Relevant Cases For Wages

Labor Law – Conditions of Employment
G.R. No. L-44169 December 3, 1985
ROSARIO A. GAA, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, EUROPHIL INDUSTRIES CORPORATION, and
CESAR R. ROXAS, Deputy Sheriff of Manila, respondents.
Federico C. Alikpala and Federico Y. Alikpala, Jr. for petitioner.
Borbe and Palma for private respondent.
PATAJO, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals promulgated on
March 30, 1976, affirming the decision of the Court of First Instance of Manila.
It appears that respondent Europhil Industries Corporation was formerly one of the tenants in Trinity
Building at T.M. Kalaw Street, Manila, while petitioner Rosario A. Gaa was then the building
administrator. On December 12, 1973, Europhil Industries commenced an action (Civil Case No.
92744) in the Court of First Instance of Manila for damages against petitioner "for having perpetrated
certain acts that Europhil Industries considered a trespass upon its rights, namely, cutting of its
electricity, and removing its name from the building directory and gate passes of its officials and
employees" (p. 87 Rollo). On June 28, 1974, said court rendered judgment in favor of respondent
Europhil Industries, ordering petitioner to pay the former the sum of P10,000.00 as actual damages,
P5,000.00 as moral damages, P5,000.00 as exemplary damages and to pay the costs.
The said decision having become final and executory, a writ of garnishment was issued pursuant to
which Deputy Sheriff Cesar A. Roxas on August 1, 1975 served a Notice of Garnishment upon El
Grande Hotel, where petitioner was then employed, garnishing her "salary, commission and/or
remuneration." Petitioner then filed with the Court of First Instance of Manila a motion to lift said
garnishment on the ground that her "salaries, commission and, or remuneration are exempted from
execution under Article 1708 of the New Civil Code. Said motion was denied by the lower Court in
an order dated November 7, 1975. A motion for reconsideration of said order was likewise denied,
and on January 26, 1976 petitioner filed with the Court of Appeals a petition for certiorari against
filed with the Court of Appeals a petition for certiorari against said order of November 7, 1975.
On March 30, 1976, the Court of Appeals dismissed the petition for certiorari. In dismissing the
petition, the Court of Appeals held that petitioner is not a mere laborer as contemplated under Article
1708 as the term laborer does not apply to one who holds a managerial or supervisory position like
that of petitioner, but only to those "laborers occupying the lower strata." It also held that the term
"wages" means the pay given" as hire or reward to artisans, mechanics, domestics or menial
servants, and laborers employed in manufactories, agriculture, mines, and other manual occupation
and usually employed to distinguish the sums paid to persons hired to perform manual labor, skilled
or unskilled, paid at stated times, and measured by the day, week, month, or season," citing 67 C.J.
285, which is the ordinary acceptation of the said term, and that "wages" in Spanish is "jornal" and
one who receives a wage is a "jornalero."
In the present petition for review on certiorari of the aforesaid decision of the Court of Appeals,
petitioner questions the correctness of the interpretation of the then Court of Appeals of Article 1708
of the New Civil Code which reads as follows:
ART. 1708. The laborer's wage shall not be subject to execution or attachment,
except for debts incurred for food, shelter, clothing and medical attendance.
It is beyond dispute that petitioner is not an ordinary or rank and file laborer but "a responsibly place
employee," of El Grande Hotel, "responsible for planning, directing, controlling, and coordinating the
activities of all housekeeping personnel" (p. 95, Rollo) so as to ensure the cleanliness, maintenance
and orderliness of all guest rooms, function rooms, public areas, and the surroundings of the hotel.
Considering the importance of petitioner's function in El Grande Hotel, it is undeniable that petitioner
is occupying a position equivalent to that of a managerial or supervisory position.
In its broadest sense, the word "laborer" includes everyone who performs any kind of mental or
physical labor, but as commonly and customarily used and understood, it only applies to one
engaged in some form of manual or physical labor. That is the sense in which the courts generally
apply the term as applied in exemption acts, since persons of that class usually look to the reward of
a day's labor for immediate or present support and so are more in need of the exemption than are
other. (22 Am. Jur. 22 citing Briscoe vs. Montgomery, 93 Ga 602, 20 SE 40; Miller vs. Dugas, 77 Ga
4 Am St Rep 192; State ex rel I.X.L. Grocery vs. Land, 108 La 512, 32 So 433; Wildner vs.
Ferguson, 42 Minn 112, 43 NW 793; 6 LRA 338; Anno 102 Am St Rep. 84.
In Oliver vs. Macon Hardware Co., 98 Ga 249 SE 403, it was held that in determining whether a
particular laborer or employee is really a "laborer," the character of the word he does must be taken
into consideration. He must be classified not according to the arbitrary designation given to his
calling, but with reference to the character of the service required of him by his employer.
In Wildner vs. Ferguson, 42 Minn 112, 43 NW 793, the Court also held that all men who earn
compensation by labor or work of any kind, whether of the head or hands, including judges, laywers,
bankers, merchants, officers of corporations, and the like, are in some sense "laboring men." But
they are not "laboring men" in the popular sense of the term, when used to refer to a must presume,
the legislature used the term. The Court further held in said case:
There are many cases holding that contractors, consulting or assistant engineers,
agents, superintendents, secretaries of corporations and livery stable keepers, do not
come within the meaning of the term. (Powell v. Eldred, 39 Mich, 554, Atkin v.
Wasson, 25 N.Y. 482; Short v. Medberry, 29 Hun. 39; Dean v. De Wolf, 16 Hun.
186; Krausen v. Buckel, 17 Hun. 463; Ericson v. Brown, 39 Barb. 390; Coffin v.
Reynolds, 37 N.Y. 640; Brusie v. Griffith, 34 Cal. 306; Dave v. Nunan, 62 Cal. 400).
Thus, in Jones vs. Avery, 50 Mich, 326, 15 N.W. Rep. 494, it was held that a traveling salesman,
selling by sample, did not come within the meaning of a constitutional provision making stockholders
of a corporation liable for "labor debts" of the corporation.
In Kline vs. Russell 113 Ga. 1085, 39 SE 477, citing Oliver vs. Macon Hardware Co., supra, it was
held that a laborer, within the statute exempting from garnishment the wages of a "laborer," is one
whose work depends on mere physical power to perform ordinary manual labor, and not one
engaged in services consisting mainly of work requiring mental skill or business capacity, and
involving the exercise of intellectual faculties.
So, also in Wakefield vs. Fargo, 90 N.Y. 213, the Court, in construing an act making stockholders in
a corporation liable for debts due "laborers, servants and apprentices" for services performed for the
corporation, held that a "laborer" is one who performs menial or manual services and usually looks to
the reward of a day's labor or services for immediate or present support. And in Weymouth vs.
Sanborn, 43 N.H. 173, 80 Am. Dec. 144, it was held that "laborer" is a term ordinarily employed to
denote one who subsists by physical toil in contradistinction to those who subsists by professional
skill. And in Consolidated Tank Line Co. vs. Hunt, 83 Iowa, 6, 32 Am. St. Rep. 285, 43 N.W. 1057,
12 L.R.A. 476, it was stated that "laborers" are those persons who earn a livelihood by their own
manual labor.
Article 1708 used the word "wages" and not "salary" in relation to "laborer" when it declared what are
to be exempted from attachment and execution. The term "wages" as distinguished from "salary",
applies to the compensation for manual labor, skilled or unskilled, paid at stated times, and
measured by the day, week, month, or season, while "salary" denotes a higher degree of
employment, or a superior grade of services, and implies a position of office: by contrast, the term
wages " indicates considerable pay for a lower and less responsible character of employment, while
"salary" is suggestive of a larger and more important service (35 Am. Jur. 496).
The distinction between wages and salary was adverted to in Bell vs. Indian Livestock Co. (Tex.
Sup.), 11 S.W. 344, wherein it was said: "'Wages' are the compensation given to a hired person for
service, and the same is true of 'salary'. The words seem to be synonymous, convertible terms,
though we believe that use and general acceptation have given to the word 'salary' a significance
somewhat different from the word 'wages' in this: that the former is understood to relate to position of
office, to be the compensation given for official or other service, as distinguished from 'wages', the
compensation for labor." Annotation 102 Am. St. Rep. 81, 95.
We do not think that the legislature intended the exemption in Article 1708 of the New Civil Code to
operate in favor of any but those who are laboring men or women in the sense that their work is
manual. Persons belonging to this class usually look to the reward of a day's labor for immediate or
present support, and such persons are more in need of the exemption than any others. Petitioner
Rosario A. Gaa is definitely not within that class.
We find, therefore, and so hold that the Trial Court did not err in denying in its order of November 7,
1975 the motion of petitioner to lift the notice of garnishment against her salaries, commission and
other remuneration from El Grande Hotel since said salaries, Commission and other remuneration
due her from the El Grande Hotel do not constitute wages due a laborer which, under Article 1708 of
the Civil Code, are not subject to execution or attachment.
IN VIEW OF THE FOREGOING, We find the present petition to be without merit and hereby
AFFIRM the decision of the Court of Appeals, with costs against petitioner.
SO ORDERED.
Teehankee (Chairman), Plana, Gutierrez, Jr. and De la Fuente, JJ., concur.
Melencio-Herrera (Chairperson) and Relova, JJ., is on leave.
G.R. No. L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,
vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO
AGUAS, and F.E. ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabora, Del Rosario & Castillo for private respondent.
MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of the National Labor Relations
Commission in NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres,
Complainants-Appellants, v. F.E. Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No. RN-
IV-20855-78-T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee," which dismissed the appeal of petitioners herein and in effect affirmed the
decision of the Labor Arbiter ordering private respondent to pay petitioners separation pay
equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year of
service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department
of Labor (Regional Office No. 4) an application seeking clearance to terminate the services of
petitioners Jose Songco, Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners)
allegedly on the ground of retrenchment due to financial losses. This application was seasonably
opposed by petitioners alleging that the company is not suffering from any losses. They alleged
further that they are being dismissed because of their membership in the union. At the last hearing of
the case, however, petitioners manifested that they are no longer contesting their dismissal. The
parties then agreed that the sole issue to be resolved is the basis of the separation pay due to
petitioners. Petitioners, who were in the sales force of Zuellig received monthly salaries of at least
P40,000. In addition, they received commissions for every sale they made.
The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees
Association, of which petitioners are members, contains the following provision (p. 71, Rollo):
ARTICLE XIV — Retirement Gratuity
Section l(a)-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. One month of salary as used in this paragraph
shall be deemed equivalent to the salary at date of retirement; years of service shall
be deemed equivalent to total service credits, a fraction of at least six months being
considered one year, including probationary employment. (Emphasis supplied)
On the other hand, Article 284 of the Labor Code then prevailing provides:
Art. 284. Reduction of personnel. — The termination of employment of any employee
due to the installation of labor saving-devices, redundancy, retrenchment to prevent
losses, and other similar causes, shall entitle the employee affected thereby to
separation pay. In case of termination due to the installation of labor-saving devices
or redundancy, the separation pay shall be equivalent to 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 other similar causes, 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)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code
provide:
xxx
Sec. 9(b). Where the termination of employment is due to retrechment initiated by the
employer to prevent losses or other similar causes, or where the employee suffers
from a disease and his continued employment is prohibited by law or is prejudicial to
his health or to the health of his co-employees, the employee shall be entitled to
termination pay equivalent at least to his one month salary, or to one-half
month pay for every year of service, whichever is higher, a fraction of at least six (6)
months being considered as one whole year.
xxx
Sec. 10. Basis of termination pay. — The computation of the termination pay of an
employee as provided herein shall be based on his latest salary rate, unless the
same was reduced by the employer to defeat the intention of the Code, in which case
the basis of computation shall be the rate before its deduction. (Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads (p.
78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered

to pay the complainants separation pay equivalent to their one month salary
(exclusive of commissions, allowances, etc.) for every year of service that they have
worked with the company.
SO ORDERED.
The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of
merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and
Withdrawal of Petition dated April 7, 1980 filed by petitioner Romeo Cipres, based on the ground that
he wants "to abide by the decision appealed from" since he had "received, to his full and complete
satisfaction, his separation pay," resolved to dismiss the petition as to him.
The issue is 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.
The petition is impressed with merit.
Petitioners' position was that in arriving at the correct and legal amount of separation pay due them,
whether under the Labor Code or the CBA, their basic salary, earned sales commissions and
allowances should be added together. They cited Article 97(f) of the Labor Code which includes
commission as part on one's salary, to wit;
(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. 'Fair reasonable value' shall not include
any profit to the employer or to any person affiliated with the employer.
Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules
to include commission in the computation of separation pay, it could have explicitly said so in clear
and unequivocal terms. Furthermore, in the definition of the term "wage", "commission" is used only
as one of the features or designations attached to the word remuneration or earnings.
Insofar as the issue of whether or not allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation pay is concerned, this has been settled
in the case of Santos v. NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where
We ruled that "in the computation of backwages and separation pay, account must be taken not only
of the basic salary of petitioner but also of her transportation and emergency living allowances." This
ruling was reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987, 155 SCRA 124
and recently, in Planters Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989.
We shall concern ourselves now with the issue of whether or not earned sales commission should
be included in the monthly salary of petitioner for the purpose of computation of their separation pay.
Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has
been repeatedly declared by the courts that where the law speaks in clear and categorical language,
there is no room for interpretation or construction; there is only room for application (Cebu Portland
Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga
v. Court of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and unambiguous
statute speaks for itself, and any attempt to make it clearer is vain labor and tends only to obscurity.
How ever, it may be argued that if We correlate Article 97(f) with Article XIV of the Collective
Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing
Rules, there appears to be an ambiguity. In this regard, the Labor Arbiter rationalized his decision in
this manner (pp. 74-76, Rollo):
The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be
(sic) stated as a general definition. It is 'wage ' in its generic sense. A careful perusal
of the same does not show any indication that commission is part of salary. We can
say that commission by itself may be considered a wage. This is not something novel
for it cannot be gainsaid that certain types of employees like agents, field personnel
and salesmen do not earn any regular daily, weekly or monthly salaries, but rely
mainly on commission earned.
Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the
implementing rules in conjunction with Articles 273 and 274 (sic) of the Code
specifically states that the basis of the termination pay due to one who is sought to
be legally separated from the service is 'his latest salary rates.
x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.
The above terms found in those Articles and the particular Rules were intentionally
used to express the intent of the framers of the law that for purposes of separation
pay they mean to be specifically referring to salary only.
.... Each particular benefit provided in the Code and other Decrees on Labor has its
own pecularities and nuances and should be interpreted in that light. Thus, for a
specific provision, a specific meaning is attached to simplify matters that may arise
there from. The general guidelines in (sic) the formation of specific rules for particular
purpose. Thus, that what should be controlling in matters concerning termination pay
should be the specific provisions of both Book VI of the Code and the Rules. At any
rate, settled is the rule that in matters of conflict between the general provision of law
and that of a particular- or specific provision, the latter should prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the implementing rules, it could be
deduced that wage is used in its generic sense and obviously refers to the basic
wage rate to be ascertained on a time, task, piece or commission basis or other
method of calculating the same. It does not, however, mean that commission,
allowances or analogous income necessarily forms part of the employee's salary
because to do so would lead to anomalies (sic), if not absurd, construction of the
word "salary." For what will prevent the employee from insisting that emergency
living allowance, 13th month pay, overtime, and premium pay, and other fringe
benefits should be added to the computation of their separation pay. This situation, to
our mind, is not the real intent of the Code and its rules.
We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article
XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10
of the Implementing Rules, which mention the terms "pay" and "salary", is more apparent than real.
Broadly, the word "salary" means a recompense or consideration made to a person for his pains or
industry in another man's 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 (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins
vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481; 38 Am. Jur. 496). "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" (Black's Law Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary"
have the same meaning, and commission is included in the definition of "wage", the logical
conclusion, therefore, is, in the computation of the separation pay of petitioners, their salary base
should include also their earned sales commissions.
The aforequoted provisions are not the only consideration for deciding the petition in favor of the
petitioners.
We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in
the form of incentives or encouragement, so that the petitioners would be inspired to put a little more
industry on the jobs particularly assigned to them, still these commissions are direct remuneration
services rendered which contributed to the increase of income of Zuellig . Commission is the
recompense, compensation or reward of an agent, salesman, executor, trustees, 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 (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123,
141 A.2d 749, 750). The nature of the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly that commission are part of petitioners'
wage or salary. We take judicial notice of the fact that some salesmen do not receive any basic
salary but depend on commissions and allowances or commissions alone, are part of petitioners'
wage or salary. We take judicial notice of the fact that some salesman do not received any basic
salary but depend on commissions and allowances or commissions alone, although an employer-
employee relationship exists. Bearing in mind the preceeding dicussions, if we adopt the opposite
view that commissions, do not form part of 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. Will this not be absurd? This narrow interpretation is not in accord
with the liberal spirit of our labor laws and considering the purpose of separation pay which is, to
alleviate the difficulties which confront a dismissed employee thrown the the streets to face the harsh
necessities of life.
Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should
be used in computing the separation pay, We held that:
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.
Applying this by analogy, since the commissions in the present case were earned by actual market
transactions attributable to petitioners, these should be included in their separation pay. In the
computation thereof, what should be taken into account is the average commissions earned during
their last year of employment.
The final consideration is, in carrying out and interpreting the Labor Code's provisions and its
implementing regulations, the workingman's welfare should be the primordial and paramount
consideration. This kind of interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of the Labor Code which states that "all
doubts in the implementation and interpretation of the provisions of the Labor Code including its
implementing rules and regulations shall be resolved in favor of labor" (Abella v. NLRC, G.R. No.
71812, July 30,1987,152 SCRA 140; Manila Electric Company v. NLRC, et al., G.R. No. 78763, July
12,1989), and Article 1702 of the Civil Code which provides that "in case of doubt, all labor
legislation and all labor contracts shall be construed in favor of the safety and decent living for the
laborer.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National Labor
Relations Commission is MODIFIED by including allowances and commissions in the separation pay
of petitioners Jose Songco and Amancio Manuel. The case is remanded to the Labor Arbiter for the
proper computation of said separation pay.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Griño-Aquino, JJ., concur.
G.R. No. L-72654-61 January 22, 1990
ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN,
NICANOR FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES
and/or ARSENIO DE GUZMAN, respondents.
J.C. Espinas & Associates for petitioners.

Tomas A. Reyes for private respondent.
FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not the fishermen-crew members of the
trawl fishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing
Enterprises, and if so, whether or not they were illegally dismissed from their employment.
Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of
several fishing vessels owned and operated by private respondent De Guzman Fishing Enterprises
which is primarily engaged in the fishing business with port and office at Camaligan, Camarines Sur.
Petitioners rendered service aboard said fishing vessel in various capacities, as follows: Alipio Ruga
and Jose Parma patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second engineer;
Jaime Barbin, master fisherman; Nicanor Francisco, second fisherman; Philip Cervantes and
Eleuterio Barbin, fishermen.
For services rendered in the conduct of private respondent's regular business of "trawl" fishing,
petitioners were paid on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier
of private respondent. As agreed upon, they received thirteen percent (13%) of the proceeds of the
sale of the fish-catch if the total proceeds exceeded the cost of crude oil consumed during the fishing
trip, otherwise, they received ten percent (10%) of the total proceeds of the sale. The patron/pilot,
chief engineer and master fisherman received a minimum income of P350.00 per week while the
assistant engineer, second fisherman, and fisherman-winchman received a minimum income of
P260.00 per week. 1
On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman,
president of private respondent, to proceed to the police station at Camaligan, Camarines Sur, for
investigation on the report that they sold some of their fish-catch at midsea to the prejudice of private
respondent. Petitioners denied the charge claiming that the same was a countermove to their having
formed a labor union and becoming members of Defender of Industrial Agricultural Labor
Organizations and General Workers Union (DIALOGWU) on September 3, 1983.
During the investigation, no witnesses were presented to prove the charge against petitioners, and
no criminal charges were formally filed against them. Notwithstanding, private respondent refused to
allow petitioners to return to the fishing vessel to resume their work on the same day, September 11,
1983.
On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-
payment of 13th month pay, emergency cost of living allowance and service incentive pay, with the
then Ministry (now Department) of Labor and Employment, Regional Arbitration Branch No. V,
Legaspi City, Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They uniformly contended that
they were arbitrarily dismissed without being given ample time to look for a new job.
On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman,
submitted its position paper denying the employer-employee relationship between private
respondent and petitioners on the theory that private respondent and petitioners were engaged in a
joint venture. 3
After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for
joint hearing furnishing the parties with notice and summons. On December 27, 1983, after two (2)
previously scheduled joint hearings were postponed due to the absence of private respondent, one
of the petitioners herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman II, testified, among
others, on the manner the fishing operations were conducted, mode of payment of compensation for
services rendered by the fishermen-crew members, and the circumstances leading to their
dismissal. 4
On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde
rendered a joint decision 5 dismissing all the complaints of petitioners on a finding that a "joint fishing
venture" and not one of employer-employee relationship existed between private respondent and
petitioners.
From the adverse decision against them, petitioners appealed to the National Labor Relations
Commission.
On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6 affirming
the decision of the labor arbiter that a "joint fishing venture" relationship existed between private
respondent and petitioners.
Hence, the instant petition.
Petitioners assail the ruling of the public respondent NLRC that what exists between private
respondent and petitioners is a joint venture arrangement and not an employer-employee
relationship. To stress that there is an employer-employee relationship between them and private
respondent, petitioners invite attention to the following: that they were directly hired by private
respondent through its general manager, Arsenio de Guzman, and its operations manager, Conrado
de Guzman; that, except for Laurente Bautu, they had been employed by private respondent from 8
to 15 years in various capacities; that private respondent, through its operations manager,
supervised and controlled the conduct of their fishing operations as to the fixing of the schedule of
the fishing trips, the direction of the fishing vessel, the volume or number of tubes of the fish-catch
the time to return to the fishing port, which were communicated to the patron/pilot by radio (single
side band); that they were not allowed to join other outfits even the other vessels owned by private
respondent without the permission of the operations manager; that they were compensated on
percentage commission basis of the gross sales of the fish-catch which were delivered to them in
cash by private respondent's cashier, Mrs. Pilar de Guzman; and that they have to follow company
policies, rules and regulations imposed on them by private respondent.
Disputing the finding of public respondent that a "joint fishing venture" exists between private
respondent and petitioners, petitioners claim that public respondent exceeded its jurisdiction and/or
abused its discretion when it added facts not contained in the records when it stated that the pilot-
crew members do not receive compensation from the boat-owners except their share in the catch
produced by their own efforts; that public respondent ignored the evidence of petitioners that private
respondent controlled the fishing operations; that public respondent did not take into account
established jurisprudence that the relationship between the fishing boat operators and their crew is
one of direct employer and employee.
Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is
now final and executory for failure of petitioners to file their appeal with the NLRC within 10 calendar
days from receipt of said decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine
Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor General claims that the ruling of public
respondent that a "joint fishing venture" exists between private respondent and petitioners rests on
the resolution of the Social Security System (SSS) in a 1968 case, Case No. 708 (De Guzman
Fishing Enterprises vs. SSS), exempting De Guzman Fishing Enterprises, private respondent herein,
from compulsory coverage of the SSS on the ground that there is no employer-employee relations
between the boat-owner and the fishermen-crew members following the doctrine laid down
in Pajarillo vs. SSS, 17 SCRA 1014 (1966). In applying to the case at bar the doctrine in Pajarillo
vs. SSS, supra, that there is no employer-employee relationship between the boat-owner and the
pilot and crew members when the boat-owner supplies the boat and equipment while the pilot and
crew members contribute the corresponding labor and the parties get specific shares in the catch for
their respective contribution to the venture, the Solicitor General pointed out that the boat-owners in
the Pajarillo case, as in the case at bar, did not control the conduct of the fishing operations and the
pilot and crew members shared in the catch.
We rule in favor of petitioners.
Fundamental considerations of substantial justice persuade Us to decide the instant case on the
merits rather than to dismiss it on a mere technicality. In so doing, we exercise the prerogative
accorded to this Court enunciated in Firestone Filipinas Employees Association, et al. vs. Firestone
Tire and Rubber Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the well-settled doctrine is
that in labor cases before this Tribunal, no undue sympathy is to be accorded to any claim of a
procedural misstep, the idea being that its power be exercised according to justice and equity and
substantial merits of the controversy."
Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly

engaged in trawl fishing, as in the case of petitioners herein, who spend one (1) whole week or
more 7 in the open sea performing their job to earn a living to support their families, convince Us to
adopt a more liberal attitude in applying to petitioners the 10-calendar day rule in the filing of appeals
with the NLRC from the decision of the labor arbiter.
Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only
on July 3,1984 by their non-lawyer representative during the arbitration proceedings, Jose Dialogo
who received the decision eight (8) days earlier, or on June 25, 1984. As adverted to earlier, the
circumstances peculiar to petitioners' occupation as fishermen-crew members, who during the
pendency of the case understandably have to earn a living by seeking employment elsewhere,
impress upon Us that in the ordinary course of events, the information as to the adverse decision
against them would not reach them within such time frame as would allow them to faithfully abide by
the 10-calendar day appeal period. This peculiar circumstance and the fact that their representative
is a non-lawyer provide equitable justification to conclude that there is substantial compliance with
the ten-calendar day rule of filing of appeals with the NLRC when petitioners filed on July 10, 1984,
or seven (7) days after receipt of the decision, their appeal with the NLRC through registered mail.
We have consistently ruled that in determining the existence of an employer-employee relationship,

the elements that are generally considered are the following (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee with respect to the means and methods by which the work is to be
accomplished. 8 The employment relation arises from contract of hire, express or implied. 9 In the
absence of hiring, no actual employer-employee relation could exist.
From the four (4) elements mentioned, We have generally relied on the so-called right-of-control
test 10 where the person for whom the services are performed reserves a right to control not only the
end to be achieved but also the means to be used in reaching such end. The test calls merely for the
existence of the right to control the manner of doing the work, not the actual exercise of the right. 11
The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that
a "joint fishing venture" existed between private respondent and petitioners is not applicable in the
instant case. There is neither light of control nor actual exercise of such right on the part of the boat-
owners in the Pajarillo case, where the Court found that the pilots therein are not under the order of
the boat-owners as regards their employment; that they go out to sea not upon directions of the
boat-owners, but upon their own volition as to when, how long and where to go fishing; that the boat-
owners do not in any way control the crew-members with whom the former have no relationship
whatsoever; that they simply join every trip for which the pilots allow them, without any reference to
the owners of the vessel; and that they only share in their own catch produced by their own efforts.
The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The
conduct of the fishing operations was undisputably shown by the testimony of Alipio Ruga, the
patron/pilot of 7/B Sandyman II, to be under the control and supervision of private respondent's
operations manager. Matters dealing on the fixing of the schedule of the fishing trip and the time to
return to the fishing port were shown to be the prerogative of private respondent. 12 While performing
the fishing operations, petitioners received instructions via a single-side band radio from private
respondent's operations manager who called the patron/pilot in the morning. They are told to report
their activities, their position, and the number of tubes of fish-catch in one day. 13 Clearly thus, the
conduct of the fishing operations was monitored by private respondent thru the patron/pilot of 7/B
Sandyman II who is responsible for disseminating the instructions to the crew members.
The conclusion of public respondent that there had been no change in the situation of the parties
since 1968 when De Guzman Fishing Enterprises, private respondent herein, obtained a favorable
judgment in Case No. 708 exempting it from compulsory coverage of the SSS law is not supported
by evidence on record. It was erroneous for public respondent to apply the factual situation of the
parties in the 1968 case to the instant case in the light of the changes in the conditions of
employment agreed upon by the private respondent and petitioners as discussed earlier.
Records show that in the instant case, as distinguished from the Pajarillo case where the crew
members are under no obligation to remain in the outfit for any definite period as one can be the
crew member of an outfit for one day and be the member of the crew of another vessel the next day,
the herein petitioners, on the other hand, were directly hired by private respondent, through its
general manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman and have
been under the employ of private respondent for a period of 8-15 years in various capacities, except
for Laurente Bautu who was hired on August 3, 1983 as assistant engineer. Petitioner Alipio Ruga
was hired on September 29, 1974 as patron/captain of the fishing vessel; Eladio Calderon started as
a mechanic on April 16, 1968 until he was promoted as chief engineer of the fishing vessel; Jose
Parma was employed on September 29, 1974 as assistant engineer; Jaime Barbin started as a pilot
of the motor boat until he was transferred as a master fisherman to the fishing vessel 7/B Sandyman
II; Philip Cervantes was hired as winchman on August 1, 1972 while Eleuterio Barbin was hired as
winchman on April 15, 1976.
While tenure or length of employment is not considered as the test of employment, nevertheless the
hiring of petitioners to perform work which is necessary or desirable in the usual business or trade of
private respondent for a period of 8-15 years since 1968 qualify them as regular employees within
the meaning of Article 281 of the Labor Code as they were indeed engaged to perform activities
usually necessary or desirable in the usual fishing business or occupation of private respondent. 14
Aside from performing activities usually necessary and desirable in the business of private
respondent, it must be noted that petitioners received compensation on a percentage commission
based on the gross sale of the fish-catch i.e. 13% of the proceeds of the sale if the total proceeds
exceeded the cost of the crude oil consumed during the fishing trip, otherwise only 10% of the
proceeds of the sale. Such compensation falls within the scope and meaning of the term "wage" as
defined under Article 97(f) of the Labor Code, thus:
(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 included 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. . . .
The claim of private respondent, which was given credence by public respondent, that petitioners get
paid in the form of share in the fish-catch which the patron/pilot as head of the team distributes to his
crew members in accordance with their own understanding 15 is not supported by recorded evidence.
Except that such claim appears as an allegation in private respondent's position paper, there is
nothing in the records showing such a sharing scheme as preferred by private respondent.
Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their
fish-catch at midsea without the knowledge and consent of private respondent, petitioners were
unjustifiably not allowed to board the fishing vessel on September 11, 1983 to resume their activities
without giving them the opportunity to air their side on the accusation against them unmistakably
reveals the disciplinary power exercised by private respondent over them and the corresponding
sanction imposed in case of violation of any of its rules and regulations. The virtual dismissal of
petitioners from their employment was characterized by undue haste when less extreme measures
consistent with the requirements of due process should have been first exhausted. In that sense, the
dismissal of petitioners was tainted with illegality.
Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private
respondent virtually resulting in their dismissal evidently contradicts private respondent's theory of
"joint fishing venture" between the parties herein. A joint venture, including partnership, presupposes
generally a parity of standing between the joint co-venturers or partners, in which each party has an
equal proprietary interest in the capital or property contributed 16 and where each party exercises
equal lights in the conduct of the business. 17 It would be inconsistent with the principle of parity of
standing between the joint co-venturers as regards the conduct of business, if private respondent
would outrightly exclude petitioners from the conduct of the business without first resorting to other
measures consistent with the nature of a joint venture undertaking, Instead of arbitrary unilateral
action, private respondent should have discussed with an open mind the advantages and
disadvantages of petitioners' action with its joint co-venturers if indeed there is a "joint fishing
venture" between the parties. But this was not done in the instant case. Petitioners were arbitrarily
dismissed notwithstanding that no criminal complaints were filed against them. The lame excuse of
private respondent that the non-filing of the criminal complaints against petitioners was for
humanitarian reasons will not help its cause either.
We have examined the jurisprudence on the matter and find the same to be supportive of petitioners'
stand. In Negre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were
recruited by one master fisherman locally known as "maestro" in charge of recruiting others to
complete the crew members are considered employees, not industrial partners, of the boat-owners.
In an earlier case of Abong vs. WCC, 54 SCRA 379 (1973) where petitioner therein, Dr. Agustin
Abong, owner of the fishing boat, claimed that he was not the employer of the fishermen crew
members because of an alleged partnership agreement between him, as financier, and Simplicio
Panganiban, as his team leader in charge of recruiting said fishermen to work for him, we affirmed
the finding of the WCC that there existed an employer-employee relationship between the boat-
owner and the fishermen crew members not only because they worked for and in the interest of the
business of the boat-owner but also because they were subject to the control, supervision and
dismissal of the boat-owner, thru its agent, Simplicio Panganiban, the alleged "partner" of Dr. Abong;
that while these fishermen crew members were paid in kind, or by "pakiao basis" still that fact did not
alter the character of their relationship with Dr. Abong as employees of the latter.
In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA
159 (1982), we held that the employer-employee relationship between the crew members and the
owners of the fishing vessels engaged in deep sea fishing is merely suspended during the time the
vessels are drydocked or undergoing repairs or being loaded with the necessary provisions for the
next fishing trip. The said ruling is premised on the principle that all these activities i.e., drydock,
repairs, loading of necessary provisions, form part of the regular operation of the company fishing
business.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the
National Labor Relations Commission dated May 30,1985 is hereby REVERSED and SET ASIDE.
Private respondent is ordered to reinstate petitioners to their former positions or any equivalent
positions with 3-year backwages and other monetary benefits under the law. No pronouncement as
to costs.
SO ORDERED.
Gutierrez, Jr., Bidin and Cortés, JJ., concur.
Feliciano, J., concurs in the result.
G.R. No. L-7349 July 19, 1955

ATOK-BIG WEDGE MUTUAL BENEFIT ASSOCIATION, petitioner,
vs.
ATOK-BIG WEDGE MINING COMPANY, INCORPORATED, respondents.
Pablo C. Sanidad for petitioner.

