment as Ledger Custodian on December 1, 1989 after which is regular work period was already
reduced to eight hours, there being no showing that the complainant absented himself from work, and he
being then required to work for a period of twelve hours daily, We therefore rule on complainant’s
entitlement to overtime compensation for the duration of the aforesaid period in excess of one working day.
Consequently, complainant’s overtime pay shall be computed as follows:

OVERTIME PAY: (4 HRS/DAY)

October 10, 1987 — December 13, 1987 = 2.10 mos.

P54/8 hrs. = P6.75 x 4 hrs. = P27.00

P27 x 1.25 = P33.75 x 26 x 2.10 mos. = P1,842.75

55
December 14, 1987 — June 30, 1989 = 18.53 mos.

P64/8 hrs. = P8 x 4 hrs. = P32.00

P32 x 1.25 = P40 x 26 x 18.53 = P19,271.20

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

P89/8 hrs. = P11.12 x 4 hrs. = P44.50

P44.50 x 1.25 = P55.62 x 25 x 5 mos. = P6,952.50(P6,953.125)

TOTAL OVERTIME PAY

P28,066.45(P28,067.075)" (Rollo, pp. 210-212).

Prescinding therefrom, it is evident that petitioner had no basis to argue that respondent NLRC committed
any grave abuse of discretion in quoting the questioned portion of the labor arbiter’s holding.

Fourth Issue: Newly Discovered Evidence?

In its Supplemental Petition filed on July 17, 1996, petitioner alleges in part:
jgc: chan roble s.com.p h

"2. That only recently, the petitioner was able to locate the Employees Payroll Sheets which contained the
salaries, overtime pay, vacation and sick leaves of respondent Esquejo which pertains to the period starting
from January 1, 1987 up to November 1989. Therefore, said total amount of overtime pay paid to and
received by respondent Esquejo should be deducted from the computed amount of P28,066.45 based on the
questioned decision;" (Rollo, p. 220).

Contrary to petitioner’s claim however, said documents consisting of payroll sheets, cannot be considered as
"newly-discovered evidence" since said papers were in its custody and possession all along, petitioner being
the employer of private respondent

Furthermore, petitioner offers no satisfactory explanation why these documents were unavailable at the time
the case was being heard by the labor arbiter. In its Memorandum, petitioner excused itself for its failure to
present such evidence before the labor arbiter and respondent NLRC by saying that "petitioner(’s office)
appeared to be in disorder or in a state of confusion since the then officers (of petitioner) were disqualified
by the Monetary Board on grounds of misappropriation of funds of the association and other serious
irregularities. There was no formal turn-over of the documents from the disqualified set of officers to the
new officers of petitioner." 31 We find such excuse weak and unacceptable, the same not being
substantiated by any evidence on record. Moreover, payroll records are normally not in the direct custody
and possession of corporate officers but of their subordinates, i.e., payroll clerks and the like. In the normal
course of business, such payroll sheets are not the subject of formal turnovers by outgoing officers to their
successors in office. And if indeed it is true that petitioner had been looking for such records or documents
during the pendency of the case with the labor arbiter and with public respondent, petitioner never alleged
such search before the said labor tribunals a quo. Hence, such bare allegations of facts cannot now be fairly
appreciated in this petition for certiorari, which is concerned only with grave abuse of discretion or lack (or
excess) of jurisdiction.

The Solicitor General quotes with approval a portion of private respondent’s Opposition to petitioner’s
motion for reconsideration thus: jgc:chanro bles. com.ph

"It is clear from the payroll, although the substantial pages thereof do not show that the net amount
indicated therein have been received or duly acknowledged to have been received by the complainant, THAT
OVERTIME PAYMENTS THAT WERE MADE REFER TO WORK RENDERED DURING COMPLAINANT’S OFF DAYS.
What has been rightfully claimed by the complainant and awarded by this Honorable Office is the overtime
works (sic) rendered by the complainant daily for six (6) days a week computed at four (4) hours per day.
This computation is based on the evidence thus submitted by the parties. All appointments issued by the
respondent carries (sic) with it (sic) that the basic salary of the complainant is equivalent to 12 hours work
everyday for six (6) days a week, hence, the four (4) hours overtime daily was not considered and therefore
not paid by the Respondent." (Rollo, p. 327).

It has been consistently held that factual issues are not proper subjects of a petition for certiorari, as the
power of the Supreme Court to review labor cases is limited to questions of jurisdiction and grave abuse of
discretion. 32 The introduction in this petition of so-called newly discovered evidence is unwarranted. This
Court is not a trier of facts and it is not its function to examine and evaluate the evidence the evidence
presented (or which ought to have been presented) in the tribunals below. 33

56
WHEREFORE, in view of the foregoing considerations, the Petition is DISMISSED, the temporary restraining
order issued on July 30, 1992 LIFTED, and the assailed decision of the public respondent AFFIRMED. Costs
against petitioner.

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

Endnotes:

1. Rollo, pp. 202-212.

2. First Division, composed of Presiding Commissioner Bartolome S. Carale, ponente, and Commissioners
Vicente S.E. Veloso and Romeo B. Putong, concurring.

3. Rollo, pp. 198-201.

4. Rollo, pp. 38-43.

5. Rollo, pp. 65-76.

6. See rollo, p. 5.

7. Rollo, pp. 317-318.

8. People’s Security, Inc. v. National Labor Relations Commission, 226 SCRA 146, September 8, 1993, citing
Pearl S. Buck Foundation, Inc. v. NLRC, 182 SCRA 446, February 21, 1990.

9. Paderanga v. Court of Appeals, 247 SCRA 741, August 28, 1995.

10. Zapata v. National Labor Relations Commission, 175 SCRA 56, 60, July 5, 1989.

11. Palomado v. NLRC, Et Al., G.R. No. 96520, June 28, 1996, pp. 7-8, citing Purefoods Corporation v.
NLRC, 171 SCRA 425, March 21, 1989 and Villarama v. NLRC, 236 SCRA 280, September 2, 1994.

12. Rollo, p. 165.

13. Rollo, pp. 11 & 370.

14. Rollo, pp. 371-374.

15. Rollo, p. 371.

16. Rollo, 375.

17. Rollo, pp. 208-210.

18. Manila Bay Club Corporation v. Court of Appeals, 245 SCRA 715, July 11, 1995.

19. Ongsiako v. Gamboa, 86 Phil. 50, 56 (1950).

20. The Conference of Maritime Manning Agencies, Inc. v. Philippine Overseas Employment Administration,
243 SCRA 666, 678-679, April 21, 1995.

21. Cf. Capital Insurance & Surety Co., Inc. v. Central Azucarera del Danao, 221 SCRA 98, April 7, 1993.

22. Civil Code of the Philippines, Art. 1371. See also Rapanut v. Court of Appeals, 246 SCRA 323, July 14,
1995.

23. Cormero v. Court of Appeals, 247 SCRA 291, August 14, 1995.

24. Jimenez v. Fernandez, 184 SCRA 190, April 6, 1990; Palmera v. Civil Service Commission, 235 SCRA 87,
August 4, 1994.

25. Fuentes v. NLRC, 167 SCRA 767, November 24, 1988.

26. Rollo, p. 28.

57
27. Rollo, p. 24.

28. Rollo, p. 201.

29. 69 Phil. 635 (1940).

30. Rollo, pp. 30-33.

31. Rollo, p. 396.

32. Oscar Ledesma and Company v. National Labor Relations Commission, 246 SCRA 247, July 13, 1995,
citing Loadstar Shipping Co., v. Gallo, 229 SCRA 654, February 4, 1994.

33. Trade Unions of the Philippines v. Laguesma, 236 SCRA 586, September 21, 1994.

58
 THIRD DIVISION

[G.R. No. 121004. January 28, 1998.]

ROMEO LAGATIC, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, CITYLAND

DEVELOPMENT CORPORATION, STEPHEN ROXAS, JESUS GO, GRACE LIUSON, and ANDREW
LIUSON, Respondents.

DECISION

ROMERO, J.:

Petitioner seeks, in this petition for certiorari under Rule 65, the reversal of the resolution of the National
Labor Relations Commission dated May 12, 1995, affirming the February 17, 1994, decision of Labor Arbiter
Ricardo C. Nova finding that petitioner had been validly dismissed by private respondent Cityland
Development Corporation (hereafter referred to as Cityland) and that petitioner was not entitled to
separation pay, premium pay and overtime pay. chanroble s law lib rary

The facts of the case are as follows: cha nro b1es vi rtua l 1aw lib ra ry

Petitioner Romeo Lagatic was employed in May 1986 by Cityland, first as a probationary sales agent, and
later on as a marketing specialist. He was tasked with soliciting sales for the company, with the
corresponding duties of accepting call-ins, referrals, and making client calls and cold calls. Cold calls refer to
the practice of prospecting for clients through the telephone directory. Cityland, believing that the same is
an effective and cost-efficient method of finding clients, requires all its marketing specialists to make cold
calls. The number of cold calls depends on the sales generated by each: more sales mean less cold calls.
Likewise, in order to assess cold calls made by the sales staff, as well as to determine the results thereof,
Cityland requires the submission of daily progress reports on the same.

On October 22, 1991, Cityland issued a written reprimand to petitioner for his failure to submit cold call
reports for September 10, October 1 and 10, 1991. This notwithstanding, petitioner again failed to submit
cold call reports for September 2, 5, 8, 10, 11, 12, 15 17, 18, 19, 20, 22, and 28, as well as for October 6,
8, 9, 10, 12, 13 and 14, 1992. Petitioner was required to explain his inaction, with a warning that further
non-compliance would result in his termination from the company. In a reply dated October 18, 1992,
petitioner claimed that the same was an honest omission brought about by his concentration on other
aspects of his job. Cityland found said excuse inadequate and, on November 9, 1992, suspended him for
three days, with a similar warning.

Notwithstanding the aforesaid suspension and warning, petitioner again failed to submit cold call reports for
February 5, 6, 8, 10 and 12, 1993. He was verbally reminded to submit the same and was even given up to
February 17, 1993 to do so. Instead of complying with said directive, Petitioner, on February 16, 1993,
wrote a note, "TO HELL WITH COLD CALLS! WHO CARES?" and exhibited the same to his co-employees. To
worsen matters, he left the same lying on his desk where everyone could see it.

On February 23, 1993, petitioner received a memorandum requiring him to explain why Cityland should not
make good its previous warning for his failure to submit cold call reports, as well as for issuing the written
statement aforementioned. On February 24, 1993, he sent a letter-reply alleging that his failure to submit
cold call reports should not be deemed as gross insubordination. He denied any knowledge of the damaging
statement, "TO HELL WITH COLD CALLS!"

Finding petitioner guilty of gross insubordination, Cityland served a notice of dismissal upon him on February
26, 1993. Aggrieved by such dismissal, petitioner filed a complaint against Cityland for illegal dismissal,
illegal deduction, underpayment, overtime and rest day pay, damages and attorney’s fees. The labor arbiter
dismissed the petition for lack of merit. On appeal, the same was affirmed by the NLRC; hence the present
recourse.

Petitioner raises the following issues: chan rob1e s virtual 1aw lib rary

59
1. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN NOT FINDING THAT
PETITIONER WAS ILLEGALLY DISMISSED;

2. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN RULING THAT PETITIONER
IS NOT ENTITLED TO SALARY DIFFERENTIALS, BACKWAGES, SEPARATION PAY, OVERTIME PAY, REST DAY
PAY, UNPAID COMMISSIONS, MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES.

The petition lacks merit.

To constitute a valid dismissal from employment, two requisites must be met, namely: (1) the employee
must be afforded due process, and (2) the dismissal must be for a valid cause. 1 In the case at bar,
petitioner contends that his termination was illegal on both substantive and procedural aspects. It is his
submission that the failure to submit a few cold calls does not qualify as willful disobedience, as, in his
experience, cold calls are one of the least effective means of soliciting sales. He thus asserts that a couple of
cold call reports need not be accorded such tremendous significance as to warrant his dismissal for failure to
submit them on time.

These arguments are specious. Petitioner loses sight of the fact that" (e)xcept as provided for, or limited by,
special laws, an employer is free to regulate, according to his discretion and judgment, all aspects of
employment." 2 Employers may, thus, make reasonable rules and regulations for the government of their
employees, and when employees, with knowledge of an established rule, enter the service, the rule
becomes a part of the contract of employment. 3 It is also generally recognized that company policies and
regulations, unless shown to be grossly oppressive or contrary to law, are generally valid and binding on the
parties and must be complied with. 4 "Corollarily, an employee may be validly dismissed for violation of a
reasonable company rule or regulation adopted for the conduct of the company business. An employer
cannot rationally be expected to retain the employment of a person whose . . . lack of regard for his
employer’s rules . . . has so plainly and completely been bared." 5 Petitioner’s continued infraction of
company policy requiring cold call reports, as evidenced by the 28 instances of non-submission of aforesaid
reports, justifies his dismissal. He cannot be allowed to arrogate unto himself the privilege of setting
company policy on the effectivity of solicitation methods. To do so would be to sanction oppression and the
self-destruction of the employer.

Moreover, petitioner made it worse for himself when he wrote the statement, "TO HELL WITH COLD CALLS!
WHO CARES?" When required to explain, he merely denied any knowledge of the same. Cityland, on the
other hand, submitted the affidavits of his co-employees attesting to his authorship of the same. Petitioner’s
only defense is denial. The rule, however, is that denial, if unsubstantiated by clear and convincing evidence,
is negative and self-serving evidence which has no weight in law. 6 More telling, Petitioner, while making
much capital out of his lack of opportunity to confront the affiants, never, in all of his pleadings,
categorically denied writing the same. He only denied knowledge of the allegation that he issued such a
statement.

Based on the foregoing, we find petitioner guilty of willful disobedience. Willful disobedience requires the
concurrence of at least two requisites: the employee’s assailed conduct must have been willful or
intentional, the willfulness being characterized by a wrongful and perverse attitude; and the order violated
must have been reasonable, lawful, made known to the employee and must pertain to the duties which he
had been engaged to discharge. 7

Petitioner’s failure to comply with Cityland’s policy of requiring cold call reports is clearly willful, given the 28
instances of his failure to do so, despite a previous reprimand and suspension. More than that, his written
statement shows his open defiance and disobedience to lawful rules and regulations of the company.
Likewise, said company policy of requiring cold calls and the concomitant reports thereon is clearly
reasonable and lawful, sufficiently known to petitioner, and in connection with the duties which he had been
engaged to discharge. There is, thus, just cause for his dismissal.

On the procedural aspect, petitioner claims that he was denied due process. Well settled is the dictum that
the twin requirements of notice and hearing constitute the elements of due process in the dismissal of
employees. Thus, the employer must furnish the employee with two written notices before the termination
of employment can be effected. The first apprises the employee of the particular acts or omissions for which
his dismissal is sought; the second informs him of the employer’s decision to dismiss him. 8

In the case at bar, petitioner was notified of the charges against him in a memorandum dated February 19,
1993, which he received on February 23, 1993. He submitted a letter-reply thereto on February 24, 1993,
wherein he asked that his failure to submit cold call reports be not interpreted as gross insubordination. 9
He was given notice of his termination on February 26, 1993. This chronology of events clearly show that
petitioner was served with the required written notices. chan rob l es virt ual lawli bra ry

Nonetheless, petitioner contends that he has not been given the benefit of an effective hearing. He alleges
that he was not adequately informed of the results of the investigation conducted by the company, nor was
he able to confront the affiants who attested to his writing the statement, "TO HELL WITH COLD CALLS!"

60
While we have held that in dismissing employees, the employee must be afforded ample opportunity to be
heard, "ample opportunity" connoting every kind of assistance that management must afford the employee
to enable him to prepare adequately for his defense, 10 it is also true that the requirement of a hearing is
complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing
be conducted. 11 Petitioner had an opportunity to be heard as he submitted a letter-reply to the charge. He,
however, adduced no other evidence on his behalf. In fact, he admitted his failure to submit cold call
reports, praying that the same be not considered as gross insubordination. As held by this Court in Bernardo
v. NLRC, 12 there is no necessity for a formal hearing where an employee admits responsibility for an
alleged misconduct. As to the written statement, "TO HELL WITH COLD CALLS!," petitioner merely denied
knowledge of the same. He failed to submit controverting evidence thereon although the memorandum of
February 19, 1993, clearly charged that he had shown said statement to several sales personnel. Denials
are weak forms of defenses, particularly when they are not substantiated by clear and convincing evidence.
Given the foregoing, we hold that petitioner’s constitutional right to due process has not been violated.

As regards the second issue, petitioner contends that he is entitled to amounts illegally deducted from his
commissions, to unpaid overtime, rest day and holiday premiums, to moral and exemplary damages, as well
as attorney’s fees and costs.

