LABOR LAW REVIEW (Atty. Amando Virgil Ligutan) disapproved his leaves.
is leaves. Macasio added that David Second, David paid Macasio’s wages. Both David and
Case Digests for Weeks 3, 4 ,5 and 6
III.A
•Art. 82, Labor Code
•Book III, Rule I, Sec. 2, Implementing Rules (Labor
Code)
David v. Macasio, 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.
Doctrines:
*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 inappropriate regulations.
*Employee engaged in pakyaw basis is not excluded
from the coverage of SIL or Holiday pay provided
they are not field personnel.
Facts:
Macasio filed before the LA a complaint
against petitioner for non-payment of overtime pay,
holiday pay and 13thmonth pay. He also claimed
payment for moral and exemplary damages and
attorney’s fees. And payment for service incentive
leave (SIL). Macasio alleged 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 P700.00,
which was increased from P600.00 in 2007, P500.00
in 2006 and P400.00 in 2005; and(3) approved and
owned the hogs delivered for chopping, as well as the
work tools and implements; the latter also rented the
work place in his defense, David claimed 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 IRR of the Labor
Code.
Issues:
1. WON there is an employer-employee relationship
[YES]
2. WON respondent is a field personnel [NO]
Held:
1. Yes,
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 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[.]" Also, Solano and Antonio stated in their
"Pinagsamang Sinumpaang Salaysay" 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."
Macasio categorically stated in their respective
pleadings before the lower tribunals and even before
this Court that the former had been paying the latter
P700.00 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." 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.
2. No,
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.
Page 1

Penaranda v. Baganga Plywood, G.R. No. 159577;
5/3/06
Doctrine:
*Article 82 of the Labor Code exempts managerial
employees from the coverage of labor standards.
Under this provision, managerial employees are
“those whose primary duty consists of the
management of the establishment in which they are
employed or of a department or subdivision.
Facts:
Charlito Penaranda was hired as an employee of
Baganga Corporation with a monthly salary of P5,000
as Foreman/Boiler Head/ Shift Engineer to take
charge of the operations and maintenance of its
steam plant boiler. He alleges that he was illegally
terminated and that his termination was without due
process and valid grounds. Furthermore, he was not
paid his OT pay, premium pay for working during
holidays, and night shift differentials. So he filed an
action for illegal dismissal.
Hudson Chua, the General Manager of Baganga alleges
that Penaranda’s separation was done pursuant to Art.
238 of the Labor Code. The company was on
temporary closure due to repair and general
maintenance and it applied for clearance with the
DOLE to shut down and dismiss employees. He
claims that due to the insistence of complainant, he
was paid his separation benefits. But when the
company partially re-opened, Penaranda failed to re-
apply. Chua also alleges that since he is a managerial
employee, he is not entitled to OT pay and if ever he
rendered services beyond the normal hours of work,
there was no office order/authorization for him to do
so.
Labor Arbiter> ruled that there was no illegal
dismissal and that Penaranda’s complaint was
premature because he was still employed with
Baganga. As regards the benefits, the Labor Arbiter
found petitioner entitled to OT pay, premium pay for Petitioner supervised the engineering section of the
working on rest days and attorney’s fees. steam plant boiler. His work involved overseeing the
operation of the machines and the performance of the
NLRC> (on appeal) deleted the award of OT pay, workers in the engineering section. This work
premium pay and attorney’s fees. necessarily required the use of discretion and
independent judgment to ensure the proper
CA> dismissed Penaranda’s Petition for Certiorari functioning of the steam plant boiler. As supervisor,
based on procedural failures. petitioner is deemed a member of the managerial
staff.
Issue:
WON Penaranda is a regular employee entitled to Even Penaranda admitted that he was a supervisor. In
monetary benefits under Art. 82 of the Labor Code. his Position Paper, he stated that he was the
foreman responsible for the operation of the boiler.
Ruling: NO. The term foreman implies that he was the
Penaranda is part of the managerial staff which representative of management over the workers and
takes him out of the coverage of labor standards. the operation of the department. His classification
as supervisor is further evident from the manner
The Implementing Rules define members of his salary was paid. He belonged to the 10% of
managerial staff as those w/ the ff. responsibilities: respondent’s 354 employees who were paid on a
monthly basis; the others were paid only on a daily
(1) The primary duty consists of the performance of basis.
work directly related to management policies of the
employer;
(2) Customarily and regularly exercise discretion
and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a
managerial employee whose primary duty consists
of the management of the establishment in which he
is employed or subdivision thereof; or
(ii) execute under general supervision work along
specialized or technical lines requiring special
training, experience, or knowledge; or
(iii) execute under general supervision special
assignments and tasks; and
(4) who do not devote more than 20 percent of
their hours worked in a workweek to activities which
are not directly and closely related to the
performance of the work described in paragraphs
(1), (2), and (3) above."
Page 2
 PICOP v. Laguesma, G.R. No. 101738, April 12, 2000
PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES,
petitioner, vs. HON. BIENVENIDO E. LAGUESMA,
Undersecretary of Labor and Employment, HON. HENRY
PABEL, Director of the DOLE
DOCTRINE:
Managerial employees are ranked as Top Managers,
Middle Managers and First Line Managers. Top and
Middle Managers have the authority to devise,
implement and control strategic and operational
policies while the task of First-Line Managers is simply
to ensure that such policies are carried out by the rank-
and- file employees of an organization. Under this
distinction, "managerial employees" therefore fall in
two (2) categories, namely, the "managers" per se
composed of Top and Middle Managers, and the
"supervisors" composed of First-Line Managers. Thus,
the mere fact that an employee is designated manager"
does not ipso facto make him one. Designation should
be reconciled with the actual job description of the
employee, for it is the job description that determines
the nature of employment.
FACTS:
Petitioner Paper Industries Corporation of the
Philippines is engaged in the manufacture of paper and
timber products. PICOP-Bislig instituted a Petition for
Certification Election to determine the sole and
exclusive bargaining agent of the supervisory and
technical staff employees of PICOP for collective
bargaining agreement (CBA) purposes.
Initial hearing was set. Paper Industries Corp failed to
file any comment or position paper. Meanwhile, private
respondents Federation of Free Workers (FFW) and
Associated Labor Union (ALU) filed their respective
petitions for intervention.
An Order was issued granting the petitions for
interventions of the FFW and ALU. Another Order
issued on the same day set the holding of a certification
election among PICOP's supervisory and technical staff
employees in with four choices, namely: (1) PICOP Bislig
Union; (2) FFW; (3) ALU; and (4) no union.
Paper Industries Corp appealed the Order
which set the holding of the certification election
contending that the Med-Arbiter committed grave
abuse of discretion in deciding the case without giving
the corporation the opportunity to file its
comments/answer, and that PICOP-Bislig Union had no
personality to file the petition for certification election.
PICOP questioned and objected to the
inclusion of some section heads and supervisors in the
list of voters whose positions it averred were
reclassified as managerial employees in the light of the
reorganization effected by it.
PICOP’s contention: the company was divided
into four (4) main business groups, namely: Paper
Products Business, Timber Products Business, Forest
Resource Business and Support Services Business. A
vice- president or assistant vice-president heads each of
these business groups. A division manager heads the
divisions comprising each business group. A department
manager heads the departments comprising each
division. Section heads and supervisors, now called
section managers and unit managers, head the
sections and independent units, respectively, comprising
each department. PICOP advanced the view that
considering the alleged present authority of these
section managers and unit managers to hire and fire,
they are classified as managerial employees, and
hence, ineligible to form or join any labor organization.
Med-Arbiter ruling: supervisors and section heads of
the petitioner are managerial employees and therefore
excluded from the list of voters for purposes of
certification election.
DOLE Under Sec Laguesma: issued an order declaring
that the subject supervisors and section heads are
supervisory employees eligible to vote in the
certification election.
ISSUE:
WON the positions Section Heads and Supervisors, who
have been designated as Section Managers and Unit
Managers, were converted to managerial employees
under the decentralization and reorganization program
RULING:
No, they are not managerial employees
A thorough dissection of the job description of the
concerned supervisory employees and section heads
indisputably show that they are not actually
managerial but only supervisory employees since they
do not lay down company policies. PICOP's contention
that the subject section heads and unit managers
exercise the authority to hire and fire is ambiguous and
quite misleading for the reason that any authority they
exercise is not supreme but merely advisory in
character. Theirs is not a final determination of the
company policies inasmuch as any action taken by them
on matters relative to hiring, promotion, transfer,
suspension and termination of employees is still subject
to confirmation and approval by their respective
superior. Thus, where such power, which is in effect
recommendatory in character, is subject to evaluation,
review and final action by the department heads and
other higher executives of the company, the same,
although present, is not effective and not an exercise of
independent judgment as required by law.
DISPOSITIVE: Undersec. Laguesma was correct. The
members of the labor unions won.
Page 3

III.A.1 Sime Darby v. NLRC, G.R. No. 119205, April 15, 1998
•Art. 83, Labor Code Principle:
*The right to fix the work schedules of the employees
•Book III, Rule 1, Secs. 3-4, Implementing Rules rests principally on their employer. Management is
(Labor Code) free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring,
•DO No. 65-04, Serie s of 2004 work assignments, working methods, time, place and
manner of work, processes to be followed,
•R.A. 8972, Sec. 6 supervision of workers, working regulations, transfer
of employees, work supervision, lay off of workers
•R.A. 10361, Secs. 20-21 and discipline, dismissal and recall of workers.
•CHED Memorandum Circular No. 40, Series of 2008 Facts:
Sime Darby is engaged in the manufacture of
III.A.1.a automotive tires, tubes and other rubber products.
Private respondent is an association of the monthly
•DOLE Dept. Advisory No. 2, Series of 2004 salaried employees of the Sime Darby factory
workers in Marikina. Prior to the controversy, all
•DOLE Dept. Advisory No. 2, Series of 2009 employees of Sime Darby worked from 7:45am to
3:45pm with a 30-minute paid "on call" lunch break.
•DOLE Dept. Advisory No. 4, Series of 2010 On August 14, 1992, the company issued a
memorandum to all factory employees advising all
its monthly salaried employees in Marikina Tire
III.A.2 plant except those in the warehouse and Quality
Assurance Dept., of a change in work schedules. (M-F,
•Art. 85, Labor Code 7:45am-4:45pm and Sat 7:45am-11:45am) with
cofee break of 10 minutes between 9:30am-10:30am
•Book III, Rule I, Sec. 7, Implementing Rules (Labor and 2:30pm-3:30pm and lunch break between 12nn-
Code) 1pm(M-F).
Because of this memorandum, the association
•Letter-Opinion dated Nov. 27, 1989, Sec. Drilon to filed a complaint in behalf of its members a complaint
Kodak Philippines with labor Arbiter for unfair labor practice,
discrimination and evasion of liability.
•Manual on Labor Standards 2004- Bureau of Labor arbiter>, however, dismissed the
Working Conditions complaint on the grounds that the elimination of the
30 minute paid lunch break constituted a valid
exercise of management prerogative and that the new
work schedule did not have the effect of diminishing
the benefits for the work did not exceed 8 hours.
The association appealed to the NLRC but
NLRC has affirmed the labor arbiter's decision and
dismissed the appeal. However, in the motion for
reconsideration, NLRC having two new
commissioners has reversed the earlier decision.
Stating that, the public respondent declared that the
new work schedule deprived the employees of the
benefits of a 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.
Issue:
WON the act of management in revising the work
schedule of its employees and discarding their paid
lunch break is constitutive of unfair labor practice?
Ruling: NO.
The right to fix the work schedules of the employees
rests principally on their employer. In the instant
case petitioner, as the employer, cites as reason for
the adjustment the efficient conduct of its business
operations and its improved production. The case
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. (Insert here the doctrine)
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 employer's 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.
Page 4
 Pan Am v. Pan Am Employees, G.R. No. L-16275,
February 23, 1961
PRINCIPLES:
When meal period is part of overtime work.—
Where during the so-called meal period, the laborers
are required to stand by for emergency work, or where
said meal hour is not one of complete rest, such period
is considered overtime.
FACTS:
*Petitioner claims that the one-hour meal period
should not be considered overtime work (after
deducting 15 minutes), because the evidence showed
that respondent could rest completely, and were not
in any manner under the control of the company
during that period.
The Court found that during the so called meal
period, the mechanics were required to stand by for
emergency work; that if they happened not to be
available when called, they were reprimanded by the
leadman; that as in fact it happened on many
occasions, the mechanics had been called from their
meals or told to hurry up eating to perform work
during this period.
ISSUE:
Whether or not the one-hour meal period is part of
overtime work.
HELD: Yes.
The meal hour was not one of complete rest, but was
actually a work hour, since for its duration, the
laborers had to be on ready call. Of course, if the
Company practices in this regard should be modified
to afford the mechanics a real rest during that hour
(i.e. by installing an entirely different emergency
crew, or any similar arrangement), then the
modification of this part of the decision may be
sought from the Court below. As things now stand,
the Court sees no warrant for altering the decision.
III.A.3
•Book III, Rule I, Sec. 5, Implementing Rules (Labor
Code)
Arica v. NLRC, G.R. No. 78210, February 28, 1998
Doctrine:
…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.
xxx
…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.
Facts:
Teofilo Arica et al and 561 others sued Standard
Fruits Corporation (STANFILCO) Philippines for
allegedly not paying the workers for their assembly
time which takes place every work day from 5:30am
to 6am. 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 (ER’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.
(d)Lastly, they travel to the field bringing with them
their tools, equipment and materials.
All these activities take 30 minutes to accomplish.
Issue:
Whether or not the worker’s assembly time should
be paid?
Ruling: No.
The SC agreed to the decision of the decision
of the Minister of Labor:
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.
Page 5
 III.A.4
•Art. 87, Labor Code
•Book III, Rule I, Secs. 8-11, Implementing Rules
(Labor Code)
•See Manual on Labor Standards 2004- Bureau of
Working Conditions
•Art. 88, Labor Code
•Art. 89, Labor Code
•No. 3, DOLE Handbook on Workers Statutory
Monetary Benefits
ROBINA FARMS CEBU V. VILLA, G.R. NO. 175869,
APRIL 18, 2016
FACTS:
Respondent Elizabeth Villa brought against the
petitioner her complaint for illegal suspension, illegal
dismissal, nonpayment of overtime pay, and
nonpayment of service incentive leave pay in the RAB
No. VII of the NLRC in Cebu City.
In her verified position paper, Villa averred
that she had been employed by petitioner Robina
Farms as sales clerk since August 1981; that in the
later part of 2001, the petitioner had enticed her to
avail herself of the company's special retirement
program; that on March 2, 2002, she had received a
memorandum from Lily Ngochua requiring her to
explain her failure to issue invoices for unhatched eggs
in the months of January to February 2002; that she
had explained that the invoices were not delivered on
time because the delivery receipts were delayed and
overlooked; that despite her explanation, she had
been suspended for 10 days; that upon reporting back
to work, she had been advised to cease working
because her application for retirement had already
been approved; that she had been subsequently
informed that her application had been disapproved,
and had then been advised to tender her resignation
with a request for financial assistance; that she had
manifested her intention to return to work but the
petitioner had confiscated her gate pass; and that she
had since then been prevented from entering the
company premises and had been replaced by another
employee.
The petitioner admitted that Villa had been
its sales clerk at Robina Farms. It stated that her
attention had been called by the accounting
department to explain her failure to issue invoices for
the unhatched eggs for the month of February; After
the administrative hearing Villa was found to have
violated the company rule on the timely issuance of
the invoices that had resulted in delay in the payment
of buyers considering that the payment had depended
upon the receipt of the invoices; that she had been
suspended from her employment as a consequence;
that after serving the suspension, she had returned to
work and had followed up her application for
retirement with Lucina de Guzman, who had then
informed her that the management did not approve
the benefits equivalent to 86% of her salary rate
applied for, but only 1/2 month for every year of
service; and that disappointed with the outcome, she
had then brought her complaint against the
petitioners
LA> rendered a decision finding that Villa had not
been dismissed from employment.
NLRC> rendered its judgment dismissing the appeal
by the petitioner but granting that of Villa.
CA> upheld the finding of the NLRC that the
petitioner had illegally dismissed Villa
ISSUES:
(1) Was Villa illegally dismissed? [YES]
(2) Was Villa entitled to overtime pay and Service
Incentive Leave (SIL) pay?
RULING:
(1) Yes, private respondent was illegally dismissed.
It is undeniable that private respondent was
suspended for ten (10) days. Ordinarily, after an
employee [has] served her suspension, she should be
admitted back to work and to continue to receive
compensation for her services.
In the case at bar, it is clear that private
respondent was not admitted immediately after
her suspension. When she reported back after her
suspension, she was advised not to report back
anymore as her application was approved, which
was latter [sic] on disapproved. She was then
advised to tender a resignation letter with request for
financial assistance by Lucy de Guzman. After that
another letter of petitioner Lily Ngochua advised
private respondent to do the same. Clearly, these acts
are strong indication that petitioners wanted to
severe [sic] the employer-employee relationship
between them and that of private respondent. This is
buttressed by the fact that when private respondent
signified her intention to return back to work after
learning of the disapproval of her application, she
was prevented to enter the petitioner's premises by
confiscating her ID and informing her that a new
employee has already replaced her.
Moreover, private respondent’s application
for early retirement did not manifest her intention to
sever the employer-employee relationship. Although
she applied for early retirement, she did so upon the
belief that she would receive a higher benefit based
on the petitioner's offer. As such, her consent to be
retired could not be fairly deemed to have been
knowingly and freely given.
(2) Private Respondent is entitled to SIL pay but not
to overtime payment
OVERTIME PAYMENT
Firstly, entitlement to overtime pay must
first be established by proof that the overtime work
was actually performed before the employee may
properly claim the benefit. The burden of proving
entitlement to overtime pay rests on the employee
because the benefit is not incurred in the normal
course of business.
And, secondly, the NLRC's reliance on the
daily time records (DTRs) showing that Villa had
stayed in the company's premises beyond eight hours
was misplaced. The DTRs did not substantially prove
the actual performance of overtime work. An
employee could render overtime work only when
there was a prior authorization therefor by the
management. Without the prior authorization,
therefore, Villa could not validly claim having
performed work beyond the normal hours of work
Page 6
SERVICE INCENTIVE LEAVE PAY
The LA originally awarded the SIL pay because the
petitioner did not present proof showing that Villa
had been justly paid. The petitioner submitted the
affidavits of Zanoria explaining the payment of service
incentive leave after the Labor Arbiter had rendered
her decision. But that was not enough, for evidence
should be presented in the proceedings before the
Labor Arbiter, not after the rendition of the adverse
decision by the Labor Arbiter or during appeal. Such
a practice of belated presentation cannot be
tolerated because it defeats the speedy
administration of justice in matters concerning the
poor worker.
Pigcaulan v. Security and Credit, G.R. No. 173648,
January 16, 2012
G.R. No. 173648 January 16, 2012
ABDULJUAHID R. PIGCAULAN,* Petitioner, vs.
SECURITY and CREDIT NVESTIGATION, INC. and/or
RENE AMBY REYES, Respondents.
Doctrine:
It is not for an employee to prove non-payment of
benefits to which he is entitled by law. Rather, it is on
the employer that the burden of proving payment of
these claims rests.
Facts:
Canoy and Pigcaulan were both employed by SCII as
security guards and were assigned to SCII’s different
clients. Subsequently, however, Canoy and Pigcaulan
filed with the Labor Arbiter separate complaints for
underpayment of salaries and non-payment of
overtime, holiday, rest day, service incentive leave and
13th month pays. These complaints were later on
consolidated as they involved the same causes of
action. Canoy and Pigcaulan, in support of their claim,
submitted their respective daily time records
reflecting the number of hours served and their
wages for the same. They likewise presented
itemized lists of their claims for the corresponding
periods served.
Respondent maintains: that Canoy and Pigcaulan
were paid their just salaries and other benefits under
the law; that the salaries they received were above
the statutory minimum wage and the rates provided
by the Philippine Association of Detective and
Protective Agency Operators (PADPAO) for security
guards; that their holiday pay were already included
in the computation of their monthly salaries; that
they were paid additional premium of 30% in
addition to their basic salary whenever they were
required to work on Sundays and 200% of their
salary for work done on holidays; and, that Canoy
and Pigcaulan were paid the corresponding 13th
month pay for the years 1998 and 1999. In support
thereof, copies of payroll listings and lists of
employees who received their 13th month pay, for
the said periods.
Labor Arbiter: (in favor of petitioner herein) held
that the payroll listings presented by the respondents
did not prove that Canoy and Pigcaulan were duly paid
as same were not signed by the latter or by any SCII
officer. The 13th month payroll was, however,
acknowledged as sufficient proof of payment, for it
bears Canoy’s and Pigcaulan’s signatures.
NLRC> affirmed;
CA> however reversed in favor of respondent.
Hence, the present Petition for Review on Certiorari
[filed by petitioner PIGCAULAN alone]
Issue:
WON CA erred when it dismissed the complaint
allegedly due to absence of legal/factual basis despite
attendance of substantial evidence in the records.
Held: YES
There was no substantial evidence to support
the grant of overtime pay.
The Labor Arbiter relied heavily on the
itemized computations they submitted which he
considered as representative DTRs to substantiate
the award of salary differentials. The NLRC then
sustained the award on the ground that there was
substantial evidence of underpayment of salaries and
benefits.
We find that both the Labor Arbiter and the
NLRC erred in this regard. The handwritten
itemized computations are self-serving, unreliable
and unsubstantial evidence to sustain the grant of
salary differentials, particularly overtime pay.
Unsigned and unauthenticated as they are, there is no
way of verifying the truth of the handwritten entries
stated therein. Written only in pieces of paper and
solely prepared by Canoy and Pigcaulan, these
representative daily time records, as termed by the
Labor Arbiter, can hardly be considered as
competent evidence to be used as basis to prove that
the two were underpaid of their salaries.
Hence, in the absence of any concrete proof
that additional service beyond the normal working
hours and days had indeed been rendered, we cannot
affirm the grant of overtime pay to Pigcaulan.
However, with respect to the award for
holiday pay, service incentive leave pay and 13th
month pay, we affirm and rule that Pigcaulan is
entitled to these benefits [under the LC, Art. 94-95].
SCII failed to show any other concrete proof
by means of records, pertinent files or similar
documents reflecting that the specific claims have
been paid. With respect to 13th month pay, SCII
presented proof that this benefit was paid but only
for the years 1998 and 1999. To repeat, the burden
of proving payment of these monetary claims rests
on SCII, being the employer.
The CA erred in dismissing the claims
instead of remanding the case to the Labor Arbiter for
a detailed computation of the judgment award.
PETITION GRANTED. Pigcaulan is hereby
declared entitled to holiday pay and service incentive
leave pay for the years 1997-2000 and proportionate
13th month pay for the year 2000. The case is
REMANDED to the Labor Arbiter for further
proceedings to determine the exact amount and to
make a detailed computation of the monetary
benefits due.
Page 7
 III.A.5
•R.A. 10151
GMA Network v. Pabriga, G.R. No. 176419, 11/27/13
GMA NETWORK, INC., Petitioner, vs. CARLOS P.
PABRIGA, GEOFFREY F. ARIAS, KIRBY N. CAMPO,
ARNOLD L. LAGAHIT, and ARMANDO A. CATUBIG,
Respondents
Facts:
Private respondents were engaged by petitioner for the
latter’s operations in the Technical Operations Center
as Transmitter/VTR men, as Maintenance staff and as
Cameramen. On July 19 1999 due to the miserable
working conditions private respondents were forced to
file a complaint against petitioner before the NLRC
Regional Arbitration Branch No. VII Cebu City.
Private respondents filed an amended complaint
raising the following additional issues of 1) Unfair
Labor Practice; 2) Illegal dismissal; and 3) Damages
and Attorney’s fees.
An amicable settlement between the parties was set
but the same proved to be futile.
Labor Arbiter> dismissed the complaint of
respondents for illegal dismissal and unfair labor
practice, but held petitioner liable for 13th mo. pay.
NLRC> reversed the Decision of the Labor Arbiter,
and held that:
a) All complainants are regular employees with
respect to the particular activity to which they were
assigned, until it ceased to exist. As such, they are
entitled to payment of separation pay computed at
one (1) month salary for every year of service;
b) They are not entitled to overtime pay and holiday
pay; and
c) They are entitled to 13th month pay, night shift
differential and service incentive leave pay.
CA> When Petitioner elevated the case to the CA via
a Petition for Certiorari, it rendered its Decision
denying the petition for lack of merit. Hence, this
present Petition for Review on Certiorari.
Issues:
[1] Did the CA err in finding the respondents as
regular employees of the petitioner? NO
[2] Did the CA err in awarding separation pay to the
respondents absent a finding that respondents were
illegally dismissed? NO
Held:
1. Respondents claim that they are regular
employees of petitioner GMA Network, Inc. The latter,
on the other hand, interchangeably characterize
respondents employment as project and fixed
period/fixed term employment.
ARTICLE 280. Regular and casual employment.
The provisions of written agreement to the contrary
notwithstanding and regardless of the oral
agreement of the parties, an employment shall be
deemed to be regular where the employee has been
engaged to perform activities which are usually
necessary or desirable in the usual business or
trade of the employer, except where the employment
has been fixed for a specific project or undertaking
the completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or services to be
performed is seasonal in nature and employment is
for the duration of the season.
An employment shall be deemed to be
casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has
rendered at least one year of service, whether such
service is continuous or broken, shall be considered a
regular employee with respect to the activity in
which he is employed and his employment shall
continue while such activity actually exist.
Pursuant to the above-quoted Article 280 of the
Labor Code, employees performing activities which
are usually necessary or desirable in the employers
usual business or trade can either be regular,
project or seasonal employees, while, as a general
rule, those performing activities not usually
necessary or desirable in the employers usual
business or trade are casual employees. The
consequence of the distinction is found in Article 279
of the Labor Code, which provides:
ARTICLE 279. Security of tenure. In cases
of regular employment, the employer shall not
terminate the services of an employee except for a
just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time
his compensation was withheld from him up to the
time of his actual reinstatement.
On the other hand, the activities of project
employees may or may not be usually necessary or
desirable in the usual business or trade of the
employer.
The term "project" could also refer to,
secondly, a particular job or undertaking that is not
within the regular business of the corporation. Such
a job or undertaking must also be identifiably
separate and distinct from the ordinary or regular
business operations of the employer. The job or
undertaking also begins and ends at determined or
determinable times. ALU-TUCP v. National Labor
Relations Commission, G.R. No. 109902, August 2,
1994
The jobs and undertakings are clearly within
the regular or usual business of the employer
company and are not identifiably distinct or separate
from the other undertakings of the company. There is
no denying that the manning of the operations center
to air commercials, acting as transmitter/VTR men,
maintaining the equipment, and acting as cameramen
are not undertakings separate or distinct from the
business of a broadcasting company.
Page 8
In sum, we affirm the findings of the NLRC and the
Court of Appeals that respondents are regular
employees of petitioner. As regular employees, they
are entitled to security of tenure and therefore their
services may be terminated only for just or
authorized causes. Since petitioner failed to prove
any just or authorized cause for their termination,
we are constrained to affirm the findings of the NLRC
and the Court of Appeals that they were illegally
dismissed.
2. Since the respondents were illegally dismissed,
they entitled to separation pay in lieu of
reinstatement.
As regards night shift differential, the Labor Code
provides that every employee shall be paid not less
than ten percent (10%) of his regular wage for each
hour of work performed between ten o'clock in the
evening and six o'clock in the morning.
As employees of petitioner, respondents are
entitled to the payment of this benefit in
accordance with the number of hours they worked
from 10:00 p.m. to 6:00 a.m., if any.
The matter of attorney's fees cannot be touched once
and only in the fallo of the decision, else, the award
should be thrown out for being speculative and
conjectural. In the absence of a stipulation, attorney's
fees are ordinarily not recoverable; otherwise a
premium shall be placed on the right to litigate. They
are not awarded every time a party wins a suit.
In the case at bar, the factual basis for the award of
attorney's fees was not discussed in the text of NLRC
Decision. Thus, the Court constrained to delete the
same.
III.A.6
PAL v. Pascua, G.R. No. 143258, August 15, 2003
Doctrine:
*Article 280 of the Labor Code provide that any
employee who renders at least 1 yr of service,
whether such service is continuous or broken, shall
be considered a regular employee with respect to
activity in which he is employed and his employment
shall continue while such activity exists.
Facts:
Respondents were hired by PAL as station attendants
with the task of loading and unloading cargoes to and
from the plane. They were made to work for 4 to 6
hrs per day, 5 to 6 times a week. They were even
made to work overtime. Their contract as for part-
time employment which should only last for three
months. However, the said employment was
extended twice since the job was required for its
operations.
Respondents filed a complaint with the Labor Arbiter
claiming that they should be regularized and that
they should be granted the benefits of
regularization on the ground that the nature of their
job is necessary to the operations of PAL and that
their contract with PAL has been extended twice.
While the case was pending, PAL converted the
respondents' employment status from casual part-
timers to regular full-timers.
Issues:
1. WON PAL's act of converting respondents' status
into regular part-time made respondents' claim for
regularization moot and academic.
2. WON there is an infringement of management
prerogatives when NLRC compelled PAL to make
them regular employees.
Held:
1. An issue becomes moot and academic when it
ceases to present a justiciable controversy, so that a
declaration on the issue would be of no practical use or
value. In that situation, there is no actual substantial
relief to which respondents would be entitled and
which would be negated by the dismissal of their
original complaint.11 Here, it is readily apparent that
the dismissal of the original complaint by the labor
arbiter would negate the substantial relief to which
respondents would have been entitled. They seek
regular full-time employment and this claim is fully set
forth in the original complaint. They specifically
prayed for entitlement to benefits due to a regular
full-time employee with seniority rights.12 The mere
regularization of respondents would still not entitle
them to all benefits under the CBA, which regular full-
time employees enjoy. In fact, regular part-time
employees are covered by the benefits under
Personnel Policies and Procedures Manual, not the
CBA. The dismissal then of the complaint by the labor
arbiter is reversible error, and the NLRC still acted
within its power and authority as a quasi-judicial
agency in finding that respondents deserve more
than just being regular employees but must be
regular full-time employees. The pleadings filed by
complainants consistently show that to want to
become regular full-time employees, not just regular
part-time. Actually, the employees work for more than
8 hrs a day. Ultimately, they want to be entitled to
the benefits under a CBA, which can only be
enjoyed by regular full-time employees.
2. The exercise of management prerogatives is not
absolute. Although it is the management that best
knows its operational needs, such fact should not
defeat the ends of social justice. Records show that
complainants were first hired for one year and were
later extended for two yrs. Article 280 of the Labor
Code provide that any employee who renders at least
1 yr of service, whether such service is continuous or
broken, shall be considered a regular employee with
respect to activity in which he is employed and his
employment shall continue while such activity exists.
Page 9
 Perpetual Help Credit v. Faburada, G.R. No. 121948,
October 8, 2001
DOCTRINE:
*Working only on a part-time basis, does not mean
that he is not a regular employee. One's regularity of
employment is not determined by the number of hours
one works but by the nature and by the length of
time one has been in that particular job.
FACTS:
On January 3, 1990, Benedicto Faburada, Sisinita
Vilar, Imelda Tamayo and Harold Catipay, private
respondents, filed a complaint against the Perpetual
Help Credit Cooperative, Inc. (PHCCI), petitioner, with
the Arbitration Branch, Department of Labor and
Employment (DOLE), Dumaguete City, for illegal
dismissal, premium pay on holidays and rest days,
separation pay, wage differential, moral damages, and
attorney's fees.
Petitioner PHCCI filed a motion to dismiss the
complaint on the ground that there is no employer-
employee relationship between them as private
respondents are all members and co-owners of the
cooperative. Furthermore, private respondents have
not exhausted the remedies provided in the
cooperative by-laws.
Petitioner filed a supplemental motion to dismiss
alleging that Article 121 of R.A. No. 6939, otherwise
known as the Cooperative Development Authority
Law which took effect on March 26, 1990, requires
conciliation or mediation within the cooperative
before a resort to judicial proceeding.
Labor Arbiter> denied petitioner's motion to
dismiss, holding that the case is impressed with
employer-employee relationship and that the law
on cooperatives is subservient to the Labor Code. LA
rendered a decision saying that the complainants
were illegally dismissed. However, complainant
Benedicto Faburada shall only be awarded what are
due him in proportion to the nine and a half months
that he had served the respondent, he being a part-
time employee.
Petitioner PHCCI contends that private respondents
are its members and are working for it as volunteers.
Not being regular employees, they cannot sue
petitioner.
ISSUE:
WON there is ER-EE relationship between the
parties and that private respondents were illegally
dismissed.
RULING:
(focus on the underlined sentence/phrases for the
emphasis of the ruling in relation to the topic; I also
included other parts of the ruling that Atty might ask)
There was an employer-employee relationship
and they were illegally dismissed.
In determining the existence of an employer-
employee relationship, the following elements are
considered:
(1)the selection and engagement of the worker or the
power to hire;
(2) the power to dismiss;
(3) the payment of wages by whatever means; and
(4) the power to control the worker's conduct, with
the latter assuming primacy in the overall
consideration.
No particular form of proof is required to prove the
existence of an employer-employee relationship. Any
competent and relevant evidence may show the
relationship.
The above elements are present here. Petitioner
PHCCI, through its Manager, hired private
respondents to work for it. They worked regularly on
regular working hours, were assigned specific duties,
were paid regular wages and made to accomplish
daily time records just like any other regular
employee. They worked under the supervision of the
cooperative manager.
That an employer-employee exists between the
parties is shown by the averments of private
respondents in their respective affidavits, carefully
considered by respondent NLRC. (too long to include
the contents of the affidavits... )
...Benedicto Faburada —Regular part-time
Computer programmer/ operator. Worked with the
Cooperative since June 1, 1988 up to December 29,
1989. Work schedule: Tuesdays and Thursdays, from
1:00 p.m. to 5:30 p.m. and every Saturday from 8:00
to 11:30 a.m. and 1:00 to 4:00 p.m. and for at least
three (3) hours during Sundays. ... Duties: Among
others, — Enter data into the computer; compute
interests on savings deposits, effect mortuary
deductions and dividends on fixed deposits; maintain
the masterlist of the cooperative members; perform
various forms for mimeographing; and perform such
other duties as may be assigned from time to time.
Sisinita Vilar — Clerk. Worked with the Cooperative
since December 1, 1987 up to December 29, 1989.
Work schedule: Regular working hours. Monthly
salary: P500.00 — from December 1, 1987 to
December 31, 1988; P1,000.00 — from January 1,
1989 to June 30, 1989; and P1,150.00 — from July 1,
1989 to December 31, 1989....
Imelda C. Tamayo — Clerk. Worked with the
Cooperative since October 19, 1987 up to December
29, 1989. Work schedule: Monday to Friday - 8:00 to
11:30 a.m and 2:00 to 5:30 p.m.; every Saturday —
8:00 to 11:30 a.m and 1:00 to 4:00 p.m; and for one
Sunday each month - for at least three (3) hours. ....
Harold D. Catipay — Clerk. Worked with the
Cooperative since March 3 to December 29, 1989.
Work schedule: — Monday to Friday — 8:00 to 11:30
a.m. and 2:00 to 5:30 p.m.; Saturday — 8:00 to 11:30
a.m. and 1:00 to 4:00 p.m.; and one Sunday each
month — for at least three (3) hours....
Page 10
Article 280 of the Labor Code provides for three kinds
of employees:
(1) regular employees or those who have been
engaged to perform activities which are usually
necessary or desirable in the usual business or trade
of the employer;
(2) project employees or those whose employment
has been fixed for a specific project or undertaking,
the completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or service to be
performed is seasonal in nature and the employment
is for the duration of the season; and
(3) casual employees or those who are neither
regular nor project employees.
The employees who are deemed regular are:
(a) those who have been engaged to perform
activities which are usually necessary or desirable in
the usual trade or business of the employer; and
(b) those casual employees who have rendered at
least one (1) year of service, whether such service is
continuous or broken, with respect to the activity in
which they are employed.
Undeniably, private respondents were rendering
services necessary to the day-to-day operations of
petitioner PHCCI. This fact alone qualified them as
regular employees.
All of them, except Harold D. Catipay, worked with
petitioner for more than one (1) year: Benedicto
Faburada, for one and a half (1 1/2) years; Sisinita
Vilar, for two (2) years; and Imelda C. Tamayo, for
two (2) years and two (2) months. That Benedicto
Faburada worked only on a part-time basis, does
not mean that he is not a regular employee. One's
regularity of employment is not determined by the
number of hours one works but by the nature and by
the length of time one has been in that particular job.
Petitioner's contention that private respondents are
mere volunteer workers, not regular employees,
must necessarily fail.
As regular employees or workers, private about payment of wages, overtime pay, rest day and
respondents are entitled to security of tenure. Thus, termination of employment.
their services may be terminated only for a valid
cause, with observance of due process. As illegally dismissed employees, private
respondents are therefore entitled to reinstatement
Private respondents were dismissed not for any of without loss of seniority rights and other privileges
the causes allowed by law. They were dismissed and to full backwages, inclusive of allowances, plus
because petitioner considered them to be mere other benefits or their monetary equivalent
voluntary workers, being its members, and as such computed from the time their compensation was
work at its pleasure. Petitioner thus vehemently withheld from them up to the time of their actual
insists that their dismissal is not against the law. reinstatement.
Procedural due process requires that the employer The decision of respondent NLRC is AFFIRMED, with
serve the employees to be dismissed two (2) written modification in the sense that the backwages due
notices before the termination of their employment private respondents shall be paid in full, computed
is effected. In this case, only one notice was served from the time they were illegally dismissed up to the
upon private respondents by petitioner. It was in the time of the finality of this Decision.13
form of a Memorandum signed by the Manager of the
Cooperative dated January 2, 1990 terminating their
services effective December 29, 1989. Clearly,
petitioner failed to comply with the twin requisites
of a valid notice. Private respondents have been
illegally dismissed.
As to the issue of non-submission to conciliations, the
court said that P.D. 175 does not provide for a
grievance machinery where a dispute or claim may
first be submitted. LOI 23 refers to instructions to the
Secretary of Public Works and Communications to
implement immediately the recommendation of the
Postmaster General for the dismissal of some
employees of the Bureau of Post. This LOI has no
relevance to the instant case.
Article 121 of Republic Act No. 6938 (Cooperative
Code of the Philippines) provides the procedure
how cooperative disputes are to be resolved
(invoked by the petitioners)
The law apply to members, officers and directors of
the cooperative involved in disputes within a
cooperative or between cooperatives. There is no
evidence that private respondents are members of
petitioner PHCCI and even if they are, the dispute is
Page 11
 CIT v. Ople, G.R. No. L-58870, December 18, 1987
DOCTRINE:
*The phrase "those who are engaged on task or
contract basis" 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.
FACTS:
This is a consolidation of six cases involving various
private schools, their teachers and non-teaching school
personnel, and even parents with children studying in
said schools, as well as the then Minister of Labor and
Employment, his Deputy, the National Labor
Relations Commission, and the then Minister of
Education, Culture and Sports in order to dispose of
uniformly the common legal issue raised therein,
namely, the allocation of the incremental proceeds of
authorized tuition fee increases of private schools
provided for in section 3 (a) of Presidential Decree
No. 451, and thereafter, under the Education Act of
1982 (Batas Pambansa Blg. 232).
Specifically, the common problem presented by these
cases requires an interpretation of section 3(a) of
Pres. Decree No. 451 which states:
SEC. 3. Limitations. — The increase in tuition or
other school fees or other charges as well as the new
fees or charges authorized under the next preceding
section shall be subject to the following conditions;
(a) That no increase in tuition or other school
fees or charges shall be approved unless sixty (60%)
per centum of the proceeds is allocated for increase in
salaries or wages of the members of the faculty and
all other employees of the school concerned, and the
balance for institutional development, student
assistance and extension services, and return to
investments: Provided That in no case shall the return
to investments exceed 12% of the incremental
proceeds; xxx xxx xxx
In addition, there is also a need for a pronouncement
on the effect of the subsequent enactment of B.P. Blg.
232 which provides for the allocation of tuition fee
increases in section 42 thereof.
In a nutshell, the present controversy was
precipitated by the claims of some school personnel
for allowances and other benefits and the refusal of
the private schools concerned to pay said allowances
and benefits on the ground that said items should be
deemed included in the salary increases they had paid
out of the 60% portion of the proceeds from tuition
fee increases provided for in section 3 (a) of Pres.
Decree No. 451.
CIT case
This case originated from a Complaint filed
with the Regional Office No. VII of the Ministry of
Labor on against petitioner CIT by private
respondents, Panfilo Canete, et al., teachers of CIT,
for non-payment of: a) COLA; b) 13th month pay
differentials and c) service incentive leave. By virtue
of an Order issued by the then Deputy Minister of
Labor Carmelo C. Noriel, a labor-management
committee was created to ascertain compliance with
the legal requirements for the payment of COLA, 13th
month pay and service incentive leave.
CIT claimed that it had paid the allowances
mandated by various decrees but the same had been
integrated in the teacher's hourly rate. It alleged
that the payment of COLA by way of salary increases
is in line with Pres. Dec. No. 451. It also claimed that
it had paid 13th month pay to its employees and that
it was exempt from the payment of service incentive
leave to its teachers who were employed on contract
basis.
After the report and recommendation of the
committee, then Minister of Labor and Employment
issued an order holding that the basic hourly rate
designated in the Teachers' Program is regarded as
the basic hourly rate of teachers exclusive of the
COLA, and that COLA should not be taken from the
60% incremental proceeds of the approved increase in
tuition fee. Petitioner assails the aforesaid Order in a
Special Civil Action of certiorari with Preliminary
Injunction and/or Restraining Order. The Court
issued a Temporary Restraining Order on against the
enforcement of the questioned Order of the Minister
of Labor and Employment.
Issues:
1)WON allowances and other fringe benefits of
employees may be charged against the 60% portion of
the incremental proceeds provided for in sec. 3(a) of
Pres. Dec. No. 451. [NO]
2)WON CIT is exempted and/or not obliged to pay
service incentive leave. [NO]
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].
Petitioner's claim that private respondents are not entitled
to the service incentive leave benefit cannot therefore be
sustained.
RULING:
1)No. The Court has consistently held, beginning with
the University of the East case, that if the schools have
no resources other than those derived from tuition fee
increases, allowances and benefits should be charged
against the proceeds of tuition fee increases which the
law allows for return on investments under section
3(a) of Pres. Dec. No. 451, therefore, not against the
60% portion allocated for increases in salaries and
wages (See 117 SCRA at 571). This ruling was
reiterated in the University of Pangasinan case and in
the Saint Louis University case.
There is no cogent reason to reverse the Court's
ruling in the aforecited cases. Section 3(a) of Pres.
Dec. No. 451 imposes among the conditions for the
approval of tuition fee increases, the allocation of
60% per cent of the incremental proceeds thereof for
increases in salaries or wages of school personnel
and not for any other item such as allowances or
other fringe benefits. As aptly put by the Court in
Page 12
University of Pangasinan Faculty Union v. Univ. of
Pangasinan, supra:
The 60% incremental proceeds from the
tuition increase are to be devoted entirely to wage or
salary increases which means increases in basic
salary. The law cannot be construed to include
allowances which are benefits over and above the
basic salaries of the employees. To charge such
benefits to the 60% incremental proceeds would be
to reduce the increase in basic salary provided by
law, an increase intended also to help the teachers
and other workers tide themselves and their families
over these difficult economic times. [Italics supplied]
(127 SCRA 691, 702).
This interpretation of the law is consistent with the
legislative intent expressed in the Decree itself, i.e., to
alleviate the sad plight of private schools and that of
their personnel wrought by slump in enrollment and
increasing operational costs on the part of the
schools, and the increasing costs of living on the part
of the personnel (Preamble, Pres. Dec. No. 451).
While coming to the aid of the private school system
by simplifying the procedure for increasing tuition
fees, the Decree imposes as a condition for the
approval of any such increase in fees, the allocation
of 60% of the incremental proceeds thereof, to
increases in salaries or wages of school personnel.
This condition makes for a quid pro quo of the
approval of any tuition fee hike by a school, thereby
assuring the school personnel concerned, of a share
in its proceeds. The condition having been imposed
to attain one of the main objectives of the Decree,
which is to help the school personnel cope with the
increasing costs of living, the same cannot be
interpreted in a sense that would diminish the
benefit granted said personnel.
2) No. Petitioner claims that private respondents are
engaged by the school on a contract basis as shown by
the individual teachers contract which defines the
nature, scope and period of their employment; hence,
they are not entitled to the said benefit according to
Rule V of the Implementing Rules and Regulations of
the Labor Code to wit:
Sec. 1. Coverage. — This rule [on Service Incentive
Leave] shall apply to all employees, except:
xxx xxx xxx
(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;
(MOLE Rules and Regulations, Rule V, Book III)
The phrase "those who are engaged on task or
contract basis" 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, [Vera
v. Cuevas, G.R. No. L-33693, May 31, 1979, 90 SCRA
379]. 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.
Page 13
 UST v. NLRC, G.R. No. 85519, February 15, 1990
Doctrine:
*The legal requisites, therefore, for acquisition by a
teacher of permanent employment, or security of
tenure, are as follows:
1)the teacher is a full time teacher;
2)the teacher must have rendered three (3)
consecutive years of service; and
3)such service must have been satisfactory.
*Now, the Manual of Regulations also states that "a
full-time teacher" is "one whose total working day is
devoted to the school, has no other regular
remunerative employment and is paid on a regular
monthly basis regardless of the number of teaching
hours" (Par. 77); and that in college, "the normal
teaching load of a full-time instructor shall be
eighteen hours a week" (par. 78).
Facts:
Dr. Basilio E. Borja was first appointed as "affiliate
faculty" in the Faculty of Medicine and Surgery at the
University of Sto. Tomas (UST for short) on
September 29, 1976. In the second semester of the
school year 1976-77 he was appointed instructor
with a load of twelve (12) hours a week. He was
reappointed instructor for the school year 1977-78
with a load of nine (9) hours a week in the first
semester and two (2) hours a week in the second. On
June 10, 1978 he was appointed as Instructor III for
the school year 1978-79. His load for the first
semester was eight (8) hours a week, and for the
second semester, seven (7) hours a week.
On March 19, 1979 Dean Gilberto Gamez observed
that Dr. Borja should not be reappointed based on
the evaluation sheet that shows his sub-standard and
inefficient performance. 1 Nevertheless in view of the
critical shortage of staff members in the Department
of Neurology and Psychiatry, Dr. Gamez
recommended the reappointment of Dr. Borja, after
informing the latter of the negative feedbacks
regarding his teaching and his promise to improve
his performance. Thus on July 27, 1979 he was
extended a reappointment as Instructor III in the
school year 1979-80. He was given a load of six (6)
hours a week. In all these appointments he was a part
time instructor.
At the end of the academic year, it appearing that Dr.
Borja had not improved his performance in spite of
his assurances of improvement, his reappointment
was not recommended.
In July, 1982 he filed a complaint in the National
Labor Relations Commission (NLRC for short) for
illegal dismissal against the UST.
The Labor Arbiter ruled in favor of Borja, stating that
he is a regular employee because he worked for more
than three consecutive years. The case was appealed
to NLRC which affirmed the LA’s decision with
modification.
Hence the appeal to the SC.
ISSUE:
Whether or not there was illegal dismissal.
RULING:
No. There was no illegal dismissal because Borja was
just a part-time teacher.
According to Policy Instructions No. 11 issued by the
Department of Labor and Employment, "the
probationary employment of professors, instructors
and teachers shall be subject to standards
established by the Department of Education and
Culture." Said standards are embodied in paragraph
75 of the Manual of Regulations for Private Schools,
to wit:
"75. Full time teachers who have rendered three
consecutive years of satisfactory service shall be
considered permanent."
The legal requisites, therefore, for acquisition by a
teacher of permanent employment, or security of
tenure, are as follows:
1) the teacher is a full time teacher;
2) the teacher must have rendered three (3)
consecutive years of service; and
3) such service must have been satisfactory.
Now, the Manual of Regulations also states that "a
full-time teacher" is "one whose total working day is
devoted to the school, has no other regular
remunerative employment and is paid on a regular
monthly basis regardless of the number of teaching
hours" (Par. 77); and that in college, "the normal
teaching load of a full-time instructor shall be
eighteen hours a week" (par. 78).
It follows that a part-time member of the faculty
cannot acquire permanence in employment under
the Manual of Regulations in relation to the Labor
Code.
Hence, the crucial question is whether or not the
private respondent was a full-time or part-time
member of the faculty during the three (3) years that
he served in the petitioner-university's College of
Medicine. Stated otherwise, the question is (1)
whether or not the said respondent's "total working
day . . . (was) devoted to the school" and he had "no
other regular remunerative employment" and was
"paid on a regular monthly basis regardless of the
number of teaching hours;" and/or (2) whether or
not his normal teaching load was eighteen (18) hours
a week.
It cannot be said that respondent's total working day
was devoted to the school alone. It is clear from the
record that he was practising his profession as a
doctor and maintaining a clinic in the hospital for this
purpose during the time that he was given a teaching
load. In other words, he had another regular
remunerative work aside from
Page 14
In other words, he had another regular remunerative
work aside from teaching. His total working day was
not, therefore, devoted to the school. Indeed, his
salaries from teaching were computed by the
respondent Commission itself at only an average of
P660.00 per month; he, therefore, had to have other
sources of income, and this of course was his self-
employment as a practising psychiatrist. That the
compensation for teaching had to be averaged also
shows that he was not paid on a regular monthly
basis. Moreover, there is absolutely no evidence that
he performed other functions for the school when
not teaching. All things considered, it would appear
that teaching was only a secondary occupation or
"sideline," his professional practice as a psychiatrist
being his main vocation.
In view of the explicit provisions of the Manual of
Regulations above-quoted, and the fact that private
respondent was not a full-time teacher, he could not
have and did not become a permanent employee
even after the completion of three (3) years of
service.
Having found that private respondent did not
become a permanent employee of petitioner UST, it
correspondingly follows that there was no duty on
the part of petitioner UST to reappoint private
respondent as Instructor, the temporary
appointment having lapsed. Such appointment is a
matter addressed to the discretion of said petitioner.
The findings, therefore, of the public respondent
NLRC that private respondent was constructively
terminated is without lawful basis. By the same
token, the order for reinstatement of private
respondent with backwages plus an award of actual
or compensatory, moral and exemplary damages
must be struck down.
Herrera-Manaois v. St. Scholastica’s College
JOCELYN HERRERA-MANAOIS v. ST. SCHOLASTICA’S
COLLEGE December 11, 2013 | Serreno, C. J. |
[Probationary Employment]
SUMMARY:
Josie Herrera Manaois taught in St. Scholastica
College (SSC) as an English teacher (part-time). She
was recommended to become a full-time faculty
member. In her application, she mentioned that she
was taking her masters in UP and that her oral
defense was scheduled for June 2000. This was
approved and SSC hired her as a probationary full
time employee. She failed to acquire her MA degree
on time and she requested for an extension. SSC
denied and subsequently opted not to rehire her. LA
and NLRC ruled for Josie stating that she was not
informed of the requirement to finish her MA degree
and that the minimum requirement is finishing 25%
of her MA studies only. CA reversed saying that the
requirement cited by LA is for ranking purposes and
not a qualification for permanency. SC affirmed the
ruling of the LA and also cited a CHED Memorandum
requiring tertiary level educators to be MA degree
holders.
DOCTRINE:
Mere completion of the three-year probation does
not guarantee that the employee will acquire
permanent employment status. The probationer can
only qualify upon fulfillment of the reasonable
standards set for permanent employment as a
member of the teaching personnel. In line with
academic freedom and constitutional autonomy, an
institution of higher learning has the discretion and
prerogative to impose standards on its teachers and
determine whether these standards have been met.
FACTS:
Petitioner Jocelyn Herrera-Manaois (Josie?) graduated
from St. Scholastica’s College (SSC) with a degree of BA
English
(1994) She returned to her alma mater as a part-time
English teacher
After taking a leave of absence for more than one year, she
was again rehired by SSC for the same position
Four years after, she was recommended by her
Department Chairperson to become a full-time faculty
member of the English Department
She applied for a position as full time instructor for the
school year of 2000-2001
o She mentioned in her application letter than she had
been taking her MA in English Studies, Major in
Creative Writing at UP Diliman and that she was
completing her master’s thesis
o She stated that her oral defense was scheduled for
June 2000
The Dean of Arts and Sciences informed her of the
approval of her application and was advised to submit the
necessary papers pertaining to her master’s degree
SSC hired her as a probationary full-time faculty member
with no derogatory record, she was given above-
satisfactory ratings by both the Department Chairperson
and the Dean f Arts and Sciences
Because of forthcoming completion of her third year
probationary employment, Josie requested for an
extension of her teaching load for SY 2003-04
She mentioned once again that she was a candidate for a
master’s degree and that the schedule of her oral defense
may actually materialize anytime within the first academic
semester of 2003
She furnished a certification from UP that she had finished
her coursework in her studies
Page 15
 She indicated that it was her long-term goal to apply for a
return to full-time faculty status by then and asked SSC to
consider the above-mentioned matters
Josie eventually received a letter from the Dean of College
and Chairperson of the Promotions and Permanency
Board officially informing her of the board’s decision not
to renew her contract stating that:
o She failed to comply with the terms she herself
requested in granting her a three-year extension
o That her specialization cannot be maximized at SSC due
to the college’s curriculum changes and streamlining
Josie sought for reconsideration which SSC denied
Josie then filed a case for illegal dismissal, payment of 13th
month pay, damages, and attorney’s fees against SSC
SSC explained that upon consideration of the written
application of Josie, the Dean wrote the following notation
at the bottom of her letter of application: “APPROVED:
on the basis that she finishes her MA”
The college clarified that for full-time faculty status of
Josie was accepted that she would submit the necessary
papers pertaining to her MA degree
Permanency is extended to full-time faculty members only
if they had fulfilled the criteria provided in the SSC Faculty
Manual
SSC also refuted the performance ratings of Josie and
pointed out that she had merely received an average rating
from her students
Josie specialized in the subject of writing and not English
Literature, which was the subject area they needed a
faculty member for.
LA: Ruled in favor of Josie
With respect to the reason that Josie failed to finish her
MA within the 3 year period, the notation on the
employment application showing that her employment
was premised on her completion of an MA degree was not
made known to her at the start of her engagement
o She only received when it was attached to
the position paper of SSC
o LAonly credible evidence that a
precondition had been set for the acceptance
of her employment application was SSC’s
letter expressly requiring (1) good
performance and (2) submission of papers
pertaining to her MA degree
o The allegation that she was rated only an
average performance is not substantiated
with documentary proof
 In any case, SSC already admitted
that her probationary employment
was satisfactory (first condition:
OK)
o The certification of UP is also sufficient
evidence for the second condition
o Also noted the faculty manual that the
minimum requirements were a bachelor’s
degree with at least 25% of MA studies
completed
 MA requirement pertained to the
rank of Assistant Professor (not the
one applied for by Josie)
 Thus, failure to finish MA degree
not a ground
o The reason that “your specialization cannot
be maximized…” is also not a valid cause
for dismissing a probationary employee,
reiterating that probationers may only be
terminated either for:
 Just cause
 Failure to qualify as a regular
employee in accordance with
reasonable standards made known
at the time of engagement
o Josie had attained permanent status and
SSC’s non-renewal is deemed to be as a
dismissal without just cause
 NLRC: Affirmed
 CA: reversed NLRC’s judgment and dismissed Josie’s
complaint and that the decision of LA and NLRC
were contrary to the evidence on record
o First, various pieces of evidence show that
Josie had been aware that possession of an
MA degree was a criteria
 As early as April 2000, when she
applied, she had already sent a
letter indicating she was completing
an MA degree
 This implies that she was fully
aware of the necessity of an MA
degree in order for her to attain
permanent status at SSC
 CA deduced from her submission
of the UP certification was that she
had endeavored to substantially
comply with one of the
requirements of permanency
 She was required to submit
necessary papers which CA treated
as proof of SSC’s appraisal
 Disclosure of notation was already
inconsequential
o Second, the employment contract of Josie
incorporated the conditions set in the SSC
Faculty Manual
 Manual explicitly stated that the
criteria for permanency included an
MA degree
 LA erred when it solely relied on
the minimum requirements
provided for the rank of instructor
and that it cited for the rank of
instructor referred to the basis on
which full-time and part-time
members were ranked, and not to
the requirements to be fulfilled
 Agreed with SSC that what
happened was merely the
expiration of an employment
contract and non-renewal thereof
o Third, in spite of the requests of Josie for
the extension of her employment in order to
finish her MA degree, she failed to do so.
 She even informed SSC that there
was still no fixed schedule for her
oral defense
Page 16
RULING: Decision of Court of Appeals is AFFIRMED.
Petition DENIED.
Whether or not the completion of a master’s degree is
required for a tertiary level educator to earn the status
of permanency in a private educational institution—
YES.
 Probationary employment refers to the trial stage or
period during which the employer examines the
competency and qualifications of job applicants, and
determines whether they are qualified to be extended
permanent employment status
 This arrangement allows the employer an opportunity
to fully scrutinize and observe the fitness and worth
of probationers while on the job to determine
whether they would become proper and efficient
employees—before the guarantee of security of
tenure comes into play
 Citing Article 281 of the Labor Code, the Court
agrees with the CA in ruling that the requirement to
obtain a master’s degree was made known to Josie
 The contract she signed clearly and expressly
contained the conditions in the SSC Faculty Manual,
most pertinent of which is that the faculty member
must have completed at least a master’s degree
 CA correctly pointed out that the “requirement” cited
by the LA merely refer to how instructors are ranked
and not to the academic qualifications required to
attain permanency
o This ranking covers those who are still on
probationary employment and those who
have already obtained permanency
o In order to properly arrive at the criteria,
sections on both permanency and ranking
must be read in conjunction with each other
 Court reiterates that mere completion of the three-
year probation, even with an above-average
performance DOES NOT guarantee that the
employee will automatically acquire a permanent
employment status
 It is settled jurisprudence that probationer can only
qualify upon fulfillment of the reasonable standards
set for the permanent employment as a member of semesters of satisfactory service. The requisites to
the teaching personal acquire permanent employment, or security of tenure
 This is in line with academic freedom and are:
constitutional autonomy—an institution of higher o The teacher is a full-time teacher
learning has the discretion and prerogative to impose o Teacher must have rendered 3 consecutive
years of service
standards on its teachers and determine whether these
have been met. o Such service must have been satisfactory
o The university has the sole prerogative to  ONLY when one has served as a full time teacher
make a decision on whether or not to rehire can he acquire permanent or regular status. As
probationer previously held, a part time teacher cannot acquire
o Probationer cannot automatically assert permanent status…as a part-time lecturer, her
acquisition of security of tenure and force employment ended when her contract expired cannot
employer to renew the employment contract be credited to her in computing the number of years
she has served to qualify her permanent status
 Josie failed to comply with the stated academic
qualifications and even if we were to disregard the o Application to this case? Josie completing
SSC Faculty Manual, she still cannot legally acquire her probation period is not an automatic
the status of permanency qualification. She could only qualify upon
o Private educational institutions must still fulfilling the reasonable standards for
supplementarily refer to the prevailing permanent employment set by the
standards, qualifications set by the employer.
appropriate government agencies Whether or not there was a valid contract of sale—
(DepEd/CHED) NO.
o Sec. 44. of the CHED Manual states that the
minimum qualification for faculty for tertiary  It
education (undergrad courses other than
vocational) “…Holder of a master’s degree,
to teach largely in his major field…”
o Sec. 45 states that “all teaching personnel
who do not meet the foregoing
qualifications are considered part time.”
 This minimum requirement is not subject to the
prerogative of the school or the agreement of the
parties
o IT IS DEEMED TO BE IMPLIEDLY
WRITTEN IN THE EMPLOYMENT
CONTRACTS, thus the issue of whether
probationers were informed of the academic
requirement is immaterial
o Under the 2002 Manual, Josie cannot attain
the status of permanent full-time faculty
members, even if they completed 3 years of
satisfactory service
 Citing Lacuesta v. Ateneo de Manila: Moreover, for
those teaching in the tertiary level, the probationary
period shall not be more than 6-consecutive regular
Page 17
 Lacuesta v. ADMU,
G.R. No. 152777, December 9, 2005
Doctrine:
A part-time teacher cannot acquire
permanent status. Only when one has served as a
full-time teacher can he acquire permanent or
regular status.
Probationary employees enjoy security of
tenure, but only within the period of probation.
Likewise, an employee on probation can only be
dismissed for just cause or when he fails to qualify as
a regular employee in accordance with the
reasonable standards made known by the employer
at the time of his hiring. Upon expiration of their
contract of employment, academic personnel on
probation cannot automatically claim security of
tenure and compel their employers to renew their
employment contracts.
Facts:
Respondent Ateneo de Manila University (Ateneo)
hired, on a contractual basis, petitioner Lolita R.
Lacuesta as a part-time lecturer in its English
Department for the second semester of school year
1988-1989. She was re-hired, still on a contractual
basis, for the first and second semesters of school
year 1989-1990.
On July 13, 1990, the petitioner was first appointed
as full-time instructor on probation, in the same
department effective June 1, 1990 until March 31,
1991. Thereafter, her contract as faculty on
probation was renewed effective April 1, 1991 until
March 31, 1992. She was again hired for a third year
effective April 1, 1992 until March 31, 1993. During
these three years she was on probation status.
In a letter, Dean of Ateneos Graduate School and
College of Arts and Sciences, notified petitioner that
her contract would no longer be renewed because
she did not integrate well with the English
Department. Petitioner then appealed to the
President of the Ateneo at the time, Fr. Joaquin
Bernas, S.J.
In another letter, Fr. Bernas offered petitioner the job
as book editor in the University Press under terms
comparable to that of a faculty member. Petitioner
worked as editor in the University Press from April 1,
1993 to March 31, 1994 including an extension of
two months after her contract expired.
Later, she agreed to extend her contract from June
16, 1994 to October 31, 1994. Then petitioner
decided not to have her contract renewed due to a
severe back problem. She did not report back to
work, but she submitted her clearance on February
20, 1995.
On December 23, 1996, petitioner filed a complaint
for illegal dismissal with prayer for reinstatement,
back wages, and moral and exemplary damages.
Issue:
Whether or not the petitioner has attained
regular/permanent status as to warrant illegal
dismissal.
Ruling:
No. The Manual of Regulations for Private Schools,
and not the Labor Code, determines whether or not a
faculty member in an educational institution has
attained regular or permanent status.
Section 93 of the 1992 Manual of Regulations for
Private Schools provides that full-time teachers who
have satisfactorily completed their probationary
period shall be considered regular or permanent.
Moreover, for those teaching in the tertiary level, the
probationary period shall not be more than six
consecutive regular semesters of satisfactory service.
The requisites to acquire permanent employment, or
security of tenure, are (1) the teacher is a full-time
teacher; (2) the teacher must have rendered three
consecutive years of service; and (3) such service
must have been satisfactory.
As previously held, a part-time teacher cannot
acquire permanent status. Only when one has served
as a full-time teacher can he acquire permanent or
regular status. The petitioner was a part-time
lecturer before she was appointed as a full-time
instructor on probation. As a part-time lecturer, her
employment as such had ended when her contract
expired. Thus, the three semesters she served as
part-time lecturer could not be credited to her in
computing the number of years she has served to
qualify her for permanent status.
We reiterate, however, that probationary employees
enjoy security of tenure, but only within the period of
probation. Likewise, an employee on probation can
only be dismissed for just cause or when he fails to
qualify as a regular employee in accordance with the
reasonable standards made known by the employer
at the time of his hiring. Upon expiration of their
contract of employment, academic personnel on
probation cannot automatically claim security of
tenure and compel their employers to renew their
employment contracts. In the instant case, petitioner,
did not attain permanent status and was not illegally
dismissed.
•
Page 18
 Saint Mary’s University v. C.A.,
G.R. No. 157788, March 8, 2005
DOCTRINE:
Section 93 of the 1992 Manual of Regulations for
Private Schools, provides that full-time teachers who
have satisfactorily completed their probationary
period shall be considered regular or permanent.
Furthermore, the probationary period shall not be
more than six consecutive regular semesters of
satisfactory service for those in the tertiary level.
Thus, the following requisites must concur before a
private school teacher acquires permanent status:
(1) the teacher is a full-time teacher; (2) the teacher
must have rendered three consecutive years of
service; and (3) such service must have been
satisfactory.
Since there is no showing that respondent worked on
a full-time basis for at least three years, he could not
have acquired a permanent status. A part-time
employee does not attain permanent status no
matter how long he has served the school.
FACTS:
Respondent Marcelo Donelo started teaching on a
contractual basis at St. Mary’s University in 1992.
In 1995, he was issued an appointment as an
Assistant Professor I. Later on, he was promoted to
Assistant Professor III. He taught until the first
semester of school year 1999- 2000 when the school
discontinued giving him teaching assignments.
For this, respondent filed a complaint for illegal
dismissal against the university. In its defense,
petitioner St. Mary’s University showed that
respondent was merely a part-time instructor and,
except for three semesters, carried a load of less than
eighteen units. Petitioner argued that respondent
never attained permanent or regular status for he
was not a full-time teacher.
Further, petitioner showed that respondent was
under investigation by the university for giving
grades to students who did not attend classes.
Petitioner alleged that respondent did not respond to
inquiries relative to the investigation. Instead,
respondent filed the instant case against the
university. The Labor
Arbiter ruled that respondent was lawfully dismissed
because he had not attained permanent or regular
status pursuant to the Manual of Regulations for
Private Schools.
The Labor Arbiter held that only full-time teachers
with regular loads of at least 18 units, who have
satisfactorily completed three consecutive years of
service qualify as permanent or regular employees.
On appeal by respondent, the National Labor
Relations Commission (NLRC) reversed the Decision
of the Labor Arbiter and ordered the reinstatement
of respondent without loss of seniority rights and
privileges with full backwages from the time his
salaries were withheld until actual reinstatement.
It held that respondent was a full-time teacher as he
did not appear to have other regular remunerative
employment and was paid on a regular monthly basis
regardless of the number of teaching hours. As a full-
time teacher and having taught for more than 3
years, respondent qualified as a permanent or
regular employee of the university. Petitioner sought
for reconsideration and pointed out that respondent
was also working for the Provincial Government of
Nueva Vizcaya from 1993 to 1996.
Nevertheless, the NLRC denied petitioner’s Motion
for Reconsideration. Aggrieved, petitioner elevated
the matter to the Court of Appeals, which affirmed
the Decision of the NLRC.
ISSUES:
WON respondent is a full-time teacher and that he
attained permanent status.
HELD: NO.
Section 93 of the 1992 Manual of Regulations for
Private Schools, provides that full-time teachers who
have satisfactorily completed their probationary
period shall be considered regular or permanent.
Furthermore, the probationary period shall not be
more than six consecutive regular semesters of
satisfactory service for those in the tertiary level.
Thus, the following requisites must concur before a
private school teacher acquires permanent status:
(1) the teacher is a full-time teacher; (2) the teacher
must have rendered three consecutive years of
service; and (3) such service must have been
satisfactory.
In the present case, petitioner claims that private
respondent lacked the requisite years of service with
the university and also the appropriate quality of his
service, i.e., it is less than satisfactory. The basic
question, however, is whether respondent is a full-
time teacher.
Section 45 of the 1992 Manual of Regulations for
Private Schools provides that full-time academic
personnel are those meeting all the following
requirements:
a. Who possess at least the minimum academic
qualifications prescribed by the Department under
this Manual for all academic personnel;
b. Who are paid monthly or hourly, based on the
regular teaching loads as provided for in the policies,
rules and standards of the Department and the
school;
c. Whose total working day of not more than eight
hours a day is devoted to the school;
Page 19