Roxas and Sarmiento for respondents.
REYES, J. B. L., J.:
On September 4, 1950, the petitioner labor union, the Atok-Big Wedge Mutual Benefit Association,
submitted to the Atok-Big Wedge Mining Co., Inc. (respondent herein) several demands, among
which was an increase of P0.50 in daily wage. The matter was referred by the mining company to
the Court of Industrial Relations for arbitration and settlement (Case No. 523-V). In the course of
conciliatory measures taken by the Court, some of the demands were granted, and others (including
the demand for increased wages) rejected, and so, hearings proceeded and evidence submitted on
the latter. On July 14, 1951, the Court rendered a decision (Record, pp. 25-32) fixing the minimum
wage at P2.65 a day with the rice ration, or P3.20 without rice ration; denying the deduction from
such minimum wage, of the value of housing facilities furnished by the company to the laborers, as
well as the efficiency bonus given to them by the company; and ordered that the award be made
effective retroactively from the date of the demand, September 4, 1950, as agreed by the parties.
From this decision, the mining company appealed to this Court (G.R. No. L-5276).
Subsequently, an urgent petition was presented in Court on October 15, 1952 by the Atok-Big
Wedge Mining Company for authority to stop operations and lay off employees and laborers, for the
reason that due to the heavy losses, increased taxes, high cost of materials, negligible quantity of
ore deposits, and the enforcement of the Minimum Wage Law, the continued operation of the
company would lead to its immediate bankruptcy and collapse (Rec. pp. 100-109). To avert the
closure of the company and the consequent lay-off of hundreds of laborers and employees, the
Court, instead of hearing the petition on the merits, convened the parties for voluntary conciliation
and mediation. After lengthy discussions and exchange of views, the parties on October 29, 1952
reached an agreement effective from August 4, 1952 to December 31, 1954 (Rec. pp. 18-23). The
Agreement in part provides:
That the petitioner, Atok-Big Wedge Mining Company, Incorporated, agrees to abide by
whatever decision that the Supreme Court may render with respect to Case No. 523-V (G.R.
5276) and Case No. 523-1 (10) (G.R. 5594).
xxx xxx xxx
III
xxx xxx xxx
That the petitioner, Atok-Big Wedge Mining Company, Incorporated, and the respondent,
Atok-Big Wedge Mutual Benefit Association, agree that the following facilities heretofore
given or actually being given by the 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 such as recreation
facilities, medical treatment to
dependents of laborers, school
facilities, rice ration during off-days,
water, light, fuel, etc., equivalent to
at least 85 per day
It is understood that the said amount of facilities valued at the abovementioned prices, may be
charged in full or partially by the Atok-Big Wedge Mining Company, Inc., against laborer or
employee, as it may see fit pursuant to the exigencies of its operation.
The agreement was submitted to the Court for approval and on December 26, 1952, was approved
by the Court in an order giving it effect as an award or decision in the case (Rec., p. 24).
Later, Case No. G.R. No. L-5276 was decided by this Court (promulgated March 3, 1953), affirming
the decision of the Court of Industrial Relations fixing the minimum cash wage of the laborers and
employees of the Atok-Big Wedge Mining Co. at P3.20 cash, without rice ration, or P2.65, with rice
ration. On June 13, 1953, the labor union presented to the Court a petition for the enforcement of the
terms of the agreement of October 29, 1952, as allegedly modified by the decision of this Court in
G.R. No. L-5276 and the provisions of the Minimum Wage Law, which has since taken effect,
praying for the payment of the minimum cash wage of P3.45 a day with rice ration, or P4.00 without
rice ration, and the payment of differential pay from August 4, 1952, when the award became
effective. The mining company opposed the petition claiming that the Agreement of October 29,
1952 was entered into by the parties with the end in view that the company's cost of production be
not increased in any way, so that it was intended to supersede whatever decision the Supreme
Court would render in G.R. No. L-5276 and the provisions of the Minimum Wage Law with respect to
the minimum cash wage payable to the laborers and employees. Sustaining the opposition, the
Court of Industrial Relations, in an order issued on September 22, 1953 (Rec. pp. 44-49), denied the
petition, upon the ground that when the Agreement of the parties of October 29, 1952 was entered
into by them, they already knew the decision of said Court (although subject to appeal to the
Supreme Court) fixing the minimum cash wage at P3.20 without rice ration, or P2.65 with rice ration,
as well as the provisions of the Minimum Wage Law requiring the payment of P4 minimum daily
wage in the provinces effective August 4, 1952; so that the parties had intended to be regulated by
their Agreement of October 29, 1952. On the same day, the Court issued another order (Rec. pp.
50-55), denying the claim of the labor union for payment of an additional 50 per cent based on the
basic wage of P4 for work on Sundays and holidays, holding that the payments being made by the
company were within the requirements of the law. Its motion for the reconsideration of both orders
having been denied, the labor union filed this petition for review by certiorari.
The first issue submitted to us arises from an apparent contradiction in the Agreement of October
29, 1952. By paragraph III thereof, the parties by common consent evaluated the facilities furnished
by the Company to its laborers (rice rations, housing, recreation, medical treatment, water, light, fuel,
etc.) at P1.80 per day, and authorized the company to have such value "charge in full or partially —
against any laborer or employee as it may see fit"; while in paragraph I, the Company agreed to
abide by the decision of this Court (pending at the time the agreement was had) in G.R. No. L-5594;
and as rendered, the decision was to the effect that the Company could deduct from the minimum
wage only the value of the rice ration.
It is contended by the petitioner union that the two provisions should be harmonized by holding
paragraph III (deduction of all facilities) to be merely provisional, effective only while this Court had
not rendered its decision in G.R. No. L-5594; and that the terms of said paragraph should be
deemed superseded by the decision from the time the latter became final, some four or five months
after the agreement was entered into; in consequence, (it is claimed), the laborers became entitled
by virtue of said decision to the prevailing P4.00 minimum wage with no other deduction than that of
the rice ration, or a net cash wage of P3.45.
This contention, in our opinion, is untenable. The intention of the parties could not have been to
make the arrangement in paragraph III a merely provisional arrangement pending the decision of the
Supreme Court for "this agreement" was expressly made retroactive and effective as of August 4,
1952, and to be in force up to and including December 31, 1954" (Par. IV). When concluded on
October 29, 1952, neither party could anticipate the date when the decision of the Supreme Court
would be rendered; nor is any reason shown why the parties should desire to limit the effects of the
decision to the period 1952-1954 if it was to supersede the agreement of October 29, 1952.
To ascertain the true import of paragraph I of said Agreement providing that the respondent
company agreed to abide by whatever decision the Supreme Court would render in G.R. No. L-
5276, it is important to remember that, as shown by the records, the agreement was prompted by an
urgent petition filed by the respondent mining company to close operations and lay-off laborers
because of heavy losses and the full enforcement of the Minimum Wage Law in the provinces,
requiring it to pay its laborers the minimum wage of P4; to avoid such eventuality, through the
mediation of the Court of Industrial Relations, a compromise was reached whereby it was agreed
that the company would pay the minimum wage fixed by the law, but the facilities then being
received by the laborers would be evaluated and charged as part of the wage, but without in any
way reducing the P2.00 cash portion of their wages which they were receiving prior to the agreement
(hearing of Oct. 28, 1952, CIR, t.s.n. 47). In other words, while it was the objective of the parties to
comply with the requirements of the Minimum Wage Law, it was also deemed important that the
mining company should not have to increase the cash wages it was then paying its laborers, so that
its cost of production would not also be increased, in order to prevent its closure and the lay-off of
employees and laborers. And as found by the Court below in the order appealed from (which finding
is conclusive upon us), "it is this eventuality that the parties did not like to happen, when they have
executed the said agreement" (Rec. p. 49). Accordingly, after said agreement was entered into, the
Company started paying its laborers a basic cash or "take-home" wage of P2.20 (Rec. p. 9),
representing the difference between P4 (minimum wage) and P1.80 (value of all facilities).
With this background, the provision to abide by our decision in G.R. No. L-5276 can only be
interpreted thus: That the company agreed to pay whatever award this Court would make in said
case from the date fixed by the decision (which was that of the original demand, September 4, 1950)
up to August 3, 1952 (the day previous to the effectivity of the Compromise Agreement) and from
August 4, 1954 to December 31, 1954, they are to be bound by their agreement of October 29,
1952.
This means that during the first period (September 4, 1950 to August 3, 1952), only rice rations
given to the laborers are to be regarded as forming part of their wage and deductible therefrom. The
minimum wage was then fixed (by the Court of Industrial Relations, and affirmed by this Court) at
P3.20 without rice ration, or P2.65 with rice ration. Since the respondent company had been paying
its laborers the basic cash or "take-home" wage of P2 prior to said decision and up to August 3,
1952, the laborers are entitled to a differential pay of P0.65 per working day from September 4, 1950
(the date of the effectivity of the award in G.R. L-5276) up to August 3, 1952.
From August 4, 1952, the date when the Agreement of the parties of October 29, 1952 became
effective (which was also the date when the Minimum Wage Law became fully enforceable in the
provinces), the laborers should be paid a minimum wage of P4 a day. From this amount, the
respondent mining company is given the right to charge each laborer "in full or partially", the facilities
enumerated in par. III of the Agreement; i.e., rice ration at P0.55 per day, housing facility at P0.40
per day, and other facilities "constitute part of his wages". It appears that the company had actually
been paying its laborers the minimum wage of P2.20 since August 4, 1952; hence they are not
entitled to any differential pay from this date.
Petitioner argues that to allow the deductions stipulated in 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 Republic Act No. 602, section 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". 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, as defined by section 2 of Republic Act No. 602,
"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." 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". It is not here claimed that the valuations fixed in the Agreement of October 29, 1952
are not fair and reasonable. On the contrary, the agreement expressly states that such valuations:
"have been arrived at after careful study and deliberation by both representatives of both
parties, with the assistance of their respective counsels, and in the presence of the
Honorable Presiding Judge of the Court of Industrial Relations" (Rec. p. 2).
Neither is it claimed that the parties, with the aid of the Court of Industrial Relations in a dispute
pending before it, may not fix by agreement the valuation of such facilities, without referring the
matter to the Department of Labor.
Petitioner also argues that to allow the deductions of the facilities appearing in the
Agreement referred to, would be contrary to the mandate of section 19 of the law, that
"nothing in this Act . . . justify an employer . . . in reducing supplements furnished on the date
of enactment.
The meaning of the term "supplements" has been fixed by the Code of Rules and Regulations
promulgated by the Wage Administration Office to implement the Minimum Wage Law (Ch. 1, [c]),
as:
extra renumeration or benefits received by wage earners from their employees and include
but are not restricted to pay for 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.
"Supplements", therefore, constitute extra renumeration 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 the 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. It is thus clear that the facilities mentioned in the agreement of
October 29, 1952 do not come within the term "supplements" as used in Art. 19 of the Minimum
Wage Law.
For the above reasons, we find the appeal from the Order of the Court a quo of September 22, 1953
denying the motion of the petitioner labor union for the payment of the minimum wage of P3.45 per
day plus rice ration, or P4 without rice ration, to be unmeritorious and untenable.
The second question involved herein relates to the additional compensation that should be paid by
the respondent company to its laborers for work rendered on Sundays and holidays. It is admitted
that the respondent company is paying an additional compensation of 50 per cent based on the
basic "cash portion" of the laborer's wage of P2.20 per day; i.e., P1.10 additional compensation for
each Sunday or holiday's work. Petitioner union insists, however, that this 50 per cent additional
compensation should be computed on the minimum wage of P400 and not on the "cash portion" of
the laborer's wage of P2.20, under the provisions of the Agreement of October 29, 1952 and the
Minimum Wage Law.
SEC. 4. Commonwealth Act No. 444 (otherwise known as the Eight Hour Labor Law) provides:
No person, firm, or corporations, business establishment or place or center of labor shall

compel an employee or laborer to work during Sundays and holidays, unless he is paid an
additional sum of at least twenty-five per centum of his regular renumeration:
The minimum legal additional compensation for work on Sundays and legal holidays is, therefore, 25
per cent of the laborer's regular renumeration. Under the Minimum Wage Law, this minimum
additional compensation is P1 a day (25 per cent of P4, the minimum daily wage).
While the respondent company computes the additional compensation given to its laborers for work
on Sundays and holidays on the "cash portion" of their wages of P2.20, it is giving them 50 per cent
thereof, or P1.10 a day. Considering that the minimum additional compensation fixed by the law is
P1 (25 per cent of P4), the compensation being paid by the respondent company to its laborers is
even higher than such minimum legal additional compensation. We, therefore, see no error in the
holding of the Court a quo that the respondent company has not violated the law with respect to the
payment of additional compensation for work rendered by its laborers on Sundays and legal
holidays.
Finding no reason to sustain the present petition for review, the same is, therefore, dismissed, with
costs against the petitioner Atok-Big Wedge Mutual Benefit Association.
Bengzon, Acting C.J., Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Labrador, and
Concepcion, JJ.,concur.
G.R. No. L-12444 February 28, 1963
STATES MARINE CORPORATION and ROYAL LINE, INC., petitioners,

vs.
CEBU SEAMEN'S ASSOCIATION, INC., respondent.
Pedro B. Uy Calderon for petitioners.

Gaudioso C. Villagonzalo for respondent.
PAREDES, J.:
Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the business of marine
coastwise transportation, employing therein several steamships of Philippine registry. They had a
collective bargaining contract with the respondent Cebu Seamen's Association, Inc. On September
12, 1952, the respondent union filed with the Court of Industrial Relations (CIR), a petition (Case No.
740-V) against the States Marine Corporation, later amended on May 4, 1953, by including as party
respondent, the petitioner Royal Line, Inc. The Union alleged that the officers and men working on
board the petitioners' vessels have not been paid their sick leave, vacation leave and overtime pay;
that the petitioners threatened or coerced them to accept a reduction of salaries, observed by other
shipowners; that after the Minimum Wage Law had taken effect, the petitioners required their
employees on board their vessels, to pay the sum of P.40 for every meal, while the masters and
officers were not required to pay their meals and that because Captain Carlos Asensi had refused to
yield to the general reduction of salaries, the petitioners dismissed said captain who now claims for
reinstatement and the payment of back wages from December 25, 1952, at the rate of P540.00,
monthly.
The petitioners' shipping companies, answering, averred that very much below 30 of the men and
officers in their employ were members of the respondent union; that the work on board a vessel is
one of comparative ease; that petitioners have suffered financial losses in the operation of their
vessels and that there is no law which provides for the payment of sick leave or vacation leave to
employees or workers of private firms; that as regards the claim for overtime pay, the petitioners
have always observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law),
notwithstanding the fact that it does not apply to those who provide means of transportation; that the
shipowners and operators in Cebu were paying the salaries of their officers and men, depending
upon the margin of profits they could realize and other factors or circumstances of the business; that
in enacting Rep. Act No. 602 (Minimum Wage Law), the Congress had in mind that the amount of
P.40 per meal, furnished the employees should be deducted from the daily wages; that Captain
Asensi was not dismissed for alleged union activities, but with the expiration of the terms of the
contract between said officer and the petitioners, his services were terminated.
A decision was rendered on February 21, 1957 in favor of the respondent union. The motion for
reconsideration thereof, having been denied, the companies filed the present writ of certiorari, to
resolve legal question involved. Always bearing in mind the deep-rooted principle that the factual
findings of the Court of Industrial Relations should not be disturbed, if supported by substantial
evidence, the different issues are taken up, in the order they are raised in the brief for the petitioners.
1. First assignment of error. — The respondent court erred in holding that it had jurisdiction
over case No. 740-V, notwithstanding the fact that those who had dispute with the
petitioners, were less than thirty (30) in number.
The CIR made a finding that at the time of the filing of the petition in case No. 740-V,
respondent Union had more than thirty members actually working with the
companies, and the court declared itself with jurisdiction to take cognizance of the
case. Against this order, the herein petitioners did not file a motion for
reconsideration or a petition for certiorari. The finding of fact made by the CIR
became final and conclusive, which We are not now authorized to alter or modify. It
is axiomatic that once the CIR had acquired jurisdiction over a case, it continues to
have that jurisdiction, until the case is terminated (Manila Hotel Emp. Association v.
Manila Hotel Company, et al., 40 O.G. No. 6, p. 3027). It was abundantly shown that
there were 56 members who signed Exhibits A, A-I to A-8, and that 103 members of
the Union are listed in Exhibits B, B-1 to B-35, F, F-1 and K-2 to K-3. So that at the
time of the filing of the petition, the respondent union had a total membership of 159,
working with the herein petitioners, who were presumed interested in or would be
benefited by the outcome of the case (NAMARCO v. CIR, L-17804, Jan. 1963).
Annex D, (Order of the CIR, dated March 8, 1954), likewise belies the contention of
herein petitioner in this regard. The fact that only 7 claimed for overtime pay and only
7 witnesses testified, does not warrant the conclusion that the employees who had
some dispute with the present petitioners were less than 30. The ruling of the CIR,
with respect to the question of jurisdiction is, therefore, correct.
2. Second assignment of error. — The CIR erred in holding, that inasmuch as in the shipping
articles, the herein petitioners have bound themselves to supply the crew with provisions and
with such "daily subsistence as shall be mutually agreed upon" between the master and the
crew, no deductions for meals could be made by the aforesaid petitioners from their wages
or salaries.
3. Third assignment of error. — The CIR erred in holding that inasmuch as with regard to
meals furnished to crew members of a vessel, section 3(f) of Act No. 602 is the general rule,
which section 19 thereof is the exception, the cost of said meals may not be legally deducted
from the wages or salaries of the aforesaid crew members by the herein petitioners.
4. Fourth assignment of error. — The CIR erred in declaring that the deduction for costs of
meals from the wages or salaries after August 4, 1951, is illegal and same should be
reimbursed to the employee concerned, in spite of said section 3, par. (f) of Act No. 602.
It was shown by substantial evidence, that since the beginning of the operation of the petitioner's
business, all the crew of their vessels have been signing "shipping articles" in which are stated
opposite their names, the salaries or wages they would receive. All seamen, whether members of
the crew or deck officers or engineers, have been furnished free meals by the ship owners or
operators. All the shipping articles signed by the master and the crew members, contained, among
others, a stipulation, that "in consideration of which services to be duly performed, the said master
hereby agrees to pay to the said crew, as wages, the sums against their names respectively
expressed in the contract; and to supply them with provisions as provided herein ..." (Sec. 8, par. [b],
shipping articles), and during the duration of the contract "the master of the vessel will provide each
member of the crew such daily subsistence as shall be mutually agreed daily upon between said
master and crew; or, in lieu of such subsistence the crew may reserve the right to demand at the
time of execution of these articles that adequate daily rations be furnished each member of the
crew." (Sec. 8, par. [e], shipping articles). It is, therefore, apparent that, aside from the payment of
the respective salaries or wages, set opposite the names of the crew members, the petitioners
bound themselves to supply the crew with ship's provisions, daily subsistence or daily rations, which
include food.
This was the situation before August 4, 1951, when the Minimum Wage Law became effective. After
this date, however, the companies began deducting the cost of meals from the wages or salaries of
crew members; but no such deductions were made from the salaries of the deck officers and
engineers in all the boats of the petitioners. Under the existing laws, therefore, the query converges
on the legality of such deductions. While the petitioners herein contend that the deductions are legal
and should not be reimbursed to the respondent union, the latter, however, claims that same are
illegal and reimbursement should be made.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove
their case not covered by this stipulation of facts.
1äwphï1.ñët
We hold that such deductions are not authorized. In the coastwise business of transportation of
passengers and freight, the men who compose the complement of a vessel are provided with free
meals by the shipowners, operators or agents, because they hold on to their work and duties,
regardless of "the stress and strain concomitant of a bad weather, unmindful of the dangers that lurk
ahead in the midst of the high seas."
Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows —
(f) Until and unless investigations by the Secretary of Labor on his initiative or on petition of
any interested party result in a different determination of the fair and reasonable value,
the furnishing of meals shall be valued at not more than thirty centavos per meal for
agricultural employees and not more than forty centavos for any other employees covered by
this Act, and the furnishing of housing shall be valued at not more than twenty centavos daily
for agricultural workers and not more than forty centavos daily for other employees covered
by this Act.
Petitioners maintain, in view of the above provisions, that in fixing the minimum wage of employees,
Congress took into account the meals furnished by employers and that in fixing the rate of forty
centavos per meal, the lawmakers had in mind that the latter amount should be deducted from the
daily wage, otherwise, no rate for meals should have been provided.
However, section 19, same law, states —
SEC. 19. Relations to other labor laws and practices.— Nothing in this Act shall deprive an
employee of the right to seek fair wages, shorter working hours and better working conditions
nor justify an employer in violating any other labor law applicable to his employees, in
reducing the wage now paid to any of his employees in excess of the minimum wage
established under this Act, or in reducing supplements furnished on the date of enactment.
At first blush, it would appear that there exists a contradiction between the provisions of section 3(f)
and section 19 of Rep. Act No. 602; but from a careful examination of the same, it is evident that
Section 3(f) constitutes the general rule, while section 19 is the exception. In other words, if there are
no supplements given, within the meaning and contemplation of section 19, but merely facilities,
section 3(f) governs. There is no conflict; the two provisions could, as they should be harmonized.
And even if there is such a conflict, the respondent CIR should resolve the same in favor of the
safety and decent living laborers (Art. 1702, new Civil Code)..
It is argued that the food or meals given to the deck officers, marine engineers and unlicensed crew
members in question, were mere "facilities" which should be deducted from wages, and not
"supplements" which, according to said section 19, should not be deducted from such wages,
because it is provided therein: "Nothing in this Act shall deprive an employee of the right to such fair
wage ... or in reducing supplements furnished on the date of enactment." In the case of Atok-Big
Wedge Assn. v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms are
defined as follows —
"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 criterion is not so much with the kind
of the benefit or item (food, lodging, bonus or sick leave) given, but its purpose. Considering,
therefore, as definitely found by the respondent court that the meals were freely given to crew
members prior to August 4, 1951, while they were on the high seas "not as part of their wages but as
a necessary matter in the maintenance of the health and efficiency of the crew personnel during the
voyage", the deductions therein made for the meals given after August 4, 1951, should be returned
to them, and the operator of the coastwise vessels affected should continue giving the same benefit..
In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L-9742, Oct. 27,
1955, the company used to pay to its drivers and conductors, who were assigned outside of the City
limits, aside from their regular salary, a certain percentage of their daily wage, as allowance for food.
Upon the effectivity of the Minimum Wage Law, however, that privilege was stopped by the
company. The order CIR to the company to continue granting this privilege, was upheld by this
Court.
The shipping companies argue that the furnishing of meals to the crew before the effectivity of Rep.
Act No. 602, is of no moment, because such circumstance was already taken into consideration by
Congress, when it stated that "wage" includes the fair and reasonable value of boards customarily
furnished by the employer to the employees. If We are to follow the theory of the herein petitioners,
then a crew member, who used to receive a monthly wage of P100.00, before August 4, 1951, with
no deduction for meals, after said date, would receive only P86.00 monthly (after deducting the cost
of his meals at P.40 per meal), which would be very much less than the P122.00 monthly minimum
wage, fixed in accordance with the Minimum Wage Law. Instead of benefiting him, the law will
adversely affect said crew member. Such interpretation does not conform with the avowed intention
of Congress in enacting the said law.
One should not overlook a fact fully established, that only unlicensed crew members were made to
pay for their meals or food, while the deck officers and marine engineers receiving higher pay and
provided with better victuals, were not. This pictures in no uncertain terms, a great and unjust
discrimination obtaining in the present case (Pambujan Sur United Mine Workers v. CIR, et al., L-
7177, May 31, 1955).
Fifth, Sixth and Seventh assignments of error.— The CIR erred in holding that Severino Pepito, a
boatsman, had rendered overtime work, notwithstanding the provisions of section 1, of C.A. No. 444;
in basing its finding ofthe alleged overtime, on the uncorroborated testimony of said Severino Pepito;
and in ordering the herein petitioners to pay him. Severino Pepito was found by the CIR to have
worked overtime and had not been paid for such services. Severino Pepito categorically stated that
he worked during the late hours of the evening and during the early hours of the day when the boat
docks and unloads. Aside from the above, he did other jobs such as removing rusts and cleaning the
vessel, which overtime work totalled to 6 hours a day, and of which he has not been paid as yet.
This statement was not rebutted by the petitioners. Nobody working with him on the same boat "M/V
Adriana" contrawise. The testimonies of boatswains of other vessels(M/V Iruna and M/V Princesa),
are incompetent and unreliable. And considering the established fact that the work of Severino
Pepito was continuous, and during the time he was not working, he could not leave and could not
completely rest, because of the place and nature of his work, the provisions of sec. 1, of Comm. Act
No. 444, which states "When the work is not continuous, the time during which the laborer is not
working and can leave his working place and can rest completely shall not be counted", find no
application in his case.
8. Eighth assignment of error.— The CIR erred in ordering petitioners to reinstate Capt. Carlos
Asensi to his former position, considering the fact that said officer had been employed since January
9, 1953, as captain of a vessel belonging to another shipping firm in the City of Cebu.
The CIR held —
Finding that the claims of Captain Carlos Asensi for back salaries from the time of his alleged
lay-off on March 20, 1952, is not supported by the evidence on record, the same is hereby
dismissed. Considering, however, that Captain Asensi had been laid-off for a long time and
that his failure to report for work is not sufficient cause for his absolute dismissal,
respondents are hereby ordered to reinstate him to his former job without back salary but
under the same terms and conditions of employment existing prior to his lay-off, without loss
of seniority and other benefits already acquired by him prior to March 20, 1952. This Court is
empowered to reduce the punishment meted out to an erring employee (Standard Vacuum
Oil Co., Inc. v. Katipunan Labor Union, G.R. No. L-9666, Jan. 30, 1957). This step taken is in
consonance with section 12 of Comm. Act 103, as amended." (p. 16, Decision, Annex 'G').
The ruling is in conformity with the evidence, law and equity.
Ninth and Tenth assignments of error. — The CIR erred in denying a duly verified motion for new
trial, and in overruling petitioner's motion for reconsideration.
The motion for new trial, supported by an affidavit, states that the movants have a good and valid
defense and the same is based on three orders of the WAS (Wage Administration Service), dated
November 6, 1956. It is alleged that they would inevitably affect the defense of the petitioners. The
motion for new trial is without merit. Having the said wage Orders in their possession, while the case
was pending decision, it was not explained why the proper move was not taken to introduce them
before the decision was promulgated. The said wage orders, dealing as they do, with the evaluation
of meals and facilities, are irrelevant to the present issue, it having been found and held that the
meals or food in question are not facilities but supplements. The original petition in the CIR having
been filed on Sept. 12, 1952, the WAS could have intervened in the manner provided by law to
express its views on the matter. At any rate, the admission of the three wage orders have not altered
the decision reached in this case.
IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Dizon,
Regala and Makalintal, JJ., concur.
[G.R. No. 118506. April 18, 1997.]
NORMA MABEZA, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, PETER

NG/HOTEL SUPREME, Respondents.
Tenefrancia Agranzamendez, Liceralde & Associates for Petitioner.
Romeo M. Rome for Private Respondent.

SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; DISMISSAL; JUST CAUSE, BURDEN OF PROOF. — In

termination cases the employer bears the burden of proof to show that the dismissal is for just
cause, the failure of which would mean that the dismissal is not justified and the employee is entitled
to reinstatement.
2. ID.; ID.; ID.; ABANDONMENT; REQUISITES; CASE AT BAR. — For abandonment to arise, there
must be concurrence of two things: 1) lack of intention to work., and 2) the presence of overt acts
signifying the employee’s intention not to work. While absence from work for a prolonged period may
suggest abandonment in certain instances, mere absence of one or two days would not be enough
to sustain such a claim. The over act (absence) ought to unerringly point to the fact that the
employee has no intention to return to work, which is patently not the case here.
3. ID.; ID.; ID.; LOSS OF CONFIDENCE; NOT APPLICABLE IN CASE AT BAR. — Loss of
confidence as a just cause for dismissal was never intended to provide employers with a blank
check for terminating their employees. Loss of confidence should ideally apply only to cases
involving employees occupying positions to trust and confidence or to those situations where the
employee is routinely charged with the care and custody of the employer’s money or property. 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. Loss of confidence
should not be simulated in order to justify what would otherwise be, under the provisions of law an
illegal dismissal. "It should not be used as a subterfuge for causes which are illegal, improper and
unjustified. It must be genuine, not a mere afterthought to justify, an earlier action taken in bad faith.
4. ID.; EMPLOYERS; UNFAIR LABOR PRACTICES; CASE AT BAR. — The pivotal question in any
case where unfair labor practice on the part of the employer is alleged is whether or not the
employer has exerted pressure, in the form of restraint, interference or coercion, against his
employee’s right to institute concerted action for better terms and conditions of employment. Without
doubt, the act of compelling employees to sign an instrument indicating that the employer observed
labor standards provisions of law when he might have not, together with the act of terminating or
coercing those who refuse to cooperate with the employer’s scheme constitutes unfair labor practice.
The first act clearly preempts the right of the hotel’s workers to seek better terms and conditions of
employment through concerted action. We agree with the Solicitor General’s observation in his
manifestation that" [t]his actuation . . . is analogous to the situation envisaged in paragraph (f) of
Article 248 of the Labor Code" which distinctly makes it an unfair labor practice "to dismiss,
discharge or otherwise prejudice or discriminate against an employee for having given or being
about to give testimony" under the Labor Code. For in not giving positive testimony in favor of her
employer, petitioner had reserved not only her right to dispute the claim and proffer evidence in
support thereof but also to work for better terms and conditions of employment.
5. ID.; WAGES; SALARY LESS THAN MINIMUM BECAUSE OF OTHER FACILITIES PROVIDED
NOT JUSTIFIED. — 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 accepted in writing by the employee. Finally, facilities must be charged
at fair and reasonable value. These requirements were not met in the instant case. More
significantly, the food and lodging, or the electricity and water consumed by the petitioner were not
facilities but supplements. A benefit or privilege granted to an employee for the convenience of the
employer is not a facility. The criterion in making a distinction between the two not so much lies in
the kind (food, lodging) but the purpose. Considering., 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.
6. ID.; MONEY CLAIMS; PROPER MONETARY AWARD IN CASE AT BAR. — 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. Additionally, petitioner is entitled to payment of service
incentive leave pay, emergency cost of living allowance, night differential pay, and 13th month pay
for the periods alleged by the petitioner as the private respondent has never been able to adduce
proof that petitioner was paid the aforestated benefits. However, the claims covering the period of
October 1987 up to the time of filing the case on May 13, 1988 are barred by prescription as P.D.
442 (as amended) and its implementing rules limit all money claims arising out of employer-
employee relationship to three (3) years from the time the cause of action accrues.
7. ID.; ILLEGAL DISMISSAL; SEPARATION PAY IN LIEU OF REINSTATEMENT PROPER IN