Petitioner anchors his claim for illegal deductions of commissions on Cityland’s formula for determining
commissions, viz: chan rob 1es vi rtual 1aw lib rary

COMMISSIONS = Credits Earned (CE) less CUMULATIVE NEGATIVE (CN) less AMOUNTS RECEIVED (AR)

= (CE - CN) - AR where CE = Monthly Sales Volume x

Commission Rate (CR)

AR = Monthly Compensation/.75

CR = 4.5%

Under said formula, an increase in salary would entail an increase in AR, thus diminishing the amount of
commissions that petitioner would receive. Petitioner construes the same as violative of the non-diminution
of benefits clause embodied in the wage orders applicable to petitioner. Inasmuch as Cityland has paid
petitioner commissions based on a higher AR each time there has been a wage increase, the difference
between the original AR and the subsequent ARs have been viewed by petitioner as illegal deductions, to
wit:
chan rob1e s vi rtual 1aw lib rary

Wage Date of Amount of Corresponding Duration Total

Order Effectivity Increase Increase in Up To

Quota (AR) 2/26/93

RA 6640 1/1/88 P265.75 P353.33 x 62 mos. P21,906.46

RA 6727 7/1/89 780.75 1,040.00 x 44 mos. 45,760.00

NCR 01 11/1/90 785.75 1,046.67 x 28 mos. 29,306.76

NCR 01-A ————

Grand Total P96,973.22 13

========

Petitioner even goes as far as to claim that with the use of Cityland’s formula, he is indebted to the company
in the amount of P1,410.00, illustrated as follows: c hanro b1es vi rt ual 1aw li bra ry

Petitioner’s Basic Salary = P4,230.00

= 4,230.00/.75

AR. = 5,640.00

Petitioner’s Basic Salary - AR = P1,410.00

While it is true that an increase in salary would cause an increase in AR, with the same being deducted from
credits earned, thus lessening his commissions, the fact remains that petitioner still receives his basic salary

61
without deductions. Petitioner’s argument that he is indebted to respondent by P1,410.00 is fallacious as his
basic salary remains the same and he continues to receive the same, regardless of his collections. The
failure to attain a CE equivalent to the AR of P5,640.00 only means that the difference would be credited to
his CN for the next month. Clearly, the purpose of the same is to encourage sales personnel to accelerate
their sales in order for them to earn commissions.

Additionally, there is no law which requires employers to pay commissions, and when they do so, as stated
in the letter-opinion of the Department of Labor and Employment dated February 19, 1993, "there is no law
which prescribes a method for computing commissions. The determination of the amount of commissions is
the result of collective bargaining negotiations, individual employment contracts or established employer
practice." 14 Since the formula for the computation of commissions was presented to and accepted by
petitioner, such prescribed formula is in order. As to the allegation that said formula diminishes the benefits
being received by petitioner whenever there is a wage increase, it must be noted that his commissions are
not meant to be in a fixed amount. In fact, there was no assurance that he would receive any commission at
all. Non-diminution of benefits, as applied here, merely means that the company may not remove the
privilege of sales personnel to earn a commission, not that they are entitled to a fixed amount thereof.

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

In addition to the above, the labor arbiter and the NLRC sanctioned respondent’s practice of offsetting rest
day or holiday work with equivalent time on regular workdays on the ground that the same is authorized by
Department Order 21, Series of 1990. As correctly pointed out by petitioner, said D.O. was misapplied in
this case. The D.O. involves the shortening of the workweek from six days to five days but with prolonged
hours on those five days. Under this scheme, non-payment of overtime premiums was allowed in exchange
for longer weekends for employees. In the instant case, petitioner’s workweek was never compressed.
Instead, he claims payment for work over and above his normal 5� days of work in a week. Applying by
analogy the principle that overtime cannot be offset by undertime, to allow off-setting would prejudice the
worker. He would be deprived of the additional pay for the rest day work he has rendered and which is
utilized to offset his equivalent time off on regular workdays. To allow Cityland to do so would be to
circumvent the law on payment of premiums for rest they day and holiday work. chanroblesvi rtua l|awlib rary

Notwithstanding the foregoing discussion, petitioner failed to show his entitlement to overtime and rest day
pay due, to the lack of sufficient evidence as to the number of days and hours when he rendered overtime
and rest day work. Entitlement to overtime pay must first be established by proof that said overtime work
was actually performed, before an employee may avail of said benefit. 15 To support his allegations,
petitioner submitted in evidence minutes of meetings wherein he was assigned to work on weekends and
holidays at Cityland’s housing projects. Suffice it to say that said minutes do not prove that petitioner
actually worked on said dates. It is a basic rule in evidence that each party must prove his affirmative
allegations. 16 This petitioner failed to do. He explains his failure to submit more concrete evidence as being
due to the decision rendered by the labor arbiter without resolving his motion for the production and
inspection of documents in the control of Cityland. Petitioner conveniently forgets that on January 27, 1994,
he agreed to submit the case for decision based on the records available to the labor arbiter. This amounted
to an abandonment of above-said motion, which was then pending resolution.

Lastly, with the finding that petitioner’s dismissal was for a just and valid cause, his claims for moral and
exemplary damages, as well as attorney’s fees, must fail.

WHEREFORE, premises considered, the assailed Resolution is AFFIRMED and this petition is hereby
DISMISSED for lack of merit. Costs against petitioner.

SO ORDERED.

Narvasa, C.J., Melo, Francisco, and Panganiban, JJ., concur.

Endnotes:

1. Pizza Hut/Progressive Development Corporation v. NLRC, 252 SCRA 531(1996).

62
2. Manila Electric Co. v. NLRC, 263 SCRA 531 (1996).

3. AZUCENA, THE LABOR CODE WITH COMMENTS AND CASES (1992), p. 19, citing 31 Am Jur, Section 12,
p. 389.

4. Tanala v. NLRC, 252 SCRA 315 (1996).

5. Philippine-Singapore Transport Services, Inc. v. NLRC, G.R. No. 95449, August 18, 1997, citing Makati
Haberdashery, Inc. v. NLRC, 79 SCRA 448 (1989).

6. De Guzman v. CA, 260 SCRA 389 (1996).

7. Stolt-Nielsen Marine Service (Phils.), Inc. v. NLRC, 258 SCRA 643 (1996).

8. Pono v. NLRC, G.R. No. 118860, July 17, 1997.

9. Reply to Memo dated February 19, 1993, Rollo, p. 283.

10. Mirano, et. al. v. NLRC, G.R. No. 121112, March 19, 1997.

11. Pono v. NLRC, supra, note 8.

12. 255 SCRA 108 (1996).

13. Rollo, p. 27.

14. Rollo, p. 299.

15. Cagampan v. NLRC, 195 SCRA 533 (1991).

16. Jimenez v. NLRC, 256 SCRA 84 (1996).

63
 THIRD DIVISION

[G.R. No. 100701. March 28, 2001.]

PRODUCERS BANK OF THE PHILIPPINES, Petitioner, v. NATIONAL LABOR RELATIONS

COMMISSION and PRODUCERS BANK EMPLOYEES ASSOCIATION, 1 respondents.

DECISION

GONZAGA-REYES, J.:

Before us is a special civil action for certiorari with prayer for preliminary injunction and/or restraining order
seeking the nullification of (1) the decision of public respondent in NLRC-NCR Case No. 02-00753-88,
entitled "Producers Bank Employees Association v. Producers Bank of the Philippines," promulgated on 30
April 1991, reversing the Labor Arbiter’s dismissal of private respondent’s complaint and (2) public
respondent’s resolution dated 18 June 1991 denying petitioner’s motion for partial reconsideration.

The present petition originated from a complaint filed by private respondent on 11 February 1988 with the
Arbitration Branch, National Capital Region, National Labor Relations Commission (NLRC), charging
petitioner with diminution of benefits, non-compliance with Wage Order No. 6 and non-payment of holiday
pay. In addition, private respondent prayed for damages. 2

On 31 March 1989, Labor Arbiter Nieves V. de Castro found private respondent’s claims to be unmeritorious
and dismissed its complaint. 3 In a complete reversal, however, the NLRC 4 granted all of private
respondent’s claims, except for damages. 5 The dispositive portion of the NLRC’s decision provides —

WHEREFORE, premises considered, the appealed Decision is, as it is hereby, SET ASIDE and another one
issued ordering respondent-appellee to pay complainant-appellant: chan rob 1es vi rtual 1aw lib rary

1. The unpaid bonus (mid-year and Christmas bonus) and 13th month pay;

2. Wage differentials under Wage Order No. 6 for November 1, 1984 and the corresponding adjustment
thereof; and

3. Holiday pay under Article 94 of the Labor Code, but not to exceed three (3) years.

The rest of the claims are dismissed for lack of merit.

SO ORDERED.

Petition filed a Motion for Partial Reconsideration, which was denied by the NLRC in a Resolution issued on
18 June 1991. Hence, recourse to this Court.

Petitioner contends that the NLRC gravely abused its discretion in ruling as it did for the succeeding reasons
stated in its Petition —

1. On the alleged diminution of benefits, the NLRC gravely abused its discretion when (1) it contravened the
Supreme Court decision in Traders Royal Bank v. NLRC, Et Al., G.R. No. 88168, promulgated on August 30,
1990, (2) its ruling is not justified by law and Art. 100 of the Labor Code, (3) its ruling is contrary to the
CBA, and (4) the so-called "company practice invoked by it has no legal and moral bases" (p. 2, Motion for
Partial Reconsideration, Annex "H");

2. On the alleged non-compliance with Wage Order No. 6, the NLRC again gravely abused its discretion
when it patently and palpably erred in holding that it is "more inclined to adopt the stance of appellant
(private respondent UNION) in this issue since it is more in keeping with the law and its implementing
provisions and the intendment of the parties as revealed in their CBA" without giving any reason or
justification for such conclusions as the stance of appellant (private respondent UNION) does not traverse
the clear and correct finding and conclusion of the Labor Arbiter.

Furthermore, the petitioner, under conservatorship and distressed, is exempted under Wage Order No. 6.

64
Finally, the "wage differentials under Wage Order No. 6 for November 1, 1984 and the corresponding
adjustment thereof" (par. 2, dispositive portion, NLRC Decision), has prescribed (p. 12, Motion for Partial
Reconsideration, Annex "H").

3. On the alleged non-payment of legal holiday pay, the NLRC again gravely abused its discretion when it
patently and palpably erred in approving and adopting "the position of appellant (private respondent
UNION)" without giving any reason or justification therefor which position does not squarely traverse or
refute the Labor Arbiter’s correct finding and ruling (p. 18, Motion for Partial Reconsideration, Annex "H"). 6

On 29 July 1991, the Court granted petitioner’s prayer for a temporary restraining order enjoining
respondents from executing the 30 April 1991 Decision and 18 June 1991 Resolution of the NLRC. 7

Coming now to the merits of the petition, the Court shall discuss the issues ad seriatim.

Bonuses

As to the bonuses, private respondent declared in its position paper 8 filed with the NLRC that: chanrob1e s virtual 1aw lib rary

1. Producers Bank of the Philippines, a banking institution, has been providing several benefits to its
employees since 1971 when it started its operation. Among the benefits it had been regularly giving is a
mid-year bonus equivalent to an employee’s one-month basic pay and a Christmas bonus equivalent to an
employee’s one whole month salary (basic pay plus allowance);

2. When P.D. 851, the law granting a 13th month pay, took effect, the basic pay previously being given as
part of the Christmas bonus was applied as compliance to it (P.D. 851), the allowances remained as
Christmas bonus;

3. From 1981 up to 1983, the bank continued giving one month basic pay as mid-year bonus, one month
basic pay as 13th month pay but the Christmas bonus was no longer based on the allowance but on the
basic pay of the employees which is higher;

4. In the early part of 1984, the bank was placed under conservatorship but it still provided the traditional
mid-year bonus;

5. By virtue of an alleged Monetary Board Resolution No. 1566, the bank only gave a one-half (1/2) month
basic pay as compliance of the 13th month pay and none for the Christmas bonus. In a tabular form, here
are the bank’s violations:chanrob 1es vi rtual 1aw lib rary

YEAR MID-YEAR BONUS CHRISTMAS 13TH MONTH PAY

BONUS

previous years one mo. basic one mo. basic one mo. basic

1984 [one mo. basic] none one-half mo. basic

1985 one-half mo. basic none one-half mo. basic

1986 one-half mo. basic one-half mo. basic one mo. basic

1987 one-half mo. basic one-half mo. basic one mo. basic

Private respondent argues that the mid-year and Christmas bonuses, by reason of their having been given
for thirteen consecutive years, have ripened into a vested right and, as such, can no longer be unilaterally
withdrawn by petitioner without violating Article 100 of Presidential Decree No. 442 9 which prohibits the
diminution or elimination of benefits already being enjoyed by the employees. Although private respondent
concedes that the grant of a bonus is discretionary on the part of the employer, it argues that, by reason of
its long and regular concession, it may become part of the employee’s regular compensation. 10

On the other hand, petitioner asserts that it cannot be compelled to pay the alleged bonus differentials due
to its depressed financial condition, as evidenced by the fact that in 1984 it was placed under
conservatorship by the Monetary Board. According to petitioner, it sustained losses in the millions of pesos
from 1984 to 1988, an assertion which was affirmed by the labor arbiter. Moreover, petitioner points out
that the collective bargaining agreement of the parties does not provide for the payment of any mid-year or
Christmas bonus. On the contrary, section 4 of the collective bargaining agreement states that —

Acts of Grace. Any other benefits or privileges which are not expressly provided in this Agreement, even if
now accorded or hereafter accorded to the employees, shall be deemed purely acts of grace dependent upon

65
the sole judgment and discretion of the BANK to grant, modify or withdraw. 11

A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the
success of the employer’s business and made possible the realization of profits. It is an act of generosity
granted by an enlightened employer to spur the employee to greater efforts for the success of the business
and realization of bigger profits. 12 The granting of a bonus is a management prerogative, something given
in addition to what is ordinarily received by or strictly due the recipient. 13 Thus, a bonus is not a
demandable and enforceable obligation, 14 except when it is made part of the wage, salary or compensation
of the employee. 15

However, an employer cannot be forced to distribute bonuses which it can no longer afford to pay. To hold
otherwise would be to penalize the employer for his past generosity. Thus, in Traders Royal Bank v. NLRC,
16 we held that —

It is clear . . . that the petitioner may not be obliged to pay bonuses to its employees. The matter of giving
them bonuses over and above their lawful salaries and allowances is entirely dependent on the profits, if
any, realized by the Bank from its operations during the past year.

From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986, the
income of the Bank was only 20.2 million pesos, but the Bank still gave out the usual two (2) months basic
mid-year and two months gross year-end bonuses. The petitioner pointed out, however, that the Bank
weakened considerably after 1986 on account of political developments in the country. Suspected to be a
Marcos-owned or controlled bank, it was placed under sequestration by the present administration and is
now managed by the Presidential Commission on Good Government (PCGG).

In light of these submissions of the petitioner, the contention of the Union that the granting of bonuses to
the employees had ripened into a company practice that may not be adjusted to the prevailing financial
condition of the Bank has no legal and moral bases. Its fiscal condition having declined, the Bank may not
be forced to distribute bonuses which it can no longer afford to pay and, in effect, be penalized for its past
generosity to its employees.

Private respondents’ contention, that the decrease in the mid-year and year-end bonuses constituted a
diminution of the employees’ salaries, is not correct, for bonuses are not part of labor standards in the same
class as salaries, cost of living allowances, holiday pay, and leave benefits, which are provided by the Labor
Code.

This doctrine was reiterated in the more recent case of Manila Banking Corporation v. NLRC 17 wherein the
Court made the following pronouncements —

By definition, a "bonus" is a gratuity or act of liberality of the giver which the recipient has no right to
demand as a matter of right. It is something given in addition to what is ordinarily received by or strictly
due the recipient. The granting of a bonus is basically a management prerogative which cannot be forced
upon the employer who may not be obliged to assume the onerous burden of granting bonuses or other
benefits aside from the employee’s basic salaries or wages, especially so if it is incapable of doing so.

x x x

Clearly then, a bonus is an amount given ex gratia to an employee by an employer on account of success in
business or realization of profits. How then can an employer be made liable to pay additional benefits in the
nature of bonuses to its employees when it has been operating on considerable net losses for a given period
of time?

Records bear out that petitioner Manilabank was already in dire financial straits in the mid-80’s. As early as
1984, the Central Bank found that Manilabank had been suffering financial losses. Presumably, the problems
commenced even before their discovery in 1984. As earlier chronicled, the Central Bank placed petitioner
bank under comptrollership in 1984 because of liquidity problems and excessive interbank borrowings. In
1987, it was placed under receivership and ordered to close operation. In 1988, it was ordered liquidated.

It is evident, therefore, that petitioner bank was operating on net losses from the years 1984, 1985 and
1986, thus, resulting to its eventual closure in 1987 and liquidation in 1988. Clearly, there was no success in
business or realization of profits to speak of that would warrant the conferment of additional benefits sought
by private respondents. No company should be compelled to act liberally and confer upon its employees
additional benefits over and above those mandated by law when it is plagued by economic difficulties and
financial losses. No act of enlightened generosity and self-interest can be exacted from near empty, if not
empty coffers.

It was established by the labor arbiter 18 and the NLRC 19 and admitted by both parties 20 that petitioner
was placed under conservatorship by the Monetary Board, pursuant to its authority under Section 28-A of

66
Republic Act No. 265, 21 as amended by Presidential Decree No. 72, 22 which provides —

SECTION 28-A. Appointment of conservator. — Whenever, on the basis of a report submitted by the
appropriate supervising and examining department, the Monetary Board finds that a bank is in a state of
continuing inability or unwillingness to maintain a condition of solvency and liquidity deemed adequate to
protect the interest of depositors and creditors, the Monetary Board may appoint a conservator to take
charge of the assets, liabilities, and the management of that banking institution, collect all monies and debts
due said bank and exercise all powers necessary to preserve the assets of the bank, reorganize the
management thereof and restore its viability. He shall have the power to overrule or revoke the actions of
the previous management and board of directors of the bank, any provision of law to the contrary
notwithstanding, and such other powers as the Monetary Board shall deem necessary.

x x x

Under Section 28-A, the Monetary Board may place a bank under the control of a conservator when it finds
that the bank is continuously unable or unwilling to maintain a condition of solvency or liquidity. In Central
Bank of the Philippines v. Court of Appeals, 23 the Court declared that the order placing petitioner herein
under conservatorship had long become final and its validity could no longer be litigated upon. Also, in the
same case, the Court found that sometime in August, 1983, some news items triggered a bank-run in
petitioner which resulted in continuous over-drawings on petitioner’s demand deposit account with the
Central Bank; the over-drawings reached P143.955 million by 17 January 1984; and as of 13 February
1990, petitioner had over-drawings of up to P1.233 billion, which evidences petitioner’s continuing inability
to maintain a condition of solvency and liquidity, thus justifying the conservatorship. Our findings in the
Central Bank case coincide with petitioner’s claims that it continuously suffered losses from 1984 to 1988 as
follows —

YEAR NET LOSSES IN MILLIONS OF PESOS

1984 P144.418

1985 P144.940

1986 P132.940

1987 P 84.182

January-February 1988 P 9.271

These losses do not include the interest expenses on the overdraft loan of the petitioner to the Central Bank,
which interest as of July 31, 1987, amounted to P610.065 Million, and penalties on reserve deficiencies
which amounted to P89.029 Million. The principal balance of the overdraft amounted to P971.632 Million as
of March 16, 1988. 24

Petitioner was not only experiencing a decline in its profits, but was reeling from tremendous losses
triggered by a bank-run which began in 1983. In such a depressed financial condition, petitioner cannot be
legally compelled to continue paying the same amount of bonuses to its employees. Thus, the conservator
was justified in reducing the mid-year and Christmas bonuses of Petitioner’s employee. To hold otherwise
would be to defeat the reason for the conservatorship which is to preserve the assets and restore the
viability of the financially precarious bank. Ultimately, it is to the employees’ advantage that the
conservatorship achieve its purposes for the alternative would be petitioner’s closure whereby employees
would lose not only their benefits, but their jobs as well.