d. Who have no other remunerative occupation
elsewhere requiring regular hours of work that will
conflict with the working hours in the school; and
e. Who are not teaching full-time in any other
educational institution.
All teaching personnel who do not meet the foregoing
qualifications are considered part-time.
A perusal of the various orders of the then
Department of Education, Culture and Sports
prescribing teaching loads shows that the regular
full-time load of a faculty member is in the range of
15 units to 24 units a semester or term, depending on
the courses taught. Part-time instructors carry a load
of not more than 12 units. The evidence on record
reveals that, except for four non-consecutive terms,
respondent generally carried a load of twelve units
or less from 1992 to 1999.
There is also no evidence that he performed other
functions for the school when not teaching. These
give the impression that he was merely a part-time
teacher. Although this is not conclusive since there
are full-time teachers who are allowed by the
university to take fewer load, in this case, respondent
did not
show that he belonged to the latter group, even after
the university presented his teaching record. With a
teaching load of twelve units or less, he could not
claim he worked for the number of hours daily as
prescribed by Section 45 of the Manual. Furthermore,
the records also indubitably show he was employed
elsewhere from 1993 to 1996.
Since there is no showing that respondent worked on
a full-time basis for at least three years, he could not
have acquired a permanent status. A part-time
employee does not attain permanent status no
matter how long he has served the school. And as a
part-timer, his services could be terminated by the
school without being held liable for illegal dismissal.
Moreover, the requirement of twin-notice applicable
only to regular or permanent employees could not be
invoked by respondent.
Yet, this is not to say that part-time teachers may not
have security of tenure. The school could not lawfully
terminate a part-timer before the end of the agreed
period without just cause. But once the period,
semester, or term ends, there is no obligation on the
part of the school to renew the contract of
employment for the next period, semester, or term.
•See DOLE Handbook on Workers Statutory
Monetary Benefits III.A.7
•Art. 1713, Civil Code
III.A.7
Dingcong v. Guingona, G.R. No. 76044 June 28, 1988
ATTY. PRAXEDIO P. DINGCONG, petitioner,
vs. HON. TEOFISTO T. GUINGONA, JR., Chairman, B. C.
FERNANDEZ, JR., and COMMISSIONER EUFEMIO C.
DOMINGO Commissioner, COMMISSION ON AUDIT
Quezon City, respondents.
MELENCIO-HERRERA, J.:
An appeal on certiorari seeking to annul and set aside
the decision of respondent Commission on Audit
(COA) in its 7th Indorsement of 1 September 1986
disallowing petitioner's claim for reimbursement of
payments he had advanced for services rendered on
"pakyao" basis in the renovation and improvement of
the office of the Bureau of Treasury, Iloilo City.
Petitioner, Atty. Praxedio P. Dingcong, was the
former Acting Regional Director of Regional Office
No. VI of the Bureau of Treasury in Iloilo City, until
his retirement on 17 January 1984.
On three occasions—June 1982, September 1982 and
February 1983—petitioner, after public bidding,
contracted, admittedly on an "emergency labor
basis," the services of one Rameses Layson, a private
carpenter and electrician on "pakyao" basis for the
renovation and improvement of the Bureau of
Treasury Office, Iloilo City. Layson submitted the
lowest bids so that the contracts were awarded to
him, as follows:
Dates Contract Amount
June, 1982 P 2,800.00
Sept., 1982 2,980.00
February 1983 2 522 00
Total P 8,302.00
Subsequently, Layson was hired as a casual employee
in the Bureau of Treasury Office in order to do away
with the hiring of a private carpenter and electrician.
When petitioner retired on 17 January 1984, among
the items disallowed by the Resident Auditor was the
amount of P6,574.00 from the labor contracts with
Layson, by reducing the latter's daily rate from
P40.00 per day to P18.00 daily.
Petitioner appealed to the Chairman of the
Commission on Audit, who affirmed the disallowance
as being "excessive and disadvantageous to the
government," but increased Layson's daily rate to
P25.00 thereby reducing the total amount disallowed
to P4,276.00. Despite petitioner's request for
reconsideration, respondent Commission remained
unmoved, hence, the instant appeal.
On 8 April 1987, we resolved to give due course to
the petition and required the parties to submit their
respective memoranda, which they have done.
Petitioner assails the disallowance as invalid for
being a usurpation of a management function and an
impairment of contract.
Page 20

We reject petitioner's submission.
Not only is the Commission on Audit (COA) vested
with the power and authority, but it is also charged
with the duty, to examine, audit and settle all
accounts pertaining to ... the expenditures or uses of
funds ... owned ... by, or pertaining to, the
Government or any of its subdivisions, agencies, or
instrumentalities (Article IX [D], Section 2 [1],1987
Constitution). That authority extends to the accounts
of all persons respecting funds or properties received
or held by them in an accountable capacity (Section
26, P. D. No. 1445). In the exercise of its jurisdiction,
it determines whether or not the fiscal responsibility
that rests directly with the head of the government
agency has been properly and effectively discharged
(Section 25[1], Ibid.), and whether or not there has
been loss or wastage of government resources. It is
also empowered to review and evaluate contracts
(Section 18 [4], Ibid.). And, after an audit has been
made, its auditors issue a certificate of settlement to
each officer whose account has been audited and
settled in whole or in part, stating the balances found
due thereon and certified, and the charges or
differences arising from the settlement by reason of
disallowances, charges or suspensions (Section 82,
Ibid.).
Viewed in this light, the disallowance made by COA is
neither illegal nor a usurpation of a management
function. The authority of the petitioner, as agency
head, to enter into a contract is not being curtailed.
What COA maintains is that the "pakyao" contract has
proved disadvantageous to the government.
Addressing this issue now, the payments for the
"pakyao" labor contract were disallowed on the
ground that the cost of that contract was excessive
and, therefore, disadvantageous to the government in
that the rate applied by petitioner was P40.00/day
when the prevailing rate at that time was only
P25.00/day for casuals.
We find ourselves in disagreement. 750). In this case, each contract with Layson did not
exceed P3,000.00.
The labor contract entered into by petitioner was on
the "pakyao" basis. On the other hand, the Recourse to a "pakyao" labor contract, therefore, is
transaction was audited on a daily minimum wage not necessarily disadvantageous. In this case, it was
rate basis. The result was that the emergency nature entered into only after public bidding pursuant to
of the contract was overlooked, a different cost of existing regulations through canvass among three
labor for casuals was imposed, the assistance of two qualified "bidders." Since Layson submitted the
other carpenters who worked with Layson even on lowest price, each contract was awarded to him. The
Saturdays was disregarded, and Layson's additional Court also notes that Layson was subsequently hired
skill as an electrician and plumber was not as a casual in the Bureau of Treasury Office in order
adequately considered. to do away with the hiring of a carpenter and
electrician, thereby exhibiting an awareness on
Indeed, the criteria for a daily wage rate contract can petitioner's part of government interests and a
hardly be applied to "pakyao" arrangements, the two positive effort to avail of cost-cutting options.
being worlds apart. In "pakyao" a worker is paid by
results. It is akin to a contract for a piece of work WHEREFORE, the Decision of the Commission on
where-by the contractor binds himself to execute a Audit is hereby SET ASIDE, and it is hereby ordered
piece of work for the employer, in consideration of a to refund to petitioner the disallowed item of
certain price or consideration. The contractor may P4,276.00, which amount was deducted from his
either employ his labor or skill, or also furnish the terminal leave voucher upon his retirement.
material (Article 1713, Civil Code). Not so in a
contract on a daily wage basis, where what is paid for SO ORDERED.
is the labor alone. Under the "pakyao" system,
payment is made in a lump sum; the laborer makes a Yap, C.J., Paras
profit for himself, which is justified by the fact that
any loss would also be borne by him. On the other
hand, no profit inures to the daily wage worker and
no materials are furnished by him. The "pakyao"
arrangement is not without its advantages. The
tendency to dilly-dally on the work, generally
experienced in a daily wage contract, is hardly
present in labor on a "pakyao" basis. The latter can
also be more flexible, with the need for supervision
reduced to the minimum. It is not necessarily
frowned upon. In fact; it is recognized in the Labor
Code (Article 101), and even in the Revised Manual of
Instructions to Treasurers, which provides that
"except in construction or repairs requiring technical
skill such as upon buildings, bridges, water works
structures, culverts, etc., when the total cost of the
work does not exceed P3,000.00, the same may be
performed under the "pakyao" contract ..." (Section
Page 21
 Mackay v. Spouses Caswell,
G.R. No. 183872, November 17, 2014
OWEN PROSPER A. MACKAY VS. SPS. DANA
CASWELL
Doctrine:
If the work of a contractor has defects which destroy
or lessen its value or fitness for its ordinary or
stipulated use, he may be required to remove the
defect or execute another work. If he fails to do so, he
shall be liable for the expenses by the employer for
the correction of the work.
Facts:
Complainant Owen Prosper A. Mackay initiated a
Complaint for Collection of Sum of Money with
Damages against defendants Sps. Dana Caswell and
Cerelina Caswell. Previously, defendants engaged the
services of complainant and his group who obligated
themselves to provide electrical installation service
for P250,000.00 in the new home of the spouses.
Nearing completion, defendants had already paid
P227,000.00 to complainant. However, when the
local distributor of electricity conducted its
inspection of the installation work, it refused to
provide electricity as there were several defects.
As a result, defendants searched for complainant to
remedy the problems. As complainant was nowhere
to be found, defendants were constrained to contract
the services of the local distributor. Thereafter,
defendants filed a case against complainant and his
group for estafa but which case was dismissed to
reasonable doubt. In response, complainant initiated
this case to recover the remaining P23,000.00 from
defendants.
HELD:
The complaint was dismissed. Complainant was
ordered to pay the liabilities incurred by the spouses
in rectifying his work. “Suffice it to say that Owen’s
job was not only to finish the electrical installation
work. It was likewise his obligation to do quality
work and to provide quality materials to ensure that
electricity would flow in the Caswell home. For the
Caswells to avail of this utility, it is definitely
expected that the electrical materials used should
meet the technical requirements for a service
entrance as imposed by the only distributor of the
electricity in the area, Zameco II, so that the latter can
supply residential electric service efficiently and
safely to the Caswells. However, as shown above,
Owen failed to execute his work in such a manner
that it has no defects which destroy or lessen its
value or fitness for its ordinary or stipulated use.”
The law specifically provides the liability of a
contractor in such a case as this. “Under Article 1715
of the Civil Code, if the work of a contractor has
defects which destroy or lessen its value or fitness for
its ordinary or stipulated use, he may be required to
remove the defect or execute another work. If he fails
to do so, he shall be liable for the expenses by the
employer for the correction of the work. The demand
required of the employer under the subject provision
need not be in a particular form. In the case at bar,
we agree with the CA that Owen was given the
opportunity to rectify his work. Subsequent to
Zameco II’s disapproval to supply the Caswells
electricity for several reasons, the Court gives
credence to the latter’s claim that they looked for
Owen to demand a rectification of the work, but
Owen and his group were nowhere to be found. Had
Owen really been readily available to the Caswells to
correct any deficiency in the work, the latter would
not have entertained the thought that they were
deceived and would not have been constrained to
undergo the rigors of filing a criminal complaint and
testifying therein. Without doubt, the Caswells
exercised due diligence when they demanded from
Owen the proper rectification of his work. As
correctly held by the CA, the Caswells substantially
complied with the requirement of Article 1715 of the
Civil Code…”
As to the filing of a complaint for specific
performance, “to require the Caswells to file an
action for specific performance, as opined by the
RTC, not only deprives them of hiring someone else
to rectify the work, but also defeats the very purpose
of the contracted work, i.e., to immediately have
electricity in their home. In this situation, time is of
the essence.”
Due to the substandard work, “the Caswells
necessarily incurred expenses by purchasing
materials to finally get a supply of electricity in their
home.”
It is a well established rule that one is entitled to
adequate compensation “only for such pecuniary loss
suffered by him as he has duly proved. ‘To justify an
award of actual damages, there must be competent
proof of the actual amount of loss, credence can be
given only to claims which are duly supported by
receipts.’ The claimant must prove the actual amount
of loss with a reasonable degree of certainty
premised upon competent proof and on the best
evidence obtainable. In the case at bar, we give
credence to the documents relied upon by the CA and
the MTC in arriving at the rectification cost, i.e., a)
Engr. Pulangco’s handwritten receipt of P15,400.00,
to which he had testified before the court that he had
indeed received such amount and b) the Sales Invoice
No. 2029 issued by Peter A. Eduria Enterprises
reflecting the total cost of P53,805.00.00.”
As for the Sales Invoice which failed to indicate the
unit prices, such failure “does not defeat the claim of
the Caswells for reimbursement. In most cases in the
ordinary course of business, sellers issue
handwritten receipts that are perfunctorily filled out
without completely stating all the details of the
purchase. This ‘flaw’ should not be taken against the
Caswells. Besides, if the unit price per item is an
issue, a perusal of Dana’s separate list will show the
unit prices of the items in the sales invoice.”
As for the alleged non-existence of Peter A. Eduria
Enterprises, “the negative certifications presented
however only highlight the probable liability of the
store with the government for non-compliance with
business registration. Regardless of whether the
Page 22
latter had registered itself as a business entity with
the proper authorities, the documents Owen relies
upon fail to overcome the point of the receipt: that a
sale of electrical items for installation had transpired
between the Caswells and the seller. With the
relevant facts established that Zameco II rejected the
quality of Owen’s work and that rectifications were
made by installing the necessary materials to meet
the electric distributor’s specifications, the said
invoice cannot be considered as bereft of evidentiary
value.”
Lastly, legal compensation was proper as to the
Owen’s claim for P23,000.00 unpaid fees. Here,
“Cerelina herself admitted that the contract price
agreed upon was the lump sum of P250,000.00, and
that she only paid Owen P227,000.00, while the
dispositive portion of the MTC Decision stated that
Owen’s claims are dismissed, the lower court implies
that the P23,000.00 unpaid compensation he sought
to recover from the Caswells shall not be given
directly to him, offsetting the said amount from the
rectification cost that the Caswells had prayed for. In
effect, under the circumstances, we deem this fair
and just to measure the actual damages due the
Caswells by reducing the cost they shouldered to
repair the defects with the unpaid amount of the
contract price due Owen.”
III.B
•Arts. 97-98, Labor Code
III.B.1
Equitable v. Sadac, G.R. No. 164772, June 8, 2006
Principle:
Broadly, the word salary means a recompense or
consideration made to a person for his pains or
industry in another mans business. Whether it be
derived from salarium, or more fancifully from
sal, the pay of the Roman soldier, it carries with it the
fundamental idea of compensation for services
rendered. Indeed, there is eminent authority for
holding that the words wages and salary are in
essence synonymous. Salary, the etymology of which
is the Latin word salarium, is often used
interchangeably with wage, the etymology of which is
the Middle English word wagen. Both words
generally refer to one and the same meaning, that is,
a reward or recompense for services performed.
Likewise, pay is the synonym of wages and salary.
Facts:
As culled from the records, respondent Sadac was
appointed Vice President of the Legal Department of
petitioner Bank effective 1 August 1981, and
subsequently General Counsel thereof on 8 December
1981. On 26 June 1989, nine lawyers of petitioner
Banks Legal Department, in a letter-petition to the
Chairman of the Board of Directors, accused
respondent Sadac of abusive conduct, inter alia, and
ultimately, petitioned for a change in leadership of
the department. On the ground of lack of confidence
in respondent Sadac, under the rules of client and
lawyer relationship, petitioner Bank instructed
respondent Sadac to deliver all materials in his
custody in all casesin which the latter was appearing
as its counsel of record. In reaction thereto,
respondent Sadac requested for a full hearing and
formal investigation but the same remained
unheeded. On 9 November 1989, respondent Sadac
filed a complaint for illegal dismissal with damages
against petitioner Bank and individual members of
the Board of Directors thereof. After learning of the
filing of the complaint, petitioner Bank terminated
the services of respondent Sadac. Finally, on 10
August 1989, respondent Sadac was removed from
his office and ordered disentitled to any
compensation and other benefits.
Issue:
Whether general salary increases should be included
in the base figure to be used in the computation of
backwages.
Ruling:
NO The weight of authority leans in petitioner Banks
favor and against respondent Sadacs claim for the
inclusion ofgeneral increases in the computation of
his backwages. We stressed in Paramount that an
unqualified award of backwages means that the
employee is paid at the wage rate at the time of his
dismissal. In Evangelista v. National Labor Relations
Commission, we addressed the sole issue of whether
the computation of the award of backwages should
be based on current wage level or the wage levels at
the time of the dismissal. We resolved that an
unqualified award of backwages means that the
employee is paid at the wage rate at the time of his
dismissal. The case of Paramount was relied upon by
the Court in the latter case of Espejo v. National
Labor Relations Commission, where we reiterated
that the computation of backwages should be based
on the basic salary at the time of the employees
dismissal plus the regular allowances that he had
been receiving. Further, the clarification made by the
Court in General Baptist Bible
College v. National Labor Relations Commission,
settles the issue, thus: We also want to clarify that
when there is an award of backwages this actually
refers to backwages without qualifications and
deductions. Thus, We held that: The term backwages
without qualification and deduction means that the
workers are to be paid their backwages fixed as of
the time of the dismissal or strike without deduction
Page 23
for their earnings elsewhere during their layoff and
without qualification of their wages as thus fixed; i.e., been settled in Songco v. National Labor Relations
unqualified by any wage increases or other benefits Commission. We said: Broadly, the word salary
that may have been received by their co-workers means a recompense or consideration made to a
who are not dismissed or did not go on strike. person for his pains or industry in another mans
Awards including salary differentials are not allowed. business. Whether it be derived from salarium, or
The salary base properly used should, however, more fancifully from sal, the pay of the Roman
include not only the basic salary but also the soldier, it carries with it the fundamental idea of
emergency cost of living allowances and also compensation for services rendered. Indeed, there is
transportation allowances if the workers are entitled eminent authority for holding that the words wages
thereto. A demarcation line between salary increases and salary are in essence synonymous. Salary, the
and backwages was drawn by the Court in Paguio v. etymology of which is the Latin word salarium, is
Philippine Long Distance Telephone Co., Inc. often used interchangeably with wage, the etymology
Applying Paguio to the case at bar, we are not of which is the Middle English word wagen. Both
prepared to accept that this degree of assuredness words generally refer to one and the same meaning,
applies to respondent Sadacs salary increases. There that is, a reward or recompense for services
was no lawful decree or order supporting his claim, performed. Likewise, pay is the synonym of wages
such that his salary increases can be made a and salary.
component in the computation of backwages. What is
evident is that salary increases are a mere
expectancy. They are, by its nature volatile and are
dependent on numerous variables, including the
companys fiscal situation and even the employees
future performance on the job, or the employees
continued stay in a position subject to management
prerogative to transfer him to another position
where his services are needed. In short, there is no
vested right to salary increases. That respondent
Sadac may have received salary increases in the past
only proves fact of receipt but does not establish a
degree of assuredness that is inherent in backwages.
From the foregoing, the plain conclusion is that
respondent Sadacs computation of his full backwages
which includes his prospective salary increases
cannot be permitted. Respondent Sadac cannot take
exception by arguing that jurisprudence speaks only
of wage and not salary, and therefore, the rule is
inapplicable to him. It is respondent Sadacs stance
that he was not paid at the wage rate nor was he
engaged in some form of manual or physical labor as
he was hired as Vice President of petitioner Bank. He
cites Gaa v. Court of Appeals where the Court
distinguished between wage and salary are
synonymous has
Page 24

Songco v. NLRC,
G.R. Nos. 50999-501000, March 23, 1990
DOCTRINE:
In the computation of backwages and separation pay,
account must be taken not only of the basic salary of
the employee, but also of the transportation and
emergency living allowances.
FACTS:
Zuelig filed an application with DOLE for clearance to
terminate the services of Songco, and several other
employees, on the ground of retrenchment due to
financial losses. During the last hearing, petitioners
manifested that they are no longer contesting their
dismissal. The parties agreed that the sole issue to be
resolved was the basis of the separation pay due. The
petitioners, who were part of the sales force of
Zuellig, receveid monthly salaries of P400.00 and
commission for every sale they made.
The CBA between Zuelig and the union of which
SOngco, et al. (Zuelig Employees Assoc.) were
members contained the following provision: “Any
employee who is separated from employment due to
old age, sickness, death or permanent lay-off, not due
to the fault of said employee, shall receive from the
company a retirement gratuity in an amount
equivalent to one (1) month’s salary per year of
service.”
The LA ordered Zuelig to pay Songco separation pay
equivalent to their one month salary but EXCLUSIVE
OF COMMISSIONS, ALLOWANCES, ETC. for every
year of service with the company.
ISSUE:
Whether or not earned sales commissions and
allowances should be included in the monthly salary
of petitioners for the purpose of computation of their
separation pay.
In Soriano vs. NLRC (155 SCRA 124), we held that the
HELD: commissions also claimed by the employee (override
In the computation of backwages and separation pay, commission plus net deposit incentive) are not
account must be taken not only of the basic salary of properly includible in such base figure since such
the employee, but also of the transportation and commissions must be earned by actual market
emergency living allowances. transactions attributable to the petitioner
[salesman]. Since the commissions in the present
Even if the commissions were in the form of case were earned by actual transactions attributable
incentives or encouragement, so that the salesman to Song, et al., these should be included in their
would be inspired to put a little more industry on separation pay. In the computation thereof, what
jobs particularly assigned to them, still these should be taken into account is the average
commissions are direct remunerations for services commission earned during their last year of
rendered which contributed to the increase of employment.
income of the employee. Commission is the
recompense compensation or reward of an agent,
salesman, executor, trustee, receiver, factor, broker
or bailee, when the same is calculated as a
percentage on the amount of his transactions or on
the profit to the principal. The nature of the work of a
salesman and the reason for such type of
remuneration for services rendered demonstrate
that commissions are part of Songco, et al's wage or
salary.
The Court takes judicial notice of the fact that some
salesmen do not receive any basic salary, but depend
on commissions and allowances or commissions
alone, although an employer-employee relationships
exists.
If the opposite view is adopted, i.e., that commissions
do not form part of the wage or salary, then in effect,
we will be saying that this kind of salesmen do not
receive any salary and, therefore, not entitled to
separation pay in the event of discharge from
employment. This narrow interpretation is not in
accord with the liberal spirit of the labor laws, and
considering the purpose of separation pay which is,
to alleviate the difficulties which confront a
dismissed employee thrown to the streets to face the
harsh necessities of life.
Page 25
 Reyes v. NLRC,
G.R. No. 160233, August 8, 2007
Doctrine:
The commissions which petitioner received were not
part of his salary structure but were profit-sharing
payments and had no clear, direct or necessary
relation to the amount of work he actually
performed. The collection made by the salesmen
from the sale transactions was the profit of private
respondent from which petitioner had a share in the
form of a commission. Certainly, from the foregoing,
the doctrine in Boie-Takeda Chemicals and Philippine
Fuji Xerox Corporation, which pronounced that
commissions are additional pay that does not form
part of the basic salary, applies to the present case.
Facts:
Petitioner was employed as a salesman at private
respondents Grocery Division in Davao City on
August 12, 1977. He was eventually appointed as unit
manager of Sales Department, a position he held until
his retirement on November 30, 1997. The company
offered to pay a total of Php 200,322.21 separation
pay based on petitioner’s P10,919.22 basic salary.
However, petitioner insists that his retirement
benefits and 13th month pay must be based on the
average monthly salary of P42,766.19, which consists
of P10,919.22 basic salary and P31,846.97 average
monthly commission.
Petitioner filed a complaint before the
arbitration branch of the NLRC for retirement
benefits, 13th month pay, tax refund, earned sick and
vacation leaves, financial assistance, service incentive
leave pay, damages and attorneys fees.
The Labor Arbiter rendered a decision
holding that sales commission is part of the basic
salary of a unit manager. On appeal, the NLRC
modified the decision of the Labor Arbiter by
excluding the overriding commission in the
computation of the retirement benefits and 13th
month pay and deleted the award of attorneys fees.
CA dismissed the petition for Certiorari by the
petitioner for lack of merit. Hence this petition.
Issue:
1. WHETHER OR NOT THE AVERAGE
MONTHLY SALES COMMISSION SHOULD BE
INCLUDED IN THE COMPUTATION OF RETIREMENT
BENEFITS AND 13THMONTH PAY.
2. WHAT CONSTITUTES BASIC SALARY?
Ruling:
1. No.
For the purpose of computing retirement pay, one-
half month salary shall include all of the following:
1) 15 days salary based on the latest salary
rate;
2) cash equivalent of 5 days of service incentive
leave (or vacation leave);
3) 1/12 of the 13th month pay;
4) other benefits as may be agreed upon by
employer and employee for inclusion.
But, it shall not include the following:
1) cost of living allowance;
2) profit-sharing payments; and
3) other monetary benefits which are not
considered as part of or integrated into the regular
salary of the employees
Petitioner filed for optional retirement upon reaching
the age of 60. However, the basis in computing his
retirement benefits is his latest salary rate of
P10,919.22 as the commissions he received are in the
form of profit-sharing payments specifically excluded
by the foregoing rules. Aside from the fact that as unit
manager petitioner did not enter into actual sale
transactions, but merely supervised the salesmen
under his control, the disputed commissions were
not regularly received by him. Only when the
salesmen were able to collect from the sale
transactions can petitioner receive the commissions.
Conversely, if no collections were made by the
salesmen, then petitioner would receive no
commissions at all. In fine, the commissions which
petitioner received were not part of his salary
structure but were profit-sharing payments and had
no clear, direct or necessary relation to the amount of
work he actually performed. The collection made by
the salesmen from the sale transactions was the
profit of private respondent from which petitioner
had a share in the form of a commission. Certainly,
from the foregoing, the doctrine in Boie-Takeda
Chemicals and Philippine Fuji Xerox Corporation,
which pronounced that commissions are additional
pay that does not form part of the basic salary,
applies to the present case.
2. Insofar as what constitutes basic salary, the
foregoing discussions equally apply to the
computation of petitioners 13th month pay.
Under Presidential Decree 851 and its
implementing rules, the basic salary of an employee
is used as the basis in the determination of his 13th-
month pay. Any compensations or remunerations
which are deemed not part of the basic pay is
excluded as basis in the computation of the
mandatory bonus.
Under the Rules and Regulations
Implementing Presidential Decree 851, the following
compensations are deemed not part of the basic
salary:
a) Cost-of-living allowances granted pursuant
to Presidential Decree 525 and Letter of Instruction
No. 174;
b) Profit sharing payments;
c) All allowances and monetary benefits which
are not considered or integrated as part of the
regular basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.
WHEREFORE, the petition is DENIED. The November
14, 2002 Decision of the Court of Appeals in CA-G.R.
SP No. 64799, affirming the Decision of the National
Labor Relations Commission, which modified the
Decision of the Labor Arbiter with respect to the
awards of retirement pay and 13th month pay, and
deleted the award of attorneys fees is AFFIRMED in
toto.
Page 26
 Sugue v. Triumph International,
G.R. No. 164804, January 30, 2009
DOCTRINE:
The grant of vacation and sick leave privileges to an
employee, the employer is given leeway to impose
conditions on the entitlement to the same as the
grant of vacation and sick leave is not a standard of
law, but a prerogative of management. It is a mere
concession or act of grace of the employer and not a
matter of right on the part of the employee.[37] Thus,
it is well within the power and authority of an
employer to deny an employees application for leave
and the same cannot be perceived as discriminatory
or harassment.
FACTS:
The antecedents of the case show that Triumph hired
Sugue in May 1990 as its Assistant Manager for
Marketing and was subsequently promoted to
Marketing Services Manager with a monthly salary of
P82,500.00. On the other hand, Valderrama was
hired in April 1993 as Direct Sales Manager with a
monthly salary ofP121,000.00. Their main
function/responsibility was to ensure that the
companys sales targets and objectives were met.
Beginning sometime in October 1999, Triumphs top
management began to notice a sharp decline in the
sales of the company. Moreover, in the following
months, the actual sales figures continued to be
significantly below the sales targets set by
Valderrama himself. This persistent below target
sales performance was the subject of correspondence
between Valderrama and his superiors from
November 1999 to July 2000.[4]
On June 1, 2000, Sugue and Valderrama filed a
complaint with the NLRC against Triumph for
payment of money claims arising from allegedly
unpaid vacation and sick leave credits, birthday leave
and 14th month pay for the period 1999-2000.
SUBSEQUENT ALLEGED COMPANY’S
INFRACTIONS:
-BOTH OF THEM were directed to submit a written
explanation as to why they used company time and
the company vehicle and driver in attending the
preliminary conference at the NLRC and why they
left the office without advising the Managing
Director. They explained that they believed they may
use company time and the company vehicle since the
hearing they attended was pursuant to a complaint
that they filed as employees of the company.
Triumph charged the one-half day utilized by
Sugue and Valderrama in attending the NLRC hearing
on June 19, 2000 to their vacation leave credits.
Valderrama’s request for an executive check-
up on June 19, 2000 was disapproved by Triumph.
Thereafter, Valderrama did not report for work on
July 3 to 5, 2000 due allegedly to persistent cough
and vertigo, but his request for sick leave on those
dates was disapproved by Triumph because he failed
to submit a medical certificate as required by the
company’s rules and policies.
Triumph issued a show cause memo to
Valderrama requiring him to explain, among others,
his departments dismal performance since October
1999, within 48 hours from receipt.[8] On July 11,
2000, Valderrama replied to the show cause
memo.[9]
Thus, Valderrama sent a letter to the
company stating that he considered himself as
constructively dismissed.
• Triumph issued a memorandum requiring
Valderrama to explain, under pain of dismissal, his
continued absences without official leave.
Valderrama failed to respond, thus, on August 11,
2000, Triumph decided to terminate Valderramas
employment for abandonment of work.[11]
SUGUE’S PART
Sugue also wrote the company stating that
she considers herself constructively dismissed based
on the fact that her request for vacation leave from
July 14 to 15, 2000 was subject to the condition that
she first submit a report on the companys 2001
Marketing Plan. Also, the approval of her request for
executive check-up was deferred. Then, on July 18,
2000, she received a memorandum instructing her to
report to Mr. Efren Temblique, who was appointed
OIC for Marketing as a result of a reorganization
prompted by Valderramas continued absences. Sugue
claimed that such act by Triumph was an outright
demotion considering that Mr. Temblique was her
former assistant.
On August 11, 2000, Triumph required
Sugue to explain why she should not be terminated
for continued absences without official leave.[13]
Sugue failed to comply, thus, on September 1, 2000,
her employment was terminated for abandonment of
work.[14]
BOTH filed a complaint for constructive
dismissal against Triumph, docketed as NLRC NCR
Case No. 00-07-03965-2000.[15]
The following day, on August 1, 2000,
Valderrama commenced his employment as Sales
Director of Fila Phils., Inc., a competitior of Triumph.
Labor Arbiter Salimathar Nambi rendered a
decision, declaring that Sugue and Valderrama were
constructively dismissed.
Aggrieved, Triumph filed an appeal with the
NLRC,[17] and in a decision dated June 13, 2001, the
First Division of the NLRC granted the appeal and
reversed the ruling of Labor Arbiter Nambi.
Not satisfied with the NLRC decision, Sugue
and Valderrama elevated the matter to the CA by way
of a petition for certiorari. While the matter was
pending with the CA, Valderrama passed away (on
July 3, 2003) and notice of his death was filed by his
counsel.[18]
CA reinstated LA’s decision.
Hence, this petition.
Page 27

ISSUES:
WON THERE WAS CONSTRUCTIVE DISMISSAL,
UNLAWFUL CHARGING OF ABSENCES TO THEIR
LEAVE CREDITS.
RULING: NO. We find sufficient reasons to uphold
Triumphs position.
Constructive dismissal is defined as an involuntary
resignation resorted to when continued employment
becomes impossible, unreasonable or unlikely; when
there is a demotion in rank or a diminution in pay; or
when a clear discrimination, insensibility or disdain
by an employer becomes unbearable to an employee.
CHARGING THEIR ABSENCES TO THEIR LEAVE
CREDITS the case of J.B. Heilbronn Co. v. National
Labor Union,[29] this Court held that: xxx.
In a case where a laborer absents himself from work
because of a strike or to attend a conference or
hearing in a case or incident between him and his
employer, he might seek reimbursement of his wages
from his union which had declared the strike or filed
the case in the industrial court. Or, in the present
case, he might have his absence from his work
charged against his vacation leave.xxx (Emphasis
ours)
NO UNJUST DENIAL OF THEIR AVAILMENT OF
THEIR LEAVES
Valderrama’s part, . The record, however,
reveals that he failed to comply with the companys
requirement that an application for sick leave for two
or more days must be supported by a medical
certificate which must be verified by the company
physician. He was even given twenty-four (24) hours
to submit the same but he totally ignored it. That his
sick leave application was denied was mainly due to
his own fault and must not be unduly blamed on his
employer.
Sugue’s part, first submit a report on the
2001 Marketing Plan. To be very accurate, Mr.
Escuetas memorandum dated July 13, 2000 advised
Sugue that her application for leave will be approved
if she will commit to submit her reports in
connection with the 2001 Marketing Plan by July 17,
2000, which was two days after her leave. Again, we
find nothing discriminatory in such a condition
considering that she was unable to show that she was
the only employee whose leave application has been
subjected to a condition. Discrimination is the failure
to treat all persons equally when no reasonable
distinction can be found between those favored and
those not favored.[
GRANT OF VACATION LEAVE CREDITS
the grant of vacation and sick leave privileges to an
employee, the employer is given leeway to impose
conditions on the entitlement to the same as the
grant of vacation and sick leave is not a standard of
law, but a prerogative of management. It is a mere
concession or act of grace of the employer and not a
matter of right on the part of the employee.[37] Thus,
it is well within the power and authority of an
employer to deny an employees application for leave
and the same cannot be perceived as discriminatory
or harassment.
NO DEMOTION
ON Sugue’spart, Demotion involves a situation where
an employee is relegated to a subordinate or less
important position constituting a reduction to a
lower grade or rank, with a corresponding decrease
in salaries, benefits and privileges.
Mr. Temblique occupied the position of
Assistant Manager for Direct Sales,[39] and as such
was Valderramas subordinate and not of Sugue.
Sugue likewise failed to adequately prove her
assertion that she reported directly to the General
Manager, Mr. Escueta, when she was Marketing
Services Manager or that she was not subordinate to
Valderrama.
SUGUE AND VALEDRRAMA deemed to have
Abandoned their work
Having failed to substantiate their claim of
constructive dismissal, Sugue and Valderrama should
be deemed to have abandoned their work, thus, their
dismissal is warranted. Abandonment is the
deliberate and unjustified refusal of an employee to
resume his employment, without any intention of
returning. It is a form of neglect of duty, hence, a just
cause for termination of employment by the
employer. For abandonment to be a valid ground for
dismissal, two elements must then be satisfied: (1)
the failure to report for work or absence without
valid or justifiable reason; and (2) a clear intention to
sever the employer-employee relationship. The
second element is the more determinative factor and
must be evinced by overt acts.
First, Sugue and Valderramas failure to
report for work was without justifiable reason. As
earlier discussed, their allegation of discrimination
and harassment lacks factual basis, thus, under the
circumstances, we find their absences to be
unjustified and without any valid reason. Second,
their overt act of writing letters informing Triumph
that they considered themselves constructively
dismissed was a clear manifestation of their intention
to desist from their employment. Too, their defiance
and disregard of the memorandum sent by Triumph
requiring them to explain their unauthorized
absences demonstrated a clear intention on their
part to sever their employer-employee relationship.
This is particularly true with Valderrama who, even
before unilaterally terminating his employment with
Triumph, had already sought regular employment
elsewhere and in fact was set to join a competitor,
Fila Phils., Inc.
Further, they filed a complaint for
constructive dismissal without praying for
reinstatement. By analogy, we point to the doctrine
that abandonment of work is inconsistent with the
filing of a complaint for illegal dismissal is not
applicable where the complainant does not pray for
reinstatement and just asks for separation pay
instead.[49] In this case, Sugue and Valderrama
opted not to ask for reinstatement and even for
separation pay, which clearly contradicts their stance
that they did not abandon their work, for it appears
they have no intention of ever returning to their
positions in Triumph.
HENCE, PETITION OS GRANTED.
Page 28

International School v. Quisumbing,
G.R. No. 128845, June 1, 2000
Doctrine:
That public policy abhors inequality and
discrimination is beyond contention. Our
Constitution and laws reflect the policy against these
evils. The Constitution[8] in the Article on Social
Justice and Human Rights exhorts Congress to "give
highest priority to the enactment of measures that
protect and enhance the right of all people to human
dignity, reduce social, economic, and political
inequalities." The very broad Article 19 of the Civil
Code requires every person, "in the exercise of his
rights and in the performance of his duties, [to] act
with justice, give everyone his due, and observe
honesty and good faith."
The Constitution enjoins the State to "protect the
rights of workers and promote their welfare,"[25] "to
afford labor full protection."[26] The State, therefore,
has the right and duty to regulate the relations
between labor and capital.[27] These relations are
not merely contractual but are so impressed with
public interest that labor contracts, collective
bargaining agreements included, must yield to the
common good.[28] Should such contracts contain
stipulations that are contrary to public policy, courts
will not hesitate to strike down these stipulations.
Facts:
Private respondent International School, Inc. (the
School, for short), pursuant to Presidential Decree
732, is a domestic educational institution established
primarily for dependents of foreign diplomatic
personnel and other temporary residents.[1] To
enable the School to continue carrying out its
educational program and improve its standard of
instruction, Section 2(c) of the same decree
authorizes the School to employ its own teaching and
management personnel selected by it either locally or
abroad, from Philippine or other nationalities, such
personnel being exempt from otherwise applicable
laws and regulations attending their employment,
except laws that have been or will be enacted for the
protection of employees.
The School grants foreign-hires certain benefits not
accorded local-hires. These include housing,
transportation, shipping costs, taxes, and home leave
travel allowance. Foreign-hires are also paid a salary
rate twenty-five percent (25%) more than local-
hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires
have to endure, namely: (a) the "dislocation factor"
and (b) limited tenure. The School explains:
A foreign-hire would necessarily have to uproot
himself from his home country, leave his family and
friends, and take the risk of deviating from a
promising career path-all for the purpose of pursuing
his profession as an educator, but this time in a
foreign land. The new foreign hire is faced with
economic realities: decent abode for oneself and/or
for one's family, effective means of transportation,
allowance for the education of one's children,
adequate insurance against illness and death, and of
course the primary benefit of a basic
salary/retirement compensation.
When negotiations for a new collective bargaining
agreement were held on June 1995, petitioner
International School Alliance of Educators, "a
legitimate labor union and the collective bargaining
representative of all faculty members"[4] of the
School, contested the difference in salary rates
between foreign and local-hires. This issue, as well as
the question of whether foreign-hires should be
included in the appropriate bargaining unit,
eventually caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of
strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a
compromise prompted the Department of Labor and
Employment (DOLE) to assume jurisdiction over the
dispute. On June 10, 1996, the DOLE Acting Secretary,
Crescenciano B. Trajano, issued an Order resolving
the parity and representation issues in favor of the
School. Then DOLE Secretary Leonardo A.
Quisumbing subsequently denied petitioner's motion
for reconsideration in an Order dated March 19,
1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification
employed by the School is discriminatory to Filipinos
and that the grant of higher salaries to foreign-hires
constitutes racial discrimination.
The School disputes these claims and gives a
breakdown of its faculty members, numbering 38 in
all, with nationalities other than Filipino, who have
been hired locally and classified as local hires.[5]The
Acting Secretary of Labor found that these non-
Filipino local-hires received the same benefits as the
Filipino local-hires:
The compensation package given to local-hires has
been shown to apply to all, regardless of race. Truth
to tell, there are foreigners who have been hired
locally and who are paid equally as Filipino local
hires.
The Acting Secretary upheld the point-of-hire
classification for the distinction in salary rates:
The Union cannot also invoke the equal protection
clause to justify its claim of parity. It is an established
principle of constitutional law that the guarantee of
equal protection of the laws is not violated by
legislation or private covenants based on reasonable
classification. A classification is reasonable if it is
based on substantial distinctions and apply to all
members of the same class. Verily, there is a
substantial distinction between foreign hires and
local hires, the former enjoying only a limited tenure,
having no amenities of their own in the Philippines
and have to be given a good compensation package in
order to attract them to join the teaching faculty of
the School.[
Page 29

Issues:
1. Whether or not the policy of the school of
different salary rate between local-hired teachers
and foreign hired is tantamount to discrimination;
2. Whether or not the foreign hired employees
can be part of the bargaining unit of the union;
Ruling:
1. Yes.
That public policy abhors inequality and
discrimination is beyond contention. Our
Constitution and laws reflect the policy against these
evils. The Constitution[8] in the Article on Social
Justice and Human Rights exhorts Congress to "give
highest priority to the enactment of measures that
protect and enhance the right of all people to human
dignity, reduce social, economic, and political
inequalities." The very broad Article 19 of the Civil
Code requires every person, "in the exercise of his
rights and in the performance of his duties, [to] act
with justice, give everyone his due, and observe
honesty and good faith."
International law, which springs from general
principles of law,[9] likewise proscribes
discrimination. General principles of law include
principles of equity,[10] i.e., the general principles of
fairness and justice, based on the test of what is
reasonable.[11] The Universal Declaration of Human
Rights,[12] the International Covenant on Economic,
Social, and Cultural Rights,[13] the International
Convention on the Elimination of All Forms of Racial
Discrimination,[14] the Convention against
Discrimination in Education,[15] the Convention (No.
111) Concerning Discrimination in Respect of
Employment and Occupation[16] - all embody the
general principle against discrimination, the very
antithesis of fairness and justice. The Philippines,
through its Constitution, has incorporated this
principle as part of its national laws.
In the workplace, where the relations between
capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all
the more reprehensible.
The Constitution[17] specifically provides that labor
is entitled to "humane conditions of work." These
conditions are not restricted to the physical
workplace - the factory, the office or the field - but
include as well the manner by which employers treat
their employees.
The Constitution[18] also directs the State to
promote "equality of employment opportunities for
all." Similarly, the Labor Code[19] provides that the
State shall "ensure equal work opportunities
regardless of sex, race or creed." It would be an
affront to both the spirit and letter of these
provisions if the State, in spite of its primordial
obligation to promote and ensure equal employment
opportunities, closes its eyes to unequal and
discriminatory terms and conditions of
employment.[20]
Discrimination, particularly in terms of wages, is
frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes[21] the payment of
lesser compensation to a female employee as against
a male employee for work of equal value. Article 248
declares it an unfair labor practice for an employer to
discriminate in regard to wages in order to
encourage or discourage membership in any labor
organization.
2. No.
A bargaining unit is "a group of employees of a given
employer, comprised of all or less than all of the
entire body of employees, consistent with equity to
the employer indicate to be the best suited to serve
the reciprocal rights and duties of the parties under
the collective bargaining provisions of the law."[29]
The factors in determining the appropriate collective
bargaining unit are (1) the will of the employees
(Globe Doctrine); (2) affinity and unity of the
employees' interest, such as substantial similarity of
work and duties, or similarity of compensation and
working conditions (Substantial Mutual Interests
Rule); (3) prior collective bargaining history; and (4)
similarity of employment status.[30] The basic test of
an asserted bargaining unit's acceptability is whether
or not it is fundamentally the combination which will
best assure to all employees the exercise of their
collective bargaining rights.[31]
It does not appear that foreign-hires have indicated
their intention to be grouped together with local -
hires for purposes of collective bargaining. The
collective bargaining history in the School also shows
that these groups were always treated separately.
Foreign-hires have limited tenure; local-hires enjoy
security of tenure. Although foreign-hires perform
similar functions under the same working conditions
as the local-hires, foreign-hires are accorded certain
benefits not granted to local-hires. These benefits,
such as housing, transportation, shipping costs, taxes,
and home leave travel allowance, are reasonably
related to their status as foreign-hires, and justify the
exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires
would not assure either group the exercise of their
respective collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE.
The petition is hereby GRANTED IN PART. The
Orders of the Secretary of Labor and Employment
dated June 10, 1996 and March 19, 1997, are hereby
REVERSED and SET ASIDE insofar as they uphold the
practice of respondent School of according foreign-
hires higher salaries than local-hires.
Page 30
Atok-Big Association v. Atok-Big Wedge, G.R. No. L-
7349, July 19, 1955
DOCTRINE:
An agreement to deduct certain facilities received by
the laborers from their employer is not a waiver of
the minimum wage fixed by the law. Wage includes
the fair and reasonable value as determined by the
Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to
the employee (Sec 2 of RA 602).
Supplements, defined – extra remuneration or
special privileges or benefits given to or received by
the laborers over and above their ordinary earnings
or wages [vacation and holidays not worked; paid
sick leave or maternity leave; overtime rate in excess
of what is required by law; sick, pension, retirement
and death benefits; profit sharing; family allowances;
Christmas, war risk and cost of living bonuses or
other bonuses other than those paid as a reward for
extra output or time spent on the job].
Facilities, defined – items of expense necessary for
laborer’s and his family’s existence and subsistence,
so that by express provision of the law, they form
part of the wage and when furnished by the employer
are deductible therefrom since if they are not so
furnished, the laborer would spend and pay for them
just the same.
FACTS:
On September 4, 1950, a demand was submitted to
petitioner by respondent union through its officers
for various concessions, among which were:
(a) An increase of P0.50 in wages;
(b) Commutation of sick and vacation leave if
not enjoyed during the year;
(c) Various privileges, such as free medical care,
medicine, and hospitalization;
(d) Right to a closed shop, check off etc.;(e) No
dismissal without prior just cause and with a prior
investigation, etc.
Some of the demands were granted by petitioner and
the others were rejected. Hearings were held in the
Court of Industrial Relations. After the hearing, the
respondent court rendered a decision fixing the
minimum wage for the laborers at P3.20 without rice
ration and 2.65 a day with rice ration, declaring that
additional compensation representing efficiency
bonus should not be included as part of the wage, and
making the award effective from September 4, 1950
(the date of the presentation of the original demand,
instead of from April 5, 1951, the date of the
amended demand).
Atok Company asked the Court for authority
to stop operations & lay off employees and laborers,
for the reason that due to the heavy losses, increased
taxes, high cost of materials, negligible quantity of
ore deports, and the enforcement of the Minimum
Wage Law, the continued operation of the company
and the consequent lay-off of hundreds of laborers
and employees.
The parties reached an agreement on
October 29, 1952 after the SC decision which states
agreement that the following facilities heretofore
given or actually being given by petitioner to its
workers and laborers, and which constitute as part of
their wages, be valued as follows:
Rice ration P.55 per day
Housing facility 40 per day
All other facilities at least 85 per day
It is understood that the said amount of facilities
valued at the above mentioned prices, may be
charged in full or partially by the Company against
laborer or employee, as they may see fit pursuant to
the exigencies of its operation.
This was approved by the Court on
December 26, 1952.
Later, another case was decided involving
the 2 parties giving the employees minimum cash
wage of 3.45 a day with rice ration or 4.00 without
rice ration.
ISSUES:
(1) Which of the two decisions would prevail?
The agreement or the subsequent decision giving the
employees minimum case wage?, and;
WON the Agreement of October 29, 1952 from the
minimum daily wage of P4 would be a waiver of the
minimum wage fixed by the law and hence null and
void, since RA 602 sec. 20 provides that “no
agreement or contract, oral or written, to accept a
lower wage or less than any other under this Act,
shall be valid”.
(2) WON additional compensation should be
paid by the Company to its workers for work
rendered on Sundays and holidays which should be
based on the minimum wage of 4.00 and not on the
cash portion which is 2.20. [Currently the company
pays additional compensation of 50% based on the
2.20 wage]
RULING:
(1) The Agreement subsists.
An agreement to deduct certain facilities received by
the laborers from their employer is not a waiver of
the minimum wage fixed by the law. Wage includes
the fair and reasonable value as determined by the
Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to
the employee (Sec 2 of RA 602).
Thus, the law permits the deduction of such facilities
from the laborer’s minimum wage of P4, as long as
their value is “fair and reasonable”
(2) NO. The Company is correct.
Section 4 of the Commonwealth Act No. 444 (Eight
Hour Labor Law) provides: No person, firm, or
corporations... shall compel an employee or laborer
to work during Sundays and holidays, unless he is
paid an additional sum of at least 25% of his regular
Page 31
remuneration. Thus, the Company even pays the
laborers higher wage than the minimum. Thus, no
law is violated. OTHER NOTES:
DIFFERENCE BETWEEN A SUPPLEMENT and
FACILITY
Supplements, defined – extra remuneration or
special privileges or benefits given to or received by
the laborers over and above their ordinary earnings
or wages [vacation and holidays not worked; paid
sick leave or maternity leave; overtime rate in excess
of what is required by law; sick, pension, retirement
and death benefits; profit sharing; family allowances;
Christmas, war risk and cost of living bonuses or
other bonuses other than those paid as a reward for
extra output or time spent on the job].
Facilities, defined – items of expense necessary for
laborer’s and his family’s existence and subsistence,
so that by express provision of the law, they form
part of the wage and when furnished by the employer
are deductible therefrom since if they are not so
furnished, the laborer would spend and pay for them
just the same.
Our Haus v. Parian, G.R. No. 204651, August 6, 2014
Doctrine:
Even if a benefit is customarily provided by
the trade, it must still pass the purpose test set by
jurisprudence. Under this test, if a benefit or privilege
granted to the employee is clearly for the employer’s
convenience, it will not be considered as a facility but
a supplement.
Under the law,46 only the value of the
facilities may be deducted from the employees’
wages but not the value of supplements. Facilities
include articles or services for the benefit of the
employee or his family but exclude tools of the trade
or articles or services primarily for the benefit of the
employer or necessary to the conduct of the
employer’s business.47
The law also prescribes that the computation
of wages shall exclude whatever benefits,
supplements or allowances given to employees.
Supplements are paid to employees on top of their
basic pay and are free of charge.48 Since it does not
form part of the wage, a supplement’s value may not
be included in the determination of whether an
employer complied with the prescribed minimum
wage rates.
Facts:
Respondent Alexander Parian is working for
petitioner Our Haus Realty Development Corporation
(Our Haus), a company engaged in the construction
business.
Sometime in May 2010, Our Haus
experienced financial distress. To alleviate its
condition, Our Haus suspended some of its
construction projects and asked the affected workers,
including the respondents, to take vacation leaves.
Eventually, the respondents were asked to
report back to work but instead of doing so, they filed
with the LA a complaint for underpayment of their
daily wages.
Before the LA, Our Haus primarily argued
that the respondents’ wages complied with the law’s
minimum requirement. Aside from paying the
monetary amount of the respondents’ wages, Our
Haus also subsidized their meals (3 times a day), and
gave them free lodging near the construction project
they were assigned to. In determining the total
amount of the respondents’ daily wages, the value of
these benefits should be considered, in line with
Article 97(f) of the Labor Code.
On the other hand, the respondents argued
that the value of their meals should not be
considered in determining their wages’ total amount
since the requirements set under Section 4 of DOLE
Memorandum Circular No. 2 were not complied with.
The respondents pointed out that Our Haus
never presented any proof that they agreed in
writing to the inclusion of their meals’ value in their
wages. Also, Our Haus failed to prove that the value
of the facilities it furnished was fair and reasonable.
The respondents appealed the LA’s decis ion
to the NLRC, which in turn, reversed it. Citing the
case of Mayon Hotel & Restaurant v. Adana,21 the
NLRC noted that the respondents did not authorize
Our Haus in writing to charge the values of their
board and lodging to their wages. Thus, the same
cannot be credited.
Our Haus moved for the reconsideration23
of the NLRC’s decision and submitted new evidence
(the five kasunduans) to show that the respondents
authorized Our Haus in writing to charge the values
of their meals and lodging to their wages.
The NLRC denied Our Haus’ motion.
The CA’s Ruling
Our Haus, however, failed to prove that it complied
with any of the requirements laid down in Mabeza v.
National Labor Relations Commission. Accordingly, it
cannot consider the values of its meal and housing
facilities in the computation of the respondents’ total
wages.
Issue:
Whether the facility’s value will be included in the
computation of the wages
Page 32