VIEW OF STRAINED RELATIONS BETWEEN THE PARTIES. — We depart from the settled rule
that an employee who is unjustly dismissed from work normally should be reinstated without loss of
seniority rights and other privileges. Owing to the strained relations between petitioner and private
respondent, allowing the former to return to her job would only subject her to possible harassment
and future embarrassment. In the instant case, separation pay equivalent to one month’s salary for
every year of continuous service with the private respondent would be proper, starting with her job at
the Belfront Hotel.
8. ID.; ID.; BACKWAGES. — In addition to separation pay, backwages are in order. Pursuant to R.A.
6715 and our decision in Osmalik Bustamante, et al v. National Labor Relations Commission,
petitioner is entitled to full backwages from the time of her illegal dismissal up to the date of
promulgation of this decision without qualification or deduction. Also, the dismissal of petitioner
without the benefit of notice and hearing prior to her termination violated her constitutional right to
due process. Under the circumstances, an award of One Thousand Pesos (P1,000.00) on top of
payment of the deficiency in wages and benefits for the period aforestated would be proper.
DECISION
KAPUNAN, J.:
This petition seeking the nullification of a resolution of public respondent National Labor Relations
Commission dated April 28, 1994 vividly illustrates why courts should be ever vigilant in the
preservation of the constitutionally enshrined rights of the working class. Without the protection
accorded by our laws and the tempering of courts, the natural and historical inclination of capital to
ride roughshod over the rights of labor would run unabated.
The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent,
are illustrative.
Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-
employees at the Hotel Supreme in Baguio City were asked by the hotel’s management to sign an
instrument attesting to the latter’s compliance with minimum wage and other labor standard
provisions of law. 1 The instrument provides: 2
JOINT AFFIDAVIT
We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA JUGUETA, ADELAIDA
NONOG, NORMA MABEZA, JONATHAN PICART and JOSE DIZON, all of legal ages (sic), Filipinos
and residents of Baguio City, under oath, depose and say:chanrob1es virtual 1aw library
1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No. 416 Magsaysay
Ave., Baguio City;
2. That the said Hotel is separately operated from the Ivy’s Grill and Restaurant;
3. That we are all (8) employees in the hotel and assigned in each respective shifts;
4. That we have no complaints against the management of the Hotel Supreme as we are paid
accordingly and that we are treated well.
5. That we are executing this affidavit voluntarily without any force or intimidation and for the
purpose of informing the authorities concerned and to dispute the alleged report of the Labor
Inspector of the Department of Labor and Employment conducted on the said establishment on
February 2, 1991.
IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991 at Baguio City,
Philippines.
(Sgd.) (Sgd.) (Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY
(Sgd) (Sgd.) (Sgd.)
MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA
(Sgd) (Sgd.)
JONATHAN PICART JOSE DIZON
SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.
Asst. City Prosecutor
Petitioner signed the affidavit but refused to go to the City Prosecutor’s Office to swear to the
veracity and contents of the affidavit as instructed by management. The affidavit was nevertheless
submitted on the same day to the Regional Office of the Department of Labor and Employment in
Baguio City.
As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting
findings of the Labor Inspector of DOLE (in an inspection of respondent’s establishment on February
2, 1991) apparently adverse to the private Respondent. 3
After she refused to proceed to the City Prosecutor’s Office — on the same day 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. 4 According to her, respondent strongly chided her for refusing to proceed to the City
Prosecutor’s Office to attest to the affidavit. 5 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. Consequently, on May 13, 1991, three days after her
attempt to return to work, petitioner filed a complaint for illegal dismissal before the Arbitration
Branch of the National Labor Relations Commission — CAR Baguio City. In addition to her
complaint for illegal dismissal, she alleged underpayment of wages, non-payment of holiday pay,
service incentive leave pay, 13th month pay, night differential and other benefits. The complaint was
docketed as NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati.
Responding to the allegations made in support of petitioner’s complaint for illegal dismissal, private
respondent Peter Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job)
without notice to the management" 6 and that she actually abandoned her work. He maintained that
there was no basis for the money claims for underpayment and other benefits as these were paid in
the form of facilities to petitioner and the hotel’s other employees. 7 Pointing to the Affidavit of May
7, 1991, the private respondent asserted that his employees actually have no problems with
management. In a supplemental answer submitted eleven (11) months after the original complaint
for illegal dismissal was filed, private respondent raised a new ground, loss of confidence, which was
supported by a criminal complaint for Qualified Theft he filed before the prosecutor’s office of the
City of Baguio against petitioner on July 4, 1991. 8
On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner’s complaint on the
ground of loss of confidence. His disquisitions in support of his conclusion read as
follows:chanrob1es virtual 1aw library
It appears from the evidence of respondent that complainant carted away or stole one (1) blanket, 1
piece bedsheet, 1 piece thermos, 2 pieces towel (Exhibits ‘9’, ‘9-A,’ ‘9-B,’ ‘9-C’ and ‘10’ pages 12-14
TSN, December 1, 1992). cdti
In fact, this was the reason why respondent Peter Ng lodged a criminal complaint against
complainant for qualified theft and perjury. The fiscal’s office finding a prima facie evidence that
complainant committed the crime of qualified theft issued a resolution for its filing in court but
dismissing the charge of perjury (Exhibit ‘4’ for respondent and Exhibit ‘B-7’ for complainant). As a
consequence, complainant was charged in court for the said crime (Exhibit ‘5’ for respondent and
Exhibit ‘B-6’ for the complainant).
With these pieces of evidence, complainant committed serious misconduct against her employer
which is one of the just and valid grounds for an employer to terminate an employee (Article 282 of
the Labor Code as amended). 9
On April 28, 1994, respondent NLRC promulgated its assailed Resolution 10 affirming the Labor
Arbiter’s decision. The resolution substantially incorporated the findings of the Labor Arbiter. 11
Unsatisfied, petitioner instituted the instant special civil action for certiorari under Rule 65 of the
Rules of Court on the following grounds: 12
1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN ITS FAILURE TO CONSIDER THAT THE ALLEGED LOSS OF CONFIDENCE IS
A FALSE CAUSE AND AN AFTERTHOUGHT ON THE PART OF THE RESPONDENT-EMPLOYER
TO JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL OF THE COMPLAINANT FROM HER
EMPLOYMENT;
DISCRETION IN ADOPTING THE RULING OF THE LABOR ARBITER THAT THERE WAS NO
UNDERPAYMENT OF WAGES AND BENEFITS ON THE BASIS OF EXHIBIT "8" (AN UNDATED
SUMMARY OF COMPUTATION PREPARED BY ALLEGEDLY BY RESPONDENT’S EXTERNAL
ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN EVIDENCE TO PROVE PAYMENT
OF WAGES AND BENEFITS;
DISCRETION IN FAILING TO CONSIDER THE EVIDENCE ADDUCED BEFORE THE LABOR
ARBITER AS CONSTITUTING UNFAIR LABOR PRACTICE COMMITTED BY THE RESPONDENT.
The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private
respondent’s principal claims and defenses and urges this Court to set aside the public respondent’s
assailed resolution. 13
We agree.
It is settled that in termination cases the employer bears the burden of proof to show that the
dismissal is for just cause, the failure of which would mean that the dismissal is not justified and the
employee is entitled to reinstatement. 14
In the case at bar, the private respondent initially claimed that petitioner abandoned her job when
she failed to return to work on May 8, 1991. Additionally, in order to strengthen his contention that
there existed sufficient cause for the termination of petitioner, he belatedly included a complaint for
loss of confidence, supporting this with charges that petitioner had stolen a blanket, a bedsheet and
two towels from the hotel. 15 Appended to his last complaint was a suit for qualified theft filed with
the Baguio City prosecutor’s office.
From the evidence on record, it is crystal clear that the circumstances upon which private
respondent anchored his claim that petitioner "abandoned" her job were not enough to constitute just
cause to sanction the termination of her services under Article 283 of the Labor Code. For
abandonment to arise, there must be concurrence of two things: 1) lack of intention to work; 16 and
2) the presence of overt acts signifying the employee’s intention not to work. 17
In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of
absence when she learned that the hotel management was displeased with her refusal to attest to
the affidavit. The fact that she made this attempt clearly indicates not an intention to abandon but an
intention to return to work after the period of her leave of absence, had it been granted, shall have
expired.
Furthermore, while absence from work for a prolonged period may suggest abandonment in certain
instances, mere absence of one or two days would not be enough to sustain such a claim. The overt
act (absence) ought to unerringly point to the fact that the employee has no intention to return to
work, 18 which is patently not the case here. In fact, several days after she had been advised to take
an informal leave, petitioner tried to resume working with the hotel, to no avail. It was only after she
had been repeatedly rebuffed that she filed a case for illegal dismissal. These acts militate against
the private respondent’s claim that petitioner abandoned her job. As the Solicitor General in his
manifestation observed:chanrob1es virtual 1aw library
Petitioner’s absence on that day should not be construed as abandonment of her job. She did not
report because the cashier told her not to report anymore, and that private respondent Ng did not
want to see her in the hotel premises. But two days later or on the 10th of May, after realizing that
she had to clarify her employment status, she again reported for work. However, she was prevented
from working by private respondents. 19
We now come to the second cause raised by private respondent to support his contention that
petitioner was validly dismissed from her job.chanroblesvirtualawlibrary
Loss of confidence as a just cause for dismissal was never intended to provide employers with a
blank check for terminating their employees. Such a vague, all-encompassing pretext as loss of
confidence, if unqualifiedly given the seal of approval by this Court, could readily reduce to barren
form the words of the constitutional guarantee of security of tenure. Having this in mind, loss of
confidence should ideally apply only to cases involving employees occupying positions of trust and
confidence or to those situations where the employee is routinely charged with the care and custody
of the employer’s money or property. To the first class belong managerial employees, i.e., those
vested with the powers or prerogatives to lay down management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such
managerial actions; and to the second class belong cashiers, auditors, property custodians, etc., or
those who, in the normal and routine exercise of their functions, regularly handle significant amounts
of money or property. 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. Illustrating this distinction, this Court, in Marina Port Services, Inc. v. NLRC, 20 has
stated that:chanrob1es virtual 1aw library
To be sure, every employee must enjoy some degree of trust and confidence from the employer as
that is one reason why he was employed in the first place. One certainly does not employ a person
he distrusts. Indeed, even the lowly janitor must enjoy that trust and confidence in some measure if
only because he is the one who opens the office in the morning and closes it at night and in this
sense is entrusted with the care or protection of the employer’s property. The keys he holds are the
symbol of that trust and confidence.
By the same token, the security guard must also be considered as enjoying the trust and confidence
of his employer, whose property he is safeguarding. Like the janitor, he has access to this property.
He too, is charged with its care and protection.
Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting
that property. The employer’s trust and confidence in him is limited to that ministerial function. He is
not entrusted, in the Labor Arbiter’s words, ‘with the duties of safekeeping and safeguarding
company policies, management instructions, and company secrets such as operation devices.’ He is
not privy to these confidential matters, which are shared only in the higher echelons of management.
It is the persons on such levels who, because they discharge these sensitive duties, may be
considered holding positions of trust and confidence. The security guard does not belong in such
category. 21
More importantly, we have repeatedly held that loss of confidence should not be simulated in order
to justify what would otherwise be, under the provisions of law, an illegal dismissal. "It should not be
used as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a
mere afterthought to justify an earlier action taken in bad faith." 22
In the case at bar, the suspicious delay in private respondent’s filing of qualified theft charges
against petitioner long after the latter exposed the hotel’s scheme (to avoid its obligations as
employer under the Labor Code) by her act of filing illegal dismissal charges against the private
respondent would hardly warrant serious consideration of loss of confidence as a valid ground for
dismissal. Notably, the Solicitor General has himself taken a position opposite the public respondent
and has observed that:chanrob1es virtual 1aw library
If petitioner had really committed the acts charged against her by private respondents (stealing
supplies of respondent hotel), private respondents should have confronted her before dismissing her
on that ground. Private respondents did not do so. In fact, private respondent Ng did not raise the
matter when petitioner went to see him on May 9, 1991, and handed him her application for leave. It
took private respondents 52 days or up to July 4, 1991 before finally deciding to file a criminal
complaint against petitioner, in an obvious attempt to build a case against her.
The manipulations of private respondents should not be countenanced. 23
Clearly, the efforts to justify petitioner’s dismissal — on top of the private respondent’s scheme of
inducing his employees to sign an affidavit absolving him from possible violations of the Labor Code
— taints with evident bad faith and deliberate malice petitioner’s summary termination from
employment.
Having said this, we turn to the important question of whether or not the dismissal by the private
respondent of petitioner constitutes an unfair labor practice.
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice on the part of the employer is alleged is
whether or not the employer has exerted pressure, in the form of restraint, interference or coercion,
against his employee’s right to institute concerted action for better terms and conditions of
employment. Without doubt, the act of compelling employees to sign an instrument indicating that
the employer observed labor standards provisions of law when he might have not, together with the
act of terminating or coercing those who refuse to cooperate with the employer’s scheme constitutes
unfair labor practice. The first act clearly preempts the right of the hotel’s workers to seek better
terms and conditions of employment through concerted action.chanrobles law library
We agree with the Solicitor General’s observation in his manifestation that" [t]his actuation . . . is
analogous to the situation envisaged in paragraph (f) of Article 248 of the Labor Code" 24 which
distinctly makes it an unfair labor practice "to dismiss, discharge or otherwise prejudice or
discriminate against an employee for having given or being about to give testimony" 25 under the
Labor Code. For in not giving positive testimony in favor of her employer, petitioner had reserved not
only her right to dispute the claim and proffer evidence in support thereof but also to work for better
terms and conditions of employment.
For refusing to cooperate with the private respondent’s scheme, petitioner was obviously held up as
an example to all of the hotel’s employees, that they could only cause trouble to management at
great personal inconvenience. Implicit in the act of petitioner’s termination and the subsequent filing
of charges against her was the warning that they would not only be deprived of their means of
livelihood, but also possibly, their personal liberty.
This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the
same are ably supported by the evidence on record. However, where such conclusions are based
on a misperception of facts or where they patently fly in the face of reason and logic, we will not
hesitate to set aside those conclusions. Going into the issue of petitioner’s money claims, we find
one more salient reason in this case to set things right: the labor arbiter’s evaluation of the money
claims in this case incredibly ignores existing law and jurisprudence on the matter. Its blatant one-
sidedness simply raises the suspicion that something more than the facts, the law and jurisprudence
may have influenced the decision at the level of the Arbiter.
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. 26 Granting that meals and lodging were provided
and indeed constituted facilities, such facilities could not be deducted without the employer
complying first with certain legal requirements. Without satisfying these requirements, the employer
simply cannot deduct the value from the employee’s wages. First, proof must be shown that such
facilities are customarily furnished by the trade. Second, the provision of deductible facilities must be
voluntarily accepted in writing by the employee. Finally, facilities must be charged at fair and
reasonable value. 27
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;" 28 he
failed to provide proof of the employee’s written authorization; and, he failed to show how he arrived
at the valuations. 29
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 pointed out 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." 30
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. 31 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.
Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living
allowance, night differential pay, and 13th month pay for the periods alleged by the petitioner as the
private respondent has never been able to adduce proof that petitioner was paid the aforestated
benefits.
However, the claims covering the period of October 1987 up to the time of filing the case on May 13,
1988 are barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money
claims arising out of employer-employee relationship to three (3) years from the time the cause of
action accrues. 32
We depart from the settled rule that an employee who is unjustly dismissed from work normally
should be reinstated without loss of seniority rights and other privileges. Owing to the strained
relations between petitioner and private respondent, allowing the former to return to her job would
only subject her to possible harassment and future embarrassment. In the instant case, separation
pay equivalent to one month’s salary for every year of continuous service with the private
respondent would be proper, starting with her job at the Belfront Hotel.chanrobles virtual lawlibrary
In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in
Osmalik Bustamante, Et. Al. v. National Labor Relations Commission, 33 petitioner is entitled to full
backwages from the time of her illegal dismissal up to the date of promulgation of this decision
without qualification or deduction.
Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to
be terminated from employment with two written notices before the same may be legally effected.
The first is a written notice containing a statement of the cause(s) for dismissal; the second is a
notice informing the employee of the employer’s decision to terminate him stating the basis of the
dismissal. During the process leading to the second notice, the employer must give the employee
ample opportunity to be heard and defend himself, with the assistance of counsel if he so desires.
Given the seriousness of the second cause (qualified theft) of the petitioner’s dismissal, it is
noteworthy that the private respondent never even bothered to inform petitioner of the charges
against her. Neither was petitioner given the opportunity to explain the loss of the articles. It was only
almost two months after petitioner had filed a complaint for illegal dismissal, as an afterthought, that
the loss was reported to the police and added as a supplemental answer to petitioner’s complaint.
Clearly, the dismissal of petitioner without the benefit of notice and hearing prior to her termination
violated her constitutional right to due process. Under the circumstances, an award of One
Thousand Pesos (P1,000.00) on top of payment of the deficiency in wages and benefits for the
period aforestated would be proper.
WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations

Commission dated April 24, 1994 is REVERSED and SET ASIDE, with costs. For clarity, the
economic benefits due the petitioner are hereby summarized as follows:chanrob1es virtual 1aw
library
1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner’s
illegal dismissal;
2) Service incentive leave pay; night differential pay and 13th month pay for the same period;
3) Separation pay equal to one month’s salary for every year of petitioner’s continuous service with
the private respondent starting with her job at the Belfront Hotel; cdtech
4) Full backwages, without qualification or deduction, from the date of petitioner’s illegal dismissal up
to the date of promulgation of this decision pursuant to our ruling in Bustamante v. NLRC. 34
5) P1,000.00.
SO ORDERED.
Padilla, Bellosillo and Vitug, JJ., concur.
Hermosisima, Jr., J., is on leave.
G.R. No. L-58870 December 18, 1987
CEBU INSTITUTE OF TECHNOLOGY (CIT), petitioner,

vs.
HON. BLAS OPLE, in his capacity as Minister, Ministry of Labor and Employment, JULIUS
ABELLA, ARSENIO ABELLANA, RODRIGO ALIWALAS, ZOSIMO ALMOCERA, GERONIDES
ANCOG, GREGORIO ASIA, ROGER BAJARIAS, BERNARDO BALATAYO, JR., BASILIO
CABALLES, DEMOCRITO TEVES, VOLTAIRE DELA CERNA, ROBERTO COBARRUBIAS,
VILMA GOMEZ CHUA, RUBEN GALLITO, EDGARDO CONCEPCION, VICTOR COQUILLA,
JOSE DAKOYKOY, PATERNO WONG, EVELYN LACAYA, RODRIGO GONZALES, JEOGINA
GOZO, MIGUEL CABALLES, CONSUELO JAVELOSA, QUILIANO LASCO, FRANKLIN LAUTA,
JUSTINIANA LARGO, RONALD LICUPA, ALAN MILANO, MARIA MONSANTO, REYNALDO
NOYNAY, RAMON PARADELA, NATALIO PLAZA, LUZPURA QUIROGA, NOE RODIS,
COSMENIA SAAVEDRA, LEONARDO SAGARIO, LETICIA SERRA, SIEGFREDO TABANAG,
LUCINO TAMAOSO, DANILO TERANTE, HELEN CALVO TORRES, ERNESTO VILLANUEVA,
DOLORES VILLONDO, EDWARD YAP, ROWENA VIVARES, DOLORES SANANAM, RODRIGO
BACALSO, YOLANDA TABLANTE, ROMERO BALATUCAN, CARMELITA LADOT, PANFILO
CANETE, EMMANUEL CHAVEZ, JR., SERGIO GALIDO, ANGEL COLLERA, ZOSIMO
CUNANAN, RENE BURT LLANTO, GIL BATAYOLA, VICENTE DELANTE, CANDELARIO DE
DIOS, JOSE MA. ESTELLA, NECITA TRINIDAD, ROTELLO ILUMBA, TEODORICO JAYME,
RAYMUNDO ABSIN, RUDY MANEJA, REYNA RAMOS, ANASTACIA BLANCO, FE DELMUNDO,
ELNORA MONTERA, MORRISON MONTESCLAROS, ELEAZAR PANIAMOGAN, BERNARDO
PILAPIL, RODOLFO POL, DEMOSTHENES REDOBLE, PACHECO ROMERO, DELLO
SABANAL, SARAH SALINAS, RENATO SOLATORIO, EDUARDO TABLANTE, EMMANUEL
TAN, FELICISIMO TESALUNA, JOSE VERALLO, JR., MAGDALENO VERGARA, ESMERALDA
ABARQUEZ, MAC ARTHUR DACUYCUY ACOMPANADA, TRINIDAD ADLAWAN, FE
ELIZORDO ALCANTARA, REOSEBELLA AMPER, ZENAIDA BACALSO, ELIZA BADANA,
GEORGIA BAS, ERLINDA BURIAS, ELDEFONSO BURIAS, CORAZON CASENAS, REGINO
CASTANEDA, GEORGE CATADA, CARMENCITA G. CHAVEZ, LORETIA CUNANAN, FLORES
DELFIN, TERESITA ESPINO, ELVIE GALANZA, AMADEA GALELA, TERESITA. JUNTILLA,
LEONARDA KAPUNGAN, ADORACION LANAWAN, LINDA LAYAO, GERARDO LAYSON,
VIRGILIO LIBETARIO, RAYMOND PAUL LOGARTA, NORMA LUCERO, ANATOLIA MENDEZ,
ELIODORO MENDEZ, JUDALINE MONTE, ELMA OCAMPO, ESTEFA OLIVARES, GEORGE
ORAIS, CRISPINA PALANG, GRETA PEGARIDO, MELBA QUIACHON, REMEDIOS QUIROS,
VIRGINIA RANCES, EDNA DELOS REYES, VICENTE TAN, EMERGENCIA ROSELL, JULIETA
TATING, MERCIA TECARRO, FELISA VERGARA, WEMINA VILLACIN, MACRINA YBARSABAL,
MILAGROS CATALAN, JULIETA AQUINDE, SONIA ARTIAGA, MA. TERESITA OBANDO,
ASUNCION ABAYAN, ESTHER CARREON, ECHEVARRE, BUENAFE SAMSON, CONCEPCION
GONZALES, VITALIANA VENERACION, LEONCIA ABELLAR, REYNITA
VILLACARLOS. respondents.
No. L-68345 December 18, 1987

DIVINE WORD COLLEGE OF LEGAZPI, petitioner,
vs.
The Honorable Deputy Minister of Labor and Employment, VICENTE LEOGARDO, JR., the
HONORABLE REGIONAL DIRECTOR (Regional Office No. 5) of the Ministry of Labor &
Employment GERARDO S. CASTILLO, CECILIA MANUEL and other alleged
complainants, respondents.
Nos. L-69224-5 December 18, 1987
FAR EASTERN UNIVERSITY EMPLOYEES LABOR UNION, petitioner,

vs.
FAR EASTERN UNIVERSITY and the NATIONAL LABOR RELATIONS
COMMISSION, respondents.
No. 70832 December 18, 1987
GREGORIO T. FABROS, ROGELIO B. DE GUZMAN, CRESENCIANO ESPINO, JOSE RAMOS

SUNGA, BAYLON BANEZ FERNANDO ELESTERIO, ISMAEL TABO, AMABLE TUIBEO CELSO
TUBAY, RAFAEL HERNANDEZ, GERONIMO JASARENO, MEL BALTAZAR, MA. LOURDES
PASCUAL, T. DEL ROSARIO ACADEMY TEACHERS and EMPLOYEES ASSOCIATION,
DENNIS MONTE, BECKY TORRES, LOIDA VELASCO, ROMLY NERY, DAISY N. AMPIG,
PATRICIO DOLORES, ROGELIO RAMIREZ, and NILDA L. SEVILLA, petitioners,
vs.
The HON. JAIME C. LAYA, in his capacity as Minister of Education, Culture and
Sports, respondents.
No. L-76524 December 18, 1987
JASMIN BISCOCHO, ROWENA MARIANO, AGNES GALLEGO, MA. ANA ORDENES, ISABEL
DE LEON, LUZVIMINDA FIDEL, MARIQUIT REYES, SOTERA ORTIZ, ANGELINA ROXAS,
BITUIN DE PANO, ELIZABETH ORDEN, APOLLO ORDEN, GUILLERMA CERCANO, IMELDA
CARINGAL, EFREN BATIFORA, ROSIE VALDEZ, DELIA QUILATEZ, FELIX RODRIGUEZ,
OSCAR RODRIGUEZ, JOVITA CEREZO, JOSEFINA BONDOC, BELEN POSADAS, DOLORES
PALMA, ANTONINA CRUS, CONRADO BANAYAT, TERESITA LORBES, and CORAZON
MIRANDA, petitioners,
vs.
THE HONORABLE AUGUSTO SANCHEZ, in his capacity as Minister of Labor and
Employment, ESPIRITU SANTO PAROCHIAL SCHOOL AND ESPIRITU SANTO PAROCHIAL
SCHOOL FACULTY ASSOCIATION, respondents.
No. 76596 December 18, 1987
RICARDO C. VALMONTE and CORAZON BADIOLA, petitioners,

vs.
THE HONORABLE AUGUSTO SANCHEZ, in his capacity as Minister of Labor and
Employment, ESPIRITU SANTO PAROCHIAL SCHOOL FACULTY ASSOCIATION, and
ESPIRITU SANTO PAROCHIAL SCHOOL, respondents.
CORTES, J.:
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, have been consolidated in this single Decision 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 twelve (12%) per centum 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. The interpretation and construction of laws being a
matter of judicial power and duty [Marbury v. Madison, 1 Cranch 137 (1803); Endencia v. David, 93
Phil. 696 (1953)], this Court has been called upon to resolve the controversy.
In the process of reading and at times, having to decipher, the numerous pleadings filed in the six
cases, the Court found that the main issue has been approached by the parties from almost
diametrical points, thereby bringing into focus three sub-issues: first, whether or not allowances and
other fringe benefits of faculty members and other school employees may be charged against the
60% portion of the tuition fee increases provided for in section 3(a) of Pres. Dec. No. 451: second,
whether or not the same items may be charged against said portion under the provisions of B.P. Blg.
232: and, third, whether or not schools and their employees may enter into a collective bargaining
agreement allocating more than 60% of said incremental proceeds for salary increases and other
benefits of said employees. After these sub-issues have been resolved, the Court will tackle the
other incidents attending the individual cases, seriatim.
The factual antecedents that brought these cases before this Tribunal are as follows:
I.. FACTUAL BACKGROUND OF EACH CASE
A.
CEBU INSTITUTE OF TECHNOLOGY CASE
This case originated from a Complaint filed with the Regional Office No. VII of the Ministry of Labor
on February 11, 1981 against petitioner Cebu Institute of Technology (CIT) by private respondents,
Panfilo Canete, et al., teachers of CIT, for non-payment of: a) cost of living allowances (COLA)
under Pres. Dec. Nos. 525, 1123, 1614, 1678 and 1713, b) thirteenth (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 composed of one representative each from the
Ministry of Labor and Employment (MOLE), the Minister of Education, Culture and Sports (MECS),
and two representatives each from CIT and from the teachers was created. Said committee was to
ascertain compliance with the legal requirements for the payment of COLA, thirteenth (13th) month
pay and service incentive leave [Rollo, p. 84].
The position taken by CIT during the conference held by the labor management committee was 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 in its position paper that it had paid thirteenth 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 [Rollo, pp. 85-86].
After the report and recommendation of the committee, herein public respondent, then Minister of
Labor and Employment issued the assailed Order dated September 29, 1981 and held 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. The dispositive portion of the Order reads:
PREMISES CONSIDERED, CIT is hereby ordered to pay its teaching staff the
following:
1) COLA under P.D.'s 525 and 1123 from February 1978 up to 1981;
2) COLA under P.D.'s l6l4,1634,1678 and l7l3;and
3) Service incentive leave from l978 upto l981.
CIT is further directed to integrate into the basic salaries of its teachers and (sic)
COLA under P.D.'s 525 and 1123 starting on January 1981, pursuant to P.D. 1751.
For purposes of integration, the hourly rate shown in its Teachers' Program for
school year 198182 shall be considered as the basic hourly rate.
SO ORDERED.
Petitioner assails the aforesaid Order in this Special Civil Action of certiorari with Preliminary
Injunction and/or Restraining Order. The Court issued a Temporary Restraining Order on December
7, 1981 against the enforcement of the questioned Order of the Minister of Labor and Employment.
B.
DIVINE WORD COLLEGE OF LEGAZPI CASE

Upon a complaint filed by ten faculty members for alleged non-compliance by herein petitioner
Divine Word College of Legazpi with, among others, Pres. Dec. No. 451, i.e., allowances were
charged to the 60% incremental proceeds of tuition fee increase, the Labor Regulation Section of
Regional Office No. V (Legazpi City) of the Ministry of Labor and Employment conducted an
inspection of the employment records of said school. On the basis of the report on the special
inspection that the school did not comply with Pres. Dec. No. 451, herein respondent Regional
Director issued an Order dated May 30, 1983, requiring compliance by the Divine Word College. The
latter filed a Memorandum of Appeal from said Order which the Regional Director treated as a
Motion for Reconsideration. Upon failure of the school to comply with the aforesaid Order, another
Order (August 2, 1983) was issued by herein respondent Regional Director requiring herein
petitioner to pay the faculty members- complainants (herein private respondents) the amounts
indicated therein or the total sum of Six Hundred Seventeen Thousand Nine Hundred Sixty Seven
Pesos and Seventy Seven Centavos (P 617,967.77). Petitioner's Motion for Reconsideration of the
Order was denied.
On appeal, the respondent Deputy Minister of Labor and Employment affirmed the Order of the
Regional Director, viz:
xxx xxx xxx
Coming now to the substantial merit of the case, we share the view that the
emergency allowances due the complainants under the several presidential decrees
(PD's 525, 1123, etc.) cannot be charged by the respondent against the 60% of the
incremental proceeds from increase in tuition fees authorized under PD 451, not only
because as per decision of the Supreme Court (UE vs. UE Faculty Association, et.
al., G.R. No. 57387, September 30, 1982) said allowances whether mandated by law
or secured by collective bargaining should be taken only from the return to
investment referred to in the decree if the school has no other resources to grant the
allowances but not from the 60% incremental proceeds, but also because to hold
otherwise would, to our mind, inevitably result in the loss of one benefit due the
complainants-that is the salary or wage increase granted them by PD 451.
In other words, we believe that by paying the complainants' allowances out of the
60% incremental proceeds intended for their salary increase they are practically
being deprived of one benefit-their share in the 60% incremental proceeds in terms
of salary or wage increase.
WHEREFORE, for the reasons abovestated, the Order appealed from is hereby
AFFIRMED, and the appeal DISMISSED, for lack of merit.
SO ORDERED.
(Annex "K " to Petition; Rollo, p. 108, 110).
This special civil action of certiorari and Prohibition with Preliminary Injunction questions the
interpretation of, and application by the respondent Deputy Minister, of the provisions of Pres. Dec.
No. 45 1, as set forth in the assailed Order.
On March 25, 1985, after considering the allegations, issues and arguments adduced in the Petition
as well as the Comment thereon of the public respondent and dispensing with the private
respondents' Comment, the Court resolved to dismiss the Petition for lack of merit (Rollo, p. 198).
On April 26, 1985, petitioner filed a Motion for Reconsideration with Motion to Consider the Case En
Banc. On June 26, 1985 the First Division of the Court referred the case to the Court En Banc for
consolidation with G.R. No. 70832, entitled "Gregorio T. Fabros, et al vs. Hon. Jaime C. Laya, etc.
" since it involves the same issue on the application of 60% incremental proceeds of authorized
tuition fee increases [Rollo, p. 235]. The Court EN BANC resolved to accept the case. (Resolution of
July 16, 1985). These cases were further consolidated with other cases involving the same issues.
C.
FAR EASTERN UNIVERSITY CASE
On December 17, 1978, petitioner Union filed with the Ministry of Labor and Employment a
complaint against respondent University for non-payment of legal holiday pay and under-payment of
the thirteenth (13th) month pay. On July 7, 1979, while the case was pending, the Union President,
in his personal capacity, filed another complaint for violation of Pres. Dec. No. 451 against the same
respondent.
The two cases were forthwith consolidated and jointly heard and tried. On March 10, 1980, Labor
Arbiter Ruben A. Aquino promulgated a decision the dispositive portion of which is quoted
hereunder:
RESPONSIVE TO THE FOREGOING, respondent is hereby directed, within ten (10)

days from receipt hereof, to:
1. To (sic) pay the paid legal holidays that it withdrew since January 14, 1976 up to
the present; and
2. Pay the 13th month pay differential of complainant's for the covered period
December 16, 1975 to December 17, 1978, date of filing of complaint for non-
payment of legal holiday pay and under payment of the 13th month pay, and
thereafter. Barred forever are money claims beyond three (3) years from the time the
course (sic) of action occurred. Respondent's formula on transportation allowance
which was deducted from the 13th month pay is thus subject to this prescriptive
period, for purposes of computation of differentials for the 13th month pay.
The claim under PD 451 is hereby dismissed for lack of merit.
SO ORDERED.
(Annex " E " to Petition; Rollo, p. 55, 65-66).
Both parties appealed the decision of the Labor Arbiter. On September 18, 1984, the respondent
Commission disposed of the appeal in the following manner:
RESPONSIVE TO THE FOREGOING, the Decision of Labor Arbiter Ruben A.

Aquino in the instant case dated March 10, 1980 is hereby Modified in the sense that
complainant's claims for legal holiday pay and 13th month pay are likewise dismissed
for lack of merit and the dismissal of the claim under P.D. 451 is hereby
Affirmed en (sic) toto.
(Annex "A" to Petition: Rollo, p. 24, 35).

Petitioner's Motion for Reconsideration dated September 29, 1984 was denied for lack of merit on
November 8, 1984. Before this Court is the petition on certiorari filed by the Union assailing the
abovementioned decision of the Commissioner.
D.
FABROS CASE
This petition is in the nature of a class suit brought by petitioners in behalf of the faculty members
and other employees of more than 4000 private schools nationwide. Petitioners seek to enjoin the
implementation of paragraphs 7 to 7.5 of MECS Order No. 5, series of 1985 on the ground that the
said order is null and void for being contrary to Pres. Dec. No. 451 and the rulings of the Supreme
Court in the cases of University of the East v. UE Faculty Association [G.R. No. L-57387, September
20, 1982, 117 SCRA 5541, University of Pangasinan Faculty Union v. University of Pangasinan and
NLRC [G.R. No. 63122, February 20, 1984, 127 SCRA 691 ], St. Louis University Faculty Club v.
NLRC and St. Louis University [G.R. No. 65585, September 28, 1984, 132 SCRA 380].
On September 11, 1982, Batas Pambansa Blg. 232 (Education Act of 1982) was signed into law. On
the matter of tuition and other school fees of private schools, section 42 of said law provides as
follows:
Sec. 42. Tuition and other School Fees. — Each private School shall determine its
rate of tuition and other school fees or charges. The rates and charges adopted by
schools pursuant to this provision shall be collectible, and their application or use
authorized subject to rules and regulations promulgated by the Ministry of Education,
Culture and Sports. (Emphasis supplied).
Invoking section 42 of B.P. Blg. 232, among others, as its legal basis, the then Minister of Education
Jaime C. Laya promulgated on April 1, 1985 the disputed MECS Order No. 25, s. 1985
entitled Rules and Regulations To Implement the Provisions of B.P. Blg. 232. The Education Act of
1982, Relative to Student Fees for School Year 1985-1986. The relevant portions of said Order are
quoted hereunder:
7. Application or Use of Tuition and
Other School Fees or Charges.
7.1. The proceeds from tuition fees and other school charges as well as other income
of each school shall be treated as an institutional fund which shall be administered
and managed for the support of school purposes strictly: Provided, That for the
purpose of generating additional financial resources or income for the operational
support and maintenance of each school two or more schools may pool their
institutional funds, in whole or in part, subject to the prior approval of their respective
governing boards.
7.2. Tuition fees shag be used to cover the general expenses of operating the school
in order to allow it to meet the minimum standards required by the Ministry or any
other higher standard, to which the school aspires. They may be used to meet the
costs of operation for maintaining or improving the quality of
instruction/training/research through improved facilities and through the payment of
adequate and competitive compensation for its faculty and support personnel,
including compliance with mandated increases in personnel compensation and/or
allowance.
7.3. Tuition fees shag be used to cover minimum and necessary costs including the
following: (a) compensation of school personnel such as teaching or academic staff,
school administrators, academic non-teaching personnel, and non-academic
personnel, (b) maintenance and operating expenses, including power and utilities,
rentals, depreciation, office supplies; and (c) interest expenses and installment
payments on school debts.
7.4. Not less than sixty (60) percent of the incremental tuition proceeds shall be used
for salaries or wages, allowances and fringe benefits of faculty and support staff,
including cost of living allowance, imputed costs of contributed services, thirteenth
(13th) month pay, retirement fund contributions, social security, medicare, unpaid
school personnel claims and payments as may be prescribed by mandated wage
orders. collective bargaining agreements and voluntary employer practices, Provided
That increases in fees specifically authorized for the purposes listed in paragraph
4.3.3 hereof shall be used entirely for those purposes. (Italics supplied).
7.5. Other student fees and charges as may be approved, including registration,
library, laboratory, athletic, application, testing fees and charges shall be used
exclusively for the indicated purposes, including (a) the acquisition and maintenance
of equipment, furniture and fixtures, and buildings, (b) the payment of debt
amortization and interest charges on debt incurred for school laboratory, athletic, or
other purposes, and (c) personal services and maintenance and operating expenses
incurred to operate the facilities or services for which fees and charges are collected.
The Petition prayed for the issuance of a temporary restraining order which was granted by this
Court after hearing. The dispositive portion of the resolution dated May 28, 1985 reads as follows:
After due consideration of the allegations of the petition dated May 22, 1985 and the
arguments of the parties, the Court Resolved to ISSUE, effective immediately and
continuing until further orders from this Court, a TEMPORARY RESTRAINING
ORDER enjoining the respondent from enforcing or implementing paragraphs 7.4 to
7.5 of MECS Order No. 25, s. 1985, which provide for the use and application of sixty
per centum (60%) of the increases in tuition and other school fees or charges
authorized by public respondent for the school year 1985-1986 in a manner
inconsistent with section 3(a), P.D. No. 451, (which allocates such 60% of the
increases exclusively "for increases in salaries or wages of the members of the
faculty and other employees of the school concerned.") and directing accordingly that
such 60% of the authorized increases shall be held in escrow by the respective
colleges and universities, i.e., shall be kept intact and not disbursed for any purpose
pending the Court's resolution of the issue of the validity of the aforementioned
MECS Order in question.
(Rollo, p. 21).
In the same resolution, the Philippine Association of Colleges and Universities (PACU) was
impleaded as respondent.
Subsequent to the issuance of this resolution, four (4) schools, represented in this petition, moved
for the lifting of the temporary restraining order as to them. In separate resolutions, this Court
granted their prayers.
Ateneo de Manila University, De La Sale University (Taft Avenue) and De La Salle University-South,
through their respective counsels, manifested that for the school year 1985-1986, tuition fee
increase was approved by the MECS and that on the basis of Pres. Dec. No. 451, 60% of the tuition
fee increases shall answer for salary increase. However, a budgeted salary increase, exclusive of
living allowances and other benefits, was approved for the same school year which when computed
amounts to more than the 60%.
This Court granted the motions in separate resolutions lifting the temporary restraining order with
respect to these schools in order that they may proceed with the implementation of the general
salary increase for their employees.
In the case of St. Louis University, its Faculty Club, Administrative Personnel Association and the
University itself joined in a petition seeking for leave that 49% of the increase in tuition and other
fees for school year 1985-1986 be released. Petitioners manifested that the remaining balance shall
continue to be held in escrow by the University.
In a resolution dated January 28, 1986, the Court resolved as follows:
Accordingly, the Temporary Restraining Order issued by this Court on May 28, 1985
is hereby ordered LIFTED with respect to Saint Louis University of Baguio City in
order that it may proceed immediately with the implementation of salary increases for
its employees.
D.
BISCOCHO CASE
The Espiritu Santo Parochial School and the Espiritu Santo Parochial School Faculty Association
were parties to a labor dispute which arose from a deadlock in collective bargaining. The parties
entered into conciliation proceedings. The union went on strike after efforts at the conciliation failed.
Subsequently, a return to work agreement was forged between the parties and both agreed to
submit their labor dispute to the jurisdiction of the Minister of Labor.
In the exercise of his power to assume jurisdiction, the Ministry of Labor and Employment issued an
Order dated April 14, 1986 which provides for the following:
IN CONSIDERATION OF ALL THE FOREGOING, the Ministry hereby declares the

strike staged by the Union to be legal and orders the following:
a) the School to submit the pertinent record of employment of Romualdo Noriego to

the Research and Information Division of the NLRC for computation of his
underpayment of wages and for the parties to abide by the said computation;
b) the School to submit all pertinent record of collections of tuition fee increases for
school year (sic) 1982-1983, 1983-1984 and 1984-1985 to the Research and
Information Division of the NLRC for proper computation and for equal distribution of
the amount to all employees and teachers during the abovementioned school year
(sic) as their salary adjustment under P.D. 461;
c) the parties to wait for the final resolution of the illegal dismissal (case) docketed as
NLRC NCR Case No. 5-1450-85 and to abide by the said resolution;
d) to furnish the MECS a copy of this order for them to issue the guidelines in the
implementation of PRODED Program;
e) the parties to execute a collective bargaining agreement with an economic

package equivalent to 90% of the proceeds from tuition fee increases for school year
1985-1986 and another 90% for school year 1986-1987 and 85% for school year
1987-1988. The amount aforementioned shall be divided equally to all members of
the bargaining unit as their respective salary adjustments. Such other benefits being
enjoyed by the members of the bargaining unit prior to the negotiation of the CBA
shall remain the same and shall not be reduced.
f) the School to deduct the amount equivalent to ten (10%) per cent of the
backwages payable to all members of the bargaining unit as negotiation fee and to
deliver the same to the Union Treasurer for proper disposition (Emphasis supplied).
SO ORDERED.
(Rollo, pp. 16-17)
Pursuant to the said order, private respondent Union agreed to incorporate in their proposed
collective bargaining agreement (CBA) with the School the following:
2) The Union and School Administration will incorporate the following in their CBA -
1) The computation of the tuition fee increase shall be gross to gross

from which the corresponding percentage of 90% will be taken. The
resulting amount will be divided among 141.5 employees for 1985-86
and 132.5 employees for 1986-87.
1/2 of the resulting increase will be added to basic and divided by