13th Month Pay

With regard to the 13th month pay, the NLRC adopted the position taken by private respondent and held
that the conservator was not justified in diminishing or not paying the 13th month pay and that petitioner
should have instead applied for an exemption, in accordance with section 7 of Presidential Decree No. 851
(PD 851), as amended by Presidential Decree No. 1364, but that it did not do so. 25 The NLRC held that the
actions of the conservator ran counter to the provisions of PD 851.

In its position paper, 26 private respondent claimed that petitioner made the following payments to its
members —

YEAR MID-YEAR BONUS 13TH MONTH PAY CHRISTMAS BONUS

1984 1 month basic 1/2 month basic None

67
1985 1/2 month basic 1/2 month basic None

1986 1/2 month basic 1 month basic 1/2 month basic

1987 1/2 month basic 1 month basic 1/2 month basic

However, in its Memorandum 27 filed before this Court, private respondent revised its claims as follows —

YEAR MID-YEAR BONUS 13TH MONTH PAY CHRISTMAS BONUS

1984 1 month basic None 1/2 month basic

1985 1/2 month basic None 1/2 month basic

1986 1/2 month basic 1/2 month basic 1 month basic

1987 1/2 month basic 1/2 month basic 1 month basic

1988 1/2 month basic 1/2 month basic 1 month basic

Petitioner argues that it is not covered by PD 851 since the mid-year and Christmas bonuses it has been
giving its employees from 1984 to 1988 exceeds the basic salary for one month (except for 1985 where a
total of one month basic salary was given). Hence, this amount should be applied towards the satisfaction of
the 13th month pay, pursuant to Section 2 of PD 851. 28

PD 851, which was issued by President Marcos on 16 December 1975, requires all employers to pay their
employees receiving a basic salary of not more than P1,000 a month, 29 regardless of the nature of the
employment, a 13th month pay, not later than December 24 of every year. 30 However, employers already
paying their employees a 13th month pay or its equivalent are not covered by the law. Under the Revised
Guidelines on the Implementation of the 13th Month Pay Law, 31 the term "equivalent" shall be construed to
include Christmas bonus, mid-year bonus, cash bonuses and other payments amounting to not less than
1/12 of the basic salary. The intention of the law was to grant some relief — not to all workers — but only to
those not actually paid a 13th month salary or what amounts to it, by whatever name called. It was not
envisioned that a double burden would be imposed on the employer already paying his employees a 13th
month pay or its equivalent — whether out of pure generosity or on the basis of a binding agreement. To
impose upon an employer already giving his employees the equivalent of a 13th month pay would be to
penalize him for his liberality and in all probability, the employer would react by withdrawing the bonuses or
resist further voluntary grants for fear that if and when a law is passed giving the same benefits, his prior
concessions might not be given due credit. 32

In the case at bar, even assuming the truth of private respondent’s claims as contained in its position paper
or Memorandum regarding the payments received by its members in the form of 13th month pay, mid-year
bonus and Christmas bonus, it is noted that, for each and every year involved, the total amount given by
petitioner would still exceed, or at least be equal to, one month basic salary and thus, may be considered as
an "equivalent" of the 13th month pay mandated by PD 851. Thus, petitioner is justified in crediting the
mid-year bonus and Christmas bonus as part of the 13th month pay.

Wage Order No. 6

Wage Order No. 6, which came into effect on 1 November 1984, increased the statutory minimum wage of
workers, with different increases being specified for agricultural plantation and non-agricultural workers. The
bone of contention, however, involves Section 4 thereof which reads —

All wage increase in wage and/or allowance granted by employers between June 17, 1984 and the effectivity
of this Order shall be credited as compliance with the minimum wage and allowance adjustments prescribed
herein, provided that where the increases are less than the applicable amount provided in this Order, the
employer shall pay the difference. Such increases shall not include anniversary wage increases provided in
collective bargaining agreements unless the agreement expressly provide otherwise.

On 16 November 1984, the parties entered into a collective bargaining agreement providing for the following
salary adjustments —

Article VIII. Section 1. Salary Adjustments. — Cognizant of the effects of, among others, price increases of
oil and other commodities on the employees’ wages and earnings, and the certainty of continued
governmental or statutory actions adjusting employees’ minimum wages, earnings, allowances, bonuses and
other fringe benefits, the parties have formulated and agreed on the following highly substantial packaged
increases in salary and allowance which take into account and cover (a) any deflation in income of
employees because of such price increases and inflation and (b) the expected governmental response
thereto in the form of statutory adjustments in wages, allowances and benefits, during the next three (3)

68
years of this Agreement: chanrob 1es vi rtua l 1aw lib rary

(i) Effective March 1, 1984 — P225.00 per month as salary increase plus P100.00 per month as increase in
allowance to employees within the bargaining unit on March 1, 1984.

(ii) Effective March 1, 1985 — P125.00 per month as salary increase plus P100.00 per month as increase in
allowance to employees within the bargaining unit on March 1, 1985.

(iii) Effective March 1, 1986 — P125.00 per month as salary increase plus P100.00 per month as increase in
allowance to employees within the bargaining unit on March 1, 1986.

In addition, the collective bargaining agreement of the parties also included a provision on the chargeability
of such salary or allowance increases against government-ordered or legislated income adjustments —

SECTION 2. Pursuant to the MOLE Decision dated October 2, 1984 and Order dated October 24, 1984, the
first-year salary and allowance increases shall be chargeable against adjustments under Wage Order No. 5,
which took effect on June 16, 1984. The chargeability of the foregoing salary increases against government-
ordered or legislated income adjustments subsequent to Wage Order No. 5 shall be determined on the basis
of the provisions of such government orders or legislation.

Petitioner argues that it complied with Wage Order No. 6 because the first year salary and allowance
increase provided for under the collective bargaining agreement can be credited against the wage and
allowance increase mandated by such wage order. Under Wage Order No. 6, all increases in wages or
allowances granted by the employer between 17 June 1984 and 1 November 1984 shall be credited as
compliance with the wage and allowance adjustments prescribed therein. Petitioner asserts that although
the collective bargaining agreement was signed by the parties on 16 November 1984, the first year salary
and allowance increase was made to take effect retroactively, beginning from 1 March 1984 until 28
February 1985. Petitioner maintains that this period encompasses the period of creditability provided for
under Wage Order No. 6 and that, therefore, the balance remaining after applying the first year salary and
allowance increase in the collective bargaining agreement to the increase mandated by Wage Order No. 5, in
the amount of P125.00, should be made chargeable against the increase prescribed by Wage Order No. 6,
and if not sufficient, petitioner is willing to pay the difference. 33

On the other hand, private respondent contends that the first year salary and allowance increases under the
collective bargaining agreement cannot be applied towards the satisfaction of the increases prescribed by
Wage Order No. 6 because the former were not granted within the period of creditability provided for in such
wage order. According to private respondent, the significant dates with regard to the granting of the first
year increases are 9 November 1984 — the date of issuance of the MOLE Resolution, 16 November 1984 —
the date when the collective bargaining agreement was signed by the parties and 1 March 1984 — the
retroactive date of effectivity of the first year increases. Private respondent points out that none of these
dates fall within the period of creditability under Wage Order No. 6 which is from 17 June 1984 to 1
November 1984. Thus, petitioner has not complied with Wage Order No. 6. 34

The creditability provision in Wage Order No. 6 is based on important public policy, that is, the
encouragement of employers to grant wage and allowance increases to their employees higher than the
minimum rates of increases prescribed by statute or administrative regulation. Thus, we held in Apex Mining
Company, Inc. v. NLRC 35 that —

[t]o obliterate the creditability provisions in the Wage Orders through interpretation or otherwise, and to
compel employers simply to add on legislated increases in salaries or allowances without regard to what is
already being paid, would be to penalize employers who grant their workers more than the statutorily
prescribed minimum rates of increases. Clearly, this would be counter-productive so far as securing the
interest of labor is concerned. The creditability provisions in the Wage Orders prevent the penalizing of
employers who are industry leaders and who do not wait for statutorily prescribed increases in salary or
allowances and pay their workers more than what the law or regulations require.

Section 1 of Article VIII of the collective bargaining agreement of the parties states that." . . the parties
have formulated and agreed on the following highly substantial packaged increases in salary and allowance
which take into account and cover (a) any deflation in income of employees because of such price increases
and inflation and (b) the expected governmental response thereto in the form of statutory adjustments in
wages, allowances and benefits, during the next three (3) years of this Agreement . . ." The unequivocal
wording of this provision manifests the clear intent of the parties to apply the wage and allowance increases
stipulated in the collective bargaining agreement to any statutory wage and allowance adjustments issued
during the effectivity of such agreement — from 1 March 1984 to 28 February 1987. Furthermore, contrary
to private respondent’s contentions, there is nothing in the wording of Section 2 of Article VIII of the
collective bargaining agreement that would prevent petitioner from crediting the first year salary and
allowance increases against the increases prescribed by Wage Order No. 6.

It would be inconsistent with the abovestated rationale underlying the creditability provision of Wage Order

69
No. 6 if, after applying the first year increase to Wage Order No. 5, the balance was not made chargeable to
the increases under Wage Order No. 6 for the fact remains that petitioner actually granted wage and
allowance increases sufficient to cover the increases mandated by Wage Order No. 5 and part of the
increases mandated by Wage Order No. 6.

Holiday Pay

Article 94 of the Labor Code provides that every worker shall be paid his regular daily wage during regular
holidays 36 and that the employer may require an employee to work on any holiday but such employee shall
be paid a compensation equivalent to twice his regular rate. In this case, the Labor Arbiter found that the
divisor used by petitioner in arriving at the employees’ daily rate for the purpose of computing salary-related
benefits is 314. 37 This finding was not disputed by the NLRC. 38 However, the divisor was reduced to 303
by virtue of an inter-office memorandum issued on 13 August 1986, to wit —

To increase the rate of overtime pay for rank and filers, we are pleased to inform that effective August 18,
1986, the acting Conservator approved the use of 303 days as divisor in the computation of Overtime pay.
The present Policy of 314 days as divisor used in the computation for cash conversion and determination of
daily rate, among others, still remain, Saturdays, therefore, are still considered paid rest days.

Corollarily, the Acting Conservator also approved the increase of meal allowance from P25.00 to P30.00 for
a minimum of four (4) hours of work for Saturdays.

Proceeding from the unambiguous terms of the above quoted memorandum, the Labor Arbiter observed that
the reduction of the divisor to 303 was for the sole purpose of increasing the employees’ overtime pay and
was not meant to replace the use of 314 as the divisor in the computation of the daily rate for salary-related
benefits. 39

Private respondent admits that, prior to 18 August 1986, petitioner used a divisor of 314 in arriving at the
daily wage rate of monthly-salaried employees. Private respondent also concedes that the divisor was
changed to 303 for purposes of computing overtime pay only. In its Memorandum, private respondent states
that —

49. The facts germane to this issue are not debatable. The Memorandum Circular issued by the Acting
Conservator is clear. Prior to August 18, 1986, the petitioner bank used a divisor of 314 days in arriving at
the daily wage rate of the monthly-salaried employees. Effective August 18, 1986, this was changed. It
adopted the following formula: chan rob1es v irt ual 1aw l ibra ry

(Basic salary x 12 months)

—————————— = Daily Wage Rate

303 days

50. By utilizing this formula even up to the present, the conclusion is inescapable that the petitioner bank is
not actually paying its employees the regular holiday pay mandated by law. Consequently, it is bound to pay
the salary differential of its employees effective November 1, 1974 up to the present.

x x x

54. Since it is a question of fact, the Inter-office Memorandum dated August 13, 1986 (Annex "E") provides
for a divisor of 303 days in computing overtime pay. The clear import of this document is that from the 365
days in a year, we deduct 52 rest days which gives a total of 313 days. Now, if 313 days is the number of
working days of the employees then, there is a disputable presumption that the employees are paid their
holiday pay. However, this is not so in the case at bar. The bank uses 303 days as its divisor. Hence, it is
not paying its employees their corresponding holiday pay. 40

In Union of Filipino Employees v. Vivar, Jr. 41 the Court held that" [t]he divisor assumes an important role
in determining whether or not holiday pay is already included in the monthly paid employee’s salary and in
the computation of his daily rate." This was also our ruling in Chartered Bank Employees Association v. Ople,
42 as follows —

It is argued that even without the presumption found in the rules and in the policy instruction, the company
practice indicates that the monthly salaries of the employees are so computed as to include the holiday pay
provided by law. The petitioner contends otherwise.

One strong argument in favor of the petitioner’s stand is the fact that the Chartered Bank, in computing
overtime compensation for its employees, employs a "divisor" of 251 days. The 251 working days divisor is
the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of

70
calendar days in a year. If the employees are already paid for all non-working days, the divisor should be
365 and not 251.

Apparently, the divisor of 314 is arrived at by subtracting all Sundays from the total number of calendar
days in a year, since Saturdays are considered paid rest days, as stated in the inter-office memorandum.
Thus, the use of 314 as a divisor leads to the inevitable conclusion that the ten legal holidays are already
included therein.

We agree with the labor arbiter that the reduction of the divisor to 303 was done for the sole purpose of
increasing the employees’ overtime pay, and was not meant to exclude holiday pay from the monthly salary
of petitioner’s employees. In fact, it was expressly stated in the inter-office memorandum — also referred to
by private respondent in its pleadings — that the divisor of 314 will still be used in the computation for cash
conversion and in the determination of the daily rate. Thus, based on the records of this case and the
parties’ own admissions, the Court holds that petitioner has complied with the requirements of Article 94 of
the Labor Code.

Damages

As to private respondent’s claim for damages, the NLRC was correct in ruling that there is no basis to
support the same.

WHEREFORE, for the reasons above stated, the 30 April 1991 Decision of public respondent in NLRC-NCR
Case No. 02-00753-88, entitled "Producers Bank Employees Association v. Producers Bank of the
Philippines," and its 18 June 1991 Resolution issued in the same case are hereby SET ASIDE, with the
exception of public respondent’s ruling on damages.

SO ORDERED.

Melo, Vitug, Panganiban and Sandoval-Gutierrez, JJ., concur.

Endnotes:

1. Re-raffled to herein ponente pursuant to the Court’s Resolution in A.M. No. 00-9-03-SC dated February
27, 2001.

2. Rollo, 39-49.

3. Ibid., 60-76.

4. Second Division, composed of Rustico L. Diokno, ponente; Edna Bonto-Perez, presiding commissioner;
and Domingo H. Zapanta.

5. Rollo, 114-140.

6. Ibid., 12-13.

7. Ibid., 170.

8. Ibid., 39.

9. Otherwise known as "The Labor Code of the Philippines" ; hereinafter referred to as" [the] Labor Code."
libra ry
cralaw virt ua1aw

10. Rollo, 44, 284.

11. Ibid., 241-242, 244.

12. Luzon Stevedoring Corp. v. Court of Industrial Relations, 15 SCRA 660 (1965).

13. Traders Royal Bank v. NLRC, 189 SCRA 274 (1990).

14. Luzon Stevedoring Corp. v. Court of Industrial Relations, supra.

15. Philippine National Construction Corporation v. NLRC, 307 SCRA 218 (1999); Atok-Big Wedge Mutual
Benefit Association v. Atok-Big Wedge Mining Co., 92 Phil 754 (1953).

16. Supra.

71
17. 279 SCRA 602 (1997).

18. Rollo, 68.

19. Ibid., 128.

20. Ibid., 41, 51.

21. Otherwise known as "The Central Bank Act." cralaw virtua1 aw lib rary

22. Issued on November 29, 1972.

23. 208 SCRA 652 (1992).

24. Rollo, 227.

25. Ibid., 125.

26. Ibid., 42.

27. Ibid., 275.

28. Ibid., 243.

29. On 13 August 1986, President Aquino issued Memorandum Order No. 28 removing the P1,000 salary
ceiling, thus entitling all rank-and-file employees to the 13th month pay.

30. Section 1.

31. Issued on 16 November 1987.

32. National Federation of Sugar Workers v. Ovejera, 114 SCRA 354 (1982). See UST Faculty Union v.
NLRC, 190 SCRA 215 (1990); Brokenshire Memorial Hospital, Inc. v. NLRC, 143 SCRA 564 (1986).

33. Rollo, 252-253.

34. Ibid., 295-296.

35. 206 SCRA 497 (1992). See also National Federation of Labor v. NLRC, 234 SCRA 311 (1994).