Ruling:
As the CA correctly ruled, these requirements, as
summarized in Mabeza, are the following:
a. proof must be shown thatsuch facilities are
customarily furnished by the trade;
b. the provision of deductiblefacilities must be
voluntarily accepted in writingby the employee; and
c. The facilities must be charged at fair and
reasonable value.40
We examine Our Haus’ compliance with each of these
requirements in seriatim.
a. The facility must be customarily furnished by the
trade
In a string of cases, we have concluded that one of the
badges to show that a facility is customarily
furnished by the trade is the existence of a company
policy or guideline showing that provisions for a
facility were designated as part of the employees’
salaries.41 To comply with this, Our Haus presented
in its motion for reconsideration with the NLRC the
joint sinumpaang salaysayof four of its alleged
employees.
We agree with the NLRC’s finding that the
sinumpaang salaysay statements submitted by Our
Haus are self-serving.1âwphi1 For one, Our Haus
only produced the documents when the NLRC had
already earlier determined that Our Haus failed to
prove that it was traditionally giving the respondents
their board and lodging. This document did not state
whether these benefits had been consistently
enjoyed by the rest of Our Haus’ employees.
Moreover, the records reveal that the board and
lodging were given on a per project basis. Our Haus
did not show if these benefits were also provided
inits other construction projects, thus negating its
claimed customary nature.
Even if a benefit is customarily provided by the trade,
it must still pass the purpose testset by
jurisprudence. Under this test, if a benefit or privilege
granted to the employee is clearly for the employer’s
convenience, it will not be considered as a facility but
a supplement.
Under the law,46 only the value of the
facilities may be deducted from the employees’
wages but not the value of supplements. Facilities
include articles or services for the benefit of the
employee or his family but exclude tools of the trade
or articles or services primarily for the benefit of the
employer or necessary to the conduct of the
employer’s business.47
The law also prescribes that the computation
of wages shall exclude whatever benefits,
supplementsor allowances given to employees.
Supplements are paid to employees on top of their
basic pay and are free of charge.48 Since it does not
form part of the wage, a supplement’s value may not
be includedin the determination of whether an
employer complied with the prescribed minimum
wage rates.
In the present case, the board and lodging
provided by Our Haus cannot be categorized
asfacilities but as supplements.
Under the purpose test, the subsidized meals and
free lodging provided by Our Haus are actually
supplements. Although they also work to benefit the
respondents, an analysis of the nature of these
benefits in relation to Our Haus’ business shows that
they were given primarily for Our Haus’ greater
convenience and advantage. If weighed on a scale, the
balance tilts more towards Our Haus’ side.
Accordingly, their values cannot be considered in
computing the total amount of the respondents’
wages.
Under the circumstances, the dailywages paid to the
respondents are clearly below the prescribed
minimum wage rates in the years 2007-2010.
b. The provision of deductible facilities must be
voluntarily accepted in writing by the employee
In Mayon Hotel, we reiterated that a facility may only
be deducted from the wage if the employer was
authorized in writingby the concerned employee.
Again, in the motion for reconsideration with the
NLRC, Our Haus belatedly submitted five
kasunduans, supposedly executed by the
respondents, containing their conformity to the
inclusion of the values of the meals and housing to
their total wages. Oddly, Our Haus only offered these
documents when the NLRC had already ruled that
respondents did not accomplish any written
authorization, to allow deduction from their wages.
These five kasunduans were also undated, making us
wonder if they had reallybeen executed when
respondents first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our
Haus’ four employees, it was not mentioned that they
also executed a kasunduanfor their board and
lodging benefits. Because of these surrounding
circumstances and the suspicious timing when the
five kasunduanswere submitted as evidence, we
agree withthe CA that the NLRC committed no grave
abuse of discretion in disregarding these documents
for being self serving.
c. The facility must be charged at a fair and
reasonable value
Our Haus admitted that it deducted the amount of
P290.00 per week from each of the respondents for
their meals. But it now submits that it did not
actually withhold the entire amount as it did not
figure in the computation the money it expended for
the salary of the cook, the water, and the LPG used
for cooking, which amounts to P249.40 per week per
person. From these, it appears that the total meal
expense per week for each person is P529.40,making
Our Haus’ P290.00 deduction within the 70% ceiling
prescribed by the rules.
However, Our Haus’ valuation cannotbe plucked out
of thin air. The valuation of a facility must
Page 33
besupported by relevant documents such as receipts
and company records for it to be considered as fair
and reasonable. In Mabeza, we noted:
Curiously, in the case at bench, the only valuations
relied upon by the labor arbiter in his decision were
figures furnished by the private respondent's own
accountant, without corroborative evidence.On the
pretext that records prior to the July 16, 1990
earthquake were lost or destroyed, respondent failed
to produce payroll records, receipts and other
relevant documents, where he could have, as has
been pointedout in the Solicitor General's
manifestation, "secured certified copies thereof from
the nearest regional office of the Department of
Labor, the SSS or the BIR".52 [emphasis ours]
In the present case, Our Haus never explained how it
came up with the valuesit assigned for the benefits it
provided; it merely listed its supposed expenses
without any supporting document. Since Our Haus is
using these additional expenses (cook’s salary, water
and LPG) to support its claim that it did not withhold
the full amount of the meals’ value, Our Haus is
burdened to present evidence to corroborate its
claim. The records however, are bereft of any
evidence to support Our Haus’ meal expense
computation. Eventhe value it assigned for the
respondents’ living accommodations was not
supported by any documentary evidence. Without
any corroborative evidence, it cannot be said that
Our Haus complied withthis third requisite.
*Book III, Rule VII-A
*DOLE D.O. No. 126-13, April 2013
III.B.2
•Art. 99, Labor Code
•R.A. 6727, Wage Rationalization Act
•Book III, Rule VII, Sec. 1, Implementing Rules (Labor
Code)
•NWPC Guidelines No. 1, Series of 2007 (June 19,
2007)
•See Wage Order No. ROVII-20, February 13, 2017
Employees Confederation v. NWPC,
G.R. No. 96169, September 24, 1991
Doctrine:
It is the Court's thinking, reached after the Court's
own study of the Act, that the Act is meant to
rationalize wages, that is, by having permanent
boards to decide wages rather than leaving wage
determination to Congress year after year and law
after law. The Court is not of course saying that the
Act is an effort of Congress to pass the buck, or
worse, to abdicate its duty, but simply, to leave the
question of wages to the expertise of experts. As
Justice Cruz observed, "[w]ith the proliferation of
specialized activities and their attendant peculiar
problems, the national legislature has found it more
necessary to entrust to administrative agencies the
power of subordinate legislation' as it is caned."
Facts:
There was a Wage Order No. NCR-01-A promulgated
Regional Tripartite Wages and Productivity Board in
pursuance to RA 6727 (Wage Rationalization Act).
Aside from providing new wage rates, the "Wage
Rationalization Act" also provides, among other
things, for various Regional Tripartite Wages and
Productivity Boards in charge of prescribing
minimum wage rates for all workers in the various
regions and for a National Wages and Productivity
Commission to review, among other functions, wage
levels determined by the boards.
This wage order was questioned by Employers
Confederation of the Philippines (ECOP). Meanwhile,
Regional Board of the National Capital Region issued
Wage Order No. NCR-01, increasing the minimum
wage by P17.00 daily in the National Capital Region.
The Trade Union Congress of the Philippines (TUCP)
moved for reconsideration; so did the Personnel
Management Association of the Philippines (PMAP)
but ECOP opposed.
The Board then issued Wage Order No. NCR-01-A
amending Wage Order No. NCR-01, as follows:
Section 1. Upon the effectivity of this Wage Order, all
workers and employees in the private sector in the
National Capital Region already receiving wages
above the statutory minimum wage rates up to one
hundred and twenty-five pesos (P125.00) per day
shall also receive an increase of seventeen pesos
(P17.00) per day.
ECOP appealed to the National Wages and
Productivity Commission. The Commission
promulgated an order, dismissing the appeal for lack
of merit. The reconsideration was then denied by the
Commission.
ECOP assails the board's grant of an "across-the-
board" wage increase to workers already being paid
more than existing minimum wage rates (up to P125.
00 a day) as an alleged excess of authority, and
alleges that under the Republic Act No. 6727, the
boards may only prescribe "minimum wages," not
determine "salary ceilings." ECOP likewise claims
that Republic Act No. 6727 is meant to promote
collective bargaining as the primary mode of settling
wages, and in its opinion, the boards can not preempt
collective bargaining agreements by establishing
ceilings.
Page 34
ISSUE:
Is the Wage Order No. NCR-01-A valid?
RULING: Yes.
The Supreme Court is not convinced that the
Regional Board of the National Capital Region, in
decreeing an across-the-board hike, performed an
unlawful act of legislation. It is true that wage-fixing,
like rate constitutes an act Congress; it is also true,
however, that Congress may delegate the power to fix
rates provided that, as in all delegations cases,
Congress leaves sufficient standards. As this Court
has indicated, it is impressed that the above-quoted
standards are sufficient, and in the light of the floor-
wage method's failure, the Court believes that the
Commission correctly upheld the Regional Board of
the National Capital Region.
Apparently, ECOP is of the mistaken
impression that Republic Act No. 6727 is meant to
"get the Government out of the industry" and leave
labor and management alone in deciding wages. The
Court does not think that the law intended to
deregulate the relation between labor and capital for
several reasons: (1) The Constitution calls upon the
State to protect the rights of workers and promote
their welfare; (2) the Constitution also makes it a
duty of the State "to intervene when the common
goal so demands" in regulating property and
property relations; (3) the Charter urges Congress to
give priority to the enactment of measures, among
other things, to diffuse the wealth of the nation and
to regulate the use of property; (4) the Charter
recognizes the "just share of labor in the fruits of
production;" (5) under the Labor Code, the State shall
regulate the relations between labor and
management; (6) under Republic Act No. 6727 itself,
the State is interested in seeing that workers receive
fair and equitable wages; and (7) the Constitution is
primarily a document of social justice, and although it
has recognized the importance of the private sector,
it has not embraced fully the concept of laissez faire
or otherwise, relied on pure market forces to govern
the economy; We can not give to the Act a meaning or
intent that will conflict with these basic principles.
It is the Court's thinking, reached after the Court's
own study of the Act, that the Act is meant to
rationalize wages, that is, by having permanent
boards to decide wages rather than leaving wage
determination to Congress year after year and law
after law. The Court is not of course saying that the
Act is an effort of Congress to pass the buck, or
worse, to abdicate its duty, but simply, to leave the
question of wages to the expertise of experts. As
Justice Cruz observed, "[w]ith the proliferation of
specialized activities and their attendant peculiar
problems, the national legislature has found it more
necessary to entrust to administrative agencies the
power of subordinate legislation' as it is caned."
Nasipit Integrated v. Nasipit Employees,
G.R. No. 162411, June 27, 2008
Doctrine:
It is abundantly clear from the provisions of WO
RXIII-02 and its IRR that only minimum wage earners
are entitled to the prescribed wage increase. The
beneficent, operative provision of WO RXIII-02 is
specific enough to cover only minimum wage
earners. Necessarily excluded are those receiving
rates above the prescribed minimum wage. The only
situation when employees receiving a wage rate
higher than that prescribed by the WO RXIII-02 may
still benefit from the order is, as indicated in Sec. 1
(c) of the IRRs, through the correction of wage
distortions.
FACTS:
NIASSI is a domestic corporation with office at
Talisay, Nasipit, Agusan del Norte. Respondent
Nasipit Employees Labor Union (Union) wasand may
still bethe collective bargaining agent of the rank-
and-file employees of NIASSI and is a local chapter of
the Associated Labor Union.The dispute started
when, in October 1999, the Regional Tripartite
Wages and Productivity Board (Wage Board) of
Caraga Region in Northeastern Mindanao issued
Wage Order No. (WO) RXIII-02 which granted an
additional PhP 12 per day cost of living allowance to
the minimum wage earners in that region. Owing
allegedly to NIASSIs failure to implement the wage
order, the Union filed a complaint before the
Department of Labor and Employment (DOLE)
Caraga Regional Office for the inspection of NIASSIs
records and the enforcement of WO RXIII-02. A DOLE
inspection team was accordingly dispatched to
NIASSI an in its reports the inspection team stated
that WO RXIII-02 was not applicable to NIASSIs
employees since they were already receiving a wage
rate higher than the prescribed minimum wage.
Upon motion by the Union, the DOLE
Regional Director indorsed the case to the National
Labor Relations Commission (NLRC) Regional
Arbitration Branch for further hearing. On May 18,
2001, Executive Labor Arbiter Rogelio P. Legaspi, in
turn, referred the case to the National Conciliation
and Mediation Board (NCMB) for voluntary
arbitration.
On February 22, 2002, Voluntary Arbitrator
Jesus G. Chavez rendered a decision granting the
Unions prayer for the implementation of WO RXIII-
02 on the rationale that WO RXIII-02 did not
specifically prohibit the grant of wage increase to
employees earning above the minimum wage. On the
contrary, Chavez said, the wage order specifically
enumerated those who are outside its coverage, but
did not include in the enumeration those earning
above the minimum wage. He also held that the
Collective Bargaining Agreement (CBA) between
NIASSI and the Union provides that wage increases
granted by the company within one year from CBA
signing shall not be creditable to future legally
mandated wage increases.
Following the denial of its motion for
reconsideration, NIASSI filed with the CA a petition
for review under Rule 43 of the Rules of Court to
nullify the February 22, 2002 Decision of Chavez. By
a decision dated September 30, 2003, the CA found
the decision of the voluntary arbitrator and the
premises holding it together to be in order and,
accordingly, dismissed NIASSIs petition for review.
Page 35
ISSUE:
Whether WO RXIII-02 may be made to apply and
cover Nasipits employees who, at the time of the
issuance and effectivity of the wage order, were
already receiving a wage rate higher than the
prevailing minimum wage.
RULING: NO.
The pertinent portion of WO RXIII-02
provides, as follows:
Section 1. COVERAGE. The rates prescribed under
this Wage Order shall apply to minimum wage
earners in the private sector regardless of their
position designation or status and irrespective of the
method by which their wages are paid.
Not covered by the provisions of this Order
are household or domestic helpers and persons
employed in the personal service of another,
including family drivers. (Emphasis supplied.)
The provision of the wage orders
Implementing Rules and Regulations (IRR)1[5]
pertinent to the instant issue reads, as follows:
RULE II > NEW MINIMUM WAGE RATES
Section 1. COVERAGE
a. The minimum wage rates prescribed under
the Order shall apply to the minimum wage earners
in the private sector regardless of their position,
designation or status and irrespective of the method
by which their wages are paid.
b. Not covered by the provision of the Order
are household or domestic helpers or persons
employed in the personal service of another
including family drivers.
c. Workers and employees who, prior to the
effectivity of the Order were receiving a basic wage
rate per day or its monthly equivalent of more than
those prescribed under the Order, may receive wage
increases through the correction of wage distortions
in accordance with Section 1, Rule IV of this Rules.
(Emphasis supplied.)
It is abundantly clear from the above quoted
provisions of WO RXIII-02 and its IRR that only
minimum wage earners are entitled to the prescribed
wage increase. Expressio unius est exclusio
alterius.2[6] The express mention of one person,
thing, act, or consequence excludes all others. The
beneficent, operative provision of WO RXIII-02 is
specific enough to cover only minimum wage
earners. Necessarily excluded are those receiving
rates above the prescribed minimum wage. The only
situation when employees receiving a wage rate
higher than that prescribed by the WO RXIII-02 may
still benefit from the order is, as indicated in Sec. 1
(c) of the IRRs, through the correction of wage
distortions.
Clearly then, only employees receiving salaries below
the prescribed minimum wage are entitled to the
wage increase set forth under WO RXIII-02, without
prejudice, of course, to the grant of increase to
correct wage distortions consequent to the
implementation of such wage order. Considering that
NIASSIs employees are undisputedly already
receiving a wage rate higher than that prescribed by
the wage order, NIASSI is not legally obliged to grant
them wage increase.
III.B.3.a
•Art. 124, Labor Code
•Art. 101, Labor Code
•Book III, Rule VII-A, Implementing Rules (Labor
Code)
Page 36
Tan v. Lagrama, G.R. No. 151228, August 15, 2002
DOCTRINE:
The Bureau of Working Conditions classifies workers
paid by results into two groups, namely; (1) those
whose time and performance is supervised by the
employer, and (2) those whose time and
performance is unsupervised by the employer. The
first involves an element of control and supervision
over the manner the work is to be performed, while
the second does not. If a piece worker is supervised,
there is an employer-employee relationship.
However, such an employee is not entitled to service
incentive leave pay since, as pointed out in Makati
Haberdashery v. NLRC and Mark Roche International
v. NLRC, he is paid a fixed amount for work done,
regardless of the time he spent in accomplishing such
work.
FACTS:
Private respondent Leovigildo Lagrama is a
painter, making ad billboards and murals for the
motion pictures shown at the Empress, Supreme, and
Crown Theaters for more than 10 years which is
managed by Rolando Tan. He was dismissed for
urinating inside the drawing area. Lagrama denied
the charge against him. He claimed that he was not
the only one who entered the drawing area and that,
even if the charge was true, it was a minor infraction
to warrant his dismissal.
Lagrama filed a complaint with the Sub -
Regional Arbitration Branch No. X of the National
Labor Relations Commission (NLRC) in Butuan City.
He alleged that he had been illegally dismissed and
sought reinvestigation and payment of 13th month
pay, service incentive leave pay, salary differential,
and damages.
Petitioner Tan denied that Lagrama was his
employee. He asserted that Lagrama was an
independent contractor who did his work according
to his methods, while he (petitioner) was only
interested in the result thereof. He cited the
admission of Lagrama during the conferences before
the Labor Arbiter that he was paid on a fixed piece-
work basis, i.e., that he was paid for every painting
turned out as ad billboard or mural for the pictures
shown in the three theaters, on the basis of a no
mural/billboard drawn, no pay policy. He submitted
the affidavits of other cinema owners, an amusement
park owner, and those supervising the construction
of a church to prove that the services of Lagrama
were contracted by them. He denied having
dismissed Lagrama and alleged that it was the latter
who refused to paint for him after he was scolded for
his habits. The LA awarded a total of 136,849.99 in
benefits and damages.
Petitioner Rolando Tan appealed to the
NLRC finding Lagrama to be an independent
contractor, and for this reason reversing the decision
of the Labor Arbiter. Lagrama filed a motion for
reconsideration which was denied. He then filed a
petition for certiorari under Rule 65 before the Court
of Appeals. The CA reinstated the decision of the LA.
ISSUE:
Whether or not an employer-employee relationship
existed, the private respondent being a piece worker.
HELD: YES.
In determining whether there is an employer-
employee relationship, we have applied a four-fold
test, to wit: (1) whether the alleged employer has the
power of selection and engagement of employees; (2)
whether he has control of the employee with respect
to the means and methods by which work is to be
accomplished; (3) whether he has the power to
dismiss; and (4) whether the employee was paid
wages. These elements of the employer-employee
relationship are present in this case.
The existence in this case of the first element
is undisputed. It was petitioner who engaged the
services of Lagrama without the intervention of a
third party. Of the four elements of the employer-
employee relationship, the control test is the most
important. Compared to an employee, an
independent contractor is one who carries on a
distinct and independent business and undertakes to
perform the job, work, or service on its own account
and under its own responsibility according to its own
manner and method, free from the control and
direction of the principal in all matters connected
with the performance of the work except as to the
results thereof. Hence, while an independent
contractor enjoys independence and freedom from
the control and supervision of his principal, an
employee is subject to the employers power to
control the means and methods by which the
employees work is to be performed and
accomplished.
In the case at bar, albeit petitioner Tan claims that
private respondent Lagrama was an independent
contractor and never his employee, the evidence
shows that the latter performed his work as painter
under the supervision and control of petitioner.
Moreover, it would appear that petitioner not only
provided the workplace, but supplied as well the
materials used for the paintings, because he admitted
that he paid Lagrama only for the latters services.
Second. That petitioner’s right to hire and fire was
admitted by him in his position paper submitted to
the NLRC. By stating that he had the right to fire
Lagrama, petitioner in effect acknowledged Lagrama
to be his employee. For the right to hire and fire is
another important element of the employer-
employee relationship Third. Payment of wages is
one of the four factors to be considered in
determining the existence of employer-employee
relation. That Lagrama worked for Tan on a fixed
piece-work basis is of no moment. Payment by result
is a method of compensation and does not define the
essence of the relation. It is a method of computing
compensation, not a basis for determining the
existence or absence of employer-employee
relationship. One may be paid on the basis of results
or time expended on the work, and may or may not
acquire an employment status, depending on
whether the elements of an employer-employee
relationship are present or not.
Page 37
The Bureau of Working Conditions classifies workers
paid by results into two groups, namely; (1) those
whose time and performance is supervised by the
employer, and (2) those whose time and
performance is unsupervised by the employer. The
first involves an element of control and supervision
over the manner the work is to be performed, while
the second does not. If a piece worker is supervised,
there is an employer-employee relationship, as in
this case. However, such an employee is not entitled
to service incentive leave pay since, as pointed out in
Makati Haberdashery v. NLRC and Mark Roche
International v. NLRC, he is paid a fixed amount for
work done, regardless of the time he spent in
accomplishing such work.
III.B.3.b & c
•Arts. 57-60, Labor Code
•Arts. 73-77, Labor Code
•Book II, Rule VI, Sec. 29, Implementing Rules (Labor
Code)
III.B.3.d
•Arts. 78-81, Labor Code
•R.A. 7277, Magna Carta for Disabled Persons
III.B.4
•See Songco v. NLRC, G.R. Nos. 50999-501000, March
23, 1990
•See Reyes v. NLRC, G.R. No. 160233, August 8, 2007
Soriano v. NLRC, G.R. No. L-75510, October 27, 1987
Doctrine:
Commissions must be earned to be properly included
in the salary base for the computation of separation
pay and backwages. - The salary base properly used
in computing the separation pay and the backwages
due to petitioner should include not just the basic
salary but also the regular allowances that petitioner
had been receiving (See Santos v. National Labor
Relations Commission G.R. No. 76721, 21 September
1987). In petitioner's case, the base figure properly
includes her: (a) basic salary of P3,000.00 a month;
and (b) living allowance of P2,400 a month. The
commissions also claimed by petitioner ("override
commission" plus "net deposit incentive") are not
properly includible in such base figure since such
commissions must be earned by actual market
transactions attributable to petitioner.
Facts:
Rufina Soriano was the Vice-President for
Marketing of Kingly Commodities Traders and Multi-
Resources Inc. Her job was to supervise investment
counselors and their transactions and to be
personally acquainted with clients. She was charged
with failure to perform her duties after it was
discovered that some investment counselors made
unauthorized manipulations like opening accounts
without authorization from clients and also
unauthorized transfers of funds. Soriano was place
on preventive suspension and later dismissed for loss
of trust and confidence.
Soriano filed a complaint for illegal
suspension and dismissal alleging denial of due
process because she was suspended without prior
hearing. She claimed she was dismissed because of a
personal grudge by Guil Rivera, Senior Vice
President, and she was also discriminated against
because the immediate supervisors of the erring
investment counselors who were similarly charged
were not dismissed.
On 8 July 1985, Labor Arbiter A.L Sevilla rendered a
Decision requiring the respondent Corporation to
pay petitioner: (1) separation pay in the amount of
P10,500.00; (2) six (6) months backwages in the
amount of P120,000.00; (3) moral damages in the
amount of P500,000.00; (4) exemplary damages in
the amount of P100,000.00; and (5) attorney's fees
equivalent to 10% of the award.
On appeal by the private respondents, public
respondent NLRC, in a Decision dated 10 March
1986, modified the Labor Arbiter's award by deleting
the award of moral and exemplary damages and
requiring respondent Corporation to pay: (1)
separation pay amounting to P21,000.00; (2) three
(3) months backwages without qualification and
deduction amounting to P9,000.00; and (3) 10% of
the award as attorney's fees.
Soriano filed the instant petition for
certiorari to annul the NLRC Decision and reinstate
the Arbiter’s
Decision. Petitioner also claimed the
following to be included in the computation of her
separation pay and backwages:
•“override commission" plus "net deposit incentive"
•"travels equivalent" [an unusual and unexplained
term; P10,000.00 a month]
•commission in trading personal clients" P3,000.00 a
month
Issue:
WON the commissions claimed should be included in
the salary base for the computation of separation pay
and backwages
SC Ruling: NO.
Turning to the specific award made by
respondent NLRC, the salary base properly used in
computing the separation pay and the backwages
due to petitioner should include not just the basic
salary but also the regular allowances that petitioner
had been receiving (See Santos v. National Labor
Relations CommissionG.R. No. 76721, 21 September
1987). In petitioner's case, the base figure properly
includes her:
Page 38
(a)basic salary of P3,000.00 a month; and (b) living
allowance of P2,400 a month (petitioner's Affidavit,
dated 12 April 1985, Exhibit "G", Rollo, p. 105). The
commissions also claimed by petitioner ("override
commission" plus "net deposit incentive") are not
properly includible in such base figure since such
commissions must be earned by actual market
transactions attributable to petitioner. Neither
should "travels equivalent" [an unusual and
unexplained term; P10,000.00 a month] and
"commission in trading personal clients" P3,000.00 a
month] be included in such base figure. Considering
that the charge of bad faith on the part of private
respondents was not proven, the respondent NLRC
having, on the contrary, made a finding that
petitioner's dismissal was made in good faith there
appears no real basis for the award of attorney's fees
(Art. 2208 5 Civil Code). This award should not
exceed a nominal amount which we set at P1,500.00.
Thus, the appropriate computation would be:
A. Separationpay-P5,400.00/month 7 = P37,800.00
(in view of petitioner's seven (7) years of service)
B. Backwages-P5,400.00/month x 3 mos. = Rivera unless there was knowledge of the act In
P16,200.00
Sub-Total P54,000.00 plus nominal attorney's fees
1,500.00
TOTAL P55,500.00
ACCORDINGLY, the Court Resolved to DISMISS the
Petition for certiorari for lack of merit. The Decision
of the respondent NLRC dated 10 March 1986 is
modified so as to award petitioner the following
items: a) separation pay in the amount of P37,800.00;
b) backwages for three (3) months in the amount of
P16,200.00; and c) attorney's fees of P1,500.00,
making a total of P55,500.00.
Other issues: On Discrimination
On preventive suspension: respondent Corporation must be accorded
1. preventive suspension does not in itself reasonable latitude in determining who among erring
prove that the company had prejudged that officers or employees should be punished by the
petitioner was guilty of the charges she was asked to company and to what extent. In the instant case,
answer and explain. Preventive suspension may be respondent Corporation presumably found it was not
necessary for the protection of the company, its necessary to terminate the services also of the two
operations and assets, pending investigation of the (2) section heads in petitioner's department, who
alleged malfeasance or misfeasance on the part of clearly are much lower in the corporate hierarchy
officers or employees of the company and pending a than petitioner.
decision on the part of the company (See Sec. 3 of
Rule XIV, Book V, of the Omnibus Rules Implementing
the Labor Code). Considering the very senior and
sensitive character of petitioner's position as head of
a Department, a fine position as distinguished from a
staff or planning position, and considering the
unauthorized transactions then just discovered by
the respondent Corporation, we do not believe that
the preventive suspension was an arbitrary and
capricious act amounting to bad faith on the part of
the respondent Corporation.
Personal grudge
2. Corporation not liable for malice on the part of
respect of Item 2, the alleged personal motive behind
petitioner's dismissal-personal envy or feelings of
personal insecurity on the part of Guil Rivera, Senior
Vice-President, respondent NLRC found that
petitioner had not sufficiently established her
assertion. Petitioner's assertion on this point appears
no more than a conjecture or supposition and does
not afford an adequate basis for overturning
respondent NLRC's finding on this point. Further, if
petitioner had clearly proven such personal ill-will
on the part of Mr. Rivera, a serious question would
arise as to whether the respondent Corporation (as
distinguished from Mr. Rivera) could be held liable at
all for Mr. Rivera's acts in the absence of clear
authorization for, or approval or adoption of, such act
by the respondent Corporation with knowledge of
the personal malice on the part of Mr. Rivera.
Page 39
Iran v. NLRC, G.R. No. 121927, April 22, 1998
Doctrine:
“While commissions are, indeed, incentives or forms
of encouragement to inspire employees to put a little
more industry on the jobs particularly assigned to
them, still these commissions are direct
remunerations for services rendered.”
Facts:
Petitioner Iran is engaged in softdrinks
merchandising and distribution in Mandaue. He
employed private respondents as truck drivers who
double as salesman and truck helpers. As part of their
compensation, the driver/salesmen and truck
helpers of petitioner received commissions per case
of soft-drinks sold.
Sometime in June 1991, petitioner, while
conducting an audit of his operations, discovered
cash shortages and irregularities allegedly
committed by private respondents. Pending the
investigation of irregularities and settlement of the
cash shortages, petitioner required private
respondents to report for work everyday. They were
not allowed, however, to go on their respective
routes. A few days thereafter, despite aforesaid
order, private respondents stopped reporting for
work, prompting petitioner to conclude that the
former had abandoned their employment.
Consequently, petitioner terminated their services
and filed a complaint for estafa against private
respondents.
On the other hand, private respondents filed
complaints against petitioner for illegal dismissal,
illegal deduction, underpayment of wages, premium
pay for holiday and rest day, holiday pay, service
incentive leave pay, 13th month pay, allowances,
separation pay, recovery of cash bond, damages and
attorneys fees.
Issue:
Whether or not commissions are included in
determining compliance with the minimum wage
requirement.
SC Ruling: Yes. the recompense, compensation or reward of an
The NLRC, in denying petitioners claim that agent, salesman, executor, trustee, receiver, factor,
commissions be included in determining compliance broker or bailee, when the same is calculated as a
with the minimum wage ratiocinated thus: percentage on the amount of his transactions or on
the profit to the principal. The nature of the work of a
Respondent (petitioner herein) insist assiduously salesman and the reason for such type of
that the commission should be included in the remuneration for services rendered demonstrate
computation of actual wages per agreement. We will clearly that commissions are part of a salesmans
not fall prey to this fallacious argument. An employee wage or salary.
should receive the minimum wage as mandated by
law and that the attainment of the minimum wage Thus, the commissions earned by private
should not be dependent on the commission earned respondents in selling softdrinks constitute part of
by an employee. A commission is an incentive for an the compensation or remuneration paid to
employee to work harder for a better production that drivers/salesmen and truck helpers for serving as
will benefit both the employer and the employee. To such, and hence, must be considered part of the
include the commission in the computation of wage wages paid them.
in order to comply with labor standard laws is to
negate the practice that a commission is granted after
an employee has already earned the minimum wage
or even beyond it.
This holding is unsupported by law and
jurisprudence. Article 97(f) of the Labor Code defines
wage as follows:
Art. 97(f) Wage paid to any employee shall
mean the remuneration or earnings, however
designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of
calculating the same, which is payable by an
employer to an employee under a written or
unwritten contract of employment for work done or
to be done, or for services rendered or to be
rendered and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by
the employer to the employee.
This definition explicitly includes
commissions as part of wages. While commissions
are, indeed, incentives or forms of encouragement to
inspire employees to put a little more industry on the
jobs particularly assigned to them, still these
commissions are direct remunerations for services
rendered. In fact, commissions have been defined as
Page 40

III.B.5
•Arts. 113-118, Labor Code
•Book III, Rule VIII, Secs. 10-11, Implementing Rules
(Labor Code)
•Arts. 1706, 1708, Civil Code
•DOLE Labor Advisory No. 11, Series of 2014
•Art. 59, R.A. 6938, Cooperative Code of the Phils.
Bluer Than Blue v. Esteban,
G.R. No. 192582, April 7, 2014
DOCTRINE:
Article 113 of the Labor Code provides that no
employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of
his employees, except in cases where the employer is
authorized by law or regulations issued by the
Secretary of Labor and Employment, among others.
FACTS:
A rank-in-file employee, Glyza Esteban, was
employed as Sales Clerk assigned at Bluer Than Blue
Joint Ventures Company's EGG boutique in SM City
Marilao, Bulacan. Part of her primary tasks were
attending to all customer needs, ensuring efficient
inventory, coordinating orders from clients,
cashiering and reporting to the accounting
department. Bluer Than Blue received a report that
several employees have access to its point-of-sale
(POS) system through a universal password given by
Elmer Flores. Upon investigation, it was discovered
that it was Esteban who gave Flores the password.
Bluer Than Blue sent a letter memorandum to
Esteban asking her to explain in writing why she
should not be disciplinary dealt with for tampering
with the company’s POS system through the use of an
unauthorized password. Esteban admitted that she
used the universal password three times on the same
day after she learned of it from two other employees
who she saw browsing Bluer Than Blue’s sales
inquiry. She was told that they used the "123456"
password. Finding her explanation unsatisfactory,
Bluer Than Blue terminated her employment
immediately on the ground of loss of trust and
confidence. Esteban was given her final pay,
including benefits and bonuses, less inventory
variances incurred by the store amounting to
P8,304.93. Thereafter, Esteban filed before the Labor
Arbiter a complaint for illegal dismissal. The LA
found that she was illegally dismissed, but the NLRC
reversed the LA’s decision. She then appealed the
NLRC’s decision to the CA, which reversed the NLRC
ruling and reinstated the LA’s decision. The CA held
that the wage deduction for the negative variance is
unfounded.
ISSUES:
1.WON Esteban’s acts constitute just cause to
terminate her employment with the company on the
ground of loss of trust and confidence.
2.WON the CA is correct in holding that the wage
deduction for the negative variance is unfounded.
RULING:
1. NO. Loss of trust and confidence to be a valid
cause for dismissal must be work related such as
would show the employee concerned to be unfit to
continue working for the employer and it must be
based on a willful breach of trust and founded on
clearly established facts. Such breach is willful if it is
done intentionally, knowingly, and purposely,
without justifiable excuse as distinguished from an
act done carelessly, thoughtlessly, heedlessly or
inadvertently. The loss of trust and confidence must
spring from the voluntary or willful act of the
employee, or by reason of some blameworthy act or
omission on the part of the employee.
In this case, the Court finds that the acts
committed by Esteban do not amount to a willful
breach of trust. She admitted that she accessed the
POS system with the use of the unauthorized
"123456" password out of curiosity and without any
obvious intention of defrauding the petitioner.
Moreover, Bluer Than Blue even admitted that
Esteban has her own password to the POS system. If
it was her intention to manipulate the store’s
inventory and funds, she could have done so long
before she had knowledge of the unauthorized
password. But the facts on hand show that she did
not. To the Court’s mind, Esteban’s lapse is, at best, a
careless act that does not merit the imposition of the
penalty of dismissal.
2. YES. Article 113 of the Labor Code provides
that no employer, in his own behalf or in behalf of
any person, shall make any deduction from the wages
of his employees, except in cases where the employer
is authorized by law or regulations issued by the
Secretary of Labor and Employment, among others.
The Omnibus Rules Implementing the Labor
Code, meanwhile, provides:
SECTION 14. Deduction for loss or damage. – Where
the employer is engaged in a trade, occupation or
business where the practice of making deductions or
requiring deposits is recognized to answer for the
reimbursement of loss or damage to tools, materials,
or equipment supplied by the employer to the
employee, the employer may make wage deductions
or require the employees to make deposits from
which deductions shall be made, subject to the
following conditions:
(a)That the employee concerned is clearly shown to
be responsible for the loss or damage;
(b)That the employee is given reasonable
opportunity to show cause why deduction should not
be made;
(c)That the amount of such deduction is fair and
reasonable and shall not exceed the actual loss or
damage; and
(d)That the deduction from the wages of the
employee does not exceed 20 percent of the
employee’s wages in a week.
In this case, Bluer Than Blue failed to
sufficiently establish that Esteban was responsible
for the negative variance it had in its sales for the
year 2005 to 2006 and that Esteban was given the
opportunity to show cause the deduction from her
last salary should not be made. The Court cannot
accept Bluer Than Blue’s statement that it is the
practice in the retail industry to deduct variances
from an employee’s salary, without more.
Page 41
 Nina Jewelry v. Trinidad
G.R. No. 188169, November 28, 2011
Doctrine:
ART. 113. Wage Deduction. No employer, in his own
behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:
a. In cases where the worker is insured with his
consent by the employer, and the deduction is to
recompense the employer for the amount paid by
him as premium on the insurance;
b. For union dues, in cases where the right of the
worker or his union to check-off has been recognized
by the employer or authorized in writing by the
individual worker concerned; and
c. In cases where the employer is authorized by law
or regulations issued by the Secretary of Labor.
Facts:
Respondents, Madeline Montecillo
(Madeline) and Liza Trinidad (Liza) were first hired
as goldsmiths by Nia Jewelry (NIA). Madeline and
Liza’s week rate are P1,500.00 and P2,500.00,
respectively.
On August 13, 2004, Nia Jewelry imposed a
policy for goldsmiths requiring them to post cash
bonds or deposits in varying amounts but in no case
exceeding 15% of the latter's salaries per week. The
deposits were intended to answer for any loss or
damage which Nia Jewelry may sustain by reason of
the goldsmiths' fault or negligence in handling the
gold entrusted to them. The deposits shall be
returned upon completion of the goldsmiths' work
and after an accounting of the gold received.
Nia Jewelry alleged that the goldsmiths were
given the option not to post deposits, but to sign
authorizations allowing the former to deduct from
the latter's salaries amounts not exceeding 15% of
their take home pay should it be found that they lost
the gold entrusted to them.
Madeline and Liza claimed otherwise that they had
no option but to post the deposits. They alleged that
they were constructively dismissed by Nia Jewelry as
their continued employments were made dependent
on their readiness to post the required deposits.
Nia Jewelry averred that on August 14, 2004,
the respondents no longer reported for work and
signified their defiance against the new policy which
at that point had not even been implemented yet.
Respondents filed a complaint against Nia
for illegal dismissal and for the award of separation
pay but later amended the complaints and rather
seek for reinstatement, backwages, attorneys fee and
13th month pay.
The LA dismissed the complaint for lack of
merit but ordered Nia to pay Madeline the sum
ofP3,750.00, and Liza, P6,250.00, representing their
proportionate entitlements to 13th month pay for the
year 2004. On appeal, NLRC affirmed LA’s decision
but deleted the award of the 13th month pay due to
unpaid loans to Nia and ratiocinated that it was the
complainants who refused to work when they were
required to post cash bond or sign an authorization
for deduction for the gold material they received and
to be manufactured into various jewelries. x x x We
find it logically sound for the latter [Nia Jewelry] to
innovate certain policy or rule to protect its own
business. To deprive them of such prerogative
[management prerogative] will be likened to 'killing
the goose that lays the golden eggs.
Respondents filed for a petition for Certiorari before
the CA when NLRC ruled that it was not illegal
dismissal but abandonment of work.
CA reversed the decision of the LA and NLRC citing
Art 113 of the Labor Code in case of wage deduction
and Art 114 of the same code on Deposits for loss or
damages. Before petitioners may be required to
deposit cash or agree to a salary deduction
proportionate to the value of gold delivered to them,
the employer must comply with the relevant
conditions imposed by law. Hence, the latter must
prove that there is an existing law or regulation
authorizing it to impose such burden on its
employees. And, in case of deposit, that it is engaged
in a trade, occupation or business where such
requirement is a recognized practice. Nia obviously
failed in this respect but mere invoke on
management prerogative.
Issue:
Whether or not the herein respondents are illegally
dismissed.
Held:
No.
Although the propriety of requiring cash bonds
seems doubtful , the court find no grounds to hold
that the respondents were dismissed expressly or
even constructively by the petitioners. It was the
respondents who merely stopped reporting for work.
While it is conceded that the new policy will impose
an additional burden on the part of the respondents,
it was not intended to result in their demotion.
Neither is a diminution in pay intended because as
long as the workers observe due diligence in the
performance of their tasks, no loss or damage shall
result from their handling of the gold entrusted to
them, hence, all the amounts due to the goldsmiths
shall still be paid in full. Further, the imposition of the
new policy cannot be viewed as an act tantamount to
discrimination, insensibility or disdain against the
respondents. For one, the policy was intended to be
implemented upon all the goldsmiths in Nia Jewelry's
employ and not solely upon the respondents. Besides,
as stressed by the petitioners, the new policy was
intended to merely curb the incidences of gold theft
in the work place. The new policy can hardly be said
to be disdainful or insensible to the workers as to
render their continued employment unreasonable,
unlikely or impossible.
Page 42
In the findings of the LA and the NLRC that no
constructive dismissal occurred are supported by
substantial evidence, the CA thus erred in giving due
course to and granting the petition filed before it.
Hence, it is not even necessary anymore to resolve
the issue of whether or not the policy of posting cash
bonds or making deductions from the goldsmiths'
salaries is proper. However, considering that there
are other goldsmiths in Nia Jewelry's employ upon
whom the policy challenged by the respondents
remain to be enforced, in the interest of justice and to
put things to rest, we shall resolve the issue.
Article 113 of the Labor Code is clear that there are
only three exceptions to the general rule that no
deductions from the employees' salaries can be
made. The exception which finds application in the
instant petition is in cases where the employer is
authorized by law or regulations issued by the
Secretary of Labor to effect the deductions. On the
other hand, Article 114 states that generally, deposits
for loss or damages are not allowed except in cases
where the employer is engaged in such trades,
occupations or business where the practice of
making deposits is a recognized one, or is necessary
or desirable as determined by the Secretary of Labor
in appropriate rules or regulations.
While employers should generally be given leeways
in their exercise of management prerogatives, the
court with the respondents and the CA that in the
case at bar, the petitioners had failed to prove that
their imposition of the new policy upon the
goldsmiths under Nia Jewelry's employ falls under
the exceptions specified in Articles 113 and 114 of
the Labor Code.
Articles 113 and 114 of the Labor Code are clear as to
what are the exceptions to the general prohibition
against requiring deposits and effecting deductions
from the employees' salaries. Hence, a statutory
construction of the aforecited provisions is not called
for. Even if we were however called upon to interpret
the provisions, our inclination would still be to
strictly construe the same against the employer
because evidently, the posting of cash bonds and the
making of deductions from the wages would
inarguably impose an additional burden upon the
employees.
While the petitioners are not absolutely precluded
from imposing the new policy, they can only do so
upon compliance with the requirements of the law. In
other words, the petitioners should first establish
that the making of deductions from the salaries is
authorized by law, or regulations issued by the
Secretary of Labor. Further, the posting of cash bonds
should be proven as a recognized practice in the
jewelry manufacturing business, or alternatively, the
petitioners should seek for the determination by the
Secretary of Labor through the issuance of
appropriate rules and regulations that the policy the
former seeks to implement is necessary or desirable
in the conduct of business. The petitioners failed in
this respect. It bears stressing that without proofs
that requiring deposits and effecting deductions are
recognized practices, or without securing the
Secretary of Labor's determination of the necessity
or desirability of the same, the imposition of new
policies relative to deductions and deposits can be
made subject to abuse by the employers.
Page 43

Milan v. NLRC, G.R. No. 202961, February 4, 2015
FACTS:
Milan et.al are Solid Mills, Inc.’s (Solid Mills)
employees. They are represented by the National
Federation of Labor Unions (NAFLU), their collective
bargaining agent.
As Solid Mills’ employees, Milan et.al. and their
families were allowed to occupy SMI Village, a
property owned by Solid Mills. According to Solid
Mills, this was “[o]ut of liberality and for the
convenience of its employees . . . [and] on the
condition that the employees would vacate the
premises anytime the Company deems fit.”
In September 2003, Milan et.al were informed that
effective October 10, 2003, Solid Mills would cease its
operations due to serious business losses. NAFLU
recognized Solid Mills’ closure due to serious
business losses in the memorandum of agreement
dated September 1, 2003. The memorandum of
agreement provided for Solid Mills’ grant of
separation pay less accountabilities, accrued sick
leave benefits, vacation leave benefits, and 13th
month pay to the employees. The agreement was
entered into with full knowledge by the parties of
their rights under the law and they bound
themselves not to conduct any concerted action of
whatsoever kind, otherwise the grant of financial
assistance as discussed above will be withheld.
Solid Mills filed its Department of Labor and
Employment termination report on September 2,
2003.
Later, Solid Mills, through Alfredo Jingco, sent to
Milan et.al individual notices to vacate SMI Village.
Milan et.al. were no longer allowed to report for
work by October 10, 2003. They were required to
sign a memorandum of agreement with release and
quitclaim before their vacation and sick leave
benefits, 13th month pay, and separation pay would
be released. Employees who signed the
memorandum of agreement were considered to have
agreed to vacate SMI Village, and to the demolition of
the constructed houses inside as condition for the
release of their termination benefits and separation
pay. Milan et.al. refused to sign the documents and
demanded to be paid their benefits and separation
pay.
Hence, they filed complaints before the Labor Arbiter
for alleged non-payment of separation pay, accrued
sick and vacation leaves, and 13th month pay. They
argued that their accrued benefits and separation pay
should not be withheld because their payment is
based on company policy and practice. Moreover, the
13th month pay is based on law, specifically,
Presidential Decree No. 851. Their possession of
Solid Mills property is not an accountability that is
subject to clearance procedures. They had already
turned over to Solid Mills their uniforms and
equipment when Solid Mills ceased operations.
On the other hand, Solid Mills argued that Milan
et.al.’s complaint was premature because they had
not vacated its property.
The Labor Arbiter ruled in favor of Milan
et.al. According to the Labor Arbiter, Solid Mills
illegally withheld petitioners’ benefits and separation
pay. The memorandum of agreement dated
September 1, 2003 stated no condition to the effect
that petitioners must vacate Solid Mills’ property
before their benefits could be given to them. Milan
et.al.’s possession should not be construed as
their“accountabilities” that must be cleared first
before the release of benefits. er.
Silodd Mills appealed to the National Labor Relations
Commission. The National Labor Relations
Commission affirmed part of the decision but
reversed and set aside another part and decided that
Milan et.al.’s monetary claims in the form of
separation pay, accrued 13th month pay for 2003,
accrued vacation and sick leave pays are held in
abeyance pending compliance of their
accountabilities to respondent company by turning
over the subject lots they respectively occupy at SMI
Village Sucat Muntinlupa City, Metro Manila to Solid
Mills. Linga and four other were already paid their
respective separation pays and benefits. Meanwhile,
Teodora Mahilom already retired long before Solid
Mills’ closure. She was already given her retirement
benefits.
The National Labor Relations Commission ruled that
because of petitioners’ failure to vacate Solid Mills’
property, Solid Mills was justified in withholding
their benefits and separation pay.35 Solid Mills
granted the petitioners the privilege to occupy its
property on account of petitioners’ employment.36 It
had the prerogative to terminate such
privilege.37 The termination of Solid Mills and
petitioners’ employer-employee relationship made it
incumbent upon petitioners to turn over the
property to Solid Mills.
The Court of Appeals ruled that Solid Mills’ act of
allowing its employees to make temporary dwellings
in its property was a liberality on its part. It may be
revoked any time at its discretion.
ISSUE: Whether or not an employer is allowed to
withhold terminal pay and benefits pending the
employee’s return of its properties
RULING/RATIO: Yes. The fact that majority of
NAFLU’s members were not occupants of respondent
Solid Mills’ property is evidence that possession of
the property was not contemplated in the agreement.
“Accountabilities” should be interpreted to refer only
to accountabilities that were incurred by petitioners
while they were performing their duties as
employees at the worksite. Moreover, applicable
laws, company practice, or policies do not provide
that 13th month pay, and sick and vacation leave pay
benefits, may be withheld pending satisfaction of
liabilities by the employee.
Page 44
Requiring clearance before the release of last
payments to the employee is a standard procedure
among employers, whether public or
private. Clearance procedures are instituted to
ensure that the properties, real or personal,
belonging to the employer but are in the possession
of the separated employee, are returned to the
employer before the employee’s departure.
As a general rule, employers are prohibited from
withholding wages from employees (Art. 116, Labor
Code). The Labor Code also prohibits the elimination
or diminution of benefits (Art. 100, Labor Code).
However, our law supports the employers’ institution
of clearance procedures before the release of
wages. As an exception to the general rule that
wages may not be withheld and benefits may not be
diminished, the Labor Code provides: Art. 113. Wage
deduction. No employer, in his own behalf or in
behalf of any person, shall make any deduction from
the wages of his employees, except:
1. In cases where the worker is insured with his
consent by the employer, and the deduction is
to recompense the employer for the amount
paid by him as premium on the insurance;
2. For union dues, in cases where the right of the
worker or his union to check-off has been
recognized by the employer or authorized in
writing by the individual worker concerned;
and
3. In cases where the employer is authorized by
law or regulations issued by the Secretary of
Labor and Employment.
The Civil Code provides that the employer is
authorized to withhold wages for debts due: Article
1706. Withholding of the wages, except for a debt
due, shall not be made by the employer. “Debt” in this
case refers to any obligation due from the employee
to the employer. It includes any accountability that
the employee may have to the employer. There is no
reason to limit its scope to uniforms and equipment,
as petitioners would argue.
More importantly, respondent Solid Mills and NAFLU,
the union representing petitioners, agreed that the
release of petitioners’ benefits shall be “less
accountabilities.” Accountabilities of employees are
personal. They need not be uniform among all
employees in order to be included in accountabilities
incurred by virtue of an employer-employee
relationship. Milan et.al. do not categorically deny
Solid Mills’ ownership of the property, and they do
not claim superior right to it. What can be gathered
from the findings of the Labor Arbiter, National Labor
Relations Commission, and the Court of Appeals is
that Solid Mills allowed the use of its property for the
benefit of Milan et.al. as its employees. Milan et.al
were merely allowed to possess and use it out of
Solid Mills’ liberality. The employer may, therefore,
demand the property at will.
DISPOSITIVE: Solid Mills won.
DOCTRINE: An employer is allowed to withhold
terminal pay and benefits pending the employee’s
return of its properties. As a general rule, No
employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of
his employees. The following cases are considered
exceptions:
1. In cases where the worker is insured with
his consent by the employer, and the
deduction is to recompense the employer for
the amount paid by him as premium on the
insurance;
2. For union dues, in cases where the right of
the worker or his union to check-off has
been recognized by the employer or
authorized in writing by the individual
worker concerned; and
3. In cases where the employer is authorized
by law or regulations issued by the Secretary
of Labor and Employment.
Page 45
 SHS Perforated v. Diaz
G.R. No. 185814, October 13, 2010
Doctrine:
Management prerogative refers "to the right of an
employer to regulate all aspects of employment, such
as the freedom to prescribe work assignments,
working methods, processes to be followed,
regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and
dismissal and recall of work.” Although management
prerogative refers to "the right to regulate all aspects
of employment," it cannot be understood to include
the right to temporarily withhold salary/wages
without the consent of the employee.
Facts:
Diaz (respondent) was hired by petitioner SHS as
Manager for Business Development on probationary
status. During respondent’s employment, the
company president Hartmannshenn was often
abroad and, because of business exigencies, his
instructions to respondent were either sent by
electronic mail or relayed through telephone or
mobile phone. As to respondent’s work, there was no
close supervision by him. Respondent admitted that
he had reported to the SHS office and plant only eight
(8) times.
On November 18, 2005, Hartmannshenn arrived in
the Philippines from Germany, and on November 22
and 24, 2005, notified respondent of his arrival
through electronic mail messages and advised him to
get in touch with him. Respondent claimed that he
never received the messages.
On November 29, 2005, Hartmannshenn instructed
not to release respondent’s salary. Later that
afternoon, respondent called and inquired about his
salary. He was informed him that it was being
withheld and that he had to immediately
communicate with Hartmannshenn. The next day,
respondent served on SHS a demand letter and a
resignation letter.
The Labor Arbiter ruled that respondent was
constructively dismissed because the withholding of
his salary was contrary to Article 116 of the Labor
Code as it was not one of the exceptions for allowable
wage deduction by the employer under Article 113 of
the Labor Code. He had no other alternative but to
resign because he could not be expected to continue
working for an employer who withheld wages
without valid cause.
The NLRC explained that the withholding of
respondent’s salary was a valid exercise of
management prerogative. The act was deemed
justified as it was reasonable to demand an
explanation for failure to report to work and to
account for his work accomplishments. The NLRC
held that the respondent voluntarily resigned as
evidenced by the language used in his resignation
letter and demand letters.
The CA held that withholding respondent’s salary
was not a valid exercise of management prerogative
as there is no such thing as a management
prerogative to withhold wages temporarily.
Issues:
1. Whether or not the withholding of salary was a
valid exercise of management prerogative.
2. Whether or not respondent was constructively
dismissed.
3. Whether or not the corporate officers are
solidarily liable with the corporation.
SC Ruling:
1. No, the withholding of salary was not a valid
exercise of management prerogative.
Management prerogative refers "to the right of an
employer to regulate all aspects of employment, such
as the freedom to prescribe work assignments,
working methods, processes to be followed,
regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and
dismissal and recall of work."12 Although
management prerogative refers to "the right to
regulate all aspects of employment," it cannot be
understood to include the right to temporarily
withhold salary/wages without the consent of the
employee. To sanction such an interpretation would
be contrary to Article 116 of the Labor Code, which
provides:
ART. 116. Withholding of wages and
kickbacks prohibited. – It shall be unlawful for any
person, directly or indirectly, to withhold any amount
from the wages of a worker or induce him to give up
any part of his wages by force, stealth, intimidation,
threat or by any other means whatsoever without the
worker’s consent.
Any withholding of an employee’s wages by an
employer may only be allowed in the form of wage
deductions under the circumstances provided in
Article 113 of the Labor Code, as set forth below:
ART. 113. Wage Deduction. – No employer, in his own
behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:
(a) In cases where the worker is insured with
his consent by the employer, and the deduction is to
recompense the employer for the amount paid by
him as premium on the insurance;
(b) For union dues, in cases where the right of
the worker or his union to check-off has been
recognized by the employer or authorized in writing
by the individual worker concerned; and
(c) In cases where the employer is authorized
by law or regulations issued by the Secretary of
Labor.
As correctly pointed out by the LA, "absent a showing
that the withholding of complainant’s wages falls
under the exceptions provided in Article 113, the
withholding thereof is thus unlawful."
Page 46
The Court finds petitioners’ evidence insufficient to
prove that respondent did not work from November
16 to November 30, 2005. As can be gleaned from
respondent’s Contract of Probationary Employment
and the exchanges of electronic mail messages
between Hartmannshenn and respondent, the latter’s
duties as manager for business development entailed
cultivating business ties, connections, and clients in
order to make sales. Such duties called for meetings
with prospective clients outside the office rather than
reporting for work on a regular schedule. For
petitioners’ failure to satisfy their burden of proof,
respondent is presumed to have worked during the
period in question and is, accordingly, entitled to his
salary. Therefore, the withholding of respondent’s
salary by petitioners is contrary to Article 116 of the
Labor Code and, thus, unlawful.
2.Yes, respondent was constructively dismissed.
The Court, however, agrees with the LA and the CA
that respondent was forced to resign and was, thus,
constructively dismissed. In Duldulao v. Court of
Appeals, it was written:
There is constructive dismissal if an act of clear
discrimination, insensibility, or disdain by an
employer becomes so unbearable on the part of the
employee that it would foreclose any choice by him
except to forego his continued employment. It exists
where there is cessation of work because continued
employment is rendered impossible, unreasonable or
unlikely, as an offer involving a demotion in rank and
a diminution in pay.
What made it impossible, unreasonable or unlikely
for respondent to continue working for SHS was the
unlawful withholding of his salary. For said reason,
he was forced to resign. What is significant is that the
respondent prepared and served his resignation
letter right after he was informed that his salary was
being withheld.
In his resignation letter, respondent cited petitioners’
"illegal and unfair labor practice” as his cause for
resignation. As correctly noted by the CA, respondent
lost no time in submitting his resignation letter and
eventually filing a complaint for illegal dismissal just
a few days after his salary was withheld. These
circumstances are inconsistent with voluntary
resignation and bolster the finding of constructive
dismissal.
In this case, the withholding of respondent’s
salary does not fall under any of the circumstances
provided under Article 113. Neither was it
established with certainty that respondent did not
work from November 16 to November 30, 2005.
Hence, the Court agrees with the LA and the CA that
the unlawful withholding of respondent’s salary
amounts to constructive dismissal.
Although respondent was a probationary
employee, he was still entitled to security of tenure.
Section 3 (2) Article 13 of the Constitution
guarantees the right of all workers to security of
tenure. In using the expression "all workers," the
Constitution puts no distinction between a
probationary and a permanent or regular employee.
This means that probationary employees cannot be
dismissed except for cause or for failure to qualify as
regular employees.
Probationary employees who are unjustly
dismissed during the probationary period are
entitled to reinstatement and payment of full
backwages and other benefits and privileges from the
time they were dismissed up to their actual
reinstatement. Respondent is, thus, entitled to
reinstatement without loss of seniority rights and
other privileges as well as to full backwages,
inclusive of allowances, and other benefits or their
monetary equivalent computed from the time his
compensation was withheld up to the time of actual
reinstatement. Respondent, however, is not entitled
to the additional amount for 13th month pay, as it is
clearly provided in respondent’s Probationary
Contract of Employment that such is deemed
included in his salary.
Respondent’s reinstatement, however, is no longer
feasible as antagonism has caused a severe strain in
their working relationship. Under the doctrine of
strained relations, the payment of separation pay is
considered an acceptable alternative to
reinstatement when the latter option is no longer
desirable or viable. Payment liberates the employee
from what could be a highly oppressive work
environment, and at the same time releases the
employer from the obligation of keeping in its
employ a worker it no longer trusts. Therefore, a
more equitable disposition would be an award of
separation pay equivalent to at least one month pay,
in addition to his full backwages, allowances and
other benefits.
3. No, the corporate officers are not solidarily liable
with the corporation.
With respect to the personal liability of
Hartmannshenn and Schumacher, this Court has held
that corporate directors and officers are only
solidarily liable with the corporation for termination
of employment of corporate employees if effected
with malice or in bad faith. Bad faith does not
connote bad judgment or negligence; it imports
dishonest purpose or some moral obliquity and
conscious doing of wrong; it means breach of
unknown duty through some motive or interest or ill
will; it partakes of the nature of fraud.33 To sustain
such a finding, there should be evidence on record
that an officer or director acted maliciously or in bad
faith in terminating the employee.
Petitioners withheld respondent’s salary in
the sincere belief that respondent did not work for
the period in question and was, therefore, not
entitled to it. There was no dishonest purpose or ill
will involved as they believed there was a justifiable
reason to withhold his salary. Thus, although they
unlawfully withheld respondent’s salary, it cannot be
concluded that such was made in bad faith.
Accordingly, corporate officers, Hartmannshenn and
Schumacher, cannot be held personally liable for the
corporate obligations of SHS.
Page 47
III.B.6
•Art. 100, Labor Code
Wesleyan University v. Faculty
G.R. No. 181806, March 12, 2014
Doctrine:
Facts:
Petitioner Wesleyan University-Philippines is a non-
stock, non-profit educational institution while
Respondent is a duly registered labor organization
acting as the sole and exclusive bargaining agent of
all rank-and-file faculty and staff employees of
petitioner.
In December 2003, the parties signed a 5-
year CBA9 effective June 1, 2003 until May 31, 2008.
But on August 16, 2005, petitioner, through its
President, Atty. Maglaya, issued a memorandum
providing guidelines on the implementation of
vacation and sick leave credits and vacation leave
commutation. On August 25, 2005, respondents
President, Cynthia L. De Lara (De Lara) wrote a letter
to Atty. Maglaya informing him that respondent is
not amenable to the unilateral changes made by
petitioner. De Lara questioned the guidelines for
being violative of existing practices and the CBA.
On February 8, 2006, a Labor Management
Committee (LMC) Meeting was held during which
petitioner advised respondent to file a grievance
complaint on the implementation of the vacation and
sick leave policy. In the same meeting, petitioner
announced its plan of implementing a one-retirement
policy, which was unacceptable to respondent.
Unable to settle their differences at the
grievance level, the parties referred the matter to a
Voluntary Arbitrator. During the hearing, respondent
submitted affidavits to prove that there is an
established practice of giving two retirement
benefits, one from the Private Education Retirement
Annuity Association (PERAA) Plan and another from
the CBA Retirement Plan.
On November 2, 2006, the Voluntary Arbitrator
rendered a Decision declaring the one-retirement
policy and the Memorandum dated August 16, 2005
contrary to law. Aggrieved, petitioner appealed the
case to the CA via a Petition for Review under Rule 43
of the Rules of Court.
On September 25, 2007, the CA rendered a Decision
finding the rulings of the Voluntary Arbitrator
supported by substantial evidence. It also affirmed
the nullification of the one-retirement policy and the
Memorandum dated August 16, 2005 on the ground
that these unilaterally amended the CBA without the
consent of respondent.
Issues:
Whether the Court of Appeals committed grave and
palpable error -
a) in sustaining the Voluntary Arbitrators ruling that
the Affidavits submitted by Respondent WU-PFSA are
substantial evidence that would substantiate that
Petitioner WU-P has long been in the practice of
granting its employees two (2) sets of Retirement
Benefits.
b) in sustaining the Voluntary Arbitrator ruling that a
university practice of granting its employees two (2)
sets of Retirement Benefits had already been
established as defined by the law and jurisprudence,
and
c) in revoking the 16 August 2005 Memorandum of
Petitioner WU-P for being contrary to extant policy.
Ruling: NO.
As to the first 2 issues: The practice of giving two
retirement benefits to petitioner Wesleyan
University’s employees is supported by substantial
evidence. In this case, respondent was able to present
substantial evidence in the form of affidavits to
support its claim that there are two retirement plans.
Based on the affidavits, petitioner has been giving
two retirement benefits as early as 1997. Petitioner,
on the other hand, failed to present any evidence to
refute the veracity of these affidavits. Its contention
that these affidavits are self-serving holds no water.
The retired employees of petitioner have nothing to
lose or gain in this case as they have already received
their retirement benefits. Thus, they have no reason
to perjure themselves. Obviously, the only reason
they executed those affidavits is to bring out the
truth. As we see it then, their affidavits, corroborated
by the affidavits of incumbent employees, are more
than sufficient to show that the granting of two
retirement benefits to retiring employees had
already ripened into a consistent and deliberate
practice.
Moreover, petitioner’s assertion that there is only
one retirement plan as the CBA Retirement Plan and
the PERAA Plan are one and the same is not
supported by any evidence. There is nothing in
Article XVI of the CBA to indicate or even suggest that
the "Plan" referred to in the CBA is the PERAA Plan.
Besides, any doubt in the interpretation of the
provisions of the CBA should be resolved in favor of
respondent. In fact, petitioner’s assertion is negated
by the announcement it made during the LMC
Meeting on February 8, 2006 regarding its plan of
implementing a "one-retirement plan." For if it were
true that petitioner was already implementing a one-
retirement policy, there would have been no need for
such announcement. Equally damaging is the letter-
memorandum dated May 11, 2006, entitled
"Suggestions on the defenses we can introduce to
justify the abolition of double retirement policy,"
prepared by the petitioner’s legal counsel.
These circumstances, taken together, bolster the
finding that the two-retirement policy is a practice.
Thus, petitioner cannot, without the consent of
respondent, eliminate the two-retirement policy and
implement a one-retirement policy as this would
violate the rule on non-diminution of benefits.
Page 48
As a last ditch effort to abolish the two-retirement
policy, petitioner contends that such practice is
illegal or unauthorized and that the benefits were
erroneously given by the previous administration. No
evidence, however, was presented by petitioner to
substantiate its allegations. Considering the
foregoing disquisition, we agree with the findings of
the Voluntary Arbitrator, as affirmed by the CA, that
there is substantial evidence to prove that there is an
existing practice of giving two retirement benefits,
one under the PERAA Plan and another under the
CBA Retirement Plan.
On the last issue: Neither does the SC find any reason
to disturb the findings of the CA that the
Memorandum dated August 16, 2005 is contrary to
the existing CBA. Sections 1 and 2 of Article XII of the
CBA provide that all covered employees are entitled
to 15 days sick leave and 15 days’vacation leave with
pay every year. The Memorandum dated August 16,
2005, however, states that vacation and sick leave
credits are not automatic as leave credits would be
earned on a month-to-month basis. This, in effect,
limits the available leave credits of an employee at
the start of the school year. Considering that the
Memorandum dated August 16, 2005 imposes a
limitation not agreed upon by the parties nor stated
in the CBA, we agree with the CA that it must be
struck down.
In closing, it may not be amiss to mention that when
the provision of the CBA is clear, leaving no doubt on
the intention of the parties, the literal meaning of the
stipulation shall govern. However, if there is doubt in
its interpretation, it should be resolved in favor of
labor, as this is mandated by no less than the
Constitution.
The Non-Diminution Rule found in Article 100 of the
Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received by their
employees. This rule, however, applies only if the
benefit is based on an express policy, a written
contract, or has ripened into a practice.
Vergara v. Coca-Cola,
G.R. No. 176985, April 1, 2013
Doctrine:
[T]he principle against diminution of benefits is
applicable only if the grant or benefit is founded on
an express policy or has ripened into a practice over
a long period of time which is consistent and
deliberate; it presupposes that a company practice,
policy and tradition favorable to the employees has
been clearly established; and that the payments
made by the company pursuant to it have ripened
into benefits enjoyed by them.
Facts:
Petitioner Vergara, was an employee of respondent
Coca-Cola Bottlers Philippines, Inc. from May 1968
until he retired on January 2002 as a District Sales
Supervisor (DSS) for Las Pinas City. As stipulated in
respondents existing Retirement Plan Rules and
Regulations at the time, the Annual Performance
Incentive Pay of DSSs (which includes Sales
Management Incentives) shall be considered in the
computation of retirement benefits.
Claiming his entitlement to an additional
PhP474,600.00 as Sales Management Incentives
(SMI), petitioner filed a complaint before the NLRC
for the payment of his Full Retirement Benefits. The
issue base mainly on the SMI entitlement.
The LA rendered a Decision in favor of petitioner,
directing respondent to integrate therein his SMI
privilege. Upon appeal of respondent, however, the
NLRC and CA modified the award and deleted the
payment of SMI.
Before the SC, the petitioner argued that SMI should
be included in the computation of petitioner’s
retirement benefits on the ground of consistent
company practice. Petitioner insistently avers that
many DSSs who retired without achieving the sales
and collection targets were given the average SMI in
their retirement package.
Issue:
Whether or not Sales Management Incentives has
ripened into company practice.
Ruling: No.
[T]he principle against diminution of benefits is
applicable only if the grant or benefit is founded on
an express policy or has ripened into a practice over
a long period of time which is consistent and
deliberate; it presupposes that a company practice,
policy and tradition favorable to the employees has
been clearly established; and that the payments
made by the company pursuant to it have ripened
into benefits enjoyed by them.
There is diminution of benefits when the
following requisites are present: (1) the grant or
benefit is founded on a policy or has ripened into a
practice over a long period of time; (2) the practice is
consistent and deliberate; (3) the practice is not due
to error in the construction or application of a
doubtful or difficult question of law; and (4) the
diminution or discontinuance is done unilaterally by
the employer.
The common denominator in previously decided
cases appears to be the regularity and deliberateness of the
grant of benefits over a significant period of time. It
requires an indubitable showing that the employer agreed
to continue giving the benefit knowing fully well that the
employees are not covered by any provision of the law or
agreement requiring payment thereof. In sum, the benefit
must be characterized by regularity, voluntary and
deliberate intent of the employer to grant the benefit over a
considerable period of time.
Upon review of the entire case records, the
SC finds no substantial evidence to prove that the
grant of SMI to all retired DSSs regardless of whether
or not they qualify to the same had ripened into
company practice. Despite more than sufficient
opportunity given him while his case was pending
before the NLRC, the CA, and even to this Court,
petitioner utterly failed to adduce proof to establish
his allegation that SMI has been consistently,
deliberately and voluntarily granted to all retired
DSSs without any qualification or conditions
whatsoever.
Page 49
 Central Azucarera v. Labor Union
G.R. No. 188949, July 26, 2010
DOCTRINE:
(3) Non- diminution Rule Article 100 of the Labor
Code, otherwise known as the Non-Diminution Rule,
mandates that benefits given to employees cannot be
taken back or reduced unilaterally by the employer
because the benefit has become part of the
employment contract, written or unwritten. The rule
against diminution of benefits applies if it is shown
that the grant of the benefit is based on an express
policy or has ripened into a practice over a long
period of time and that the practice is consistent and
deliberate. Nevertheless, the rule will not apply if the
practice is due to error in the construction or
application of a doubtful or difficult question of law.
But even in cases of error, it should be shown that the
correction is done soon after discovery of the error.
4) Basic Salary for purposes of computing the 13th
month pay.
The term basic salary of an employee for the purpose
of computing the 13th-month pay was interpreted to
include all remuneration or earnings paid by the
employer for services rendered, but does not include
allowances and monetary benefits which are not
integrated as part of the regular or basic salary, such
as the cash equivalent of unused vacation and sick
leave credits, overtime, premium, night differential
and holiday pay, and cost-of-living allowances.
However, these salary-related benefits should be
included as part of the basic salary in the
computation of the 13th-month pay if, by individual
or collective agreement, company practice or policy,
the same are treated as part of the basic salary of the
employees.
FACTS:
In compliance with Presidential Decree (P.D.) No.
851, petitioner granted its employees the mandatory
thirteenth (13th) - month pay since 1975. The
formula used by petitioner in computing the 13th-
month pay was:
13 month pay = Total Basic Annual Salary
12
Included in petitioner’s computation of the Total
Basic Annual Salary were the following:
• basic monthly salary;
• first eight (8) hours overtime pay on Sunday
and legal/special holiday;
• night premium pay;
• and vacation and sick leaves for each year.
Throughout the years, petitioner used this
computation until 2006.
In December 2006, petitioner gave the employees
their 13th-month pay based on the employees total
earnings (based only on the basic salary) during the
year divided by 12.
Respondent objected to this computation. It averred
that petitioner did not adhere to the usual
computation of the 13th-month pay. It likewise
asserted that petitioner did not observe the company
practice of giving its employees the guaranteed
amount equivalent to their one month pay, in
instances where the computed 13th-month pay was
less than their basic monthly pay.
Labor Arbiter’s decision: Dismissed the case
The petitioner had the right to rectify the error in the
computation of the 13th-month pay of its employees.
NLRC decision: Reversed the Labor Arbiter’s
decision.
The Central Azucarera de Tarlac is ordered to adhere
to its established practice of granting 13th month pay
on the basis of gross annual basic which includes
basic pay, premium pay for work in rest days and
special holidays, night shift differential and paid
vacation and sick leaves for each year.
The Central Azucarera de Tarlac is ordered to
observe the guaranteed one[-]month pay by way of
13th month pay.
NLRC subsequently dismissed the petitioner’s Motion
for Reconsideration.
CA affirmed the decision of the NLRC.
ISSUE 1:
Whether or Not the petitioner is correct on its
argument that its new computation of 13th month
pay based only on the basic monthly salary should be
followed and not its old computation which included
the basic monthly salary, premium pay for work on
rest days and special holidays, night shift differential
pay and holiday pay
HELD: NO
The term basic salary of an employee for the purpose
of computing the 13th-month pay was interpreted to
include all remuneration or earnings paid by the
employer for services rendered, but does not include
allowances and monetary benefits which are not
integrated as part of the regular or basic salary, such
as the cash equivalent of unused vacation and sick
leave credits, overtime, premium, night differential
and holiday pay, and cost-of-living allowances.
However, these salary-related benefits should be
included as part of the basic salary in the
computation of the 13th-month pay if, by individual
or collective agreement, company practice or policy,
the same are treated as part of the basic salary of the
employees.
Page 50
The practice of petitioner in giving 13th-month pay
based on the employees gross annual earnings which
included the basic monthly salary, premium pay for
work on rest days and special holidays, night shift
differential pay and holiday pay continued for almost
thirty (30) years and has ripened into a company
policy or practice which cannot be unilaterally
withdrawn.
ISSUE 2:
Whether or Not the petitioner is correct on its
argument that there was an error in the computation
of the 13th-month pay of its employees as a result of
its mistake in implementing P.D. No. 851.
HELD: NO
The argument of petitioner that the grant of the
benefit was not voluntary and was due to error in the
interpretation of what is included in the basic salary
deserves scant consideration. No doubtful or difficult
question of law is involved in this case. The
guidelines set by the law are not difficult to decipher.
The voluntariness of the grant of the benefit was
manifested by the number of years the employer had
paid the benefit to its employees. Petitioner only
changed the formula in the computation of the 13th-
month pay after almost 30 years and only after the
dispute between the management and employees
erupted. This act of petitioner in changing the
formula at this time cannot be sanctioned, as it
indicates a badge of bad faith.
-----------------------------------------------------------
Extra Information regarding 13th month pay
All rank-and-file employees, regardless of their
designation or employment status and irrespective of
the method by which their wages are paid, are
entitled to this benefit, provided that they have
worked for at least one month during the calendar
year.
If the employee worked for only a portion of the year,
the 13th-month pay is computed pro rata.
The Rules and Regulations Implementing P.D. No.
851, promulgated on December 22, 1975, defines
13th-month pay and basic salary as follows:
Sec. 2. Definition of certain terms. - As used in this
issuance:
"Thirteenth-month pay" shall mean one twelfth
(1/12) of the basic salary of an employee within a
calendar year;
"Basic salary" shall include all remunerations or
earnings paid by an employer to an employee for
services rendered but may not include cost-of-living
allowances granted pursuant to Presidential Decree
No. 525 or Letter of Instructions No. 174, profit-
sharing payments, and all allowances and monetary
benefits which are not considered or integrated as
part of the regular or basic salary of the employee at
the time of the promulgation of the Decree on
December 16, 1975.
On January 16, 1976, the Supplementary Rules and
Regulations Implementing P.D. No. 851 was issued.
The Supplementary Rules clarifies that overtime pay,
earnings, and other remuneration that are not part of
the basic salary shall not be included in the
computation of the 13th-month pay.
CAN AN EMPLOYER APPLY FOR EXEMPTION
FROM THE REQUIREMENT OF P.D. No. 851?
YES
Under Section 7 of the Rules and Regulations
Implementing P.D. No. 851, distressed employers
shall qualify for exemption from the requirement of
the Decree only upon prior authorization by the
Secretary of Labor.
Non-Diminution Rule:
Article 100 of the Labor Code, otherwise known as
the Non-Diminution Rule, mandates that benefits
given to employees cannot be taken back or reduced
unilaterally by the employer because the benefit has
become part of the employment contract, written or
unwritten. The rule against diminution of benefits
applies if it is shown that the grant of the benefit is
based on an express policy or has ripened into a
practice over a long period of time and that the
practice is consistent and deliberate. Nevertheless,
the rule will not apply if the practice is due to error in
the construction or application of a doubtful or
difficult question of law. But even in cases of error, it
should be shown that the correction is done soon
after discovery of the error.