13.3 to arrive at monthly increase in basic. The other 1/2 will be
divided by 12.3 to arrive at monthly increase in living allowance.
xxx xxx xxx
4) xxx
Upon request/demand of the Union, School win deduct from backwages of

managerial employees and others outside the bargaining unit what Union win charge
its own members in the form of attorney's fees, special assessment and union
dues/agency fee.
5) The signing of the CBA and payment of backwages and others shall be on
November 26, 1986 at the Espiritu Santo Parochial School Library.
(Rollo, pp. 3-4).
The herein petitioners, Jasmin Biscocho and 26 others, all employees and faculty members of the
respondent School, filed the present petition for prohibition to restrain the implementation of the April
14, 1986 Order of respondent Labor Minister as well as the agreements arrived at pursuant thereto.
They contend that said Order and agreements affect their rights to the 60% incremental proceeds
under Pres. Dec. No. 451 which provide for the exclusive application of the 60% incremental
proceeds to basic salary.
Acting on the petitioners' prayer, this Court immediately issued a temporary restraining order on
November 25, 1986 ". . . enjoining the respondents from enforcing, implementing and proceeding
with the questioned order of April 14, 1986 and collective bargaining agreement executed between
respondents Union and the School Administration in pursuance thereof." [Rollo, p. 20].
F.
VALMONTE CASE
This Petition was filed by parents with children studying at respondent school, Espiritu Santo
Parochial School to nullify the Order dated April 14, 1986 issued by public respondent, then Minister
of Labor and Employment, specifically paragraphs (e) and (f) thereof, quoted in the Biscocho case.
The award contained in the said Order is the result of the assumption of jurisdiction by the public
respondent over a labor dispute involving the private respondents school and faculty association.
The latter had earlier filed a notice of strike because of a bargaining deadlock on the demands of its
members for additional economic benefits. After numerous conciliation conferences held while the
union was on strike, the parties voluntarily agreed that the public respondent shall assume
jurisdiction over all the disputes between them. As to the subject matter of the instant case, the
public respondent found that the latest proposals of the respondent school was to give 85% of the
proceeds from tuition fee increases for the school years to be divided among the teachers and
employees as salary adjustments. What the respondent faculty association offered to accept was a
package of 95% for school year 1985-1986, 90% for school year 1986- 1987. The respondent school
offered to strike the middle of the two positions, hence the Order complained of by the petitioners
[See Annex "A", Petition; Rollo, pp. 9, 14-15; Comment of the Respondent Faculty Association:
Rollo, p. 26].
II. RESOLUTION OF THE COMMON LEGAL ISSUE
This long-drawn controversy has sadly placed on the balance diverse interests, opposed yet
intertwined, and all deserving, and demanding, the protection of the State. On one arm of the
balance hang the economic survival of private schools and the private school system, undeniably
performing a complementary role in the State's efforts to maintain an adequate educational system
in the country. Perched precariously on the other arm of the same balance is the much-needed
financial uplift of schoolteachers, extolled for all times as the molders of the minds of youth, hence of
every nation's future. Ranged with them with needs and claims as insistent are other school
personnel. And then, anxiously waiting at the sidelines, is the interest of the public at large, and of
the State, in the continued availability to all who desire it, high-standard education consistent with
national goals, at a reasonable and affordable price.
Amidst these opposing forces the task at hand becomes saddled with the resultant implications that
the interpretation of the law would bear upon such varied interests. But this Court can not go beyond
what the legislature has laid down. Its duty is to say what the law is as enacted by the lawmaking
body. That is not the same as saying what the law should be or what is the correct rule in a given set
of circumstances. It is not the province of the judiciary to look into the wisdom of the law nor to
question the policies adopted by the legislative branch. Nor is it the business of this Tribunal to
remedy every unjust situation that may arise from the application of a particular law. It is for the
legislature to enact remedial legislation if that be necessary in the premises. But as always, with apt
judicial caution and cold neutrality, the Court must carry out the delicate function of interpreting the
law, guided by the Constitution and existing legislation and mindful of settled jurisprudence. The
Court's function is therefore limited, and accordingly, must confine itself to the judicial task of saying
what the law is, as enacted by the lawmaking body.
FIRST SUB-ISSUE
A. Whether or not 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.
1. Arguments raised in the Cebu Institute of Technology case
In maintaining its position that the salary increases it had paid to its employees should be considered
to have included the COLA, Cebu Institute of Technology (CIT) makes reference to Pres. Dec. No.
451 and its Implementing Rules. The line of reasoning of the petitioner appears to be based on the
major premise that under said decree and rules, 60% of the incremental proceeds from tuition fee
increases may be applied to salaries, allowances and other benefits of teachers and other school
personnel. In support of this major premise, petitioner cites various implementing rules and
regulations of the then Minister of Education, Culture and Sports, to the effect that 60% of the
incremental proceeds may be applied to salaries, allowances and other benefits for members of the
faculty and other school personnel [Petition citing Implementing Rules and Regulations of Pres. Dec.
No. 451 of various dates; Rollo, pp. 318-320]. Petitioner concludes that the salary increases it had
granted the CIT teachers out of the 60% portion of the incremental proceeds of its tuition fee
increases from 1974-1980 pursuant to Pres. Dec. No. 451 and the MECS implementing rules and
regulations must be deemed to have included the COLA payable to said employees for those years
[Rollo, pp. 911].
With leave of Court, the Philippine Association of Colleges and Universities, filed its Memorandum
as Intervenor in support of the proposition that schools may pay the COLA to faculty members and
other employees out of the 60% of the increase in tuition fees. In addition to the arguments already
set forth in the memorandum of the petitioner CIT, intervenor PACU attacks the Decision of this
Court in University of the East v. University of the East Faculty Association et. all G.R. No. 57387 as
"not doctrinal" and inapplicable to the CIT case. The Court held in the UE case, which was
promulgated on September 30, 1982, during the pendency of these cases, that:
... allowances and benefits should be chargeable to the return to investment referred
to in Sec. 3(a), if the schools should happen to have no other resources than
incremental proceeds of authorized tuition fee increases ... (See Dispositive Portion
of the Decision)
Intervenor PACU alleges that the aforecited U.E. decision does not categorically rule that COLA and
other fringe benefits should not be charged against the 60% incremental proceeds of the authorized
tuition fee increase.
The Solicitor General, on the other hand, argues in support of the Order of the public respondent
that Pres. Dec. No. 451 allocates the 60% proceeds of tuition fee increases exclusively for salary
increases of teachers and non- teaching supportive personnel of the school concerned, and that the
Decree does not provide that said salary increases would take the place of the COLA [Rollo, p. 244-
245]. He cites as authority for this stance, two (2) memoranda of the then President dated June 6,
1978 and March 30, 1979 both of which provide that the 60% incremental proceeds of tuition fee
increases "shall be allocated for the increase in the salaries of teachers and supportive personnel. "
Anent the U.E. case, the Solicitor General states that the Supreme Court in deciding said case took
note of the stand of the Office of the President that the 60% incremental proceeds shall be solely
applied to salaries of faculty members and employees.
On August 7, 1986, considering the supervening events, including the change of administration, that
have transpired during the pendency of these cases, the Court required the Solicitor General to state
whether or not he maintains the action and position taken by his predecessor-in-office. In his
Compliance with said Resolution, the Solicitor General Manifested the position that:
a. If the tuition fee increase was collected during the effectivity oil Presidential
Decree No. 451, 60% thereof shall answer exclusively for salary increase of school
personnel. Other employment benefits shall be covered by the 12% allocated for
return of investment, this is in accordance with the ruling of this Honorable Court
in University of the East vs. U.E. Faculty Association, et. al (117 SCRA 554), ... and
reiterated in University of Pangasinan Faculty Union v. University of Pangasinan, et.
al. (127 SCRA 691) and St. Louis Faculty Club u. NLRC (132 SCRA 380).
b. If the salary increase was collected during the effectivity of Batas Pambansa Blg.
(sic) 232, 60% thereof shall answer not only for salary increase of school personnel
but also for other employment benefits.
(Rollo, at pp. 513-514)
2. Arguments raised in the Divine Word College Case
Petitioner Divine Word College of Legazpi (DWC) advances the theory that the COLA, 13th month
pay and other personnel benefits decreed by law, must be deemed chargeable against the 60%
portion allocated for increase of salaries or wages of faculty and all other school employees. In
support of this stance, petitioner points out that said personnel benefits are not included in the
enumeration of the items for which the balance (less 60%) or 40% portion of the incremental
proceeds may be alloted under section 3(a) of Pres. Dec. No. 451 [Rollo, pp. 29-30. Petitioner
likewise cites the interpretation of the respondent Minister of Education, Culture and Sports
embodied in the Implementing Rules and Regulations of P.D. 451, DEC Issuance, May 13, 1987;
Rollo, p. 30], that the 60% incremental proceeds of authorized tuition fee increases may be applied
to increases in emoluments and/or benefits for members of faculty, including staff and administrative
employees of the school as the valid interpretation of the law, as against that made by the
respondent Deputy Minister of Labor in the assailed Order. If the latter interpretation is upheld,
petitioner would go as far as questioning the constitutionality of Pres. Dec. No. 451 upon the ground
that the same discriminates against the petitioner and other private schools as a class of employers.
According to the petitioner, the discrimination takes the form of requiring said class of employers to
give 60% of their profits to their employees in addition to the COLA mandated by law, while other
employers have to contend only with salary increases and COLA [Petition; Rollo, p. 46].
With regard to the Decision of this Court in the U.E. case, petitioner claims exemption therefrom
upon the ground that the Court's interpretation of a law cannot be applied retroactively to parties who
have relied upon the previous administrative interpretation which has not been declared invalid or
unconstitutional [Petition; Rollo, pp. 50-51 1. Petitioner further argues on this point that if the court
had intended to invalidate the MECS interpretation of the Decree, it should have positively stated so
in the Decision [Petition; Rollo, p. 50].
The Comment of the public respondents cite as settled jurisprudence applicable to the case at bar,
the ruling of this Court in the U.E. case, supra, which was reiterated in the subsequent cases
of University of Pangasinan Faculty Union v. University of Pangasinan et all and St. Louis Faculty
Club v. NLRC, et al.
Public respondents Deputy Minister of Labor and Employment and Regional Director of the MOLE
(Region V) likewise attack the validity of the Revised Implementing Rules and Regulations of Pres.
Dec. No. 451 cited by the petitioner insofar as said rules direct the allotment of the 60% of
incremental proceeds from tuition fee hikes for retirement plan, faculty development and allowances.
They argue that said rules and regulations were invalid for having been promulgated in excess of the
rule-making authority of the then Minister of Education under Pres. Dec. No. 451 which mandates
that the 60% of incremental proceeds from tuition fee hikes should be allotted solely for salary
increases [Comment; Rollo, pp. 184-185]. Finally, with respect to the issue on the allege
unconstitutionality of Pres. Dec. No. 451, the public respondents posit that a legislation (such as
Pres. Dec. No. 451) which affects a particular class does not infringe the constitutional guarantee of
equal protection of the law as long as it applies uniformly and without discrimination to everyone of
that class [Comment; Rollo, p. 14].
3. Arguments raised in the Far Eastern University case
It is the petitioner's contention that in respect of Pres. Dec. No. 451, the decision of the NLRC is a
defiance of the rulings of this Court in the cases of University of the East v. U.E. Faculty, Association
et al. and of University of Pangasinan Faculty Union v. University of Pangasinan and NLRC (supra).
The Union submits that monetary benefits, other than increases in basic salary, are not chargeable
to the 60% incremental proceeds.
The respondent University in its Comment dated June 13, 1982 refers to Article 97(f) of the Labor
Code which provides a definition of the term "wages" to support its position that "salaries or wages"
as used in Pres. Dec. No. 451 should be interpreted to include other benefits in terms of money.
As mentioned in the Cebu Institute of Technology case, the Solicitor General filed its Compliance
with this Court's resolution dated August 7, 1986 requiring him to manifest whether public
respondents maintain the position they have taken in these consolidated cases. The resolution of
September 25, 1986 required petitioners to Comment on said Compliance.
The Comment dated December 6, 1986 was received by this Court after petitioner Union was
required to show cause why no disciplinary action should be taken against them for failure to comply
earlier. The Union agreed with the position taken by the Solicitor General that under Pres. Dec. No.
451, 60% of the tuition fee increases, shall answer exclusively for salary increase. However, it
expressed disagreement with the opinion that during the effectivity of B.P. Blg. 232, the 60%
ncremental proceeds shall answer not only for salary increases but also for other employment
benefits. The Union argues that whereas "Pres. Dec. No. 451 is a law on a particular subject, viz.,
increase of tuition fee by educational institutions and how such increase shall be allocated B.P. Blg.
232 is not a law on a particular subject of increase of tuition fee . . . ; at most it is a general
legislation on tuition fee as it touches on such subject in general, " [Comment on Compliance; Rollo,
p. 376], Suppletory to its argument that B.P. Blg. 232 did not impliedly repeal Pres. Dec. No. 451, the
Union also invokes the principle that a special or particular law cannot be repealed by a general law.
RESOLUTION OF THE FIRST SUB-ISSUE
This 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 University of Pangasinan Faculty Union v. University of Pangasinan, supra:
... The sixty (60%) percent 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.
In the light of existing laws which exclude allowances from the basic salary or wage in the
computation of the amount of retirement and other benefits payable to an employee, this Court will
not adopt a different meaning of the terms "salaries or wages" to mean the opposite, i.e. to include
allowances in the concept of salaries or wages.
As to the alleged implementing rules and regulations promulgated by the then MECS to the effect
that allowances and other benefits may be charged against the 60% portion of the proceeds of
tuition fee increases provided for in Section 3(a) of Pres. Dec. No. 45 1, suffice it to say that these
were issued ultra vires, and therefore not binding upon this Court.
The rule-making authority granted by Pres. Dec. No. 451 is confined to the implementation of the
Decree and to the imposition of limitations upon the approval of tuition fee increases, to wit:
SEC. 4. Rules and Regulations. — The Secretary of Education and Culture is hereby
authorized, empowered and directed to issue the requisite rules and regulations for
the effective implementation of this Decree. He may, in addition to the requirements
and limitations provided for under Sections 2 and 3 hereof, impose other
requirements and limitations as he may deem proper and reasonable.
The power does not allow the inclusion of other items in addition to those for which 60% of the
proceeds of tuition fee increases are allocated under Section 3(a) of the Decree.
Rules and regulations promulgated in accordance with the power conferred by law would have the
force and effect of law [Victorias Milling Company, Inc. v. Social Security Commission, 114 Phil. 555
(1962)] if the same are germane to the subjects of the legislation and if they conform with the
standards prescribed by the same law [People v. Maceren, G.R. No. L-32166, October 18, 1977, 79
SCRA 450]. Since the implementing rules and regulations cited by the private schools adds
allowances and other benefits to the items included in the allocation of 60% of the proceeds of tuition
fee increases expressly provided for by law, the same were issued in excess of the rule-making
authority of said agency, and therefore without binding effect upon the courts. At best the same may
be treated as administrative interpretations of the law and as such, they may be set aside by this
Court in the final determination of what the law means.
SECOND SUB-ISSUE
B. Whether or not allowances and other fringe benefits may be charged against the 60% portion of
the incremental proceeds of tuition fee increases upon the effectivity of the Education Act of 1982
(B.P. Blg. 232).
1. Arguments raised in the Fabros case
In assailing MECS Order No. 25, s. 1985, petitioners argue that the matter of allocating the proceeds
from tuition fee increases is still governed by Pres. Dec. No. 451. It is their opinion that section 42 of
B.P. Blg. 232 did not repeal Pres. Dec. No. 451 for the following reasons: first, there is no conflict
between section 42 of B.P. Blg. 232 and section 3(a) of Pres. Dec. No. 451 or any semblance of
inconsistency to deduce a case of a repeal by implication: second, Pres. Dec. No. 451 is a specific
law upon a particular subject-the purposes and distribution of the incremental proceeds of tuition fee
increases, while B.P. Blg. 232 is a general law on the educational system; as such, a specific law is
not repealed by a subsequent general law in the absence of a clear intention; and third, Pres. Dec.
No. 451 is still the only law on the subject of tuition fee increases there being no prescription or
provision in section 42 of B.P. Blg. 232 or elsewhere in the law. They furthermore aver that the
disputed MECS Order which imposed additional burdens against the 60% incremental proceeds of
tuition fee increases are not provided in either Pres. Dec. No. 451 or B.P. Blg. 232. The logical result
as intimated by petitioners is that the inclusion of paragraph 7.4 and related paragraphs 7 to 7.3 and
7.5 in the questioned MECS order contravenes the statutory authority granted to the public
respondent, and the same are therefore, void.
Respondent PACU takes the contrary view contending that MECS Order No. 25, s. 1985, complies
with the mandate of section 42 of B.P. Blg. 232 which law had already repealed Pres. Dec. No. 451.
PACU notes that the University of the East case invoked by petitioners is not applicable because the
issue in that case does not involve the effect of B.P. Blg. 232 on Pres. Dec. No. 451.
The Solicitor General, representing the public respondent, after giving a summary of the matters
raised by petitioner and respondent PACU, points out that the decisive issue in this case is whether
B.P. Big. 232 has repealed Pres. Dec. No. 451 because on the answer to this question depends the
validity of MECS Order No. 25, s. 1985. Public respondent holds the view consistent with that of
PACU on the matter of B.P. Blg. 232 having repealed Pres. Dec. No. 451. To support this
contention, the Solicitor General compared the respective provisions of the two laws to show the
inconsistency and incompatibility which would result in a repeal by implication.
RESOLUTION OF THE SECOND SUB-ISSUE
On the matter of tuition fee increases section 42 of B.P. Blg. 232 provides:
SEC. 42. Tuition and Other School Fees. — Each private school shall determine its
rate of tuition and other school fees or charges. The rates and charges adopted by
schools pursuant to this provision shall be collectible and their application or use
authorized, subject to rules and regulations promulgated by the Ministry of
Education, Culture and Sports. (Emphasis supplied).
The enactment of B.P. Blg. 232 and the subsequent issuance of MECS Order No. 25, s. 1985
revived the old controversy on the application and use of the incremental proceeds from tuition fee
increases. As can be gleaned from the pleadings and arguments of the parties in these cases, one
side, composed of the teachers and other employees of the private schools, insist on the
applicability of section 3(a) of Pres. Dec. No. 451 as interpreted arid applied in the University of the
East, University of Pangasinan and St Louis University cases, while the private schools uphold the
view that the matter of allocating the incremental proceeds from tuition fee increases is governed by
section 42 of B.P. Blg. 232 as implemented by the MECS Rules and Regulations. As stated, the
latter's argument is premised on the allegation that B.P. Blg. 232 impliedly repealed Pres. Dec. No.
451.
On the second sub-issue, therefore, this Court upholds the view taken by the Solicitor General in
the Fabros case, that the decisive issue is whether B.P. Blg. 232 has repealed Pres. Dec. No. 451.
In recognition of the vital role of private schools in the country's educational system, the government
has provided measures to regulate their activities. As early as March 10, 1917, the power to inspect
private schools, to regulate their activities, to give them official permits to operate under certain
conditions and to revoke such permits for cause was granted to the then Secretary of Public
Instruction by Act No. 2706 as amended by Act No. 3075 and Commonwealth Act No. 180. Republic
Act No. 6139, enacted on August 31, 1970, provided for the regulation of tuition and other fees
charged by private schools in order to discourage the collection of exorbitant and unreasonable fees.
In an effort to simplify the "cumbersome and time consuming" procedure prescribed under Rep. Act
No. 6139 and "to alleviate the sad plight of private schools," Pres. Dec. No. 451 was enacted on May
11, 1974. While this later statute was being implemented, the legislative body envisioned a
comprehensive legislation which would introduce changes and chart directions in the educational
system, hence, the enactment of B.P. Blg. 232. What then was the effect of B.P. Blg. 232 on Pres.
Dec. No. 451?
The Court after comparing section 42 of B.P. Blg. 232 and Pres. Dec. No. 451, particularly section
3(a) thereof, finds evident irreconcilable differences.
Under Pres. Dec. No. 451, the authority to regulate the imposition of tuition and other school fees or
charges by private schools is lodged with the Secretary of Education and Culture (Sec. 1), where
section 42 of B.P. Blg. 232 liberalized the procedure by empowering each private school to
determine its rate of tuition and other school fees or charges.
Pres. Dec. No. 451 provides that 60% of the incremental proceeds of tuition fee increases shall be
applied or used to augment the salaries and wages of members of the faculty and other employees
of the school, while B.P. Blg. 232 provides that the increment shall be applied or used in accordance
with the regulations promulgated by the MECS.
A closer look at these differences leads the Court to resolve the question in favor of repeal. As
pointed out by the Solicitor General, three aspects of the disputed provisions of law support the
above conclusion. First, the legislative authority under Pres. Dec. No. 451 retained the power to
apportion the incremental proceeds of the tuition fee increases; such power is delegated to the
Ministry of Education and Culture under B.P. Blg. 232. Second, Pres. Dec. No. 451 limits the
application or use of the increment to salary or wage increase, institutional development, student
assistance and extension services and return on investment, whereas B.P. Blg. 232 gives the MECS
discretion to determine the application or use of the increments. Third, the extent of the application
or use of the increment under Pres. Dec. No. 451 is fixed at the pre-determined percentage
allocations; 60% for wage and salary increases, 12% for return in investment and the balance of
28% to institutional development, student assistance and extension services, while under B.P. Blg.
232, the extent of the allocation or use of the increment is likewise left to the discretion of the MECS.
The legislative intent to depart from the statutory limitations under Pres. Dec. No. 451 is apparent in
the second sentence of section 42 of B.P. Blg. 232. Pres. Dec. No. 451 and section 42 of B.P. Blg.
232 which cover the same subject matter, are so clearly inconsistent and incompatible with each
other that there is no other conclusion but that the latter repeals the former in accordance with
section 72 of B.P. Blg. 232 to wit:
Sec. 72. Repealing clause. — All laws or parts thereof inconsistent with any provision
of this Act shall be deemed repealed or modified, as the case may be.
Opinion No. 16 of the Ministry of Justice dated January 29, 1985, quoted below, supports the above
conclusion:
Both P.D. No. 451 and B.P. Blg. 232 deal with the imposition of tuition and other
school fees or charges and their use and application, although the latter is broader in
scope as it covers other aspects of the education system. We note substantial
differences or inconsistencies between the provisions of the two laws. P.D. No. 451
prescribes certain limitations in the increase of tuition and other school fees and their
application, whereas the latter law, B.P. Blg. 232 s silent on the matter. Under P.D.
451, rates of tuition/school fees need prior approval of the Secretary of Education,
Culture (now Minister of Education, Culture and Sports), who also determines the
reasonable rates for new school fees, whereas under B.P. Blg. 232, each private
school determines its rate of tuition and other school fees or charges. P.D. No. 451
authorizes the Secretary of Education and Culture to issue requisite rules and
regulations to implement the said Decree and for that purpose, he is empowered to
impose other requirements and limitations as he may deem proper and reasonable in
addition to the limitations prescribed by the Decree for increases in tuition fees and
school charges, particularly, the limitations imposed in the allocation of increases in
fees and charges, whereas under B.P. Blg. 232, the collection and application or use
of rates and charges adopted by the school are subject to rules and regulations
promulgated by the Ministry of Education, Culture and Sports without any mention of
the statutory limitations on the application or use of the fees or charges. The
authority granted to private schools to determine its rates of tuition and unconditional
authority vested in the Ministry of Education, Culture and Sports to determine by
rules and regulations the collection and application or use of tuition or fees rates and
charges under B.P. Big. 232 constitute substantial and irreconcilable incompatibility
with the provisions of P.D. No. 451, which should be for that reason deemed to have
been abrogated by the subsequent legislation.
Moreover, B.P. Blg. 232 is a comprehensive legislation dealing with the

establishment and maintenance of an integrated system of education and as such,
covers the entire subject matter of the earlier law, P.D. No. 451. The omission of the
limitations or conditions imposed in P.D. No. 451 for increases in tuition fees and
school charges is an indication of a legislative intent to do away with the said
limitations or conditions. (Crawford, supra, p. 674). It has also been said that —
an act which purports to set out in full all that it intends to contain,
operates as a repeal of anything omitted which was contained in the
old act and not included in the amendatory act." (People vs. Almuete
69 SCRA 410; People vs. Adillo 68 SCRA 90) (Ministry of Justice,
Op. No. 16, s. 1985).
Having concluded that under B.P. Big. 232 the collection and application or use of tuition and other
school fees are subject only to the limitations under the rules and regulations issued by the Ministry,
the crucial point now shifts to the said implementing rules.
The guidelines and regulations on tuition and other school fees issued after the enactment of B.P.
Blg. 232 consistently permit the charging of allowances and other benefits against the 60%
incremental proceeds. Such was the tenor in the MECS Order No. 23, s. 1983; MECS Order No. 15,
s. 1984; MECS Order No. 25, s. 1985; MECS Order No. 22, s. 1986; and DECS Order No. 37, s.
1987. The pertinent portion of the latest order reads thus:
In any case of increase at least sixty percent (60%) of the incremental proceeds
should be allocated for increases in or provisions for salaries or wages, allowances
and fringe benefits of faculty and other staff, including accruals to cost of living
allowance, 13th month pay, social security, medicare and retirement contribution and
increases as may be provided in mandated wage orders, collective bargaining
agreements or voluntary employer practices.
The validity of these orders, particularly MECS Order No. 25, s. 1985, is attacked on the ground that
the additional burdens charged against ". . . the 60% of the proceeds of the increases in tuition fees
constitute both as [sic] an excess of statutory authority and as (sic) a substantial impairment of the
accrued, existing and protected rights and benefits of the members of faculty and non-academic
personnel of private schools." Memorandum for Petitioners, Rollo, p. 1911. Petitioners alleged that
these additional burdens under the MECS Order are not provided in the law itself, either in section
42 of B.P. Blg. 232 or section 3(a) of Pres. Dec. No. 451, except increases in salaries in the latter
provision.
Section 42 of B.P. Blg. 232 grants to the Minister of Education (now Secretary of Education) rule-
making authority to fill in the details on the application or use of tuition fees and other school
charges. In the same vein is section 70 of the same law which states:
SEC. 70. Rule-making Authority. — The Minister of Education, Culture and Sports
charged with the administration and enforcement of this Act, shall promulgate the
necessary implementing rules and regulations.
Contrary to the petitioners' insistence that the questioned rules and regulations contravene the
statutory authority granted to the Minister of Education, this Court finds that there was a valid
exercise of rule-making authority.
The statutory grant of rule-making power to administrative agencies like the Secretary of Education
is a valid exception to the rule on non-delegation of legislative power provided two conditions concur,
namely: 1) the statute is complete in itself, setting forth the policy to be executed by the agency, and
2) said statute fixes a standard to which the latter must conform [Vigan Electric Light Co., Inc. v.
Public Service Commission, G.R. No. L-19850, January 30, 1964, and Pelaez v. Auditor General, G.
R. No. L-23825, December 24, 1965].
The Education Act of 1982 is "an act providing for the establishment and maintenance of an
integrated system for education " with the following basic policy:
It is the policy of the State to establish and maintain a complete, adequate and
integrated system of education relevant to the goals of national development. Toward
this end, the government shall ensure, within the context of a free and democratic
system, maximum contribution of the educational system to the attainment of the
following national development goals:
1. To achieve and maintain an accelerating rate of economic development and social

progress;
2. To assure the maximum participation of all the people in the attainment and
enjoyment of the benefits of such growth; and
3. To achieve and strengthen national unity and consciousness and preserve,

develop and promote desirable cultural, moral and spiritual values in a changing
world.
The State shall promote the right of every individual to relevant quality education,
regardless of sex, age, creed, socioeconomic status, physical and mental conditions,
racial or ethnic origin, political or other affiliation. The State shall therefore promote
and maintain equality of access to education as well as the enjoyment of the benefits
of education by all its citizens.
The State shall promote the right of the nation's cultural communities in the exercise
of their right to develop themselves within the context of their cultures, customs,
traditions, interests and belief, and recognizes education as an instrument for their
maximum participation in national development and in ensuring their involvement in
achieving national unity. (Section 3, Declaration of Basic Policy).
With the foregoing basic policy as well as, specific policies clearly set forth in its various provisions,
the Act is complete in itself and does not leave any part of the policy-making, a strictly legislative
function, to any administrative agency.
Coming now to the presence or absence of standards to guide the Minister of Education in the
exercise of rule-making power, the pronouncement in Edu v. Ericta [G.R. No. L-32096, October 24,
1970, 35 SCRA 481, 497] is relevant:
The standard may be either expressed or implied. If the former, the non-delegation
objection is easily met. The standard though does not have to be spelled out
specifically. It could be implied from the policy and purpose of the act considered as
a whole. In the Reflector Law, clearly the legislative objective is public safety. What is
sought to be attained as in Calalang v. Williams is "safe transit upon the roads."
(Italics supplied).
Thus, in the recent case of Tablarin et al. v. Hon. Gutierrez, et al. (G.R. No. 78164, July 31, 1987],
the Court held that the necessary standards are set forth in Section 1 of the 1959 Medical Act, i.e.,
"the standardization and regulation of medical education" as well as in other provisions of the Act.
Similarly, the standards to be complied with by Minister of Education in this case may be found in the
various policies set forth in the Education Act of 1982.
MECS Order No. 25, s. 1985 touches upon the economic relationship between some members and
elements of the educational community, i.e., the private schools and their faculty and support staff.
In prescribing the minimum percentage of tuition fee increments to be applied to the salaries,
allowances and fringe benefits of the faculty and support staff, the Act affects the economic status
and the living and working conditions of school personnel, as well as the funding of the private
schools.
The policies and objectives on the welfare and interests of the various members of the educational
community are found in section 5 of B.P. Blg. 232. which states:
SEC. 5. Declaration of Policy and Objectives. — It is likewise declared government

policy to foster, at all times, a spirit of shared purposes and cooperation among the
members and elements of the educational community, and between the community
and other sectors of society, in the realization that only in such an atmosphere can
the true goals and objectives of education be fulfilled.
Moreover, the State shall:
1. Aid and support the natural right and duty of parents in the rearing of the youth
through the educational system.
2. Promote and safeguard the welfare and interests of the students by defining their
rights and obligations, according them privileges, and encouraging the establishment
of sound relationships between them and the other members of the school
community.
3. Promote the social and economic status of an school personnel, uphold their
rights, define their obligations, and improve their living and working conditions and
career prospects.
4. Extend support to promote the viability of those institutions through which parents,
students and school personnel seek to attain their educational goals.
On the other hand, the policy on the funding of schools in general, are laid down in section 33:
SEC. 33. Declaration of Policy. — It is hereby declared to be a policy of the State

that the national government shall contribute to the financial support of educational
programs pursuant to the goals of education as declared in the Constitution. Towards
this end, the government shall:
1. Adopt measures to broaden access to education through financial assistance and