36. Executive Order No. 203, which took effect on 30 June 1987, provides that there are only ten (10)
regular holidays — New Year’s Day (January 1), Maundy Thursday (movable date), Good Friday (movable
date), Araw ng Kagitingan (April 9), Labor Day (May 1), Independence Day (June 12), National Heroes Day
(Last Sunday of August), Bonifacio Day (November 30), Christmas Day (December 25), and Rizal Day
(December 30).

37. Rollo, 75.

38. Ibid., 137-138.

39. Ibid., 75.

40. Ibid., 286-288.

41. 205 SCRA 200 (1992).

42. 138 SCRA 273 (1985).

72
 FIRST DIVISION

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

JOSE RIZAL COLLEGE, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION AND NATIONAL
ALLIANCE OF TEACHERS/OFFICE WORKERS, Respondents.

DECISION

PARAS, J.:

This is a petition for certiorari with prayer for the issuance of a writ of preliminary injunction, seeking the
annulment of the decision of the National Labor Relations Commission * in NLRC Case No. RB-IV-23037-78
(Case No. R4-1-1081-71) entitled "National Alliance of Teachers and Office Workers and Juan E. Estacio,
Jaime Medina, Et. Al. v. Jose Rizal College" modifying the decision of the Labor Arbiter as follows: jgc:cha nrob les.co m.ph

"WHEREFORE, in view of the foregoing considerations, the decision appealed from is MODIFIED, in the sense
that teaching personnel paid by the hour are hereby declared to be entitled to holiday pay.

"SO ORDERED." cralaw virtua1aw lib rary

The factual background of this case which is undisputed is as follows: chan rob1e s virtual 1aw l ibrary

Petitioner is a non-stock, non-profit educational institution duly organized and existing under the laws of the
Philippines. It has three groups of employees categorized as follows: (a) personnel on monthly basis, who
receive their monthly salary uniformly throughout the year, irrespective of the actual number of working
days in a month without deduction for holidays; (b) personnel on daily basis who are paid on actual days
worked and they receive unworked holiday pay and (c) collegiate faculty who are paid on the basis of
student contract hour. Before the start of the semester they sign contracts with the college undertaking to
meet their classes as per schedule.

Unable to receive their corresponding holiday pay, as claimed, from 1975 to 1977, private respondent
National Alliance of Teachers and Office Workers (NATOW) in behalf of the faculty and personnel of Jose
Rizal College filed with the Ministry of Labor a complaint against the college for said alleged non-payment of
holiday pay, docketed as Case No. RO4-10-81-72. Due to the failure of the parties to settle their differences
on conciliation, the case was certified for compulsory arbitration where it was docketed as RB-IV-23037-78
(Rollo, pp. 155-156).

After the parties had submitted their respective position papers, the Labor Arbiter ** rendered a decision on
February 5, 1979, the dispositive portion of which reads: jgc:chan roble s.com.p h

"WHEREFORE, judgment is hereby rendered as follows: cha nrob1es vi rtual 1aw lib rary

1. The faculty and personnel of the respondent Jose Rizal College who are paid their salary by the month
uniformly in a school year, irrespective of the number of working days in a month, without deduction for
holidays, are presumed to be already paid the 10 paid legal holidays and are no longer entitled to separate
payment for the said regular holidays;

2. The personnel of the respondent Jose Rizal College who are paid their wages daily are entitled to be paid
the 10 unworked regular holidays according to the pertinent provisions of the Rules and Regulations
Implementing the Labor Code;

3. Collegiate faculty of the respondent Jose Rizal College who by contract are paid compensation per student
contract hour are not entitled to unworked regular holiday pay considering that these regular holidays have
been excluded in the programming of the student contact hours." (Rollo, pp. 26-27)

On appeal, respondent National Labor Relations Commission in a decision promulgated on June 2, 1982,
modified the decision appealed from, in the sense that teaching personnel paid by the hour are declared to

73
be entitled to holiday pay (Rollo, p. 33).

Hence, this petition.

The sole issue in this case is whether or not the school faculty who according to their contracts are paid per
lecture hour are entitled to unworked holiday pay. chanrob les.com : vi rtua l law lib ra ry

Labor Arbiter Julio Andres, Jr. found that faculty and personnel employed by petitioner who are paid their
salaries monthly, are uniformly paid throughout the school year regardless of working days, hence their
holiday pay are included therein while the daily paid employees are renumerated for work performed during
holidays per affidavit of petitioner’s treasurer (Rollo, pp. 72-73).

There appears to be no problem therefore as to the first two classes or categories of petitioner’s workers.

The problem, however, lies with its faculty members, who are paid on an hourly basis, for while the Labor
Arbiter sustains the view that said instructors and professors are not entitled to holiday pay, his decision
was modified by the National Labor Relations Commission holding the contrary. Otherwise stated, on appeal
the NLRC ruled that teaching personnel paid by the hour are declared to be entitled to holiday pay.

Petitioner maintains the position among others, that it is not covered by Book V of the Labor Code on Labor
Relations considering that it is a non-profit institution and that its hourly paid faculty members are paid on a
"contract" basis because they are required to hold classes for a particular number of hours. In the
programming of these student contract hours, legal holidays are excluded and labelled in the schedule as
"no class day." On the other hand, if a regular week day is declared a holiday, the school calendar is
extended to compensate for that day. Thus petitioner argues that the advent of any of the legal holidays
within the semester will not affect the faculty’s salary because this day is not included in their schedule while
the calendar is extended to compensate for special holidays. Thus the programmed number of lecture hours
is not diminished (Rollo, pp. 157-158).

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

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

Subject holiday pay is provided for in the Labor Code (Presidential Decree No. 442, as amended), which
reads:chan robles v irt ual lawl ibra ry

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

(b) The employer may require an employee to work on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate; . . ." cralaw virtu a1aw libra ry

and in the Implementing Rules and Regulations, Rule IV, Book III, which reads: jgc:chanrob les.com .ph

"SEC. 8. Holiday pay of certain employees. — (a) Private school teachers, including faculty members of
colleges and universities, may not be paid for the regular holidays during semestral vacations. They shall,
however, be paid for the regular holidays during Christmas vacations. . . .

Under the foregoing provisions, apparently, the petitioner, although a non-profit institution is under
obligation to give pay even on unworked regular holidays to hourly paid faculty members subject to the
terms and conditions provided for therein.

We believe that the aforementioned implementing rule is not justified by the provisions of the law which
after all is silent with respect to faculty members paid by the hour who because of their teaching contracts
are obliged to work and consent to be paid only for work actually done (except when an emergency or a
fortuitous event or a national need calls for the declaration of special holidays). Regular holidays specified as
such by law are known to both school and faculty members as "no class days;" certainly the latter do not
expect payment for said unworked days, and this was clearly in their minds when they entered into the
teaching contracts.

74
On the other hand, both the law and the Implementing Rules governing holiday pay are silent as to payment
on Special Public Holidays.chan roble s.com:c ralaw:red

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

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

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

The records show petitioner JRC was amply heard and represented in the instant proceedings. It submitted
its position paper before the Labor Arbiter and the NLRC and even filed a motion for reconsideration of the
decision of the latter, as well as an "Urgent Motion for Hearing En Banc" (Rollo, p. 175). Thus, petitioner’s
claim of lack of due process is unfounded.

PREMISES CONSIDERED, the decision of respondent National Labor Relations Commission is hereby set
aside, and a new one is hereby RENDERED: chanroble svirtualawl ibra ry

(a) exempting petitioner from paying hourly paid faculty members their pay for regular holidays, whether
the same be during the regular semesters of the school year or during semestral, Christmas, or Holy Week
vacations;

(b) but ordering petitioner to pay said faculty members their regular hourly rate on days declared as special
holidays or for some reason classes are called off or shortened for the hours they are supposed to have
taught, whether extensions of class days be ordered or not; in case of extensions said faculty members shall
likewise be paid their hourly rates should they teach during said extensions.

SO ORDERED.

Teehankee (C.J.), Narvasa, Cruz and Gancayco, JJ., concur.

Endnotes:

* Rendered by Presiding Commissioner Guillermo C. Medina, Commissioner Gabriel M. Gatchalian and

Commissioner Miguel B. Varela.

** Labor Arbiter Julio F. Andres, Jr.

75
The National Alliance of Teachers sued Jose Rizal College for alleged nonpayment of
unworked holidays from 1975 to 1977. The members of the Alliance concerned are faculty
members who are paid on the basis of student contract hour.
ISSUE: Whether or not the school faculty are entitled to unworked holiday pay.
HELD: As far as unworked regular holidays are concerned, the teachers are not entitled to
holiday pay. Regular holidays specified as such by law are known to both school and faculty
members as no class days;” certainly the latter do not expect payment for said unworked
days, and this was clearly in their minds when they entered into the teaching contracts.
On the other hand, the teachers are entitled to be paid for unworked special holidays.
Otherwise stated, the faculty member, although forced to take a rest, does not earn what he
should earn on that day. Be it noted that when a special public holiday is declared, the faculty
member paid by the hour is deprived of expected income, and it does not matter that the
school calendar is extended in view of the days or hours lost, for their income that could be
earned from other sources is lost during the extended days. Similarly, when classes are called
off or shortened on account of typhoons, floods, rallies, and the like, these faculty members
must likewise be paid, whether or not extensions are ordered.

76
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 195466 July 2, 2014

ARIEL L. DAVID, doing business under the name and style "YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010
decision2 and the January 31, 2011 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
116003. The CA decision annulled and set aside the May 26, 2010 decision4 of the National Labor
Relations Commission (NLRC)5 which, in turn, affirmed the April 30, 2009 Decision6 of the Labor
Arbiter (LA). The LA's decision dismissed respondent John G. Macasio's monetary claims.

The Factual Antecedents

In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing
business under the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay
and 13th month pay. He also claimed payment for moral and exemplary damages and attorney’s
fees. Macasio also claimed payment for service incentive leave (SIL).8

Macasio alleged9 before the LA that he had been working as a butcher for David since January 6,
1995. Macasio claimed that David exercised effective control and supervision over his work, pointing
out that David: (1) set the work day, reporting time and hogs to be chopped, as well as the manner
by which he was to perform his work; (2) daily paid his salary of ₱700.00, which was increased from
₱600.00 in 2007, ₱500.00 in 2006 and ₱400.00 in 2005; and (3) approved and disapproved his
leaves. Macasio added that David owned the hogs delivered for chopping, as well as the work tools
and implements; the latter also rented the workplace. Macasio further claimed that David employs
about twenty-five (25) butchers and delivery drivers.

In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has
ten employees. He alleged that he hired Macasio as a butcher or chopper on "pakyaw" or task basis
who is, therefore, not entitled to overtime pay, holiday pay and 13th month pay pursuant to the
provisions of the Implementing Rules and Regulations (IRR) of the Labor Code. David pointed out
that Macasio: (1) usually starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or
earlier, depending on the volume of the delivered hogs; (2) received the fixed amount of ₱700.00 per
engagement, regardless of the actual number of hours that he spent chopping the delivered hogs;
and (3) was not engaged to report for work and, accordingly, did not receive any fee when no hogs
were delivered.

Macasio disputed David’s allegations.11 He argued that, first, David did not start his business only in
2005. He pointed to the Certificate of Employment12 that David issued in his favor which placed the
date of his employment, albeit erroneously, in January 2000. Second, he reported for work every day
which the payroll or time record could have easily proved had David submitted them in evidence.

Refuting Macasio’s submissions,13 David claims that Macasio was not his employee as he hired the
latter on "pakyaw" or task basis. He also claimed that he issued the Certificate of Employment, upon
Macasio’s request, only for overseas employment purposes. He pointed to the "Pinagsamang

77
Sinumpaang Salaysay,"14 executed by Presbitero Solano and Christopher (Antonio Macasio’s co-
butchers), to corroborate his claims.

In the April 30, 2009 decision,15 the LA dismissed Macasio’s complaint for lack of merit. The LA gave
credence to David’s claim that he engaged Macasio on "pakyaw" or task basis. The LA noted the
following facts to support this finding: (1) Macasio received the fixed amount of ₱700.00 for every
work done, regardless of the number of hours that he spent in completing the task and of the volume
or number of hogs that he had to chop per engagement; (2) Macasio usually worked for only four
hours, beginning from 10:00 p.m. up to 2:00 a.m. of the following day; and (3) the ₱700.00 fixed
wage far exceeds the then prevailing daily minimum wage of ₱382.00. The LA added that the nature
of David’s business as hog dealer supports this "pakyaw" or task basis arrangement.

The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to
overtime, holiday, SIL and 13th month pay.

The NLRC’s Ruling

In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did
not require Macasio to observe an eight hour work schedule to earn the fixed ₱700.00 wage; and
that Macasio had been performing a non-time work, pointing out that Macasio was paid a fixed
amount for the completion of the assigned task, irrespective of the time consumed in its
performance. Since Macasio was paid by result and not in terms of the time that he spent in the
workplace, Macasio is not covered by the Labor Standards laws on overtime, SIL and holiday pay,
and 13th month pay under the Rules and Regulations Implementing the 13th month pay law.18

Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010
resolution,20 prompting Macasio to elevate his case to the CA via a petition for certiorari.21

The CA’s Ruling

In its November 22, 2010 decision,22 the CA partly granted Macasio’s certiorari petition and reversed
the NLRC’s ruling for having been rendered with grave abuse of discretion.

While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it
nevertheless found Macasio entitled to his monetary claims following the doctrine laid down in
Serrano v. Severino Santos Transit.23 The CA explained that as a task basis employee, Macasio is
excluded from the coverage of holiday, SIL and 13th month pay only if he is likewise a "field
personnel." As defined by the Labor Code, a "field personnel" is one who performs the work away
from the office or place of work and whose regular work hours cannot be determined with
reasonable certainty. In Macasio’s case, the elements that characterize a "field personnel" are
evidently lacking as he had been working as a butcher at David’s "Yiels Hog Dealer" business in Sta.
Mesa, Manila under David’s supervision and control, and for a fixed working schedule that starts at
10:00 p.m.

Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th month pay for three years,
with 10% attorney’s fees on the total monetary award. The CA, however, denied Macasio’s claim for
moral and exemplary damages for lack of basis.

David filed the present petition after the CA denied his motion for reconsideration24 in the CA’s
January 31, 2011 resolution.25

The Petition

In this petition,26 David maintains that Macasio’s engagement was on a "pakyaw" or task basis.
Hence, the latter is excluded from the coverage of holiday, SIL and 13th month pay. David reiterates
his submissions before the lower tribunals27 and adds that he never had any control over the manner
by which Macasio performed his work and he simply looked on to the "end-result." He also contends

78
that he never compelled Macasio to report for work and that under their arrangement, Macasio was
at liberty to choose whether to report for work or not as other butchers could carry out his tasks. He
points out that Solano and Antonio had, in fact, attested to their (David and Macasio’s) established
"pakyawan" arrangement that rendered a written contract unnecessary. In as much as Macasio is a
task basis employee – who is paid the fixed amount of ₱700.00 per engagement regardless of the
time consumed in the performance – David argues that Macasio is not entitled to the benefits he
claims. Also, he posits that because he engaged Macasio on "pakyaw" or task basis then no
employer-employee relationship exists between them.

Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality
especially when, as in this case, they are supported by substantial evidence. Hence, David posits
that the CA erred in reversing the labor tribunals’ findings and granting the prayed monetary claims.

The Case for the Respondent

Macasio counters that he was not a task basis employee or a "field personnel" as David would have
this Court believe.28 He reiterates his arguments before the lower tribunals and adds that, contrary to
David’s position, the ₱700.00 fee that he was paid for each day that he reported for work does not
indicate a "pakyaw" or task basis employment as this amount was paid daily, regardless of the
number or pieces of hogs that he had to chop. Rather, it indicates a daily-wage method of payment
and affirms his regular employment status. He points out that David did not allege or present any
evidence as regards the quota or number of hogs that he had to chop as basis for the "pakyaw" or
task basis payment; neither did David present the time record or payroll to prove that he worked for
less than eight hours each day. Moreover, David did not present any contract to prove that his
employment was on task basis. As David failed to prove the alleged task basis or "pakyawan"
agreement, Macasio concludes that he was David’s employee. Procedurally, Macasio points out that
David’s submissions in the present petition raise purely factual issues that are not proper for a
petition for review on certiorari. These issues – whether he (Macasio) was paid by result or on
"pakyaw" basis; whether he was a "field personnel"; whether an employer-employee relationship
existed between him and David; and whether David exercised control and supervision over his work
– are all factual in nature and are, therefore, proscribed in a Rule 45 petition. He argues that the
CA’s factual findings bind this Court, absent a showing that such findings are not supported by the
evidence or the CA’s judgment was based on a misapprehension of facts. He adds that the issue of
whether an employer-employee relationship existed between him and David had already been
settled by the LA29 and the NLRC30 (as well as by the CA per Macasio’s manifestation before this
Court dated November 15, 2012),31 in his favor, in the separate illegal case that he filed against
David.

The Issue

The issue revolves around the proper application and interpretation of the labor law provisions on
holiday, SIL and 13th month pay to a worker engaged on "pakyaw" or task basis. In the context of
the Rule 65 petition before the CA, the issue is whether the CA correctly found the NLRC in grave
abuse of discretion in ruling that Macasio is entitled to these labor standards benefits.

The Court’s Ruling

We partially grant the petition.