The 13th-month pay mandated by Presidential
Decree (P.D.) No. 851 represents an additional
income based on wage but not part of the wage.
It is equivalent to one-twelfth (1/12) of the total
basic salary earned by an employee within a calendar
year.
On November 16, 1987, the Revised Guidelines on
the Implementation of the 13th-Month Pay Law was
issued. Significantly, under this Revised Guidelines, it
was specifically stated that the minimum 13th-month
pay required by law shall not be less than one-twelfth
(1/12) of the total basic salary earned by an
employee within a calendar year.
Page 51
 Netlink v. Delmo, G.R. No. 160827, June 18, 2014
DOCTRINE:
Verily, the phrase "supplements, or other employee
benefits" in Article 100 is construed to mean the
compensation and privileges received by an
employee aside from regular salaries or wages.
With regard to the length of time the company
practice should have been observed to constitute a
voluntary employer practice that cannot be
unilaterally reduced, diminished, discontinued or
eliminated by the employer, we find that
jurisprudence has not laid down any rule requiring a
specific minimum number of years.
FACTS:
Netlink Computer, Inc. Products and Services
(Netlink) hired Eric S. Delmo (Delmo) as account
manager tasked to canvass and source clients and
convince them to purchase the products and services
of Netlink. Delmo worked in the field most of the
time. He was able to generate sales worth
P35,000,000.00, more or less, from which he earned
commissions amounting to P993,558.89 and
US$7,588.30. He then requested payment of his
commissions, but Netlink refused and only gave him
partial cash advances chargeable to his commissions.
Later on, Netlink began to nitpick and fault find, like
stressing his supposed absences and tardiness. In
order to force him to resign, Netlink issued several
memoranda detailing his supposed infractions of the
company’s attendance policy. Despite the
memoranda, Delmo continued to generate huge sales
for Netlink.2
On November 28, 1996, Delmo was shocked when he
was refused entry into the company premises by the
security guard pursuant to a memorandum to that
effect. His personal belongings were still inside the
company premises and he sought their return to him.
This incident prompted Delmo to file a complaint for
illegal dismissal.3
The Labor Arbiter ruled against Netlink and in favor
of Delmo, to wit:
Judgment is hereby rendered declaring complainant
as illegally and unjustly dismissed and respondents
are ordered to reinstate complainant to his former
position without loss of seniority rights with full
backwages and other benefits and respondents are
hereby ordered to pay complainant as follows:
5,000.00 - 13th month pay for 1996 to 1998
993,558.89 - unpaid commissions
On appeal, the National Labor Relations Commission
(NLRC) modified the decision of the Labor Arbiter by
setting aside the backwages and reinstatement
decreed by the Labor Arbiter due to the existence of
valid and just causes for the termination of Delmo’s
employment.
CA promulgated its assailed decision upholding the
NLRC’s ruling subject to modifications,7viz:
In the present case, since the payment of the
commission is made to depend on the future and
uncertain event – which is the payment of the
accounts by the persons who have transacted
business with the petitioner, without payment by the
former to the latter, the obligation to pay the
commission has not yet arisen.
With respect to the other arguments of the petitioner,
this Court is not persuaded. Petitioner failed to refute
by evidence that private respondent is not entitled to
the commissions payable in US dollars. Neither is
there any reason for us to agree with the petitioner
that the computation of these commissions must be
based on the value of [the] Peso in relation to a Dollar
at the time of sale.
Issue
Whether or not the payment of the commissions
should be in dollars?
RULING:
Netlink submits that the CA committed a
palpable and reversible error of law in not holding
that the applicable exchange rate for computing the
US dollar commissions of Delmo should be the rates
prevailing at the time when the sales were actually
generated, not the rates prevailing at the time of the
payment; and in awarding attorney’s fees.
The appeal lacks merit.
As a general rule, all obligations shall be paid
in Philippine currency. However, the contracting
parties may stipulate that foreign currencies may be
used for settling obligations. This is pursuant to
Republic Act No. 8183,10which provides as follows:
Section 1. All monetary obligations shall be settled in
the Philippine currency which is legal tender in the
Philippines. However, the parties may agree that the
obligation ortransaction shall be settled in any other
currency at the time of payment.
We remarked in C.F. Sharp & Co. v. Northwest
Airlines, Inc.11 that the repeal of Republic Act No.
529 had the effect of removing the prohibition on the
stipulation of currency other than Philippine
currency, such that obligations or transactions could
already be paid in the currency agreed upon by the
parties. However, both Republic Act No. 529 and
Republic Act No. 8183 did not stipulate the
applicable rate of exchange for the conversion of
foreign currency-incurred obligations to their peso
equivalent. It follows, therefore, that the
jurisprudence established under Republic Act No.
529 with regard to the rate of conversion remains
applicable. In C.F. Sharp, the Court cited Asia World
Recruitment,Inc. v. NLRC,12 to the effect that the real
value of the foreign exchange-incurred obligation up
to the date of itspayment should be preserved.
There was no written contract between Netlink and
Delmo stipulating that the latter’s commissions
would be paid in US dollars.1âwphi1 The absence of
the contractual stipulation notwithstanding,
Page 52
Netlink was still liable to pay Delmo in US dollars dollars or their equivalent in Philippine currency
because the practice of paying its sales agents in US determined at the time of the sales. To rule otherwise
dollars for their US dollar-denominatedsales had would be to cause an unjust diminution of the
become a company policy. This was impliedly commissions due and owing to Delmo.
admitted by Netlink when it did not refute the
allegation that the commissions earned by Delmo and
its other sales agents had been paid in US dollars.
Instead of denying the allegation, Netlink only sought
a declaration that the US dollar commissions be paid
using the exchange rate at the time of sale. The
principle of non-diminution of benefits, which has
been incorporated in Article 10013 of the Labor
Code, forbade Netlink from unilaterally reducing,
diminishing, discontinuing or eliminating the
practice. Verily, the phrase "supplements, or other
employee benefits" in Article 100 is construed to
mean the compensation and privileges received by
an employee aside from regular salaries or wages.
With regard to the length of time the company
practice should have been observed to constitute a
voluntary employer practice that cannot be
unilaterally reduced, diminished, discontinued or
eliminated by the employer, we find that
jurisprudence has not laid down any rule requiring a
specific minimum number of years. In Davao Fruits
Corporation v. Associated Labor Unions,14 the
company practice lasted for six years. In Davao
Integrated Port Stevedoring Services v. Abarquez,15
the employer, for three years and nine months,
approved the commutation to cash of the unenjoyed
portion of the sick leave with pay benefits of its
intermittent workers. In Tiangco v. Leogardo, Jr.,16
the employer carried on the practice of giving a fixed
monthly emergency allowance from November 1976
to February 1980, or three years and four months. In
Sevilla Trading Company v. Semana, 17 the employer
kept the practice of including non-basic benefits such
as paid leaves for unused sick leave and vacation in
the computation of their 13th-month pay for at least
two years.

With the payment of US dollar commissions having

ripened into a company practice, there is no way that
the commissions due to Delmo were to be paid in US
Page 53
III.B.7
•Art. 97 (f), Labor Code
SLL International v. NLRC,
G.R. No. 172161, March 2, 2011
DOCTRINE:
As a general rule, on payment of wages, a party who
alleges payment as a defense has the burden of
proving it. Specifically with respect to labor cases, the
burden of proving payment of monetary claims rests
on the employer, the rationale being that the
pertinent personnel files, payrolls, records,
remittances and other similar documents — which
will show that overtime, differentials, service
incentive leave and other claims of workers have
been paid — are not in the possession of the worker
but in the custody and absolute control of the
employer.
FACTS:
Private Respondents were hired by Lagon as
apprentice or trainee cable/lineman and were paid
the full minimum wage and other benefits; they did
not report to work regularly, since they are trainees,
but came in substitutes for other regular workers.
After their training, they were engaged as Project
Employees in different parts of the Country (Bohol,
Anitpolo, Bulacan and Caloocan) upon which they
have to re-apply after every completion. Faced with
economic problems, Lagon was constrained to cut
down the overtime work of its workers. Thus, when
private respondents requested to work overtime,
Lagon refused. Private respondents went home to
Cebu and filed a complaint for illegal dismissal, non-
payment of wages, holiday pay, 13th month pay and
service incentive leave pay as well as damages and
attorney’s fees.
Petitioners admitted private respondents’
employment but claimed that the latter were only
project employees for their services were merely
engaged for a specific project or undertaking and the
same were covered by contracts duly signed by
private respondents. And since the workplaces of
private respondents were all in Manila, the complaint
should be filed there. Thus, petitioners prayed for the
dismissal of the complaint for lack of jurisdiction and
utter lack of merit.
The LA claimed that his office had
jurisdiction under RULE 4 SEC 1 of the NLRC RULES
because the "workplace," as defined in the said rule,
included the place where the employee was
supposed to report back after a temporary detail,
assignment or travel, which in this case was Cebu. As
to the status of their employment, the LA opined that
private respondents were regular employees because
they were repeatedly hired by petitioners and they
performed activities which were usual, necessary
and desirable in the business or trade of the
employer.
LA found that private respondents were
underpaid. It ruled that the free board and lodging,
electricity, water, and food enjoyed by them could
not be included in the computation of their wages
because these were given without their written
consent. However, petitioners were not liable for
illegal dismissal. The LA viewed private respondents’
act of going home as an act of indifference when
petitioners decided to prohibit overtime work.
The NLRC affirmed the LA’s decision. It
noted that no single report of project completion was
filed with the PUBLIC EMPLOYMENT office as
required by DOLE. The CA affirmed both the LA’s and
NLRC’s decisions and considered that petitioners
failure to comply with the simple but compulsory
requirement to submit a report of termination to the
nearest Public Employment Office every time private
respondents’ employment was terminated was proof
that the latter were not project employees but
regular employees.
ISSUE:
WON private respondents are entitled to be paid the
minimum wage.
HELD:
As a general rule, on payment of wages, a party who
alleges payment as a defense has the burden of
proving it. Specifically with respect to labor cases, the
burden of proving payment of monetary claims rests
on the employer, the rationale being that the
pertinent personnel files, payrolls, records,
remittances and other similar documents — which
will show that overtime, differentials, service
incentive leave and other claims of workers have
been paid — are not in the possession of the worker
but in the custody and absolute control of the
employer.
In this case, petitioners, aside from bare allegations
that private respondents received wages higher than
the prescribed minimum, failed to present any
evidence, such as payroll or payslips, to support their
defense of payment. Thus, petitioners utterly failed to
discharge the onus probandi. Private respondents, on
the other hand, are entitled to be paid the minimum
wage, whether they are regular or non-regular
employees.
Section 3, Rule VII of the Rules to Implement the
Labor Code specifically enumerates those who are
not covered by the payment of minimum wage.
Project employees are not among them.
On whether the value of the facilities should be
included in the computation of the "wages" received
by private respondents, Section 1 of DOLE
Memorandum Circular No. 2 provides that an
employer may provide subsidized meals and snacks
to his employees provided that the subsidy shall not
be less that 30% of the fair and reasonable value of
such facilities. In such cases, the employer may
deduct from the wages of the employees not more
than 70% of the value of the meals and snacks
enjoyed by the latter, provided that such deduction is
with the written authorization of the employees
concerned.
Moreover, before the value of facilities can be
deducted from the employees’ wages, the following
requisites must all be attendant: first, proof must be
shown that such facilities are customarily furnished
by the trade; second , the provision of deductible
Page 54
facilities must be voluntarily accepted in writing by
the employee; and finally, facilities must be charged
at reasonable value. Mere availment is not sufficient
to allow deductions from employees’ wages.
These requirements, however, have not been met in
this case. SLL failed to present any company policy or
guideline showing that provisions for meals and
lodging were part of the employee’s salaries. It also
failed to provide proof of the employees’ written
authorization, much less show how they arrived at
their valuations. At any rate, it is not even clear
whether private respondents actually enjoyed said
facilities.
The Court, at this point, makes a distinction between
"facilities" and "supplements." It is of the view that
the food and lodging, or the electricity and water
allegedly consumed by private respondents in this
case were not facilities but supplements.
"Supplements," therefore, constitute extra
remuneration or special privileges or benefits given
to or received by the laborers over and above their
ordinary earnings or wages. "Facilities," on the other
hand, are items of expense necessary for the
laborer's and his family's existence and subsistence
so that by express provision of law (Sec. 2[g]), they
form part of the wage and when furnished by the
employer are deductible therefrom, since if they are
not so furnished, the laborer would spend and pay
for them just the same.
In short, the benefit or privilege given to the
employee which constitutes an extra remuneration
above and over his basic or ordinary earning or wage
is supplement; and when said benefit or privilege is
part of the laborers' basic wages, it is a facility. The
distinction lies not so much in the kind of benefit or
item (food, lodging, bonus or sick leave) given, but in
the purpose for which it is given. In the case at bench,
the items provided were given freely by SLL for the
purpose of maintaining the efficiency and health of
its workers while they were working at their
respective projects.
Mabeza v. NLRC,
G.R. No. 118506, April 18, 1997
DOCTRINE:
A benefit or privilege granted to an employee for the
convenience of the employer is not a facility. Without
satisfying these requirements, the employer simply
cannot deduct the value from the employee's wages.
First, proof must be shown that such facilities are
customarily furnished by the trade. Second, the
provision of deductible facilities must be voluntarily
accepted in writing by the employee. Finally, facilities
must be charged at fair and reasonable value.
Facts:
Norma Mabeza was an employee hired by Hotel
Supreme in Baguio City. In 1991, an inspection was
made by the Department of Labor and Employment
(DOLE) at Hotel Supreme and the DOLE inspectors
discovered several violations by the hotel
management. Immediately, the owner of the hotel,
Peter Ng, directed his employees to execute an
affidavit which would purport that they have no
complaints whatsoever against Hotel Supreme.
Mabeza signed the affidavit but she refused to certify
it with the prosecutor’s office. The affidavit was
submitted to the Cordillera Regional Office of DOLE -
petitioner avers that she was ordered by the hotel
management to turn over the keys to her living
quarters and to remove her belongings from the
hotel premises. According to her, respondent
strongly chided her for refusing to proceed to the
City Prosecutor's Office to attest to the affidavit. She
thereafter reluctantly filed a leave of absence from
her job which was denied by management. When she
attempted to return to work on May 10, 1991, the
hotel's cashier, Margarita Choy, informed her that she
should not report to work and, instead, continue with
her unofficial leave of absence.Later, when she
reported to work, she was not allowed to take her
shift. She then asked for a leave but was not granted
yet she’s not being allowed to work. In May 1991, she
then sued Peter Ng for illegal dismissal. Peter Ng, in
his defense, said that Mabeza abandoned her work. In
July 1991, Peter Ng also filed a criminal complaint
against Mabeza as he alleged that she had stolen a
blanket and some other stuff from the hotel. Peter Ng
went on to amend his reply in the labor case to make
it appear that the reason why he dismissed Mabeza
was because of his loss of confidence by reason of the
theft allegedly committed by Mabeza. The labor
arbiter who handled the case, a certain Felipe Pati,
ruled in favor of Peter Ng. Peter ng maintained that
there was no basis for the money claims for
underpayment and other benefits as these were paid
in the form of facilities to petitioner and the hotel's
other employees
ISSUE:
Whether or not there is abandonment in the case at
bar. Whether or not loss of confidence as ground for
dismissal applies in the case at bar. Whether or not
the meals, lodging, electric consumption and water
are considered as facilities deductible from wages
HELD:
No. The side of Peter Ng is bereft of merit so
is the decision of the Labor Arbiter which was
unfortunately affirmed by the NLRC. The benefits
given by the employer were considered supplements
and not facilities.
Labor Arbiter Pati accepted hook, line and
sinker the private respondent's bare claim that the
reason the monetary benefits received by petitioner
between 1981 to 1987 were less than minimum
wage was because petitioner did not factor in the
meals, lodging, electric consumption and water she
received during the period in her computations.
Granting that meals and lodging were provided and
indeed constituted facilities, such facilities could not
be deducted without the employer complying first
with certain legal requirements. Without satisfying
these requirements, the employer simply cannot
deduct the value from the employee's wages. First,
proof must be shown that such facilities are
customarily furnished by the trade. Second, the
provision of deductible facilities must be voluntarily
Page 55
accepted in writing by the employee. Finally, facilities
must be charged at fair and reasonable value.
These requirements were not met in the instant case.
Private respondent "failed to present any company
policy or guideline to show that the meal and lodging
. . . (are) part of the salary;" he failed to provide proof
of the employee's written authorization; and, he
failed to show how he arrived at the valuations.
More significantly, the food and lodging, or the
electricity and water consumed by the petitioner
were not facilities but supplements. A benefit or
privilege granted to an employee for the convenience
of the employer is not a facility. The criterion in
making a distinction between the two not so much
lies in the kind (food, lodging) but the purpose.
Considering, therefore, that hotel workers are
required to work different shifts and are expected to
be available at various odd hours, their ready
availability is a necessary matter in the operations of
a small hotel, such as the private respondent's hotel.
It is therefore evident that petitioner is entitled to the
payment of the deficiency in her wages equivalent to
the full wage applicable from May 13, 1988 up to the
date of her illegal dismissal.
Loss of Confidence
It is true that loss of confidence is a valid ground to
dismiss an employee. But this is ideally only applied
to workers whose positions require a certain level or
degree of trust particularly those who are members
of the managerial staff. Evidently, an ordinary
chambermaid who has to sign out for linen and other
hotel property from the property custodian each day
and who has to account for each and every towel or
bedsheet utilized by the hotel’s guests at the end of
her shift would not fall under any of these two
classes of employees for which loss of confidence, if
ably supported by evidence, would normally apply.
Further, the suspicious filing by Peter Ng of a
criminal case against Mabeza long after she initiated
her labor complaint against him hardly warrants
serious consideration of loss of confidence as a
ground of Mabeza’s dismissal.
See Our Haus v. Parian,
G.R. No. 204651, August 6, 2014

Abandonment

Abandonment is not present. Mabeza returned

several times to inquire about the status of her work
or her employment status. She even asked for a leave
but was not granted. Her asking for leave is a clear
indication that she has no intention to abandon her
work with the hotel. Even the employer knows that
his purported reason of dismissing her due to
abandonment will not fly so he amended his reply to
indicate that it is actually “loss of confidence” that led
to Mabeza’s dismissal.

Page 56
III.B.8
•Art. 124, Labor Code
Metrobank v. NLRC,
G.R. No. 102636, September 10, 1993
DOCTRINE:
Wage Distortion means a situation where an
increase in prescribed wage rates results in the
elimination or severe contradiction of intentional
quantitative differences in wage or salary rates
between and among employee groups in an
establishment as to effectively obliterate the
distinctions embodied in such wage structure based
on skills, length of service, or other logical
bases of differentiation.
Facts:
On 25 May 1989, the bank entered into a collective
bargaining agreement with the MBTCEU, granting a
monthly P900 wage increase effective 01 January
1989, P600 wage increase 01 January 1990, and
P200
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wage increase effective 01 January 1991. The
MBTCEU had also bargained for the inclusion of
probationary employees in the list of employees who
would benefit from the first P900 increase but the
bank had adamantly refused to accede thereto.
Consequently, only regular employees as of 01
January 1989 were given the increase to the
exclusion of probationary employees.
Barely a month later, or on 01 January 1989,
Republic Act 6727, "an act to rationalize wage policy
determination be establishing the mechanism and
proper standards thereof, . . . fixing new wage rates,
providing wage incentives for industrial dispersal to
the countryside, and for other purposes," took effect.
Its provisions, pertinent to this case, state:
Sec. 4. (a) Upon the effectivity of this Act, the
statutory minimum wage rates of all workers and
employees in the private sector, whether agricultural
or non-agricultural, shall be increased by twenty-five
pesos (P25) per day, . . .: Provided, That those already
receiving above the minimum wage rates up to one
hundred pesos(P100.00) shall also receive an
increase of twenty-five pesos (P25.00) per day, . . .
Pursuant to the above provisions, the bank gave the
P25 increase per day, or P750 a month, to its
probationary employees and to those who had been
promoted to regular or permanent status before 01
July 1989 but whose daily rate was P100 and below.
The bank refused to give the same increase to its
regular employees who were receiving more than
P100 per day and recipients of the P900 CBA
increase.
Contending that the bank's implementation of
Republic Act 6727 resulted in the categorization of
the employees into (a) the probationary employees
as of 30 June 1989 and regular employees receiving
P100 or less a day who had been promoted to
permanent or regular status before 01 July 1989, and
(b) the regular employees as of 01 July 1989, whose
pay was over P100 a day, and that, between the two
groups, there emerged a substantially reduced salary
gap, the MBTCEU sought from the bank the
correction of the alleged distortion in pay. In order to
avert an impeding strike, the bank petitioned the
Secretary of Labor to assume jurisdiction over the
case or to certify the same to the National Labor
Relations Commission (NLRC) under Article 263 (g)
of the Labor Code. 1 The parties ultimately agreed to
refer the issue for compulsory arbitration to the
NLRC.
ISSUE:
WON there is wage distortion
Held:
The term "wage distortion", under the Rules
Implementing Republic Act 6727, is defined, thus:
(p) Wage Distortion means a situation where an
increase in prescribed wage rates results in the
elimination or severe contradiction of intentional
quantitative differences in wage or salary rates
between and among employee groups in an
establishment as to effectively obliterate the
distinctions embodied in such wage structure based
on skills, length of service, or other logical bases of
differentiation.
The definition of "wage distortion," 10 aforequoted,
shows that such distortion can so exist when, as a
result of an increase in the prescribed wage rate, an
"elimination or severe contraction of intentional
quantitative
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differences in wage or salary rates" would occur
"between and among employee groups in an
establishment as to effectively obliterate the
distinctions embodied in such wage structure based
on skills, length of service, or other logical bases of
differentiation." In mandating an adjustment, the law
did not require that there be an elimination or total
abrogation of quantitative wage or salary differences;
a severe contraction thereof is enough. As has been
aptly observed by Presiding Commissioner Edna
Bonto-Perez in her dissenting opinion, the
contraction between personnel groupings comes
close to eighty-three (83%), which cannot, by any
stretch of imagination, be considered less than
severe.
The "intentional quantitative differences" in wage
among employees of the bank has been set by the
CBA to about P900 per month as of 01 January 1989.
It is intentional as it has been arrived at through the
collective bargaining process to which the parties are
thereby concluded. 11 The Solicitor General, in
recommending the grant of due course to the
petition, has correctly emphasized that the intention
of the parties, whether the benefits under a collective
bargaining agreement should be equated with those
granted by law or not, unless there are compelling
reasons otherwise, must prevail and be given effect.
•Prubankers Assoc. v. Prudential Bank, G.R. No.
131247, January 25, 1999 – KEISHA
Doctrine:
Wage distortion presupposes an increase in
the compensation of the lower ranks in an office
hierarchy without a corresponding raise for higher-
tiered employees in the same region of the country,
resulting in the elimination or the severe diminution
of the distinction between the two groups.
Such distortion does not arise when a wage
order gives employees in one branch of a bank higher
compensation than that given to their counterparts
in other regions occupying the same pay scale, who
are not covered by said wage order. In short, the
implementation of wage orders in one region but not
in others does not in itself necessarily result in wage
distortion.
FACTS:
On November 18, 1993, the Regional Tripartite
Wages and Productivity Board of Region V issued
Wage Order No. RB 05-03 which provided for a Cost
of Living Allowance (COLA) to workers in the private
sector who ha[d] rendered service for at least three
(3) months before its effectivity, and for the same
period [t]hereafter, in the following categories:
SEVENTEEN PESOS AND FIFTY CENTAVOS (P17.50)
in the cities of Naga and Legaspi; FIFTEEN PESOS
AND FIFTY CENTAVOS (P15.50) in the municipalities
of Tabaco, Daraga, Pili and the city of Iriga; and TEN
PESOS (P10.00) for all other areas in the Bicol
Region.
Subsequently on November 23, 1993, the Regional
Tripartite Wages and Productivity Board of Region
VII issued Wage Order No. RB VII-03, which directed
the integration of the COLA mandated pursuant to
Wage Order No. RO VII- 02-A into the basic pay of all
workers. It also established an increase in the
minimum wage rates for all workers and employees
in the private sector as follows: by Ten Pesos
(P10.00) in the cities of Cebu, Mandaue and
Lapulapu; Five Pesos (P5.00) in the municipalities of
Compostela, Liloan, Consolacion, Cordova, Talisay,
Minglanilla, Naga and the cities of Davao, Toledo,
Dumaguete, Bais, Canlaon, and Tagbilaran.
The petitioner then granted a COLA of P17.50 to its
employees at its Naga Branch, the only branch
covered by Wage Order No. RB 5-03, and integrated
the P150.00 per month COLA into the basic pay of its
rank-and-
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file employees at its Cebu, Mabolo and P. del Rosario
branches, the branches covered by Wage Order No.
RB VII-03.
On June 7, 1994, respondent Prubankers Association
wrote the petitioner requesting that the Labor
Management Committee be immediately convened to
discuss and resolve the alleged wage distortion
created in the salary structure upon the
implementation of the said wage orders. Respondent
Association then demanded in the Labor
Management Committee meetings that the petitioner
extend the application of the wage orders to its
employees outside Regions V and VII, claiming that
the regional implementation of the said orders
created a wage distortion in the wage rates of
petitioners employees nationwide. As the grievance
could not be settled in the said meetings, the parties
agreed to submit the matter to voluntary arbitration.
The Arbitration Committee formed for that purpose
was composed of the following: public respondent
Froilan M. Bacungan as Chairman, with Attys.
Domingo T. Anonuevo and Emerico O. de Guzman as
Page 58
members. The issue presented before the Committee
was whether or not the banks separate and regional
implementation of Wage Order No. 5-03 at its Naga
Branch and Wage Order No. VII-03 at its Cebu,
Mabolo and P. del Rosario branches, created a wage
distortion in the bank nationwide.
The Arbitration Committee on June 18, 1996
rendered the questioned decision.
The Court of Appeals held that the variance in the
salary rates of employees in different regions of the
country was justified by RA 6727. It noted that the
underlying considerations in issuing the wage orders
are diverse, based on the distinctive situations and
needs existing in each region. Hence, there is no basis
to apply the salary increases imposed by Wage Order
No. VII- 03 to employees outside of Region VII.
Furthermore, the Court of Appeals ruled that the
distinctions between each employee group in the
region are maintained, as all employees were granted
an increase in minimum wage rate.
ISSUE:
Whether or not there is wage distortion
HELD:
NO.
The petition is devoid of merit.
The statutory definition of wage distortion is found
in Article 124 of the Labor Code, as amended by
Republic Act No. 6727, which reads:
Article 124. Standards/Criteria for Minimum Wage
Fixing - xxx
As used herein, a wage distortion shall mean a
situation where an increase in prescribed wage
results in the elimination or severe contraction of
intentional quantitative differences in wage or salary
rates between and among employee groups in an
establishment as to effectively obliterate the
distinctions embodied in such wage structure based
on skills, length of service, or other logical bases of
differentiation.
Elaborating on this statutory definition, this Court
ruled: Wage distortion presupposes a classification of
positions and ranking of these positions at various
levels. One visualizes a hierarchy of positions with
corresponding ranks basically in terms of wages and
other emoluments. Where a significant change occurs
at the lowest level of positions in terms of basic wage
without a corresponding change in the other level in
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the hierarchy of positions, negating as a result
thereof the distinction between one level of position
from the next higher level, and resulting in a parity
between the lowest level and the next higher level or
rank, between new entrants and old hires, there
exists a wage distortion. xxx. The concept of wage
distortion assumes an existing grouping or
classification of employees which establishes
distinctions among such employees on some relevant
or legitimate basis. This classification is reflected in a
differing wage rate for each of the existing classes of
employees[11]
Wage distortion involves four elements:
1. An existing hierarchy of positions with
corresponding salary rates
2. A significant change in the salary rate of a
lower pay class without a concomitant increase in the
salary rate of a higher one
3. The elimination of the distinction between
the two levels
4. The existence of the distortion in the same
region of the country.
In the present case, it is clear that no wage distortion
resulted when respondent implemented the subject
Wage Orders in the covered branches. In the said
branches, there was an increase in the salary rates of
all pay classes. Furthermore, the hierarchy of
positions based on skills, length of service and other
logical bases of differentiation was preserved. In
other words, the quantitative difference in
compensation between different pay classes
remained the same in all branches in the affected
region. Put differently, the distinction between Pay
Class 1 and Pay Class 2, for example, was not
eliminated as a result of the implementation of the
two Wage Orders in the said region. Hence, it cannot
be said that there was a wage distortion.
Contrary to petitioners postulation, a disparity in
wages between employees holding similar positions
but in different regions does not constitute wage
distortion as contemplated by law. As previously
enunciated, it is the hierarchy of positions and the
disparity of their corresponding wages and other
emoluments that are sought to be preserved by the
concept of wage distortion. Put differently, a wage
distortion arises when a wage order engenders wage
parity between employees in different rungs of the
organizational ladder of the same establishment. It
bears emphasis that wage distortion involves a parity
in the salary rates of different pay classes which, as a
Page 59
result, eliminates the distinction between the
different ranks in the same region.
RA 6727 also amended Article 124 of the Labor Code,
thus:
Art. 124. Standards/Criteria for Minimum Wage
Fixing. - The regional minimum wages to be
established by the Regional Board shall be as nearly
adequate as is economically feasible to maintain the
minimum standards of living necessary for the
health, efficiency and general well-being of the
employees within the frame work of the national
economic and social development program. In the
determination of such regional minimum wages, the
Regional Board shall, among other relevant factors,
consider the following:
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price
index;
(c) The cost of living and changes or increases
therein;
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(d) The needs of workers and their families;
(e) The need to induce industries to invest in the
countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and
capacity to pay of employers;
(I) Effects on employment generation and family
income; and
(j) The equitable distribution of income and
wealth along the imperatives of social and economic
development.
From the above-quoted rationale of the law, as well
as the criteria enumerated, a disparity in wages
between employees with similar positions in
different regions is necessarily expected. In insisting
that the employees of the same pay class in different
regions should receive the same compensation,
petitioner has apparently misunderstood both the
meaning of wage distortion and the intent of the law
to regionalize wage rates.
It must be understood that varying in each region of
the country are controlling factors such as the cost of
living; supply and demand of basic goods, services
and necessities; and the purchasing power of the
peso. Other considerations underscore the necessity
of the law. Wages in some areas may be increased in
order to prevent migration to the National Capital
Region and, hence, to decongest the metropolis.
Therefore, what the petitioner herein bewails is
precisely what the law provides in order to achieve
its purpose.
•Bankard Employees v. NLRC, G.R. No. 140689,
February 17, 2004 – RJ
DOCTRINE:
Wage distortion is a factual and economic
condition that may be brought about by different
causes.The mere factual existence of wage distortion
does not, however, ipso facto result to an obligation
torectify it, absent a law or other source of obligation
which requires its rectification.
FACTS:
Bankard, Inc. classifies its employees by levels: Level
I, Level II, Level III, Level IV, and Level V. OnMay
1993, its Board of Directors approved a New Salary
Scale, made retroactive to April 1, 1993, forthe
purpose of
making its hiring rate competitive in the industry’s
labor market. The New SalaryScale increased the
hiring
rates of new employees, to wit: Levels I and V by one
thousand pesos(P1,000.00), and Levels II, III and IV
by nine hundred pesos (P900.00). Accordingly, the
salaries of employees who fell below the new
minimum rates were also adjusted to reach such
rates under theirlevels.This made Bankard
Employees Union-WATU (petitioner), the duly
certified exclusive bargainingagent of the regular
rank and file employees of Bankard,
to request for the increase in the salary ofits old,
regular employees. Bankard insisted that there
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was no obligation on the part of themanagement to
grant to all its employees the same increase in an
across-the-board manner.Petioner filed a notice of
strike. The strike was averted when the dispute was
certified by theSecretary of Labor and Employment
for compulsory arbitration. NLRC finding no wage
distortiondismissed the case for lack of merit.
Petitioner’s motion for reconsideration of the
dismissal of thecase was denied.
ISSUE:
Whether or not the unilateral adoption by an
employer of an upgraded salary resulted in wage
distortion within the contemplation of Article 124 of
the Labor Code?
RULING:
There exists a wage distortion but the Court will not
interfere in the management prerogativeof the
petitioner.Upon the enactment of R.A. No. 6727
(WAGE RATIONALIZATION ACT, amending, among
others,Article 124 of the Labor Code), the term "wage
distortion" was explicitly defined as... a
situationwhere an increase in prescribed wage rates
results in the elimination or severe contraction
ofintentional quantitative differences in wage or
salary rates between and among employee groups
inan establishment as to effectively obliterate the
distinctions embodied in such wage structure
basedon skills, length of service, or other logical
bases of differentiation.In the case of Prubankers
Association v. Prudential Bank and Trust Company, it
laid down the fourelements of wage distortion, to
wit: (1.) An existing hierarchy of positions with
corresponding salaryrates; (2) A significant change in
the salary rate of a lower pay class without a
concomitant increasein the salary rate of a higher
one; (3) The elimination of the distinction between
the two levels; and(4) The existence of the distortion
in the same region of the country.Normally, a
company has a wage structure or method of
determining the wages of its employees. Ina problem
dealing with "wage distortion," the basic assumption
is that there exists a grouping orclassification of
employees that establishes distinctions among them
on some relevant or legitimatebases. Involved in the
classification of employees are various factors such
as the degrees ofresponsibility, the skills and
knowledge required, the complexity of the job, or
other logical basis ofdifferentiation. The differing
wage rate for each of the existing classes of
employees reflects thisclassification.Put differently,
the entry of new employees to the company ipso
facto places them under any of thelevels mentioned
in the new salary scale which private respondent
adopted retroactive to April 1,1993. While seniority
may be a factor in determining the wages of
employees, it cannot be made thesole basis in cases
where the nature of their work differs.Moreover, for
purposes of determining the existence of wage
distortion, employees cannot createtheir own
independent classification and use it as a basis to
demand an across-the-board increase insalary.The
wordings of Article 124 are clear. If it was the
intention of the legislators tto cover all kinds ofwage
adjustments, then the language of the law should
have been broad, not restrictive as it iscurrently
phrased:Article 124. Standards/Criteria for Minimum
Wage Fixing. Where the application of any
prescribedwage increase by virtue of a law or Wage
Order issued by any Regional Board results
indistortions of the wage structure within an
establishment, the employer and
the union shallnegotiate to correct the distortions.
Any dispute arising from the wage distortions shall
be resolved through the grievance procedure under
their collective bargaining agreement and, if
itremains unresolved, through voluntary
arbitration.Article 124 is entitled "Standards/Criteria
for
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Minimum Wage Fixing." It is found in CHAPTER V
on"WAGE STUDIES, WAGE AGREEMENTS AND
WAGE DETERMINATION" which principally
dealswith the fixing of minimum wage. Article 124
should thus be construed and correlated in relation
tominimum wage fixing, the intention of the law
being that in the event of an increase in
minimumwage, the distinctions embodied in the
wage structure based on skills, length of service, or
otherlogical bases of differentiation will be
preserved.If the compulsory mandate under Article
124 to correct "wage distortion" is applied to
voluntary andunilateral increases by the employer in
fixing hiring rates which is inherently a business
judgmentprerogative, then the hands of the employer
would be completely tied even in cases where
anincrease in wages of a particular group is justified
due to a re-evaluation of the high productivity of
aparticular group, or as in the present case, the
need to increase the competitiveness of
Bankard’shiring rate. An employer would be
discouraged from
adjusting the salary rates of a particular group
ofemployees for fear that it would result to a demand
by all employees for a similar increase,especially if
the financial conditions of the business cannot
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address an across-the-board increase.Wage
distortion is a factual and economic condition that
may be brought about by different causes.The mere
factual existence of wage distortion does not,
however, ipso facto result to an obligation torectify it,
absent a law or other source of obligation which
requires its rectification.
III.B.9
•Lim v. HMR Phils, G.R. No. 201483, August 4, 2014 –
KIM
Doctrine:
Facts:
Petitioner Conrado A. Lim (Lim) filed a case for illegal
dismissal and money claims against respondents,
HMR Philippines, Inc. (HMR)and its officers, Teresa G.
Santos-Castro, Henry G. Bunag and Nelson S.
Camiller. The Labor Arbiter (LA) dismissed the
complaint for lack of merit. On April 11, 2003, the
National Labor Relations Commission (NLRC)in
NLRC NCR No. 02-00926-01, reversed the LA and
declared Lim to have been illegally dismissed and
ordered HMR to reinstate Lim to his former position
without loss of seniority rights and other privileges;
and ordered to pay the him his full backwages,
reckoned from his dismissal on February 3, 2001 up
to the promulgation of the decision.
Both Lim and HMR filed their respective petitions for
certiorari before the CA, which were consolidated.
Pending resolution of the petitions, the CA issued the
Temporary Restraining Order (TRO) enjoining the
execution of the NLRC decision. On November 15,
2005, the CA affirmed the NLRC decision with
modification as follows: WHEREFORE, the Decision
of the National Labor Relations Commission is
AFFIRMED, with MODIFICATION by awarding moral
damages and exemplary damages to Conrado A. Lim
in the amount of P50,000.00 and P20,000.00,
respectively, as well as attorney’s fees equivalent to
10% of the total amount due him.
On September 24, 2007, Lim moved for execution. On
November 28, 2007, the Computation and Research
Unit (CRU) of the NLRC computed the total award to
amount to P2,020,053.46, which computed the
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backwages from February 3, 2001, the date of the
illegal dismissal, up to October 31, 2007, the date of
actual reinstatement. HMR opposed the computation
arguing that the backwages should be computed until
April 11, 2003 only, the date of promulgation of the
NLRC decision, as stated in the dispositive portion of
the NLRC decision. It also noted that the 10% annual
increase was computed from 1998 to 2007, instead
of only from 1998 to 2000 as decreed.
Lim argued that the body of the NLRC decision
explictly stated that he was entitled tofull backwages
from the time he was illegally dismissed until his
actual reinstatement, which was also in accord with
Article 279 of the Labor Codeand all prevailing
jurisprudence. On April 21, 2009, the LA issued the
order granting the motion for execution filed by Lim.
Holding thatthe backwages should be reckoned until
April 11, 2003 only in accordance with the NLRC
decision
the NLRC treated the motion as an appeal and
sustained the computation of the LA, explaining that
the dispositive portion was clear, and that it could
not alter or amend the amount based on the final
decision of the NLRC which was affirmed by both the
CA and this Court. Aggrieved, Lim subsequently filed
a petition for certiorari to the CA, which was
dismissed by the latter. It emphasized that the April
11, 2003 NLRC decision had long become final and
executory after it was affirmed by the Court and, as
such, it may no longer be amended or corrected.
Issues:
Whether the computation of backwages
should be reckoned until the promulgation of the
NLRC Decision on April 11, 2003 or until actual
reinstatement?
Whether the petitioner is entitled to the
unpaid 10% annual salary increase from 1998-2000?
Whether the petitioner is entitled to the 10%
annual salary increase after the year 2000?
Whether the petitioner is entitled to holiday
pay?
Whether the petitioner is entitled to sick
leave pay?
Ruling:
Backwages.
The nature of an illegal dismissal case requires that
backwages continue to add on until full satisfaction.
The computation required to reflect full satisfaction
does not constitute an alteration or amendment of
the final decision being implemented as the illegal
dismissal ruling stands. Thus, in the present case, a
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computation of backwages until actual reinstatement
is not a violation of the principle of immutability of
final judgments.33
(FOR ORAL RECITATION PURPOSES, Atty. might ask
similar details like last time) The respondents aver
that the recoverable backwages cannot go beyond
December 26, 2007, the date HMR offered to
reinstate Lim, who allegedly refused to be reinstated
and abandoned his job.
HMR sent the petitioner a letter,34 dated December
22, 2007, directing him to report for work on
December 26,2007, with an offer of separation pay in
the amount of P150,000.00 in lieu of reinstatement
which he could avail of not later than December26,
2007. Lim replied in a letter,35 dated December 24,
2007, requesting for a meeting in January 2008,
considering that his counsel was out of the country;
that the NLRC was still in the process of computing
the amount of the award which was necessary to
consider the offer of separation pay; and that a writ
of execution had not yet been issued. HMR never
responded to the petitioner’s request, and up to the
present, the latter has yet to be reinstated.
From the above, it is apparent that the petitioner
cannot be deemed to have refused reinstatement or
to have
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abandoned his job. HMR’s offer of reinstatement
appeared superficial and insincere considering that it
never replied to the petitioner’s letter. It did not
make any further attempt to reinstate the petitioner
either. The recoverable backwages, thus, continue to
run, and must be reckoned up until the petitioner’s
actual reinstatement.
10% annual salary increase.
We see no reason, therefore, why complainant-
appellant herein, being a regular employee, should be
deprived of what he is entitled to under Company
policy. As such, he should be paid his unpaid 10%
annual increase for the years 1998, 1999 and
2000.37
Lim is, thus, entitled to be paid his unpaid 10%
annual salary increase for the years 1998-2000. In
Equitable Banking Corporation v. Sadac,41 the Court
held that although Article 279 of the Labor Code
mandates that an employee’s full backwages be
inclusive of allowances and other benefits, salary
increases cannot be interpreted as either an
allowance or a benefit, as allowances and benefits are
separate from salary, while a salary increase is added
to salary as an increment thereto.42 It was further
held therein that the base figure to be used in the
computation of backwages was pegged at the wage
rate at the time of the employee’s dismissal, inclusive
of regular allowances that the employee had been
receiving such as the emergency living allowances
and the 13th month pay mandated by law. The award
of salary differentials was not allowed, the rule being
that upon reinstatement, illegally dismissed
employees were to be paid their backwages without
deduction and qualification as to any wage increases
or other benefits that might have been received by
their co-workers who were not dismissed.43
Holiday pay.
Under Article 94 of the Labor Code, every worker
shall be paid his regular daily wage during regular
holidays. Thus, an employee must receive his daily
wage even if he does not work on a regular holiday.
The purpose of holiday pay is to prevent diminution
of the monthly income of workers on account of work
interruptions declared by the State.44
Whether or not holiday pay is included in the
monthly salary of an employee, may be gleaned from
the divisors used by the company in the computation
of overtime pay and employees’ absences. To
illustrate, if all nonworking days are paid, the divisor
of the monthly salary to obtain daily rate should be
If nonworking days are not paid, the divisor
is 251, which is a result of subtracting all Saturdays,
Sundays, and the ten legal holidays.45 Hence, if the
petitioner’s base pay does not yet include holiday
pay, it must be added tohis monetary award.
Sick leave pay.
The LA found that that the petitioner was not entitled
to have his sick leaves converted to cash because
such was subject to the discretion of management in
accordance with company policy. The pertinent
provision on sick leave conversion in the Personnel
Policy handbook of HMR reads:
(5) Accumulated days of unused sick leave may
be converted into cash, time-off or vacation
allowance at the end of the calendar year, any of
these upon the discretion of the General Manager.
It is clear from the above that the provision does not
give HMR the absolute discretion, it only pertains to
what form the sick leave conversion may take, and
not to whether or not sick leave conversion will be
granted at all. An HMR employee is, therefore,
entitled to conversion of unused sick leave, subject
only to the general manager’sdiscretion as to the
form it will take, namely – cash, time-off, or vacation
allowance. Considering that the conversion optionsof
time -off and vacation allowance are no longer
feasible because the petitioner was illegally
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dismissed, he is now entitled to have his unused sick
leaves converted to cash.
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basic rule in this jurisdiction of no work, no pay. The
right to be paid for un-worked days is generally Yes the University is correct.
limited to the ten legal holidays in a year.
As for petitioners claim of substantial diminution of
Facts: their salary on account of the divisor used by the
University in its computation 314 days, instead of
The Arellano University Employees and Workers 365 days, this Court finds nothing wrong therewith.
Union, the exclusive bargaining representative of Sundays being un-worked and considered unpaid
about 380 rank-and-fil employees of Arellano rest days, while regular holidays as well as special
University, Inc filed with the National Conciliation holidays considered as paid days, the factor used by
and Mediation Board a Notice of Strike charging the the University merely complies with the basic rule in
University with Unfair Labor Practice. After several this jurisdiction of no work, no pay. The right to be
controversies and petitions, a strike was staged. paid for un-worked days is generally limited to the
ten legal holidays in a year.
On July 28, 1998, the University moved for the
consolidation with the ULP charge (NCMB-NCR-NS-
12-520-97) the Interpleader it filed against the Union
and some of its members, docketed as NLRC NCR
Case No. 00-02-02036-98 and pending before Labor
Arbiter Felipe T. Garduque II, and the Complaint the
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employees and non-payment of Sunday pay,
docketed as NLRC NCR Case No. 00-02-01422-98 and
pending before Labor Arbiter Ramon Valentin T.
Reyes, both of which involve the same parties.