other forms of incentives to schools, teachers, pupils and students; and
2. Encourage and stimulate private support to education through, inter alia, fiscal and
other assistance measures.
Given the abovementioned policies and objectives, there are sufficient standards to guide the
Minister of Education in promulgating rules and regulations to implement the provisions of the
Education Act of 1982, As in the Ericta and Tablarin cases, there is sufficient compliance with the
requirements of the non-delegation principle.
THIRD SUB-ISSUE
C. Whether or not schools and their employees may enter into a collective bargaining
agreement allocating more than 60% of said incremental proceeds for salary
increases and other benefits of said employees.
1. Arguments raised in the Biscocho and Valmonte cases
Assailed by the petitioners in the Biscocho and the Valmonte cases is the Order of the respondent
Minister of Labor directing the execution of a CBA between the school and the respondent Espiritu
Santo Parochial School Faculty Association which provides for an economic package equivalent to
90% of the proceeds of tuition fee increases for school year 1985-1986, another 90% for school year
1986-1987 and 85% for school year 1987-1988. Pursuant to said Order, petitioners in
the Biscocho case alleged that the parties had agreed to incorporate in their CBA a provision which
allocates one-half (1/2) of the 90% portion of the proceeds or 45% to increases in the monthly basic
salaries and the other one-half (1/2) or 45% to increases in monthly living allowance.
The petitioners in the two cases seek the nullification of the MOLE Order for exactly opposite
reasons. In the Biscocho case, the controversy springs from what petitioners perceive to be a
diminution of the benefits to be received by the school employees insofar as the CBA allocates only
45% for salary increases instead of 60%, which petitioners claim to be the portion set aside by Pres.
Dec. No. 451 for that purpose. Parenthetically, the case questions the allocation of the remaining
45% of the 90% economic package under the CBA, to allowances. Stripped down to its essentials,
the question is whether or not the 90% portion of the proceeds of tuition fee increases alloted for the
economic package may be allocated for both salary increases and allowances.
On the other hand, petitioners in the Valmonte case believe that the MOLE cannot order the
execution of a CBA which would allocate more than 60% of the proceeds of tuition fee increases for
salary increases of school employees. Furthermore, petitioners question the authority of the then
Minister of Labor and Employment to issue the aforequoted Order insofar as this allocates the tuition
fee increases of the respondent private school. According to them, only the Minister of Education,
Culture and Sports has the authority to promulgate rules and regulations on the use of tuition fees
and increases thereto, pursuant to the provisions of B.P. Blg. 232. They further argue that the
assailed Order collides with the provisions of Pres. Dec. No. 451 insofar as it allocates 90% of the
tuition fee increases for salary adjustments of the members of the bargaining unit which exceeds the
60% of the said increases allocated by the Decree for the same purpose.
Before delving further into the questions raised, this Court notes that in the Valmonte case,
respondent Minister and respondent Faculty Association raise a procedural objection to the filing of
the Petition: the standing of the petitioners to bring this suit. Both respondents decry the petitioners'
lack of the interest required in Rule 65 of the Rules of Court for the filing of the Petition for certiorari
and Prohibition, since the latter do not appear to be in any way aggrieved by the enforcement of the
Order. Petitioners-parents did not even participate in the proceedings below which led to the
issuance of the assailed Order.
This Court finds merit in the respondents' objection. Under Rule 65 of the Rules of Court (Secs. 1
and 2), only a person aggrieved by the act or proceeding in question may file a petition for certiorari
and/or prohibition. The Valmonte petition fails to indicate how the petitioners would be aggrieved by
the assailed Order. It appears that the petitioners are not parties and never at any time intervened in
the conciliation conferences and arbitration proceedings before the respondent Minister. The parties
therein, who stand to be directly affected by the Order of the respondent Minister, do not contest the
validity of said Order. The petition does not even state that petitioners act as representative of the
parents' association in the School or in behalf of other parents similarly situated.
If indeed, petitioners Valmonte and Badiola are aggrieved by the said Order, they should have
intervened and moved for a reconsideration of respondent Minister's Order before filing the instant
petition. Petitioners failed to show that the case falls under any one of the recognized exceptions to
the rule that a motion for reconsideration should first be availed of before filing a petition for certiorari
and prohibition.
In view of the foregoing, the resolution of the third sub-issue will be based mainly on the arguments
raised in the Biscocho case.
RESOLUTION OF THE THIRD SUB-ISSUE
The Biscocho case involves the issue on the allocation of the incremental proceeds of the tuition fee
increases applied for by the respondent Espiritu Santo Parochial School for school years 1985-1986,
1986-1987, and 1987-1988. With the repeal of Pres. Dec. No. 451 by B.P. Blg. 232, the allocation of
the proceeds of any authorized tuition fee increase must be governed by specific rules and
regulations issued by the Minister (now Secretary) of Education pursuant to his broadened rule
making authority under section 42 of the new law. Thus, insofar as the proceeds of the authorized
tuition fee increases for school year 1985-1986 are concerned, the allocation must conform with the
pertinent section of MECS Order No. 25, s. 1985, to wit:
7. Application or Use of Tuition and Other School Fees or Charges.
xxx xxx xxx
7.4. Not less than sixty (60) percent of the incremental tuition proceeds shall be used
for salaries or wages, allowances and fringe benefits of faculty and support staff,
including cost of living allowance, imputed costs of contributed services, thirteenth
(13th) month pay, retirement fund contributions, social security, medicare, unpaid
school personnel claims, and payments as may be prescribed by mandated wage
orders, collective bargaining agreements and voluntary employer
practices: Provided, That increases in fees specifically authorized for the purposes
fisted in paragraph 4.3.3 hereof shall be used entirely for those purposes.
xxx xxx xxx

With regard to the proceeds of the tuition fee increases for school year 1986-1987, the applicable
rules are those embodied in MECS Order No. 22, s. 1986 which made reference to MECS Order No.
25, s. 1985, the pertinent portion of which is quoted above.
Finally, as to the proceeds of the tuition fee increases for school year 1987- 1988, DECS Order No.
37, s. 1987 must apply:
c. Allocation of lncremental Proceeds
(1) In any case of increase at least sixty percent (60%) of the incremental proceeds
should be allocated for increases in or provisions for salaries or wages, allowances
and fringe benefits of faculty and other staff, including accruals to cost of living
allowance, 13th month pay, social security, medicare and retirement contributions
and increases as may be provided in mandated wage orders, collective bargaining
agreements or voluntary employer practices.
(2) Provided, that in all cases of increase the allocation of the incremental proceeds
shall be without prejudice to the Supreme Court cases on the interpretation and
applicability of existing legislations on tuition and other fees especially on the
allocation and use of any incremental proceeds of tuition and other fees increases.
(Emphasis supplied).
xxx xxx xxx
Based on the aforequoted MECS and DECS rules and regulations which implement BP Blg. 232, the
60% portion of the proceeds of tuition fee increases may now be allotted for both salaries and
allowances and other benefits. The 60% figure is, however, a minimum which means that schools
and their employees may agree on a larger portion, or in this case, as much as 90% for salaries and
allowances and other benefits. This is not in anyway to allow diminution or loss of the portion allotted
for institutional development of the school concerned. Thus, paragraph 7.5 of MECS Order No. 25,
series of 1985 specifically provides that other student fees and charges like registration, library,
laboratory or athletic fees shall be used exclusively for the purposes indicated.
III RESOLUTION OF THE SPECIFIC ISSUES
Petitioner assigns three other errors in the petition for certiorari:
RESPONDENT MINISTER OF THE MINISTRY OF LABOR AND EMPLOYMENT COMMITTED

GRAVE ABUSE OF DISCRETION AMOUNTING TO A DENIAL OF DUE PROCESS OF LAW IN
DIRECTLY ISSUING THE ORDER DATED SEPTEMBER 29,1981 WITHOUT CONDUCTING A
FORMAL INVESTIGATION AND ARBITRATION PROCEEDINGS.
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PETITIONER IS EXEMPTED

AND/OR NOT OBLIGED TO PAY SERVICE INCENTIVE LEAVE.
3
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PRIVATE RESPONDENTS' CLAIMS

FOR COLA AND SERVICE INCENTIVE LEAVE ARE FULLY BARRED BY LACHES AND/OR
EXTINGUISHED BY PRESCRIPTION.
1. Petitioner assails the Order of the Minister of Labor on the ground that the same was issued
without the benefit of a hearing and was merely based on the report of the labor management
committee which is allegedly without power to pass upon the issues raised. On this premise,
petitioner claims that it was denied its right to due process.
Petitioner's contention is without merit. The Labor Management Committee was empowered to
investigate the complaint against the petitioner for non-payment of the cost of living allowance, 13th
month pay and service incentive leave from 1974-1981 [Annex "F"; Rollo, p. 37]. In the committee,
petitioner was represented by its counsel, registrar and assistant accountant and in the conferences
that were held, the representatives of the petitioner were present. Furthermore, the petitioner's
position paper submitted to the committee reflects that in all the deliberations, it was never denied
the right to present evidence and be heard on all the issues raised, particularly to demonstrate that it
had complied with the various COLA, 13th month pay and service incentive leave decrees. The
evidence presented during the conferences and the position paper of the parties were made the
basis of the committee's report and recommendation which in turn became the basis of the order of
the Minister of Labor directing the petitioner to pay the complainants their COLA and service
incentive leave benefits.
It could not therefore be contended that the petitioner was deprived of his right to be heard when it
appears on the record that it was permitted to ventilate its side of the issues. There was sufficient
compliance with the requirements of due process. In the face of the well- settled principle that
administrative agencies are not strictly bound by the technical rules of procedure, this Court
dismisses the petitioner's claim that formal investigative and arbitration proceedings should be
conducted. "While a day in court is a matter of right in judicial proceedings, in administrative
proceedings it is otherwise since they rest upon different principles." [Cornejo v. Gabriel and
Provincial Board of Rizal, 41 Phil. 188 (1920); Tajonera v. Lamaroza, G.R. Nos. L-48907 and L-
49035, December 19,1981, 110 SCRA 438].
2. Going now to the matter of service incentive leave benefits, 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.
3. As a last ditch effort to bar private respondents'claims, petitioner asserts that the same are barred
by laches and/or extinguished by prescription according to Article 291 of the Labor Code which
provides:
Art. 291. Money claims. — All money claims arising from employer-employee ,
relations accruing during the effectivity of this Code shall be filed within three (3)
years from the time the cause of action accrued; otherwise, they shall be forever
barred.
All money claims accruing prior to the effectivity of this Code shall be filed with the
appropriate entities established under this Code within one (1) year from the date of
effectivity, and shall be processed or determined in accordance with implementing
rules and regulations of the Code; otherwise, they shall be forever barred.
xxx xxx xxx
Considering that the complaint alleging non-payment of benefits was filed only on February 11,
1981, petitioner argues that prescription has already set in.
From the aforequoted provision, it is not fully accurate to conclude that the entire claims for COLA
and service incentive leave are no longer recoverable. This Court finds no reason to disturb the
following pronouncement of the Minister of Labor:
xxx xxx xxx
Simply stated, claims for COLA under P.D. 525, which took effect on August 1, 1974,
for the months of August, September and October 1974 must be filed within one (1)
year from November 1, 1974, otherwise they shall be considered prescribed; claims
under the same decree that accrued on or after November 1, 1974 should be
initiated within three (3) years from the date of accrual thereof, otherwise the same
shall be deemed extinguished. Although this particular claim was filed on February
11, 1981, petitioners herein are entitled to COLA under P.D. 525 from February 1978
up to the present since the COLA that accrued in February 1978 has not yet
prescribed at the time that the claim was filed in February 1981. In the same vein,
petitioners herein should be granted COLA under P.D. 1123 from February 1978 up
to 1981 inasmuch as said decree became effective only on May 11, 1977. Further,
petitioners are entitled to the full amount of COLA provided under P.D.'s 1614, 1634,
1678 and 1713. It must be pointed out that the earliest of the just cited four (4)
decrees, i.e., P.D. 1614, just took effect on April 1, 1979. Thus, the prescriptive
period under Art. 292 of the Labor Code, as amended, does not as yet apply to
money claims under the just mentioned decrees.
DIVINE WORD COLLEGE CASE
In assailing the disputed Order, petitioner contends that the public respondents acted with grave and
patent abuse of discretion amounting to lack of jurisdiction in that:
1. The Regional Director has no jurisdiction over money claims arising from
employer-employee relationship; and
2. The Regional Director and Deputy Minister of Labor adopted the report of the
Labor Standards Division without affording the petitioner the opportunity to be heard.
1. Petitioner school claims that the case at bar is a money claim and should therefore be within the
original and exclusive jurisdiction of the Labor Arbiter pursuant to article 217 of the Labor Code, as
amended.
It appears from the record, however, that the original complaint filed by ten (10) faculty members of
the Divine Word College was for non-compliance with Pres. Dec. No. 451 and with Labor Code
provisions on service incentive leave, holiday and rest day pay and which complaint specifically
prayed that an inspection of the College be conducted.
Contrary to the petitioner's protestation of lack of jurisdiction, the Secretary of Labor or his duly
authorized representatives (which includes Regional Directors) are accorded the power to
investigate complaints for non- compliance with labor laws, particularly those which deal with labor
standards such as payment of wages and other forms of compensation, working hours, industrial
safety, etc. This is provided for in article 128 of the Labor Code, as amended:
Art. 128. Visitorial and enforcement power. —
(a) The Secretary of Labor or his duly authorized representatives including labor
regulation officers, shall have access to employers' records and premises at any time
of the day or night, whenever work is being undertaken therein, and the right to copy
therefrom, to question any employee and investigate any fact, condition or matter
which may be necessary to determine violations or which may aid in the enforcement
of this Code and of any labor law, wage order or rules and regulations issued
pursuant thereto.
(b) The Secretary of Labor or his duly authorized representatives shall have the
power to order and administer, after due notice and hearing, compliance with the
labor standards provisions of this Code based on the findings of labor regulation
officers or industrial safety engineers made in the course of inspection, and to issue
writs of execution to the appropriate authority for the enforcement of their order,
except in cases where the employer contests the findings of the labor regulations
officer and raises issues which cannot be resolved without considering evidentiary
matters that are not verifiable in the normal course of inspection. (Emphasis
supplied).
Furthermore, Policy Instruction No. 6 which deals with the distribution of jurisdiction over labor cases
restates inter alia that "(L)abor standards cases arising from violation of labor standards laws
discovered in the course of inspection or complaints where employer-employee relations still exist"
are under the exclusive original jurisdiction of the Regional Director.
Even assuming that respondent Regional Director was without jurisdiction to entertain the case at
bar, petitioner is now barred at this stage to claim lack of jurisdiction having actively participated in
the proceedings below. Petitioner never questioned the jurisdiction of the respondent Regional
Director.
2. The petitioner claims that it was never afforded the opportunity to be heard and was therefore
denied due process.
There is no dispute that an inspection of the College was conducted after a complaint by some
faculty members was filed with the Regional Office of the Ministry of Labor and Employment. A
report was submitted on the basis of the findings contained therein. Petitioner was furnished a copy
of said report to which it filed a comment. Finding this to be without merit, the Regional Director
issued an order giving petitioner ten (10) days to manifest its compliance with the findings,
otherwise, another would be issued to enforce payment. Petitioner appealed but instead of resolving
the memorandum of appeal, which the Regional Director treated as a motion for reconsideration,
said Director issued another Order dated August 2, 1983 directing the payment of the employees'
share in the sixty (60%) percent incremental proceeds. Petitioner moved for a reconsideration of the
latest order which the Regional Director, however, denied, thereby elevating the case to the Office of
the Minister of Labor and Employment.
The foregoing facts demonstrate that petitioner had the opportunity to refute the report on the
inspection conducted. It submitted a comment thereto, which was in effect its position paper. The
arguments therein and evidence attached thereto were considered by respondent Regional Director
in the order issued subsequently. They, therefore, had ample opportunity to present their side of the
controversy.
What due process contemplates is not merely the existence of an actual hearing. The "right to be
heard" focuses more on the substance rather than the form. In the case at bar, petitioner was
actually heard through the pleadings that it filed with the Regional Office V. As it itself admitted in its
petition that it was afforded the right to be heard on appeal [See Rollo, p. 581, petitioner cannot
therefore insist that it was denied due process.
Two other issues are raised in this petition, to wit:
WHETHER OR NOT 'TRANSPORTATION ALLOWANCE' SHOULD BE CONSIDERED AS

'EQUIVALENT TO 13TH-MONTH PAY UNDER PRES. DEC. NO. 851.
WHETHER OR NOT LEGAL HOLIDAY PAY BENEFIT COULD BE VALIDLY WITHDRAWN AFTER
BEING PRACTICED CONTINUOUSLY FOR EIGHT (8) MONTHS.
1. The issue on the thirteenth (13th) month pay involves an interpretation of the provisions of Pres.
Dec. No. 851 which requires all employers "to pay all their employees receiving a basic salary of not
more than Pl,000 a month, regardless of the nature of the employment, a 13th- month pay" (Sec. 1).
However, "employer[s] already paying their employees a 13th-month pay or its equivalent are not
covered" (Sec. 2). (Emphasis supplied)
The Rules and Regulations Implementing Pres. Dec. No. 851 provide the following:
SEC. 3. Employees. — The Decree shall apply to all employers except to: ...
c) Employers already paying their employees 13th-month or more in a calendar year

or its equivalent at the time of this issuance; ...
xxx xxx xxx
The term "its equivalent" as used in paragraph (c) hereof shall include Christmas
bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting
to not less than 1/12th of the basic salary but shall not include cash and stock
dividends, cost of living allowances and all other allowances regularly enjoyed by the
employer, as well as non-monetary benefits. Where an employer pays less than 1/1
2th of the employees basic salary, the employer shall pay the difference.
In the case at bar, the 13th month pay is paid in the following manner:
FOR REGULAR EMPLOYEES:
Transportation Allowance (TA)
50% of basic for the first year of service plus additional 5% every year thereafter but
not to exceed 100% of basic salary
Christmas Bonus (CB)
50% of basic salary for the first year of service plus additional 5% every year
thereafter but not to exceed 100% of basic salary.
For employees who have served the University for more than 10 years, the
University pays them emoluments equivalent to the 14 months salaries.
13th Month Pay Formula:
Monthly Rate x No. of
months served for the year
Less TA/CB = 13th Mo. pay
12 months
FOR CASUAL EMPLOYEES:
13th Month Pay Formula:
Add salaries from 16 December of previous year to 15th December of present year [and] divide by
12 months = 13th Mo. Pay (Rollo, pp. 60, 72).
The University's answer to the Union's claim of underpayment of the 13th month pay is that the
"transportation allowance" paid to its employees partakes the nature of a mid-year bonus which
under section 2 of Pres. Dec. No. 851 and section 3(c) of the Implementing Rules and Regulations is
equivalent to the 13th month pay,
The Labor Arbiter ordered FEU to pay the 13th month pay differentials of the complainants
reasoning that:
CLEARLY, transportation allowance cannot be considered as equivalent" of 13th

month pay as it is neither a Christmas bonus, mid-year bonus, profit sharing
payment, or other cash bonuses, pursuant to paragraphs (c) and (e), Section 3 of PD
851. The regularity of its payment further cements this proposition.
PERFORCE, complainants are underpaid of their 13th month pay in an amount

equivalent to 50% of their basic salary for the lst year of service, plus additional 5%
every year thereafter but not to exceed 100% of their basic salary which, per
respondent's formula, corresponds to their transportation allowance. (Rollo, p. 61).
On appeal, the Third Division of the National Labor Relations Commission reversed the Labor
Arbiter's ruling by dismissing the complainant's claim for underpayment of the 13th month pay for
lack of merit. The NLRC ruled that:
From the above findings and conclusion, it is clear that insofar as employees with ten
(10) years of service or more are concerned, they receive the equivalent of one (1)
month pay for Christmas bonus and another one (1) month pay as transportation
allowance or a total of fourteen (14) months salary in a year. Obviously, this group of
employees are fully paid of their 13th month pay and are not therefore subject to the
instant claim. As it is only those with less than ten (10) years of service are included
or encompassed by the Labor Arbiter's resolution on this particular issue. With this
clarification, we shall now proceed to discuss the crux of the controversy, that is, the
determination of whether or not the so designated "transportation allowance" being
paid to the employees should be considered among those deemed equivalent to 13th
month pay. As adverted earlier, the Labor Arbiter opined that it cannot be so
considered as the equivalent of 13th month pay.
xxx xxx xxx
In passing upon the issue, we deemed it best to delve deeper into the nature and
intendment of the transportation allowances as designated by both the complainants
and the respondent. Complainants claim that the transportation allowance they enjoy
has always been called and termed allowance and never as bonus since the time the
same was given to them. They assert that it simply was intended as an allowance
and not a bonus. It would appear however that complainants do not dispute
respondent's stand that transportation allowance is being paid only every March of
each year as distinguished from other allowances that are being paid on a monthly
basis or on a bimonthly basis; that the amount of transportation allowance to be paid
is dependent on the length of service of the employee concerned (i.e. 50% basic in
the first year and additional 5% for each succeeding years, etc.); that the said
method of computing the amount of the transportation allowance to be paid the
complainants is Identical to that used in determining Christmas bonus (respondent's
exhibit 8) that the reason behind said transportation allowance is to financially assist
employees in meeting their tax obligations as the same become due on or about the
month of March of each year.
xxx xxx xxx
We are inclined to believe and so hold that by the manner by which said
transportation allowance is being paid (only once a year) as well as the method in
determining the amount to be paid (similar to Christmas bonus) and considering
further the reason behind said payment (easing the burden of taxpayer-employee),
the said transportation allowance given out by respondent while designating as such,
partakes the nature of a mid-year bonus. It bears to note in passing that in providing
for transportation allowance, respondent was not compelled by law nor by the CBA
(Annex "A" of respondent's Appeal) as nowhere in the CBA nor in the Labor Code
can be found any provision on transportation allowance. It was therefore a benefit
that stemmed out purely from the voluntary act and generosity of the respondent
FEU. Moreover, said transportation allowance is only being paid once a year. On the
other hand, regular allowances not considered as 13th month pay equivalent under
P.D. 851, to our mind, refer to those paid on regular intervals and catering for specific
employees' needs and requirements that recur on a regular basis. Verily, if the
intendment behind the disputed transportation allowance is to answer for the daily
recurring transportation expenses of the employees, the same should have been
paid to employees on regular periodic intervals. All indications, as we see it, point out
to conclusion that the disputed transportation allowance, while dominated as such
apparently for lack of better term, is in fact a form of bonus doled out by the
respondent during the month of March every year.
Hence, we hold that it is one of those that can very well be considered as equivalent
to the 13th month pay (Rollo, pp. 73, 74, 75, 76).
This Court sustains the aforequoted view of public respondent. The benefit herein designated as
"transportation allowance" is a form of bonus equivalent to the 13th month pay. Nevertheless, where
this does not amount to 1/12 of the employees basic salary, the employer shall pay the difference.
The evident intention of the law was to grant an additional income in the form of a 13th month pay to
employees not already receiving the same. This Court ruled in National Federation of Sugar Workers
(NFSW) v. Ovejera [G.R. No. 59743, May 31, 1982, 114 SCRA 354].
Otherwise put, the intention was to grant some relief — not to all workers — but only
to the unfortunate ones not actually paid a 13th month salary or what amounts to it,
by whatever name called: but it was not envisioned that a double burden would be
imposed on the employer already paying his employees a 13th month pay or its
equivalent — whether out of pure generosity or on the basis of a binding agreement
and, in the latter case, regardless of the conditional character of the grant (such as
making the payment dependent on profit), so long as there is actual payment.
Otherwise, what was conceived to be a 13th month salary would in effect become a
14th or possibly 15th month pay.
xxx xxx xxx
Pragmatic considerations also weigh heavily in favor of crediting both voluntary and
contractual bonuses for the purpose of determining liability for the 13th month pay.
To require employers (already giving their employees a 13th month salary or its
equivalent) to give a second 13th month pay would be unfair and productive of
undesirable results. To the employer who had acceded and is already bound to give
bonuses to his employees, the additional burden of a 13th month pay would amount
to a penalty for his munificence or liberality. The probable reaction of one so
circumstanced would be to withdraw the bonuses or resist further voluntary grants for
fear that if and when a law is passed giving the same benefits, his prior concessions
might not be given due credit; and this negative attitude would have an adverse
impact on the employees (pp.369,370).
The case of Dole Philippines, Inc. v. Leogardo [G.R. No. 60018, October 23, 1982, 117 SCRA 938
(1982)], citing the ruling in the above case also pointed out that:
To hold otherwise would be to impose an unreasonable and undue burden upon those employers
who had demonstrated their sensitivity and concern for the welfare of their employees. A contrary
stance would indeed create an absurd situation whereby an employer who started giving his
employees the 13th month pay only because of the unmistakable force of the law would be in a far
better position than another who, by his own magnanimity or by mutual agreement, had long been
extending his employees the benefits contemplated under PD No. 851, by whatever nomenclature
these benefits have come to be known. Indeed, PD No. 851, a legislation benevolent in its purpose,
never intended to bring about such oppressive situation. (p. 944)
2. Presidential Decree No. 570-A was issued on November 1, 1974 amending certain articles of
Presidential Decree No. 442 (Labor Code of the Philippines promulgated on May 1, 1974 which took
effect six months thereafter). Section 28 thereof provides that:
Section 28. A new provision is hereby substituted in lieu of the original provision of
Article 258 of the same Code to read as follows:
Art. 258. Right to holiday pay-
(a) Every worker shall be paid his regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;
(b) 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 thirtieth of
December and the day designated by law for holding a general election.
(c) When employer may require work on holidays. The employer may require an
employee to work on any holiday but such employee shall be paid a compensation
equivalent twice his regular rate.
Presidential Decree No. 850 issued on December 16, 1975 also amending certain articles of Pres.
Dec. No. 442 adopted the aforequoted provision. Two months later, on February 16, 1976, the Rules
and Regulations Implementing the Labor Code, as amended, was released the pertinent portion of
which states that:
Section 2. Status of employees paid by the month. — 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.
For this purpose, the monthly minimum wage shall not be less than the statutory
minimum wage multiplied by 365 days divided by twelve.
(e) Section 3. Holiday Pay. — Every employer shall pay his employees their regular
daily wage for any unworked regular holiday.
As used in the Rule, the term 'holiday' shall exclusively refer to: New Year's Day,
Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth of
June, the fourth of July, the thirtieth of November, the twenty-fifth and thirtieth of
December and the day designated by law for a general election or national
referendum or plebiscite (MOLE Rules and Reg. Book III, Rule IV, sec. 2 (1976).
After one week, on February 23, 1976, the Minister of Labor issued Policy Instruction No. 9, to clarify
further the right to holiday pay, thus:
The Rules Implementing PD 850 have clarified the policy in the implementation of the
ten (10) paid legal holidays. Before PD 850. the number of working days a year in a
firm was considered important in determining entitlement to the benefit. Thus, where
an employee was working for at least 313 days, he was definitely already paid. If he
was working for less than 313, there was no certainty whether the ten (10) paid legal
holidays were already paid to him or not.
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.
Under the rules implementing PD 850, 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 P 240, 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 entitled to the ten (10) legal holidays.
These new interpretations must be uniformly and consistently upheld.
This issuance shall take effect immediately.
In the meantime, respondent University paid its employees holiday pay for the following days:
DATE HOLIDAYS PAID
June 9, 1975 for the previous nine legal holidays
August, 1975 for the previous June 12 and July 4
Jan. 14, 1976 or the previous Nov. 30, Dec. 25

and 30 and Jan. 1
After January 14, 1976, however, the University ceased paying the holiday pay allegedly by reason
of Policy Instruction No. 9. Specifically, the University claimed that the monthly salary of its
employees was, as of 1976, more than P 240.00 without deductions from their monthly salary on
account of holidays in months where they occurred and that therefore, by virtue of Policy Instruction
No. 9, they were no longer entitled to the ten paid legal holidays.
Petitioners, upon the other hand, contend that Policy Instruction No. 9 could not have possibly been
the reason that prompted the University to withdraw such benefits from its faculty and employees
because said implementing rule was issued only on April 23, 1976 or four months later.
The Labor Arbiter ruled in favor of the complainant Union for the reason that ". . . the payment of the
10-paid legal holiday benefits from June 8, 1975 up to January 14, 1976 is considered an employer
practice that can no longer be withdrawn." [Decision; Rollo, p. 59].
As in the case of the 13th month pay, the NLRC reversed the Labor Arbiter's ruling. The NLRC held
that:
Apparently, Arbiter Ruben Aquino concluded that payment by the respondent of the
legal holiday pay preceded the effectivity of the Rules and Regulations Implementing
P.D. 850 and which rules took effect on February 16, 1976. Hence, his conclusion
that the payment of the legal holiday pay stemmed out from company practice and
not from law. Tracing back, however, the payments made by respondent of said
holiday pay will show that, if ever, the same was made pursuant to P.D. 570-A which
took effect on November 1, 1974. Noteworthy is the undisputed fact that respondent
first paid its employees legal holiday pay in June 1975 corresponding to nine (9) legal
holidays. It bears to note that from the time of the effectivity of P.D. 570-A which was
in November of 1974 up to June of 1975, the time respondent first paid legal holiday
pay for nine (9) legal holidays, there, were indeed more or less nine legal holidays
that transpired to wit: November 30, 1974, December 25, 1974, December 30, 1974,
January 1, 1975, February 27, 1975 (Referendum Day), Maundy Thursday of 1975,
Good Friday of 1975, April 9, 1975 and finally, May 1st of 1975. We are therefore
inclined to lend credence to respondent's claim that the payment of legal holiday pay
was in fact made pursuant to law, P.D. 570-A in particular, it is not one that arose out
of company practice or policy.
Finding that said payment was made based on an honest although erroneous
interpretation of law, which interpretation was later on corrected by the issuance (sic)
of Policy Instruction No. 9 and which issuance prompted respondent to withdraw the
holiday pay benefits extended to the employees who were paid on a regular monthly
basis, and finding further that under Policy Instructions No. 9, said subject employees
are deemed paid their holiday pay as they were paid on a monthly basis at a wage
rate presumably above the statutory minimum, we believe and so hold that the
withdrawal of said holiday pay benefit was valid and justifiable under the
circumstances (Rollo, pp. 33-4).
This Court cannot sustain the foregoing decision of public respondent. Said decision relied on
Section 2, Rule IV, Book Ill of the implementing rules and on Policy Instruction No. 9 which were
declared by this Court to be null and void in Insular Bank of Asia and America Employee's Union
(IBAAEU) v. Inciong (G.R. No. 52415, October 23, 1984, 132 SCRA 6631. In disposing of the issue
at hand, this Court reiterates the ruling in that case, to wit:
WE agree with the petitioner's contention that Section 2, Rule IV, Book Ill of the
implementing rules and Policy Instruction No. 9 issued by the then Secretary of
Labor are nun and void since in the guise of clarifying the Labor Code's provision on
holiday pay, they in fact amended them by enlarging the scope of their exclusion.
xxx xxx xxx
It is elementary in the rules of statutory construction that when the language of the
law is clear and unequivocal the law must be taken to mean exactly what it says. 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. " Moreover, it shall always be
presumed that the legislature intended to enact a valid and permanent statute which
would have the most beneficial effect that its language permits (Orlosky vs. Haskell,
155 A. 112). (pp. 673-4).
BISCOCHO CASE
At issue also in this petition is whether the 60% incremental proceeds may be subjected to attorney's
fees, negotiation fees, agency fees and the like.
The Court notes the fact that there are two classes of employees among the petitioners: (1) those
who are members of the bargaining unit and (2) those who are not members of the bargaining unit.
The first class may be further subdivided into two: those who are members of the collective
bargaining agent and those who are not.
It is clear that the questioned Order of the respondent Minister applies only to members of the
bargaining unit. The CBA prepared pursuant to said Order, however, covered employees who are
not members of the bargaining unit, although said CBA had not yet been signed at the time this
petition was filed on November 24, 1986. Assuming it was signed thereafter, the inclusion of
employees outside the bargaining unit should be nullified as this does not conform to said order
which directed private respondents to execute a CBA covering only members of the bargaining unit.
Being outside the coverage of respondent Minister's order, and thus, not entitled to the economic
package involved therein, employees who are non- members of the bargaining unit should not be
assessed negotiation fees, attorney's fees, agency fees and the like, for the simple reason that the
resulting collective bargaining agreement does not apply to them. It should be clear, however, that
while non-members of the bargaining unit are not entitled to the economic package provided by said
order, they are, in lieu thereof, still entitled to their share in the 60% incremental proceeds of
increases in tuition or other school fees or charges.
As far as assessment of fees against employees of the collective bargaining unit who are not
members of the collective bargaining agent is concerned, Article 249 of the Labor Code, as
amended by B.P. Blg. 70, provides the rule:
Art. 249. Unfair labor practices of employers.-
xxx xxx xxx
(e) ... Employees of an appropriate collective bargaining unit who are not members of
the recognized collective bargaining agent may be assessed a reasonable fee
equivalent to the dues and other fees paid by members of the recognized collective
bargaining agent, if such non- union members accept the benefits under the
collective agreement . . .
Employees of the collective bargaining unit who are not members of the collective bargaining agent
have to pay the foregoing fees if they accept the benefits under the collective bargaining agreement
and if such fees are not unreasonable. Petitioners who are members of the bargaining unit failed to
show that the equivalent of ten (10%) percent of their backwages sought to be deducted is
unreasonable.
WHEREFORE, the Court rules:
In G.R. No. 58870, the Order of respondent Minister of Labor and Employment dated September 29,
1981 is SUSTAINED insofar as it ordered petitioner Cebu Institute of Technology to pay its teaching
staff the following:
(1) Cost of living allowance under Pres. Dec.Nos.525 and 1123 from February 1978
up to 1981;
(2) Cost of living allowance under Pres. Dec. Nos. 1614, 1634, 1678 and 1713; and
(3) Service incentive leave due them from 1978.
The Temporary Restraining Order issued by this Court on December 7, 1981 is hereby LIFTED and
SET ASIDE. No costs.
DIVINE WORD COLLEGE CASE
The petition in G.R. No. 68345 is DENIED for lack of merit. The questioned Orders of respondent
Deputy Minister of Labor and Employment, dated December 19, 1983 and July 4, 1984
are SUSTAINED insofar as said Orders denied the payment of the emergency cost of living
allowances of private respondents faculty teachers of the Divine Word College of Legazpi out of the
sixty (60%) incremental proceeds of tuition and other school fee increases collected during the
effectivity of Pres. Dec. No. 451. The Rules and Regulations implementing Pres. Dec. No. 451 are
hereby declared invalid for being ultra vires No costs.
The Decision of public respondent National Labor Relations Commission dated September 18, 1984
is REVERSEDinsofar as it affirmed in toto the dismissal of petitioner Far Eastern University
Employee Labor Union's claim under Pres. Dec. No. 451 and its claim for payment of holiday pay.
Private respondent Far Eastern University is therefore ordered to pay its employees the following:
(1) Their sixty (60) percent share in the increases in tuition and other school fees or
charges which shall be allocated exclusively for increase in salaries or wages if the
tuition or other school fee increase was collected during the effectivity of Pres. Dec.
No. 451;
(2) Their claim for holiday pay which was withdrawn since January 14, 1976 up to the
present.
The Decision of respondent National Labor Relations Commission, however, is SUSTAINED insofar
as it denied petitioner's claim for thirteenth (1 3th month pay. No costs.
FABROS CASE
In G.R. No. 70832, the Petition for certiorari and Prohibition is DISMISSED. MECS Order No. 25. s.
1985, particularly paragraphs 7.0 to 7.5 thereof, which provide for the use and application of sixty
(60%) percent of the increases in tuition and other school fees or charges, having been issued
pursuant to B.P. Blg. 232 which repealed Pres. Dec. No. 451, is hereby declared VALID. The
Temporary Restraining Order issued by this Court dated May 29, 1985 is LIFTED and SET ASIDE.
No costs.
BISCOCHO CASE
The assailed portions of the Order of the Minister of Labor and Employment dated April 14, 1986 are
AFFIRMED. The collective bargaining agreement prepared pursuant thereto should, however, be
MODIFIED to cover only members of the bargaining unit. Only petitioners who are members of the
collective bargaining unit, if they accept the benefits under the resulting collective bargaining
agreement, shall be charged ten (10%) percent of the payable backwages as negotiation fees. The
Temporary Restraining Order dated November 25, 1986 is LIFTED and SET ASIDE. No costs.
VALMONTE CASE
The petition in G.R. No. 76596 is DISMISSED for lack of merit.
Effective September 1, 1982, the application and use of the proceeds from increases in tuition fees
and other schools fees or charges shall be governed by section 42 of B.P. Blg. 232 as implemented
by the Rules and Regulations issued by the then Ministry, now Department of Education, Culture
and Sports. SO ORDERED.
Teehankee, C.J., Yap, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin and
Sarmiento, JJ., concur.
Fernan, Narvasa, Cruz and Padilla, JJ., took no part.
G.R. No. 128845 June 1, 2000
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner,

vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and
Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of
Labor and Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of
International School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent
School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their
colleagues in other schools is, of course, beside the point. The point is that employees should be
given equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a
principle that rests on fundamental notions of justice. That is the principle we uphold today. 1âwphi 1.nêt
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.
Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying
the same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine
whether a faculty member should be classified as a foreign-hire or a local hire:
a. What is one's domicile?
b. Where is one's home economy?
c. To which country does one owe economic allegiance?
d. Was the individual hired abroad specifically to work in the School and was the School
responsible for bringing that individual to the Philippines?2
Should the answer to any of these queries point to the Philippines, the faculty member is classified
as a local hire; otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local-hires. These include housing,
1avv phi 1
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.
Because of a limited tenure, the foreign hire is confronted again with the same economic
reality after his term: that he will eventually and inevitably return to his home country where
he will have to confront the uncertainty of obtaining suitable employment after along period in
a foreign land.
The compensation scheme is simply the School's adaptive measure to remain competitive
on an international level in terms of attracting competent professionals in the field of
international education.3
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.6
The Acting secretary upheld the point-of-hire classification for the distinction in salary rates:
The Principle "equal pay for equal work" does not find applications in the present case. The
international character of the School requires the hiring of foreign personnel to deal with
different nationalities and different cultures, among the student population.
We also take cognizance of the existence of a system of salaries and benefits accorded to
foreign hired personnel which system is universally recognized. We agree that certain
amenities have to be provided to these people in order to entice them to render their services
in the Philippines and in the process remain competitive in the international market.
Furthermore, we took note of the fact that foreign hires have limited contract of employment
unlike the local hires who enjoy security of tenure. To apply parity therefore, in wages and
other benefits would also require parity in other terms and conditions of employment which
include the employment which include the employment contract.
A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary
and professional compensation wherein the parties agree as follows:
All members of the bargaining unit shall be compensated only in accordance with
Appendix C hereof provided that the Superintendent of the School has the discretion
to recruit and hire expatriate teachers from abroad, under terms and conditions that
are consistent with accepted international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the Overseas Recruited Staff
(OSRS) salary schedule. The 25% differential is reflective of the agreed value of
system displacement and contracted status of the OSRS as differentiated from the
tenured status of Locally Recruited Staff (LRS).
To our mind, these provisions demonstrate the parties' recognition of the difference in the
status of two types of employees, hence, the difference in their salaries.
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.7
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our Constitution and
laws reflect the policy against these evils. The Constitution8 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.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7
thereof, provides:
The States Parties to the present Covenant recognize the right of everyone to the enjoyment
of just and favourable conditions of work, which ensure, in particular:
a. Remuneration which provides all workers, as a minimum, with:
(i) Fair wages and equal remuneration for work of equal value without
distinction of any kind, in particular women being guaranteed conditions of
work not inferior to those enjoyed by men, with equal pay for equal work;
xxx xxx xxx
The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism
of "equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort
and responsibility, under similar conditions, should be paid similar salaries. 22 This rule applies to the
School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform work equal to
that of foreign-hires. 23 The Court finds this argument a little cavalier. If an employer accords
employees the same position and rank, the presumption is that these employees perform equal
work. This presumption is borne by logic and human experience. If the employer pays one employee
less than the rest, it is not for that employee to explain why he receives less or why the others
receive more. That would be adding insult to injury. The employer has discriminated against that
employee; it is for the employer to explain why the employee is treated unfairly.
The employer in this case has failed to discharge this burden. There is no evidence here that
foreign-hires perform 25% more efficiently or effectively than the local-hires. Both groups have
similar functions and responsibilities, which they perform under similar working conditions.
The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration
paid at regular intervals for the rendering of services." In Songco v. National Labor Relations
Commission, 24 we said that:
"salary" means a recompense or consideration made to a person for his pains or industry in
another man's 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. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires
and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation
factor" and the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in
salary rates. The dislocation factor and limited tenure affecting foreign-hires are adequately
compensated by certain benefits accorded them which are not enjoyed by local-hires, such as
housing, transportation, shipping costs, taxes and home leave travel allowances.
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. 27These 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.
In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is
no reasonable distinction between the services rendered by foreign-hires and local-hires. The
practice of the School of according higher salaries to foreign-hires contravenes public policy and,
certainly, does not deserve the sympathy of this Court. 1avv phi 1
We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.
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.
SO ORDERED.
Puno and Pardo, JJ., concur.

Davide, Jr., C.J., on official leave.
Ynares-Santiago, J., is on leave.
CEBU AUTOBUS CO., petitioner vs UNITED CEBU AUTOBUS EMPLOYEES ASSN., respondent
GR. No. L-9742

Oct. 27, 1955
FACTS:
The company used to pay to its drivers and conductors, who were assigned outside of the
City limits, aside from their regular salary, a certain percentage of their daily wage, as
allowance for food. Upon the effectivity of the Minimum Wage Law, however, that privilege
was stopped by the company. The order of CIR to the company to continue granting this
privilege, was upheld by this Court.
The shipping company argue that the furnishing of meals to the crew before the effectivity
of Rep. Act No. 602, is of no moment, because such circumstance was already taken into
consideration by Congress, when it stated that “wage” includes the fair and reasonable
value of boards customarily furnished by the employer to the employees.
ISSUE:
WON “wage” includes the fair and reasonable value of boards customarily furnished by the
employer to the employees.
HELD:
No.
If We are to follow the theory of the herein petitioners, then a crew member, who used to
receive a monthly wage of P100.00, before August 4, 1951, with no deduction for meals,
after said date, would receive only P86.00 monthly (after deducting the cost of his meals at
P.40 per meal), which would be very much less than the P122.00 monthly minimum wage,
fixed in accordance with the Minimum Wage Law. Instead of benefiting him, the law will
adversely affect said crew member. Such interpretation does not conform with the avowed
intention of Congress in enacting the said law
G.R. No. 74156 June 29, 1988
GLOBE MACKAY CABLE AND RADIO CORPORATION, FREDERICK WHITE and JESUS
SANTIAGO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FFW-GLOBE MACKAY EMPLOYEES UNION
and EDA CONCEPCION, respondents.
Castillo, Laman, Tan & Pantaleon for petitioners.
Edwin D. Dellaban for private respondents.

MELENCIO-HERRERA, J.:
A special civil action for certiorari with a prayer for a Temporary Restraining Order to enjoin respondents from enforcing the Decision of 10
March 1986 of the National Labor Relations Commission (NLRC), in NCR Case No. 1-168-85 entitled "FFW-Globe Mackay Employees
Union, et al., vs. Globe Mackay Cable & Radio Corporation, et al.," the dispositive portion of which reads:
WHEREFORE, premises considered, the appealed Decision is as it is hereby SET

ASIDE and another one issued:
1. Declaring respondents-appellees (petitioners herein) guilty of illegal deductions of

cost-of-living allowance;
2. Ordering respondents-appellees to pay complainants-appellants their back

allowances reckoned from the time of illegal deduction; and
3. Ordering respondents-appellees from further illegally deducting the allowances of

complainants-appellants.
SO ORDERED.
Presiding Commissioner of the NLRC, Diego P. Atienza, concurred in the result, while
Commissioner Cleto T. Villaltuya dissented and voted to affirm in toto the Labor Arbiter's Decision.
On 19 May 1986, we issued the Temporary Restraining Order enjoining respondents from enforcing
the assailed Decision. On 2 September 1987, we gave due course to the petition and required the
submittal of memoranda, by the parties, which has been complied with.
The facts follow:
Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance of
non-agricultural workers in the private sector. Petitioner corporation complied with the said Wage
Order by paying its monthly-paid employees the mandated P3.00 per day COLA. However, in
computing said COLA, Petitioner Corporation multiplied the P 3.00 daily COLA by 22 days, which is
the number of working days in the company.
Respondent Union disagreed with the computation of the monthly COLA claiming that the daily
COLA rate of P3.00 should be multiplied by 30 days to arrive at the monthly COLA rate. The union
alleged furthermore that prior to the effectivity of Wage Order No. 6, Petitioner Corporation had been
computing and paying the monthly COLA on the basis of thirty (30) days per month and that this
constituted an employer practice, which should not be unilaterally withdrawn.
After several grievance proceedings proved futile, the Union filed a complaint against Petitioner
Corporation, its President, F. White, and Vice-President, J. Santiago, for illegal deduction,
underpayment, unpaid allowances, and violation of Wage Order No. 6. Petitioners White and
Santiago were sought to be held personally liable for the money claims thus demanded.
Labor Arbiter Adelaido F. Martinez sustained the position of Petitioner Corporation by holding that
since the individual petitioners acted in their corporate capacity they should not have been
impleaded; and that the monthly COLA should be computed on the basis of twenty two (22) days,
since the evidence showed that there are only 22 paid days in a month for monthly-paid employees
in the company. His reasoning, inter alia, was as follows:
To compel the respondent company to use 30 days in a month to compute the

allowance and retain 22 days for vacation and sick leave, overtime pay and other
benefits is inconsistent and palpably unjust. If 30 days is used as divisor, then it must
be used for the computation of all benefits, not just the allowance. But this is not fair
to complainants, not to mention that it will contravene the provision of the parties'
CBA.
On appeal, the NLRC reversed the Labor Arbiter, as heretofore stated, and held that Petitioner
Corporation was guilty of illegal deductions, upon the following considerations: (1) that the P3.00
daily COLA under Wage Order No. 6 should be paid and computed on the basis of thirty (30) days
instead of twenty-two (22) days since workers paid on a monthly basis are entitled to COLA on
Saturdays, Sundays and legal holidays "even if unworked;" (2) that the full allowance enjoyed by
Petitioner Corporation's monthly-paid employees before the CBA executed between the parties in
1982 constituted voluntary employer practice, which cannot be unilaterally withdrawn; and (3) that
petitioners White and Santiago were properly impleaded as respondents in the case below.
Hence, this Petition, anchored on the charge of grave abuse of discretion by the NLRC.
We are constrained to reverse the reversal.
Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as follows:
Section 5. Allowance for Unworked Days.
All covered employees shall be entitled to their daily living allowance during the days
that they are paid their basic wage, even if unworked. (Emphasis supplied)
The primordial consideration, therefore, for entitlement to COLA is that basic wage is being paid. In
other words, the payment of COLA is mandated only for the days that the employees are paid their
basic wage, even if said days are unworked. So that, on the days that employees are not paid their
basic wage, the payment of COLA is not mandated. As held in University of Pangasinan Faculty
Union vs. University of Pangasinan, L-63122, February 20, 1984, 127 SCRA 691):
... it is evident that the intention of the law is to grant ECOLA upon the payment of
basic wages. Hence, we have the principle of 'No Pay, No ECOLA.
Applied to monthly-paid employees if their monthly salary covers all the days in a month, they are
deemed paid their basic wages for all those days and they should be entitled to their COLA on those
days "even if unworked," as the NLRC had opined. Peculiar to this case, however, is the
circumstance that pursuant to the Collective Bargaining Agreement (CBA) between Petitioner
Corporation and Respondent Union, the monthly basic pay is computed on the basis of five (5) days
a week, or twenty two (22) days a month. Thus, the pertinent provisions of that Agreement read:
Art. XV(a)—Eight net working hours shall constitute the regular work day for five
days.
Art. XV(b)—Forty net hours of work, 5 working days, shall constitute the regular work
week.
Art. XVI, Sec. 1(b)—All overtime worked in excess of eight net hours daily or in
excess of 5 days weekly shall be computed on hourly basis at the rate of time and
one half.
The Labor Arbiter also found that in determining the hourly rate of monthly paid employees for
purposes of computing overtime pay, the monthly wage is divided by the number of actual work days
in a month and then, by eight (8) working hours. If a monthly-paid employee renders overtime work,
he is paid his basic salary rate plus one-half thereof. For example, after examining the specimen
payroll of employee Jesus L. Santos, the Labor Arbiter found:
the employee Jesus L. Santos, who worked on Saturday and Sunday was paid base
pay plus 50% premium. This is over and above his monthly basic pay as supported
by the fact that base pay was paid. If the 6th and 7th days of the week are deemed
paid even if unworked and included in the monthly salary, Santos should not have
been paid his base pay for Saturday and Sunday but should have received only the
50% overtime premium.
Similarly, the specimen payrolls of employees, Dennis Dungon and Rene Sanvictores, showed that
in computing the vacation and sick leaves of the employees, Petitioner Corporation consistently
used twenty-two (22) days.
Under the peculiar circumstances obtaining, therefore, where the company observes a 5-day work
week, it will have to be held that the COLA should be computed on the basis of twenty two (22)
days, which is the period during which the monthly-paid employees of Petitioner Corporation receive
their basic wage. The CBA is the law between the parties and, if not acceptable, can be the subject
of future re-negotiation.
2) Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982
and in compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not be
construed as constitutive of voluntary employer practice, which cannot now be unilaterally withdrawn
by petitioner. To be considered as such, it should have been practiced over a long period of time,
and must be shown to have been consistent and deliberate. Adequate proof is wanting in this
respect. The test of long practice has been enunciated thus:
... Respondent Company agreed to continue giving holiday pay knowing fully
well that said employees are not covered by the law requiring payment of holiday
pay.' (Oceanic Pharmacal Employees Union [FFW] vs. Inciong, L-50568, November
7, 1979, 94 SCRA 270). (Emphasis ours)
Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the
implementation of the Wage Orders. It was only when the Rules Implementing Wage Order No. 4
were issued on 21 May 1984 that a formula for the conversion of the daily allowance to its monthly
equivalent was laid down, thus:
Section 3. Application of Section 2--
xxx xxx xxx
(a) Monthly rates for non-agricultural workers covered Under PDs 1614, 1634, 1678
and 1713:
xxx xxx xxx
(3) For workers who do not work and are not considered paid on Saturdays and
Sundays:
P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70 (Emphasis ours)
As the Labor Arbiter had analyzed said formula:
Under the aforecited formula/guideline, issued for the first time, when applied to a
company like respondent which observes a 5-day work week (or where 2 days in a
week, not necessarily Saturday and Sunday, are not considered paid), the monthly
equivalent of a daily allowance is arrived at by multiplying the daily allowance by 262
divided by 12. This formula results in the equivalent of 21.8 days in a month.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous
application of the law. Payment may be said to have been made by reason of a mistake in the
construction or application of a "doubtful or difficult question of law." (Article 2155, 1 in relation to
Article 2154 2 of the Civil Code). Since it is a past error that is being corrected, no vested right may
be said to have arisen nor any diminution of benefit under Article 100 of the Labor Code3 may be
said to have resulted by virtue of the correction.
With the conclusions thus reached, there is no further need to discuss the liability of the officers of
Petitioner Corporation.
WHEREFORE, certiorari is granted, the Decision of the National Labor Relations Commission, dated
10 March 1986, is SET ASIDE, and the Decision of the Labor Arbiter, dated 9 May 1985, is hereby
REINSTATED. The Temporary Restraining Order heretofore issued is hereby made permanent.
SO ORDERED.
Yap, C.J., Paras, and Sarmiento, JJ., concur.
Padilla, J., took no part.
G.R. No. 113856 September 7, 1998
SAMAHANG MANGGAGAWA SA TOP FORM MANUFACTURING UNITED WORKERS OF THE

PHILIPPINES (SMTFM-UWP), its officers and members, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. JOSE G. DE VERA and TOP FORM
MANUFACTURING PHIL., INC., respondents.
ROMERO, J.:
The issue in this petition for certiorari is whether or not an employer committed an unfair labor
practice by bargaining in bad faith and discriminating against its employees. The charge arose from
the employer's refusal to grant across-the-board increases to its employees in implementing Wage
Orders Nos. 01 and 02 of the Regional Tripartite Wages and Productivity Board of the National
Capital Region (RTWPB-NCR). Such refusal was aggravated by the fact that prior to the issuance of
said wage orders, the employer allegedly promised at the collective bargaining conferences to
implement any government-mandated wage increases on an across-the-board basis.
Petitioner Samahang Manggagawa sa Top Form Manufacturing — United Workers of the Philippines
(SMTFM) was the certified collective bargaining representative of all regular rank and file employees
of private respondent Top Form Manufacturing Philippines, Inc. At the collective bargaining
negotiation held at the Milky Way Restaurant in Makati, Metro Manila on February 27, 1990, the
parties agreed to discuss unresolved economic issues. According to the minutes of the meeting,
Article VII of the collective bargaining agreement was discussed. The following appear in said
Minutes:
Art. VII, Wages
Sect. 1. — Defer —
Sect. 2. Status quo
Sec. 3. Union proposed that any future wage increase given by the government
should be implemented by the company across-the-board or non-conditional.
Management requested the union to retain this provision since their sincerity was
already proven when the P25.00 wage increase was granted across-the-board. The
union acknowledges management's sincerity but they are worried that in case there
is a new set of management, they can just show their CBA. The union decided to
defer this provision. 1
In their joint affidavit dated January 30, 1992, 2 union members Salve L. Barnes, Eulisa Mendoza,
Lourdes Barbero and Concesa Ibañez affirmed that at the subsequent collective bargaining
negotiations, the union insisted on the incorporation in the collective bargaining agreement (CBA) of
the union proposal on "automatic across-the-board wage increase." They added that:
11. On the strength of the representation of the negotiating panel of the company
and the above undertaking/promise made by its negotiating panel, our union agreed
to drop said proposal relying on the undertakings made by the officials of the
company who negotiated with us, namely, Mr. William Reynolds, Mr. Samuel Wong
and Mrs. Remedios Felizardo. Also, in the past years, the company has granted to
us government mandated wage increases on across-the-board basis.
On October 15, 1990, the RTWPB-NCR issued Wage Order No. 01 granting an increase of P17.00
per day in the salary of workers. This was followed by Wage Order No. 02 dated December 20, 1990
providing for a P12.00 daily increase in salary.
As expected, the union requested the implementation of said wage orders. However, they
demanded that the increase be on an across-the-board basis. Private respondent refused to accede
to that demand. Instead, it implemented a scheme of increases purportedly to avoid wage distortion.
Thus, private respondent granted the P17.00 increase under Wage Order No. 01 to
workers/employees receiving salary of P125.00 per day and below. The P12.00 increase mandated
by Wage Order No. 02 was granted to those receiving the salary of P140.00 per day and below. For
employees receiving salary higher than P125.00 or P140.00 per day, private respondent granted an
escalated increase ranging from P6.99 to P14.30 and from P6.00 to P10.00, respectively. 3
On October 24, 1991, the union, through its legal counsel, wrote private respondent a letter
demanding that it should "fulfill its pledge of sincerity to the union by granting an across-the-board
wage increases (sic) to all employees under the wage orders." The union reiterated that it had
agreed to "retain the old provision of CBA" on the strength of private respondent's "promise and
assurance" of an across-the-board salary increase should the government mandate salary
increases. 4 Several conferences between the parties notwithstanding, private respondent adamantly
maintained its position on the salary increases it had granted that were purportedly designed to
avoid wage distortion.
Consequently, the union filed a complaint with the NCR NLRC alleging that private respondent's act
of "reneging on its undertaking/promise clearly constitutes act of unfair labor practice through
bargaining in bad faith." It charged private respondent with acts of unfair labor practices or violation
of Article 247 of the Labor Code, as amended, specifically "bargaining in bad faith," and prayed that
it be awarded actual, moral and exemplary damages.5 In its position paper, the union added that it
was charging private respondent with "violation of Article 100 of the Labor Code." 6
Private respondent, on the other hand, contended that in implementing Wage Orders Nos. 01 and
02, it had avoided "the existence of a wage distortion" that would arise from such implementation. It
emphasized that only "after a reasonable length of time from the implementation" of the wage orders
"that the union surprisingly raised the question that the company should have implemented said
wage orders on an across-the-board basis." It asserted that there was no agreement to the effect
that future wage increases mandated by the government should be implemented on an across-the-
board basis. Otherwise, that agreement would have been incorporated and expressly stipulated in
the CBA. It quoted the provision of the CBA that reflects the parties' intention to "fully set forth"
therein all their agreements that had been arrived at after negotiations that gave the parties
"unlimited right and opportunity to make demands and proposals with respect to any subject or
matter not removed by law from the area of collective bargaining." The same CBA provided that
during its effectivity, the parties "each voluntarily and unqualifiedly waives the right, and each agrees
that the other shall not be obligated, to bargain collectively, with respect to any subject or matter not
specifically referred to or covered by this Agreement, even though such subject or matter may not
have been within the knowledge or contemplation of either or both of the parties at the time they
negotiated or signed this Agreement." 7
On March 11, 1992, Labor Arbiter Jose G. de Vera rendered a decision dismissing the complaint for
lack of merit. 8He considered two main issues in the case: (a) whether or not respondents are guilty
of unfair labor practice, and (b) whether or not the respondents are liable to implement Wage Orders
Nos. 01 and 02 on an across-the-board basis. Finding no basis to rule in the affirmative on both
issues, he explained as follows:
The charge of bargaining in bad faith that the complainant union attributes to the
respondents is bereft of any certitude inasmuch as based on the complainant union's
own admission, the latter vacillated on its own proposal to adopt an across-the-board
stand or future wage increases. In fact, the union acknowledges the management's
sincerity when the latter allegedly implemented Republic Act 6727 on an across-the-
board basis. That such union proposal was not adopted in the existing CBA was due
to the fact that it was the union itself which decided for its deferment. It is, therefore,
misleading to claim that the management undertook/promised to implement future
wage increases on an across-the-board basis when as the evidence shows it was
the union who asked for the deferment of its own proposal to that effect.
The alleged discrimination in the implementation of the subject wage orders does not
inspire belief at all where the wage orders themselves do not allow the grant of wage
increases on an across-the-board basis. That there were employees who were
granted the full extent of the increase authorized and some others who received less
and still others who did not receive any increase at all, would not ripen into what the
complainants termed as discrimination. That the implementation of the subject wage
orders resulted into an uneven implementation of wage increases is justified under
the law to prevent any wage distortion. What the respondents did under the
circumstances in order to deter an eventual wage distortion without any arbitral
proceedings is certainly commendable.
The alleged violation of Article 100 of the Labor Code, as amended, as well as Article
XVII, Section 7 of the existing CBA as herein earlier quoted is likewise found by this
Branch to have no basis in fact and in law. No benefits or privileges previously
enjoyed by the employees were withdrawn as a result of the implementation of the
subject orders. Likewise, the alleged company practice of implementing wage
increases declared by the government on an across-the-board basis has not been
duly established by the complainants' evidence. The complainants asserted that the
company implemented Republic Act No. 6727 which granted a wage increase of
P25.00 effective July 1, 1989 on an across-the-board basis. Granting that the same
is true, such isolated single act that respondents adopted would definitely not ripen
into a company practice. It has been said that "a sparrow or two returning to
Capistrano does not a summer make."
Finally, on the second issue of whether or not the employees of the respondents are
entitled to an across-the-board wage increase pursuant to Wage Orders Nos. 01 and
02, in the face of the above discussion as well as our finding that the respondents
correctly applied the law on wage increases, this Branch rules in the negative.
Likewise, for want of factual basis and under the circumstances where our findings
above are adverse to the complainants, their prayer for moral and exemplary
damages and attorney's fees may not be granted.
Not satisfied, petitioner appealed to the NLRC that, in turn, promulgated the assailed Resolution of
April 29, 1993 9dismissing the appeal for lack of merit. Still dissatisfied, petitioner sought
reconsideration which, however, was denied by the NLRC in the Resolution dated January 17, 1994.
Hence, the instant petition for certiorari contending that:
-A-
THE PUBLIC RESPONDENTS GROSSLY ERRED IN NOT DECLARING THE

PRIVATE RESPONDENTS GUILTY OF ACTS OF UNFAIR LABOR PRACTICES
WHEN, OBVIOUSLY, THE LATTER HAS BARGAINED IN BAD FAITH WITH THE
UNION AND HAS VIOLATED THE CBA WHICH IT EXECUTED WITH THE HEREIN
PETITIONER UNION.
-B-
THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT DECLARING THE

PRIVATE RESPONDENTS GUILTY OF ACTS OF DISCRIMINATION IN THE
IMPLEMENTATION OF NCR WAGE ORDER NOS. 01 AND 02.
-C-
THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT FINDING THE

PRIVATE RESPONDENTS GUILTY OF HAVING VIOLATED SECTION 4, ARTICLE
XVII OF THE EXISTING CBA.
-D-
THE PUBLIC RESPONDENTS GRAVELY ERRED IN NOT DECLARING THE

PRIVATE RESPONDENTS GUILTY OF HAVING VIOLATED ARTICLE 100 OF THE
LABOR CODE OF THE PHILIPPINES, AS AMENDED.
-E-
ASSUMING, WITHOUT ADMITTING THAT THE PUBLIC RESPONDENTS HAVE

CORRECTLY RULED THAT THE PRIVATE RESPONDENTS ARE GUILTY OF
ACTS OF UNFAIR LABOR PRACTICES, THEY COMMITTED SERIOUS ERROR IN
NOT FINDING THAT THERE IS A SIGNIFICANT DISTORTION IN THE WAGE
STRUCTURE OF THE RESPONDENT COMPANY.
-F-
THE PUBLIC RESPONDENTS ERRED IN NOT AWARDING TO THE

PETITIONERS HEREIN ACTUAL, MORAL, AND EXEMPLARY DAMAGES AND
ATTORNEY'S FEES.
As the Court sees it, the pivotal issues in this petition can be reduced into two, to wit: (a) whether or
not private respondent committed an unfair labor practice in its refusal to grant across-the-board
wage increases in implementing Wage Orders Nos. 01 and 02, and (b) whether or not there was a
significant wage distortion of the wage structure in private respondent as a result of the manner by
which said wage orders were implemented.
With respect to the first issue, petitioner union anchors its arguments on the alleged commitment of
private respondent to grant an automatic across-the-board wage increase in the event that a
statutory or legislated wage increase is promulgated. It cites as basis therefor, the aforequoted
portion of the Minutes of the collective bargaining negotiation on February 27, 1990 regarding
wages, arguing additionally that said Minutes forms part of the entire agreement between the
parties.
The basic premise of this argument is definitely untenable. To start with, if there was indeed a
promise or undertaking on the part of private respondent to obligate itself to grant an automatic
across-the-board wage increase, petitioner union should have requested or demanded that such
"promise or undertaking" be incorporated in the CBA. After all, petitioner union has the means under
the law to compel private respondent to incorporate this specific economic proposal in the CBA. It
could have invoked Article 252 of the Labor Code defining "duty to bargain," thus, the duty includes
"executing a contract incorporating such agreements if requested by either party." Petitioner union's
assertion that it had insisted on the incorporation of the same proposal may have a factual basis
considering the allegations in the aforementioned joint affidavit of its members. However, Article 252
also states that the duty to bargain "does not compel any party to agree to a proposal or make any
concession." Thus, petitioner union may not validly claim that the proposal embodied in the Minutes
of the negotiation forms part of the CBA that it finally entered into with private respondent.
The CBA is the law between the contracting parties 10 — the collective bargaining representative and
the employer-company. Compliance with a CBA is mandated by the expressed policy to give
protection to labor. 11 In the same vein, CBA provisions should be "construed liberally rather than
narrowly and technically, and the courts must place a practical and realistic construction upon it,
giving due consideration to the context in which it is negotiated and purpose which it is intended to
serve." 12 This is founded on the dictum that a CBA is not an ordinary contract but one impressed
with public interest. 13 It goes without saying, however, that only provisions embodied in the CBA
should be so interpreted and complied with. Where a proposal raised by a contracting party does not
find print in the CBA, 14 it is not a part thereof and the proponent has no claim whatsoever to its
implementation.
Hence, petitioner union's contention that the Minutes of the collective bargaining negotiation meeting
forms part of the entire agreement is pointless. The Minutes reflects the proceedings and
discussions undertaken in the process of bargaining for worker benefits in the same way that the
minutes of court proceedings show what transpired therein. 15 At the negotiations, it is but natural for
both management and labor to adopt positions or make demands and offer proposals and counter-
proposals. However, nothing is considered final until the parties have reached an agreement. In fact,
one of management's usual negotiation strategies is to ". . . agree tentatively as you go along with
the understanding that nothing is binding until the entire agreement is reached." 16 If indeed private
respondentpromised to continue with the practice of granting across-the-board salary increases
ordered by the government, such promise could only be demandable in law if incorporated in the
CBA.
Moreover, by making such promise, private respondent may not be considered in bad faith or at the
very least, resorting to the scheme of feigning to undertake the negotiation proceedings through
empty promises. As earlier stated, petitioner union had, under the law, the right and the opportunity
to insist on the foreseeable fulfillment of the private respondent's promise by demanding its
incorporation in the CBA. Because the proposal was never embodied in the CBA, the promise has
remained just that, a promise, the implementation of which cannot be validly demanded under the
law.
Petitioner's reliance on this Court's pronouncements 17 in Kiok Loy v. NLRC 18 is, therefore,
misplaced. In that case, the employer refused to bargain with the collective bargaining
representative, ignoring all notices for negotiations and requests for counter proposals that the union
had to resort to conciliation proceedings. In that case, the Court opined that "(a) Company's refusal
to make counter-proposal, if considered in relation to the entire bargaining process, may indicate
bad faith and this is specially true where the Union's request for a counter-proposal is left
unanswered." Considering the facts of that case, the Court concluded that the company was
"unwilling to negotiate and reach an agreement with the Union." 19
In the case at bench, however, petitioner union does not deny that discussion on its proposal that all
government-mandated salary increases should be on an across-the-board basis was "deferred,"
purportedly because it relied upon the "undertaking" of the negotiating panel of private
respondent. 20 Neither does petitioner union deny the fact that "there is no provision of the 1990 CBA
containing a stipulation that the company will grant across-the-board to its employees the mandated
wage increase." They simply assert that private respondent committed "acts of unfair labor practices
by virtue of its contractual commitment made during the collective bargaining process." 21 The mere
fact, however, that the proposal in question was not included in the CBA indicates that
no contractual commitmentthereon was ever made by private respondent as no agreement had
been arrived at by the parties. Thus:
Obviously the purpose of collective bargaining is the reaching of an agreement
resulting in a contract binding on the parties; but the failure to reach an agreement
after negotiations continued for a reasonable period does not establish a lack of good
faith. The statutes invite and contemplate a collective bargaining contract, but they
do not compel one. The duty to bargain does not include the obligation to reach an
agreement. . . . 32
With the execution of the CBA, bad faith bargaining can no longer be imputed upon any of the
parties thereto. All provisions in the CBA are supposed to have been jointly and voluntarily
incorporated therein by the parties. This is not a case where private respondent exhibited an
indifferent attitude towards collective bargaining because the negotiations were not the unilateral
activity of petitioner union. The CBA is proof enough that private respondent exerted "reasonable
effort at good faith bargaining." 23
Indeed, the adamant insistence on a bargaining position to the point where the negotiations reach an
impasse does not establish bad faith. Neither can bad faith be inferred from a party's insistence on
the inclusion of a particular substantive provision unless it concerns trivial matters or is obviously
intolerable. 24
The question as to what are mandatory and what are merely permissive subjects of
collective bargaining is of significance on the right of a party to insist on his position
to the point of stalemate. A party may refuse to enter into a collective bargaining
contract unless it includes a desired provision as to a matter which is a mandatory
subject of collective bargaining; but a refusal to contract unless the agreement
covers a matter which is not a mandatory subject is in substance a refusal to bargain
about matters which are mandatory subjects of collective bargaining, and it is no
answer to the charge of refusal to bargain in good faith that the insistence on the
disputed clause was not the sole cause of the failure to agree or that agreement was
not reached with respect to other disputed clauses. 25
On account of the importance of the economic issue proposed by petitioner union, it could have
refused to bargain and to enter into a CBA with private respondent. On the other hand, private
respondent's firm stand against the proposal did not mean that it was bargaining in bad faith. It had
the right "to insist on (its) position to the point of stalemate." On the part of petitioner union, the
importance of its proposal dawned on it only after the wage orders were issued after the CBA had
been entered into. Indeed, from the facts of this case, the charge of bad faith bargaining on the part
of private respondent was nothing but a belated reaction to the implementation of the wage orders
that private respondent made in accordance with law. In other words, petitioner union harbored the
notion that its members and the other employees could have had a better deal in terms of wage
increases had it relentlessly pursued the incorporation in the CBA of its proposal. The inevitable
conclusion is that private respondent did not commit the unfair labor practices of bargaining in bad
faith and discriminating against its employees for implementing the wage orders pursuant to law.
The Court likewise finds unmeritorious petitioner union's contention that by its failure to grant across-
the-board wage increases, private respondent violated the provisions of Section 5, Article VII of the
existing CBA 26 as well as Article 100 of the Labor Code. The CBA provision states:
Sec. 5. The COMPANY agrees to comply with all the applicable provisions of the
Labor Code of the Philippines, as amended, and all other laws, decrees, orders,
instructions, jurisprudence, rules and regulations affecting labor.
Art. 100 of the Labor Code on prohibition against elimination or diminution of benefits
provides that "(n)othing in this Book shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of promulgation of this
Code."
We agree with the Labor Arbiter and the NLRC that no benefits or privileges previously enjoyed by
petitioner union and the other employees were withdrawn as a result of the manner by which private
respondent implemented the wage orders. Granted that private respondent had granted an across-
the-board increase pursuant to Republic Act No. 6727, that single instance may not be considered
an established company practice. Petitioner union's argument in this regard is actually tied up with
its claim that the implementation of Wage Orders Nos. 01 and 02 by private respondent resulted in
wage distortion.
The issue of whether or not a wage distortion exists is a question of