Preliminary considerations: the Montoya ruling and the factual-issue-bar rule

In this Rule 45 petition for review on certiorari of the CA’s decision rendered under a Rule 65
proceeding, this Court’s power of review is limited to resolving matters pertaining to any perceived
legal errors that the CA may have committed in issuing the assailed decision. This is in contrast with
the review for jurisdictional errors, which we undertake in an original certiorari action. In reviewing
the legal correctness of the CA decision, we examine the CA decision based on how it determined
the presence or absence of grave abuse of discretion in the NLRC decision before it and not on the
basis of whether the NLRC decision on the merits of the case was correct.32 In other words, we have

79
to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it.33

Moreover, the Court’s power in a Rule 45 petition limits us to a review of questions of law raised
against the assailed CA decision.34

In this petition, David essentially asks the question – whether Macasio is entitled to holiday, SIL and
13th month pay. This one is a question of law. The determination of this question of law however is
intertwined with the largely factual issue of whether Macasio falls within the rule on entitlement to
these claims or within the exception. In either case, the resolution of this factual issue presupposes
another factual matter, that is, the presence of an employer-employee relationship between David
and Macasio.

In insisting before this Court that Macasio was not his employee, David argues that he engaged the
latter on "pakyaw" or task basis. Very noticeably, David confuses engagement on "pakyaw" or task
basis with the lack of employment relationship. Impliedly, David asserts that their "pakyawan" or task
basis arrangement negates the existence of employment relationship.

At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis does
not characterize the relationship that may exist between the parties, i.e., whether one of employment
or independent contractorship. Article 97(6) of the Labor Code defines wages as "xxx the
remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services rendered or to be
rendered[.]"35 In relation to Article 97(6), Article 10136 of the Labor Code speaks of workers paid by
results or those whose pay is calculated in terms of the quantity or quality of their work output which
includes "pakyaw" work and other non-time work.

More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis
negates employer-employee relationship, David would want the Court to engage on a factual
appellate review of the entire case to determine the presence or existence of that relationship. This
approach however is not authorized under a Rule 45 petition for review of the CA decision rendered
under a Rule 65 proceeding.

First, the LA and the NLRC denied Macasio’s claim not because of the absence of an employer-
employee but because of its finding that since Macasio is paid on pakyaw or task basis, then he is
not entitled to SIL, holiday and 13th month pay. Second, we consider it crucial, that in the separate
illegal dismissal case Macasio filed with the LA, the LA, the NLRC and the CA uniformly found the
existence of an employer-employee relationship.37

In other words, aside from being factual in nature, the existence of an employer-employee
relationship is in fact a non-issue in this case. To reiterate, in deciding a Rule 45 petition for review
of a labor decision rendered by the CA under 65, the narrow scope of inquiry is whether the CA
correctly determined the presence or absence of grave abuse of discretion on the part of the NLRC.
In concrete question form, "did the NLRC gravely abuse its discretion in denying Macasio’s claims
simply because he is paid on a non-time basis?"

At any rate, even if we indulge the petitioner, we find his claim that no employer-employee
relationship exists baseless. Employing the control test,38 we find that such a relationship exist in the
present case.

Even a factual review shows that Macasio is David’s employee

To determine the existence of an employer-employee relationship, four elements generally need to

be considered, namely: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct. These

80
elements or indicators comprise the so-called "four-fold" test of employment relationship. Macasio’s
relationship with David satisfies this test.

First, David engaged the services of Macasio, thus satisfying the element of "selection and
engagement of the employee." David categorically confirmed this fact when, in his "Sinumpaang
Salaysay," he stated that "nag apply po siya sa akin at kinuha ko siya na chopper[.]"39 Also, Solano
and Antonio stated in their "Pinagsamang Sinumpaang Salaysay"40 that "[k]ami po ay nagtratrabaho
sa Yiels xxx na pag-aari ni Ariel David bilang butcher" and "kilalanamin si xxx Macasio na isa ring
butcher xxx ni xxx David at kasama namin siya sa aming trabaho."

Second, David paid Macasio’s wages.Both David and Macasio categorically stated in their
respective pleadings before the lower tribunals and even before this Court that the former had been
paying the latter ₱700.00 each day after the latter had finished the day’s task. Solano and Antonio
also confirmed this fact of wage payment in their "Pinagsamang Sinumpaang Salaysay."41 This
satisfies the element of "payment of wages."

Third, David had been setting the day and time when Macasio should report for work. This power to
determine the work schedule obviously implies power of control. By having the power to control
Macasio’s work schedule, David could regulate Macasio’s work and could even refuse to give him
any assignment, thereby effectively dismissing him.

And fourth, David had the right and power to control and supervise Macasio’s work as to the means
and methods of performing it. In addition to setting the day and time when Macasio should report for
work, the established facts show that David rents the place where Macasio had been performing his
tasks. Moreover, Macasio would leave the workplace only after he had finished chopping all of the
hog meats given to him for the day’s task. Also, David would still engage Macasio’s services and
have him report for work even during the days when only few hogs were delivered for butchering.

Under this overall setup, all those working for David, including Macasio, could naturally be expected
to observe certain rules and requirements and David would necessarily exercise some degree of
control as the chopping of the hog meats would be subject to his specifications. Also, since Macasio
performed his tasks at David’s workplace, David could easily exercise control and supervision over
the former. Accordingly, whether or not David actually exercised this right or power to control is
beside the point as the law simply requires the existence of this power to control 4243 or, as in this
case, the existence of the right and opportunity to control and supervise Macasio.44

In sum, the totality of the surrounding circumstances of the present case sufficiently points to an
employer-employee relationship existing between David and Macasio.

Macasio is engaged on "pakyaw" or task basis

At this point, we note that all three tribunals – the LA, the NLRC and the CA – found that Macasio
was engaged or paid on "pakyaw" or task basis. This factual finding binds the Court under the rule
that factual findings of labor tribunals when supported by the established facts and in accord with the
laws, especially when affirmed by the CA, is binding on this Court.

A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour

wage payment, is the non-consideration of the time spent in working. In a task-basis work, the
emphasis is on the task itself, in the sense that payment is reckoned in terms of completion of the
work, not in terms of the number of time spent in the completion of work.45 Once the work or task is
completed, the worker receives a fixed amount as wage, without regard to the standard
measurements of time generally used in pay computation.

In Macasio’s case, the established facts show that he would usually start his work at 10:00 p.m.
Thereafter, regardless of the total hours that he spent at the workplace or of the total number of the
hogs assigned to him for chopping, Macasio would receive the fixed amount of ₱700.00 once he had
completed his task. Clearly, these circumstances show a "pakyaw" or task basis engagement that all
three tribunals uniformly found.

81
In sum, the existence of employment relationship between the parties is determined by applying the
"four-fold" test; engagement on "pakyaw" or task basis does not determine the parties’ relationship
as it is simply a method of pay computation. Accordingly, Macasio is David’s employee, albeit
engaged on "pakyaw" or task basis.

As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether
Macasio is entitled to holiday, 13th month, and SIL pay.

On the issue of Macasio’s entitlement to holiday, SIL and 13th month pay

The LA dismissed Macasio’s claims pursuant to Article 94 of the Labor Code in relation to Section 1,
Rule IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential
Decree (PD) No. 851. The NLRC, on the other hand, relied on Article 82 of the Labor Code and the
Rules and Regulations Implementing PD No. 851. Uniformly, these provisions exempt workers paid
on "pakyaw" or task basis from the coverage of holiday, SIL and 13th month pay.

In reversing the labor tribunals’ rulings, the CA similarly relied on these provisions, as well as on
Section 1, Rule V of the IRR of the Labor Code and the Court’s ruling in Serrano v. Severino Santos
Transit.46 These labor law provisions, when read together with the Serrano ruling, exempt those
engaged on "pakyaw" or task basis only if they qualify as "field personnel."

In other words, what we have before us is largely a question of law regarding the correct
interpretation of these labor code provisions and the implementing rules; although, to conclude that
the worker is exempted or covered depends on the facts and in this sense, is a question of fact: first,
whether Macasio is a "field personnel"; and second, whether those engaged on "pakyaw" or task
basis, but who are not "field personnel," are exempted from the coverage of holiday, SIL and 13th
month pay.

To put our discussion within the perspective of a Rule 45 petition for review of a CA decision
rendered under Rule 65 and framed in question form, the legal question is whether the CA correctly
ruled that it was grave abuse of discretion on the part of the NLRC to deny Macasio’s monetary
claims simply because he is paid on a non-time basis without determining whether he is a field
personnel or not.

To resolve these issues, we need tore-visit the provisions involved.

Provisions governing SIL and holiday pay

Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the
Labor Code - provisions governing working conditions and rest periods.

Art. 82. Coverage.— The provisions of [Title I] shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees,
field personnel, members of the family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another, and workers who are paid by results
as determined by the Secretary of Labor in appropriate regulations.

xxxx

"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away
from the principal place of business or branch office of the employer and whose actual hours of work
in the field cannot be determined with reasonable certainty. [emphases and underscores ours]

Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code)
and SIL pay (under Article 95 of the Labor Code). Under Article 82,"field personnel" on one hand
and "workers who are paid by results" on the other hand, are not covered by the Title I provisions.
The wordings of Article82 of the Labor Code additionally categorize workers "paid by results" and

82
"field personnel" as separate and distinct types of employees who are exempted from the Title I
provisions of the Labor Code.

The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the
IRR47 reads:

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

xxxx

SECTION 1. Coverage. – This Rule shall apply to all employees except:

xxxx

(e)Field personnel and other employees whose time and performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely commission basis, or
those who are paid a fixed amount for performing work irrespective of the time consumed in the
performance thereof. [emphases ours]

On the other hand, Article 95 of the Labor Code and its corresponding provision in the
IRR48 pertinently provides:

Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year of service
shall be entitled to a yearly service incentive leave of five days with pay.

(b) This provision shall not apply to those who are already enjoying the benefit herein provided,
those enjoying vacation leave with pay of at least five days and those employed in establishments
regularly employing less than ten employees or in establishments exempted from granting this
benefit by the Secretary of Labor and Employment after considering the viability or financial
condition of such establishment. [emphases ours]

xxxx

Section 1. Coverage. – This rule shall apply to all employees except:

xxxx

(e) Field personnel and other employees whose performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those who
are paid a fixed amount for performing work irrespective of the time consumed in the performance
thereof. [emphasis ours]

Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees.
To be excluded from their coverage, an employee must be one of those that these provisions
expressly exempt, strictly in accordance with the exemption. Under the IRR, exemption from the
coverage of holiday and SIL pay refer to "field personnel and other employees whose time and
performance is unsupervised by the employer including those who are engaged on task or contract
basis[.]" Note that unlike Article 82 of the Labor Code, the IRR on holiday and SIL pay do not
exclude employees "engaged on task basis" as a separate and distinct category from employees
classified as "field personnel." Rather, these employees are altogether merged into one classification
of exempted employees.

Because of this difference, it may be argued that the Labor Code may be interpreted to mean that
those who are engaged on task basis, per se, are excluded from the SIL and holiday payment since
this is what the Labor Code provisions, in contrast with the IRR, strongly suggest. The arguable

83
interpretation of this rule may be conceded to be within the discretion granted to the LA and NLRC
as the quasi-judicial bodies with expertise on labor matters.

However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the phrase "those
who are engaged on task or contract basis" in the rule has already been interpreted to mean as
follows:

[the phrase] should however, be related with "field personnel" applying the rule on ejusdem generis
that general and unlimited terms are restrained and limited by the particular terms that they follow
xxx Clearly, petitioner's teaching personnel cannot be deemed field personnel which refers "to non-
agricultural employees who regularly perform their duties away from the principal place of business
or branch office of the employer and whose actual hours of work in the field cannot be determined
with reasonable certainty. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that
private respondents are not entitled to the service incentive leave benefit cannot therefore be
sustained.

In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one
from the coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including
the holiday and SIL pay) only if they qualify as "field personnel." The IRR therefore validly qualifies
and limits the general exclusion of "workers paid by results" found in Article 82 from the coverage of
holiday and SIL pay. This is the only reasonable interpretation since the determination of excluded
workers who are paid by results from the coverage of Title I is "determined by the Secretary of Labor
in appropriate regulations."

The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v.
Bautista:

A careful perusal of said provisions of law will result in the conclusion that the grant of service
incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to
apply only to those employees not explicitly excluded by Section 1 of Rule V. According to the
Implementing Rules, Service Incentive Leave shall not apply to employees classified as "field
personnel." The phrase "other employees whose performance is unsupervised by the employer"
must not be understood as a separate classification of employees to which service incentive leave
shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of field
personnel under the Labor Code as those "whose actual hours of work in the field cannot be
determined with reasonable certainty."

The same is true with respect to the phrase "those who are engaged on task or contract basis,
purely commission basis." Said phrase should be related with "field personnel," applying the rule on
ejusdem generis that general and unlimited terms are restrained and limited by the particular terms
that they follow.

The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support
of granting Macasio’s petition.

In Serrano, the Court, applying the rule on ejusdem generis50 declared that "employees engaged on
task or contract basis xxx are not automatically exempted from the grant of service incentive leave,
unless, they fall under the classification of field personnel."51 The Court explained that the phrase
"including those who are engaged on task or contract basis, purely commission basis" found in
Section 1(d), Rule V of Book III of the IRR should not be understood as a separate classification of
employees to which SIL shall not be granted. Rather, as with its preceding phrase - "other
employees whose performance is unsupervised by the employer" - the phrase "including those who
are engaged on task or contract basis" serves to amplify the interpretation of the Labor Code
definition of "field personnel" as those "whose actual hours of work in the field cannot be determined
with reasonable certainty."

In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the
Labor Code provisions and the IRR as exempting an employee from the coverage of Title I of the

84
Labor Code based simply and solely on the mode of payment of an employee. The NLRC’s utter
disregard of this consistent jurisprudential ruling is a clear act of grave abuse of discretion.52 In other
words, by dismissing Macasio’s complaint without considering whether Macasio was a "field
personnel" or not, the NLRC proceeded based on a significantly incomplete consideration of the
case. This action clearly smacks of grave abuse of discretion.

Entitlement to holiday pay

Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only
taken counsel from Serrano and earlier cases, they would have correctly reached a similar
conclusion regarding the payment of holiday pay since the rule exempting "field personnel" from the
grant of holiday pay is identically worded with the rule exempting "field personnel" from the grant of
SIL pay. To be clear, the phrase "employees engaged on task or contract basis "found in the IRR on
both SIL pay and holiday pay should be read together with the exemption of "field personnel."

In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday
and SIL pay, the presence (or absence) of employer supervision as regards the worker’s time and
performance is the key: if the worker is simply engaged on pakyaw or task basis, then the general
rule is that he is entitled to a holiday pay and SIL pay unless exempted from the exceptions
specifically provided under Article 94 (holiday pay) and Article95 (SIL pay) of the Labor Code.
However, if the worker engaged on pakyaw or task basis also falls within the meaning of "field
personnel" under the law, then he is not entitled to these monetary benefits.

Macasio does not fall under the classification of "field personnel"

Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does
not fall under the definition of "field personnel." The CA’s finding in this regard is supported by the
established facts of this case: first, Macasio regularly performed his duties at David’s principal place
of business; second, his actual hours of work could be determined with reasonable certainty; and,
third, David supervised his time and performance of duties. Since Macasio cannot be considered a
"field personnel," then he is not exempted from the grant of holiday, SIL pay even as he was
engaged on "pakyaw" or task basis.

Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRC’s ruling
dismissing Macasio’s complaint for holiday and SIL pay for having been rendered with grave abuse
of discretion.

Entitlement to 13th month pay

With respect to the payment of 13th month pay however, we find that the CA legally erred in finding
that the NLRC gravely abused its discretion in denying this benefit to Macasio. 1âwphi1

The governing law on 13th month pay is PD No. 851.53

As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee
must be one of those expressly enumerated to be exempted. Section 3 of the Rules and Regulations
Implementing P.D. No. 85154enumerates the exemptions from the coverage of 13th month pay
benefits. Under Section 3(e), "employers of those who are paid on xxx task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the time consumed in the
performance thereof"55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and
Regulations Implementing PD No. 851 exempts employees "paid on task basis" without any
reference to "field personnel." This could only mean that insofar as payment of the 13th month pay is
concerned, the law did not intend to qualify the exemption from its coverage with the requirement
that the task worker be a "field personnel" at the same time.

85
WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar
as the payment of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM the
decision dated November 22, 2010 and the resolution dated January 31, 2011 of the Court of
Appeals in CA-G.R. SP No. 116003.

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

MARIANO C. DEL CASTILLO JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

1
Rollo, pp. 8-30.

2
Penned by Associate Justice Celia C. Librea-Leagogo, and concurred in by Associate
Justices Remedios A. Salazar-Fernando and Michael P. Elbinias; id. at 32-46.

3
Id. at 47-48.

4
Penned by Presiding Commissioner Herminio V. Suelo; id. at 150-156.

5
In NLRC LAC No. 07-002073-09 (NLRC NCR Case No. 01-00298-09).

86
6
Penned by Labor Arbiter Daniel J. Cajilig; id. at 119-122.

7
Id. at 61-63.

8
Filed on February 18, 2009; id. at 64-75.

9
Ibid.

10
Position Paper filed on February 18, 2009; id. at 80-86.

11
Reply by the Complainant; id. at 87-91.

12
Id. at 76.

13
Respondent’s Reply; id. at 92-96.

14
Id. at 99-100.

15
Supra note 5.

16
Supra note 4.

17
Rollo, pp. 123-139.

Presidential Decree No. 851 - "Requiring All Employers to Pay Their Employees a 13th
18

Month Pay." Enacted on December 16, 1975.

19
Rollo, pp. 160-176.

20
Id. at 157-159.

21
Id. at 180-204.

22
Supra note 2.

23
G.R. No. 187698, August 9, 2010, 627 SCRA 483.

24
Rollo, pp. 49-56.

25
Supra note 3.

26
Supra note 1.

27
Although he now claims that he engaged Macasio’s services in 2000 instead of 2005.

28
Rollo, pp. 223-243.

Docketed as NLRC OFW Case No. 06-09181-09. Decision dated January 27, 2010; id. at
29

260- 266.