•Arellano University Employees v. CA, G.R. No.

139940, September 19, 2006 – KLIVE
Doctrine:
As for petitioners claim of substantial
diminution of their salary on account of the divisor
used by the
University in its computation 314 days, instead of
365 days, this Court finds nothing wrong therewith.
Sundays being un-worked and considered unpaid
rest days, while regular holidays as well as special
holidays considered as paid days, the factor used by
the University merely complies with the
Upon the lifting of the strike, the University filed a
Petition to Declare the Strike Illegal before the
National Labor Relations Commission. The NLRC
issued a Resolution holding that the University was
not guilty of ULP. Consequently, the strike was
declared illegal. All the employees who participated
in the illegal strike were thereafter declared to have
lost their employment status.
Issues:
Whether or not the University was correct in using
the 314 days, instead of 365 days in computing the
equivalent daily rate of pay of worker.
Held:
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•Leyeco IV v. Employees, G.R. No. 157775, October
19, 2007 – LOUYS
Doctrine:
The divisor assumes an important role in
determining whether or not holiday pay is already
included in the monthly paid employee’s salary and
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in the computation of his daily rate. The employees
are required to work only from Monday to Friday.
Thus, the minimum allowable divisor is 263, which is
arrived at by deducting 51 un-worked Sundays and
51 un-worked Saturdays from 365 days. Considering
that petitioner used the 360-day divisor, which is
clearly above the minimum, indubitably, petitioner's
employees are being given their holiday pay.
Facts:
Leyte IV Electric Cooperative, Inc. (petitioner) and
Leyeco IV Employees Union-ALU (respondent)
entered into a Collective Bargaining Agreement
(CBA) covering petitioner rank-and-file employees,
for a period of five (5) years effective January 1,
1998. Respondent, through its Regional Vice-
President, Vicente P. Casilan, sent a letter to
petitioner demanding holiday pay for all employees,
as provided for in the CBA. Petitioner, through its
legal counsel, sent a letter-reply to Casilan, explaining
that after perusing all available pay slips, it found
that it had paid all employees all the holiday pays
enumerated in the CBA. After exhausting the
procedures of the grievance machinery, the parties
agreed to submit the issues of the interpretation and
implementation of Section 2, Article VIII of the CBA
on the payment of holiday pay, for arbitration of the
National Conciliation and Mediation Board (NCMB.
While admitting in its Position Paper that the
employees were paid all of the days of the month
even if there was no work, respondent alleged that it
is not prevented from making separate demands for
the payment of regular holidays concomitant with
the provisions of the CBA. Petitioner, on the other
hand, in its Position Paper, insisted payment of the
holiday pay in compliance with the CBA provisions,
stating that payment was presumed since the
formula used in determining the daily rate of pay of
the covered employees is Basic Monthly Salary
divided by 30 days or Basic Monthly Salary
multiplied by 12 divided by 360 days, thus with said
formula, the employees are already paid their regular
and special days, the days when no work is done, the
51 un-worked Sundays and the 51 un-worked
Saturdays.
Voluntary Arbitrator rendered a Decision in favor of
respondent, holding petitioner liable for payment of
unpaid holidays. Petitioner filed a Motion for
Reconsideration but it was denied. Thirty days later,
or on July 27, 2002, petitioner filed a Petition for
Certiorari in the CA, ascribing grave abuse of
discretion amounting to lack of jurisdiction to the
Voluntary Arbitrator which was dismissed outright
for adopting a wrong mode of appeal. Petitioner filed
a Motion for Reconsideration but it was also denied.
Hence, this petition.
Issue:
Whether or not the divisor used by the employed
already included the payment of holiday pay?
Ruling:
YES.
In Union of Filipro Employees v. Vivar, Jr. 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 ruling was
applied in Wellington Investment and
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Manufacturing Corporation v. Trajano and Producers
Bank of the Philippines v. National Labor Relations
Commission, among others.
In Wellington, the monthly salary was fixed by
Wellington to provide for compensation for every
working day of the year including the holidays
specified by law and excluding only Sundays. In fixing
the salary, Wellington used what it called the 314
factor; that is, it simply deducted 51 Sundays from
the 365 days normally comprising a year and used
the difference, 314, as basis for determining the
monthly salary. The monthly salary thus fixed
actually covered payment for 314 days of the year,
including regular and special holidays, as well as days
when no work was done by reason of fortuitous
cause, such as transportation strike, riot, or typhoon
or other natural calamity, or cause not attributable to
the employees.
In Producers Bank, the employer used the divisor
314 in arriving at the daily wage rate of monthly
salaried employees. The divisor 314 was arrived at
by subtracting all Sundays from the total number of
calendar days in a year, since Saturdays are
considered paid rest days. The Court held that the
use of 314 as a divisor leads to the inevitable
conclusion that the ten legal holidays are already
included therein.
In this case, the employees are required to work only
from Monday to Friday. Thus, the minimum
allowable divisor is 263, which is arrived at by
deducting 51 un-worked Sundays and 51 un-worked
Saturdays from 365 days. Considering that petitioner
used the 360-day divisor, which is clearly above the
minimum, indubitably, petitioner's employees are
being given their holiday pay.
Thus, the Voluntary Arbitrator should not have
simply brushed aside petitioner's divisor formula. In
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granting respondent's claim of non-payment of
holiday pay, a double burden was imposed upon
petitioner because it was being made to pay twice for
its employees' holiday pay when payment thereof
had already been included in the computation of
their monthly salaries. Moreover, it is absurd to grant
respondent's claim of non-payment when they in fact
admitted that they were being paid all of the days of
the month even if not worked. By granting
respondent's claim, the Voluntary Arbitrator
sanctioned unjust enrichment in favor of the
respondent and caused unjust financial burden to the
petitioner. Obviously, the Court cannot allow this.
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•Art. 93, Labor Code
III.D.1
•Art. 94, Labor Code
•Book III, Rule IV, Implementing Rules (Labor Code)
•Jose Rizal College v. NLRC, G.R. No. 65482,
December 1, 1987 – HANS
DOCTRINE:
(e) Hourly paid faculty members are not entitled
to their pay for unworked regular holidays.
(f) Hourly paid faculty members are however
entitled to their regular hourly rate on days declared
as special holidays or when classes are called off or
shortened. 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
Page 79 other sources is lost during the extended days.
Similarly, when classes are called off or shortened on
LABOR LAW REVIEW (Atty. Amando Virgil Ligutan) account of typhoons, floods, rallies, and the like,
these faculty members must likewise be paid,
Case Digests for Weeks 3, 4 ,5 and 6 whether or not extensions are ordered.
FACTS:
III.C.1
JRC is a non-stock, non-profit educational institution
•Art. 91, Labor Code which has three groups of employees categorized as
follows: (a) personnel on monthly basis, who receive
•Book III, Rule III, Implementing Rules (Labor Code) their monthly salary uniformly throughout the year,
irrespective of the actual number of working days in
III.C.2 a month without deduction for holidays; (b)
personnel on daily basis who are paid on actual days
•Art. 92, Labor Code worked and they receive unworked holiday pay and
(c) collegiate faculty who are paid on the basis of
•Book III, Rule III, Implementing Rules (Labor Code) student contract hour.
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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.
The Labor Arbiter rendered a decision that the
faculty and personnel of JRC who are paid their
salary by the month are presumed to be already paid
the 10 paid legal holidays and are no longer entitled
to separate payment for the said regular holidays;
those who are paid their wages daily are entitled to
be
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paid the 10 unworked regular holidays; and
Collegiate faculty 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.
On appeal, NLRC modified the decision in the sense
that teaching personnel paid by the hour are declared
to be entitled to holiday pay.
Petitioner maintains 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. "
Petitioner likewise 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
ISSUE:
Whether or not the school faculty who according to
their contracts are paid per lecture hour are entitled
to unworked holiday pay.
HELD:
Unworked regular holiday – not entitled
Unworked special holiday – entitled
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, both the law and the
Implementing Rules governing holiday pay are silent
as to payment on Special Public Holidays.
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. 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.
The Court held by:
(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;
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(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.
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•Insular Bank v. Inciong, G.R. No. L-52415, October
23, 1984 – BARRY
Doctrine:
It is clear that monthly paid employees are
not excluded from the benefits of holiday pay.
xxx
“ However, the implementing rules on holiday pay
promulgated by the then Secretary of Labor excludes
monthly paid employees from the said benefits by
inserting, under Rule IV, Book Ill of the implementing
rules, Section 2, which provides that: "employees
who are uniformly paid by the month, irrespective of
the number of working days therein, with a salary of
not less than the statutory or established minimum
wage shall be presumed to be paid for all days in the
month whether worked or not. "
xxx
In view of the foregoing, Section 2, Rule IV, Book III of
the Rules to implement the Labor Code and Policy
instruction No. 9 issued by the then Secretary of
Labor must be declared null and void. Accordingly,
public respondent Deputy Minister of Labor Amado
G. Inciong had no basis at all to deny the members of
petitioner union their regular holiday pay as directed
by the Labor Code.
Facts:
On August 25, 1975, Labor Arbiter Ricarte T. Soriano
rendered a decision in the above-entitled case,
granting petitioner's complaint for payment of
holiday pay. Pertinent portions of the decision read:
têñ.£îhqwâ£
xxx xxx xxx
The records disclosed that employees of respondent
bank were not paid their wages on unworked regular
holidays as mandated by the Code, particularly
Article 208, to wit: têñ.£îhqwâ£
Art. 208. Right to holiday pay.
Every worker shall be paid his regular daily
wage during regular holidays, except in retail and
service establishments regularly employing less than
10 workers.
The term "holiday" as used in this chapter,
shall include: New Year's Day, Maundy Thursday,
Good Friday, the ninth of April the first of May, the
twelfth of June, the fourth of July, the thirtieth of
November, the twenty-fifth and the thirtieth of
December and the day designated by law for holding
a general election.
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xxx xxx xxx
This conclusion is deduced from the fact that the
daily rate of pay of the bank employees was
computed in the past with the unworked regular
holidays as excluded for purposes of determining the
deductible amount for absences incurred Thus, if the
employer uses the factor 303 days as a divisor in
determining the daily rate of monthly paid employee,
this gives rise to a presumption that the monthly rate
does not include payments for unworked regular
holidays. The use of the factor 303 indicates the
number of ordinary working days in a year (which
normally has 365 calendar days), excluding the 52
Sundays and the 10 regular holidays. The use of 251
as a factor (365 calendar days less 52 Saturdays, 52
Sundays, and 10 regular holidays) gives rise likewise
to the same presumption that the unworked
Saturdays, Sundays and regular holidays are unpaid.
This being the case, it is not amiss to state with
certainty that the instant claim for wages on regular
unworked holidays is found to be tenable and
meritorious.
WHEREFORE, judgment is hereby rendered:
(2) xxx xxxx xxx
(3) Ordering respondent to pay wages to all its
employees for all regular h(olidays since November
1, 1974 (pp. 97-99, rec., underscoring supplied).
Respondent bank did not appeal from the said
decision. Instead, it complied with the order of
Arbiter Ricarte T. Soriano by paying their holiday pay
up to and including January, 1976.
On December 16, 1975, Presidential Decree No. 850
was promulgated amending, among others, the
provisions of the Labor Code on the right to holiday
pay to read as follows:
Art. 94. Right to holiday pay. — (a) Every worker
shall be paid his regular daily wages during regular
holidays, except in retail and service establishments
regularly employing less than ten (10) workers.
Accordingly, LATER on by authority of Article 5 of the
same Code, the Department of Labor (now Ministry
of Labor) promulgated the rules and regulations for
the implementation of holidays with pay. Sec.
2.Status of employees paid by the month. —
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Employees who are uniformly paid by the month,
irrespective of the number of working days therein,
with a salary of not less than the statutory or
established minimum wage shall be presumed to be
paid for all days in the month whether worked or not.
Subsequently, Policy Instruction No. 9 was issued by
the then Secretary of Labor (now Minister)
interpreting the above-quoted rule, STATING THAT:
“The ten (10) paid legal holidays law, to start with, is
intended to benefit principally daily employees. In
the case of monthly, only those whose monthly salary
did not yet include payment for the ten (10) paid
legal holidays are entitled to the benefit.” THIS policy
has been fully clarified to eliminate controversies on
the entitlement of monthly paid employees, The new
determining rule is this: If the monthly paid
employee is receiving not less than P240, the
maximum monthly minimum wage, and his monthly
pay is uniform from January to December, he is
presumed to be already paid the ten (10) paid legal
holidays. However, if deductions are made from his
monthly salary on account of holidays in months
where they occur, then he is still entitled to the ten
(10) paid legal holidays. ..."
Respondent bank, by reason of the above rule,
stopped the payment of holiday pay to its employees.
Hence, petitioner secured a writ of execution to
enforce the arbiter's decision of August 25, 1975,
whereby the respondent bank was ordered to pay its
employees their daily wage for the unworked regular
holidays.
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BUT Labor Arbiter Ricarte T. Soriano, instead of
issuing a writ of execution, issued an order enjoining
the respondent bank to continue paying its
employees their regular holiday pay due to the
reason that since the decision had been partially
implemented by the respondent bank, appeal from
the said decision is no longer available.
NLRC set aside Labor Arbiter Ricarte T. Soriano's
order AND MANDATED THE issuance of the proper
writ of execution. THE Office of the Minister of Labor,
through Deputy Minister Amado G. Inciong, issued an
order, SETTING ASIDE THE NLRC RESOLUTION and a
new judgment promulgated dismissing the instant
case for lack of merit. Hence, this petition for
certiorari charging public respondent Amado G.
Inciong with abuse of discretion amounting to lack or
excess of jurisdiction.
ISSUE:
Whether or not Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9
issued by the then Secretary of Labor are null and
void since in the guise of clarifying the Labor Code's
provisions on holiday pay, they in effect amended
them by enlarging the scope of their exclusion
RULING:
YES. WE agree with the petitioner's contention that
Section 2, Rule IV, Book III of the implementing rules
and Policy Instruction No. 9 issued by the then
Secretary of Labor are null and void since in the guise
of clarifying the Labor Code's provisions on holiday
pay, they in effect amended them by enlarging the
scope of their exclusion.
Article 94 of the Labor Code, as amended by P.D. 850,
provides:
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. ...
The coverage and scope of exclusion of the Labor
Code's holiday pay provisions is spelled out under
Article 82 thereof which reads: têñ.£îhqwâ£
Art. 82. Coverage. — The provision of this Title shall
apply to employees in all establishments and
undertakings, whether for profit or not, but not to
government employees, managerial employees, field
personnel members of the family of the employer
who are dependent on him for support domestic
helpers, persons in the personal service of another,
and workers who are paid by results as determined
by the Secretary of Labor in appropriate regulations.
From the above-cited provisions, it is clear that
monthly paid employees are not excluded from the
benefits of holiday pay. However, the implementing
rules on holiday pay promulgated by the then
Secretary of Labor excludes monthly paid employees
from the said benefits by inserting, under Rule IV,
Book Ill of the implementing rules, Section 2, which
provides that: "employees who are uniformly paid by
the month, irrespective of the number of working
days therein, with a salary of not less than the
statutory or established minimum wage shall be
presumed to be paid for all days in the month
whether worked or not. "
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Public respondent insists that "(T)he rules
implementing P. D. 850 and Policy Instruction No. 9
were issued to clarify the policy in the
implementation of the ten (10) paid legal holidays. As
interpreted, 'unworked' legal holidays are deemed
paid insofar as monthly paid employees are
concerned if (a) they are receiving not less than the
statutory minimum wage, (b) their monthly pay is
uniform from January to December, and (c) no
deduction is made from their monthly salary on
account of holidays in months where they occur. As
explained in Policy Instruction No, 9, 'The ten (10)
paid legal holidays law, to start with, is intended to
benefit principally daily paid employees. In case of
monthly, only those whose monthly salary did not yet
include payment for the ten (10) paid legal holidays
are entitled to the benefit' " (pp. 340-341, rec.). This
contention is incorrect.
In the case at bar, the provisions of the Labor Code on
the entitlement to the benefits of holiday pay are
clear and explicit - it provides for both the coverage
of and exclusion from the benefits. In Policy
Instruction No. 9, the then Secretary of Labor went as
far as to categorically state that the benefit is
principally intended for daily paid employees, when
the law clearly states that every worker shall be paid
their regular holiday pay. This is a flagrant violation
of the mandatory directive of Article 4 of the Labor
Code, which states that "All doubts in the
implementation and interpretation of the provisions
of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor."
WHEREFORE, THE PETITION IS HEREBY GRANTED,
THE ORDER OF PUBLIC RESPONDENT IS SET ASIDE,
AND THE DECISION OF LABOR ARBITER RICARTE T.
SORIANO DATED AUGUST 25, 1975, IS HEREBY
REINSTATED.
•No. 3, DOLE Handbook on Workers Statutory
Monetary Benefits
III.D.2
•David v. Macasio, G.R. No. 195466, July 2, 2014 –
KEN
Doctrine:
(3) A worker paid in pakyaw basis or by results
is not entitled to holiday pay, overtime pay, and SIL
pay since they are expressly excluded from the
provisions of Title 1 Book 3 of the LC per Art. 83.
However, they are entitled to 13th month. All
employees are generally entitled to such benefit.
(4) A worker paid in pakyaw basis is different
from a regular employee since the former are paid a
fixed amount regardless of the time they spend at
work as long as the task assigned to them is done.
Facts:
John Macasio was working as a butcher in Ariel
David's business "Yiel's Hog Dealer." Now he claims
for the payment of overtime pay, holiday pay,
13thmonth pay and service incentive leave. Macasio
maintains that since there is an employer-employee
relationship between David, he is entitled to such
benefits. David, on the other hand,maintains that
Macasio is not entitled since he is a worker paid in
pakyaw or task basis since he is paid P700 regardless
of the time he spends at work.
Issue:
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Whether or not Macasio is a worker paid in pakyaw
or task basis, and hence, not entitled to the above
benefits.
Ruling:
He is a worker paid in pakyaw basis. The
surrounding circumstances of the case reveals that
he is task
worker because he is paid a fixed amount of P700
regardless of the time he spent at work, as long as the
task of chopping the assigned hogs for that day is
done. The fact that there is an E - E relationship does
not automatically warrant his entitlement to such
benefits. To answer whether or not he is entitled to
the above benefits, Art. 82 of the Labor Code
specifically excludes a worker paid by results or task
or in pakyaw basis from the coverage of Title 1 Book
3 of the Labor Code, which pertains to working
conditions, rest periods, holiday pay and SIL pay. As
for the 13th month pay, he is entitled per PD 851,
Page 70
which provides that all employees are generally
entitled to such benfit.
•Tan v. Lagman, G.R. No. 151228, August 15, 2002 –
CAMILLE
DOCTRINE:
FACTS:
This is a petition for review on certiorari of the
decision, dated May 31, 2001, and the resolution,2
dated November 27, 2001, of the Court of Appeals in
C.A.-G.R. SP. No. 63160, annulling the resolutions of
the National Labor Relations Commission (NLRC)
and reinstating the ruling of the Labor Arbiter which
found petitioner Rolando Tan guilty of illegally
dismissing private respondent Leovigildo Lagrama
and ordering him to pay the latter the amount of
P136,849.99 by way of separation pay, backwages,
and damages.
Petitioner Rolando Tan is the president of Supreme
Theater Corporation and the general manager of
Crown and Empire Theaters in Butuan City. Private
respondent Leovigildo Lagrama is a painter, making
ad billboards and murals for the motion pictures
shown at the Empress, Supreme, and Crown Theaters
for more than 10 years. On October 17, 1998, private
respondent Lagrama was summoned by Tan and was
fired since he was accused to have urinated inside his
drawer. Lagrama denied the charge against him. He
claimed that he was not the only one who entered the
drawing area and that, even if the charge was true, it
was a minor infraction to warrant his dismissal.
However, everytime he spoke, Tan shouted "Gawas"
("Get out"), leaving him with no other choice but to
leave the premises. Lagrama filed a complaint with
the Sub-Regional Arbitration Branch No. X of the
National Labor Relations Commission (NLRC) in
Butuan City. He alleged that he had been illegally
dismissed and sought reinvestigation and payment of
13th month pay, service incentive leave pay, salary
differential, and damages.
Petitioner Tan denied that Lagrama was his
employee. He asserted that Lagrama was an
independent contractor who did his work according
to his methods, while he (petitioner) was only
interested in the result thereof. He cited the
admission of Lagrama during the conferences before
the Labor Arbiter that he was paid on a fixed piece-
work basis. He submitted the affidavits of other
cinema owners, an amusement park owner, and
those supervising the construction of a church to
prove that the services of
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Lagrama were contracted by them. He denied having
dismissed Lagrama and alleged that it was the latter
who refused to paint for him after he was scolded for
his habits.
The Labor Arbiter declared that Lagrama’s dismissal
was illegal and ordered respondent to pay complaint
his separation pay, backwages, 13 month pay, service
incentive leave and damages totalling P136, 849.99.
Petitioner Rolando Tan appealed to the NLRC Fifth
Division, Cagayan de Oro City, which, on June 30,
2000, rendered a decision4 finding Lagrama to be an
independent contractor, and for this reason reversing
the decision of the Labor Arbiter. Respondent
Lagrama filed a motion for reconsideration, but it
was denied for lack of merit by the NLRC in a
resolution of September 29, 2000. He then filed a
petition for certiorari under Rule 65 before the Court
of Appeals.
ISSUES:
Whether or not there was an employer-employee
relationship that existed between the petitioner and
the respondent.
Whether or not petitioner was illegally dismissed.
RULING:
In determining whether there is an employer-
employee relationship, a "four-fold test is to be
applied to wit: (1) whether the alleged employer has
the power of selection and engagement of employees;
whether he has control of the employee with
respect to the means and methods by which work is
to be accomplished; (3) whether he has the power to
dismiss; and (4) whether the employee was paid
wages. These elements of the employer-employee
relationship are present in this case. Of the four
elements of the employer-employee relationship, the
"control test" is the most important. Compared to an
employee, an independent contractor is one who
carries on a distinct and independent business and
undertakes to perform the job, work, or service on its
own account and under its own responsibility
according to its own manner and method, free from
the control and direction of the principal in all
matters connected with the performance of the work
except as to the results thereof. Hence, while an
independent contractor enjoys independence and
freedom from the control and supervision of his
principal, an employee is subject to the employer's
power to control the means and methods by which
Page 71
the employee's work is to be performed and
accomplished.
In the case at bar, albeit petitioner Tan claims that
private respondent Lagrama was an independent
contractor and never his employee, the evidence
shows that the latter performed his work as painter
under the supervision and control of petitioner.
Lagrama worked in a designated work area inside
the Crown Theater of petitioner, for the use of which
petitioner prescribed rules. The rules included the
observance of cleanliness and hygiene and a
prohibition against urinating in the work area and
any place other than the toilet or the rest rooms.
Petitioner's control over Lagrama's work extended
not only to the use of the work area, but also to the
result of Lagrama's work, and the manner and means
by which the work was to be accomplished.
The second issue is whether private respondent
Lagrama was illegally dismissed. The Implementing
Rules of the Labor Code provide that no worker shall
be dismissed except for a just or authorized cause
provided by law and after due process. This
provision has two aspects: (1) the legality of
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the act of dismissal, that is, dismissal under the
grounds provided for under Article 282 of the Labor
Code and (2) the legality in the manner of dismissal.
The illegality of the act of dismissal constitutes
discharge without just cause, while illegality in the
manner of dismissal is dismissal without due process.
In this case, by his refusal to give Lagrama work to do
and ordering Lagrama to get out of his sight as the
latter tried to explain his side, petitioner made it
plain that Lagrama was dismissed.
III.E.1
•Art. 95, Labor Code
•Book III, Rule V, Implementing Rules (Labor Code)
•See David v. Macasio, G.R. No. 195466, July 2, 2014
•See CIT v. Ople, G.R. No. L-58870, December 18,
1987
III.E.2
•Art. 133, Labor Code
•Sec. 14-A, Social Security Law (as amended)
•No. 11, DOLE Handbook on Workers Statutory
Monetary Benefits
•R.A. 10151, Sec. 4
III.E.3
•R.A. 8187, Paternity Leave Act
•Revised Implementing Rules of R.A. 8187 (March 13,
1997)
III.E.4
•R.A. 8972, Solo Parents’ Welfare Act
•Implementing Rules, R.A. 8972
•DelaCueva v. Omaga, A.M. No. P-08-2590, July 5,
2010 – GOLDIE
Doctrine:
(b) It is a well-settled rule that administrative
penalties must be supported by substantial evidence
for the imposition thereof. This is in keeping with the
constitutional imperative that a person is entitled to
due process of law. The Court will exercise its
disciplinary authority over respondent only if the
case against her is established by clear, convincing
and satisfactory evidence.
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3) Section 7 of Republic Act No. 8972, the Solo
Parents’ Welfare Act of 2000, to wit: No employer
shall discriminate against any solo parent employee
with respect to terms and conditions of employment
on account of his/her status.
FACTS:
This administrative case stemmed from a sworn
Affidavit-Complaint dated June 15, 2007 filed by Julie
Page 72
Ann dela Cueva charging respondent Selima B.
Omaga, Court Stenographer, Municipal Trial Court,
Calauan, Laguna, with Immorality.
Complainant Julie Ann C. dela Cueva is the legal wife
of P/Supt. Nestor dela Cueva.They were married on
July 29, 1984, and the union bore three children. Due
to the philandering ways of her husband, the couple
separated on November 30, 1994. Thereafter, the
complainant cohabited with two different men in
succession – (1) William Castillo with whom she had
three children: Jessica, born on February 24, 1998;
William Paolo, born on March 6, 2000; and Frenz
William, born on August 8, 2002; and (2) Justiniano
Montillano with whom she had one child, Justin Jan,
born on March 31, 2006.
On May 31, 2007, P/Supt. Nestor dela Cueva filed a
Petition for Declaration of Nullity of Marriage
alleging as ground his own psychological incapacity.
This angered and prompted his wife, the
complainant, to file a criminal complaint against him
for bigamy and concubinage. Her complaint alleged
that he and respondent, Selima B. Omaga, got
married and were living together as husband and
wife despite the subsistence of his marriage with her
(the complainant). The criminal charges were
dismissed by the provincial prosecutor in a
resolution dated August 24, 2007.
Complainant dela Cueva also filed an administrative
complaint against both her husband and the
respondent. In her defense, respondent averred that
she first met P/Supt. dela Cueva in 1995 when he was
assigned by the Philippine National Police as Chief of
Police in Calauan, Laguna. Their relationship started
on March 8, 1995 and continued until she received
notice of the bigamy and concubinage case filed
against him. It was only then that she discovered that
he was married.10 She bore P/Supt. dela Cueva three
children: John Emmanuel, born on December 27,
1996; Patrick Josef, born on May 1, 1998; and Patricia
May, born on May 18, 2000.11 Respondent further
asserted that despite having had three children with
P/Supt. dela Cueva, they did not live together in one
house but rather, he would just visit her in her house
from time to time.
On October 23, 2008, the Office of the Court
Administrator recommended that "the complaint be
re-docketed as a regular administrative matter and
that respondent be in the meantime suspended for a
period six (6) months and one (1) day, without pay
with a stern warning that a repetition of the same act
would be dealt with more severely."
During the hearing of the case before the
investigating judge on October 8, 2009, the
complainant manifested that she was withdrawing
her complaint after learning that respondent and her
husband never lived together as husband and wife.
Complainant confessed that she was prompted to file
the complaint simply because her husband had filed a
petition for declaration of nullity of their marriage.
In his Report and Recommendation dated December
10, 2009, Judge Morga recommended that the
respondent be absolved from any administrative
liability taking into consideration the following
circumstances: (1) respondent and P/Supt. dela
Cueva began their relationship after he was already
separated in fact from complainant; (2) complainant
is no longer interested in pursuing the case as she
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realized that filing it was a mistake since respondent
and her husband never lived together as husband
and wife; (3) there is no evidence to contradict
respondent’s claim that during their relationship she
did not know dela Cueva was married and that they
did not cohabit in one house; (4) respondent’s
performance as court stenographer was not
adversely affected by her situation; and (5)
respondent has properly reared her children and
conducted herself in public appropriately. He further
stated that:
All told, the totality of the above circumstances
necessitates a review on the findings of the
Honorable Court and the Court Administrator to
impose a six-month suspension. While it cannot be
disputed that respondent entered into an illicit
relationship, the same to the mind of this Investigator
was not so corrupt and false as to constitute a
criminal act or so unprincipled as to be reprehensible
to a high degree.
ISSUE:
Whether or not respondent is guilty of immoral
conduct?
HELD:
NO. It should be stressed that complainant’s change
of heart in deciding not to pursue the case against
respondent is of no moment as it has no controlling
significance in this administrative case. The long
standing policy is:
Administrative actions cannot depend on the will or
pleasure of the complainant who may, for reasons of
his own, condone what may be detestable. Neither
can the Court be bound by the unilateral act of the
complainant in a matter relating to its disciplinary
power x x x Desistance cannot divest the Court of its
jurisdiction to investigate and decide the complaint
against the respondent. To be sure, public interest is
Page 73
at stake in the conduct and actuations of officials and
employees of the judiciary. And the program and
efforts of this Court in improving the delivery of
justice to the people should not be frustrated and put
to naught by private arrangements between the
parties.
This is so because the issue in administrative cases is
not whether the complainant has a cause of action
against the respondent but, rather, whether the
employee against whom the complaint is filed has
breached the norms and standards of service in the
judiciary. As such, this Court, having disciplinary
authority over employees of the lower courts, has the
power and duty to pursue this administrative matter
regardless of complainant’s desistance.
There is no doubt that engaging in sexual relations
with a married man is not only a violation of the
moral standards expected of employees of the
judiciary but is also a desecration of the sanctity of
the institution of marriage which this Court abhors
and is, thus, punishable.
Respondent claims, however, that she had no
knowledge that P/Supt. dela Cueva was married and
that she ended their relationship as soon as she was
made aware of his true civil status. If her contention
were true, this would serve to exculpate her from the
accusation of immorality.
The Court finds respondent’s assertion to be
plausible. It should be noted that the complainant did
not refute her defense that she did not learn of
P/Supt. dela Cueva’s marital status until complainant
filed a complaint against them. Indeed, there is no
concrete evidence on record to show that respondent
knew of his married state at the time their
relationship started.
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The idea, however, that the respondent never had the
slightest notion that P/Supt. dela Cueva was married
and that she did not cohabit with him despite having
three children may be quite a stretch of the
imagination. It is fairly inconceivable for a woman to
have had a relationship with a married man for more
than a decade without even a tinge of suspicion that
he might have been lying about his true civil status.
But then again, there is nothing on record which can
refute respondent’s allegation. In view of the lack of
proof showing that respondent willingly entered into
an immoral sexual liaison with a married man, she
cannot be held liable for immoral and disgraceful
conduct.
It is a well-settled rule that administrative penalties
must be supported by substantial evidence for the
imposition thereof. This is in keeping with the
constitutional imperative that a person is entitled to
due process of law. The Court will exercise its
disciplinary authority over respondent only if the
case against her is established by clear, convincing
and satisfactory evidence.34 In this case, the Court
finds the evidence against respondent insufficient to
warrant the imposition of an administrative penalty.
On a final note, the Court would like to point out that,
in the absence of clear and convincing evidence, it
would be insensitive to condemn the respondent for
simply being an unmarried mother of three. There
has been no showing that she has lived her life in a
scandalous and disgraceful manner which, by any
means, has affected her standing in the
community.39 To speculate that she did so would be
tantamount to committing a discrimination against a
solo parent,40 which is prohibited under Section 7 of
Republic Act No. 8972, the Solo Parents’ Welfare Act
of 2000, to wit:
Section 7. Work Discrimination – No employer shall
discriminate against any solo parent employee with
respect to terms and conditions of employment on
account of his/her status.
III.E.5
•Sec. 43, R.A. 9262, Anti-VAWC Act
•Sec. 42, Implementing Rules, R.A. 9262
III.E.6
•Sec. 18, R.A. 9710, Magna Carta of Women
•Sec. 21, Rule IV, Implementing Rules, R.A. 9710
•Sec. 7 (m), Rule II, Implementing Rules, R.A. 9710
III.F
•Art. 96, Labor Code
•Book III, Rule V, Implementing Rules (Labor Code)
•No. 7 (a), (c), DOLE Handbook on Workers Statutory
Monetary Benefits
•Mayon Hotel v. Adana, G.R. No. 157634, May 16,
2005 – ANNE
DOCTRINE:
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2) While complainants, who were employed in
the hotel, receive[d] various amounts as profit share,
the same cannot be considered as part of their wages
in determining their claims for violation of labor
standard benefits. Although called profit share[,]
such is in the nature of share from service charges
charged by the hotel. This is more explained by
[respondents] when they testified that what they
received are not fixed amounts and the same are paid
not on a monthly basis. Also, [petitioners] failed to
submit evidence that the amounts received by
[respondents] as profit share are to be considered
part of their wages and had been agreed by them
prior to their employment. Further, how can the
amounts receive[d] by [respondents] be considered
as profit share when the same [are] based on the
gross receipt of the hotel[?] No profit can as yet be
determined out of the gross receipt of an enterprise.
Profits are realized after expenses are deducted from
the gross income.
FACTS:
Petitioner Mayon Hotel & Restaurant is a single
proprietor business registered in the name of
petitioner Pacita O. Po, whose mother, petitioner
Josefa Po Lam, manages the establishment. The hotel
and restaurant employed about sixteen (16)
employees.
Due to the expiration and non-renewal of the lease
contract for the rented space occupied by the said
hotel and restaurant at Rizal Street, the hotel
operations of the business were suspended on March
31, 1997. The operation of the restaurant was
continued in its new location at Elizondo Street,
Legazpi City, while waiting for the construction of a
new Mayon Hotel & Restaurant at Pearanda Street,
Legazpi City. Only nine (9) of the sixteen (16)
employees continued working in the Mayon
Restaurant at its new site.
On various dates of April and May 1997, the 16
employees filed complaints for underpayment of
wages and other money claims against petitioners.
On July 14, 2000, Executive Labor Arbiter Gelacio L.
Rivera, Jr. rendered a Joint Decision in favor of the
employees. The Labor Arbiter awarded substantially
all of respondents money claims, and held that
respondents Loveres, Macandog and Llarena were
entitled to separation pay, while respondents
Guades, Nicerio and Alamares were entitled to their
retirement pay.
On appeal to the NLRC, the decision of the Labor
Arbiter was reversed, and all the complaints were
dismissed.
CA reversed the NLRC decision and the employers
filed MR which was denied, hence the case before the
SC.
ISSUE:
Are respondents entitled to their money claims due
to underpayment of wages, and nonpayment of
holiday pay, rest day premium, SILP, COLA, overtime
pay, and night shift differential pay?
RULING:
Respondents are entitled to their money claims.
The court agrees with the Labor Arbiter and the CA
that the documents petitioners submitted, i.e.,
affidavits executed by some of respondents during an
ocular inspection conducted by an inspector of the
DOLE; notices of inspection result and Facility
Evaluation Orders issued by DOLE, are not sufficient
to
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prove payment. Despite repeated orders from the
Labor Arbiter, petitioners failed to submit the
pertinent employee files, payrolls, records,
remittances and other similar documents which
would show that respondents rendered work
entitling them to payment for overtime work, night
shift differential, premium pay for work on holidays
and rest day, and payment of these as well as the
COLA and the SILP documents which are not in
respondents possession but in the custody and
absolute control of petitioners. By choosing not to
fully and completely disclose information and
present the necessary documents to prove payment
of labor standard benefits due to respondents,
petitioners failed to discharge the burden of proof.
Indeed, petitioners failure to submit the necessary
documents which as employers are in their
possession, inspite of orders to do so, gives rise to the
presumption that their presentation is prejudicial to
its cause. As aptly quoted by the CA:
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[W]hen the evidence tends to prove a material fact
which imposes a liability on a party, and he has it in
his power to produce evidence which from its very
nature must overthrow the case made against him if
it is not founded on fact, and he refuses to produce
such evidence, the presumption arises that the
evidence, if produced, would operate to his prejudice,
and support the case of his adversary.
Petitioners next claim that the cost of the food and
snacks provided to respondents as facilities should
have been included in reckoning the payment of
respondents wages. They state that although on the
surface respondents appeared to receive minimal
wages, petitioners had granted respondents other
benefits which are considered part and parcel of
their wages and are allowed under existing laws.
They claim that these benefits make up for whatever
inadequacies there may be in compensation.
Specifically, they invoked Sections 5 and 6, Rule VII-
A, which allow the deduction of facilities provided by
the employer through an appropriate Facility
Evaluation Order issued by the Regional Director of
the DOLE. Petitioners also aver that they give five (5)
percent of the gross income each month as
incentives. As proof of compliance of payment of
minimum wages, petitioners submitted the Notice of
Inspection Results issued in 1995 and 1997 by the
DOLE Regional Office.
The cost of meals and snacks purportedly provided
to respondents cannot be deducted as part of
respondents minimum wage. As stated in the Labor
Arbiters decision:
While [petitioners] submitted Facility Evaluation
Orders issued by the DOLE Regional Office whereby
the cost of meals given by [petitioners] to
[respondents] were specified for purposes of
considering the same as part of their wages, We
cannot consider the cost of meals in the Orders as
applicable to [respondents]. [Respondents] were not
interviewed by the DOLE as to the quality and
quantity of food appearing in the applications of
[petitioners] for facility evaluation prior to its
approval to determine whether or not [respondents]
were indeed given such kind and quantity of food.
Also, there was no evidence that the quality and
quantity of food in the Orders were voluntarily
accepted by [respondents]. On the contrary; while
some [of the respondents] admitted that they were
given meals and merienda, the quality of food
serve[d] to them were not what were provided for in
the Orders and that it was only when they filed these
cases that they came to know about said Facility
Evaluation Orders. [Petitioner] Josefa herself, who
applied for evaluation of the facility (food) given to
[respondents], testified that she did not inform
[respondents] concerning said Facility Evaluation
Orders.
Even granting that meals and snacks were provided
and indeed constituted facilities, such facilities could
not be deducted without compliance with certain
legal requirements. As stated in Mabeza v. NLRC, the
employer simply cannot deduct the value from the
employee's wages without satisfying the following:
3) proof that such facilities are customarily
furnished by the trade; (b) the provision of
deductible facilities is voluntarily accepted in writing
by the employee; and (c) the facilities are charged at
fair and reasonable value. The records are clear that
petitioners failed to comply with these requirements.
There was no proof
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of respondents written authorization. Indeed, the
Labor Arbiter found that while the respondents
admitted that they were given meals and merienda,
the quality of food served to them was not what was
provided for in the Facility Evaluation Orders and it
was only when they filed the cases that they came to
know of this supposed Facility Evaluation Orders.
Petitioner Josefa Po Lam herself admitted that she
did not inform the respondents of the facilities she
had applied for.
Considering the failure to comply with the above-
mentioned legal requirements, the Labor Arbiter
therefore erred when he ruled that the cost of the
meals actually provided to respondents should be
deducted as part of their salaries, on the ground that
respondents have availed themselves of the food
given by petitioners.[90] The law is clear that mere
availment is not sufficient to allow deductions from
employees wages.
More important, we note the uncontroverted
testimony of respondents on record that they were
required to eat in the hotel and restaurant so that
they will not go home and there is no interruption in
the services of Mayon Hotel & Restaurant. As ruled in
Mabeza, food or snacks or other convenience
provided by the employers are deemed as
supplements if they are granted for the convenience
of the employer. The criterion in making a distinction
between a supplement and a facility does not so
much lie in the kind (food, lodging) but the purpose.
Considering, therefore, that hotel workers are
required to work different shifts and are expected to
be available at various odd hours, their ready
availability is a necessary matter in the operations of
a small hotel, such as petitioners business. The
deduction of the cost of meals from respondents
wages, therefore, should be removed.
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We also do not agree with petitioners that the five (5)
percent of the gross income of the establishment can
be considered as part of the respondents wages. We
quote with approval the Labor Arbiter on this matter,
to wit:
While complainants, who were employed in the
hotel, receive[d] various amounts as profit share, the
same cannot be considered as part of their wages in
determining their claims for violation of labor
standard benefits. Although called profit share[,]
such is in the nature of share from service charges
charged by the hotel. This is more explained by
[respondents] when they testified that what they
received are not fixed amounts and the same are paid
not on a monthly basis. Also, [petitioners] failed to
submit evidence that the amounts received by
[respondents] as profit share are to be considered
part of their wages and had been agreed by them
prior to their employment. Further, how can the
amounts receive[d] by [respondents] be considered
as profit share when the same [are] based on the
gross receipt of the hotel[?] No profit can as yet be
determined out of the gross receipt of an enterprise.
Profits are realized after expenses are deducted from
the gross income.
On the issue of the proper minimum wage applicable
to respondents, we sustain the Labor Arbiter. We
note that petitioners themselves have admitted that
the establishment employs more or less sixteen (16)
employees, therefore they are estopped from
claiming that the applicable minimum wage should
be for service establishments employing 15
employees or less.
As for petitioners repeated invocation of serious
business losses, suffice to say that this is not a
defense to payment of labor standard benefits. The
employer cannot exempt himself from liability to pay
minimum wages because of poor financial condition
of the company. The payment of minimum wages is
not dependent on the employers ability to pay.
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•Philippine Hoteliers v. National Union, G.R. No.
181972, August 25, 2009 – LIZ
DOCTRINE:
(e) It must be noted that the hotel employees
have a right to their share in the service charges
collected.
(f) Article 96. Service charges. – All service
charges collected by hotels, restaurants and similar
establishments shall be distributed at the rate of
eighty-five percent (85%) for all covered employees
and fifteen percent (15%) for management. The
share of employees shall be equally distributed
among them. In case the service charge is abolished,
the share of the covered employees shall be
considered integrated in their wages.
(g) Since Dusit Hotel is explicitly mandated by
the afore-quoted statutory provision to pay its
employees and management their respective shares
in the service charges collected, the hotel cannot
claim that payment thereof to its 82 employees
constitute substantial compliance with the payment
of ECOLA under WO No. 9. Undoubtedly, the hotel
employees’ right to their shares in the service
charges collected by Dusit Hotel is distinct and
separate from their right to ECOLA; gratification by
the hotel of one does not result in the satisfaction of
the other.
Facts:
Regional Tripartite Wages and Productivity Board
(RTWPB) issued wage order no.9 of the National
Capital Region (NCR), took effect on 5 November
2001. It grants P30.00 ECOLA to particular
employees and workers of all private sectors,
identified as follows in Section 1 thereof:
Section 1. Upon the effectivity of this Wage Order, all
private sector workers and employees in the National
Capital Region receiving daily wage rates of TWO
HUNDRED FIFTY PESOS (P250.00) up to TWO
HUNDRED NINETY PESOS (P290.00) shall receive an
emergency cost of living allowance in the amount of
THIRTY PESOS (P30.00) per day payable in two
tranches as follows:
Amount of ECOLA Effectivity
P 15.00 5 November 2001
P 15.00 1 February 2002
Respondent union, through its President, Reynaldo
Rasing, sent a letter to Director Alex Maraan of the
DOLE-NCR, reporting the non-compliance of Dusit
Hotel of the Wage Order No. 9, while there was an
ongoing compulsory arbitration before the NLRC due
to a bargaining deadlock between the Union and
Dusit Hotel; and requesting immediate assistance on
the matter. Based on the inspection report, the
employees are receiving P290.00 average daily rate
which is exempted in the compliance of Wage Order.
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By virtue of Rasing’s request for another inspection,
there was a second inspection conducted on May
2002.
In its report, it stated that:
Non-presentation of records / payrolls
Based on submitted payrolls & list of union
members by NUWHRAIN-DUSIT HOTEL NIKKO
Chapter, there are 144 affected in the
implementation of the Wage Order covering the
periods form Nov. 5,2001 to 2002
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Accordingly, the DOLE-NCR issued a notice of
inspection result directing Dusit Hotel to effect
restitution and/ correction of the noted violations
within 5 days from receipt of the notice, and to
submit any question on the findings of the labor
inspector within the same period, otherwise, an
order of compliance be issued.
In the meantime, the NLRC rendered a Decision dated
9 October 2002 in NLRC-NCR-CC No. 000215- 02 –
the compulsory arbitration involving the Collective
Bargaining Agreement (CBA) deadlock between Dusit
Hotel and the Union – granting the hotel employees
the following wage increases, in accord with the CBA:
Effective January 1, 2001- P500.00/month
Effective January 1, 2002- P550.00/month
Effective January 1, 2003- P600.00/month
On 22 October 2002, based on the results of the
second inspection of Dusit Hotel premises, DOLE-
NCR, through Dir. Maraan, issued the Order directing
Dusit Hotel to pay 144 of its employees the total
amount of P1,218,240.00, corresponding to their
unpaid ECOLA under WO No. 9; plus, the penalty of
double indemnity, pursuant to Section 12 of Republic
Act No. 6727,as amended by Republic Act No. 8188.
Dusit Hotel filed a Motion for Reconsideration of the
DOLE-NCR Order dated 22 October 2002, arguing
that the NLRC Decision dated 9 October 2002,
resolving the bargaining deadlock between Dusit
Hotel and the Union, and awarding salary increases
under the CBA to hotel employees retroactive to 1
January 2001, already rendered the DOLE-NCR Order
moot and academic. With the increase in the salaries
of the hotel employees ordered by the NLRC Decision
of 9 October 2002, along with the hotel employees’
share in the service charges, the 144 hotel
employees, covered by the DOLE-NCR Order of 22
October 2002, would already be receiving salaries
beyond the coverage of WO No. 9.
Acting on the Motion for Reconsideration of Dusit
Hotel, DOLE-NCR issued a Resolution on 27
December 2002, setting aside its earlier Order dated
22 October 2002 for being moot and academic, in
consideration of the NLRC Decision dated 9 October
2002; and dismissing the complaint of the Union
against Dusit Hotel, for non-compliance with WO No.
9, for lack of merit.
Issue:
Whether the 144 employees were still entitled to
ECOLA granted by WO. No.9 despite the increases in
their salaries, retroactive to January 1, 2001, ordered
by NLRC in the latter’s decision dated October 2002.
Whether Dusit hotel is liable for double indemnity for
violation of wage order.
Held:
The Court rules in the negative.
It must be noted that the hotel employees have a
right to their share in the service charges collected by
Dusit Hotel, pursuant to Article 96 of the Labor Code
of 1991, to wit:
Article 96. Service charges. – All service charges
collected by hotels, restaurants and similar
establishments shall be distributed at the rate of
eighty-five percent (85%) for all covered employees
and fifteen percent (15%) for management. The
share of employees shall be equally distributed
among them. In case the service charge is abolished,
the share of the covered employees shall be
considered integrated in their wages.
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Since Dusit Hotel is explicitly mandated by the afore-
quoted statutory provision to pay its employees and
management their respective shares in the service
charges collected, the hotel cannot claim that
payment thereof to its 82 employees constitute
substantial compliance with the payment of ECOLA
under WO No. 9. Undoubtedly, the hotel employees’
right to their shares in the service charges collected
by Dusit Hotel is distinct and separate from their
right to ECOLA; gratification by the hotel of one does
not result in the satisfaction of the other.
The Court, however, finds no basis to hold Dusit
Hotel liable for double indemnity. Under Section
2(m) of DOLE Department Order No. 10, Series of
1998, the Notice of Inspection Result "shall specify
the violations discovered, if any, together with the
officer’s recommendation and computation of the
unpaid benefits due each worker with an advice that
the employer shall be liable for double indemnity in
case of refusal or failure to correct the violation
within five calendar days from receipt of notice." A
careful review of the Notice of Inspection Result
dated 29 May 2002, issued herein by the DOLE-NCR
to Dusit Hotel, reveals that the said Notice did not
contain such an advice. Although the Notice directed
Dusit Hotel to correct its noted violations within five
days from receipt thereof, it was not sufficiently
apprised that failure to do so within the given period
would already result in its liability for double
indemnity. The lack of advice deprived Dusit Hotel of
the opportunity to decide and act accordingly within
the five-day period, as to avoid the penalty of double
indemnity. By 22 October 2002, the DOLE-NCR,
through Dir. Maraan, already issued its Order
directing Dusit Hotel to pay 144 of its employees the
total amount of P1,218,240.00, corresponding to
their unpaid ECOLA under WO No. 9; plus the penalty
of double indemnity, pursuant to Section 12 of
Republic Act No. 6727, as amended by Republic Act
No. 8188.
Although the Court is mindful of the fact that labor
embraces individuals with a weaker and unlettered
position as against capital, it is equally mindful of the
protection that the law accords to capital. While the
Constitution is committed to the policy of social
justice and the protection of the working class, it
should not be supposed that every labor dispute will
be automatically decided in favor of labor.
Management also has its own rights which, as such,
are entitled to respect and enforcement in the
interest of simple fair play.
III.G
•P.D. 851
•Revised Guidelines on the Implementation of 13th
Month Law
•Central Azucarera v. Labor Union, G.R. No. 188949,
July 26, 2010 – GERSON
DOCTRINE:
(3) Non- diminution Rule
Article 100 of the Labor Code, otherwise known as
the Non-Diminution Rule, mandates that benefits
given to employees cannot be taken back or reduced
unilaterally by the employer because the benefit has
become part of the employment contract, written or
unwritten. The rule against diminution of benefits
applies if it is shown that the grant of the benefit is
based on an express policy or has ripened into a
practice over a long period of time and that the
practice is consistent and deliberate. Nevertheless,
the rule will not apply if the practice is due to error in
the construction or application of a doubtful or
difficult question of law. But even in cases of error, it
should be shown that the correction is done soon
after discovery of the error.
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4) Basic Salary for purposes of computing the
13th month pay.
The term basic salary of an employee for the purpose
of computing the 13th-month pay was interpreted to
include all remuneration or earnings paid by the
employer for services rendered, but does not include
allowances and monetary benefits which are not
integrated as part of the regular or basic salary, such
as the cash equivalent of unused vacation and sick
leave credits, overtime, premium, night differential
and holiday pay, and cost-of-living allowances.
However, these salary-related benefits should be
included as part of the basic salary in the
computation of the 13th-month pay if, by individual
or collective agreement, company practice or policy,
the same are treated as part of the basic salary of the
employees.
FACTS:
In compliance with Presidential Decree (P.D.) No.
851, petitioner granted its employees the mandatory
thirteenth (13th) - month pay since 1975. The
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formula used by petitioner in computing the 13th-
month pay was:
13 month pay = Total Basic Annual Salary
12
Included in petitioner’s computation of the Total
Basic Annual Salary were the following:
• basic monthly salary;
• first eight (8) hours overtime pay on Sunday
and legal/special holiday;
• night premium pay;
• and vacation and sick leaves for each year.
Throughout the years, petitioner used this
computation until 2006.
In December 2006, petitioner gave the employees
their 13th-month pay based on the employees total
earnings (based only on the basic salary) during the
year divided by 12.
Respondent objected to this computation. It averred
that petitioner did not adhere to the usual
computation of the 13th-month pay. It likewise
asserted that petitioner did not observe the company
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practice of giving its employees the guaranteed
amount equivalent to their one month pay, in
instances where the computed 13th-month pay was
less than their basic monthly pay.
Labor Arbiter’s decision: Dismissed the case
The petitioner had the right to rectify the error in the
computation of the 13th-month pay of its employees.
NLRC decision: Reversed the Labor Arbiter’s
decision.
The Central Azucarera de Tarlac is ordered to adhere
to its established practice of granting 13th month pay
on the basis of gross annual basic which includes
basic pay, premium pay for work in rest days and
special holidays, night shift differential and paid
vacation and sick leaves for each year.
The Central Azucarera de Tarlac is ordered to
observe the guaranteed one[-]month pay by way of
13th month pay.
NLRC subsequently dismissed the petitioner’s Motion
for Reconsideration.
CA affirmed the decision of the NLRC.
ISSUE 1:
Whether or Not the petitioner is correct on its
argument that its new computation of 13th month
pay based only on the basic monthly salary should be
followed and not its old computation which included
the basic monthly salary, premium pay for work on
rest days and special holidays, night shift differential
pay and holiday pay
HELD: NO
The term basic salary of an employee for the purpose
of computing the 13th-month pay was interpreted to
include all remuneration or earnings paid by the
employer for services rendered, but does not include
allowances and monetary benefits which are not
integrated as part of the regular or basic salary, such
as the cash equivalent of unused vacation and sick
leave credits, overtime, premium, night differential
and holiday pay, and cost-of-living allowances.
However, these salary-related benefits should be
included as part of the basic salary in the
computation of the 13th-month pay if, by individual
or collective agreement, company practice or policy,
the same are treated as part of the basic salary of the
employees.
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The practice of petitioner in giving 13th-month pay
based on the employees gross annual earnings which
included the basic monthly salary, premium pay for
work on rest days and special holidays, night shift
differential pay and holiday pay continued for almost
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thirty (30) years and has ripened into a company
policy or practice which cannot be unilaterally
withdrawn.
ISSUE 2:
Whether or Not the petitioner is correct on its
argument that there was an error in the computation
of the 13th-month pay of its employees as a result of
its mistake in implementing P.D. No. 851.
HELD: NO
The argument of petitioner that the grant of the
benefit was not voluntary and was due to error in the
interpretation of what is included in the basic salary
deserves scant consideration. No doubtful or difficult
question of law is involved in this case. The
guidelines set by the law are not difficult to decipher.
The voluntariness of the grant of the benefit was
manifested by the number of years the employer had
paid the benefit to its employees. Petitioner only
changed the formula in the computation of the 13th-
month pay after almost 30 years and only after the
dispute between the management and employees
erupted. This act of petitioner in changing the
formula at this time cannot be sanctioned, as it
indicates a badge of bad faith.
--------------------------------------------------------------------
-----------------------------------------------------------
Extra Information regarding 13th month pay
The 13th-month pay mandated by Presidential
Decree (P.D.) No. 851 represents an additional
income based on wage but not part of the wage.
It is equivalent to one-twelfth (1/12) of the total
basic salary earned by an employee within a calendar
year.
All rank-and-file employees, regardless of their
designation or employment status and irrespective of
the method by which their wages are paid, are
entitled to this benefit, provided that they have
worked for at least one month during the calendar
year.
If the employee worked for only a portion of the year,
the 13th-month pay is computed pro rata.
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The Rules and Regulations Implementing P.D. No.
851, promulgated on December 22, 1975, defines
13th-month pay and basic salary as follows:
Sec. 2. Definition of certain terms. - As used in this
issuance:
"Thirteenth-month pay" shall mean one
twelfth (1/12) of the basic salary of an employee
within a calendar year;
"Basic salary" shall include all
remunerations or earnings paid by an employer to an
employee for services rendered but may not include
cost-of-living allowances granted pursuant to
Presidential Decree No. 525 or Letter of Instructions
No. 174, profit-sharing payments, and all allowances
and monetary benefits which are not considered or
integrated as part of the regular or basic salary of the
employee at the time of the promulgation of the
Decree on December 16, 1975.
On January 16, 1976, the Supplementary Rules and
Regulations Implementing P.D. No. 851 was issued.
The Supplementary Rules clarifies that overtime pay,
earnings, and other remuneration that are not part of
the basic salary shall not be included in the
computation of the 13th-month pay.
On November 16, 1987, the Revised Guidelines on
the Implementation of the 13th-Month Pay Law was
issued. Significantly, under this Revised Guidelines, it
was specifically stated that the minimum 13th-month
pay required by law shall not be less than one-twelfth
(1/12) of the total basic salary earned by an
employee within a calendar year.
CAN AN EMPLOYER APPLY FOR EXEMPTION FROM
THE REQUIREMENT OF P.D. No. 851?
YES
Under Section 7 of the Rules and Regulations
Implementing P.D. No. 851, distressed employers
shall qualify for exemption from the requirement of
the Decree only upon prior authorization by the
Secretary of Labor.
Non-Diminution Rule:
Article 100 of the Labor Code, otherwise known as
the Non-Diminution Rule, mandates that benefits
given to employees cannot be taken back or reduced
unilaterally by the employer because the benefit has
Page 81
become part of the employment contract, written or
unwritten. The rule against diminution of benefits
applies if it is shown that the grant of the benefit is
based on an express policy or has ripened into a
practice over a long period of time and that the
practice is consistent and deliberate. Nevertheless,
the rule will not apply if the practice is due to error in
the construction or application of a doubtful or
difficult
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question of law. But even in cases of error, it should
be shown that the correction is done soon after
discovery of the error.
•King of Kings Transport v. Mamac, G.R. No. 166208,
June 29, 2007 – CHRISTIAN
DOCTRINE:
Bus drivers and conductors who are paid a
fixed or guaranteed minimum wage in case their
commission be less than the statutory minimum, and
commissions only in case where they are over and
above the statutory minimum, are entitled to a 13th-
month pay equivalent to one-twelfth of their total
earnings during the calendar year. Those receiving
on commission basis only are excluded from
receiving the 13th-month pay benefit.
FACTS:
Petitioner KKTI is a corporation engaged in public
transportation and managed by Claire Dela Fuente
and Melissa Lim.
Respondent Mamac was hired as bus conductor of
Don Mariano Transit Corporation (DMTC). The DMTC
employees including respondent formed the
Damayan ng mga Manggagawa, Tsuper at Conductor-
Transport Workers Union and registered it with the
Department of Labor and Employment. Pending the
holding of a certification election in DMTC, petitioner
KKTI was incorporated with the Securities and
Exchange Commission. Many DMTC employees were
subsequently transferred to KKTI and excluded from
the election.
The KKTI employees later organized the Kaisahan ng
mga Kawani sa King of Kings (KKKK) which was
registered with DOLE. Respondent was elected KKKK
president.
Respondent was required to accomplish a
"Conductor’s Trip Report" and submit it to the
company after each trip. As a background, this report
indicates the ticket opening and closing for the
particular day of duty. After submission, the company
audits the reports. Once an irregularity is discovered,
the company issues an "Irregularity Report" against
the employee, indicating the nature and details of the
irregularity. Thereafter, the concerned employee is
asked to explain the incident by making a written
statement or counter-affidavit at the back of the same
Irregularity Report. After considering the explanation
of the employee, the company then makes a
determination of whether to accept the explanation
or impose upon the employee a penalty for
committing an infraction. That decision shall be
stated on said Irregularity Report and will be
furnished to the employee.
Upon audit of the Conductor’s Report of respondent,
KKTI noted an irregularity. It discovered that
respondent declared several sold tickets as returned
tickets causing KKTI to lose an income of eight
hundred and ninety pesos. While no irregularity
report was prepared on the October 28, 2001
incident, KKTI nevertheless asked respondent to
explain the discrepancy. Respondent said that the
erroneous declaration in his October 28, 2001 Trip
Report was unintentional. He explained that during
that day’s trip, the windshield of the bus assigned to
them was smashed; and they had to cut short the trip
in order to
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immediately report the matter to the police. As a
result of the incident, he got confused in making the
trip report.
On November 26, 2001, respondent received a letter
terminating his employment effective November 29,
2001. The dismissal letter alleged that the October
28, 2001 irregularity was an act of fraud against the
company. KKTI also cited as basis for respondent’s
dismissal the other offenses he allegedly committed
since 1999.
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Respondent filed a Complaint for illegal dismissal,
illegal deductions, nonpayment of 13th-month pay,
service incentive leave, and separation pay. He
denied committing any infraction and alleged that his
dismissal was intended to bust union activities.
Moreover, he claimed that his dismissal was effected
without due process.
KKTI claimed that respondent had violated the trust
and confidence reposed upon him by KKTI. Also, it
averred that it had observed due process in
dismissing respondent and maintained that
respondent was not entitled to his money claims
such as service incentive leave and 13th-month pay
because he was paid on commission or percentage
basis.
Affirming the NLRC, the CA held that there was just
cause for respondent’s dismissal. It ruled that
respondent’s act in "declaring sold tickets as
returned tickets x x x constituted fraud or acts of
dishonesty justifying his dismissal."
ISSUE:
Whether the respondents are entitled to 13th month
pay. (main issue in relation to the topic of 13th
month pay)
SC RULING:
No.
Section 3 of the Rules Implementing Presidential
Decree No. 851 provides the exceptions in the
coverage of the payment of the 13th-month benefit.
The provision states:
SEC. 3. Employers covered.––The Decree shall apply
to all employers except to:
xxxx
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.
Petitioner KKTI maintains that respondent was paid
on purely commission basis; thus, the latter is not
entitled to receive the 13th-month pay benefit.
However, applying the ruling in Philippine
Agricultural Commercial and Industrial Workers
Union v. NLRC, the CA held that respondent is
entitled to the said benefit.
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It was erroneous for the CA to apply the case of
Philippine Agricultural Commercial and Industrial
Workers Union. Notably in the said case, it was
established that the drivers and conductors praying
for 13th- month pay were not paid purely on
commission. Instead, they were receiving a
commission in addition to a fixed or guaranteed wage
or salary. Thus, the Court held that bus drivers and
conductors who are paid a fixed or guaranteed
minimum wage in case their commission be less than
the statutory minimum, and commissions only in
case where they are over and above the statutory
minimum, are entitled to a 13th-month pay
equivalent to one-twelfth of their total earnings
during the calendar year.
On the other hand, in his Complaint, respondent
admitted that he was paid on commission only.
Moreover, this fact is supported by his pay slips
which indicated the varying amount of commissions
he was receiving each trip. Thus, he was excluded
from receiving the 13th-month pay benefit.
AS TO OTHER ISSUES:
There was non-compliance with the Due Process
Requirements.
To clarify, the following should be considered in
terminating the services of employees:
(q) The first written notice to be served on the
employees should contain the specific causes or
grounds for termination against them, and a directive
that the employees are given the opportunity to
submit their written explanation within a reasonable
period. "Reasonable opportunity" under the Omnibus
Rules means every kind of assistance that
management must accord to the employees to enable
them to prepare adequately for their defense. This
should be construed as a period of at least five (5)
calendar days from receipt of the notice to give the
employees an opportunity to study the accusation
against them, consult a union official or lawyer,
gather data and evidence, and decide on the defenses
they will raise against the complaint. Moreover, in
order to enable the employees to intelligently
prepare their explanation and defenses, the notice
should contain a detailed narration of the facts and
circumstances that will serve as basis for the charge
against the employees. A general description of the
charge will not suffice. Lastly, the notice should
specifically mention which company rules, if any, are
violated and/or which among the grounds under Art.
282 is being charged against the employees.
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(r) After serving the first notice, the employers
should schedule and conduct a hearing or conference
wherein the employees will be given the opportunity
to: (1) explain and clarify their defenses to the charge
against them; (2) present evidence in support of their
defenses; and (3) rebut the evidence presented
against them by the management. During the hearing
or conference, the employees are given the chance to
defend themselves personally, with the assistance of
a representative or counsel of their choice. Moreover,
this conference or hearing could be used by the
parties as an opportunity to come to an amicable
settlement.
(s) After determining that termination of
employment is justified, the employers shall serve
the employees a written notice of termination
indicating that: (1) all circumstances involving the
charge against the employees have been considered;
and (2) grounds have been established to justify the
severance of their employment.
First, respondent was not issued a written notice
charging him of committing an infraction. The law is
clear on the matter. A verbal appraisal of the charges
against an employee does not comply with the first
notice requirement. Consultations or conferences are
not a substitute for the actual observance of notice
and
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hearing. Also, in sanctioning the employer for
disregarding the due process requirements, held that
the employee’s written explanation did not excuse
the fact that there was a complete absence of the first
notice.
Second, even assuming that petitioner KKTI was able
to furnish respondent an Irregularity Report
notifying him of his offense, such would not comply
with the requirements of the law. We observe from
the irregularity reports against respondent for his
other offenses that such contained merely a general
description of the charges against him.
Third, no hearing was conducted. Regardless of
respondent’s written explanation, a hearing was still
necessary in order for him to clarify and present
evidence in support of his defense.
Sanction for Non-compliance with Due Process
Requirements
Thus, for non-compliance with the due process
requirements in the termination of respondent’s
employment, petitioner KKTI is sanctioned to pay
respondent the amount of thirty thousand pesos
(PhP 30,000) as damages.
III.H
•Arts. 283-284, Labor Code
•Sec. 32, Art. V, R.A. 10361
•Manila Water v. Rosario, G.R. No. 188747, January
29, 2014 – DANESSA
DOCTRINE:
As a general rule, an employee who has been
dismissed for any of the just causes enumerated
under Article 282 of the Labor Code is not entitled to
a separation pay. In exceptional cases, however, the
Court has granted separation pay to a legally
dismissed employee as an act of "social justice" or on
"equitable grounds." In both instances, it is required
that the dismissal (1) was not for serious
misconduct; and (2) did not reflect on the moral
character of the employee.
FACTS:
On 22 October 1979, Del Rosario was employed as
Instrument Technician by Metropolitan Waterworks
and Sewerage System (MWSS). Sometime in 1996,
MWSS was reorganized pursuant to RA No. 8041 or
the
National Water Crisis Act of 1995, and its
implementing guidelines − EO No. 286. Because of
the
reorganization, Manila Water absorbed some MWSS
employees including Del Rosario. On 1 August 1997,
Del Rosario officially became an employee of Manila
Water.
Sometime in May 2000, Manila Water discovered that
24 water meters were missing in its stockroom. Upon
initial investigation, it appeared that Del Rosario and
his co-employee, a certain Danilo Manguera, were
involved in the pilferage and the sale of water meters
to the company’s contractor. Consequently,
Manila Water issued a Memorandum directing Del
Rosario to explain in writing within 72 hours why he
should not be dealt with administratively for the loss
of the said water meters.In his letter-explanation,Del
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Rosario confessed his involvement in the act charged
and pleaded for forgiveness, promising not to commit
similar acts in the future.
During the formal investigation, Del Rosario was
found responsible for the loss of the water meters
and therefore liable for violating Section 11.1 of the
Company’s Code of Conduct. Manila Water dismissed
Del Rosario from employment, prompting Del
Rosario to file an action for illegal dismissal. He
claims that his severance from employment is
without just cause. He averred that his admission to
the misconduct charged was not voluntary but was
coerced by the company and was made without the
assistance of a counsel.
Invoking Section 11.1 of the Company’s Code of
Conduct, Manila Water averred that such act of
stealing the company’s property is punishable by
dismissal.
The Labor Arbiter issued a Decision dismissing the
case for lack of merit, however, Del Rosario was
awarded separation pay. According to the LA, Del
Rosario’s length of service for 21 years, without
previous derogatory record, warrants the award of
separation pay.
In a Resolution, the NLRC dismissed the appeal
interposed by Manila Water for its failure to append
a certification against forum shopping in its
Memorandum of Appeal. Manila Water’s Motion for
Reconsideration was likewise denied by the NLRC.
On Certiorari, the Court of Appeals reversed the
NLRC Resolution and held that it committed a grave
abuse of discretion when it dismissed Manila Water’s
appeal on mere technicality. The appellate court,
however, affirmed the decision of the LA awarding
separation pay to Del Rosario. Manila Water filed the
instant Petition for Review on Certiorari.
ISSUE:
Whether or not the award of separation pay was
proper.
RULING:
No. As a general rule, an employee who has been
dismissed for any of the just causes enumerated
under Article 282 of the Labor Code is not entitled to
a separation pay. Section 7, Rule I, Book VI of the
Omnibus Rules implementing the Labor Code
provides:
Sec. 7. Termination of employment by employer. —
The just causes for terminating the services of an
employee shall be those provided in Article 282 of
the Code. The separation from work of an employee
for a just cause does not entitle him to the
termination pay provided in the Code, without
prejudice, however, to whatever rights, benefits and
privileges he may have under the applicable
individual or collective agreement with the employer
or voluntary employer policy or practice.
In exceptional cases, however, the Court has granted
separation pay to a legally dismissed employee as an
act of "social justice" or on "equitable grounds." In
both instances, it is required that the dismissal (1)
was not for serious misconduct; and (2) did not
reflect on the moral character of the employee.
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In the leading case of Philippine Long Distance
Telephone Company v. NLRC, we laid down the rule
that separation pay shall be allowed as a measure of
social justice only in the instances where the
employee is validly dismissed for causes other than
serious misconduct reflecting his moral character.
We clarified that:
We hold that henceforth separation pay shall be
allowed as a measure of social justice only in those
instances where the employee is validly dismissed
for causes other than serious misconduct or those
reflecting on his moral character. Where the reason
for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude,
like theft or illicit sexual relations with a fellow
worker, the employer may not be required to give the
dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the
ground of social justice.
A contrary rule would, as the petitioner correctly
argues, have the effect, of rewarding rather than
punishing the erring employee for his offense. And
we do not agree that the punishment is his dismissal
only and that the separation pay has nothing to do
with the wrong he has committed. Of course it has.
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Indeed, if the employee who steals from the company
is granted separation pay even as he is validly
dismissed, it is not unlikely that he will commit a
similar offense in his next employment because he
thinks he can expect a like leniency if he is again
found out. This kind of misplaced compassion is not
going to do labor in general any good as it will
encourage the infiltration of its ranks by those who
do not deserve the protection and concern of the
Constitution.
xx xxxxx
In the subsequent case of Toyota Motor Phils. Corp.
Workers Association (TMPCWA) v. National Labor
Relations Commission, we expanded the exclusions
and elucidated that separation pay shall be allowed
as a measure of social justice only in instances where
the employee is validly dismissed for causes other
than serious misconduct, willful disobedience, gross
and habitual neglect of duty, fraud or willful breach
of trust, commission of a crime against the employer
or his family, or those reflecting on his moral
character. In the same case, we instructed the labor
officials that they must be most judicious and
circumspect in awarding separation pay or financial
assistance as the constitutional policy to provide full
protection to labor is not meant to be an instrument
to oppress the employers. The commitment of the
court to the cause of the labor should not embarrass
us from sustaining the employers when they are
right, as here. In fine, we should be more cautious in
awarding financial assistance to the undeserving and
those who are unworthy of liberality of the law.
Guided by the foregoing rules, we have carefully
treaded the path of compassionate justice in the
subsequent cases so as not to slip and favor labor at
the expense of management.
In Tirazona v. Phillippine EDS Techno-Service, Inc.
(PET, Inc.), we denied the award of separation pay to
an employee who was dismissed from employment
due to loss of trust and confidence.
xx xxx That Del Rosario rendered 21 years of service to the
company will not save the day for him. To this case,
The attendant circumstances in the present case
considered, we are constrained to deny Del Rosario Central Pangasinan Electric Cooperative, Inc. v.
separation pay since the admitted cause of his National Labor Relations Commission is on all fours,
dismissal amounts to serious misconduct. He is not thus:
only
Although long years of service might generally be
considered for the award of separation benefits or
some form of financial assistance to mitigate the
QUANTUM LEAP (USJ-R SCHOOL OF LAW BATCH effects of termination, this case is not the appropriate
2017 “Together we leap, together we will succeed." instance for generosity under the Labor Code nor
under our prior decisions. The fact that private
respondent served petitioner for more than twenty
years with no negative record prior to his dismissal,
in our view of this case, does not call for such award
Page 107 of benefits, since his violation reflects a regrettable
lack of loyalty and worse, betrayal of the company. If
LABOR LAW REVIEW (Atty. Amando Virgil Ligutan) an employee's length of service is to be regarded as a
justification for moderating the penalty of dismissal,
Case Digests for Weeks 3, 4 ,5 and 6 such gesture will actually become a prize for
disloyalty, distorting the meaning of social justice
and undermining the efforts of labor to cleanse its
responsible for the loss of the water meters in ranks of undesirables.(Emphasis supplied).
flagrant violation of the company’s policy but his act
is in
utter disregard of his See Toyota v. NLRC, G.R. Nos. 158786 & 158789,
partnership with his employer October 19, 2007 – ALBERT
in the pursuit of mutual
benefits. Doctrine:
In the recent case of Daabay v. Coca-Cola Bottlers, 5. We hold that henceforth separation pay shall
this Court reiterated our ruling in Toyota and be allowed as a measure of social justice only in those
disallowed instances where the employee is validly dismissed
for causes other than serious misconduct or those
the payment of separation pay to an employee who reflecting on his moral character. Where the reason
was found guilty of stealing the company’s property. for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude,
We repeated that an award of separation pay in such like theft or illicit sexual relations with a fellow
an instance is misplaced compassion for the worker, the employer may not be required to give the
undeserving who may find their way back and dismissed employee separation pay, or financial
weaken the fiber of labor.
Page 86
assistance, or whatever other name it is called, on the
ground of social justice.
Facts:
This is a case of illegal dismissal of 227 employees of
Toyota who are Union members. The controversy
arose when Toyota did not agree to the CBA because
it questioned the validity of the certification election
allegedly held by the Union. Toyota and the Union
were required to attend a hearing on February 21,
2001 before the Bureau of Labor Relations (BLR) in
relation to the exclusion of the votes of alleged
supervisory employees from the votes cast during
the certification election. The February 21, 2001
hearing was cancelled and reset to February 22,
2001. On February 21, 2001, 135 Union officers and
members failed to render the required overtime
work, and instead marched to and staged a picket in
front of the BLR office in Intramuros, Manila. The
Union, in a letter of the same date, also requested
that its members be allowed to be absent on
February 22, 2001 to attend the hearing and instead
work on their next scheduled rest day. This request
however was denied by Toyota. Despite denial of the
Union’s request, more than 200 employees staged
mass actions on February 22 and 23, 2001 in front of
the BLR and the DOLE offices, to protest the partisan
and anti-union stance of Toyota. Due to the
deliberate absence of a considerable
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number of employees on February 22 to 23, 2001,
Toyota experienced acute lack of manpower in its
manufacturing and production lines, and was unable
to meet its production goals resulting in huge losses
of PhP 53,849,991. Soon thereafter, on February 27,
2001, Toyota sent individual letters to some 360
employees requiring them to explain within 24 hours
why they should not be dismissed for their obstinate
defiance of the company’s directive to render
overtime work on February 21, 2001, for their failure
to report for work on February 22 and 23, 2001, and
for their participation in the concerted actions which
severely disrupted and paralyzed the plant’s
operations. These letters specifically cited Section D,
paragraph 6 of the Company’s Code of Conduct, to
wit:
Inciting or participating in riots, disorders, alleged
strikes, or concerted actions detrimental to
[Toyota’s] interest.
1st offense – dismissal.
Hence, the 227 who were engaged in the illegal strike
and also illegal acts during the illegal strike were
dismissed. The NLRC granted the dismissal but with
separation pay. Toyota appealed with the CA. CA
reversed the NLRC ruling on the issue of separation
pay, the CA did not provide for any separation pay to
the dismissed employees. However, it changed its
decision. The CA gave separation pay to the
dismissed employees. Thus, the petition with the SC.
ISSUE:
Whether or not separation pay is proper when the
employee is dismissed due to illegal strike or acts
committed during the illegal strike.
RULING: No.
Separation pay is not proper. The general rule is that
when just causes for terminating the services of an
employee under Art. 282 of the Labor Code exist, the
employee is not entitled to separation pay. The
apparent reason behind the forfeiture of the right to
termination pay is that lawbreakers should not
benefit from their illegal acts. The dismissed
employee, however, is entitled to “whatever rights,
benefits and privileges [s/he] may have under the
applicable individual or collective bargaining
agreement with the employer or voluntary employer
policy or practice” or under the Labor Code and other
existing laws. This means that the employee, despite
the dismissal for a valid cause, retains the right to
receive from the employer benefits provided by law,
like accrued service incentive leaves. With respect to
benefits granted by the CBA provisions and voluntary
management policy or practice, the entitlement of the
dismissed employees to the benefits depends on the
stipulations of the CBA or the company rules and
policies. As in any rule, there are exceptions. One
exception where separation pay is given even though
an employee is validly dismissed is when the court
finds justification in applying the principle of social
justice well entrenched in the 1987 Constitution. We
hold that henceforth separation pay shall be allowed
as a measure of social justice only in those instances
where the employee is validly dismissed for causes
other than serious misconduct or those reflecting on
his moral character. Where the reason for the valid
dismissal is, for example, habitual intoxication or an
offense involving moral turpitude, like theft or illicit
sexual relations with a fellow worker, the employer
may not be required to give the dismissed employee
separation pay, or financial assistance, or whatever
other name it is called, on the ground of social justice.
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•Bani Rural Bank v. Guzman, G.R. No. 170904,
November 13, 2013 – ELERLENNE
Doctrine:
month salary for every year of service computed
Facts: from the start of their employment up to the date of
The respondents were employees of Bani Rural Bank, the finality of the decision.
Inc. and ENOC Theatre I and II who filed a complaint
for illegal dismissal against the petitioners. The The NLRC justified the award of separation pay on
complaint was initially dismissed by Labor Arbiter. account of the strained relations between the parties.
On appeal, the National Labor Relations Commission
(NLRC) reversed Labor Arbiter’s findings, and ruled
that the respondents had been illegally dismissed.
The parties did not file any motion for
reconsideration or appeal. The March 17, 1995
resolution of the NLRC became final and executory QUANTUM LEAP (USJ-R SCHOOL OF LAW BATCH
and the computation of the awards was remanded to 2017 “Together we leap, together we will succeed."
the labor arbiter for execution purposes.
The first computation of he monetary award under
the March ,17 1995 resolution of the NLRC :