30
Docketed as LAC No. 03-000566-10(3)(8)(T-7-10). Resolution dated November 12, 2010;
id. at 267-272.

31
Id. at 334-338. The CA decision dated November 6, 2012 in CA-G.R. SP No. 118736
affirmed the LA and NLRC rulings in the illegal dismissal case (rollo, pp. 340-346). On May

87
6, 2013, David assailed the CA’s decision in CA-G.R. SP No. 118736 before this Court via a
petition for certiorari. The case was docketed as G.R. No. 206735. In a Resolution dated July
15, 2013, the Court dismissed David’s petition for being a wrong remedy and for failure to
show any grave abuse of discretion in the assailed CA decision.

Montoya v. Transmed Manila Corporation, G.R. No. 183329, August 27, 2009, 597 SCRA
32

334, 342-343.

Career Philippines Shipmanagement, Inc. v. Serna, G.R. No. 172086, December 3, 2012,
33

686 SCRA 676, 683-684, citing Montoya v. Transmed Manila Corporation, supra note 30.

See Basay v. Hacienda Consolacion, G.R. No. 175532, April 19, 2010, 618 SCRA 422,
34

434. "A question of law exists when the doubt or controversy concerns the correct
application of law or jurisprudence to a certain set of facts xxx. In contrast, a question of fact
exists when the doubt or difference arises as to the truth or falsehood of facts or when the
query invites calibration of the whole evidence[.]" (Cosmos Bottling Corp. v. Nagrama, Jr.,
571 Phil. 281, 296 (2008), citing Republic v. Sandiganbayan, G.R. No. 135789, January 31,
2002, 375 SCRA 425).

35
Emphases ours.

36
Article 101 of the Labor Code reads in full -

"Art. 101. Payment by results.

The Secretary of Labor and Employment shall regulate the payment of wages by
results, including pakyaw, piecework, and other non-time work, in order to ensure the
payment of fair and reasonable wage rates, preferably through time and motion
studies or in consultation with representatives of workers’ and employer’s
organizations."

This decision lapsed to finality upon the denial of David’s petition for review filed with the
37

Court.

38
Of these elements, the power to control is the most important criterion. Under the "control
test," the important question to ask is whether the employer controls or has reserved the
right to control the employee not only as to the result of the work but also as to the means
and methods by which the result is to be accomplished. We should, however, emphasize
that the control test simply calls for the existence of the right to control and not necessarily
the actual exercise of this right. To be clear, the test does not require that the employer
actually supervises the performance of duties by the employee. (Javier v. Fly Ace
Corporation, supra, at 397-398; Chavez v. NLRC, 489 Phil. 444, 456 (2005); See Basay v.
Hacienda Consolacion, G.R. No. 175532, April 19, 2010, 618 SCRA 422, 434).

39
Rollo, pp. 97-98. In paragraph 1 of David’s "Sinumpaang Salaysay," he stated:

"1. xxx Ang katotohanan po ay nag apply po siya sa akin at kinuha ko siya na
choppersa kasunduan na pakyawan. ₱700.00 ang binabayad ko sa kanya sa bawat
apat (4) na oras na trabaho bilang chopper na mag-uumpisa ng 10:00 P.M. ng gabi
at matatapos sa 2:00 A.M. sa medaling araw o mas maaga pa dito kung kaunti lang
ang delivery ng baboy." (emphasis ours)

40
Supra note 13; underscores ours.

41
Ibid.

42
Jaime N. Gapayao v. Rosario Fulo, et al., G.R. No. 193493, June 13, 2013.

88
43
Ibid.

44
But, in addition to the above circumstances that clearly meet the "four-fold test," three other
circumstances satisfying the "economic dependence test" strengthen the conclusion of the
parties’ relationship as one of employer and employee (Dr. Sevilla v. Court of Appeals, 243
Phil. 340, 348-349 [1988]). For one, Macasio had been performing work that is usually
necessary and desirable to the usual trade and business of David. The facts show that David
is a hog dealer who sells hog meats to his customers in the wet market. He engages
butchers, such as Macasio, to butcher and chop his hogs for distribution to his customers.
Clearly, Macasio’s work as a butcher qualifies as necessary and desirable to David’s hog
dealer business.

Another, David had been repeatedly and continuously engaging Macasio’s services
to perform precisely the same task of butchering hogs or hog meats since 2000.
David categorically confirmed, in his various pleadings, his continuous and repeated
hiring or engagement of Macasio, albeit, insisting that the engagement is on
"pakyaw" or task basis.

Lastly, Macasio regularly reported for work to earn the ₱700.00 fee. He would
likewise ask for cash advances from David for his and his family’s needs. David’s
"Sinumpaang Salaysay"44 confirms this observation when he stated that he refused to
give Macasio another cash advance as the latter already had several unpaid cash
advances. These facts clearly show that Macasio looked on to David for the former’s
daily financial needs in the form of wages.

45
I C.A. Azucena, Jr., The Labor Code, 186 (Ed. 8, 2013).

46
Supra note 23.

47
Section 1, Rule IV of Book 3.

48
Section 1, Rule V of Book 3.

49
G.R. No. L- 58870, 18 December 1987.

50
The general and unlimited terms are restrained and limited by the particular terms that they
follow.

Serrano v. Severino Santos Transit, supra note 22, at 492-493; emphasis supplied,
51

underscore ours.

52
In case the LA and the NLRC cites a contrary jurisprudential ruling that creates a real
conflict in our existing case law, this is the only time that the Court may exercise its discretion
to have a wider scope of review of a Rule 65 CA decision. In this case, the wider scope of
review is necessitated by the need to create a body of harmonious and workable
jurisprudence.

53
Enacted on December 16, 1975.

54
Issued on December 22, 1975.

55
Section 3(e) of the Rules and Regulations Implementing P.D. No. 851 reads in full:

SEC. 3. Employers covered.––The Decree shall apply to all employers except to:

xxxx

89
e) Employers of those who are paid on purely commission, boundary, or task basis,
and those who are paid a fixed amount for performing a specific work, irrespective of
the time consumed in the performance thereof, except where the workers are paid on
piece-rate basis in which case the employer shall be covered by this issuance insofar
as such workers are concerned. [emphases ours]

90
 SECOND DIVISION

[G.R. NO. 156367 : May 16, 2005]

AUTO BUS TRANSPORT SYSTEMS, INC., Petitioner, v. ANTONIO BAUTISTA, Respondent.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision1 and Resolution2 of the Court of
Appeals affirming the Decision3 of the National Labor Relations Commission (NLRC). The NLRC ruling
modified the Decision of the Labor Arbiter (finding respondent entitled to the award of 13th month pay and
service incentive leave pay) by deleting the award of 13th month pay to Respondent.

THE FACTS

Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus Transport
Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio -
Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on commission basis, seven
percent (7%) of the total gross income per travel, on a twice a month basis.

On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus
he was driving accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle suddenly
stopped at a sharp curve without giving any warning.

Respondent averred that the accident happened because he was compelled by the management to go back
to Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he had just arrived in
Manila from Roxas, Isabela. Respondent further alleged that he was not allowed to work until he fully paid
the amount of P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged buses
and that despite respondent's pleas for reconsideration, the same was ignored by management. After a
month, management sent him a letter of termination.

Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for
nonpayment of 13th month pay and service incentive leave pay against Autobus.

Petitioner, on the other hand, maintained that respondent's employment was replete with offenses involving
reckless imprudence, gross negligence, and dishonesty. To support its claim, petitioner presented copies of
letters, memos, irregularity reports, and warrants of arrest pertaining to several incidents wherein
respondent was involved.

Furthermore, petitioner avers that in the exercise of its management prerogative, respondent's employment
was terminated only after the latter was provided with an opportunity to explain his side regarding the
accident on 03 January 2000.

On 29 September 2000, based on the pleadings and supporting evidence presented by the parties, Labor
Arbiter Monroe C. Tabingan promulgated a Decision,4 the dispositive portion of which reads:

WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal has no leg
to stand on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.

However, still based on the above-discussed premises, the respondent must pay to the complainant the
following:

A. his 13th month pay from the date of his hiring to the date of his dismissal, presently computed at
P78,117.87;

91
b. his service incentive leave pay for all the years he had been in service with the respondent, presently
computed at P13,788.05.

All other claims of both complainant and respondent are hereby dismissed for lack of merit.5

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the NLRC which
rendered its decision on 28 September 2001, the decretal portion of which reads:

[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3 provides:

"Section 3. Employers covered. 'The Decree shall apply to all employers except to:

xxx � � � xxx � � � xxx

e) employers of those who are paid on purely commission, boundary, or task basis, performing a specific
work, irrespective of the time consumed in the performance thereof. xxx."

Records show that complainant, in his position paper, admitted that he was paid on a commission basis.

In view of the foregoing, we deem it just and equitable to modify the assailed Decision by deleting the
award of 13th month pay to the complainant.

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of 13th month pay.
The other findings are AFFIRMED.6

In other words, the award of service incentive leave pay was maintained. Petitioner thus sought a
reconsideration of this aspect, which was subsequently denied in a Resolution by the NLRC dated 31 October
2001.

Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of said decision
with the Court of Appeals which was subsequently denied by the appellate court in a Decision dated 06 May
2002, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the assailed Decision of
respondent Commission in NLRC NCR CA No. 026584-2000 is hereby AFFIRMED in toto. No costs.7

Hence, the instant petition.

ISSUES

1. Whether or not respondent is entitled to service incentive leave;

2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor Code, as
amended, is applicable to respondent's claim of service incentive leave pay.

RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation of Article 95 of the Labor Code vis
- à-vis Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of the Labor Code which
provides:

Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE

(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service
incentive leave of five days with pay.

Book III, Rule V: SERVICE INCENTIVE LEAVE

SECTION 1. Coverage. 'This rule shall apply to all employees except:

92
(d) Field personnel and other employees whose performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed
amount for performing work irrespective of the time consumed in the performance thereof; . . .

A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive
leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to
those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules,
Service Incentive Leave shall not apply to employees classified as "field personnel." The phrase "other
employees whose performance is unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be granted. Rather, it serves as an
amplification of the interpretation of the definition of field personnel under the Labor Code as those "whose
actual hours of work in the field cannot be determined with reasonable certainty."8

The same is true with respect to the phrase "those who are engaged on task or contract basis, purely
commission basis." Said phrase should be related with "field personnel," applying the rule on ejusdem
generis that general and unlimited terms are restrained and limited by the particular terms that they
follow.9 Hence, employees engaged on task or contract basis or paid on purely commission basis are not
automatically exempted from the grant of service incentive leave, unless, they fall under the classification of
field personnel.

Therefore, petitioner's contention that respondent is not entitled to the grant of service incentive leave just
because he was paid on purely commission basis is misplaced. What must be ascertained in order to resolve
the issue of propriety of the grant of service incentive leave to respondent is whether or not he is a field
personnel.

According to Article 82 of the Labor Code, "field personnel" shall refer to non-agricultural employees who
regularly perform their duties away from the principal place of business or branch office of the employer and
whose actual hours of work in the field cannot be determined with reasonable certainty. This definition is
further elaborated in the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-
Clerical Commercial Employees Association10 which states that:

As a general rule, [field personnel] are those whose performance of their job/service is not supervised by
the employer or his representative, the workplace being away from the principal office and whose hours and
days of work cannot be determined with reasonable certainty; hence, they are paid specific amount for
rendering specific service or performing specific work. If required to be at specific places at specific times,
employees including drivers cannot be said to be field personnel despite the fact that they are performing
work away from the principal office of the employee. [Emphasis ours]

To this discussion by the BWC, the petitioner differs and postulates that under said advisory opinion, no
employee would ever be considered a field personnel because every employer, in one way or another,
exercises control over his employees. Petitioner further argues that the only criterion that should be
considered is the nature of work of the employee in that, if the employee's job requires that he works away
from the principal office like that of a messenger or a bus driver, then he is inevitably a field personnel.

We are not persuaded. At this point, it is necessary to stress that the definition of a "field personnel" is not
merely concerned with the location where the employee regularly performs his duties but also with the fact
that the employee's performance is unsupervised by the employer. As discussed above, field personnel are
those who regularly perform their duties away from the principal place of business of the employer and
whose actual hours of work in the field cannot be determined with reasonable certainty. Thus, in order to
conclude whether an employee is a field employee, it is also necessary to ascertain if actual hours of work in
the field can be determined with reasonable certainty by the employer. In so doing, an inquiry must be
made as to whether or not the employee's time and performance are constantly supervised by the
employer.

As observed by the Labor Arbiter and concurred in by the Court of Appeals:

It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors
assigned at strategic places who board the bus and inspect the passengers, the punched tickets, and the
conductor's reports. There is also the mandatory once-a-week car barn or shop day, where the bus is
regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or not there are problems
thereon as reported by the driver and/or conductor. They too, must be at specific place as [sic] specified
time, as they generally observe prompt departure and arrival from their point of origin to their point of
destination. In each and every depot, there is always the Dispatcher whose function is precisely to see to it
that the bus and its crew leave the premises at specific times and arrive at the estimated proper time.
These, are present in the case at bar. The driver, the complainant herein, was therefore under constant
supervision while in the performance of this work. He cannot be considered a field personnel.11

93
We agree in the above disquisition. Therefore, as correctly concluded by the appellate court, respondent is
not a field personnel but a regular employee who performs tasks usually necessary and desirable to the
usual trade of petitioner's business. Accordingly, respondent is entitled to the grant of service incentive
leave.

The question now that must be addressed is up to what amount of service incentive leave pay respondent is
entitled to.

The response to this query inevitably leads us to the correlative issue of whether or not the three (3)-year
prescriptive period under Article 291 of the Labor Code is applicable to respondent's claim of service
incentive leave pay.

Article 291 of the Labor Code states that all money claims arising from employer-employee relationship shall
be filed within three (3) years from the time the cause of action accrued; otherwise, they shall be forever
barred.

In the application of this section of the Labor Code, the pivotal question to be answered is when does the
cause of action for money claims accrue in order to determine the reckoning date of the three-year
prescriptive period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of
the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such
defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to
the plaintiff.12

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the third
element of a cause of action transpired. Stated differently, in the computation of the three-year prescriptive
period, a determination must be made as to the period when the act constituting a violation of the workers'
right to the benefits being claimed was committed. For if the cause of action accrued more than three (3)
years before the filing of the money claim, said cause of action has already prescribed in accordance with
Article 291.13

Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is established that
the benefits being claimed have been withheld from the employee for a period longer than three (3) years,
the amount pertaining to the period beyond the three-year prescriptive period is therefore barred by
prescription. The amount that can only be demanded by the aggrieved employee shall be limited to the
amount of the benefits withheld within three (3) years before the filing of the complaint.14

It is essential at this point, however, to recognize that the service incentive leave is a curious animal in
relation to other benefits granted by the law to every employee. In the case of service incentive leave, the
employee may choose to either use his leave credits or commute it to its monetary equivalent if not
exhausted at the end of the year.15 Furthermore, if the employee entitled to service incentive leave does not
use or commute the same, he is entitled upon his resignation or separation from work to the commutation
of his accrued service incentive leave. As enunciated by the Court in Fernandez v. NLRC:16

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments,
subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations provides
that "[e]very employee who has rendered at least one year of service shall be entitled to a yearly service
incentive leave of five days with pay." Service incentive leave is a right which accrues to every employee
who has served "within 12 months, whether continuous or broken reckoned from the date the employee
started working, including authorized absences and paid regular holidays unless the working days in the
establishment as a matter of practice or policy, or that provided in the employment contracts, is less than
12 months, in which case said period shall be considered as one year." It is also "commutable to its money
equivalent if not used or exhausted at the end of the year." In other words, an employee who has served for
one year is entitled to it. He may use it as leave days or he may collect its monetary value. To limit the
award to three years, as the solicitor general recommends, is to unduly restrict such right.17 [Italics
supplied]

Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to claim
his service incentive leave pay accrues from the moment the employer refuses to remunerate its monetary
equivalent if the employee did not make use of said leave credits but instead chose to avail of its
commutation. Accordingly, if the employee wishes to accumulate his leave credits and opts for its
commutation upon his resignation or separation from employment, his cause of action to claim the whole
amount of his accumulated service incentive leave shall arise when the employer fails to pay such amount at
the time of his resignation or separation from employment.

94
Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can
conclude that the three (3)-year prescriptive period commences, not at the end of the year when the
employee becomes entitled to the commutation of his service incentive leave, but from the time when the
employer refuses to pay its monetary equivalent after demand of commutation or upon termination of the
employee's services, as the case may be.

The above construal of Art. 291, vis - à-vis the rules on service incentive leave, is in keeping with the
rudimentary principle that in the implementation and interpretation of the provisions of the Labor Code and
its implementing regulations, the workingman's welfare should be the primordial and paramount
consideration.18 The policy is to extend the applicability of the decree to a greater number of employees who
can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give
maximum aid and protection to labor.19

In the case at bar, respondent had not made use of his service incentive leave nor demanded for its
commutation until his employment was terminated by petitioner. Neither did petitioner compensate his
accumulated service incentive leave pay at the time of his dismissal. It was only upon his filing of a
complaint for illegal dismissal, one month from the time of his dismissal, that respondent demanded from
his former employer commutation of his accumulated leave credits. His cause of action to claim the payment
of his accumulated service incentive leave thus accrued from the time when his employer dismissed him and
failed to pay his accumulated leave credits.

Therefore, the prescriptive period with respect to his claim for service incentive leave pay only commenced
from the time the employer failed to compensate his accumulated service incentive leave pay at the time of
his dismissal. Since respondent had filed his money claim after only one month from the time of his
dismissal, necessarily, his money claim was filed within the prescriptive period provided for by Article 291 of
the Labor Code.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision of the
Court of Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

Endnotes:

1
CA-G.R. SP No. 68395, dated 06 May 2002, penned by Associate Justice Andres B. Reyes, Jr. with
Associate Justices Conrado M. Vasquez, Jr. and Mario L. Guariña, III, concurring.