(i) When reinstatement is ordered, the
employment relationship continues. Once the
illegally dismissed employee is reinstated, any
compensation and benefits thereafter received stem
from the employees continued employment. In this
instance, backwages are computed only up until the
reinstatement of the employee since after the
reinstatement, the employee begins to receive
compensation from his resumed employment.
(j) When there is an order of separation pay (in
lieu of reinstatement or when the reinstatement
aspect is waived or subsequently ordered in light of a
supervening event making the award of
reinstatement no longer possible), the employment
relationship is terminated only upon the finality of
the decision ordering the separation pay. The finality
of the decision cuts-off the employment relationship
and represents the final settlement of the rights and
obligations of the parties against each other. Hence,
backwages no longer accumulate upon the finality of
the decision ordering the payment of separation pay
since the employee is no longer entitled to any
compensation from the employer by reason of the
severance of his employment.
The computation of the respondents' backwages,
under the terms of the March 17 1995 NLRC
resolution was remanded to Labor Arbiter Rolando
D. Gambito. First, Labor Arbiter Gambito deducted
the earnings derived by the respondents either from
Bani Rural Bank, Inc. or ENOC Theatre I and II.
Second, Labor Arbiter Gambito fixed the period of
backwages from the respondents' illegal dismissal
until August 25 1995 or the date when the
respondents allegedly manifested that they no longer
wanted to be reinstated.
The NLRC modified the terms of the resolution
insofar as it clarified the phrase less earnings
elsewhere. The NLRC additionally awarded the
payment of separation pay, in lieu of reinstatement,
under the following terms:
The decision of this Commission is hereby MODIFIED
to the extent that: (1) the phrase earnings elsewhere
in its dispositive portion shall exclude the
complainants' salaries from the Rural Bank of
Mangantarem; and (2) in lieu of reinstatement, the
respondents are hereby ordered to pay the
complainants separation pay equivalent to one
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Execution and Suspend Further Execution they
reiterated their position that the respondents
backwages should be computed only up to August 25,
1995. In an order dated July 12, 2000, Labor Arbiter
Gambito computed the respondents backwages only
up to August 25, 1995.
The respondents appealed the July 12, 2000 order of
Labor Arbiter Gambito to the NLRC, which reversed
Labor Arbiter Gambito s order. In its decision dated
September 28, 2001, the NLRC ruled that the
computation of the respondents backwages should
be until January 29 1999 which was the date when
the July 31, 1998 decision attained finality
Issue:
Page 88

Whether the respondents’ backwages had been
correctly computed under the decision dated
September 28, 2001 of the NLRC.
Ruling:
Yes. The computation of backwages depends on the
final awards adjudged as a consequence of illegal
dismissal, in that: First, when reinstatement is
ordered, the general concept under Article 279 of the
Labor Code, as amended, computes the backwages
from the time of dismissal until the employee’s
reinstatement. The computation of backwages (and
similar benefits considered part of the backwages)
can even continue beyond the decision of the labor
arbiter or NLRC and ends only when the employee is
actually reinstated.
Second, when separation pay is ordered in lieu of
reinstatement (in the event that this aspect of the
case is disputed) or reinstatement is waived by the
employee (in the event that the payment of
separation pay, in lieu, is not disputed), backwages is
computed from the time of dismissal until the finality
of the decision ordering separation pay.
Third, when separation pay is ordered after the
finality of the decision ordering the reinstatement by
reason of a supervening event that makes the award
of reinstatement no longer possible (as in the case),
backwages is computed from the time of dismissal
until the finality of the decision ordering separation
pay.
The above computation of backwages, when
separation pay is ordered, has been the Court s
consistent ruling. In Session Delights Ice Cream and
Fast Foods v. Court Appeals Sixth Division, we
explained that the finality of the decision becomes
the reckoning point because in allowing separation
pay, the final decision effectively declares that the
employment relationship ended so that separation
pay and backwages are to be computed up to that
point.
When reinstatement is ordered, the employment
relationship continues. Once the illegally dismissed
employee is reinstated, any compensation and
benefits thereafter received stem from the employees
continued employment. In this instance, backwages
are computed only up until the reinstatement of the
employee since after the reinstatement, the employee
begins to receive compensation from his resumed
employment.
When there is an order of separation pay (in lieu of
reinstatement or when the reinstatement aspect is
waived or subsequently ordered in light of a
supervening event making the award of
reinstatement no longer possible), the employment
relationship is terminated only upon the finality of
the decision ordering the separation pay. The finality
of the decision cuts-off the employment relationship
and represents the final settlement of the rights and
obligations of the parties against each other. Hence,
backwages no longer accumulate upon the finality of
the decision ordering the payment of separation pay
since the employee is no longer entitled to any
compensation from the employer by reason of the
severance of his employment.
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Thus, the computation of the respondents'
backwages must be from the time of the illegal
dismissal from employment until the finality of the
decision ordering the payment of separation pay. It is
only when the NLRC rendered its July 31, 1998
decision ordering the payment of separation pay
(which both parties no longer questioned and which
thereafter became final) that the issue of the
respondents' employment with the petitioners was
decided with finality, effectively terminating it. The
respondents' backwages, therefore, must be
computed from the time of their illegal dismissal
until January 29, 1999, the date of finality of the
NLRC's July 31, 1998 Decision.
•PAL v. NLRC, G.R. No. 123294, October 20, 2010 –
EVY
DOCTRINE:
While the language of Article 279 of the
Labor Code is pregnant with the implication that a
legally dismissed employee is not entitled to
separation pay, the Court, in exceptional cases, has
granted separation pay to a legally dismissed
employee as act of “social justice” or based on
“equity.”
FACTS:
An investigating committee chaired by Leslie W.
Espino formally charged Quijano as Manager-ASAD in
connection with the processing and payment of
commission claims to Goldair Pty. Ltd. wherein PAL
overpaid commissions to the latter.
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Pending further investigation, the Espino Committee
placed Quijano under preventive suspension and at
the same time required her to submit her answer to
the charges.
Another Administrative charge involving the same
Goldair anomaly was filed, this time including
Committee Chairman Leslie W. Espino and
Committee Member Romeo R. Ines and several
others, for "gross incompetence and inefficiency,
negligence, imprudence, mismanagement, dereliction
of duty, failure to observe and/or implement
administrative and executive policies, and related
acts or omissions." Pending the result of investigation
by another committee chaired by Judge Martin S.
Ocampo, the PAL Board of Directors suspended
respondents.
The Ocampo Committee having submitted its
findings to the PAL Board of Directors, the latter
considered respondents resigned from the service
effective immediately, for loss of confidence and for
acts inimical to the interest of the company.
Her motion for reconsideration having been denied
by the Board, Quijano filed the instant case against
PAL for illegal suspension and illegal dismissal.
The Labor Arbiter dismissed private respondents
complaint. Undeterred, private respondent filed an
appeal before the NLRC which rendered the assailed
Decision vacated and set aside. Petitioner filed a
Motion for Reconsideration but this was denied by
the NLRC.
ISSUE: Whether or not respondent is entitled to
separation pay.
HELD:
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The language of Article 279 of the Labor Code is
pregnant with the implication that a legally
dismissed
employee is not entitled to
separation pay, to wit:
An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from
the time his compensation was withheld from him up
to the time of his actual
reinstatement.
However, in exceptional cases, this Court has granted
separation pay to a legally dismissed employee as an
act of "social justice" or based on "equity." In both
instances, it is required that the dismissal (1) was not
for serious misconduct; and (2) does not reflect on
the moral character of the employee or would
involve moral turpitude. This equitable and
humanitarian principle was first discussed by the
Court in the landmark case of Philippine Long
Distance Telephone Co. (PLDT) v. National
Labor Relations Commission.
Serious misconduct as a valid cause for the dismissal
of an employee is defined simply as improper or
wrong conduct. It is a transgression of some
established and definite rule of action, a forbidden
act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error of
judgment. To be serious within the meaning and
intendment of the law, the misconduct must be of
such grave and aggravated character and not merely
trivial or unimportant. However serious such
misconduct, it must, nevertheless, be in connection
with the employees work to constitute just cause for
his separation. The act complained of must be related
to the performance of the employees duties such as
would show him to be unfit to continue working for
the employer. On the other hand, moral turpitude has
been defined as "everything which is done contrary
to justice, modesty, or good morals; an act of
baseness, vileness or depravity in the private and
social duties which a man owes his fellowmen, or to
society in general,
contrary to justice, honesty,
modesty, or good morals."
In the case at bar, the transgressions imputed to
private respondent have never been firmly
established as deliberate and willful acts clearly
directed at making petitioner lose millions of pesos.
At the very most, they can only be characterized as
unintentional, albeit major, lapses in professional
judgment. Likewise, the same cannot be described as
morally reprehensible actions. Thus, private
respondent may be granted separation pay on the
ground of equity which this Court had defined as
"justice outside law, being ethical rather than jural
and belonging to the sphere of morals than of law. It
is grounded on the precepts of conscience and not on
any sanction of positive law, for equity finds no room
for application where there is law."
•Solidbank v. NLRC, G.R. No. 165951, March 30, 2010
– FAITH
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Doctrine:
Moreover, a review of jurisprudence relating
to the application of compassionate and social justice
i n granting financial assistance in labor cases shows
that the same has been generally used in instan ces
when an employee has been dismissed for a just
cause under Article 282 of the Labor Code and not
when an employee has been dismissed for an
authorized cause under Article 283.
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As a general rule, an employee who has been
dismissed for any of the just causes enumerated
under Article 282[26] of the Labor Code is not
entitled to separation pay.[27] Although by way of
exceptio n, the grant of separation pay or some other
financial assistance may be allowed to an employee
dis missed for just causes on the basis of equity.[28]
The reason that the law does not statutorily
grant separation pay or financial assistance in
instance s of termination due to a just cause is
precisely because the cause for termination is due to
the acts of the employee. In such instances, however,
this Court, inspired by compassionate and social
justic e, has in the past awarded financial assistance
to dismissed employees when circumstances warran
ted such an awad.
Facts:
Before this Court is a Petition for Review on
certiorari,[1] under Rule 45 of the Rules of Court. The
CA awar ded financial assistance to respondents
Rodolfo Bombita et al. out of compassionate justice
despite the fact that petitioner Solidbank Corporation
had already paid the respondents their separation
pay in accordance with Article 283 of the Labor Code.
The facts of the case are as follows:
Sometime in May 2000, petitioner decided to cease
its commercial banking operations and forthwith
surre ndered to the Bangko Central ng Pilipinas its
expanded banking license. As a result of petitioners
decision t o cease its operations, 1,867 of its
employees would be terminated.
Petitioner granted to its employees separation pay
equivalent to 150% of gross monthly pay per year of
ser vice, and cash equivalent of earned and accrued
vacation and sick leaves as a result of their dismissal.
Upon receipt of their separation pay, the employees
of petitioner, including respondents, individually
signed a Re lease, Waiver, and Quitclaim.[7]
On September 27, 2000, respondents filed with the
Labor Arbiter (LA) complaints for illegal dismissal,
und erpayment of separation pay, plus damages and
attorneys fees.
On July 22, 2002, the LA rendered a Decision[8]
ruling that respondents were validly terminated from
empl oyment as a result of petitioners decision to
cease its banking operations. The LA, however,
inspired by co mpassionate justice, awarded financial
assistance of one months salary to respondents.
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Both parties appealed the LAs Decision to the
National Labor Relations Commission (NLRC).
On October 29, 2002, the NLRC rendered a
Decision[10] affirming the findings of the LA that
respondents w ere validly terminated. The NLRC
ruled that the closure of a business is an authorized
cause sanctioned und er Article 283 of the Labor
Code and one that is ultimately a management
prerogative. The NLRC, however, modified the LAs
Decision by increasing the amount of financial
assistance to two months salary out of com
passionate justice.
Aggrieved by the NLRC Decision, petitioner then
appealed to the CA, specifically questioning the grant
of fin ancial assistance to respondents.
On May 28, 2004, the CA rendered a Decision
reversing the Decision of the NLRC. The CA shared
the view of the LA that respondents should only be
awarded one months salary as financial assistance
and not two mo nths salary as previously decreed by
the NLRC.
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Issue:
WON THERE IS NO LEGAL BASIS FOR THE COURT OF
APPEALS AWARD OF FINANCIAL ASSISTANCE EQUI
VALENT TO ONE-MONTHS SALARY TO THE
RESPONDENTS AFTER ITS FINDING THAT
SOLIDBANK HAS M ORE THAN COMPLIED WITH
THE MANDATE OF THE LAW ON PAYMENT OF
SEPARATION PAY.
Ruling: YES, no legal basis.
To begin with, the question of whether respondents
were dismissed for authorized cause is a question of
fa ct which is beyond the province of a petition for
review on certiorari.
Article 283 of the Labor Code provides:
ARTICLE 283. Closure of establishment and
reduction of personnel. - The employer may also
term inate the employment of any employee due to
the installation of labor-saving devices, redundancy,
retrench ment to prevent losses or the closing or
cessation of operation of the establishment or
undertaking unless t he closing is for the purpose of
circumventing the provisions of this Title, by serving
a written notice on the workers and the Ministry of
Labor and Employment at least one (1) month before
the intended date thereo f. In case of termination due
to the installation of labor-saving devices or
redundancy, the worker affected t hereby shall be
entitled to a separation pay equivalent to at least his
one (1) month pay or to at least one (1 ) month pay
for every year of service, whichever is higher. In case
of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment
or undertaking not due to serious business los ses or
financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half
(1
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/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be co
nsidered one (1) whole year.
Based on Article 283, in case of cessation of
operations, the employer is only required to pay his
employees a separation pay of one month pay or at
least one-half month pay for every year of service,
whichever is hig her. That is all that the law requires.
In the case at bar, petitioner paid respondents the
following: (a) separation pay computed at 150% of
their gross monthly pay per year of service; and (b)
cash equivalent of earned and accrued vacation and
sick leav es. Clearly, petitioner had gone over and
above the requirements of the law. Despite this,
however, petition er has been ordered to pay
respondents an additional amount, equivalent to one
months salary, as a form o f financial assistance.
After a thorough consideration of the circumstances
at bar, this Court finds that the award of financial
assis tance is bereft of legal basis and serves to
penalize petitioner who has complied with the
requirements of th e law.
Moreover, a review of jurisprudence relating to the
application of compassionate and social justice in
granti ng financial assistance in labor cases shows
that the same has been generally used in instances
when an em ployee has been dismissed for a just
cause under Article 282 of the Labor Code and not
when an employee has been dismissed for an
authorized cause under Article 283.
As a general rule, an employee who has been
dismissed for any of the just causes enumerated
under Article 282[26] of the Labor Code is not
entitled to separation pay.[27] Although by way of
exception, the grant of separation pay or some other
financial assistance may be allowed to an employee
dismissed for just causes on the basis of equity.[28]
The reason that the law does not statutorily grant
separation pay or financial assistance in instances of
ter mination due to a just cause is precisely because
the cause for termination is due to the acts of the
employe e. In such instances, however, this Court,
inspired by compassionate and social justice, has in
the past awar ded financial assistance to dismissed
employees when circumstances warranted such an
award.
Looking now at Article 283, this Court holds that the
same was drafted by the legislature, taking the best
int erest of laborers in mind. It is clear that the causes
of the termination of an employee under Article 283
are due to circumstances beyond their control, such
as when management decides to reduce personnel
based o n valid grounds, or when the employer
decides to cease operations. Thus, the bias towards
labor is very ap parent, as the employer is statutorily
required to pay separation pay, the amount of which
is also statutoril
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y prescribed.
While the CA should not be faulted for sympathizing
with the plight of respondents as they suddenly lost
th eir means of livelihood, this Court holds that it is
precisely because of the sudden loss of employment
− one that is beyond the control of labor − that the
law statutorily grants separation pay and dictates
how the sam
e should be computed. Thus, any business
establishment that decides to cease its operations
has the burde n of complying with the law. This Court
should refrain from adding more than what the law
requires, as the same is within the realm of the
legislature.
It bears to stress, however, that petitioner may, as it
has done, grant on a voluntary and ex gratia basis,
any amount more than what is required by the law,
but to insist that more financial assistance be given is
certai nly something that this Court cannot
countenance, as the same serves to penalize
petitioner, which has alre ady given more than what
the
•Escario v. NLRC, G.R. No. 160302, September 27,
2010 – MARCELO
PRINCIPLES:
(6) Separation pay is made an alternative relief
in lieu of reinstatement in certain circumstances, like:
(a) when reinstatement can no longer be effected in
view of the passage of a long period of time or
because of the realities of the situation; (b)
reinstatement is inimical to the employer’s interest;
(c) reinstatement is no longer feasible; (d)
reinstatement does not serve the best interests of the
parties involved; (e) the employer is prejudiced by
the workers’ continued employment; (f) facts that
make execution unjust or inequitable have
supervened; or (g) strained relations between the
employer and employee.
FACTS:
The petitioners were among the regular employees of
respondent Pinakamasarap Corporation (PINA), a
corporation engaged in manufacturing and selling
food seasoning. They were members of petitioner
Malayang Samahan ng mga Manggagawa sa Balanced
Foods (Union).
On March 13, 1993, all the officers and some 200
members of the Union walked out of PINA’s premises
and proceeded to the barangay office to show
support for Juanito Cañete, an officer of the Union
charged with oral defamation.
As a result of the walkout, PINA preventively
suspended all officers of the Union because of the
March 13, 1993 incident. PINA terminated the
officers of the Union after a month.
April 14, 1993, PINA filed a complaint for unfair labor
practice (ULP) and damages. The complaint was
assigned to then Labor Arbiter Raul Aquino, who
ruled in his decision dated July 13, 1994 that the
March
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13, 1993 incident was an illegal walkout constituting
ULP; and that all the Union’s officers, except Cañete,
had thereby lost their employment.
On August 18, 1998, Labor Arbiter rendered a
decision declaring the strike (the walking out of 200
employees) to be illegal.
On appeal, the NLRC sustained the finding that the
strike was illegal, but reversed the LA’s ruling that
there was abandonment.
On August 18, 2003, the CA affirmed the NLRC.13 In
denying the petitioners’ claim for full backwages, the
CA applied the third paragraph of Article 264(a)
instead of Article 279 of the Labor Code.
ISSUES:
WON the award of separation pay is proper
in this case.
WON the petitioner should be entitled to
backwages from date of dismissal until date of actual
reinstatement because they have not abandoned
their jobs.
HELD:
Separation pay is properly awarded.
The petitioners were ordered reinstated because
they were union members merely instigated or
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induced to participate in the illegal strike. By joining
the strike, they did not renounce their employment
relation with PINA but remained as its employees.
The absence from an order of reinstatement of an
alternative relief should the employer or a
supervening event not within the control of the
employee prevent reinstatement negates the very
purpose of the order. The judgment favorable to the
employee is thereby reduced to a mere paper victory,
for it is all too easy for the employer to simply refuse
to have the employee back. To safeguard the spirit of
social justice that the Court has advocated in favor of
the working man, therefore, the right to
reinstatement is to be considered renounced or
waived only when the employee unjustifiably or
unreasonably refuses to return to work upon being
so ordered or after the employer has offered to
reinstate him.27
However, separation pay is made an alternative relief
in lieu of reinstatement in certain circumstances, like:
(a) when reinstatement can no longer be effected in
view of the passage of a long period of time or
because of the realities of the situation; (b)
reinstatement is i nimical to the employer’s interest;
(c) reinstatement is no longer feasible; (d)
reinstatement does not serve the best interests of the
parties involved; (e) the employer is prejudiced by
the workers’ continued employment; (f) facts that
make execution unjust or inequitable have
supervened; or (g) strained relations between the
employer and employee.28
Here, PINA manifested that the reinstatement of the
petitioners would not be feasible because: (a) it
would "inflict disruption and oppression upon the
employer"; (b) "petitioners [had] stayed away" for
more than 15 years; (c) its machines had depreciated
and had been replaced with newer, better ones; and
(d) it now sold goods through independent
distributors, thereby abolishing the positions related
to sales and distribution.29
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Under the circumstances, the grant of separation pay
in lieu of reinstatement of the petitioners was
proper.1awph!1 It is not disputable that the grant of
separation pay or some other financial assistance to
an employee is based on equity, which has been
defined as justice outside law, or as being ethical
rather than jural and as belonging to the sphere of
morals than of law.30 This Court has granted
separation pay as a measure of social justice even
when an employee has been validly dismissed, as
long as the dismissal has not been due to serious
misconduct or reflective of personal integrity or
morality.31
What is the appropriate amount for separation pay?
In G & S Transport,32 the Court awarded separation
pay equivalent to one month salary per year of
service considering that 17 years had passed from
the time when the striking employees were refused
reinstatement. In Association of Independent Unions
in the Philippines v. NLRC,33 the Court allowed
separation pay equivalent to one month salary per
year of service considering that eight years had
elapsed since the employees had staged their illegal
strike.
Here, we note that this case has dragged for almost
17 years from the time of the illegal strike. Bearing in
mind PINA’s manifestation that the positions that the
petitioners used to hold had ceased to exist for
various reasons, we hold that separation pay
equivalent to one month per year of service in lieu of
reinstatement fully aligns with the aforecited rulings
of the Court on the matter.
Petitioners are not entitled to backwages despite
their reinstatement: A fair day’s wage for a fair day’s
labor.
The petitioners’ participation in the illegal strike was
precisely what prompted PINA to file a complaint to
declare them, as striking employees, to have lost
their employment status. However, the NLRC
ultimately ordered their reinstatement after finding
that they had not abandoned their work by joining
the illegal strike. They were thus entitled only to
reinstatement, regardless of whether or not the
strike was the consequence of the employer’s
ULP,19considering that a strike was not a
renunciation of the employment relation.20
As a general rule, backwages are granted to
indemnify a dismissed employee for his loss of
earnings during the whole period that he is out of his
job. Considering that an illegally dismissed employee
is not deemed to have left his employment, he is
entitled to all the rights and privileges that accrue to
him from the employment.21 The grant of backwages
to him is in furtherance and effectuation of the public
objectives of the Labor Code, and is in the nature of a
command to the employer to make a public
reparation for his illegal dismissal of the employee in
violation of the Labor Code.22
That backwages are not granted to employees
participating in an illegal strike simply accords with
the reality that they do not render work for the
employer during the period of the illegal strike.23
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According to G&S Transport Corporation v.
Infante:24
With respect to backwages, the principle of a "fair
day’s wage for a fair day’s labor" remains as the basic
factor in determining the award thereof. If there is no
work performed by the employee there can be no
wage or pay unless, of course, the laborer was able,
willing and ready to work but was illegally locked
out, suspended or dismissed or otherwise illegally
prevented from working. xxx In Philippine Marine
Officers’ Guild v. Compañia Maritima, as affirmed in
Philippine Diamond Hotel and Resort v. Manila
Diamond Hotel
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Employees Union, the Court stressed that for this
exception to apply, it is required that the strike be
legal, a situation that does not obtain in the case at
bar. (emphasis supplied)
The petitioners herein do not deny their
participation in the June 15, 1993 strike. As such,
they did not suffer any loss of earnings during their
absence from work. Their reinstatement sans
backwages is in order, to conform to the policy of a
fair day’s wage for a fair day’s labor.
Under the principle of a fair day’s wage for a fair
day’s labor, the petitioners were not entitled to the
wages during the period of the strike (even if the
strike might be legal), because they performed no
work during the strike. Verily, it was neither fair nor
just that the dismissed employees should litigate
against their employer on the latter’s time.25Thus,
the Court deleted the award of backwages and held
that the striking workers were entitled only to
reinstatement in Philippine Diamond Hotel and
Resort, Inc. (Manila Diamond Hotel) v. Manila
Diamond Hotel Employees Union,26 considering that
the striking employees did not render work for the
employer during the strike.
•Motorola Phils. v. Ambrocio G.R. No. 173279, March
20, 2009 – IMEE
DOCTRINE:
Separation pay has been defined as the
amount that an employee receives at the time of his
severance and is designed to provide the employee
with the wherewithal during the period he is looking
for another employment,[16] and is recoverable only
in the instances enumerated under Articles 283 and
284 of the Labor Code, as amended, or in illegal
dismissal cases when reinstatement is no longer
possible.
Retirement pay, on the other hand,
presupposes that the employee entitled to it has
reached the compulsory retirement age or has
rendered the required number of years as provided
for in the collective bargaining agreement (CBA), the
employment contract or company policy, or in the
absence thereof, in Republic Act No. 7641 or the
Retirement Law.
FACTS:
Sometime in 1997, Motorola Philippines, Inc. (MPI), a
subsidiary of Motorola U.S., decided to close its
Paraaque plant in order to consolidate its operations
at its Carmona, Cavite plant. It thus offered to its
affected employees a redundancy/separation
package
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Out of about 900 employees , 236 employees
including respondents herein, filed on July 24, 2001
two separate complaints against MPI , for payment of
retirement pay equivalent to one month salary per
year of service, alleging that they were entitled
thereto under Sec. III-B of MPIs Retirement Plan.[6]
For its part, MPI alleged that the applicable
retirement plan was not Sec. III-B, but Policy 1215,
specifically Sec. III par. 6 thereof which reads:
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In case of voluntary separation from the company
due to Labor Saving devices or redundancy,
retrenchment program initiated by the Company as a
result of a merger or to prevent losses or other
similar causes, the company shall provide a
separation pay equivalent to one (1) months pay per
year of service, inclusive of any service benefit
eligibility under the Retirement Plan.[7] (Italics and
underscoring supplied)
MPI thus insisted that respondents had already
received such one-month pay, the same having been
included in the cash componentof the
separation/redundancy package, which consisted of
two-months pay per year of service, paid to them.
Labor Arbiter Waldo Emerson Gan
(g) found MPI and its officers liable to
respondents for the payment of retirement pay
service benefits under Sec. III-B of the Retirement
Plan, as well as for interest thereon at 15% per
annum, moral and exemplary damages equivalent to
25% of the total monetary award in each case, and
attorneys fees equivalent to 15% of the total
monetary award in each case.
(h) In arriving at the decision, the Arbiter noted
that retirement pay is separate and distinct from
separation pay, hence, respondents were entitled to
their claim of another separate one-month pay per
year of service
MPI appealed to the NLRC, which move was opposed
by respondents, they alleging that the appeal was not
perfected since the surety bond was filed not by MPI
but by Motorola Communications Philippines, Inc.
(MCPI) for and in behalf of Motorola Philippines, Inc.
and/or SCG Corporation, and that the initial amount
of the bond posted was insufficient, being way below
the amount of the total monetary award.
Respondents opposition notwithstanding, the NLRC
gave due course to MPIs appeal by Resolution of
December 13, 2004, it holding that there is nothing in
the law which requires that only the employer can
post the appeal bond in order to perfect it, hence,
MCPI was not precluded from filing the same on
behalf of MPI and/or SCG Corporation.
NLRC
held that MPI was not liable for payment of the so-
called retirement service benefits under Sec. III-B of
the Retirement Plan,
In granting MPIs appeal and dismissing the
complaint of respondents, the NLRC held that the
benefits received by respondents for involuntary
separation under MPIs retirement plan included the
service pay benefits under either Sec. III-B of the
Retirement Plan or Policy 1215 which both grant
exactly the same benefit in case of involuntary
separation one months pay for every year of service.
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The NLRC added that retirement pay is due only if an
employee retires, and since none of respondents
retired but were actually involuntarily separated due
to redundancy, then they cannot avail of such pay.
The NLRC thus concluded that since respondents
availed of the separation package consisting of two
months pay for every year of service (as well as other
emoluments) under MPIs retirement plan and Article
283 of the Labor Code, as amended, they no longer
have any cause of action.
appellate court
reinstated the petition on respondents
motion for reconsideration. HENCE, this petition.
ISSUE:
WON the employees are entitled to the retirement
pay.
RULING:
NO, only separation pay.
respondents have no cause of action as against
petitioners with respect to their claim for additional
retirement benefits. Article 283 of the Labor Code, as
amended, provides:
ART. 283. Closure of establishment and reduction of
personnel. The employer may also terminate the
employment of any employee due to the installation
of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of
operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on
the workers and the [Department] of Labor and
Employment at least one (1) month before the
intended date thereof. In case of termination due to
the installation of labor-saving devices or
Page 96
redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his
one (1) month pay or to at least one (1) month pay
for every year of service, whichever is higher. In case
of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment
or undertaking not due to serious business losses or
financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever
is higher. A fraction of at least six (6) months shall be
considered one (1) whole year." (Emphasis supplied)
Separation pay has been defined as the amount that
an employee receives at the time of his severance and
is designed to provide the employee with the
wherewithal during the period he is looking for
another employment,[16] and is recoverable only in
the instances enumerated under Articles 283 and
284 of the Labor Code, as amended, or in illegal
dismissal cases when reinstatement is no longer
possible.
Retirement pay, on the other hand, presupposes that
the employee entitled to it has reached the
compulsory retirement age or has rendered the
required number of years as provided for in the
collective bargaining agreement (CBA), the
employment contract or company policy, or in the
absence thereof, in Republic Act No. 7641 or the
Retirement Law.
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It is admitted that respondents were terminated
pursuant to a redundancy, and not due to retirement
program, hence, they were entitled to a separation
pay of one month salary per year of service.
As correctly ruled by the NLRC, by whatever version
of MPIs Retirement Plan would be made applicable,
respondents are entitled to a separation pay of one
month salary per year of service. Under Sec. III-B of
the Plan on which respondents rely, [i]n case of
involuntary separation with the company due to
retrenchment/redundancy, the employee shall be
given a service benefit equivalent to one month per
year of service. On the other hand, based on Policy
1215 on which MPI relies, under the same
circumstances, the company shall provide its
employee a separation pay equivalent to one (1)
months pay per year of service, inclusive of any
service benefit eligibility under the Retirement Plan.
Thus, when respondents were paid a separation pay
of two months salary for every year of service under
the Redundancy Package, they already received what
was due them under the law and in accordance with
MPIs plan.
•Sec. 6, R.A. 9231
III.I
•Art. 287, Labor Code
•Serrano v. Santos Transit, G.R. No. 187698, August 9,
2010- KIRBY
Doctrine:
3. Even if petitioner as bus conductor was paid
on commission basis then, he falls within the
coverage of R.A. 7641 and its implementing rules. As
thus correctly ruled by the Labor Arbiter, petitioner’s
retirement pay should include the cash equivalent of
the 5-day SIL and 1/12 of the 13th month pay for a
total of 22.5 days.
4. The affirmance by the appellate court of the
reliance by the NLRC on R & E Transport, Inc. is
erroneous. In said case, the Court held that a taxi
driver paid according to the "boundary system" is not
entitled to the 13th month and the SIL pay, hence, his
retirement pay should be computed on the sole basis
of his salary.
5. For purposes, however, of applying the law
on SIL, as well as on retirement, the Court notes that
there is a difference between drivers paid under the
"boundary system" and conductors who are paid on
commission basis.
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In practice, taxi drivers do not receive fixed
wages. They retain only those sums in excess of the
"boundary" or fee they pay to the owners or
operators of the vehicles. Conductors, on the other
hand, are paid a certain percentage of the bus’
earnings for the day.
It bears emphasis that under P.D. 851 or the
SIL Law, the exclusion from its coverage of workers
who are paid on a purely commission basis is only
with respect to field personnel. The more recent case
of Auto Bus Transport Systems, Inc., v. Bautista
clarifies that an employee who is paid on purely
commission basis is entitled to SIL.
Facts:
After 14 years of service or on July 14, 2006,
petitioner applied for optional retirement from the
company whose representative advised him that he
must first sign the already prepared Quitclaim before
his retirement pay could be released. As petitioner’s
request to first go over the computation of his
retirement pay was denied, he signed the Quitclaim
on which he wrote “U.P.” (under protest) after his
signature, indicating his protest to the amount of
P75,277.45 which he received, computed by the
company at 15 days per year of service.
Petitioner soon after filed a complaint, alleging that
the company erred in its computation since under
Republic Act No. 7641, otherwise known as the
Retirement Pay Law, his retirement pay should have
been computed at 22.5 days per year of service to
include the cash equivalent of the 5-day service
incentive leave (SIL) and 1/12 of the 13th month pay
which the company did not.
The company maintained, however, that the
Quitclaim signed by petitioner barred his claim and,
in any event, its computation was correct since
petitioner was not entitled to the 5-day SIL and pro-
rated 13th month pay for, as a bus conductor, he was
paid on commission basis.
Issue: WON 22.5 days retirement pay per year of
service is the correct formula.
Held:
Republic Act No. 7641 which was enacted on
December 9, 1992 amended Article 287 of the Labor
Code by providing for retirement pay to qualified
private sector employees in the absence of any
retirement plan in the establishment. The pertinent
provision of said law reads:
Section 1. Article 287 of Presidential Decree No. 442,
as amended, otherwise known as the Labor Code of
the Philippines, is hereby amended to read as
follows:
In the absence of a retirement plan or agreement
providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of
sixty (60) years or more, but not beyond sixty-five
(4) years which is hereby declared the
compulsory retirement age, who has served at least
five (5) years in the said establishment, may retire
and shall be entitled to retirement pay equivalent to
at least one-half (1/2) month salary for every year of
service, a fraction of at least six (6) months being
considered as one whole year.
Unless the parties provide for broader inclusions, the
term one-half (1/2) month salary shall mean fifteen
(5) days plus one-twelfth (1/12) of the 13th
month pay and the cash equivalent of not more than
five (5) days of service incentive leaves.
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Admittedly, petitioner worked for 14 years for the
bus company which did not adopt any retirement
scheme. Even if petitioner as bus conductor was paid
on commission basis then, he falls within the
coverage of R.A. 7641 and its implementing rules. As
thus correctly ruled by the Labor Arbiter, petitioner’s
retirement pay should include the cash equivalent of
the 5-day SIL and 1/12 of the 13th month pay for a
total of 22.5 days.
The affirmance by the appellate court of the reliance
by the NLRC on R & E Transport, Inc. is erroneous. In
said case, the Court held that a taxi driver paid
according to the "boundary system" is not entitled to
the 13th month and the SIL pay, hence, his
retirement pay should be computed on the sole basis
of his salary.
For purposes, however, of applying the law on SIL, as
well as on retirement, the Court notes that there is a
difference between drivers paid under the "boundary
Page 98
system" and conductors who are paid on commission
basis.
In practice, taxi drivers do not receive fixed wages.
They retain only those sums in excess of the
"boundary" or fee they pay to the owners or
operators of the vehicles. Conductors, on the other
hand, are paid a certain percentage of the bus’
earnings for the day.
It bears emphasis that under P.D. 851 or the SIL Law,
the exclusion from its coverage of workers who are
paid on a purely commission basis is only with
respect to field personnel. The more recent case of
Auto Bus Transport Systems, Inc., v. Bautista clarifies
that an employee who is paid on purely commission
basis is entitled to SIL.
•Eligir v. PAL, G.R. No. 181995, July 16, 2012 – MEL
Doctrine:
It can be clearly inferred from the language
of the foregoing provision that it is applicable only to
a situation where (1) there is no CBA or other
applicable employment contract providing for
retirement benefits for an employee, or (2) there is a
CBA or other applicable employment contract
providing for retirement benefits for an employee,
but it is below the requirement set by law. The
rationale for the first situation is to prevent the
absurd situation where an employee, deserving to
receive retirement benefits, is denied them through
the nefarious scheme of employers to deprive
employees of the benefits due them under existing
labor laws. On the other hand, the second situation
aims to prevent private contracts from derogating
from the public law.
XXX
(c) Comparing the benefits under the two (2)
retirement schemes, it can readily be perceived that
the 22.5 days worth of salary for every year of
service provided under Article 287 of the Labor Code
cannot match the 240% of salary or almost two and a
half worth of monthly salary per year of service
provided under the PAL Pilots’ Retirement Benefit
Plan, which will be further added to the
P125,000.00 to which the petitioner is entitled under
the PAL-ALPAP Retirement Plan. Clearly then, it is to
the petitioner’s advantage that PAL’s retirement
plans were applied in the computation of his
retirement benefits.
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FACTS: Petitioner Bibiano C. Elegir (petitioner) was
hired by Philippine Airlines, Inc. (PAL) as a
commercial pilot. PAL embarked on a refleeting
program and acquired new and highly sophisticated
aircrafts. Subsequently, it sent an invitation to bid to
all its flight deck crew. The petitioner, who was then
holding the position of A-300 Captain, submitted his
bid and was fortunately awarded the same. The
petitioner, together with seven (7) other pilots, was
sent for training at Boeing in Seattle, Washington,
United States of America to acquire the necessary
skills and knowledge in handling the new aircraft.
After rendering twenty-five (25) years, eight (8)
months and twenty (20) days of continuous service,
the petitioner applied for optional retirement
authorized under the Collective Bargaining
Agreement (CBA) between PAL and the Airline Pilots
Association of the
Philippines (ALPAP), in which he was a member of
good standing. In response, PAL asked him to
reconsider his decision, asseverating that the
company has yet to recover the full value of the costs
of his training. It warned him that if he leaves PAL
before he has rendered service for at least three (3)
years, it shall be constrained to deduct the costs of
his training from his retirement pay.7
The petitioner went on terminal leave for thirty (30)
days and thereafter made effective his retirement
from service. Upon securing his clearance, however,
he was informed that the costs of his training will be
deducted from his retirement pay, which will be
computed at the rate of P 5,000.00 per year of
service. The petitioner, through his counsel, sent PAL
a correspondence, asserting that his retirement
benefits should be based on the computation stated
in Article 287 of the Labor Code, as amended by
Republic Act (R.A.) No. 7641, and that the costs of his
training should not be deducted therefrom. PAL
refused to yield to the petitioner’s demand and
maintained that his retirement pay should be based
on PAL-ALPAP Retirement Plan of 1967 (PAL-ALPAP
Retirement Plan) and that he should reimburse the
company with the proportionate costs of his training.
Thus, petitioner filed a complaint for non-payment of
retirement pay, moral damages, exemplary damages
and attorney’s fees against PAL.
Labor Arbiter: Applied the CBA provision in
computing the retirement benefits , a total of P
4,150,106.20.
NLRC: The retirement benefits of petitioner should,
therefore, be computed in accordance with both
Article 287 of the Labor Code and the Retirement
Plan in the CBA of PAL and ALPAP, amounting to
P1,466,769.84.
Page 99