2
Dated 12 December 2002.

3
NLRC NCR CA No. 026584-2000 (NLRC Case No. RAB CAR 02-0088-00), dated 28 September 2001.

4
NLRC Case No. RAB-CAR-02-0088-00.

5
Rollo, pp. 46-47.

6
Rollo, pp. 52-53.

7
CA Decision, p. 10; Rollo, p. 24.

8
See Mercidar Fishing Corporation v. NLRC, G.R. No. 112574, 08 October 1998, 297 SCRA440.

9
Cebu Institute of Technology v. Ople, G.R. No. L-58870, 18 December 1987, 156 SCRA 629, 672, citing
Vera v. Cuevas, G.R. No. L-33693, 31 May 1979, 90 SCRA 379.

10
06 April 1989; Rollo. p. 20.

11
Rollo, pp. 45-46.

95
12
Baliwag Transit, Inc. v. Ople, G.R. No. 57642, 16 March 1989, 171 SCRA 250, citing Agric. Credit &
Cooperative Financing Administration v. Alpha Ins. & Surety Co., Inc., G.R. No. L-24566, 29 July 1968, 24
SCRA 151; Summit Guaranty and Insurance Co., Inc. v. De Guzman, G.R. No. L-50997, 30 June 1987, 151
SCRA 389; Tormon v. Cutanda, G.R. No. L-18785, 23 December 1963, 9 SCRA 698.

13
See De Guzman, et al. v. CA and Nasipit Lumber Co., G.R. No.132257, 12 October 1998, 297 SCRA 743.

14
See E. Ganzon, Inc. v. NLRC, G.R. No. 123769, 22 December 1999, 321 SCRA 434.

15
Fernandez v. NLRC, G.R. No. 105892, 28 January 1998, 349 Phil 65.

16
Ibid.

17
Ibid., pp. 94-95.

18
Abella v. NLRC, G.R. No. L-71813, 20 July 1987, 152 SCRA 140, citing Volkschel Labor Union v. Bureau of
Labor Relations, G.R. No. L-45824, 19 June 1985, 137 SCRA 43.

19
Sarmiento v. Employees' Compensation Commission, G.R. No. L-68648, 24 September 1986, 144 SCRA
421, citing Cristobal v. Employees' Compensation Commission, G.R. No. L-49280, 26 February 1981, 103
SCRA 329; Acosta v. Employees' Compensation Commission, G.R. No. L-55464, 12 November 1981, 109
SCRA 209.

96
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 177524 July 23, 2014

NATIONAL UNION OF WORKERS IN HOTEL RESTAURANT AND ALLIED INDUSTRIES

(NUWHRAIN-APL-IUF), PHILIPPINE PLAZA CHAPTER, Petitioner,
vs.
PHILIPPINE PLAZA HOLDINGS, INC., Respondent.

DECISION

BRION, J.:

We resolve the petition for review on certiorari,1 challenging the January 31, 2007 decision2 and the
April 20, 2007 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 93698.

This CA decision reversed the July 4, 2005 decision4 of the National Labor Relations Commission
(NLRC) in NLRC NCR CA No. 031977-02 (NLRC NCR-30-05-02011-01) that in tum, reversed and
set aside the April 30, 2002 decision5 of the Labor Arbiter (LA).

The LA dismissed the complaint for non-payment of service charges filed by petitioner National
Union of Workers in Hotel Restaurant and Allied Industries (NUWHRAIN-APL-IUF), Philippine Plaza
Chapter (Union).

The Factual Antecedents

The Union is the collective bargaining agent of the rank-and-file employees of respondent Philippine
Plaza Holdings, Inc. (PPHI).

On November 24, 1998, the PPHI and the Union executed the "Third Rank-and-File Collective
Bargaining Agreement as Amended"6 (CBA). The CBA provided, among others, for the collection, by
the PPHI, of a ten percent (10%) service charge on the saleof food, beverage, transportation,
laundry and rooms. The pertinent CBA provisions read:

SECTION 68. COLLECTION. The HOTEL shall continue to collect ten percent (10%) service charge
on the sale of food, beverage, transportation, laundry and rooms except on negotiated contracts and
special rates. [Emphasis supplied]

SECTION 69. DISTRIBUTION. The service charge to be distributed shall consist of the following:

Effective Food & Beverage Room, Transportation & valet

1998 95% 100%
1997 95% 100%

The distributable amount will beshared equally by all HOTEL employees, including managerial
employees but excluding expatriates, with three shares to be given to PPHI Staff and three shares to
the UNION (one for the national and two for the local funds) that may be utilized by them for
purposes for which the UNION may decide.

These provisions merely reiterated similar provisions found in the PPHIUnion’s earlier collective
bargaining agreement executed on August 29, 1995.7

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On February 25, 1999, the Union’s Service Charge Committee informed the Union President,
through an audit report (1st audit report),8 of uncollected service charges for the last quarter of 1998
amounting to ₱2,952,467.61. Specifically, the audit report referred to the service charges from the
following items: (1) "Journal Vouchers;" (2) "Banquet Other Revenue;" and (3) "Staff and Promo."
The Union presented this audit report to the PPHI’s management during the February 26, 1999
Labor Management Cooperation Meeting (LMCM).9 The PPHI’s management responded that the
Hotel Financial Controller would need to verify the audit report.

Through a letter dated June 9, 1999,10 the PPHI admitted liability for ₱80,063.88 out of the
₱2,952,467.61 thatthe Union claimed as uncollected service charges. The PPHI denied the rest of
the Union’s claims because: (1) they were exempted from the service charge being revenues from
"special promotions" (revenue from the Westin Gold Card sales) or "negotiated contracts" (alleged
revenue from the Maxi-Media contract); (2) the revenues did not belong to the PPHI but to third-party
suppliers; and (3) no revenue was realized from these transactions as they were actually expenses
incurred for the benefit of executives or by way of good-will to clients and government officials.

During the July 12, 1999 LMCM,11 the Union maintained its position on uncollected service charges
so that a deadlock on the issue ensued. The parties agreed to refer the matter to a third party for the
solution. They considered two options – voluntary arbitration or court action – and promised to get
back to each other on their chosen option.

In its formal reply (to the PPHI’sJune 9, 1999 letter) dated July 21, 1999 (2nd audit report),12 the
Union modified its claims. It claimed uncollected service charges from: (1) "Journal Vouchers -
Westin Gold Revenue and Maxi-Media" (F&B and Rooms Barter); (2) "Banquet and Other Revenue;"
and (3) "Staff and Promo."

On August 10, 2000, the Union’s Service Charge Committee made another service charge audit
report for the years 1997, 1998 and 1999 (3rd audit report).13 This 3rd audit report reflected total
uncollected service charges of ₱5,566,007.62 from the following entries: (1) "Journal Vouchers;" (2)
"Guaranteed No Show;" (3) "Promotions;" and (4) "F & B Revenue." The Union President presented
the 3rd audit report to the PPHI on August 29, 2000.

When the parties failed to reachan agreement, the Union, on May 3, 2001, filed before the LA
(Regional Arbitration Branch of the NLRC) a complaint14 for non-payment of specified service
charges. The Union additionally charged the PPHI with unfair labor practice (ULP) under Article 248
of the Labor Code, i.e., for violation of their collective bargaining agreement.

In its decision15 dated April 30, 2002, the LA dismissed the Union’s complaint for lack of merit. The
LA declared that the Union failed to show, by law, contract and practice, its entitlement to the
payment of service charges from the entries specified in its audit reports (specified
entries/transactions).

The LA pointed out that Section 68 of the CBA explicitly requires, as a precondition for the
distribution of service charges in favor of the covered employees, the collection of the 10% service
charge on the "sale of food, beverage, transportation, laundry and rooms;" at the same time, the
provision exempts from its coverage "negotiated contracts" and "special rates" that the LA deemed
as non-revenue generating transactions involving "food, beverage, transportation, laundry and
rooms." The Union failed to prove that the PPHI collected 10% service charges on the specified
entries/transactions that could have triggered the PPHI’s obligation under this provision.

Particularly, the LA pointed out that, first, the only evidence on record that could have formed the
basis of the Union’s claim for service charges was the PPHI’s admission that, as a matter of policy, it
has been charging, collecting and distributing to the covered employees 10% service charge on the
fifty percent (50%) of the total selling price of the "Maxi-Media F & B" and on the "Average House"
rate of the "Maxi-Media Rooms." And it did so, notwithstanding the fact that the "Maxi-Media F & B
and Rooms Barter" is a "negotiated contract" and/or "special rate" that Section 68 explicitly excludes
from the service charge coverage.

98
Second,while the PPHI derived revenues from the sale of the Westin Gold Cards (Westin Gold
Revenue), the PPHI did not and could not have collected a 10% service charge as these
transactions could not be considered as sale of food, beverage, transportation, laundry and rooms
that Section 68 contemplates.

Third, the "Staff and Business Promotion and Banquet" entry refers to the expenses incurred by the
PPHI’s Marketing Department and Department Heads and Hotel executives either as part of their
perks or the PPHI’s marketing tool/public relations. These are special rates that are essentially non-
revenue generating items.

Fourth, the "Backdrop" entry refers to services undertaken by third parties payment for which were
made of course to them; hence, this entry/transaction could not likewise be considered as sale of
services by PPHI for which collection of the 10% service charge was warranted.

Lastly, the LA equally brushed aside the Union’s claim of ULP declaring that the PPHI was well
within its legal and contractual right to refuse payment of service charges for entries from which it did
not collect any service charge pursuant tothe provision of their CBA.

The NLRC’s ruling

In its decision16 of July 4, 2005, the NLRC reversed the LA’s decision and considered the specified
entries/transactions as "service chargeable." As the PPHI failed to prove that it paid or remitted the
required service charges, the NLRC held the PPHI liable to pay the Union ₱5,566,007.62
representing the claimed uncollected service charges for the years 1997, 1998 and 1999 per the 3rd
audit report.

The PHHI went to the CA on a petition for certiorari17 after the NLRC denied its motion for
reconsideration.18

The CA’s ruling

The CA granted the PPHI’s petition in its January 31, 2007 decision.19 It affirmed the LA’s decision
but ordered the PPHI to pay the Union the amount of ₱80,063.88 as service charges that it found
was due under the circumstances. The CA declared that no service charges were due from the
specified entries/transactions; either these constituted "negotiated contracts" and "special rates" that
Section 68 of the CBA explicitly excludes from the coverage of service charges, or they were cited
bases that the Union failed to sufficiently prove.

The CA pointed out that: one, the "Westin Gold Card Revenues" entry involved the sale, not of food,
beverage, transportation, laundry and rooms, but of a "contractual right" to be charged a lesser rate
for the products and services that the Hotel and the stores within it provide. At any rate, the PPHI
charges, collects and distributes to the covered employees the CBAagreed service charges
whenever any Westin Gold Card member purchases food, beverage, etc. Two, the "Maxi-Media F &
B and Rooms and Barter" entry did not involve any sale transaction that Section 68 contemplates.
The CA pointed out that the arrangement20 between the PPHI and Maxi-Media International, Inc. was
not one of sale but an innominate contract of facio ut des, i.e., in exchange for the professional
entertainment services provided by Maxi-Media, the Hotel agreed to give the former ₱2,800,000.00
worth of products and services.The CA added that this agreement falls under "negotiated contracts"
that Section 68 explicitly exempts. Three, the sale of "Gift Certificates" does not involve the CBA-
contemplated "sale of food, beverage, etc." Four, the Union failed to show the source of its
computations for its "Guaranteed No Show" and "F & B Revenue" claims. Five, the "Business
Promotions" entry likewise did not involve any sale; these were part of the PPHI’s business
expenses in the form of either signing benefits for the PPHI’s executives or asmarketing tool used by
the PPHI’s marketing personnel to generate goodwill. And six, the Union’s claims for service charges
that the PPHI allegedly collected prior to May 3, 1998 or three years before the Union filed
itscomplaint on May 3, 2001 had already prescribed per Article 291 of the Labor Code.

The Union filed the present petition after the CA denied its motion for Reconsideration 21

99
in the CA’s April 20, 2007 resolution.22

The Petition

The Union argues that the CA clearly misapprehended and misappreciated, with grave abuse of
discretion, the facts and evidence on record. It maintains that the specified entries/transactions are
revenue based transactions which, per Section 68 and 69 of the CBA, clearly called for the collection
and distribution of a 10% service charge in favor of the covered employees. Particularly, the Union
argues that: (1) the "Westin Gold Cards" serve not only as a discount card but also as a "pre-paid"
card that provide its purchasing members complimentary amenities for which the Hotel employees
rendered services and should, therefore, had been subjected to the 10% service charge; (2) the
PPHI failed to prove that it had paid and distributed to the covered employees the service charge
due on the actual discounted sales of food, beverage, etc., generated by the "Westin Gold Cards;"
(3) the Hotel employees likewise rendered services whenever the Maxi-Media International, Inc.
consumed or availed part of the 2,800,000.00 worth of goods and services pursuant to its agreement
with the PPHI; (4) the "Maxi-Media" discounts should be charged to the PPHI as part of its expenses
and not the Union’s share in the service charges; (5) the PPHI has a separate budget for
promotions, hence the "Business Promotions" entry should likewise had been subjected to the 10%
service charge; (6) the sale of "Gift Certificates," recorded in the PPHI’s "Journal Vouchers" as
"other revenue/income," constituted a revenue transaction for which service charges were due; (7)
the PPHI admitted that service charges from "Guaranteed No Show" were due; and (8) it properly
identified through reference numbers the uncollected service charges from "Food and Beverage
Revenue."

The Union contends that inrefusing to collect and remit the CBA-mandated service charges that the
PPHI insists were non-revenue transactions falling under "Negotiated Contracts" and/or "Special
Rates," the PPHI, in effect, contravened the employees’ rights to service charges under the law and
the CBA. The Union also contends that the term "Negotiated Contracts" should be applied to "airline
contracts" only that they (the Union and the PPHI) intended when they executed the CBA. It points
out that at the time the CBA was executed, the PPHI had an existing agreement with Northwest
Airlines to which the term "Negotiated Contracts" clearly referred to. Further, the Union argues that
its claim for unpaid services charges for the year 1997 and part of 1998 had not yet prescribed.
Applying Article 1155 of the Civil Code in relation toArticle 291 of the Labor Code, the Union points
out that the running of the prescriptive period for the filing of its claim was interrupted when it
presented to the PPHI its 1st audit report during the February 26, 1999 LMCMand when the PPHI
admitted the service charges due to the Union inthe PPHI’s June 9, 1999 letter.

The Union additionally argues that the PPHI failed to conform to the generally accepted accounting
standards when it reclassified the revenue items as expense items.

Finally, the Union contends that the PPHI’s refusal, despite repeated demands, to distribute the
unremitted service charges and recognize its right to service charges on the specified entries; the
PPHI’s deliberate failure to disclose its financial transactions and audit reports; and the PPHI’s
reclassification of the revenues into expense items constitute gross violation of the CBA that
amounts to whatthe law considers as ULP.

The Case for the Respondent

The PPHI primarily counters, in its comment,23 that the Union’s call for the Court to thoroughly re-
examinethe records violates the Rule 45 proscription against questions of facts.The PPHI points out
that Rule 45 of the Rules of Court under which the petition is filed requires that only questions of law
be raised. In addition, the factual findings of the LA that had been affirmed by the CA deserve not
only respect but even finality.

On the petition’s merits, the PPHI argues that the specified entries/transactions for which the Union
claims service charges: (1) were not revenue generating transactions; (2) that did not involve a sale
of food, beverage, rooms, transportation or laundry; and/or (3) were in the nature of negotiated
contracts and special rates that Section 68 of the CBA specifically excepts from the collection of

100
service charges. Correlatively, Article 96 of the Labor Code requires the collection of service charges
as a condition precedent to its distribution or payment. Thus, as no service charges were collected
on the specified entries/transactions that the CBA expressly excepts, the Union’s claim for unpaid
service charges clearly had no basis.

To be precise, the PPHI points out that, first, the sale per se of the "Westin Gold Cards" did not
involve a sale of food, beverage, etc. that Section 68 of the CBA contemplates. The discounted
sales of food, beverage, etc. to Westin Gold Card holders, on the other hand, had already been
subjected to service charges inclusive of the discount, i.e., computed on the gross sales of food,
beverage, etc. to the card holders, and which service charges it had already distributed to the
covered employees. Second, its agreement with Maxi-Media involved an exchange or barter
transaction, i.e., its food and Hotel services in exchange for Maxi-Media’s entertainment services
that did not generate income. This agreement likewise falls under "Negotiated Contracts" that
Section 68 clearly excepts. And, in any case, it had already collected, and distributed to the covered
employees, the service charges on the food, beverage, etc. that Maxi-Media consumed based on
the monthly average rate of the rooms and on the 50% rate of the price of the consumed food and
beverage. Third, the Union failed to prove its claims for uncollected service charges from
"Guaranteed No Show" and "Business Promotions." Fourth, the "Food and Beverage other
Revenue" entry refers to the PPHI’s transactions with external service providers the payment for
whose services could not be considered as the PPHI’s revenue. Fifth, the sale per se of the "Gift
Certificates" also did not involve the Section 68-contemplated sale of food, beverage, etc. and the
Union failed to prove that the presented Gift Certificateshad actually been consumed, i.e., used
within the Hotel premises for food, beverage, etc. And sixth, it had never been its practice to collect
service charges on the specified entries/transactions that could have otherwise resulted in what the
Union considers as "partial abolition of service charges" when it refused to collect service charges
from them.