CA: The retirement benefits of petitioner Capt.
Bibiano Elegir shall be based on the 1967 PAL-ALPAP
Retirement Plan and the PAL Pilots Retirement
Benefit Plan and the balance still due him, pegged at
P385,730.97.
ISSUE: Whether the petitioner’s retirement benefits
should be computed based on Article 287 of the
Labor Code or on PAL’s retirement plans.
RULING: The petitioner’s retirement pay should be
computed based on PAL’s retirement plans.
It bears reiterating that there are only two
retirement schemes at point in this case: (1) Article
287 of the Labor Code, and; (2) the PAL-ALPAP
Retirement Plan and the PAL Pilots’ Retirement
Benefit Plan. The two retirement schemes are
alternative in nature such that the retired pilot can
only be entitled to that which provides for superior
benefits.
Article 287 of the Labor Code states:
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Art. 287. Retirement. - Any employee may be retired
upon reaching the retirement age established in the
collective bargaining agreement or other applicable
employment contract.
In case of retirement, the employee shall be entitled
to receive such retirement benefits as he may have
earned under existing laws and any collective
bargaining agreement and other agreements:
provided, however, that an employee’s retirement
benefits under any collective bargaining and other
agreements shall not be less than those provided
herein.
In the absence of a retirement plan or agreement
plan providing for retirement benefits of employees
in the establishment, an employee upon reaching the
age of sixty (60) years or more, but not beyond sixty-
five
4) years which is hereby declared as the
compulsory retirement age, who has served at least
five (5) years in the said establishment, may retire
and shall be entitled to retirement pay equivalent to
at least one-half (1/2) month salary for every year of
service, a fraction of at least six (6) months being
considered as one whole year.
Unless the parties provide for broader inclusions, the
term ‘one-half (1/2) month salary’ shallmean fifteen
3) days plus one-twelfth (1/12) of the 13th
month pay and the cash equivalent of not more than
five (5) days of service incentive leaves. x x x
(Emphasis supplied)
It can be clearly inferred from the language of the
foregoing provision that it is applicable only to a
situation where (1) there is no CBA or other
applicable employment contract providing for
retirement benefits for an employee, or (2) there is a
CBA or other applicable employment contract
providing for retirement benefits for an employee,
but it is below the requirement set by law. The
rationale for the first situation is to prevent the
absurd situation where an employee, deserving to
receive retirement benefits, is denied them through
the nefarious scheme of employers to deprive
employees of the benefits due them under existing
labor laws. On the other hand, the second situation
aims to prevent private contracts from derogating
from the public law.
Consistent with the purpose of the law, the CA
correctly ruled for the computation of the
petitioner’s retirement benefits based on the two (2)
PAL retirement plans because it is under the same
that he will reap the most benefits. Under the PAL-
ALPAP Retirement Plan, the petitioner, who qualified
for late retirement after rendering more than twenty
(20) years of service as a pilot, is entitled to a lump
sum payment of P125,000.00 for his twenty-five (25)
years of service to PAL.
Section 2, Article VII of the PAL-ALPAP Retirement
Plan provides:
Section 2. Late Retirement. Any member who
remains in the service of the company after his
normal retirement date may retire either at his
option or at the option of the Company, and when so
retired he shall be entitled either: (a) to a lump sum
payment of P5,000.00 for each completed year of
service rendered as a pilot, or (b) to such termination
pay benefits to which he may be entitled under
existing laws, whichever is the greater amount.24
Apart from the abovementioned benefit, the
petitioner is also entitled to the equity of the
retirement fund under PAL Pilots’ Retirement Benefit
Plan, which pertains to the retirement fund raised
from contributions exclusively from PAL of amounts
equivalent to 20% of each pilot’s gross monthly pay.
Each pilot stands to receive the full amount of the
contribution upon his retirement which is equivalent
to 240% of his gross monthly income for every year
of service he rendered to PAL. This is in addition to
the amount of not less than P100,000.00 that he shall
receive under the PAL-ALPAP Retirement Plan.
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Comparing the benefits under the two (2) retirement
schemes, it can readily be perceived that the 22.5
days worth of salary for every year of service
provided under Article 287 of the Labor Code cannot
match the 240% of salary or almost two and a half
worth of monthly salary per year of service provided
under the PAL Pilots’ Retirement Benefit Plan, which
will be further added to the P125,000.00 to which the
petitioner is entitled under the PAL-ALPAP
Retirement Plan. Clearly then, it is to the petitioner’s
advantage that PAL’s retirement plans were applied
in the computation of his retirement benefits.
•Grace Christian School v. Lavandera, G.R. No.
177845, August 20, 2014 – LOURDES
Doctrine:
4) "an employee’s retirement benefits under
any collective bargaining [agreement (CBA)] and
other agreements shall not be less than those
provided" under the same – that is, at least onehalf
(1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as
one whole year – and that "[u]nless the parties
provide for broader inclusions, the term one-half
(1/2) month salary shall mean fifteen (15) days plus
one-twelfth (1/12) of the 13th month pay and the
cash equivalent of not more than five (5) days of
service incentive leaves."
5) The foregoing provision is applicable where
(a) there is no CBA or other applicable agreement
providing for retirement benefits to employees, or
(b) there is a CBA or other applicableagreement
providing for retirement benefits but it is below the
requirement set by law.33 Verily, the determining
factor in choosing which retirement scheme to apply
is still superiority in terms of benefits provided.
FACTS:
Filipinas was employed by petitioner Grace Christian
High School (GCHS) as high school teacher since
June1977, with a monthly salary of 18,662.00 as of
May 31, 2001.4
On August 30, 2001,5 Filipinas filed a complaint for
illegal (constructive) dismissal, non-payment of
service incentive leave (SIL) pay, separation pay,
service allowance, damages, and attorney’s fees
against GCHS6 and/or its principal,7 Dr. James Tan.
She alleged that on May 11, 2001, she was informed
that her serviceswere to be terminated effective May
31, 2001, pursuant to GCHS’ retirement plan which
gives the school the option to retire a teacher who
has rendered at least 20 years of service, regardless
of age, with a retirement pay of one-half (½) month
for every year of service. At that time, Filipinas was
only 58 years old and still physically fit to work. She
pleaded with GCHS toallow her to continue teaching
but her services were terminated,8 contrary to the
provisions of Republic Act No. (RA) 7641,9 otherwise
known as the "Retirement Pay Law."
For their part, GCHS denied that they illegally
dismissed Filipinas. They asserted that the latter was
considered retired on May 31, 1997 after having
rendered 20 years of service pursuant to GCHS’
retirement plan and that she was duly advised that
her retirement benefits in the amount of 136,210.00
based on her salary atthe time of retirement, i.e.,
13,621.00, had been deposited to the trustee-bank in
her name. Nonetheless, her services were retained on
a yearly basis until May 11, 2001 when she was
informed that her year-to-year contract would no
longer be renewed.
the Labor Arbiter (LA) dismissed the illegal dismissal
complaint for lack of merit.
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The LA found that GCHS has a retirement plan for its
faculty and non-faculty members which pertinently
provides:
ARTICLE X
RETIREMENT DATES12
Section 1. Normal Retirement Date– For qualified
members of the Plans, the normal retirement date
shall be the last day of the month during which he
attains age sixty (60) regardless of length of service
or upon completion of 20 years of service unless
extended at the option of the School. Such extension
is subject tothe approval of the School on a case to
case and year to year basis. The School reserves the
right to require an employee before it approveshis
application for an extension of service beyond the
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normal retirement date, to have a licensed physician
appointed by the School, certify that the employee
concerned has no physical and/or mental
impediments which will prevent the employee from
performing the duties in the School.
Nonetheless, the LA found the retirement benefits
payable under GCHS retirement plan to be deficient
vis-à-vis those provided under RA 7641,17 and,
accordingly, awarded Filipinas retirement pay
differentials based on her latest salaryas follows:
P 18,662.00/30 = P 622.06/day
P 622.06 x 22.5 = P 13,996.35 x 20 = P
279,927.00 18
- P136,210.00
P143,717.00
GCHS filed an appeal before the NLRC.
the NLRC set aside the LA’s award, and ruled that
Filipinas’ retirement pay should be computed based
on her monthly salary at the time of her retirementon
May 31, 1997, i.e., 13,621.00. Moreover, it held that
under Article 287 of the Labor Code, as amended by
RA 7641, the retirement package consists of 15 days
salary, plus 13th month pay and SIL pay pro-rated to
their one-twelfth (1/12) equivalent.21
In view of the foregoing, the NLRC awarded Filipinas
retirement pay differentials in the amount of
27,057.20consisting of one-twelfth (1/12) of the
13th month pay and SIL pay based on her salary at
the time of her retirement on May 31, 1997, or
13,621.00 multiplied by 20 years.
the CA affirmed with modification the NLRC’s
Decision. It held that the Court, in the case of Capitol
Wireless, Inc.v. Sec. Confesor,24 has simplified the
computation of "one-half month salary" by equating
it to"22.5 days" which is "arrived at after adding 15 the rules on retirement pay to qualified private
days plus 2.5 days representing one-twelfth of the sector employees in the absence of any retirement
13th month pay, plus 5 days of [SIL]."25 Accordingly, plan in the establishment. The said law32 states that
it computed Filipinas’ retirement benefits differential "an employee’s retirement benefits under any
as follows: collective bargaining [agreement (CBA)] and other
agreements shall not be less than those provided"
under the same
Monthly salary P 13,624.00 26
÷ 30 days ÷ 30 days – that is, at least onehalf (1/2) month salary for every
year of service, a fraction of at least six (6) months
Daily rate P 454.13 27 being considered as one whole year – and that
"[u]nless the parties provide for broader inclusions,
the term one-half (1/2) month salary shall mean
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Page 129
The foregoing provision is applicable where (a) there
LABOR LAW REVIEW (Atty. Amando Virgil Ligutan) is no CBA or other applicable agreement providing
for retirement benefits to employees, or (b) there is a
Case Digests for Weeks 3, 4 ,5 and 6 CBA or other applicableagreement providing for
retirement benefits but it is below the requirement
set by law.33 Verily, the determining factor in
x 22.5 days x 22.5 days choosing which retirement scheme to apply is still
1/2 month salary28 P 10,218.00 superiority in terms of benefits provided.
x 20 years x 20 years In the present case, GCHS has a retirement plan for
its faculty and non-faculty members, which gives it
Total amount of retirement benefits P the option to retire a teacher who has rendered at
204,360.00 least 20 years of service, regardless of age, with a
- Amount deposited in trust P 136,210.00 retirement pay of one-half (1/2) month for every
year ofservice. Considering, however, that GCHS
Retirement benefits differential P 68,150.00 computed Filipinas’
retirement pay without including one-twelfth (1/12)
of her 13th month pay and the cash equivalent of her
ISSUE: whether or not the CA committed reversible
error in using the multiplier "22.5 days" in five (5) days SIL, both the NLRC and the CA correctly
computing the retirement pay differentials of ruled that Filipinas’ retirement benefits should be
Filipinas.
computed in accordance withArticle 287 of the Labor
RULING: NO. Code, as amended by RA 7641, being the more
beneficent retirement scheme. They differ, however,
RA 7641, which was enacted on December 9, 1992, in the resulting benefit differentials due to divergent
amended Article 287 of the Labor Code, providing for
Page 102
interpretations of the term "one-half (1/2) month
salary" as used under the law.
•Unilever v. Rivera, G.R. No. 201701, June 3, 2013 –
MAE CLAIRE
Doctrine:
Separation pay shall be allowed as a measure
of social justice only in those instances where the
employee is validly dismissed for causes other than
serious misconduct or those reflecting on his moral
character.
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Facts:
Unilever is a company engaged in the production,
manufacture, sale, and distribution of various food,
home and personal care products, while Rivera was
employed as its Area Activation Executive for Area 9.
She was primarily tasked with managing the sales,
distribution and promotional activities in her area
and supervising Ventureslink, a third party service
provider for the company’s activation projects.
Unilever enforces a strict policy that every trade
activity must be accompanied by a Trade
Development Program (TDP) and that the allocated
budget for a specific activity must be used for such
activity only.
Sometime i n 2007, Unilever’s internal auditor found
out that there were fictitious billings and fabricated
receipts supposedly from Ventureslink amounting to
P11,200,000.00 and some funds were diverted from
the original intended projects. Ventureslink reported
that the fund deviations were upon the instruction of
Rivera.
Unilever issued a show-cause notice to Rivera asking
her to explain the following charges, to wit: a)
Conversion and Misappropriation of Resources; b)
Breach of Fiduciary Trust; c) Policy Breaches; and d)
Integrity Issues.
Rivera admitted the fund diversions, but explained
that such actions were mere resourceful utilization of
budget because of the difficulty of procuring funds
from the head office.
Unilever found Rivera guilty of serious breach of the
company’s Code of Business Principles compelling it
to sever their professional relations. Rivera asked for
reconsideration and requested Unilever to allow her
to receive retirement benefits having served the
company for fourteen (14) years already. Unilever
denied her request, reasoning that the forfeiture of
retirement benefits was a legal consequence of her
dismissal from work. Rivera filed a complaint for
Illegal Dismissal and other monetary claims against
Unilever.
The Labor Arbiter dismissed her complaint for lack of
merit and denied her claim for retirement benefits,
but ordered Unilever to pay a proportionate 13th
month pay and the corresponding cash equivalent of
her unused leave credits
The NLRC held that although she was legally
dismissed from the service for a just cause, Unilever
was guilty of violating the twin notice requirement in
labor cases. It modified its earlier ruling by deleting
the award of separation pay and reducing the
nominal damages from P30,000.00 to P20,000.00,
but affirmed the award of retirement benefits to
Rivera.
Unilever elevated the case to CA via a petition for
certiorari under Rule 65 of the Rules of Court.
The CA explained that under Unilever’s Retirement
Plan, a validly dismissed employee cannot claim any
retirement benefit regardless of the length of service.
Thus, Rivera is not entitled to any retirement benefit.
However, it ruled that there was no proof that she
personally gained any pecuniary benefit from her
infractions. For said reason, the CA awarded
separation pay in her favor as a measure of social
justice.
Issue:
Whether or not a validly dismissed employee, like
Rivera, is entitled to an award of separation pay.
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SC Ruling:
No.
Page 103
As a general rule, an employee who has been
dismissed for any of the just causes enumerated
under Article 282 of the Labor Code is not entitled to
a separation pay. Section 7, Rule I, Book VI of the
Omnibus Rules Implementing the Labor Code
provides:
Sec. 7. Termination of employment by employer. —
The just causes for terminating the services of an
employee shall be those provided in Article 282 of
the Code. The separation from work of an employee
for a just cause does not entitle him to the
termination pay provided in the Code, without
prejudice, however, to whatever rights, benefits and
privileges he may have under the applicable
individual or collective agreement with the employer
or voluntary employer policy or practice.
In exceptional cases, however, the Court has granted
separation pay to a legally dismissed employee as an
act of "social justice" or on "equitable grounds." In
both instances, it is required that the dismissal (1)
was not for serious misconduct; and (2) did not
reflect on the moral character of the employee.
The leading case of Philippine Long Distance
Telephone Co. vs. NLRC is instructive on this point:
We hold that henceforth separation pay shall be
allowed as a measure of social justice only in those
instances where the employee is validly dismissed
for causes other than serious misconduct or those
reflecting on his moral character. Where the reason
for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude,
like theft or illicit sexual relations with a fellow
worker, the employer may not be required to give the
dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the
ground of social justice.
In Toyota Motor Philippines Corporation Workers
Association (TMPCWA) v. National Labor Relations
Commission, it was further elucidated that "in
addition to serious misconduct, in dismissals based
on other grounds under Art. 282 like willful
disobedience, gross and habitual neglect of duty,
fraud or willful breach of trust, and commission of a
crime against the employer or his family, separation
pay should not be conceded to the dismissed
employee.”
In Reno Foods, Inc, v. Nagkakaisang Lakas ng
Manggagawa (NLM)-Katipunan, the Court wrote that
"separation pay is only warranted when the cause for
termination is not attributable to the employee’s
fault, such as those provided in Articles 283 and 284
of the Labor Code, as well as in cases of illegal
dismissal in which reinstatement is no longer
feasible. It is not allowed when an employee is
dismissed for just cause.”
In this case, Rivera was dismissed from work because
she intentionally circumvented a strict company
policy, manipulated another entity to carry out her
instructions without the company’s knowledge and
approval, and directed the diversion of funds, which
she even admitted doing under the guise of
shortening the laborious process of securing funds
for promotional activities from the head office. These
transgressions were serious offenses that warranted
her dismissal from employment and proved that her
termination from work was for a just cause. Hence,
she is not entitled to a separation pay.
Rivera did not appeal the ruling of the NLRC
disallowing the award of separation pay to her. It was
Unilever who elevated the case to the CA. A party
who does not appeal, or file a petition for certiorari,
is not entitled to any affirmative relief. Due process
prevents the grant of additional awards to parties
who did not appeal. An appellee who is not an
appellant may assign errors in his brief where his
purpose is to maintain the judgment, but he cannot
seek modification or reversal of the judgment or
claim affirmative
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relief unless he has also appealed. It was, therefore,
erroneous for the CA to grant an affirmative relief to
Rivera who did not ask for it.
Rivera is entitled to nominal damages.
Section 2, Rule XXIII, Book V of the Rules
Implementing the Labor Code expressly states:
Section 2. Standard of due process: requirements of
notice.
— In all cases of termination of employment, the
following standards of due process shall be
substantially observed.
I. For termination of employment based on just
causes as defined in Article 282 of the Code:
(a) A written notice served on the employee
specifying the ground or grounds for termination,
and giving to said employee reasonable opportunity
within which to explain his side;
(b) A hearing or conference during which the
employee concerned, with the assistance of counsel if
the employee so desires, is given opportunity to
respond to the charge, present his evidence or rebut
the evidence presented against him; and
(c) A written notice of termination served on the
employee indicating that upon due consideration of
all the circumstance, grounds have been established
to justify his termination.
Page 104

In case of termination, the foregoing notices shall be
served on the employee’s last known address.
King of Kings Transport, Inc. v. Mamac detailed the
steps on how procedural due process can be
satisfactorily complied with. Thus:
To clarify, the following should be considered in
terminating the services of employees:
5) The first written notice to be served on the
employees should contain the specific causes or
grounds for termination against them, and a directive
that the employees are given the opportunity to
submit their written explanation within a reasonable
period. "Reasonable opportunity" under the Omnibus
Rules means every kind of assistance that
management must accord to the employees to enable
them to prepare adequately for their defense. This
should be construed as a period of at least five (5)
calendar days from receipt of the notice to give the
employees an opportunity to study the accusation
against them, consult a union official or lawyer,
gather data and evidence, and decide on the defenses
they will raise against the complaint. Moreover, in
order to enable the employees to intelligently
prepare their explanation and defenses, the notice
should contain a detailed narration of the facts and
circumstances that will serve as basis for the charge
against the employees. A general description of the
charge will not suffice. Lastly, the notice should
specifically mention which company rules, if any, are
violated and/or which among the grounds under Art.
282 is being charged against the employees.
6) After serving the first notice, the employers
should schedule and conduct a hearing or conference
wherein the employees will be given the opportunity
to: (1) explain and clarify their defenses to the charge
against them; (2) present evidence in support of their
defenses; and (3) rebut the evidence presented
against them by the management. During the hearing
or conference, the employees are given the chance to
defend themselves personally, with the assistance of
a representative or counsel of their choice. Moreover,
this conference or hearing could be used by the
parties as an opportunity to come to an amicable
settlement.
7) After determining that termination of
employment is justified, the employers shall serve
the employees a written notice of termination
indicating that: (1) all circumstances involving the
charge against the employees have been considered;
and (2) grounds have been established to justify the
severance of their employment.
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In this case, Unilever was not direct and specific in its
first notice to Rivera. The words it used were
couched in general terms and were in no way
informative of the charges against her that may result
in her dismissal from employment. There was a
violation of her right to statutory due process
warranting the payment of indemnity in the form of
nominal damages.
III.J.1
•Art. 135, Labor Code
•Chapter II, Sec. 4 (b), R.A. 9710, Magna Carta of
Women
•Rule II, Sec. 7 (c), Implementing Rules of R.A. 9710
•Rule V, Sec. 25, Implementing Rules of R.A. 9710
III.J.2
•Art. 136, Labor Code
•See Philippine Telegraph v. NLRC, G.R. No. 118978,
May 23, 1997
•See Duncan v. Glaxo, G.R. No. 162994, September 17,
2004
• Star Paper v. Simbol, G.R. No. 164774, April
12, 2006 – MARGARET
Doctrine:
Facts:
Star Paper Corporation is engaged in trading of paper
products. Its company policies include that:
New applicants will not be hired if in case
he/she has [a] relative, up to [the] 3rd degree of
relationship, already employed by the company.
In case of two of our employees (both single,
one male and another female) developed a friendly
relationship during the course of their employment
Page 105
and then decided to get married, one of them should
resign to preserve the policy stated above.
The respondents alleged that when they married co-
employees, they were compelled to resign because of
the company policy. Arguing that said policy is illegal,
they lodged a complaint for illegal dismissal and
unfair labor practice. More specifically:
On October 27, 1993, Simbol was hired by
the company. He met Alma Dayrit, also an employee
of the company. He married her on June 27, 1998.
Prior to the marriage, Ongsitco advised the couple
that should they decide to get married, one of them
should resign pursuant to a company policy
promulgated in 1995. Simbol resigned on June 20,
1998.
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On February 5, 1997, Comia was hired by the
company. She met Howard, a co-employee whom she
married on June 1, 2000. Ongsitco likewise reminded
them pursuant to the aforementioned company
policy. Comia resigned on June 30, 2000.
Simbol and Comia alleged that they did not
resign voluntarily; they were compelled to resign in
view of an illegal company policy.
Issue:
In the Philippines we employ the standard of
Whether the policy of the employer banning spouses reasonableness of the company policy which is
from working in the same company violates the parallel to the bona fide occupational qualification
rights of the employee under the Constitution and the requirement. xxx In the case at bar, there is no a
Labor Code or is a valid exercise of management reasonable business necessity. The employees were
prerogative hired after they were found fit for the job, but were
asked to resign when they married a co-employee.
Ruling: Star Paper failed to show how the marriages of the
employees could be detrimental to its business
No. The Court of Appeals did not err in holding that operations.
the subject 1995 policy/ regulation is violative of the
constitutional rights towards marriage and the family
of employees and of Article 136 of the Labor Code,
which provides:
It shall be unlawful for an employer to require as a III.J.3
condition of employment or continuation of
employment that a woman employee shall not get •Art. 137, Labor Code
married, or to stipulate expressly or tacitly that upon
getting married a woman employee shall be deemed
resigned or separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a
woman employee merely by reason of her marriage.
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occupational qualification (BFOQ) exception, that is,
unless the employer can prove that the reasonable
demands of the business require a distinction based
on marital status and there is no better available or
acceptable policy which would better accomplish the
business purpose, an employer may not discriminate
against an employee based on the identity of the Page 135
employee’s spouse.
LABOR LAW REVIEW (Atty. Amando Virgil Ligutan)
And to justify a bona fide occupational qualification,
the employer must prove two factors: Case Digests for Weeks 3, 4 ,5 and 6
that the employment qualification is
reasonably related to the essential operation of the •Del Monte v. Velasco, G.R. No. 153477, March 6,
job involved; and (2) that there is a factual basis for 2007 – JESON
believing that all or substantially all persons meeting
the qualification would be unable to properly Doctrine:
perform the duties of the job.
Facts:
Page 106

Petitioner Del Monte Phils. repeatedly warned Lolita
Velasco in writing due to her excessive absences
without permission. A notice of hearing was sent to
her notifying her of the charges filed against her for
violating the Absence Without Official Leave rule. She
failed to appear; and thus she was terminated.
She explained that she underwent a check-up from
the company doctor who advised her to have "rest-
in-quarters" on account of a pregnancy-related
sickness. She attempted to file leaves of absence but
the petitioner’s supervisor refused to receive them.
Issue:
Whether or not the petitioner as illegally dismissed
Rulings:
Yes.
The respondent’s sickness was pregnancy-related
and, therefore, the petitioner cannot terminate
respondent’s services because in doing so, petitioner
will, in effect, be violating the Labor Code which
prohibits an employer to discharge an employee on
account of the latter’s pregnancy.
Del Monte Phils. cannot terminate Velasco’s services
because in doing so, will be a violation of Art 137 of
the Labor Code which prohibits an employer to
discharge an employee on account of the latter’s
pregnancy.
Art. 137. Prohibited acts. – It shall be unlawful for
any employer:
Xxx
• To discharge such woman on account of her
pregnancy, while on leave or in confinement due to
her pregnancy;
Totality of the infractions rule to justify dismissal not
applicable Petitioner puts much emphasis on
respondent’s "long history" of unauthorized absences
committed several years beforehand. The undeniable
fact is that during her complained absences, she was
pregnant and suffered related illnesses. Again, it
must be stressed that respondent’s discharge by
reason of absences caused by her pregnancy is
covered by the prohibition under the Labor Code.
Since her last string of absences is justifiable and had
been subsequently explained, the petitioner had no
legal basis in considering these absences together
with her prior infractions as gross and habitual
neglect.
Nota bene:
The respondent gave emphasis on Filflex ruling as
justification for the dismissal. In this case, the
employee is dismissed due to unreasonable absences
as a result of an illness. However, the Court did not
gave
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credence to the argument ruling that the instant case
did not squarely falls with the Filflex case. The Court
lamented:
The Filflex ruling is not applicable, principally
because the nature and gravity of the illness involved
in that case – chronic asthmatic bronchitis – are
different from the conditions that are present in the
instant case, which is pregnancy and its related
illnesses.
III.J.4
•R.A. 7877, February 14, 1995
•Implementing Rules of R.A. 7877
•Domingo v. Rayala, G.R. No. 155831, February 18,
2008 - RAMON
DOCTRINES:
• Sexual harassment is an imposition of
misplaced "superiority" which is enough to dampen
an employee’s spirit and her capacity for
advancement. It affects her sense of judgment; it
changes her life.1
• ." But it is not necessary that the demand,
request or requirement of a sexual favor be
articulated in a categorical oral or written statement.
It may be discerned, with equal certitude, from the
acts of the offender. Holding and squeezing
Domingo’s shoulders, running his fingers across her
neck and tickling her ear, having inappropriate
conversations with her, giving her money allegedly
for school expenses with a promise of future
privileges, and making statements with unmistakable
sexual overtones – all these acts of Rayala resound
with deafening clarity the unspoken request for a
sexual favor.
• Likewise, contrary to Rayala’s claim, it is not
essential that the demand, request or requirement be
made as a condition for continued employment or for
promotion to a higher position. It is enough that the
respondent’s acts result in creating an intimidating,
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hostile or offensive environment for the employee.45
That the acts of Rayala generated an intimidating and
hostile environment for Domingo is clearly shown by
the common factual finding of the Investigating
Committee, the OP and the CA that Domingo reported
the matter to an officemate and, after the last
incident, filed for a leave of absence and requested
transfer to another unit.
FACTS:
All three petitions stem from the same factual
antecedents.
On November 16, 1998, Ma. Lourdes T. Domingo
(Domingo), then Stenographic Reporter III at the
NLRC, filed a Complaint for sexual harassment
against Rayala before Secretary Bienvenido
Laguesma of the Department of Labor and
Employment (DOLE).
After the last incident narrated, Domingo filed for
leave of absence and asked to be immediately
transferred. Thereafter, she filed the Complaint for
sexual harassment on the basis of Administrative
Order No. 250, the Rules and Regulations
Implementing RA 7877 in the Department of Labor
and Employment.
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Upon receipt of the Complaint, the DOLE Secretary
referred the Complaint to the OP, Rayala being a
presidential appointee. The OP, through then
Executive Secretary Ronaldo Zamora, ordered
Secretary Laguesma to investigate the allegations in
the Complaint and create a committee for such
purpose. On December 4, 1998, Secretary Laguesma
issued Administrative Order (AO) No. 280, Series of
1998,5 constituting a Committee on Decorum and
Investigation (Committee) in accordance with
Republic Act (RA) 7877, the Anti-Sexual Harassment
Act of 1995.6
The Committee heard the parties and received their
respective evidence. On March 2, 2000, the
Committee submitted its report and
recommendation to Secretary Laguesma. It found
Rayala guilty of the offense charged and
recommended the imposition of the minimum
penalty provided under AO 250, which it erroneously
stated as suspension for six (6) months.
WHEREFORE, in view of the foregoing, respondent
Rogelio I. Rayala, Chairman, National Labor Relations
Commission, is found guilty of the grave offense of
disgraceful and immoral conduct and is
herebyDISMISSED from the service effective upon
receipt of this Order.
Rayala filed a Motion for Reconsideration, which the
OP denied in a Resolution. He then filed a Petition for
Certiorari and Prohibition with Prayer for
Temporary Restraining Order under Rule 65.
However, the same was dismissed in a Resolution
dated June 26, 2000 for disregarding the hierarchy of
courts.10
The CA rendered its Decision13 on December 14,
2001. It held that there was sufficient evidence on
record to create moral certainty that Rayala
committed the acts he was charged with
Dismissed for disgraceful and immoral conduct in
violation of RA 6713, the Code of Conduct and Ethical
Standards for Public Officials and Employees. Rayala
timely filed a Motion for Reconsideration.
Rayala timely filed a Motion for Reconsideration.
Justices Vasquez and Tolentino voted to affirm the
December 14 Decision. However, Justice Reyes
dissented mainly because AO 250 states that the
penalty imposable is suspension for six (6) months
and one (1) day.16 Pursuant to the internal rules of
the CA, a Special Division of Five was constituted.17
In its October 18, 2002 Resolution, the CA modified
its earlier Decision:
ACCORDINGLY, the Decision dated December [14],
2001 is MODIFIED to the effect that the penalty of
dismissal is DELETED and instead the penalty of
suspension from service for the maximum period of
one (1) year is HEREBY IMPOSED upon the
petitioner. The rest of the challenged decision stands.
Meanwhile, the Republic filed a Motion for
Reconsideration of the CA, but was denied.
ISSUES
Whether or not Rayala is of sexual
harassment?
If he did, what is the applicable penalty?
RULING:
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1.
Rayala argues that the case is the definitive ruling on
what constitutes sexual harassment. Thus, he posits
that for sexual harassment to exist under RA 7877,
there must be: (a) demand, request, or requirement
of a sexual favor; (b) the same is made a pre-
condition to hiring, re-employment, or continued
employment; or
(c) the denial thereof results in discrimination
against the employee.
Rayala asserts that Domingo has failed to allege and
establish any sexual favor, demand, or request from
petitioner in exchange for her continued employment
or for her promotion. According to Rayala, the acts
imputed to him are without malice or ulterior motive.
It was merely Domingo’s perception of malice in his
alleged acts – a "product of her own imagination"25 –
that led her to file the sexual harassment complaint.
It is true that this provision calls for a "demand,
request or requirement of a sexual favor." But it is
not necessary that the demand, request or
requirement of a sexual favor be articulated in a
categorical oral or written statement. It may be
discerned, with equal certitude, from the acts of the
offender. Holding and squeezing Domingo’s
shoulders, running his fingers across her neck and
tickling her ear, having inappropriate conversations
with her, giving her money allegedly for school
expenses with a promise of future privileges, and
making statements with unmistakable sexual
overtones – all these acts of Rayala resound with
deafening clarity the unspoken request for a sexual
favor.
Likewise, contrary to Rayala’s claim, it is not
essential that the demand, request or requirement be
made as a condition for continued employment or for
promotion to a higher position. It is enough that the
respondent’s acts result in creating an intimidating,
hostile or offensive environment for the employee.45
That the acts of Rayala generated an intimidating and
hostile environment for Domingo is clearly shown by
the common factual finding of the Investigating
Committee, the OP and the CA that Domingo reported
the matter to an officemate and, after the last
incident, filed for a leave of absence and requested
transfer to another unit.
2.
Rayala attacks the penalty imposed by the OP. He
alleges that under the pertinent Civil Service Rules,
disgraceful and immoral conduct is punishable by
suspension for a period of six (6) months and one (1)
day to one (1) year. He also argues that since he is
charged administratively, aggravating or mitigating
circumstances cannot be appreciated for purposes of
imposing the penalty.
Under AO 250, the penalty for the first offense is
suspension for six (6) months and one (1) day to one
(1) year, while the penalty for the second offense is
dismissal.52 On the other hand, Section 22(o), Rule
XVI of the Omnibus Rules Implementing Book V of
the Administrative Code of 198753 and Section 52
A(15) of the Revised Uniform Rules on
Administrative Cases in the Civil Service54 both
provide that the first offense of disgraceful and
immoral conduct is punishable by suspension of six
(6) months and one (1) day to one (1) year. A second
offense is punishable by dismissal.
Under the Labor Code, the Chairman of the NLRC
shall hold office during good behavior until he or she
reaches the age of sixty -five, unless sooner removed
for cause as provided by law or becomes
incapacitated to discharge the duties of the office.55
In this case, it is the President of the Philippines, as
the proper disciplining authority, who would
determine whether there is a valid cause for the
removal of Rayala as NLRC Chairman. This power,
however, is
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qualified by the phrase "for cause as provided by
law." Thus, when the President found that Rayala
was indeed guilty of disgraceful and immoral
conduct, the Chief Executive did not have unfettered
discretion to impose a penalty other than the penalty
provided by law for such offense. As cited above, the
imposable penalty for the first offense of either the
administrative offense of sexual harassment or for
disgraceful and immoral conduct is suspension of six
(6) months and one (1) day to one (1) year.
Accordingly, it was error for the Office of the
President to impose upon Rayala the penalty of
dismissal from the service, a penalty which can only
be imposed upon commission of a second offense.
Even if the OP properly considered the fact that
Rayala took advantage of his high government
position, it still could not validly dismiss him from
the service. Under the Revised Uniform Rules on
Administrative Cases in the Civil Service,56 taking
Page 109
undue advantage of a subordinate may be considered
as an aggravating circumstance57and where only
aggravating and no mitigating circumstances are
present, the maximum penalty shall be imposed.58
Hence, the maximum penalty that can be imposed on
Rayala is suspension for one (1) year.
Insert: Employment of Minors, Househelpers,
Homeworkers, Apprentices and Learners, Persons
with Disability
IV.A.1
•Royale Homes v. Alcantara, G.R. No. 195190, July 28,
2014 – RIZA MAE
Doctrine:
3. Not every form of control that a hiring party
imposes on the hired party is indicative of employee-
employer relationship. Rules and regulations that
merely serve as guidelines towards the achievement
of a mutually desired result without dictating the
means and methods of accomplishing it do not
establish employer-employee relationship.
Facts:
Royale Homes, a corporation engaged in marketing
real estates, appointed Alcantara as its Marketing
Director for a fixed period of one year. His work
consisted mainly of marketing Royale Homes’ real
estate inventories on an exclusive basis. Royale
Homes reappointed him for several consecutive
years, the last of which covered the period January 1
to December 31, 2003.
Alcantara filed a Complaint for Illegal Dismissal
against Royale. Alcantara alleged that he is a regular
employee of Royale Homes since he is performing
tasks that are necessary and desirable to its business
and that the acts of the executive officers of Royale
Homes amounted to his dismissal from work without
any valid or just cause and in gross disregard of the
proper procedure for dismissing employees.
Royale Homes, on the other hand, vehemently denied
that Alcantara is its employee. It argued that the
appointment paper of Alcantara is clear that it
engaged his services as an independent sales
contractor for a fixed term of one year only. He never
received any salary, 13th month pay, overtime pay or
holiday pay from Royale Homes as he was paid
purely on commission basis. In addition, Royale
Homes had no control on how Alcantara would
accomplish his tasks and responsibilities as he was
free to solicit sales at any time and by any manner
which he may deem appropriate and necessary.
According to Royale Homes, Alcantara decided to
leave the company after his wife, who was once
connected with it as a sales agent, had formed a
brokerage company that directly competed with its
business, and even recruited some of its sales agents.
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Two months after he relinquished his post, however,
Alcantara appeared in Royale Homes and submitted a
letter claiming that he was illegally dismissed.
The Labor Arbiter rendered a Decision holding that
Alcantara is an employee of Royale Homes and that
the pre-termination of his contract was against the
law. The NLRC rendered its Decision, ruling that
Alcantara is not an employee but a mere independent
contractor of Royale Homes. It based its ruling
mainly on his employment contract. The CA
promulgated its Decision granting Alcantara’s
Petition and reversing the NLRC’s Decision. Applying
the four-fold and economic reality tests, it held that
Alcantara is an employee of Royale Homes.
Issue:
Whether or not Alcantara was an independent
contractor or an employee of Royale Homes.
Held:
The primary evidence of the nature of the parties’
relationship in this case is the written contract that
they signed and executed in pursuance of their
mutual agreement. While the existence of employer-
employee relationship is a matter of law, the
characterization made by the parties in their contract
as to the nature of their juridical relationship cannot
be simply ignored, particularly in this case where the
parties’ written contract unequivocally states their
intention at the time they entered into it. In this case,
the contract, duly signed and not disputed by the
parties, conspicuously provides that "no employer-
employee relationship exists between" Royale Homes
and Alcantara, as well as his sales agents. It is clear
that they did not want to be bound by employer-
employee relationship at the time of the signing of
the contract.
In determining the existence of an employer-
employee relationship, this Court has generally relied
on the four-fold test, to wit: (1) the selection and
engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the
employer’s power to control the employee with
respect to the means and methods by which the work
is to be accomplished.
However, not every form of control is indicative of
employer-employee relationship. A person who
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performs work for another and is subjected to its
rules, regulations, and code of ethics does not
necessarily become an employee. As long as the level
of control does not interfere with the means and
methods of accomplishing the assigned tasks, the
rules imposed by the hiring party on the hired party
do not amount to the labor law concept of control
that is indicative of employer-employee relationship.
In Insular Life Assurance Co., Ltd. v. National Labor
Relations Commission it was pronounced that:
Logically, the line should be drawn between rules
that merely serve as guidelines towards the
achievement of the mutually desired result without
dictating the means or methods to be employed in
attaining it, and those that control or fix the
methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to
promote the result, create no employer-employee
relationship unlike the second, which address both
the result and the means used to achieve it.
Notably, Alcantara was not required to observe
definite working hours. Except for soliciting sales,
Royale Homes did not assign other tasks to him. He
had full control over the means and methods of
accomplishing his tasks as he can "solicit sales at any
time and by any manner which [he may] deem
appropriate and necessary." He performed his tasks
on his own account free from the control and
direction of Royale Homes in all matters connected
therewith, except as to the results thereof. This Court
is, therefore, convinced that
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Alcantara is not an employee of Royale Homes, but a
mere independent contractor.
Payment of Wages
The element of payment of wages is also absent in
thiscase. As provided in the contract, Alcantara’s
remunerations consist only of commission override
of 0.5%, budget allocation, sales incentive and other
forms of company support. There is no proof that he
received fixed monthly salary. No payslip or payroll
was ever presented and there is no proof that Royale
Homes deducted from his supposed salary
withholding tax or that it registered him with the
Social Security System, Philippine Health Insurance
Corporation, or Pag -Ibig Fund. In fact, his Complaint
merely states a ballpark figure of his alleged salary of
P100,000.00, more or less. All of these indicate an
independent contractual relationship. Besides, if
Alcantara indeed consideredhimself an employee of
Royale Homes, then he, an experienced and
professional broker, would have complained that he
was being denied statutorily mandated benefits. But
for nine consecutive years, he kept mum about it,
signifying that he has agreed, consented, and
accepted the fact that he is not entitled tothose
employee benefits because he is an independent
contractor.
This Court is, therefore,convinced that Alcantara is
not an employee of Royale Homes, but a mere
independent contractor. The NLRC is, therefore,
correct in concluding that the Labor Arbiter has no
jurisdiction over the case and that the same is
cognizable by the regular courts.
•Legend Hotel v. Realuyo, G.R. No. 153511, July 18,
2012 – STEPHEN
Doctrine:
The law affords protection to an employee,
and does not countenance any attempt to subvert its
spirit and intent. Any stipulation in writing can be
ignored when the employer utilizes the stipulation to
deprive the employee of his security of tenure. The
inequality that characterizes employer-employee
relationship generally tips the scales in favor of the
employer, such that the employee is often scarcely
provided real and better options.
Facts:
This labor case for illegal dismissal involves a pianist
employed to perform in the restaurant of a hotel.
August 9, 1999: Realuyo, whose stage name was Joey
R. Roa, filed a complaint for alleged unfair labor
practice, constructive illegal dismissal, and the
underpayment/nonpayment of his premium pay for
holidays, separation pay, service incentive leave pay,
and 13th month pay. He prayed for attorney’s fees,
moral damages of P100, 000.00 and exemplary
damages for P100,000.00. Roa averred that he had
worked as a pianist at the Legend Hotel’s Tanglaw
Restaurant from September 1992 with an initial rate
of P400.00/night; and that it had increased to
P750.00/night. During his employment, he could not
choose the time of performance, which had been
fixed from 7:00PM to 10:00pm for three to six times
a week. July 9, 1999: the management had notified
him that as a cost-cutting measure, his services as a
pianist would no longer be required effective July 30,
1999. In its defense, petitioner denied the existence
of an employer-employee relationship with Roa,
insisting that he had been only a talent engaged to
provide live music at Legend Hotel’s Madison Coffee
Shop for three hours/day on two days each week;
and stated that the economic crisis that had hit the
country constrained management to dispense with
his services. December 29,1999: the Labor Arbiter
(LA) dismissed the complaint for lack of merit upon
finding that the parties had no employer- employee
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relationship, because Roa was receiving talent fee
and not salary, which was reinforced by the fact that
Roa received his talent fee nightly, unlike the regular
employees of the hotel who
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are paid monthly. NLRC affirmed the LA’s decision on
May 31, 2001. CA set aside the decision of the NLRC,
saying CA failed to take into consideration that in
Roa’s line of work, he was supervised and controlled
by the hotel’s restaurant manager who at certain
times would require him to perform only tagalong
songs or music, or wear barong tagalong to conform
with the Filipinana motif of the place and the time of
his performance is fixed. As to the status of Roa, he is
considered a regular employee of the hotel since his
job was in furtherance of the restaurant business of
the hotel. Granting that Roa was initially a
contractual employee, by the sheer length of service
he had rendered for the company, he had been
converted into a regular employee. CA held that the
dismissal was due to retrenchment in order to avoid
or minimize business losses, which is recognized by
law under Art. 283 of the Labor Code.
Issues:
Whether or not there was employer-employee
relationship
Ruling:
YES. Employer-employee relationship existed
between the parties. Roa was undeniably employed
as a pianist of the restaurant. The hotel wielded the
power of selection at the time it entered into the
service contract dated Sept. 1, 1992 with Roa. The
hotel could not seek refuge behind the service
contract entered into with Roa. It is the law that
defines and governs an employment relationship,
whose terms are not restricted to those fixed in the
written contract, for other factors, like the nature of
the work the employee has been called upon to
perform, are also considered. The law affords
protection to an employee, and does not countenance
any attempt to subvert its spirit and intent. Any
stipulation in writing can be ignored when the
employer utilizes the stipulation to deprive the
employee of his security of tenure. The inequality
that characterizes employer-employee relationship
generally tips the scales in favor of the employer,
such that the employee is often scarcely provided
real and better options. The argument that Roa was
receiving talent fee and not salary is baseless. There
is no denying that the remuneration denominated as
talent fees was fixed on the basis of his talent, skill,
and the quality of music he played during the hours
of his performance. Roa’s remuneration, albeit
denominated as talent fees, was still considered as
included in the term wage in the sense and context of
the Labor Code, regardless of how petitioner chose to
designate the remuneration, as per Article 97(f) of
the Labor Code. The power of the employer to
control the work of the employee is considered the
most significant determinant of the existence of an
employer-employee relationship. This is the so-called
control test, and is premised on whether the person
for whom the services are performed reserves the
right to control both the end achieved and the
manner and means used to achieve that end. Lastly,
petitioner claims that it had no power to dismiss
respondent due to his not being even subject to its
Code of Discipline, and that the power to terminate
the working relationship was mutually vested in the
parties, in that either party might terminate at will,
with or without cause. This claim is contrary to the
records. Indeed, the memorandum informing
respondent of the discountinuance of his service
because of the financial condition of petitioner
showed the latter had the power to dismiss him from
employment.
Roa was not validly terminated, the conclusion that
Roa’s termination was by reason of retrenchment
due to an authorized cause under the labor Code is
inevitable. Retrenchment is one of the authorized
causes for the dismissal of employees recognized by
the Labor Code. It is a management prerogative
resorted to by employers to avoid or to minimize
business losses. On this matter, Article 283 of the
Labor Code states:
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Article 283. Closure of establishment and reduction
of personnel. – The employer may also terminate the
employment of any employee due to the installation
of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of
operation of the establishment or undertaking unless
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the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on
the workers and the Ministry of Labor and
Employment at least one (1) month before the
intended date thereof. xxx. In case of retrenchment to
prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due
to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month
pay or at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at
least six
(e) months shall be considered one (1) whole
year. Justifications for retrenchment:
a. The expected losses should be substantial and not
merely de minimis in extent; b. The substantial losses
apprehended must be reasonably imminent;
c. The retrenchment must be reasonably necessary
and likely to effectively prevent the expected losses;
and
d. The alleged losses, if already incurred, and the
expected imminent losses sought to be forestalled
must be proved by sufficient and convincing
evidence.
In termination cases, the burden of proving that the
dismissal was for a valid or authorized cause rests
upon the employer. Here, petitioner did not submit
evidence of the losses to its business operations and
the economic havoc it would thereby imminently
sustain. It only claimed that Roa’s termination was
due to its “present business/financial condition.” This
bare statement fell short of the norm to show a valid
retrenchment. Hence, there was no valid cause for
the retrenchment of respondent. Since the lapse of
time since the retrenchment might have rendered
Roa’s reinstatement to his former job no longer
feasible, Legend Hotel should pay him separation pay
at the rate of one month pay for every year of service
computed from September 1992 until the finality of
this decision, and full backwages from the time his
compensation was withheld until the finality of this
decision.
Petition denied.
•See Tan v. Lagrama, G.R. No. 151228, August 15,
2002
IV.A.2.a
•GMA Network v. Pabriga, G.R. No. 176419,
November 27, 2013 – MARVIN
DOCTRINE:
(2) ARTICLE 280. Regular and casual
employment. The provisions of written agreement to
the contrary notwithstanding and regardless of the
oral agreement of the parties, an employment shall
be deemed to be regular where the employee has
been engaged to perform activities which are usually
necessary or desirable in the usual business or trade
of the employer, except where the employment has
been
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fixed for a specific project or undertaking the
completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or services to be
performed is seasonal in nature and employment is
for the duration of the season.
(3) An employment shall be deemed to be casual
if it is not covered by the preceding paragraph:
Provided, That, any employee who has rendered at
least one year of service, whether such service is
continuous
or broken, shall be considered a regular employee
with respect to the activity in which he is employed
and his employment shall continue while such
activity actually exist.
Pursuant to the above-quoted Article 280 of the
Labor Code, employees performing activities which
are usually necessary or desirable in the employers
usual business or trade can either be regular, project
or seasonal employees, while, as a general rule, those
performing activities not usually necessary or
desirable in the employers usual business or trade
are casual employees. The consequence of the
distinction is found in Article 279 of the Labor Code,
which provides:
FACTS:
Private respondents were engaged by petitioner for
the latters operations in the Technical Operations
Center as Transmitter/VTR men, as Maintenance
staff and as Cameramen On July 19 1999 due to the
miserable working conditions private respondents
were forced to file a complaint against petitioner
before the NLRC Regional Arbitration Branch No. VII
Cebu City.
Private respondents filed an amended complaint
raising the following additional issues of 1) Unfair
Labor Practice; 2) Illegal dismissal; and 3) Damages
and Attorneys fees.
Page 113