The PPHI also disputes what it considers as the Union’s strained interpretation of the CBA exception
of "Negotiated Contracts" as applicable to airline contracts only. It points out that the clear wordings
of Section 68 of the CBA plainly show the intent to except, in a general and broad sense,
"Negotiated Contracts" and "Special Rates" as to include the "Westin Gold Cards" and "Maxi-Media"
barter agreement. The PPHI additionally argues that the CBA’s exception of "Negotiated Contracts"
and "Special Rates" from the collection of service charges does not violate Article 96 of the Labor
Code. It points out that Article 96 merely provides for the minimum percentage distribution, between
it (the PPHI) as the employer and the Hotel’s covered employees, of the collected service charges
which their CBA more than satisfied. It also points out that Article 96 does not prohibit the exception
of certain transactions from the coverage and/or collection of service charges that it (as the
employer) and the Union (in behalf of the covered Hotel employees) had voluntarily and mutually
agreed on in their CBA. And in fact, the Union’s refusal to recognize these clear and express
1âw phi 1

exceptions constituted a violation of their agreement.

Further, the PPHI maintains that the Union’s claim for the alleged uncollected service charges for the
year 1997 and the early months of 1998 had already prescribed per Article 291 of the Labor Code.

Finally, the PPHI points out that the issue in this case is not whether service charges had been paid.
Rather, the clear issue is whether or not service charges should have been collected (and distributed
to the covered employees) for the specified entries/transactions that the LA and the CA correctly
addressed and which the NLRC clearly missed as it rendered a decision without any factual or legal
basis.

The Court's Ruling

We find the petition unmeritorious.

Preliminary considerations: jurisdictional limitations of the Court’s Rule 45 review of the CA’s Rule 65
decision in labor cases; the Montoya ruling and factual-issue-bar-rule

101
In a petition for review on certiorari under Rule 45 of the Rules of Court, we review the legal errors
that the CA may have committed in the assailed decision, in contrastwith the review for jurisdictional
errors that we undertake in an original certiorari action. In reviewing the legal correctness of the CA
decision in a labor case taken under Rule 65 of the Rules of Court, we examine the CA decision in
the context that it determined the presence or the absence of grave abuse of discretion in the NLRC
decision before it and not on the basis of whether the NLRC decision, on the merits of the case, was
correct. In other words, we proceed from the premise that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it. Within this limited scope of our Rule 45
review, the question that we ask is: Did the CA correctly determine whether the NLRC committed
grave abuse of discretion in ruling on the case?24

In addition, the Court’s jurisdiction in a Rule 45 petition for review on certiorari is limited to resolving
only questions of law. A question of law arises when the doubt or controversy exists as to what law
pertains to a particular set of facts; and a question of fact arises when the doubt or controversy
pertains to the truth or falsity of the alleged facts.25

The present petition essentially raises the question – whether the Union may collect from the PPHI,
under the terms of the CBA, its share of the service charges. This is a clear question of law that falls
well within the Court’s power in a Rule 45 petition.

Resolution of this question of law, however, is inextricably linked with the largely factual issue of
whether the specified entries/transactions fall within the generally covered sale of food, beverage,
transportation, etc. from which service charges are due or within the CBA excepted "Negotiated
Contracts" and "Special Rates." It also unavoidably requires resolution of another factual issue, i.e.,
whether the Union’s claim for service charges collected for the year 1997 and the early months of
1998 had already prescribed. As questions of fact, they are proscribed by our Rule 45 jurisdiction;
we generally cannot address these factual issues except to the extent necessary to determine
whether the CA correctly found the NLRC in grave abuse of discretion in granting the Union’s claim
for service charges from the specified entries/transactions.

The jurisdictional limitations of our Rule 45 review of the CA’s Rule 65 decision in labor cases
constrain us to deny the present petition for clear lack of legal error in the CA’s decision.Our
consideration of the facts taken within this limited scope of our factual review power, convinces us
that grave abuse of discretion attended the NLRC’s decision. At what point and to what extent the
NLRC gravely abusedits discretion is the matter we shall discuss below.

The NLRC’s patently erroneous appreciation of the real issue in the present controversy, along with
the facts and the evidence, amounted to grave abuse of discretion

In granting the Union’s claim, the NLRC simply declared that the PPHI "has not shown any proof that
it paid or remitted what is due to the Union and its members" and concluded that the specified
entries/transactions were "service chargeable." This NLRC conclusion plainly failed to appreciate
that it involved only the alleged uncollected service charges from the specified entries/transactions.
The NLRC likewise, in the course of its ruling, did not point to any evidence supporting its
conclusion.

In deciding as it did, the NLRC patently proceeded from the wrong premise, i.e., that the PPHI did
not at all distribute to the Hotel’s covered employees their share in the collected service charges. It
likewise erroneously assumed that all the specified entries/transactions were subject to service
charges and that the PPHI collected service charges from them as its ruling was patently silent on
this point. The NLRC also erroneously assumed that each and every transaction that the PPHI
entered into was subject to a service charge.

What the NLRC clearly and conveniently overlooked was the underlying issue of whether service
charges are due from the specified entries/transactions, i.e., whether the specified
entries/transactions are covered by the CBA’s general-rule provisions on the collection of service
charges or whether they are excepted because they fall within the excepted "Negotiated Contracts"
and "Special Rates" or simply did not involve a "sale of food, beverage, etc." from which service

102
charges are due. This understanding of this case’s real issue is an indispensable requisite in the
proper resolution of the controversy and a task that the NLRC, as a tribunal exercising quasi-judicial
power, mustperform with circumspection and utmost diligence. The patent failure led to its manifestly
flawed conclusions that were belied by the underlying facts. By so doing, the NLRC acted outside
the clear contemplation of the law.26

Accordingly, we affirm the CA’s decision to be legally correct as it correctly reversed the NLRC
decision for grave abuse of discretion.

Nature of a CBA; rules inthe interpretation of CBA provisions

A collective bargaining agreement, as used in Article 252 (now Article 262)27 of the Labor Code, is a
contract executed at the request of either the employer or the employees’ exclusive bargaining
representative with respect to wages, hours of work and all other terms and conditions of
employment, including proposals for adjusting any grievances or questions under such
agreement.28 Jurisprudence settles that a CBA is the law between the contracting parties who are
obliged under the law to comply with its provisions.29

As a contract and the governing law between the parties, the general rules of statutory construction
apply in the interpretation of its provisions. Thus, if the terms of the CBA are plain, clear and leave
no doubt on the intention of the contracting parties, the literal meaning of its stipulations, as they
appear on the face of the contract, shall prevail.30 Only when the words used are ambiguous and
doubtful or leading to several interpretations of the parties’ agreement that a resort to interpretation
and construction is called for.31

No service charges were due from the specified entries/transactions; they either fall within the CBA-
excepted "Negotiated Contracts" and "Special Rates" or did not involve "a sale of food, beverage,
etc."

The Union anchors its claim for services charges on Sections 68 and 69 of the CBA, in relation with
Article96 of the Labor Code. Section 68 states that the sale of food, beverage, transportation,
laundry and rooms are subject to service charge at the rate often percent (10%). Excepted from the
coverage of the 10% service charge are the so-called "negotiated contracts" and "special rates."

Following the wordings of Section 68 of the CBA, three requisites must be present for the provisions
on service charges to operate: (1) the transaction from which service charge is sought to be
collected is a sale; (2) the sale transaction covers food, beverage, transportation, laundry and
rooms; and (3) the sale does not result from negotiated contracts and/or at special rates.

In plain terms, all transactions involving a "sale of food, beverage, transportation, laundry and
rooms" are generally covered. Excepted from the coverage are, first, non-sale transactions or
transactions that do not involve any sale even though they involve "food, beverage, etc." Second,
transactions that involve a sale but do not involve "food, beverage, etc." And third, transactions
involving "negotiated contracts" and "special rates" i.e., a "sale of food, beverage, etc." resulting from
"negotiated contracts" or at "special rates;" non-sale transactions involving "food, beverage, etc."
resulting from "negotiated contracts" and/or "special rates;" and sale transactions, but not involving
"food, beverage, etc.," resulting from "negotiated contracts" and "special rates." Notably, the CBA
does not specifically define the terms "negotiated contracts" and "special rates." Nonetheless, the
CBA likewise does not explicitly limit the use of these terms to specified transactions. With particular
reference to "negotiated contracts," the CBA does not confine its application to "airline contracts" as
argued by the Union. Thus, as correctly declared by the CA, the term "negotiated contracts" should
be read as applying to all types of negotiated contracts and not to "airlines contracts" only. This is in
line with the basic rule of construction that when the terms are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall prevail. A constricted
interpretation of this term, i.e., as applicable to "airlines contracts" only, must be positively shown
either by the wordings of the CBA or by sufficient evidence of the parties’ intention to limit its
application. The Union completely failed to provide support for its constricted reading of the term
"negotiated contracts," either from the wordings of the CBA or from the evidence.

103
In reversing the NLRC’s ruling and denying the Union’s claim, the CA found the specified
entries/transactions as either falling under the excepted negotiated contracts and/or special rates or
not involving a sale of food, beverage, etc. Specifically, it considered the entries "Westin Gold

Cards Revenue" and "Maxi Media Barter" to be negotiated contracts or contracts under special
rates, and the entries "Business Promotions" and "Gift Certificates" as contracts that did not involve
a sale of food, beverage, etc. The CA also found no factual and evidentiary basis to support the
Union’s claim for service charges on the entries "Guaranteed No show" and "F & B Revenue."

Our consideration of the records taken under our limited factual review power convinces us that
these specified entries/transactions are indeed not subject to a 10% service charge. We thus see no
reason to disturb the CA’s findings on these points.

The PPHI did not violate Article 96 of the Labor Code when they refused the Union’s claim for
service charges on the specified entries/transactions

Article 96 of the Labor Code provides for the minimum percentage distribution between the employer
and the employees of the collected service charges, and its integration inthe covered employees’
wages in the event the employer terminates its policy of providing for its collection. It pertinently
reads:

Art. 96. Service Charges.

x x x In case the service charge is abolished, the share of the covered employees shall be
considered integrated in their wages.

This last paragraph of Article 96 of the Labor Code presumes the practice of collecting service
charges and the employer’s termination of this practice. When this happens, Article 96 requires the
employer to incorporate the amount that the employees had been receiving as share of the collected
service charges into their wages. Incases where no service charges had previously been collected
(as where the employer never had any policy providing for collection of service charges or had never
imposed the collection of service charges on certain specified transactions), Article 96 will not
operate.

In this case, the CA found that the PPHI had not in fact been collecting services charges on the
specified entries/transactions that we pointed out as either falling under "negotiated contracts" and/or
"special rates" or did not involve a "sale of food, beverage, etc." Accordingly, Article 96 of the Labor
Code finds no application in this case; the PPHI did not abolish or terminate the implementation of
any company policy providing for the collection of service charges on specified

entries/transactions that could have otherwise rendered it liable to pay an amount representing the
covered employees’ share in the alleged abolished service charges.

The Union’s claim for service charges for the year 1997 and the early months of 1998 could not have
yet prescribed at the time it filed its complaint on May 3, 2001; Article 1155 of the Civil Code applies
suppletorily to Article 291 of the Labor Code

Article 291 (now Article 305)32 of the Labor Code states that "all money claims arising from employer-
employee relations x x x shall be filed within three (3) years from the time the cause of action
accrued; otherwise, they shall forever be barred." [Emphasis supplied]

Like other causes of action, the prescriptive period for money claims under Article 291 of the Labor
Code is subject to interruption. And, in the absence of an equivalent Labor Codeprovision for
determining whether Article 291’s three-year prescriptive period may be interrupted, Article 1155 of
the Civil Code33 may be applied. Thus, the period of prescription of money claims under Article 291 is
interrupted by: (1) the filing of an action; (2) a written extrajudicial demand by the creditor; and (3) a
written acknowledgment of the debt by the debtor.

104
In the present petition, the facts indisputably showed that as early as 1998, the Union demanded, via
the 1st audit report, from the PPHI the payment and/or distribution of the alleged uncollected service
charges for the year 1997. From thereon, the parties went through negotiations (LCMC) to settle and
reconcile on their respective positions and claims.

Under these facts – the Union’s written extrajudicial demand through its 1st audit report and the
successive negotiation meetings between the Union and the PPHI – the running of the three-year
prescriptive period under Article 291 of the Labor Code could have effectively been interrupted.
Consequently, the Union’s claims for the alleged uncollected service charges for the year 1997 could
not have yet prescribed at the time it filed its complaint on May 3, 2001.

This non-barring effect of prescription, notwithstanding (i.e., that the running of the three-year
prescriptive period had effectively been interrupted – by the Union's written extrajudicial demand on
the PPHI), the CA, as it affirmed the LA, still correctly denied the Union's claims for the alleged
uncollected and/or undistributed service charges on the specified entries/transactions for the year
1997 and the early part of 1998. As the CA found and discussed in its decision, and with which we
agree as amply supported by factual and legal bases, the nature of these specified
entries/transactions as either excepted from the collection of service charges or not constituting a
"sale of food, beverage, etc.," and the Union's failure to support its claims by sufficient evidence
warranted, without doubt, the denial of the Union's action.

In sum, we find the CA's denial of the Union's claim for service charges from the specified
entries/transactions legally correct and to be well supported by the facts and the law. The CA
correctly reversed for grave abuse of discretion the NLRC's decision.

WHEREFORE, in light of these considerations, we hereby DENY the petition. We AFFIRM the
decision dated January 31, 2007 and resolution dated April 20, 2007 of the Court of Appeals in CA-
G.R. Sp No. 93698.

SO ORDERED.

ARTURO D. BRION
Associate Justice
Chairperson

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

MARIANO C. DEL CASTILLO JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

105
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P.A. SERENO

Chief Justice

Footnotes

1
Rollo, pp. 14-89.

2
Penned by Associate Justice Vicente Q. Roxas and concurred in by Associate Justices
Josefina Guevarra-Salonga and Ramon R. Garcia, id. at 91-106.

3
Id. at 108.

4
Penned by Commissioner Angelita A. Gacutan, id. at 525-538.

5
Penned by Labor Arbiter Renaldo 0. Hernandez, id. at 728-749.

6
Id. at 896-898.

7
Id. at 898.

8
Id. at 565.

9
Id. at 566-567.

10
Id. at 568-570.

11
Id. at 549-552.

12
Id. at 575-576.

13
Id. at 790.

14
Id. at 553-554.

15
Supra note 5.

16
Supra note 4.

17
Id. at 473-519.

18
Rollo, pp. 879-895.

19
Supra note 2.

20
Memorandum of Agreement dated June 17, 1998, rollo, pp. 616-624.

21
Rollo, pp. 109-171.

106
22
Supra note 3.

23
Rollo, pp. 995-1080.

Montoya v. Transmed Manila Corporation, G.R. No. 183329, August 27, 2009, 597 SCRA
24

334, 342-343.

25
See Baguio Central University v. Gallente, G.R. No. 188267, December 2, 2013.

Gonzales v. Solid Cement Corporation,G.R. No. 198423, October 23, 2012, 684 SCRA
26

344. See also Aldovino, Jr. v. Commission on Elections,G.R. No. 184836, December 23,
2009, 609 SCRA 234; and Pecson v. Commission on Elections, G.R. No. 182865, December
24, 2008, 575 SCRA 634.

27
As directed by Republic Act No. 10151, entitled "An Act Allowing the Employment of Night
Workers, thereby Repealing Articles 130 and 131 of Presidential Decree Number Four
Hundred Forty-Two, as Amended, Otherwise known as The Labor Code of the Philippines,"
approved on June 21, 2011, the Labor Code articles beginning with Article 130 are
renumbered.

Article 252 (256) of the Labor Code reads: Art. 252. MEANING OF THE DUTY TO
BARGAIN COLLECTIVELY

The duty to bargain collectively means the performance of a mutual obligation to

meet and convene promptly and expeditiously in good faith for the purpose of
negotiating an agreement with respect to wages, hours of work and all other terms
and conditions of employment including proposals for adjusting any grievances or
questions arising under such agreement and executing a contract incorporating such
agreements if requested by either party but such duty does not compel any party to
agree to a proposal or to make any concession.

Davao Integrated Port Stevedoring Services v. Abarquez, G.R. No. 102132, March 19,
28

1993, 220 SCRA 197, 204.

Goya, Inc. v. Goya, Inc. Employees Union-FFW, G.R. No. 170054, January 21, 2013, 689
29

SCRA 1, 15-16, citing TSPIC Corporation v. TSPIC Employees Union (FFW), G.R. No.
163419, February 13, 2008, 545 SCRA 215, 225.

30
PNCC Skyway Traffic Management and Security Division Workers Organization
(PSTMSDWO) v. PNCC Skyway Corporation, G.R. No.171231, February 17, 2010, 613
SCRA 28, 45; Goya, Inc. v. Goya, Inc. Employees Union-FFW, supra, note 29, at 16.

31
United Kimberly-Clark Employees Union-Philippine Transport General Workers’
Organization (UKCEU-PTGWO) v. Kimberly-Clark Philippines, Inc., G.R. No. 162957, March
6, 2006, 519 Phil. 176, 191; Honda Philippines, Inc. v. Samahan ng Malayang Manggagawa
sa Honda, G.R. No. 145561, June 15, 2005, 499 Phil. 174, 180.

32
As directed by Republic Act No. 10151, entitled "An Act Allowing the Employment of Night
Workers, thereby Repealing Articles 130 and 131 of Presidential Decree Number Four
Hundred Forty-Two, as Amended, Otherwise known as The Labor Code of the Philippines,"
approved on June 21, 2011, the Labor Code articles beginning with Article 130 are
renumbered.

33
Article 1155 of the Civil Code reads:

107
ART. 1155. The prescription of actionsis interrupted when they are filed before the
Court, when there is a written extrajudicial demand by the creditors, and when there
is any written acknowledgment of the debt by the debtor.

108