An amicable settlement between the parties was set
but the same proved to be futile.
The Labor Arbiter dismissed the complaint of
respondents for illegal dismissal and unfair labor
practice, but held petitioner liable for 13th month
pay.
The NLRC reversed the Decision of the Labor Arbiter,
and held that
All complainants are regular employees with
respect to the particular activity to which they were
assigned, until it ceased to exist. As such, they are
entitled to payment of separation pay computed at
one
(1) month salary for every year of service;
They are not entitled to overtime pay
andHOLIDAY pay; and
They are entitled to 13th month pay, night
shift differential and service incentive leave pay.
When Petitioner elevated the case to the CA via a
Petition for Certiorari, it rendered its Decision
denying the petition for lack of merit. Hence, this
present Petition for Review on Certiorari.
ISSUES:
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Whether the CA erred in finding the respondents as
regular employees of the petitioner.
Whether the CA erred in awarding separation pay to
the respondents absent a finding that respondents
were illegally dismissed.
HELD:
LABOR LAW
Respondents claim that they are regular employees
of petitioner GMA Network, Inc. The latter, on the
other hand, interchangeably characterize
respondents employment as project and fixed
period/fixed term employment.
ARTICLE 280. Regular and casual employment. The
provisions of written agreement to the contrary
notwithstanding and regardless of the oral
agreement of the parties, an employment shall be
deemed to be regular where the employee has been
engaged to perform activities which are usually
necessary or desirable in the usual business or trade
of the employer, except where the employment has
been fixed for a specific project or undertaking the
completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or services to be
performed is seasonal in nature and employment is
for the duration of the season.
An employment shall be deemed to be casual if it is
not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one
year of service, whether such service is continuous or
broken, shall be considered a regular employee with
respect to the activity in which he is employed and
his
employment shall continue while such activity
actually exist. Pursuant to the above-quoted Article
280 of the Labor Code, employees performing
activities which are usually necessary or desirable in
the employers usual business or trade can either be
regular, project or seasonal employees, while, as a
general rule, those performing activities not usually
necessary or desirable in the employers usual
business or trade are casual employees. The
consequence of the distinction is found
in Article 279 of the Labor
Code, which provides:
ARTICLE 279. Security of tenure. In cases of regular
employment, the employer shall not terminate the
services of an employee except for a just cause or
when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their
monetary equivalent computed from the time his
compensation was withheld from him up to the time
of his actual reinstatement.
On the other hand, the activities of project employees
may or may not be usually necessary or desirable in
the usual business or trade of
the employer.
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The term "project" could also refer to, secondly, a
particular job or undertaking that is not within the
regular business of the corporation. Such a job or
undertaking must also be identifiably separate and
distinct from the ordinary or regular business
operations of the employer. The job or undertaking
also begins and ends at determined or determinable
times. ALU-TUCP v. National Labor Relations
Commission,
G.R. No. 109902, August 2, 1994
The jobs and undertakings are clearly within the
regular or usual business of the employer company
and are not identifiably distinct or separate from the
other undertakings of the company. There is no
denying that the manning of the operations center to
air commercials, acting as transmitter/VTR men,
maintaining the equipment, and acting as cameramen
are not undertakings separate or distinct from the
business of a
broadcasting company.
In sum, we affirm the findings of the NLRC and the
Court of Appeals that respondents are regular
employees of petitioner. As regular employees, they
are entitled to security of tenure and therefore their
services may be terminated only for just or
authorized causes. Since petitioner failed to prove
any just or authorized cause for their termination, we
are constrained to affirm the findings of the NLRC
and the Court
of Appeals that they were illegally
dismissed.
Since the respondents were illegally dismissed, they
entitled to separation pay in lieu of reinstatement.
As regards night shift differential, the Labor Code
provides that every employee shall be paid not less
than ten percent (10%) of his regular wage for each
hour of work performed between ten o'clock in the
evening
and six o'clock in the morning.
LABOR CODE, Article 86
As employees of petitioner, respondents are entitled
to the payment of this benefit in accordance with the
number of hours they worked from 10:00 p.m. to
6:00 a.m., if any.
The matter of attorney's fees cannot be touched once
and only in the fallo of the decision, else, the award
should be thrown out for being speculative and
conjectural. In the absence of a stipulation, attorney's
fees are ordinarily not recoverable; otherwise a
premium shall be placed on the right to litigate. They
are not
awarded every time a party
wins a suit.
In the case at bar, the factual basis for the award of
attorney's fees was not discussed in the text of NLRC
Decision. Thus, the Court constrained to delete the
same.
•Art. 281, Labor Code
•Book VI, Rule I, Sec. 6, Implementing Rules (Labor
Code)
•Carvajal v. Luzon Development Bank, G.R. No.
186169, August 1, 2012 – KEISHA Doctrine:
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A probationary employee, like a regular
employee, enjoys security of tenure. However, in
cases of probationary employment, aside from just or
authorized causes of termination, an additional
ground is provided under Article 281 of the Labor
Code, i.e., the probationary employee may also be
terminated for failure to qualify as a regular
employee in accordance with reasonable standards
made known by the employer to the employee at the
time of the engagement. Thus, the services of an
employee who has been engaged on probationary
basis may be terminated for any of the following:
a just or (2) an authorized cause and (3)
when he fails to qualify as a regular employee in
accordance with reasonable standards prescribed by
the employer.
Facts:
Petitioner Mylene Carvajal was employed as a
trainee-teller by respondent Bank under a six-month
probationary employment contract. On 10 December
2003, the Bank sent petitioner a Memorandum
directing her to explain in writing why she should not
be subjected to disciplinary action for "chronic
tardiness" for a total of eight (8) times. Petitioner
apologized in writing and explained that she was in
Page 115
the process of making adjustments regarding her
work and house chores. She was thus reprimanded in
writing and reminded of her status as a probationary
employee. Still, on 6 January 2004, a second
Memorandum was sent to petitioner directing her to
explain why she should not be suspended for
"chronic tardiness" on 13 occasions. On 12 January
2004, petitioner was informed, through a
Memorandum, of her suspension for three (3)
working days without pay effective 21 January 2004.
Finally, in a Memorandum dated 22 January 2004,
petitioner’s suspension was lifted but in the same
breath, her employment was terminated effective 23
January 2004. Hence, petitioner’s filing of the
Complaint for illegal dismissal before the Labor
Arbiter. Petitioner alleged, in her position paper, that
the following were the reasons for her termination:
3. she is not an effective frontliner; 2) she has
mistakenly cleared a check; 3) tardiness; 4)
absenteeism; and 5) shortage. In their position paper,
respondents averred that petitioner was terminated
as a probationary employee on three grounds,
namely: 1) chronic tardiness; 2) unauthorized
absence; and 3) failure to perform satisfactorily as a
probationary employee. The Labor Arbiter ruled that
petitioner was illegally dismissed. The decision of the
Labor Arbiter was partially appealed to the NLRC by
petitioner. Petitioner contended that she should be
considered a regular employee and that the
computation by the Labor Arbiter of backwages up to
the end of her probationary contract is without basis.
In its Comment, respondent argued against the
illegality of petitioner’s dismissal and their joint and
solidary liability to pay complainant’s monetary
claims. The NLRC affirmed with modification the
Labor Arbiter’s
Decision. Respondents filed a motion for
reconsideration but the NLRC denied the same. In a
petition for certiorari filed by respondents, the Court
of Appeals rendered the Decision reversing the NLRC
ruling. Petitioner elevated the case to this Court via
petition for review on certiorari.
Issue:
Whether the petitioner met the qualification to be
considered as regular employee of the respondent?
Sc Ruling:
NO.
Petitioner premised her appeal on Article 279 of the
Labor Code which provides:
Art. 279. Security of Tenure — In cases of regular
employment, the employer shall not terminate the
services of an employee except for a just cause or
when authorized by this Title. An employee who is
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unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or other
monetary equivalent computed from the time his
compensation was withheld from him up to the time
of his actual reinstatement.
Petitioner maintained that she became a regular
employee by virtue of Book VI, Rule 1, Section 6(d) of
the
Implementing Rules of the Labor Code which states:
2 In all cases of probationary employment, the
employer shall make known to the employee the
standards under which he will qualify as a regular
employee at the time of his engagement. Where no
standards are made known to the employee at that
time, he shall be deemed a regular employee.
It is beyond dispute that petitioner was hired as a
probationary employee. Whether her employment
status ripened into a regular one is the point of
contention.
Under the very provision cited by petitioner, we
cannot, by any hermeneutics, see petitioner’s
employment status as regular. At the time of her
engagement and as mandated by law, petitioner was
informed in writing of the standards necessary to
qualify her as a regular employee.
A probationary employee, like a regular employee,
enjoys security of tenure. However, in cases of
probationary employment, aside from just or
authorized causes of termination, an additional
ground is provided under Article 281 of the Labor
Code, i.e., the probationary employee may also be
terminated for failure to qualify as a regular
employee in accordance with reasonable standards
made known by the employer to the employee at the
time of the engagement. Thus, the services of an
employee who has been engaged on probationary
basis may be terminated for any of the following: (1)
a just or (2) an authorized cause and (3) when he
fails to qualify as a regular employee in accordance
with reasonable standards prescribed by the
employer.
It is evident that the primary cause of respondent’s
dismissal from her probationary employment was
her "chronic tardiness." At the very start of her
employment, petitioner already exhibited poor
working habits. Even during her first month on the
job, she already incurred eight (8) tardiness. In a
Memorandum dated 11 December 2003, petitioner
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was warned that her tardiness might affect her
opportunity to become a permanent or regular
employee. And petitioner did not provide a
satisfactory explanation for the cause of her
tardiness.
More importantly, satisfactory performance is and
should be one of the basic standards for
regularization. Naturally, before an employer hires
an employee, the former can require the employee,
upon his engagement, to undergo a trial period
during which the employer determines his fitness to
qualify for regular employment based on reasonable
standards made known to him at the time of
engagement. This is the concept of probationary
employment which is intended to afford the
employer an opportunity to observe the fitness of a
probationary employee while at work, and to
ascertain whether he will become an efficient and
productive employee. While the employer observes
the fitness, propriety and efficiency of a probationer
to ascertain whether he is qualified for permanent
employment, the probationer, on the other hand,
seeks to prove to the satisfaction of the employer
that he has the qualifications to meet the reasonable
standards for permanent employment.
Moreover, in the letter of appointment, respondents
reserved the right to "immediately terminate this
contract in the event of a below satisfactory
performance, serious disregard of company rules and
policies
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and other reasons critical to its interests." In sum,
petitioner was validly dismissed from probationary
employment before the expiration of her 6-month
probationary employment contract. If the
termination is for cause, it may be done anytime
during the probation; the employer does not have to
wait until the probation period is over.
•San Miguel v. Del Rosario, G.R. Nos. 168194 &
168603, December 13, 2005 – RJ
DOCTRINE:
FACTS:
Respondent was employed by petitioner as key
account specialist. On March 9, 2001,
petitionerinformed respondent that her probationary
employment will be severed at the close of the
businesshours of March 12, 2001. On March 13,
2001, respondent was refused entry to
petitioner'spremises. On June 24, 2002, respondent
filed a complaint against petitioner for illegal
dismissal andunderpayment/non-payment of
monetary benefits. Respondent alleged that
petitioner feigned an manpower because after her
dismissal, it hired new recruits and re-employed two
of herbatch mates. On the other hand, petitioner
claimed that respondent was a probationary
employeewhose services were terminated as a result
of the excess manpower that could no longer
beaccommodated by the company.The Labor Arbiter
declared respondent a regular employee because her
employment exceeded sixmonths and holding that
she was illegally dismissed as there was no
authorized cause to terminateher employment. On
appeal to NLRC, it modified the previous decision.
ISSUE:
Whether or not the respondent was an employee and
was illegally terminated. If so, is she entitled to
monetary benefits?
RULING:
Respondent was illegally dismissed and is thus
entitled to monetary benefits.In termination cases,
the burden of proving the circumstances that would
justify the employee'sdismissal rests with the
employer. The best proof that petitioner should have
presented to prove theprobationary status of
respondent is her employment contract. None,
having been presented, thecontinuous employment
of respondent as an account specialist for almost 11
months, from April 17,2000 to March 12, 2001,
means that she was a regular employee and not a
temporary reliever or aprobationary employee. And
while it is true that by way of exception, the period of
probationary employment may exceed six months
when the parties so
agree, such as when the same isestablished by
company policy, or when it is required by the nature
of the work, none of theseexceptional circumstance
were proven in the present case. Thus, respondent
whose employmentexceeded six months is
undoubtedly a regular employee of petitioner.Her
termination from employment must be for a just or
authorized cause, otherwise, her dismissalwould be
illegal. Petitioner tried to justify the dismissal of
respondent under the authorized cause
ofredundancy. It thus argued in the alternative that
even assuming that respondent qualified for
regularemployment, her
services still had to be terminated because there are
no more regular positions inthe company.
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Undoubtedly, petitioner is invoking a redundancy
which allegedly resulted in thetermination not only
of the trainees, probationers but also of some of its
regular employees.Redundancy, for purposes of the
Labor Code, exists where the services of an employee
are inexcess of what is reasonably demanded by the
actual requirements of the enterprise. Succinctly
put,a position is redundant where it is superfluous,
and superfluity of a position or positions may be
theoutcome of a number of factors, such as
overhiring of workers, decreased volume of business,
ordropping of a particular product line or service
activity previously manufactured or undertaken by
theenterprise. The criteria in implementing a
redundancy are:
(a) less preferred status, e.g.
temporaryemployee; (b) efficiency; and (c) seniority.
What further militated against the alleged
redundancy advanced by petitioner is their failure to
refute respondent's assertion that after her dismissal,
it hired new recruits and re-employed two of her
batch mates. The Court finds that petitioner was not
able todischarge the burden of proving that the
dismissal of respondent was valid.Considering that
respondent was illegally dismissed, she is entitled
not only to reinstatement butalso to payment of full
back wages, computed from the time her
compensation was actually withheldfrom her on
March 13, 2001, up to her actual reinstatement. She
is likewise entitled to other benefits,i.e., service
incentive leave pay and 13th month pay computed
from such date also up to her actual reinstatement.
Respondent is not entitled to holiday pay because the
records reveal that she is amonthly paid regular
employee. Under Section 2, Rule IV, Book III of the
Omnibus RulesImplementing the Labor Code,
employees who are uniformly paid by the month,
irrespective of thenumber of working days therein,
shall be presumed to be paid for all the days in the
month whether worked or not.
IV.A.2.b
•Art. 280, Labor Code
•Book VI, Rule I, Sec. 5, a, Implementing Rules (Labor
Code)
•MacArthur Malicdem v. Marulas, G.R. No. 204406,
February 26, 2014 – KIM
Principle:
The test to determine whether employment
is regular or not is the reasonable connection
between the particular activity performed by the
employee in relation to the usual business or trade of
the employer. If the employee has been performing
the job for at least one year, even if the performance
is not continuous or merely intermittent, the law
deems the repeated and continuing need for its
performance as sufficient evidence of the necessity, if
not indispensability of that activity to the business.
Facts:
Petitioners were first hired by Respondent Marulas, a
corporation engaged in the business of
manufacturing sacks intended for local and export
markets, in 2006 for a period of one (1) year. Both
respondent were responsible for the bagging of
filament yarn, the quality of pp yarn package and the
cleanliness of the work place area. Every year
thereafter, they would sign a Resignation/Quitclaim
in favor of Marulas a day after their contracts ended,
and then sign another contract for one (1) year.
Until one day, on December 16, 2010, Flores was told
not to report for work anymore after being asked to
sign a paper by Marulas' HR Head to the effect that he
acknowledged the completion of his contractual
status. On February 1, 2011, Malicdem was also
terminated after signing a similar document. Thus,
both
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claimed to have been illegally dismissed.
Petitioners subsequently filed a complaint for illegal
dismissal. Marulas countered that their contracts
showed that they were fixed-term employees for a
specific undertaking, which was to work on a
particular order of a customer for a specific period.
Their severance from employment was due to the
expiration of their contracts.
The Labor Arbiter (LA) rendered a decision in favor
of the respondents, finding no illegal dismissal but
ordered Marulas to pay Malicdem and Flores their
respective wage differentials of P18,440.50 and
P20,111.26 respectively. They appealed to the NLRC,
which partially granted their appeal with the award
of payment of 13th month pay, service incentive
leave and holiday pay for three (3) years. Both filed
for a motion for reconsideration but was denied by
the NLRC, hence, the appeal of the case to the CA via
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Rule 65.T he CA denied the petition, finding no grave
abuse of discretion amounting to lack or excess of
jurisdiction on the part of the NLRC.
Issue:
Whether or not the petitioners were regular
employees and if so, were they illegally dismissed?
Ruling:
YES.
The petitioners have convincingly shown that they
should be considered regular employees and, as such,
entitled to full backwages and other entitlements. It
is undisputed that the same employer for the same
position continuously rehired the petitioners as
extruder operators. As such, they were responsible
for the operation of machines that produced the
sacks. Hence, their work was vital, necessary and
indispensable to the usual business or trade of the
employer. The Court is of the considered view that
there was clearly a deliberate intent to prevent the
regularization of the petitioners. The project
employment contracts that the petitioners were
made to sign every year since the start of their
employment were only a stratagem to violate their
security of tenure in the company.
Under Article 281 of the Labor Code, however, "an
employee who is allowed to work after a
probationary period shall be considered a regular
employee." When an employer renews a contract of
employment after the lapse of the six-month
probationary period, the employee thereby becomes
a regular employee. No employer is allowed to
determine indefinitely the fitness of its employees.14
While length of time is not the controlling test for
project employment, it is vital in determining if the
employee was hired for a specific undertaking or
tasked to perform functions vital, necessary and
indispensable to the usual business of trade of the
employer.15 Thus, in the earlier case of Maraguinot,
Jr. v. NLRC,16 it was ruled that a project or work pool
employee, who has been: (1) continuously, as
opposed to intermittently, rehired by the same
employer for the same tasks or nature of tasks; and
(2) those tasks are vital, necessary and indispensable
to the usual business or trade of the employer, must
be deemed a regular employee. Thus:
x x x. Lest it be misunderstood, this ruling does not
mean that simply because an employee is a project or
work pool employee even outside the construction
industry, he is deemed, ipso jure, a regular employee.
All that we hold today is that once a project or work
pool employee has been: (1) continuously, as
opposed to intermittently, re-hired by the same
employer for the same tasks or nature of tasks; and
(2) these tasks are vital, necessary and indispensable
to the usual business or trade of the employer, then
the employee must be deemed a regular employee,
pursuant to Article 280 of the Labor Code and
jurisprudence. To rule otherwise
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would allow circumvention of labor laws in
industries not falling within the ambit of Policy
Instruction No. 20/Department Order No. 19, hence
allowing the prevention of acquisition of tenurial
security by project or work pool employees who have
already gained the status of regular employees by the
employer's conduct.1âwphi1
The test to determine whether employment is
regular or not is the reasonable connection between
the particular activity performed by the employee in
relation to the usual business or trade of the
employer. If the employee has been performing the
job for at least one year, even if the performance is
not continuous or merely intermittent, the law deems
the repeated and continuing need for its performance
as sufficient evidence of the necessity, if not
indispensability of that activity to the business.17
Illegal dismissal
Under Article 279 of the Labor Code, an employee
who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their
monetary equivalent computed from the time his
compensation was withheld from him up to the time
of his actual reinstatement. The law intends the
award of backwages and similar benefits to
accumulate past the date of the LA decision until the
dismissed employee is actually reinstated.
•FVR Skills v. Seva, G.R. No. 200857, October 22,
2014- KLIVE
Doctrine:
For an employee to be validly categorized as
a project employee, it is necessary that the specific
project or undertaking had been identified and its
period and completion date determined and made
known to the employee at the time of his
engagement. This provision ensures that the
employee is completely apprised of the terms of his
hiring and the corresponding rights and
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obligations arising from his undertaking.
Facts:
On April 21, 2008, the petitioner entered into a
Contract of Janitorial Service (service contract) with
Robinsons Land Corporation (Robinsons). Both
agreed that the petitioner shall supply janitorial,
manpower and sanitation services to Robinsons
Place Ermita Mall for a period of one year -from
January 1, 2008 to December 31, 2008. Pursuant to
this, the respondents were deployed to Robinsons.
Halfway through the service contract, the petitioner
asked the respondents to execute individual
contracts which stipulated that their respective
employments shall end on December 31, 2008,
unless earlier terminated.
The petitioner and Robinsons no longer extended
their contract of janitorial services. Consequently, the
petitioner dismissed the respondents as they were
project employees whose duration of employment
was dependent on the petitioner's service contract
with Robinsons.
The respondents responded to the termination of
their employment by filing a complaint for illegal
dismissal with the NLRC. They argued that they were
not project employees; they were regular employees
who may only be dismissed for just or authorized
causes.
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Issues:
Whether or not respondents are project employees.
Held:
No, they are regular employees
Article 280 (now Article 294) of the Labor Code
governs the determination of whether an employee is
a regular or a project employee.
Under this provision, there are two kinds of regular
employees, namely: (1) those who were engaged to
perform activities which are usually necessary or
desirable in the usual business or trade of the
employer; and (2) those casual employees who
became regular after one year of service, whether
continuous or broken, but only with respect to the
activity for which they have been hired.
We distinguish these two types of regular employees
from a project employee, or one whose employment
was fixed for a specific project or undertaking, whose
completion or termination had been determined at
the time of engagement.
The primary standard in determining regular
employment is the reasonable connection between
the particular activity performed by the employee
and the employer's business or trade. This
connection can be ascertained by considering the
nature of the work performed and its relation to the
scheme of the particular business, or the trade in its
entirety
Guided by this test, we conclude that the
respondents' work as janitors, service crews and
sanitation aides, are necessary or desirable to the
petitioner's business of providing janitorial and
manpower services to its clients as an independent
contractor.
Also, the respondents had already been working for
the petitioner as early as 1998. Even before the
service contract with Robinsons, the respondents
were already under the petitioner's employ. They
had been doing the same type of work and occupying
the same positions from the time they were hired and
until they were dismissed in January 2009. The
petitioner did not present any evidence to refute the
respondents' claim that from the time of their hiring
until the time of their dismissal, there was no gap in
between the projects where they were assigned to.
The petitioner continuously availed of their services
by constantly deploying them to its clients.
As already discussed, for an employee to be validly
categorized as a project employee, it is necessary that
the specific project or undertaking had been
identified and its period and completion date
determined and made known to the employee at the
time of his engagement. This provision ensures that
the employee is completely apprised of the terms of
his hiring and the corresponding rights and
obligations arising from his undertaking. Notably, the
petitioner's service contract with Robinsons was
from January 1 to December 31, 2008. The
respondents were only asked to sign their
employment contracts for their deployment with
Robinsons halfway through 2008, when the
petitioner's service contract was about to expire.
If the petitioner really intended the respondents to
be project employees, then the contracts should have
been executed right from the time of hiring, or when
the respondents were first assigned to Robinsons,
not when the petitioner's service contract was
winding up. The terms and conditions of the
respondents' engagement should have been
disclosed and explained to them from the
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commencement of their employment. The
petitioner's failure to do so supports the conclusion
that it had been in bad faith in evading the
respondents' right to security of tenure.
IV.A.2.c
•Omni Hauling v. Bon, G.R. No. 199388, September 3,
2014 – LOUYS
Doctrine:
A project employee is assigned to a project
which begins and ends at determined or
determinable times. Unlike regular employees who
may only be dismissed for just and/or authorized
causes under the Labor Code, the services of
employees who are hired as “project employees” may
be lawfully terminated at the completion of the
project. the presumption of regular employment
should be accorded in their favor pursuant to Article
280 of the Labor Code which provides that
“[employees] who have rendered at least one year of
service, whether such service is continuous or
broken [– as respondents in this case –] shall be
considered as [regular employees] with respect to
the activity in which [they] are employed and [their]
employment shall continue while such activity
actually exists.”
Facts:
Petitioner Omni Hauling Services, Inc. (Omni), a
company owned by petitioners Lolita and Aniceto
Franco (petitioners), was awarded a one (1) year
service contract by the local government of Quezon
City to provide garbage hauling services for the
period July 1, 2002 to June 30, 2003. For this
purpose, Omni hired respondents as garbage truck
drivers and paleros who were then paid on a per trip
basis.
When the service contract was renewed for another
year, or for the period July 1, 2003 to June 30, 2004,
petitioners required each of the respondents to sign
employment contracts which provided that they will
be “re-hired” only for the duration of the same
period. However, respondents refused to sign the
employment contracts, claiming that they were
regular employees since they were engaged to
perform activities which were necessary and
desirable to Omni’s usual business or trade. For this
reason, Omni terminated the employment of
respondents which, in turn, resulted in the filing of
cases for illegal dismissal, nonpayment of Emergency
Cost of Living Allowance (ECOLA) and 13th month
pay, and actual, moral, and exemplary damages.
During the mandatory conference before the Labor
Arbiter (LA), Omni offered to re-employ respondents
on the condition that they sign the employment
contracts but respondents refused such offer.
The LA ruled in favor of petitioners, finding that
respondents were not illegally dismissed. It found
that respondents, at the time of their engagement,
were informed that their employment will be limited
for a specific period of one year and was co-terminus
with the service contract with the Quezon City
government. Thus, respondents were not regular but
merely project employees whose hiring was solely
dependent on the aforesaid service contract.
Dissatisfied with the LA’s ruling, respondents filed an
appeal before the NLRC. In a Decision dated May 18,
2009, the NLRC affirmed the LA’s ruling in toto.
Unconvinced, respondents filed a motion for
reconsideration which was, however, denied, leading
them to file a petition for certiorari before the CA.
The CA reversed and set aside the NLRC’s earlier
pronouncements. It held that the NLRC failed to
consider the glaring fact that no contract of
employment exists to support petitioners’ allegation
that respondents are fixed-term (or properly
speaking, project) employees. Aggrieved, petitioners
filed a motion for reconsideration which was,
however, denied by the CA. Hence, this petition.
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Issue:
Whether or not the CA erred in granting respondents’
petition for certiorari, thereby setting aside the
NLRC’s Decision holding that respondents were
project employees?
Ruling:
NO.
A project employee is assigned to a project which
begins and ends at determined or determinable
times. Unlike regular employees who may only be
dismissed for just and/or authorized causes under
the Labor Code, the services of employees who are
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hired as “project employees” may be lawfully
terminated at the completion of the project.
According to jurisprudence, the principal test for
determining whether particular employees are
properly characterized as “project employees” as
distinguished from “regular employees,” is whether
or not the employees were assigned to carry out a
“specific project or undertaking,” the duration (and
scope) of which were specified at the time they were
engaged for that project. The project could either be
(1) a particular job or undertaking that is within the
regular or usual business of the employer company,
but which is distinct and separate, and identifiable as
such, from the other undertakings of the company; or
(2) a particular job or undertaking that is not within
the regular business of the corporation. In order to
safeguard the rights of workers against the arbitrary
use of the word “project” to prevent employees from
attaining a regular status, employers claiming that
their workers are project employees should not only
prove that the duration and scope of the employment
was specified at the time they were engaged, but also
that there was indeed a project.
Even though the absence of a written contract does
not by itself grant regular status to respondents, such
a contract is evidence that respondents were
informed of the duration and scope of their work and
their status as project employees.
In this case, records are bereft of any evidence to
show that respondents were made to sign
employment contracts explicitly stating that they
were going to be hired as project employees, with the
period of their employment to be co-terminus with
the original period of Omni’s service contract with
the Quezon City government. Thus, the logical
conclusion is that respondents were not clearly and
knowingly informed of their employment status as
mere project employees, with the duration and scope
of the project specified at the time they were
engaged. As such, the presumption of regular
employment should be accorded in their favor
pursuant to Article 280 of the Labor Code which
provides that “[employees] who have rendered at
least one year of service, whether such service is
continuous or broken [– as respondents in this case –
] shall be considered as [regular employees] with
respect to the activity in which [they] are employed
and [their] employment shall continue while such
activity actually exists.”
•Asos v. PNCC, G.R. No. 192394, July 3, 2013 – BARRY
Doctrine:
Under Article 280 of the Labor Code, as
amended, a project employee is one whose
"employment has been fixed for a specific project or
undertaking the completion or termination of which
has been determined at the time of the engagement
of the employee or where the work or services to be
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performed is seasonal in nature and the employment
is for the duration of the season." Thus, the principal
test used to determine whether employees are
project employees is whether or not the employees
were assigned to carry out a specific project or
undertaking, the duration or scope of which was
specified at the time the employees were engaged for
that project.
Facts:
Petitioner Roy D. Pasos started working for
respondent PNCC on April 26, 1996. Based on the
PNCC's "Personnel Action Form Appointment for
Project Employment" dated April 30, 1996,4
petitioner was designated as "Clerk II (Accounting)"
and was assigned to the "NAIA – II Project."
Petitioner’s employment, however, did not end on
July 25, 1996 but was extended and was thereafter
been rehired for several times.
On February 23, 1999, petitioner was again hired by
PNCC as "Accounting Clerk" and was assigned to the
"SM-Project" based on the "Appointment for Project
Employment" dated February 18, 1999. It did not
specify the date when his employment will end but it
was stated therein that it will be "co-terminus with
the completion of the project." Said employment
supposedly ended on August 19, 1999 per "Personnel
Action Form – Project Employment" dated August 18,
1999, where it was stated, "termination of
petitioner’s project employment due to completion of
assigned phase/stage of work or project effective at
the close of office hours on 19 August 1999."
However, it appears that said employment was
extended per "Appointment for Project employment"
dated August 20, 1999 as petitioner was again
appointed as "Accounting Clerk" for "SM Project
(Package II)." It did not state a specific date up to
when his extended employment will be, but it
provided that it will be "co-terminus with the x x x
project." In "Personnel Action Form – Project
Employment" dated October 17, 2000, it appears that
such extension would eventually end on October 19,
2000.
Despite the termination of his employment on
October 19, 2000, petitioner claims that his superior
instructed him to report for work the following day,
intimating to him that he will again be employed for
the succeeding SM projects. For purposes of
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reemployment, he then underwent a medical
examination which allegedly revealed that he had
pneumonitis. Petitioner was advised by PNCC’s
physician, Dr. Arthur C. Obena, to take a 14-day sick
leave.
On November 27, 2000, after serving his sick leave,
petitioner claims that he was again referred for
medical examination where it was revealed that he
contracted Koch’s disease. He was then required to
take a 60-day leave of absence. The following day, he
submitted his application for sick leave but PNCC’s
Project Personnel Officer, Mr. R.S. Sanchez, told him
that he was not entitled to sick leave because he was
not a regular employee.
Petitioner, after he presented his medical clearance
to the Project Personnel Officer on even date, was
informed that his services were already terminated
on October 19, 2000 and he was already replaced due
to expiration of his contract.
Issue:
WON petitioner is considered as a regular employee
and was illegally dismissed.
Held:
Under Article 280 of the Labor Code, as amended, a
project employee is one whose "employment has
been fixed for a specific project or undertaking the
completion or termination of which has been
determined at
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the time of the engagement of the employee or where
the work or services to be performed is seasonal in
nature and the employment is for the duration of the
season." Thus, the principal test used to determine
whether employees are project employees is whether
or not the employees were assigned to carry out a
specific project or undertaking, the duration or scope
of which was specified at the time the employees
were engaged for that project.
In the case at bar, petitioner worked continuously for
more than two years after the supposed three-month
duration of his project employment for the NAIA II
Project. While his appointment for said project
allowed such extension since it specifically provided
that in case his "services are still needed beyond the
validity of the contract, the Company shall extend his
services," there was no subsequent contract or
appointment that specified a particular duration for
the extension. His services were just extended
indefinitely until "Personnel Action Form – Project
Employment" dated July 7, 1998 was issued to him
which provided that his employment will end a few
weeks later or on August 4, 1998. While for first
three months, petitioner can be considered a project
employee of PNCC, his employment thereafter, when
his services were extended without any specification
of as to the duration, made him a regular employee of
PNCC. And his status as a regular employee was not
affected by the fact that he was assigned to several
other projects and there were intervals in between
said projects since he enjoys security of tenure.
Petitioner’s regular employment was terminated by
PNCC due to contract expiration or project
completion, which are both not among the just or
authorized causes provided in the Labor Code, as
amended, for dismissing a regular employee. Thus,
petitioner was illegally dismissed.
Article 279 of the Labor Code, as amended, provides
that an illegally dismissed employee is entitled to
reinstatement, full back wages, inclusive of
allowances, and to his other benefits or their
monetary equivalent from the time his compensation
was withheld from him up to the time of his actual
reinstatement.
•See GMA Network v. Pabriga, G.R. No. 176419,
November 27, 2013
•SeeMacArthur Malicdem v. Marulas, G.R. No.
204406, February 26, 2014
IV.A.2.d
•Art. 280, Labor Code
•Universal Robina v. Acibo, G.R. No. 186439, January
15, 2014 – CAMILLE
DOCTRINE:
FACTS:
URSUMCO is a domestic corporation engaged in the
sugar cane milling business; Cabati is
URSUMCO’s Business Unit General Manager. The
complainants were employees of URSUMCO. They
were
hired on various dates (between February 1988 and
April 1996) and on different capacities. At the start of
their respective engagements, the complainants
signed contracts of employment for a period of one
(1) month or for a given season. URSUMCO
repeatedly hired the complainants to perform the
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same duties and, for every engagement, required the
latter to sign new employment contracts for the same
duration of one
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month or a given season. On August 23, 2002, the
complainants filed before the LA complaints for
regularization, entitlement to the benefits under the
existing Collective Bargaining Agreement (CBA),and
attorney’s fees.
In the decision dated October 9, 2002, the LA
dismissed the complaint for lack of merit. The LA
held that the complainants were seasonal or project
workers and not regular employees of URSUMCO.
The LA pointed out that the complainants were
required to perform, for a definite period, phases of
URSUMCO’s several projects that were not at all
directly related to the latter’s main operations. As the
complainants were project employees, they could not
be regularized since their respective employments
were coterminous with the phase of the work or
special project to which they were assigned and
which employments end upon the completion of each
project. Accordingly, the complainants were not
entitled to the benefits granted under the CBA that,
as provided, covered only the regular employees of
URSUMCO.
Of the twenty-two original complainants before the
LA, seven appealed the LA’s ruling before the NLRC.
In its decision of July 22, 2005, the NLRC reversed the
LA’s ruling; it declared the complainants as regular
URSUMCO employees and granted their monetary
claims under the CBA. The NLRC pointed out that the
complainants performed activities which were
usually necessary and desirable in the usual trade or
business of URSUMCO, and had been repeatedly
hired for the same undertaking every season. Thus,
pursuant to Article 280 of the Labor Code, the NLRC
declared that the complainants were regular
employees. As regular employees, the NLRC held that
the complainants were entitled to the benefits
granted, under the CBA, to the regular URSUMCO
employees.
The petitioners moved to reconsider this NLRC ruling
which the NLRC denied in its April 28, 2006
resolution. The petitioners elevated the case to the
CA via a petition for certiorari. In its November 29,
2007 decision, the CA granted in part the petition; it
affirmed the NLRC’s ruling finding the complainants
to be regular employees of URSUMCO, but deleted the
grant of monetary benefits under the CBA.
ISSUE: Whether or not the respondents are regular
employees of URSUMCO.
RULING:
Respondents are considered as regular seasonal
employees of URSUMCO. Article 280 of the Labor
Code provides for three kinds of employment
arrangements, namely: regular, project/seasonal and
casual. Regular employment refers to that
arrangement whereby the employee "has been
engaged to perform activities which are usually
necessary or desirable in the usual business or trade
of the employer[.]"Under the definition, the primary
standard that determines regular employment is the
reasonable connection between the particular
activity performed by the employee and the usual
business or trade of the employer; the emphasis is on
the necessity or desirability of the employee’s
activity. Thus, when the employee performs activities
considered necessary and desirable to the overall
business scheme of the employer, the law regards the
employee as regular.
Seasonal employment arrangement involves work
that is seasonal or periodic in nature, the
employment itself is not automatically considered
seasonal so as to prevent the employee from
attaining regular status. To exclude the asserted
"seasonal" employee from those classified as regular
employees, the
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employer must show that: (1) the employee must be
performing work or services that are seasonal in
nature; and (2) he had been employed for the
duration of the season. Hence, when the "seasonal"
workers are continuously and repeatedly hired to
perform the same tasks or activities for several
seasons or even after the cessation of the season, this
length of time may likewise serve as badge of regular
employment. In fact, even though denominated as
"seasonal workers," if these workers are called to
work from time to time and are only temporarily laid
off during the off-season, the law does not consider
them separated from the service during the off-
season period. The law simply considers these
seasonal workers on leave until re-employed.
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"Where the circumstances evidently show that the
employer imposed the period precisely to preclude
the employee from acquiring tenurial security, the
law and this Court will not hesitate to strike down or
disregard the period as contrary to public policy,
morals, etc." In such a case, the general restrictive
rule under Article 280 of the Labor Code will apply
and the employee shall be deemed regular.
In light of the above legal parameters laid down by
the law and applicable jurisprudence, the
respondents are neither project, seasonal nor fixed-
term employees, but regular seasonal workers of
URSUMCO.
The following factual considerations from the
records support this conclusion: First, the
respondents were made to perform various tasks
that did not at all pertain to any specific phase of
URSUMCO’s strict milling operations that would
ultimately cease upon completion of a particular
phase in the milling of sugar; rather, they were
tasked to perform duties regularly and habitually
needed in
URSUMCO’s operations during the milling season.
Second, the respondents were regularly and
repeatedly hired to perform the same tasks year after
year. This regular and repeated hiring of the same
workers (two different sets) for two separate
seasons has put in place, principally through
jurisprudence, the system of regular seasonal
employment in the sugar industry and other
industries with a similar nature of operations. Third,
while the petitioners assert that the respondents
were free to work elsewhere during the off-season,
the records do not support this assertion. There is no
evidence on record showing that after the completion
of their tasks at URSUMCO, the respondents sought
and obtained employment elsewhere.
•Gapayao v. Fulo, G.R. No. 193493, June 13, 2013 –
GOLDIE
Doctrine:
The appellate court held that it "does not
follow that a person who does not observe normal
hours of work cannot be deemed an employee." For
one, it is not essential for the employer to actually
supervise the performance of duties of the employee;
it is sufficient that the former has a right to wield the
power.
Article 280. Regular and Casual Employment.
— The provisions of written agreement to the
contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be
deemed to be regular where the employee has been
engaged to perform activities which are usually
necessary or desirable in the usual business or trade
of the employer, except where the employment has
been fixed for a specific project or undertaking the
completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or services to be
performed is seasonal in nature and the employment
is for the duration of the season.
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An employment shall be deemed to be casual
if it is not covered by the preceding paragraph:
Provided, That, any employee who has rendered at
least one year of service whether such service is
continuous or broken, shall be considered a regular
employee with respect to the activity in which he is
employed and his employment shall continue while
such actually exists.
Facts:
This is a Petition assailing the Decision2 and
Resolution3 of the Court of Appeals, affirming the
Resolution of the Social Security Commission (SSC).
The SSC held petitioner Jaime N. Gapayao liable to
pay the unpaid social security contributions due to
the deceased Jaime Fulo, and the Social Security
System (SSS) to pay private respondent Rosario L.
Fulo, the widow of the deceased, the appropriate
death benefits pursuant to the Social Security Law.
On 4 November 1997, Jaime Fulo died of "acute renal
failure secondary to 1st degree burn 70% secondary
electrocution" while doing repairs at the residence
and business establishment of petitioner located at
San Julian, Irosin, Sorsogon.
Allegedly moved by his Christian faith, petitioner
extended some financial assistance to private
respondent. On 16 November 1997, the latter
executed an Affidavit of Desistance6 stating that she
was not holding them liable for the death of her late
husband, Jaime Fulo, and was thereby waiving her
right and desisting from filing any criminal or civil
action against petitioner.
On 14 January 1998, both parties executed a
Compromise Agreement.
Thereafter, private respondent filed a claim for social
security benefits with the Social Security System
(SSS)–Sorosogon Branch. However, upon verification
and evaluation, it was discovered that the deceased
was not a registered member of the SSS.
Upon the insistence of private respondent that her
late husband had been employed by petitioner from
January 1983 up to his untimely death on 4
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November 1997, the SSS conducted a field
investigation to clarify his status of employment. In
its field investigation report, it enumerated its
findings as follows:
In connection with the complaint filed by Mrs.
Rosario Fulo, hereunder are the findings per
interview with
Mr. Leonor Delgra, Santiago Bolanos and Amado
Gacelo:
1. That Mr. Jaime Fulo was an employee of
Jaime Gapayao as farm laborer from 1983 to 1997.
2. Mr. Leonor Delgra and Santiago Bolanos are
co-employees of Jaime Fulo.
3. Mr. Jaime Fulo receives compensation on a
daily basis ranging from P5.00 to P60.00 from 1983
to 1997. Per interview from Mrs. Estela Gapayao,
please be informed that:
1. Jaime Fulo is an employee of Mr. & Mrs.
Jaime Gapayao on an extra basis.
2. Sometimes Jaime Fulo is allowed to work in
the farm as abaca harvester and earn 1/3 share of its
harvest as his income.
3. Mr. & Mrs. Gapayao hired the services of
Jaime Fulo not only in the farm as well as in doing
house repairs whenever it is available. Mr. Fulo
receives his remuneration usually in the afternoon
after doing his job.
4. Mr. & Mrs. Gapayao hires 50-100 persons
when necessary to work in their farm as laborer and
Jaime Fulo is one of them. Jaime Fulo receives more
or less P50.00 a day.
Consequently, the SSS demanded that petitioner
remit the social security contributions of the
deceased. When petitioner denied that the deceased
was his employee, the SSS required private
respondent to present documentary and testimonial
evidence to refute petitioner’s allegations.
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Instead of presenting evidence, private respondent
filed a Petition before the SSC on 17 February 2003.
In her Petition, she sought social security coverage
and payment of contributions in order to avail herself
of the benefits accruing from the death of her
husband.
On 6 May 2003, petitioner filed an Answer
disclaiming any liability on the premise that the
deceased was not the former’s employee, but was
rather an independent contractor whose tasks were
not subject to petitioner’s control and supervision.
Assuming arguendo that the deceased was
petitioner’s employee, he was still not entitled to be
paid his SSS premiums for the intervening period
when he was not at work, as he was an "intermittent
worker who was only summoned every now and
then as the need arose." Hence, petitioner insisted
that he was under no obligation to report the
former’s demise to the SSS for social security
coverage.
On 14 March 2007, the SSC rendered a Resolution,
the dispositive portion of which provides:
WHEREFORE, PREMISES CONSIDERED, this
Commission finds, and so holds, that Jaime Fulo, the
late husband of petitioner, was employed by
respondent Jaime N. Gapayao from January 1983 to
November 4, 1997, working for nine (9) months a
year receiving the minimum wage then prevailing.
The SSS is hereby directed to pay petitioner Rosario
Fulo the appropriate death benefit, pursuant to
Section 13 of the SS Law, as amended, as well as its
prevailing rules and regulations, and to inform this
Commission of its compliance herewith.
On 18 May 2007, petitioner filed a Motion for
Reconsideration, which was denied in an Order dated
16 August 2007.
Aggrieved, petitioner appealed to the CA on 19
December 2007. On 17 March 2010, the CA rendered
a
Decision21 in favor of private respondent, as follows:
In fine, public respondent SSC had sufficient basis in
concluding that private respondent’s husband was an
employee of petitioner and should, therefore, be
entitled to compulsory coverage under the Social
Security Law.
Having ruled in favor of the existence of employer -
employee relationship between petitioner and the
late Jaime Fulo, it is no longer necessary to dwell on
the other issues raised.
Resultantly, for his failure to report Jaime Fulo for
compulsory social security coverage, petitioner
should bear the consequences thereof. Under the law,
an employer who fails to report his employee for
social security coverage is liable to [1] pay the
benefits of those who die, become disabled, get sick
or reach retirement age; [2] pay all unpaid
contributions plus a penalty of three percent per
month; and [3] be held liable for a criminal offense
punishable by fine and/or imprisonment. But an
employee is still entitled to social security benefits
even is (sic) his employer fails or refuses to remit his
contribution to the SSS.
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Resolution appealed from is AFFIRMED in toto.
In holding thus, the CA gave credence to the findings
of the SSC. The appellate court held that it "does not
follow that a person who does not observe normal
hours of work cannot be deemed an employee." For
one, it is not essential for the employer to actually
supervise the performance of duties of the employee;
it is sufficient that the former has a right to wield the
power. In this case, petitioner exercised his control
through an overseer in the person of Amado Gacelo,
the tenant on petitioner’s land. Most important,
petitioner entered into a Compromise Agreement
with private respondent and expressly admitted
therein that he was the employer of the deceased.
The CA interpreted this admission as a declaration
against interest, pursuant to Section 26, Rule 130 of
the Rules of Court.
Hence, this petition.
Issue:
Whether or not there exists between the deceased
Jaime Fulo and petitioner an employer-employee
relationship that would merit an award of benefits in
favor of private respondent under social security
laws.
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Held:
Yes. There exist employer-employee relationship
between Fulo and Gapayao.
The court held that in asserting the existence of an
employer-employee relationship, private respondent
alleges that her late husband had been in the employ
of petitioner for 14 years, from 1983 to 1997. During
that period, he was made to work as a laborer in the
agricultural landholdings, a harvester in the abaca
plantation, and a repairman/utility worker in several
business establishments owned by petitioner. To
private respondent, the "considerable length of time
during which [the deceased] was given diverse tasks
by petitioner was a clear indication of the necessity
and indispensability of her late husband’s services to
petitioner’s business." This view is bolstered by the
admission of petitioner himself in the Compromise
Agreement that he was the deceased’s employer.
Private respondent’s position is similarly espoused
by the SSC, which contends that its findings are duly
supported by evidence on record. It insists that
pakyaw workers are considered employees, as long
as the employer exercises control over them. In this
case, the exercise of control by the employer was
delegated to the caretaker of his farm, Amado Gacelo.
The SSC further asserts that the deceased rendered
services essential for the petitioner’s harvest. While
these services were not rendered continuously (in
the sense that they were not rendered every day
throughout the year), still, the deceased had never
stopped working for petitioner from year to year
until the day the former died. In fact, the deceased
was required to work in the other business ventures
of petitioner, such as the latter’s bakery and grocery
store. The Compromise Agreement entered into by
petitioner with private respondent should not be a
bar to an employee demanding what is legally due
the latter.
At the outset, it is settled that the Court is not a trier
of facts and will not weigh evidence all over again.
Findings of fact of administrative agencies and quasi-
judicial bodies, which have acquired expertise
because their jurisdiction is confined to specific
matters, are generally accorded not only respect but
finality when affirmed by the CA. For as long as these
findings are supported by substantial evidence, they
must be upheld.
Farm workers may be considered regular seasonal
employees.
Article 280 of the Labor Code states:
Article 280. Regular and Casual Employment. — The
provisions of written agreement to the contrary
notwithstanding and regardless of the oral
agreement of the parties, an employment shall be
deemed to be regular where the employee has been
engaged to perform activities which are usually
necessary or desirable in the usual business or trade
of the employer, except where the employment has
been fixed for a specific project or undertaking the
completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or services to be
performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is
not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one
year of service whether such service is continuous or
broken, shall be considered a regular employee with
respect to the activity in which he is employed and
his employment shall continue while such actually
exists.
Jurisprudence has identified the three types of
employees mentioned in the provision: (1) regular
employees or those who have been engaged to
perform activities that are usually necessary or
desirable in the usual business or trade of the
employer; (2) project employees or those whose
employment has been fixed for a specific project or
undertaking, the completion or termination of which
has been determined at the time of their engagement,
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or those whose work or service is seasonal in nature
and is performed for the duration of the season; and
(3) casual employees or those who are neither
regular nor project employees.55
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Farm workers generally fall under the definition of
seasonal employees. We have consistently held that
seasonal employees may be considered as regular
employees. Regular seasonal employees are those
called to work from time to time. The nature of their
relationship with the employer is such that during
the off season, they are temporarily laid off; but
reemployed during the summer season or when their
services may be needed. They are in regular
employment because of the nature of their job,and
not because of the length of time they have worked.
IV.A.2.e
•Art. 280, Labor Code
•Book VI, Rule I, Sec. 5, b, Implementing Rules (Labor
Code)
•See Tan v. Lagrama, G.R. No. 151228, August 15,
2002
IV.A.2.f
•Fuji Television v. Espiritu, G.R. No. 204944-45,
December 3, 2014 – ANNE
DOCTRINE:
• The decisive determinant in the term
employment should not be the activities that the
employee is called upon to perform, but the day
certain agreed upon by the parties for the
commencement and termination of their
employment relationship, a day certain being
understood to be "that which must necessarily come,
although it may not be known when."
• an employee can be a regular employee with
a fixed-term contract. The law does not preclude the
possibility that a regular employee may opt to have a
fixed-term contract for valid reasons. This was
recognized in Brent: For as long as it was the
employee who requested, or bargained, that the
contract have a "definite date of termination," or that
the fixed-term contract be freely entered into by the
employer and the employee, then the validity of the
fixed-term contract will be upheld.
FACTS:
In 2005, Arlene S. Espiritu was engaged by Fuji
Television Network, Inc. as a news
correspondent/producer "tasked to report Philippine
news to Fuji through its Manila Bureau field office."
Arlene’s employment contract initially provided for a
term of one (1) year but was successively renewed
on a yearly basis with salary adjustment upon every
renewal. Sometime in January 2009, Arlene was
diagnosed with lung cancer. She informed Fuji about
her condition. In turn, the Chief of News Agency of
Fuji, Yoshiki Aoki, informed Arlene "that the
company will have a problem renewing her contract"
since it would be difficult for her to perform her job.
She "insisted that she was still fit to work as certified
by her attending physician."
After several verbal and written communications,
Arlene and Fuji signed a non-renewal contract on
where it was stipulated that her contract would no
longer be renewed after its expiration on May 31,
2009. In consideration of the non-renewal contract,
Arlene "acknowledged receipt of the total amount of
US$18,050.00 representing her monthly salary from
March 2009 to May 2009, year-end bonus, mid-year
bonus, and separation pay." However, Arlene affixed
her signature on the nonrenewal contract with the
initials "U.P." for "under protest."
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On May 6, 2009, the day after Arlene signed the non-
renewal contract, she filed a complaint for illegal
dismissal and attorney’s fees with the National
Capital Region Arbitration Branch of the National
Labor Relations Commission. She alleged that she
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was forced to sign the nonrenewal contract when
Fuji came to know of her illness and that Fuji
withheld her salaries and other benefits for March
and April 2009 when she refused to sign.
The Labor Arbiter dismissed Arlene’s complaint and
held that Arlene was not Fuji’s employee but an
independent contractor.20
Arlene appealed before the National Labor Relations
Commission. The National Labor Relations
Commission reversed the Labor Arbiter’s decision. It
held that Arlene was a regular employee with respect
to the activities for which she was employed since
she continuously rendered services that were
deemed necessary and desirable to Fuji’s business.
Arlene and Fuji filed separate motions for
reconsideration. Both motions were denied by the
National Labor Relations Commission. From the
decision of the National Labor Relations Commission,
both parties filed separate petitions for certiorari
before the Court of Appeals.
The Court of Appeals held that Arlene was a regular
employee because she was engaged to perform work
that was necessary or desirable in the business of
Fuji, and the successive renewals of her fixed-term
contract resulted in regular employment.
Hence, this petition for review on certiorari under
Rule 45.
ISSUE
WON Arlene was an Independent contractor or a
regular employee.
RULING
Arlene is a regular employee in a fixed term contract.
Fuji alleges that Arlene was an independent
contractor, citing Sonza v. ABS -CBN and relying on
the following facts: (1) she was hired because of her
skills; (2) her salary was US$1,900.00, which is
higher than the normal rate; (3) she had the power to
bargain with her employer; and (4) her contract was
for a fixed term. According to Fuji, the Court of
Appeals erred when it ruled that Arlene was forced
to sign the non-renewal agreement, considering that
she sent an email with another version of the non-
renewal agreement. Further, she is not entitled
tomoral damages and attorney’s fees because she
acted in bad faith when she filed a labor complaint
against Fuji after receiving US$18,050.00
representing her salary and other benefits. Arlene
argues that she was a regular employee because Fuji
had control and supervision over her work. The news
events that she covered were all based on the
instructions of Fuji. She maintains that the successive
renewal of her employment contracts for four (4)
years indicates that her work was necessary and
desirable. In addition, Fuji’s payment of separation
pay equivalent to one (1) month’s pay per year of
service indicates that she was a regular employee. To
further support her argument that she was not an
independent contractor, she states that Fuji owns the
laptop computer and mini-camera that she used for
work. Arlene also argues that Sonza is not applicable
because she was a plain reporter for Fuji, unlike Jay
Sonza who was a news anchor, talk show host, and
who enjoyed a celebrity status. On her illness, Arlene
points outthat it was not a ground for her dismissal
because her attending physician certified that she
was fit to work.
Article 280 of the Labor Code provides that:
Art. 280. Regular and casual employment. The
provisions of written agreement to the contrary
notwithstanding and regardless of the oral
agreement of the parties, an employment shall be
deemed to be regular where the employee has been
engaged to perform activities which are usually
necessary or desirable in the usual business or trade
of the
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employer, except where the employment has been
fixed for a specific project or undertaking the
completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or services to be
performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is
not covered by the preceding paragraph; Provided,
That, any employee who has rendered at least one
year of service, whether such service is continuous or
broken, shall be considered a regular employee with
respect to the activity in which heis employed and his
employment shall continue while such activity exist.
This provision classifies employees into regular,
project, seasonal, and casual. It further classifies
regular employees into two kinds: (1) those "engaged
to perform activities which are usually necessary or
desirable in the usual business or trade of the
employer"; and (2) casual employees who have
"rendered at least one year of service, whether such
service is continuous or broken."
Another classification of employees, i.e., employees
with fixed-term contracts, was recognized in Brent
School, Inc. v.
Zamora where this court discussed that:
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Logically, the decisive determinant in the term
employment should not be the activities that the
employee is called upon to perform, but the day
certain agreed upon by the parties for the
commencement and termination of their
employment relationship, a day certain being
understood to be "that which must necessarily come,
although it may not be known when."
This court further discussed that there are
employment contracts where "a fixed term is an
essential and natural appurtenance" such as overseas
employment contracts and officers in educational
institutions.
The test for determining regular employment is
whether there is a reasonable connection between
the employee’s activities and the usual business of
the employer. Article 280 provides that the nature of
work must be "necessary or desirable in the usual
business or trade of the employer" as the test for
determining regular employment. As stated in ABS-
CBN Broadcasting Corporation v. Nazareno:
In determining whether an employment should be
considered regular or non-regular, the applicable test
is the reasonable connection between the particular
activity performed by the employee in relation to the
usual business or trade of the employer. The
standard, supplied by the law itself, is whether the
work undertaken is necessary or desirable in the
usual business or trade of the employer, a fact that
can be assessed by looking into the nature of the
services rendered and its relation to the general
scheme under which the business or trade is pursued
in the usual course. It is distinguished from a specific
undertaking that is divorced from the normal
activities required in carrying on the particular
business or trade.
Fuji is engaged in the business of broadcasting,
including news programming. It is based in Japan and
has overseas offices to cover international news.
Based on the record, Fuji’s Manila Bureau Office is a
small unit and has a few employees. As such, Arlene
had to do all activities related to news gathering.
Although Fuji insists that Arlene was a stringer, it
alleges that her designation was "News
Talent/Reporter/Producer." (STRINGER – A
journalist who is not on the regular staff of a
newspaper but who writes stories for that
newspaper)
A news producer "plans and supervises newscast . . .
[and] work[s] with reporters in the field planning
and gathering information. . . ." Arlene’s tasks
included "[m]onitoring and [g]etting [n]ews [s]tories,
[r]eporting interviewing subjects in front of a video
camera," "the timely submission of news and current
events reports pertaining to the Philippines[,] and
traveling [sic] to [Fuji’s] regional office in Thailand."
She also had to report for work in Fuji’s office
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in Manila from Mondays to Fridays, eight (8) hours
per day. She had no equipment and had to use the
facilities of Fuji to accomplish her tasks.
The Court of Appeals affirmed the finding of the
National Labor Relations Commission that the
successive renewals of Arlene’s contract indicated
the necessity and desirability of her work in the usual
course of Fuji’s business. Because of this, Arlene had
become a regular employee with the right to security
of tenure. The Court of Appeals ruled that:
Here, Espiritu was engaged by Fuji as a stinger [sic]
or news producer for its Manila Bureau. She was
hired for the primary purpose of news gathering and
reporting to the television network’s headquarters.
Espiritu was not contracted on account of any
peculiar ability or special talent and skill that she
may possess which the network desires to make use
of. Parenthetically, if it were true that Espiritu is an
independent contractor, as claimed by Fuji, the fact
that everything that she uses to perform her job is
owned by the company including the laptop
computer and mini camera discounts the idea of job
contracting.
Moreover, the Court of Appeals explained that Fuji’s
argument that no employer-employee relationship
existed in view of the fixed-term contract does not
persuade because fixed-term contracts of
employment are strictly construed. Further, the
pieces of equipment Arlene used were all owned by
Fuji, showing that she was a regular employee and
not an independent contractor.
The Court of Appeals likewise cited Dumpit-Murillo,
which involved fixed-term contracts that were
successively renewed for four (4) years. This court
held that "[t]his repeated engagement under contract
of hire is indicative of the necessity and desirability
of the petitioner’s work in private respondent ABC’s
business."
With regard to Fuji’s argument that Arlene’s contract
was for a fixed term, the Court of Appeals cited
Philips Semiconductors, Inc. v. Fadriquela and held
that where an employee’s contract "had been
continuously extended or renewed to the same
position, with the same duties and remained in the
employ without any interruption," then such
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employee is a regular employee. The continuous
renewal is a scheme to prevent regularization. On
this basis, the Court of Appeals ruled in favor of
Arlene.
Arlene’s contract indicating a fixed term did not
automatically mean that she could never be a regular
employee. This is precisely what Article 280 seeks to
avoid. The ruling in Brent remains as the exception
rather than the general rule.
Further, an employee can be a regular employee with
a fixed-term contract. The law does not preclude the
possibility that a regular employee may opt to have a
fixed-term contract for valid reasons. This was
recognized in Brent: For as long as it was the
employee who requested, or bargained, that the
contract have a "definite date of termination," or that
the fixed-term contract be freely entered into by the
employer and the employee, then the validity of the
fixed-term contract will be upheld.
PETITION denied.
NOTE:
Fixed Term Employment
1) The fixed period of employment was
knowingly and voluntarily agreed upon by the
parties without any force, duress, or improper
pressure being brought to bear upon the employee
and absent any other circumstances vitiating
his consent; or
2) It satisfactorily appears that the employer
and the employee dealt with each other on more or
less equal terms with no moral dominance exercised
by the former or the latter.
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These indications, which must be read together,
make the Brent doctrine applicable only in a few
special cases wherein the employer and employee
are on more or less in equal footing in entering into
the contract. The reason for this is evident: when a
prospective employee, on account of special skills or
market forces, is in a position to make demands upon
the prospective employer, such prospective
employee needs less protection than the ordinary
worker. Lesser limitations on the parties’ freedom of
contract are thus required for the protection of the
employee.155 (Citations omitted)
For as long as the guidelines laid down in Brent are
satisfied, this court will recognize the validity of the
fixed-term contract. (GMA Network, Inc. vs. Pabriga)
Independent Contractor
One who carries on a distinct and independent
business and undertakes to perform the job, work, or
service on its own account and under one’s own
responsibility according to one’s own manner and
method, free from the control and direction of the
principal in all matters connected with the
performance of the work except as to the results
thereof.
No employer-employee relationship exists between
the independent contractors and their principals.
Art. 106. Contractor or subcontractor. Whenever an
employer enters into a contract with another person
for the performance of the former’s work, the
employees of the contractor and of the latter’s
subcontractor, if any, shall be
paid in accordance with the
provisions of this Code.
XXX
The Secretary of Labor and Employment may, by
appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of
workers established under this Code. In so
prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job
contracting as well as differentiations within these
types of contracting and determine who among the
parties involved shall be considered the employer for
purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
There is “labor-only” contracting where the person
supplying workers to an employer does not have
substantial capital or investment in the form of tools,
equipment, machineries, work premises, among
others, and the workers recruited and placed by such
person are performing activities which are directly
related to the principal business of such employer. In
such cases, the person or intermediary shall be
considered merely as an agent of the employer who
shall be responsible to the workers in the same
manner and extent as if the latter were directly
employed by him.
Department Order No. 18-A, Series of
2011, Section 3
(c) . . . an arrangement whereby a principal
agrees to put out or farm out with a contractor the
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performance or completion of a specific job, work or
service within a definite or predetermined period,
regardless of whether such job, work or service is to
be performed or completed within or outside the
premises of the principal.
This department order also states that there is a
trilateral relationship in legitimate job contracting
and subcontracting arrangements among the
principal, contractor, and employees of the
contractor. There is no employer-employee
relationship between the contractor and principal
who engages the contractor’s services, but there is an
employer-employee relationship between the
contractor and workers hired to accomplish the work
for
the principal.162chanRoblesvirtualLawlibrary
Jurisprudence has recognized another kind of
independent contractor: individuals with unique
skills and talents that set them apart from ordinary
employees. There is no trilateral relationship in this
case because the independent contractor himself or
herself performs the work for the principal. In other
words, the relationship is bilateral.
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XXX
There are different kinds of independent contractors:
those engaged in legitimate job contracting and those
who have unique skills and talents that set them
apart from ordinary employees.
Since no employer-employee relationship exists
between independent contractors and their
principals, their contracts are governed by the Civil
Code provisions on contracts and other applicable
laws.
Regular Employees
Contracts of employment are different and have a
higher level of regulation because they are impressed
with public interest. Article 13, Section 3 of the 1987
Constitution provides full protection to labor.
Apart from the Constitutional guarantee, Article 1700
of the Civil Code states that : The relations between
capital and labor are not merely contractual. They
are so impressed with public interest that labor
contracts must yield to the common good. Therefore,
such contracts are subject to the special laws on
labor unions, collective bargaining, strikes and
lockouts, closed shop, wages, working conditions,
hours of labor and similar subjects.
In contracts of employment, the employer and the
employee are not on equal footing. Thus, it is subject
to regulatory review by the labor tribunals and
courts of law. The law serves to equalize the unequal.
The labor force is a special class that is
constitutionally protected because of the inequality
between capital and labor.176 This presupposes that
the labor force is weak.
•See GMA Network v. Pabriga, G.R. No. 176419,
November 27, 2013
•See Universal Robina v. Acibo, G.R. No. 186439,
January 15, 2014 – LIZ
DOCTRINE:
Regular employment refers to that
arrangement whereby the employee has been
engaged to perform activities which are usually
necessary or desirable in the usual business or trade
of the employer. By way of an exception, paragraph 2,
Article 280 of the Labor Code also considers regular a
casual employment arrangement when the casual
employees engagement has lasted for at least one
year, regardless of the engagements continuity. The
controlling test in this arrangement is the length of
time during which the employee is engaged.
The respondents duties as loader operators,
hookers, crane operators and drivers were necessary
to haul and transport the sugarcane from the
plantation to the mill; laboratory attendants, workers
and laborers to mill the sugar; and welders,
carpenters and utility workers to ensure the smooth
and continuous operation of the mill for the duration
of the milling season, as distinguished from the
production of the sugarcane which involves the
planting and raising of the sugarcane until it ripens
for milling. They perform activities that are necessary
and desirable in sugarcane production.
Also, the respondents were regularly and repeatedly
hired to perform the same tasks year after year. This
regular and repeated hiring of the same workers
(two different sets) for two separate seasons has put
in place, principally through jurisprudence, the
system of regular seasonal employment in the sugar
industry and other industries with a similar nature of
operations.
FACTS:
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URSUMCO is a domestic corporation engaged in the
sugarcane milling business; Cabati is URSUMCOs
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Business Unit General Manager.
The complainants were employees of URSUMCO, and
were hired on various dates between 1988 and 1996,
and on different capacities, i.e., drivers, crane
operators, bucket hookers, welders, mechanics,
laboratory attendants and aides, steel workers,
carpenters, among others. The complainants signed
contracts of employment for a period of 1 month or
for a given season, and were repeatedly hired to
perform the same duties and, for every engagement,
were required to sign new employment contracts for
the same duration of one month or given season.
On August 23, 2002, the complainants filed before
the Labor Arbiter complaints for regularization,
entitlement to the benefits under the existing
Collective Bargaining Agreement (CBA), and
attorneys fees. The Labor Arbiter dismissed the
complaint in the decision dated October 9, 2002, for
lack of merit. The Labor Arbiter pointed out that the
complainants were required to perform several
projects that were not at all directly related to
URSUMCOs main operations, and that they were
project employees, they could not be regularized
since their respective employments end upon the
completion of each project. Also, complainants were
not entitled to the benefits granted under the CBA
that, as provided, covered only the regular employees
of URSUMCO.
7, out of the 22 original complainants, appealed the
Labor Arbiters ruling before the NLRC. NLRC
reversed the Labor Arbiter's ruling; it declared the
complainants are regular URSUMCO employees
because they performed activities which were
usually necessary and desirable in the usual trade or
business of URSUMCO, and granted their monetary
claims under the CBA. NLRC denied petitioners
motion for reconsideration.
Petitioners elevated the case to the Court of Appeals
(CA) via a petition for certiorari.
The CA granted in part the petition. It pointed out
that the primary standard for determining regular
employment is the reasonable connection between a
particular activity performed by the employee vis-vis
the usual trade or business of the employer. As the
complainants have been performing their respective
tasks for at least one year, these same tasks,
regardless of whether the performance was
continuous or intermittent, constitutes sufficient
evidence of the necessity, if not indispensability, of
the activity to URSUMCOs business. On the claim for
CBA benefits, however, the CA ruled that the
complainants were not entitled to receive them. CA
pointed out that the CBA covered regular employees
of URSUMCO performing tasks needed by the latter
for the entire year with no regard to the changing
sugar milling season. For collective bargaining
purposes, they constitute a bargaining unit separate
and distinct from the regular employees.
The petitioner filed a petition for review on certiorari
after the CA denied their motion for partial
reconsideration.
ISSUE: Whether or not the respondents are regular
employees of URSUMCO?
HELD: The respondents are regular seasonal
employees of URSUMCO
LABOR LAW : regular seasonal employees
Article 280 of the Labor Code provides for three
kinds of employment arrangements, namely: regular,
project/seasonal and casual.
Regular employment refers to that arrangement
whereby the employee has been engaged to perform
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activities which are usually necessary or desirable in
the usual business or trade of the employer. By way
of an exception, paragraph 2, Article 280 of the Labor
Code also considers regular a casual employment
arrangement when the casual employees
engagement has lasted for at least one year,
regardless of the engagements continuity. The
controlling test in this arrangement is the length of
time during which the employee is engaged.
Project employment, on the other hand,
contemplates on arrangement whereby the
employment has been fixed for a specific project or
undertaking whose completion or termination has
been determined at the time of the engagement of the
employee. The services of the project employees are
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legally and automatically terminated upon the end or
completion of the project as the employees services
are coterminous with the project.
Seasonal employment operates much in the same
way as project employment, albeit it involves work
or service that is seasonal in nature or lasting for the
duration of the season. To exclude the asserted
seasonal employee from those classified as regular
employees, the employer must show that: (1) the
employee must be performing work or services that
are seasonal in nature; and (2) he had been employed
for the duration of the season. Hence, when the
seasonal workers are continuously and repeatedly
hired to perform the same tasks or activities for
several seasons or even after the cessation of the
season, this length of time may likewise serve as
badge of regular employment.
Casual employment refers to any other employment
arrangement that does not fall under any of the first
two categories.
In the case at bar, the respondents were made to
perform various tasks that did not at all pertain to
any specific phase of URSUMCO's strict milling
operations that would ultimately cease upon
completion of a particular phase in the milling of
sugar; rather, they were tasked to perform duties
regularly and habitually needed in URSUMCO's
operations during the milling season. The
respondents duties as loader operators, hookers,
crane operators and drivers were necessary to haul
and transport the sugarcane from the plantation to
the mill; laboratory attendants, workers and laborers
to mill the sugar; and welders, carpenters and utility
workers to ensure the smooth and continuous
operation of the mill for the duration of the milling
season, as distinguished from the production of the
sugarcane which involves the planting and raising of
the sugarcane until it ripens for milling. They
perform activities that are necessary and desirable in
sugarcane production. Also, the respondents were
regularly and repeatedly hired to perform the same
tasks year after year. This regular and repeated
hiring of the same workers (two different sets) for
two separate seasons has put in place, principally
through jurisprudence, the system of regular
seasonal employment in the sugar industry and other
industries with a similar nature of operations.
Therefore, the nature of the employment does not
depend solely on the will or word of the employer or
on the procedure for hiring and the manner of
designating the employee. Rather, the nature of the
employment depends on the nature of the activities
to be performed by the employee, considering the
nature of the employers business, the duration and
scope to be done, and, in some cases, even the length
of time of the performance and its continued
existence.
The NLRC acted in grave abuse of discretion when it
declared the respondents regular employees of
URSUMCO without qualification and that they were
entitled to the benefits granted under the CBA, to
URSUMCO's regular employees. We also find that the
CA grossly misread the NLRC ruling and missed the
implications of the respondents regularization. To
reiterate, the respondents are regular seasonal
employees, as the CA itself opined when it declared
that private respondents who are regular workers
with
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respect to their seasonal tasks or activities and while
such activities exist, cannot automatically be
governed by the CBA between petitioner URSUMCO
and the authorized bargaining representative of the
regular and permanent employees.
•Colegio del Santisimo v. Rojo, G.R. No. 170388,
September 4, 2013-FRANCIS
Doctrine:
The scheme "of fixed-term contract is a
system that operates during the probationary period
and for this reason is subject to Article 281 of the
Labor Code," which provides:
x x x The services of an employee who has been
engaged on a probationary basis may be terminated
for a just cause or when he fails to qualify as a regular
employee in accordance with reasonable standards
made known by the employer to the employee at the
time of his engagement. An employee who is allowed
to work after a probationary period shall be
considered a regular employee.
FACTS:
Petitioner Colegio del Santisimo Rosario (CSR) hired
respondent as a high school teacher on probationary
basis. On April 5, 1995, through petitioner Sr.
Zenaida S. Mofada, OP (Mofada), decided not to
renew respondent’s services. Thus, respondent filed
a Complaint for illegal dismissal. He alleged that since
he had served three consecutive school years which
is the maximum number of terms allowed for
probationary employment, he should be extended
permanent employment. Citing paragraph 75 of the
1970 Manual of Regulations for Private Schools
(1970 Manual), respondent asserted that "full- time
teachers who have rendered three (3) consecutive
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years of satisfactory services shall be considered
permanent."
On the other hand, petitioners argued that
respondent knew that his Teacher’s Contract for
school year 1994-1995 with CSR would expire on
March 31, 1995. Petitioners also claimed that the
"three years" mentioned in paragraph 75 of the 1970
Manual refer to "36 months," not three school years.
And since respondent served for only three school
years of 10 months each or 30 months, then he had
not yet served the "three years" or 36 months
mentioned in paragraph 75 of the 1970 Manual.
The LA ruled that "three school years" means three
years of 10 months, not 12 months. Thus, he has
already attained regular employment status. On
appeal, the NLRC affirmed the LA’s Decision with
modification. It held that after serving three school
years, respondent had attained the status of regular
employment. It held that respondent is entitled to
reinstatement, if viable; or separation pay, if
reinstatement was no longer feasible, and
backwages, Petitioners filed a Petition for Certiorari
before the CA but the CA denied the Petition for lack
of merit.
ISSUE:
WON a teacher hired for three consecutive school
years as probationary employee automatically
becomes a regular employee upon completion of his
third year of probation.
HELD:
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SC denied the Petition.
In Mercado v. AMA Computer College-Parañaque
City, Inc., we had occasion to rule that cases dealing
with employment on probationary status of teaching
personnel are not governed solely by the Labor Code
as the law is supplemented, with respect to the
period of probation, by special rules found in the
Manual of Regulations for Private Schools Section 92
of the 1992 Manual provides:
Section 92. Probationary Period. – Subject in all
instances to compliance with the Department and
school requirements, the probationary period for
academic personnel shall not be more than three (3)
consecutive years of satisfactory service for those in
the elementary and secondary levels, six (6)
consecutive regular semesters of satisfactory service
for those in the tertiary level, and nine (9)
consecutive trimesters of satisfactory service for
those in the tertiary level where collegiate courses
are offered on a trimester basis.
In this case, petitioners’ teachers who were on
probationary employment were made to enter into a
contract effective for one school year. Thereafter, it
may be renewed for another school year, and the
probationary employment continues. At the end of
the second fixed period of probationary employment,
the contract may again be renewed for the last time.
The scheme "of fixed-term contract is a system that
operates during the probationary period and for this
reason is subject to Article 281 of the Labor Code,"
which provides:
x x x The services of an employee who has been
engaged on a probationary basis may be terminated
for a just cause or when he fails to qualify as a regular
employee in accordance with reasonable standards
made known by the employer to the employee at the
time of his engagement. An employee who is allowed
to work after a probationary period shall be
considered a regular employee.
As such, "no vested right to a permanent
appointment shall accrue until the employee has
completed the prerequisite three-year period
necessary for the acquisition of a permanent status.
When fixed-term employment is brought into play
under the above probationary period rules, the
situation
– as in the present case – may at first blush look
muddled as fixed-term employment is in itself a valid
employment mode under Philippine law and
jurisprudence. The conflict, however, is more
apparent than real when the respective nature of
fixed-term employment and of employment on
probationary status is closely examined.
The fixed -term character of employment essentially
refers to the period agreed upon between the
employer and the employee; employment exists only
for the duration of the term and ends on its own
when the term expires. However, for teachers on
probationary employment, in which case a fixed term
contract is not specifically used for the fixed term it
offers, it is incumbent upon the school to have not
only set reasonable standards to be followed by said
teachers in determining qualification for regular
employment, the same must have also been
communicated to the teachers at the start of the
probationary period, or at the very least, at the start
of the period when they were to be applied. These
terms, in addition to those expressly provided by the
Labor Code, would serve as the just cause for the
termination of the probationary contract.
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In this case, glaringly absent from petitioners’
evidence are the reasonable standards that
respondent was expected to meet that could have
served as proper guidelines for purposes of QUANTUM LEAP (USJ-R SCHOOL OF LAW BATCH
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Teacher’s Contract could such standards be found.
Neither was it mentioned that the same

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were ever conveyed to respondent. Even assuming

that respondent failed to meet the standards set forth
by CSR and made known to the former at the time he
was engaged as a teacher on probationary status,
still, the termination was flawed for failure to give
the required notice to respondent. As a matter of due
process, teachers on probationary employment, just
like all probationary employees, have the right to
know whether they have met the standards against
which their performance was evaluated.

WHEREFORE, the Petition is hereby DENIED.

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