fact 27 that is within the jurisdiction of the quasi-judicial tribunals below. Factual findings of
administrative agencies are accorded respect and even finality in this Court if they are supported by
substantial evidence. 28 Thus, in Metropolitan Bank and Trust Company, Inc. v. NLRC, the Court
said:
The issue of whether or not a wage distortion exists as a consequence of the grant of
a wage increase to certain employees, we agree, is, by and large, a question of fact
the determination of which is the statutory function of the NLRC. Judicial review of
labor cases, we may add, does not go beyond the evaluation of the sufficiency of the
evidence upon which the labor officials' findings rest. As such, the factual findings of
the NLRC are generally accorded not only respect but also finality provided that its
decisions are supported by substantial evidence and devoid of any taint of unfairness
or arbitrariness. When, however, the members of the same labor tribunal are not in
accord on those aspects of a case, as in this case, this Court is well cautioned not to
be as so conscious in passing upon the sufficiency of the evidence, let alone the
conclusions derived
therefrom. 29
Unlike in above-cited case where the Decision of the NLRC was not unanimous, the NLRC Decision
in this case which was penned by the dissenter in that case, Presiding Commissioner Edna Bonto-
Perez unanimously ruled that no wage distortions marred private respondent's implementation of the
wage orders. The NLRC said:
On the issue of wage distortion, we are satisfied that there was a meaningful
implementation of Wage Orders Nos. 01 and 02. This debunks the claim that there
was wage distortion as could be shown by the itemized wages implementation
quoted above. It should be noted that this itemization has not been successfully
traversed by the appellants. . . . . 30
The NLRC then quoted the labor arbiter's ruling on wage distortion.
We find no reason to depart from the conclusions of both the labor arbiter and the NLRC. It
is apropos to note, moreover, that petitioner's contention on the issue of wage distortion and the
resulting allegation of discrimination against the private respondent's employees are anchored on its
dubious position that private respondent's promise to grant an across-the-board increase in
government-mandated salary benefits reflected in the Minutes of the negotiation is an enforceable
part of the CBA.
In the resolution of labor cases, this Court has always been guided by the State policy enshrined in
the Constitution that the rights of workers and the promotion of their welfare shall be protected. 31 The
Court is likewise guided by the goal of attaining industrial peace by the proper application of the law.
It cannot favor one party, be it labor or management, in arriving at a just solution to a controversy if
the party has no valid support to its claims. It is not within this Court's power to rule beyond the ambit
of the law.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED and the questioned
Resolutions of the NLRC AFFIRMED. No costs.
SO ORDERED.
Narvasa, C.J., Kapunan and Purisima, JJ., concur.
[G.R. No. 88168. August 30, 1990.]
TRADERS ROYAL BANK, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION & TRADERS
ROYAL BANK EMPLOYEES UNION, Respondents.
San Juan, Gonzalez, San Agustin & Sinense for Petitioner.
E.N.A. Cruz, Enfero & Associates for Private Respondent.
DECISION
GRIÑO-AQUINO, J.:
This petition for certiorari seeks to nullify or set aside the decision dated September 2, 1988 of the National
Labor Relations Commission, which found the petitioner, Traders Royal Bank (or TRB), guilty of diminution
of benefits due the private respondents and ordered it to pay the said employees’ claims for differentials in
their holiday, mid-year, and year-end bonuses.
On November 18, 1986, the Union, through its president, filed a letter-complaint against TRB with the
Conciliation Division of the Bureau of Labor Relations claiming that: jgc:chanrob les.co m.ph
"First, the management of TRB per memo dated October 10, 1986 paid the employees their HOLIDAY PAY,
but has withheld from the Union the basis of their computation.
"Second, the computation in question, has allegedly decreased the daily salary rate of the employees. This
diminution of existing benefits has decreased our overtime rate and has affected the employees’ take home
pay.
"Third, the diminution of benefits being enjoyed by the employees since time immemorial, e.g. mid-year
bonus, from two (2) months gross pay to two (2) months basic and year-end bonus from three (3) months
gross to only two (2) months. chanrob les lawl ibra ry : redna d
"Fourth, the refusal by management to recall active union members from the branches which were being
transferred without prior notice, solely at the instance of the branch manager." (p. 26, Rollo.).
In its answer to the union’s complaint, TRB pointed out that the NLRC, not the Bureau of Labor Relations,
had jurisdiction over the money claims of the employees.
On March 24, 1987, the Secretary of Labor certified the complaint to the NLRC for resolution of the following
issues raised by the complainants: jgc:chanroble s.com.p h
"1) The Management of TRB per memo dated October 10, 1986 paid the employees their holiday pay but
has withheld from the union the basis of their computation.
"2) The computation in question has allegedly decreased the daily salary rate of the employees. This
diminution of existing benefits has decreased our overtime rate and has affected the employees’ take home
pay.
"3) The diminution of benefits being enjoyed by the employees since the (sic) immemorial, e.g. mid-year
bonus, from two (2) months gross pay to two (2) months basic and year-end bonus from three (3) months
gross to only two (2) months.
"4) The refusal by management to recall active union members from the branches which were being
transferred without prior notice, solely at the instance of the branch, manager." (p. 28, Rollo.)
In the meantime, the parties who had been negotiating for a collective bargaining agreement, agreed on the
terms of the CBA, to wit: jgc:chanroble s.com.p h
"1. The whole of the bonuses given in previous years is not demandable, i.e., there is no diminution, as to
be liable for a differential, if the bonus given is less than that in previous years.
"2. Since only two months bonus is guaranteed, only to that extent are bonuses deemed part of regular
compensation.
"3. As regards the third and fourth bonuses, they are entirely dependent on the income of the bank, and not
demandable as part of compensation." (pp. 67-68, Rollo.).
Despite the terms of the CBA, however, the union insisted on pursuing the case, arguing that the CBA would
apply prospectively only to claims arising after its effectivity. chanro bles vi rt ual lawli bra ry
Petitioner, on the other hand, insisted that it had paid the employees holiday pay. The practice of giving
them bonuses at year’s end, would depend on how profitable the operation of the bank had been. Generally,
the bonus given was two (2) months basic mid-year and two (2) months gross end-year.
On September 2, 1988, the NLRC rendered a decision in favor of the employees, the dispositive portion of
which reads: jgc:chan roble s.com.p h
"WHEREFORE, judgment is hereby rendered in favor of the petitioner and ordering respondent bank to pay
petitioner members-employees the following: jg c:chan rob les.com. ph
"1. Holiday differential for the period covering 1983-1986 as embodied in Resolution No. 4984-1986 of
respondent’s Board of Directors but to start from November 11, 1983 and using the Divisor 251 days in
determining the daily rate of the employees;
"2. Mid-year bonus differential representing the difference between two (2) months gross pay and two (2)
months basic pay and end-year bonus differential of one (1) month gross pay for 1986.
"The claim for holiday differential for the period earlier than November 11, 1983 is hereby dismissed, the
same having prescribed.
"Likewise, the charge of unfair labor practice against the respondent company is hereby dismissed for lack of
merit." (pp. 72-73, Rollo.).
A motion for reconsideration was filed by TRB but it was denied. Hence, this petition for certiorari.
There is merit in the petitioner’s contention that the NLRC gravely abused its discretion in ordering it to pay
mid-year/year-end bonus differential for 1986 to its employees.
A bonus is "a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter
of right" (Aragon v. Cebu Portland Cement Co., 61 O.G. 4597). "It is something given in addition to what is
ordinarily received by or strictly due the recipient." The granting of a bonus is basically a management
prerogative which cannot be forced upon the employer "who may not be obliged to assume the onerous
burden of granting bonuses or other benefits aside from the employee’s basic salaries or wages . . ."
(Kamaya Point Hotel v. National Labor Relations Commission, Federation of Free Workers and Nemia
Quiambao, G.R. No. 75289, August 31, 1989).
It is clear from the above-cited rulings that the petitioner may not be obliged to pay bonuses to its
employees. The matter of giving them bonuses over and above their lawful salaries and allowances is
entirely dependent on the profits, if any, realized by the Bank from its operations during the past year.
From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986, the
income of the Bank was only 20.2 million pesos, but the Bank still gave out the usual two (2) months basic
mid-year and two months gross year-end bonuses. The petitioner pointed out, however, that the Bank
weakened considerably after 1986 on account of political developments in the country. Suspected to be a
Marcos-owned or controlled bank, it was placed under sequestration by the present administration and is
now managed by the Presidential Commission on Good Government (PCGG).
In the light of these submissions of the petitioner, the contention of the Union that the granting of bonuses
to the employees had ripened into a company practice that may not be adjusted to the prevailing financial
condition of the Bank has no legal and moral bases. Its fiscal condition having declined, the Bank may not
be forced to distribute bonuses which it can no longer afford to pay and, in effect, be penalized for its past
generosity to its employees.
Private respondent’s contention, that the decrease in the mid-year and year-end bonuses constituted a
diminution of the employees’ salaries, is not correct, for bonuses are not part of labor standards in the same
class as salaries, cost of living allowances, holiday pay, and leave benefits, which are provided by the Labor
Code.
WHEREFORE, the petition for certiorari is granted. The decision of the National Labor Relations Commission
is modified by deleting the award of bonus differentials to the employees for 1986. In other respects, the
decision is affirmed. Costs against the respondent union.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.
G.R. No. L-60337 August 21, 1987
UNIVERSAL CORN PRODUCTS (A DIVISION OF UNIVERSAL ROBINA

CORPORATION), petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and JOSE ARMAS, ENGRACIO ASIS,
AUSTERINAO ELEUTERIO, FAUSTINO ATIENZA, MARIO ALTARES, JAIME ALTARES, ISIDRO
ARANO, LEONILO ARANO, ALFREDO ANCHETA, DOMINGO ANCHETA, RIZALITO, ABANTO,
RIZALITO, CRESENCIO ASCUTIA, JESUS ASCUTIA, FELICIANO ABORQUE, WILFREDO
ARMENIO, ALEJANDRO ABAGAT, PABLO ADLAWAN, FILEMON ABADINES, ROMEO
AREVALO, PABLO BUTIAL, BANAAG REMIGIO, LUCIO BERDIJO, ANTONIO BIONSON,
ABELARDO BRACAMONTE, SAMSON BORDEOS, TEODORO, BARBIANA, FRANCISCO
BABOR, HERCULANO BARRAMEDA, RODRIGO BONGAIS, JAIME BERANA, EDUARDO,
BUENAVENTURA, RODRIGO BAUTISTA, FELEMON BAUTISTA, DIONISIO BERNALES,
MARIANO BALAGTAS, ALFREDO BERNADAS, EPIGENIO BORDEOS, BRIGIDO BAER,
OSCAR BONDOC, JOSE BONDOC, ROMEO BUCAYAN, VITALIANO BATOBATO, DOMINGO
BALLON, JOSE BORLEO, JOSE BORJA, RUFINO CLEMENTE, JUAN CABALLERO,
TRANQUILINA CAUSON, AUGORIO CALNEA, LEOPOLDO CUARTERO, ALBERTO
CATBAGAN, ROMEO CALIVO, ANDRES CUNTAPAY, ALBERTO CASTRO, CASTOR
RODRIGO, SIMPLICIO CACATIAN, NILO DALANON, BIENVENIDO DUMAGAT, SR.,
BIENVENIDO DUMAGAT, JR., DOMINADOR DUMANTAY, TEODORO DULOMBAL, RODOLFO
DANDAN, SALVADOR DASIGO, ELIAS DASIGO, FRANCISCO ESTOLANO, LEOPOLDO
ESTIOCO, ROGELIO ESTANISLAO, MONTANO ESTANISLAO, ELIAS ESTRADA, ERNESTO
ESTABALLIO, FERNANDO FERNANDEZ, PEDRO GETEZO, ALFONSO DE GUZMAN,
LORENZO DE GUZMAN, MODESTO DE GUZMAN, ARELLANO GARCIA, ALFREDO GARCIA,
MANUEL GOROSPE, RAYMUNDO GELLIDO, RODOLFO GALEON, ROMEO GONZALES,
GERARDO GERMEDIA, BENITO GALE, ROBERTO HASAL, EDILBERTO HERNANDEZ,
RAFAEL IGUIZ, MARGARITO JAVIER, PABLO JOSE, PEDRO JOVE, CELEDONIO JACA,
REYNALDO JALLA, EDUARDO JUMAQUIO, DOMINGO JUANO, AGUSTIN KHO, ANTONIO
LAMERA, RODOLFO LINEZO, MANUEL LAMBATIN, MANUEL LOPEZ, BENEDICTO LOPEZ,
MARIANO LARA, ELINO MISA, FRANCISCO MINA, RODOLFO MIRABEL, ROGER MIRABEL,
ROLANDO MIRABEL, OSCAR MARTINEZ, MIGUEL MANACIO, PEDRO MANALO, LEOPOLDO
MARQUEZ, ANTONIO, MEDINA, SALVADOR MARAINAN, NAPOLEON MAGAYA, ALFREDO
MAQUI, EDUARDO MILLET, PABLO MENDEZ, DULCISIMO NATIVIDAD, ROMEO NAGTALON,
ALFONSO NOQUEZ, ALEJANDRO NOQUEZ, ANASTACIO NIVAL, EMILIO ORTIZ, PONCIANO
ORLANDA, GERARDO POSADAS, ATICO PEDRIGOZA, ALFREDO PASCUA, LEONARDO
PATRON, MIGUEL PACHECO, DOMINGO PACHECO, FELIMON POLICARPIO, ERNESTO
QUIJANO, EFREN QUIBOTE, SIMEON RESCO, FERNANDO REYNOSO, EMILIO RIVERA,
GRACIANO RAMOS, REYNALDO RAMIREZ, PAQUITO RAMIREZ, THOMAS ROSARIO, JR.,
ROMULO REYES, REYNALDO RAPSING, ALFREDO DEL ROSARIO, FLORENCIO SASAN,
ALFONSO SAMSON, LUIS SUAREZ, GREGORIO SOMODO, FRANCISCO SAPLAN, LUCIANO
SARNO, RICARDO SOREL, CRESENCIO SANTOS, ARSENIO SERGA JR., BALTAZAR
TALATO, DIOSDADO TULANG, EUGENIO TOLENTINO, AMADOR TABULOG, LAZARO
TORRES, JAIME TRAJANO, GENEROSO TANTE, SERGIO TABUAC, ANASTACIO TIMOG,
DANIEL UDAN, HERMENIGILDO VITO, VICENTE VITO, BENJAMIN VILLAMOR, ARTURO
VALIENTE, ERNESTO VALIENTE, FELICISIMO VERA, respondents.
SARMIENTO, J.:
The petitioner invokes National Federation of Sugar Workers (NFSW) v. Ovejera, 1 in which we held that
Presidential Decree No. 851, 2 the 13th-month pay law, does not cover employers already paying their employees an "equivalent" to the 13th
month pay.
There is no dispute as to the facts.
Sometime in May, 1972, the petitioner and the Universal Corn Products Workers Union entered into
a collective bargaining agreement in which it was provided, among other things, that:
xxx xxx xxx
The COMPANY agrees to grant all regular workers within the bargaining unit with at
least one (1) year of continuous service, a Christmas bonus equivalent to the regular
wages for seven (7) working days, effective December, 1972. The bonus shall be
given to the workers on the second week of December.
In the event that the service of a worker is not continuous due to factory shutdown,
machine breakdown or prolonged absences or leaves, the Christmas bonus shall be
prorated in accordance with the length of services that worker concerned has served
during the year . 3
xxx xxx xxx

The agreement had a duration of three years, effective June 1, 1971, or until June 1, 1974.
On account however of differences between the parties with respect to certain economic issues, the
collective bargaining agreement in question expired without being renewed. On June 1, 1979, the
parties entered into an "addendum" stipulating certain wage increases covering the years from 1974
to 1977. Simultaneously, they entered into a collective bargaining agreement for the years from 1979
to 1981. Like the "addendum," the new collective bargaining agreement did not refer to the
"Christmas bonus" theretofore paid but dealt only with salary adjustments. According to the
petitioner, the new agreements deliberately excluded the grant of Christmas bonus with the
enactment of Presidential Decree No. 851 4 on December 16, 1975. It further claims that since 1975,
it had been paying its employees 13th-month pay pursuant to the Decree. 5
For failure of the petitioner to pay the seven-day Christmas bonus for 1975 to 1978 inclusive, in
accordance with the 1972 CBA, the union went to the labor arbiter for relief. In his decision, 6 the
labor arbiter ruled that the payment of the 13th month pay precluded the payment of further
Christmas bonus. The union appealed to the National Labor Relations Commission (NLRC). The
NLRC set aside the decision of the labor arbiter appealed from and entered another one, "directing
respondent company [now the petitioner] to pay the members concerned of complainants [sic] union
their 7-day wage bonus in accordance with the 1972 CBA from 1975 to 1978." Justifying its reversal
of the arbiter's decision, the NLRC held:
xxx xxx xxx
It is clear that the company implemented the aforequoted provision of the CBA in
1972, 1973 and 1974. In view thereof it is our considered opinion that the crediting of
said benefit to the 13th month pay cannot be sanctioned on the ground that it is
contrary to Section 10 of the Rules and Regulations Implementing Presidential
Decree No. 85 1, which provides, to wit;
Section 10. Prohibition against reduction or elimination of benefits. —

Nothing herein shall be construed to authorize any employer to
eliminate, or diminish in any way, supplements, or other employee
benefits or favorable practice being enjoyed by the employee at the
time of promulgation of this issuance.
More so because the benefit involved was not magnanimously extended by the
company to its employees but was obtained by the latter thru bargaining
negotiations. The aforementioned CBA was the law between the parties and the
provisions thereof must be faithfully observed by them during its effectivity. In this
connection, it should be noted that the same parties entered into another 3-year CBA
on June 11, 1979, which no longer provides for a 7-day wage Christmas bonus. In
effect, therefore, the parties agreed to discontinue the privilege, which agreement
should also be respected. 7
xxx xxx xxx
We hold that in the case at bar, Ovejera (La Carlota) case does not apply.
We apply instead, United CMC Textile Workers Union v. Valenzuela 8 a recent decision. In that case
this Court, speaking through Mr. Justice Edgardo Paras, held:
xxx xxx xxx
... If the Christmas bonus was included in the 13th month pay, then there would be
no need for having a specific provision on Christmas bonus in the CBA. But it did not
provide for a bonus in graduated amounts depending on the length of service of the
employee. The intention is clear therefore that the bonus provided in the CBA was
meant to be in addition to the legal requirement. Moreover, why exclude the payment
of the 1978 Christmas bonus and pay only the 1979-1980 bonus. The classification
of the company's workers in the CBA according to their years of service supports the
allegation that the reason for the payment of bonus was to give bigger award to the
senior employees-a purpose which is not found by P.D. 851. A bonus under the CBA
is an obligation created by the contract between the management and workers while
the 13th month pay is mandated by the law (P. D. 851). 9
xxx xxx xxx
In the same vein, we consider the seven-day bonus here demanded "to be in addition to the legal
requirement." Although unlike the Valenzuela CBA, which took effect after the promulgation of
Presidential Decree No. 851 in 1975, the subject agreement was entered into as early as 1972, that
is no bar to our application of Valenzuela. What is significant for us is the fact that, like
the Valenzuela, agreement, the Christmas bonus provided in the collective bargaining agreement
accords a reward, in this case, for loyalty, to certain employees. This is evident from the stipulation
granting the bonus in question to workers "with at least one (1) year of continuous service." As we
said in Valenzuela" this is "a purpose not found in P.D. 851." 10
It is claimed, however, that as a consequence of the impasse between the parties beginning 1974
through 1979, no collective bargaining agreement was in force during those intervening years.
Hence, there is allegedly no basis for the money award granted by the respondent labor body. But it
is not disputed that under the 1972 collective bargaining agreement, [i]f no agreement and
negotiations are continued, all the provisions of this Agreement shall remain in full force up to the
time a new agreement is executed." 11 The fact, therefore, that the new agreements are silent on the seven-day bonus
demanded should not preclude the private respondents' claims thereon. The 1972 agreement is basis enough for such claims for the whole
writing is " "instinct with an obligation," imperfectly express." 12
WHEREFORE, premises considered, the petition is hereby DISMISSED. The Decision of the public
respondent NLRC promulgated on February 11, 1982, and its Resolution dated March 23, 1982, are
hereby AFFIRMED. The temporary restraining order issued on May 19, 1982 is LIFTED.
This Decision is IMMEDIATELY EXECUTORY.
No pronouncement as to costs.
SO ORDERED.
Yap (Chairman), Paras and Padilla, JJ., concur.
Melencio-Herrera, J., is on leave.
G.R. No. L-49774 February 24, 1981

SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT), petitioner,
vs.
Hon. AMADO G. INCIONG, Deputy Minister of Labor and CAGAYAN COCA-COLA FREE
WORKERS UNION, respondents.
DE CASTRO, J.:
Petition for certiorari and prohibition, with preliminary injunction to review the Order 1 dated
December 19, 1978 rendered by the Deputy Minister of Labor in STF ROX Case No. 009-77
docketed as "Cagayan Coca-Cola Free Workers Union vs. Cagayan Coca-Cola Plant, San Miguel
Corporation, " which denied herein petitioner's motion for reconsideration and ordered the immediate
execution of a prior Order 2 dated June 7, 1978.
On January 3, 1977, Cagayan Coca-Cola Free Workers Union, private respondent herein, filed a
complaint against San Miguel Corporation (Cagayan Coca-Cola Plant), petitioner herein, alleging
failure or refusal of the latter to include in the computation of 13th- month pay such items as sick,
vacation or maternity leaves, premium for work done on rest days and special holidays, including
pay for regular holidays and night differentials.
An Order 3 dated February 15, 1977 was issued by Regional Office No. X where the complaint was
filed requiring herein petitioner San Miguel Corporation (Cagayan Coca-Cola Plant) "to pay the
difference of whatever earnings and the amount actually received as 13th month pay excluding
overtime premium and emergency cost of living allowance. "
Herein petitioner appealed from that Order to the Minister of Labor in whose behalf the Deputy
Minister of Labor Amado G. Inciong issued an Order 4 dated June 7, 1978 affirming the Order of
Regional Office No. X and dismissing the appeal for lack of merit. Petitioner's motion for
reconsideration having been denied, it filed the instant petition.
On February 14, 1979, this Court issued a Temporary Restraining Order 5 enjoining respondents
from enforcing the Order dated December 19, 1978.
The crux of the present controversy is whether or not in the computation of the 13th-month pay
under Presidential Decree 851, payments for sick, vacation or maternity leaves, premium for work
done on rest days and special holidays, including pay for regular holidays and night differentials
should be considered.
Public respondent's consistent stand on the matter since the effectivity of Presidential Decree 851 is
that "payments for sick leave, vacation leave, and maternity benefits, as well as salaries paid to
employees for work performed on rest days, special and regular holidays are included in the
computation of the 13th-month pay. 6 On its part, private respondent cited innumerable past rulings,
opinions and decisions rendered by then Acting Labor Secretary Amado G. Inciong to the effect that,
"in computing the mandatory bonus, the basis is the total gross basic salary paid by the employer
during the calendar year. Such gross basic salary includes: (1) regular salary or wage; (2) payments
for sick, vacation and maternity leaves; (3) premium for work performed on rest days or holidays: (4)
holiday pay for worked or unworked regular holiday; and (5) emergency allowance if given in the
form of a wage adjustment." 7
Petitioner, on the other hand, assails as erroneous the aforesaid order, ruling and opinions,
vigorously contends that Presidential Decree 851 speaks only of basic salary as basis for the
determination of the 13th-month pay; submits that payments for sick, vacation, or maternity leaves,
night differential pay, as well as premium paid for work performed on rest days, special and regular
holidays do not form part of the basic salary; and concludes that the inclusion of those payments in
the computation of the 13th-month pay is clearly not sanctioned by Presidential Decree 851.
The Court finds petitioner's contention meritorious.
The provision in dispute is Section 1 of Presidential Decree 851 and provides:
All employers are hereby required to pay all their employees receiving a basic salary
of not more than Pl,000 a month, regardless of the nature of the employment, a 13th-
month pay not later than December 24 of every year.
Section 2 of the Rules and Regulations for the implementation of Presidential Decree 851 provides:
a) Thirteenth-month pay shall mean one twelfth (1/12) of the basic salary of an
employee within a calendar year
b) Basic salary shall include all remunerations on 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.
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 Instructions 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 tile employee at the time of the promulgation of the
Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851
issued by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are
excluded as part of the basic salary and in the computation of the 13th-month pay.
The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instructions
No. 174, and profit sharing payments indicate the intention to strip basic salary of other payments
which are properly considered as "fringe" benefits. Likewise, the catch-all exclusionary phrase "all
allowances and monetary benefits which are not considered or integrated as part of the basic salary"
shows also the intention to strip basic salary of any and all additions which may be in the form of
allowances or "fringe" benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even
more emphatic in declaring that earnings and other remunerations which are not part of the basic
salary shall not be included in the computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations Implementing Presidential
Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer
to an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically, exclude from the definition of basic salary earnings and other
remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules
indicates that what has hitherto been the subject of a broad inclusion is now a subject of broad
exclusion. The Supplementary rules and Regulations cure the seeming tendency of the former rules
to include all remunerations and earnings within the definition of basic salary.
The all-embracing phrase "earnings and other renumeration" which are deemed not part of the basic
salary includes within its meaning payments for sick, vacation, or maternity leaves. Maternity
premium for works performed on rest days and special holidays pays for regular holidays and night
differentials. As such they are deemed not part of the basic salary and shall not be considered in the
computation of the 13th-month they, were not so excluded, it is hard to find any "earnings and other
remunerations" expressly excluded in the computation of the 13th-month pay. Then the exclusionary
provision would prove to be Idle and with no purpose.
This conclusion finds strong support under the Labor Code of the Philippines. To cite a few
provisions:
Art. 87. — overtime work. Work may be performed beyond eight hours a day
provided what the employee is paid for the overtime work, additional compensation
equivalent to his regular wage plus at least twenty-five (25%) percent thereof.
It is clear that overtime pay is an additional compensation other than and added to the regular wage
or basic salary, for reason of which such is categorically excluded from the definition of basic salary
under the Supplementary Rules and Regulations Implementing Presidential Decree 851.
In Article 93 of the same Code, paragraph
c) work performed on any special holiday shall be paid an additional compensation of

at least thirty percent (30%) of the regular wage of the employee.
It is likewise clear that prernium for special holiday which is at least 30% of the regular wage is an
additional compensation other than and added to the regular wage or basic salary. For similar
reason it shall not be considered in the computation of the 13th- month pay.
WHEREFORE, the Orders of the Deputy Labor Minister dated June 7, 1978 and December 19, 1978
are hereby set aside and a new one entered as above indicated. The Temporary Restraining Order
issued by this Court on February 14, 1979 is hereby made permanent. No pronouncement as to
costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez, Guerrero and Melencio-Herrera, JJ., concur.
Mr. Justice de Castro was designated to sit with the First Division under Special Order No. 225.
G.R. No. 110068 February 15, 1995
PHILIPPINE DUPLICATORS, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES
UNION-TUPAS, respondents.
RESOLUTION
FELICIANO, J.:
On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the
Petition for Certiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No. 110068.
The Court upheld the decision of public respondent National Labor Relations Commission (NLRC),
which affirmed the order of Labor Arbiter Felipe T. Garduque II directing petitioner to pay 13th month
pay to private respondent employees computed on the basis of their fixed wages plus sales
commissions. The Third Division also denied with finality on 15 December 1993 the Motion for
Reconsideration filed (on 12 December 1993) by petitioner.
On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for
Reconsideration and (b) a Second Motion for Reconsideration. This time, petitioner invoked the
decision handed down by this Court, through its Second Division, on 10 December 1993 in the two
(2) consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna and Philippine
Fuji Xerox Corp. vs. Hon. Cresenciano B. Trajano, in G.R. Nos. 92174 and 102552, respectively. In
its decision, the Second Division inter alia declared null and void the second paragraph of Section 5
(a)1 of the Revised Guidelines issued by then Secretary of Labor Drilon. Petitioner submits that the
decision in the Duplicators case should now be considered as having been abandoned or reversed
by the Boie-Takeda decision, considering that the latter went "directly opposite and contrary to" the
conclusion reached in the former. Petitioner prays that the decision rendered in Duplicators be set
aside and another be entered directing the dismissal of the money claims of private respondent
Philippine Duplicators' Employees' Union.
In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's
Second Motion for Reconsideration, and its Motion for Leave to Admit the Second Motion for
Reconsideration, to the Court en banc en consulta. The Court en banc, after preliminary deliberation,
and inorder to settle the condition of the relevant case law, accepted G.R. No. 110068 as
a banc case.
Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as
well as its Motion for Leave to Admit the Second Motion for Reconsideration, and after review of the
doctrines embodied, respectively, in Duplicators and Boie-Takeda, we consider that these Motions
must fail.
The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare
decisis. The Boie-Takeda decision was promulgated a month after this Court, (through its Third
Division), had rendered the decision in the instant case. Also, the petitioner's (first) Motion for
Reconsideration of the decision dated 10 November 1993 had already been denied, with finality, on
15 December 1993, i.e.; before the Boie-Takeda decision became final on 5 January 1994.
Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised
Guidelines on the Implementary on of the 13th Month Pay Law, issued on November 16, 1987, by
then Labor Secretary Franklin M. Drilon, either in its Petition for Certiorari or in its (First) Motion for
Reconsideration. In fact, petitioner's counsel relied upon these Guidelines and asserted their validity
in opposing the decision rendered by public respondent NLRC. Any attempted change in petitioner's
theory, at this late stage of the proceedings, cannot be allowed.
More importantly, we do not agree with petitioner that the decision in Boie-Takeda is "directly
opposite or contrary to" the decision in the present (Philippine Duplicators). To the contrary, the
doctrines enunciated in these two (2) cases in fact co-exist one with the other. The two (2) cases
present quite different factual situations (although the same word "commissions" was used or
invoked) the legal characterizations of which must accordingly differ.
The Third Division in Durplicators found that:
In the instant case, there is no question that the sales commission earned by the
salesmen who make or close a sale of duplicating machines distributed by petitioner
corporation, constitute part of the compensation or remuneration paid to salesmen
for serving as salesmen, and hence as part of the "wage" or salary of petitioner's
salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or
guaranteed wage; the greater part of the salesmen's wages or salaries being
composed of the sales or incentive commissions earned on actual sales closed by
them. No doubt this particular galary structure was intended for the benefit of the
petitioner corporation, on the apparent assumption that thereby its salesmen would
be moved to greater enterprise and diligence and close more sales in the expectation
of increasing their sales commissions. This, however, does not detract from the
character of such commissions as part of the salary or wage paid to each of its
salesmen for rendering services to petitioner corporation.
In other words, the sales commissions received for every duplicating machine sold constituted part
of the basic compensation or remuneration of the salesmen of Philippine Duplicators for doing their
job. The portion of the salary structure representing commissions simply comprised an automatic
increment to the monetary value initially assigned to each unit of work rendered by a salesman.
Especially significant here also is the fact that the fixed or guaranteed portion of the wages paid to
the Philippine Duplicators' salesmen represented only 15%-30% of an employee's total earnings in a
year. We note the following facts on record:
Salesmen's Total Earnings and 13th Month Pay

For the Year 19862
Name of Total Amount Paid Montly Fixed

Salesman Earnings as 13th Month Pay Wages x 123
Baylon, P76,610.30 P1,350.00 P16,200.00

Benedicto
Bautista 90,780.85 1,182.00 14,184.00
Salvador
Brito, 64,382.75 1,238.00 14,856.00

Tomas
Bunagan, 89,287.75 1,266.00 15,192.00

Jorge
Canilan, 74,678.17 1,350.00 16,200.00

Rogelio
Dasig, 54,625.16 1,378,00 16,536.00

Jeordan
Centeno, 51,854.15 1,266.04 15,192.00

Melecio, Jr.
De los Santos 73,551.39 1,322.00 15,864.00

Ricardo
del Mundo, 108,230.35 1,406.00 16,872.00

Wilfredo
Garcia, 93,753.75 1,294.00 15,528.00

Delfin
Navarro, 98,618.71 1,266.00 15,192.00

Ma. Teresa
Ochosa, 66,275.65 1,406.00 16,872.00

Rolano
Quisumbing, 101,065.75 1,406.00 16,872.00

Teofilo
Rubina, 42,209.73 1,266.00 15,192.00

Emma
Salazar, 64,643.65 1,238.00 14,856.00

Celso
Sopelario, 52,622.27 1,350.00 16,200.00

Ludivico
Tan, 30,127.50 1,238.00 14,856.00

Leynard
Talampas, 146,510.25 1,434.00 17,208.00

Pedro
Villarin, 41,888.10 1,434.00 17,208.00
Constancio
Carrasco, 50,201.20 403.75*

Cicero
Punzalan, 24,351.89 1,266.00 15,192.00

Reynaldo
Poblador, 25,516.75 323.00*

Alberto
Cruz, 32,950.45 323.00*

Danilo
Baltazar, 15,681.35 323.00*

Carlito
Considering the above circumstances, the Third Division held, correctly, that the sales commissions
were an integral part of the basic salary structure of Philippine Duplicators' employees salesmen.
These commissions are not overtime payments, nor profit-sharing payments nor any other fringe
benefit. Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price
of the goods sold by each salesman, were properly included in the term "basic salary" for purposes
of computing their 13th month pay.
In Boie-Takeda the so-called commissions "paid to or received by medical representatives of Boie-

Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.," were excluded
from the term "basic salary" because these were paid to the medical representatives and rank-and-
file employees as "productivity bonuses."4 The Second Division characterized these payments as
additional monetary benefits not properly included in the term "basic salary" in computing their 13th
month pay. We note that productivity bonuses are generally tied to the productivity, or capacity for
revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and
have no clear director necessary relation to the amount of work actually done by each individual
employee. More generally, a bonus is an amount granted and paid ex gratia to the employee; its
payment constitutes an act of enlightened generosity and self-interest on the part of the employer,
rather than as a demandable or enforceable obligation. In Philippine Education Co. Inc. (PECO)
v. Court of Industrial Relations,5 the Court explained the nature of a bonus in the following general
terms:
As a rule a bonus is an amount granted and paid to an employee for his industry
loyalty which contributed to the success of the employer's business and made
possible the realization of profits. It is an act of generosity of the employer for which
the employee ought to be thankful and grateful. It is also granted by an enlightened
employer to spur the employee to greater efforts for the success of the business and
realization of bigger profits. . . . . From the legal point of view a bonus is not and
mandable and enforceable obligation. It is so when It is made part of the wage or
salary or compensation. In such a case the latter would be a fixed amount and the
former would be a contingent one dependent upon the realization of profits. . .
.6 (Emphasis supplied)
In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association,7 the Court
amplified:
. . . . Whether or not [a] bonus forms part of waqes depends upon the circumstances
or conditions for its payment. If it is an additional compensation which the employer
promised and agreed to give without any conditions imposed for its payment, such as
success of business or greater production or output, then it is part of the wage. But if
it is paid only if profits are realized or a certain amount of productivity achieved, it
cannot be considered part of wages. . . . It is also paid on the basis of actual or
actual work accomplished. If the desired goal of production is not obtained, or the
amount of actual work accomplished, the bonus does not accrue. . . . 8 (Emphasis
supplied)
More recently, the non-demandable character of a bonus was stressed by the Court in Traders
Royal Bank v.National Labor Relations Commission:9
A bonus is a "gratuity or act of liberality of the giver which the recipient has no right to
demand as a matter of right." (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567).
"It is something given in addition to what is ordinarily received by or strictly due the
recipient." The granting of a bonus is basically a management prerogative which
cannot be forced upon the employer "who may not be obliged to assume the onerous
burden of granting bonuses or other benefits aside from the employee's basic
salaries or wages . . ." (Kamaya Point Hotel v. NLRC, 177 SCRA 160
[1989]). 10 (Emphasis supplied)
If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow
that such productivity bonus, when given, should not be deemed to fall within the "basic salary" of
employees when the time comes to compute their 13th month pay.
It is also important to note that the purported "commissions" paid by the Boie-Takeda Company to its
medical representatives could not have been "sales commissions" in the same sense that Philippine
Duplicators paid its salesmen Sales commissions. Medical representatives are not salesmen; they
do not effect any sale of any article at all. In common commercial practice, in the Philippines and
elsewhere, of which we take judicial notice, medical representatives are employees engaged in the
promotion of pharmaceutical products or medical devices manufactured by their employer. They
promote such products by visiting identified physicians and inform much physicians, orally and with
the aid of printed brochures, of the existence and chemical composition and virtues of particular
products of their company. They commonly leave medical samples with each physician visited; but
those samples are not "sold" to the physician and the physician is, as a matter of professional ethics,
prohibited from selling such samples to their patients. Thus, the additional payments made to Boie-
Takeda's medical representatives were not in fact sales commissions but rather partook of the
nature of profit-sharing bonuses.
The doctrine set out in the decision of the Second Division is, accordingly, that additional payments
made to employees, to the extent they partake of the nature of profit-sharing payments, are properly
excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay
due to employees. Such additional payments are not "commissions" within the meaning of the
second paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay.
The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by
former Labor Minister Ople sought to clarify the scope of items excluded in the computation of the
13th month pay; viz.:
Sec. 4. Overtime pay, earnings and other remunerations which are not part of the
basic salary shall not be included in the computation of the 13th month pay.
We observe that the third item excluded from the term "basic salary" is cast in open ended and
apparently circular terms: "other remunerations which are not part of the basic salary." However,
what particular types of earnings and remuneration are or are not properly included or integrated in
the basic salary are questions to be resolved on a case to case basis, in the light of the specific and
detailed facts of each case. In principle, where these earnings and remuneration are closely akin to
fringe benefits, overtime pay or profit-sharing payments, they are properly excludedin computing the
13th month pay. However, sales commissions which are effectively an integral portion of the basic
salary structure of an employee, shall be included in determining his 13th month pay.
We recognize that both productivity bonuses and sales commissions may have an incentive effect.
But there is reason to distinguish one from the other here. Productivity bonuses are generally tied to
the productivity or profit generation of the employer corporation. Productivity bonuses are not directly
dependent on the extent an individual employee exerts himself. A productivity bonus is something
extra for which no specific additional services are rendered by any particular employee and hence
not legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other
hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent
or energy of an employee's endeavors. Commissions are paid upon the specific results achieved by
a salesman-employee. It is a percentage of the sales closed by a salesman and operates as an
integral part of such salesman's basic pay.
Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second
paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay issued by
former Labor Secretary Drilon, is properly understood as holding that that second paragraph
provides no legal basis for including within the term "commission" there used additional payments to
employees which are, as a matter of fact, in the nature of profit-sharing payments or bonuses. If and
to the extent that such second paragraph is so interpreted and applied, it must be regarded as
invalid as having been issued in excess of the statutory authority of the Secretary of Labor. That
same second paragraph however, correctly recognizes that commissions, like those paid
in Duplicators, may constitute part of the basic salary structure of salesmen and hence should be
included in determining the 13th month pay; to this extent, the second paragraph is and remains
valid.
ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and the (b)
aforesaid Second Reconsideration are DENIED for lack of merit. No further pleadings will be
entertained.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug,
Kapunan, Mendoza and Francisco, JJ., concur.
G.R. No. 92174 December 10, 1993
BOIE-TAKEDA CHEMICALS, INC., petitioner,

vs.
HON. DIONISIO DE LA SERNA, Acting Secretary of the Department of Labor and Employment,
respondent.
G.R. No. L-102552 December 10, 1993
PHILIPPINE FUJI XEROX CORP., petitioner,

vs.
CRESENCIANO B. TRAJANO, Undersecretary of the Department of Labor and Employment, and

PHILIPPINE FUJI XEROX EMPLOYEES UNION, respondents.
Herrera, Laurel, De los Reyes, Roxas & Teehankee for Boie-Takeda Chemicals, Inc. and Phil Xerox
Corp.
The Solicitor General for public respondents.
NARVASA, C.J.:
What items or items of employee remuneration should go into the computation of thirteenth month
pay is the basic issue presented in these consolidated petitions. Otherwise stated, the question is
whether or not the respondent labor officials in computing said benefit, committed "grave abuse of
discretion amounting to lack of jurisdiction," by giving effect to Section 5 of the Revised Guidelines
on the implementation of the Thirteenth Month Pay (Presidential Decree No. 851) promulgated by
then Secretary of Labor and Employment, Hon. Franklin Drilon, and overruling petitioner's contention
that said provision constituted a usurpation of legislative power because not justified by or within the
authority of the law sought to be implemented besides being violative of the equal protection of the
law clause of the Constitution.
Resolution of the issue entails, first, a review of the pertinent provisions of the laws and
implementing regulations.
Sections 1 and 2 of Presidential Decree No. 851, the Thirteenth Month Pay Law, read as follows:
Sec 1. All employees are hereby required to pay all their employees receiving basic
salary of not more than P1,000.00 a month, regardless of the nature of the
employment, a 13th month pay not later than December 24 of every year.
Sec. 2. Employers already paying their employees a 13th month pay or its equivalent
are not covered by this Decree.
The Rules and Regulations Implementing P.D. 851 promulgated by then Labor Minister Blas Ople on
December 22, 1975 contained the following relevant provisions relative to the concept of "thirteenth
month pay" and the employers exempted from giving it, to wit:
Sec. 2. Definition of certain terms. — . . .
a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an
employee within a calendar year;
b) "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
Sec. 3. Employers covered. — . . . (The law applies) to all employers except to:
xxx xxx xxx
c) Employers already paying their employers a 13-month pay or more in calendar

year or is equivalent at the time of this issuance;
xxx xxx xxx
e) Employers of those who are paid on purely commission, boundary, or task basis,
and those who are paid a fixed amount for performing a specific work, irrespective of
the time consumed in the performance thereof, except where the workers are paid on
piece-rate basis in which case the employer shall be covered by this issuance insofar
as such workers are concerned.
xxx xxx xxx
The term "its equivalent" as used in paragraph (c) shall include Christmas bonus,
mid-year bonus, profit-sharing payments and other cash bonuses amounting to not
less than 1/12th of the basic salary but shall not include cash and stock dividends,
cost of living allowances and all other allowances regularly enjoyed by the employee,
as well as non-monetary benefits. Where an employer pays less than 1/12th of the
employee's basic salary, the employer shall pay the difference.
Supplementary Rules and Regulations implementing P.D. 851 were subsequently issued by Minister
Ople which inter alia set out items of compensation not included in the computation of the 13th
month pay, viz.:
Sec. 4. Overtime pay, earnings and other remunerations which are not part of the
basic salary shall not be included in the computation of the 13th month pay.
On August 13, 1986, President Corazon C. Aquino promulgated Memorandum Order No. 28, which
contained a single provision modifying Presidential Decree No. 851 by removing the salary ceiling of
P1,000.00 a month set by the latter, as follows:
Section 1 of Presidential Decree No. 851 is hereby modified to the extent that all
employers are hereby required to pay all their rank-and-file employees a 13th month
pay not later than December 24, of every year.
Slightly more than a year later, on November 16, 1987, Revised Guidelines on the Implementation of
the 13th Month Pay Law were promulgated by then Labor Secretary Franklin Drilon which, among
other things, defined with particularity what remunerative items were and were not embraced in the
concept of 13th month pay, and specifically dealt with employees who are paid a fixed or guaranteed
wage plus commission. The relevant provisions read:
4. Amount and payment of 13th Month Pay.

xxx xxx xxx
The basic salary of an employee for the purpose of computing the 13th month pay
shall include all remunerations or earnings paid by the employer for services
rendered but does not include allowances and monetary benefits which are not
considered or 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.
xxx xxx xxx
5. 13th Month Pay for Certain Types of Employees.
(a) Employees Paid by Results. — Employees who are paid on piece work basis are
by law entitled to the 13th month pay.
Employees who are paid a fixed or guaranteed wage plus commission are also
entitled to the mandated 13th month pay based on their total earnings during the
calendar year, i.e., on both their fixed or guaranteed wage and commission.
This was the state of the law when the controversies at bar arose out of the following antecedents:
(RE G.R. No. 92174) A routine inspection was conducted on May 2, 1989 in the premises of
petitioner Boie-Takeda Chemicals, Inc. by Labor
and Development Officer Reynaldo B. Ramos under Inspection Authority
No. 4-209-89. Finding that Boie-Takeda had not been including the commissions earned by its
medical representatives in the computation of their 13th month pay, Ramos served a Notice of
Inspection Results 1 on Boie-Takeda through its president, Mr. Benito Araneta, requiring Boie-
Takeda within ten (10) calendar days from notice to effect restitution or correction of "the
underpayment of 13th month pay for the year(s) 1986, 1987 and 1988 of Med Rep (Revised
Guidelines on the Implementation of 13th month pay # 5) in the total amount of P558,810.89."
Boie-Takeda wrote the Labor Department contesting the Notice of Inspection Results, and
expressing the view "that the commission paid to our medical representatives are not to be included
in the computation of the 13th month pay . . . (since the) law and its implementing rules speak of
REGULAR or BASIC salary and therefore exclude all other remunerations which are not part of the
REGULAR salary." It pointed out that, "if no sales is (sic) made under the effort of a particular
representative, there is no commission during the period when no sale was transacted, so that
commissions are not and cannot be legally defined as regular in nature. 2
Regional Director Luna C. Piezas directed Boie-Takeda to appear before his Office on June 9 and
16, 1989. On the appointed dates, however, and despite due notice, no one appeared for Boie-
Takeda, and the matter had perforce to be resolved on the basis of the evidence at hand. On July
24, 1989, Director Piezas issued an Order 3 directing Boie-Takeda:
. . . to pay . . . (its) medical representatives and its managers the total amount of
FIVE HUNDRED SIXTY FIVE THOUSAND SEVEN HUNDRED FORTY SIX AND
FORTY SEVEN CENTAVOS (P565,746.47) representing underpayment of thirteenth
(13th) month pay for the years 1986, 1987, 1988, inclusive, pursuant to the . . .
revised guidelines within ten (10) days from receipt of this Order.
A motion for reconsideration 4 was seasonably filed by Boie-Takeda under date of August 3, 1989.
Treated as an appeal, it was resolved on
January 17, 1990 by then Acting Labor Secretary Dionisio de la Serna, who affirmed the July 24,
1989 Order with modification that the sales commissions earned by Boie-Takeda's medical
representatives before August 13, 1989, the effectivity date of Memorandum Order No. 28 and its
Implementing Guidelines, shall be excluded in the computation of their 13th month pay. 5
Hence the petition docketed as G.R. No. 92174.
(RE G.R. No. 102552) A similar Routine Inspection was conducted in the premises of Philippine Fuji
Xerox Corp. on September 7, 1989 pursuant to Routine Inspection Authority No. NCR-LSED-RI-494-
89. In his Notice of Inspection Results, 6 addressed to the Manager, Mr. Nicolas O. Katigbak, Senior
Labor and Employment Officer Nicanor M. Torres noted the following violation committed by
Philippine Fuji Xerox Corp., to wit:
Underpayment of 13th month pay of 62 employees, more or less — pursuant to

Revised Guidelines on the Implementation of the 13th month pay law for the period
covering 1986, 1987 and 1988.
Philippine Fuji Xerox was requested to effect rectification and/or restitution of the noted violation
within five (5) working days from notice.
No action having been taken thereon by Philippine Fuji Xerox,

Mr. Eduardo G. Gonzales, President of the Philxerox Employee Union, wrote then Labor Secretary
Franklin Drilon requesting a follow-up of the inspection findings. Messrs. Nicolas and Gonzales were
summoned to appear before Labor Employment and Development Officer Mario F. Santos, NCR
Office, Department of Labor for a conciliation conference. When no amicable settlement was
reached, the parties were required to file their position papers.
Subsequently, Regional Director Luna C. Piezas issued an Order dated August 23, 1990, 7 disposing
as follows:
WHEREFORE, premises considered, Respondent PHILIPPINE FUJI XEROX is

hereby ordered to restitute to its salesmen the portion of the 13th month pay which
arose out of the non-implementation of the said revised guidelines, ten (10) days
from receipt hereof, otherwise,
MR. NICANOR TORRES, the SR. LABOR EMPLOYMENT OFFICER is hereby
Ordered to proceed to the premises of the Respondent for the purpose of computing
the said deficiency (sic) should respondent fail to heed his Order.
Philippine Fuji Xerox appealed the aforequoted Order to the Office of the Secretary of Labor. In an
Order dated October 120, 1991, Undersecretary Cresenciano B. Trajano denied the appeal for lack
of merit. Hence, the petition in G.R. No. 102552, which was ordered consolidated with G.R. No.
92174 as involving the same issue.
In their almost identically-worded petitioner, petitioners, through common counsel, attribute grave
abuse of discretion to respondent labor officials
Hon. Dionisio dela Serna and Undersecretary Cresenciano B. Trajano in issuing the questioned
Orders of January 17, 1990 and October 10, 1991, respectively. They maintain that under P.D. 851,
the 13th month pay is based solely on basic salary. As defined by the law itself and clarified by the
implementing and Supplementary Rules as well as by the Supreme Court in a long line of decisions,
remunerations which do not form part of the basic or regular salary of an employee, such as
commissions, should not be considered in the computation of the 13th month pay. This being the
case, the Revised Guidelines on the Implementation of the 13th Month Pay Law issued by then
Secretary Drilon providing for the inclusion of commissions in the 13th month pay, were issued in
excess of the statutory authority conferred by P.D. 851. According to petitioners, this conclusion
becomes even more evident when considered in light of the opinion rendered by Labor Secretary
Drilon himself in "In Re: Labor Dispute at the Philippine Long Distance Telephone Company" which
affirmed the contemporaneous interpretation by then Secretary Ople that commissions are excluded
from the basic salary. Petitioners further contend that assuming that Secretary Drilon did not exceed
the statutory authority conferred by P.D. 851, still the Revised Guidelines are null and void as they
violate the equal protection of the law clause.
Respondents through the Office of the Solicitor General question the propriety of petitioners' attack
on the constitutionality of the Revised Guidelines in a petition for certiorari which, they contend,
should be confined purely to the correction of errors and/or defects of jurisdiction, including matters
of grave abuse of discretion amounting to lack or excess of jurisdiction and not extend to a collateral
attack on the validity and/or constitutionality of a law or statute. They aver that the petitions do not
advance any cogent reason or state any valid ground to sustain the allegation of grave abuse of
discretion, and that at any rate, P.D. No. 851, otherwise known as the 13th Month Pay Law has
already been amended by Memorandum Order No. 28 issued by President Corazon C. Aquino on
August 13, 1986 so that commissions are now imputed into the computation of the 13th Month Pay.
They add that the Revised Guidelines issued by then Labor Secretary Drilon merely clarified a gray
area occasioned by the silence of the law as to the nature of commissions; and worked no violation
of the equal protection clause of the Constitution, said Guidelines being based on reasonable
classification. Respondents point to the case of Songco vs. National Labor Relations Commission,
183 SCRA 610, wherein the Court declared that Article 97(f) of the Labor Code is explicit that
commission is included in the definition of the term "wage".
We rule for the petitioners.
Contrary to respondents' contention, Memorandum Order No. 28 did not repeal, supersede or
abrogate P.D. 851. As may be gleaned from the language of the Memorandum Order No. 28, it
merely "modified" Section 1 of the decree by removing the P1,000.00 salary ceiling. The concept of
13th Month Pay as envisioned, defined and implemented under P.D. 851 remained unaltered, and
while entitlement to said benefit was no longer limited to employees receiving a monthly basic salary
of not more than P1,000.00, said benefit was, and still is, to be computed on the basic salary of the
employee-recipient as provided under P.D. 851. Thus, the interpretation given to the term "basic
salary" as defined in P.D. 851 applies equally to "basic salary" under Memorandum Order No. 28.
In the case of San Miguel Corp. vs. Inciong, 103 SCRA 139, this Court delineated the coverage of
the term "basic salary" as used in P.D. 851. We said at some length:
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 Instructions 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
Under a later set of Supplementary Rules and Regulations Implementing Presidential

Decree 851 Presidential Decree 851 issued by then Labor Secretary Blas Ople,
overtime pay, earnings and other remunerations are excluded as part of the basic
salary and in the computation of the 13th month pay.
The exclusion of the cost-of-living allowances under Presidential Decree 525 and
Letter of Instructions No. 174, and profit-sharing payments indicate the intention to
strip basic salary of other payments which are properly considered as "fringe"
benefits. Likewise, the catch-all exclusionary phrase "all allowances and monetary
benefits which are not considered or integrated as part of the basic salary" shows
also the intention to strip basic salary of any and all additions which may be in the
form of allowances or "fringe" benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential

Decree 851 is even more emphatic in declaring that earnings and other
remunerations which are not part of the basic salary shall not be included in the
computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations
Implementing Presidential Decree 851 which defines basic salary to include all
remunerations or earnings paid by an employer to an employee, this cloud is
dissipated in the later and more controlling Supplementary Rules and Regulations
which categorically exclude from the definitions of basic salary earnings and other
remunerations paid by an employer to an employee. A cursory perusal of the two
sets of Rules indicates that what has hitherto been the subject of a broad inclusion is
now a subject of broad exclusion. The Supplementary Rules and Regulations cure
the seeming tendency of the former rules to include all remunerations and earnings
within the definition of basic salary.
The all embracing phrase "earnings and other remunerations" which are deemed not
part of the basic salary includes within its meaning payments for sick, vacation, or
maternity leaves, premium for works performed on rest days and special holidays,
pays for regular holidays and night differentials. As such they are deemed not part of
the basic salary and shall not be considered in the computation of the 13th-month
pay. If they were not excluded, it is hard to find any "earnings and other
remunerations" expressly excluded in the computation of the 13th month pay. Then
the exclusionary provision would prove to be idle and with no purpose.
This conclusion finds strong support under the Labor Code of the Philippines. To cite
a few provisions:
Art. 87. Overtime Work. Work may be performed beyond eight (8) hours a day
provided that the employee is paid for the overtime work, additional compensation
equivalent to his regular wage plus at least twenty-five (25%) percent thereof.
It is clear that overtime pay is an additional compensation other than and added to
the regular wage or basic salary, for reason of which such is categorically excluded
from the definition of basic salary under the Supplementary Rules and Regulations
Implementing Presidential Decree 851.
In Article 93 of the same Code, paragraph
c) work performed on any special holiday shall be paid an additional compensation of

at least thirty percent (30%) of the regular wage of the employee.
It is likewise clear the premiums for special holiday which is at least 30% of the
regular wage is an additional pay other than and added to the regular wage or basic
salary. For similar reason, it shall not be considered in the computation of the 13th
month pay.
Quite obvious from the foregoing is that the term "basic salary" is to be understood in its common,
generally-accepted meaning, i.e., as a rate of pay for a standard work period exclusive of such
additional payments as bonuses and overtime. 8 This is how the term was also understood in the
case of Pless v. Franks, 308 S.W. 2nd. 402, 403, 202 Tenn. 630, which held that in statutes
providing that pension should not less than 50 percent of "basic salary" at the time of retirement, the
quoted words meant the salary that an employee (e.g., a policeman) was receiving at the time he
retired without taking into consideration any extra compensation to which he might be entitled for
extra work. 9
In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or
guaranteed wage is patently the "basic salary" for this is what the employee receives for a standard
work period. Commissions are given for extra efforts exerted in consummating sales or other related
transactions. They are, as such, additional pay, which this Court has made clear do not form part of
the "basic salary."
Respondents would do well to distinguish this case from Songco vs. National Labor Relations
Commission, supra, upon which they rely so heavily. What was involved therein was the term
"salary" without the restrictive adjective "basic". Thus, in said case, we construed the term in its
generic sense to refer to all types of "direct remunerations for services rendered," including
commissions. In the same case, we also took 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 relationship exists," which statement is quite significant in that it
speaks of a "basic salary" apart and distinct from "commissions" and "allowances". Instead of
supporting respondents' stand, it would appear that Songco itself recognizes that commissions are
not part of "basic salary."
In including commissions in the computation of the 13th month pay, the second paragraph of Section
5(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law unduly expanded
the concept of "basic salary" as defined in P.D. 851. It is a fundamental rule that implementing rules
cannot add to or detract from the provisions of the law it is designed to implement. Administrative
regulations adopted under legislative authority by a particular department must be in harmony with
the provisions of the law they are intended to carry into effect. They cannot widen its scope. An
administrative agency cannot amend an act of Congress. 10
Having reached this conclusion, we deem it unnecessary to discuss the other issues raised in these
petitions.
WHEREFORE, the consolidated petitions are hereby GRANTED. The second paragraph of Section
5 (a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law issued on
November 126, 1987 by then Labor Secretary Franklin M. Drilon is declared null and void as being
violative of the law said Guidelines were issued to implement, hence issued with grave abuse of
discretion correctible by the writ of prohibition and certiorari. The assailed Orders of January 17,
1990 and October 10, 1991 based thereon are SET ASIDE.
SO ORDERED.
G.R. No. 107994 August 14, 1995
PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKERS UNION (PACIWU)-

TUCP, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND VALLACAR TRANSIT, INC., respondents.
KAPUNAN, J.:
This is a petition for certiorari seeking to reverse the decision of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-0159-92 which dismissed the appeal of petitioner union
and in effect, affirmed the decision of the Labor Arbiter ordering the dismissal of the complaint of
petitioner for payment of 13th month pay to the drivers and conductors of respondent company.
Petitioner Philippine Agricultural Commercial and Agricultural Workers Union — TUCP is the
exclusive bargaining agent of the rank and file employees of respondent Vallacar Transit, Inc.
Petitioner union instituted a complaint with NLRC Regional Arbitration Branch No. VI, Bacolod City,
for payment of 13th month pay in behalf of the drivers and conductors of respondent company's
Visayan operation on the ground that although said drivers and conductors are compensated on a
"purely commission" basis as described in their Collective Bargaining Agreement (CBA), they are
automatically entitled to the basic minimum pay mandated by law should said commission be less
than their basic minimum for eight (8) hours work.1
In its position paper, respondent Vallacar Transit, Inc. contended that since said drivers and
conductors are compensated on a purely commission basis, they are not entitled to 13th month pay
pursuant to the exempting provisions enumerated in paragraph 2 of the Revised Guidelines on the
Implementation of the Thirteenth Month Pay Law.2 It further contended that Section 2 of Article XIV
of the Collective Bargaining Agreement (CBA) concluded on October 17, 1988 expressly provided
that "drivers and conductors paid on a purely commission are not legally entitled to 13th month pay."
Said CBA, being the law between the parties, must be respected, respondent opined.
On May 22, 1992, Labor Arbiter Reynaldo Gulmatico rendered a decision dismissing the complaint.3
The appeal of the petitioner to the National Labor Relations Commission was likewise dismissed 4 so
was the motion for reconsideration of the said decision.5
Hence, the present petition.
The principal issue posed for consideration is whether or not the bus drivers and conductors of
respondent Vallacar Transit, Inc. are entitled to 13th month pay.
We rule in the affirmative.
It may be recalled that on December 16, 1975, P.D. 851, otherwise known as the "13th Month Pay"
Law, was promulgated. The same prescribed payment of 13th month pay in the following terms:
Sec. 1. All employers are hereby required to pay all their employees receiving a basic
salary of not more than P1,000.00 a month, regardless of the nature of the employment, a
13th month pay not later than December 24 of every year.
Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not
covered by this Decree.
The Rules and Regulations Implementing P.D. No. 851, issued by the then Secretary of Labor and
Employment on December 22, 1975, defined the following basic terms:
xxx xxx xxx
(a) 13th month pay shall mean one-twelfth (1/12) of the basic salary of an employee within a
calendar year;
(b) basic salary shall include all remunerations or earnings paid by an employer to an
employer for services rendered, but may not include cost of living allowances granted
pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profitsharing
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.
xxx xxx xxx
On August 13, 1986, President Corazon C. Aquino, exercising both executive and legislative
authority, issued Memorandum Order No. 28 which provided as follows:
xxx xxx xxx
Sec.1. of Presidential Decree No. 851 is hereby modified to the extent that all employers are
hereby required to pay all their rank-and-file employees a 13th month pay not later than
December 24 of every year.
xxx xxx xxx

In connection with and in implementation of Memorandum Order No. 28, the then Minister of Labor
and Employment issued MOLE Explanatory Bulletin No. 86-12 on November 24, 1986. Item No. 5
(a) of the said issuance read:
xxx xxx xxx
Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the
mandated 13th month pay, based on their total earning(s) during the calendar year, i.e., on
both their fixed and guaranteed wage and commission.
xxx xxx xxx
(emphasis ours)
From the foregoing legal milieu, it is clear that every employee receiving a commission in addition to
a fixed or guaranteed wage or salary, is entitled to a 13th month pay. For purposes of entitling rank
and file employees a 13th month pay, it is immaterial whether the employees concerned are paid a
guaranteed wage plus commission or a commission with guaranteed wage inasmuch as the botton
line is that they receive a guaranteed wage. This is correctly construed in the MOLE Explanatory
Bulletin No. 86-12.
In the case at bench, while the bus drivers and conductors of respondent company are considered
by the latter as being compensated on a commission basis, they are not paid purely by what they
receive as commission. As admitted by respondent company, the said bus drivers and conductors
are automatically entitled to the basic minimum pay mandated by law in case the commissions they
earned be less than their basic minimum for eight (8) hours work.6 Evidently therefore, the
commissions form part of the wage or salary of the bus drivers and conductors. A contrary
interpretation would allow an employer to skirt the law and would result in an absurd situation where
an employee who receives a guaranteed minimum basic pay cannot be entitled to a 13th month pay
simply because he is technically referred to by his employer per the CBA as an employee
compensated on a purely commission basis. Such would be a narrow interpretation of the law,
certainly not in accord with the liberal spirit of our labor laws. Moreover, what is controlling is not the
label attached to the remuneration that the employee receives but the nature of the
remuneration7 and the purpose for which the 13th month pay was given to alleviate the plight of the
working masses who are receiving low wages. This is extant from the "WHEREASES" of PD 851, to
wit:
WHEREAS, it is necessary to further protect the level of real wages from the ravage of
world-wide inflation.
WHEREAS, there has been no increase in the legal minimum wage since 1970.
WHEREAS, the Christmas season is an opportune time for society to show its concern for
the plight of the working masses so they may properly celebrate Christmas and New Year.
Misplaced legal hermeneutics cannot be countenanced to evade paying the rank and file what is due
to them under the law.
Commission is the recompense, compensation, reward of an employee, 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 of the principal.8 While said commissions may be in the
form of incentives or encouragement to inspire said bus drivers and conductors to put a little more
zeal and industry on their jobs, still, it is safe to say that the same are direct remunerations for
services rendered, given the small remuneration they receive for the services they render,9 which is
precisely the reason why private respondent allowed the drivers and conductors a guaranteed
minimum wage. The conclusion is ineluctable that said commissions are part of their salary.
In Philippine Duplicators, Inc. v. National Labor Relations Commission,10 we had the occasion to
estate that:
. . . Article 97 (f) of the Labor Code defines the term "wage" (which is equivalent to "salary,"
as used in P.D. No. 851 and Memorandum Order No. 28) in the following terms:
(f) "Wage" paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in term of money, 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
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. "Fair and reasonable value" shall not include any profit to the
employer or to any person affiliated with the employer.
In the instant case, there is no question that the sales commissions earned by salesmen who
make or close a sale of duplicating machines distributed by petitioner corporation, constitute
part of the compensation or remuneration paid to salesmen for serving as salesmen, and
hence as part of the "wage" or "salary" of petitioner's salesmen. Indeed, it appears that
petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the
salesmen's wages or salaries being composed of the sales or incentive commissions earned
on actual sales closed by them. No doubt this particular salary structure was intended for the
benefit of petitioner corporation, on the apparent assumption that thereby its salesmen would
be moved to greater enterprise and diligence and close more sales in the expectation of
increasing their sales commissions. This, however, does not detract from the character of
such commissions as part of the salary or wage paid to each or its salesmen for rendering
services to petitioner corporation. 11
In sum, the 13th month pay of the bus drivers and conductors who are paid a fixed or guaranteed
minimum wage in case their commissions be less than the statutory minimum, and commissions
only in case where the same is over and above the statutory minimum, must be equivalent to one-
twelfth (1/12) of their total earnings during the calendar year.
WHEREFORE, the petition is hereby GRANTED. The decision of respondent National Labor
Relations Commission is hereby REVERSED and SET ASIDE. The case is remanded to the labor
Arbiter for the proper computation of 13th month pay.
SO ORDERED.
Padilla, Davide, Jr., Bellosillo and Hermosisima, Jr., JJ., concur.

[G.R. Nos. 83380-81. November 15, 1989.]
MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G. INOCENCIO, Petitioners, v.

NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor Arbiter, Department
of Labor and Employment, National Capital Region), SANDIGAN NG MANGGAGAWANG PILIPINO
(SANDIGAN) - TUCP and its members, JACINTO GARCIANO, ALFREDO C. BASCO, VICTORIO Y.
LAURETO, ESTER NARVAEZ, EUGENIO L. ROBLES, BELEN N. VISTA, ALEJANDRO A. ESTRABO,
VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA ESTRABO, LEONORA MENDOZA, MACARIA G.
DIMPAS, MERILYN A. VIRAY, LILY OPINA, JANET SANGDANG, JOSEFINA ALCOCEBA and MARIA
ANGELES, Respondents.
Ledesma, Saludo & Associates, for Petitioners.
Pablo S. Bernardo for Private Respondents.
DECISION
FERNAN, J.:
This petition for certiorari involving two separate cases filed by private respondents against herein
petitioners assails the decision of respondent National Labor Relations Commission in NLRC CASE No. 7-
2603-84 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN) — TUCP etc., Et. Al. v. Makati
Haberdashery and/or Toppers Makati, Et. Al." and NLRC CASE No. 2-428-85 entitled "Sandigan Ng
Manggagawang Pilipino (SANDIGAN) — TUCP etc., Et. Al. v. Toppers Makati, Et. Al.", affirming the decision
of the Labor Arbiter who jointly heard and decided aforesaid cases, finding: (a) petitioners guilty of illegal
dismissal and ordering them to reinstate the dismissed workers and (b) the existence of employer-employee
relationship and granting respondent workers by reason thereof their various monetary claims. chanroble s.com. ph : virtual law l ibra ry
The undisputed facts are as follows:cha nro b1es vi rtua l 1aw lib ra ry
Individual complainants, private respondents herein, have been working for petitioner Makati Haberdashery,
Inc. as tailors, seamstress, sewers, basters (manlililip) and "plantsadoras." They are paid on a piece-rate
basis except Maria Angeles and Leonila Serafina who are paid on a monthly basis. In addition to their piece-
rate, they are given a daily allowance of three (P3.00) pesos provided they report for work before 9:30 a.m.
everyday.
Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m. from Monday to
Saturday and during peak periods even on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the respondent workers,
filed a complaint docketed as NLRC NCR Case No. 7-2603-84 for (a) underpayment of the basic wage; (b)
underpayment of living allowance; (c) non-payment of overtime work; (d) non-payment of holiday pay; (e)
non-payment of service incentive pay; (f) 13th month pay; and (g) benefits provided for under Wage Orders
Nos. 1, 2, 3, 4 and 5. 1
During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro Pelobello left with
Salvador Rivera, a salesman of petitioner Haberdashery, an open package which was discovered to contain a
"jusi" barong tagalog. When confronted, Pelobello replied that the same was ordered by respondent
Casimiro Zapata for his customer. Zapata allegedly admitted that he copied the design of petitioner
Haberdashery. But in the afternoon, when again questioned about said barong, Pelobello and Zapata denied
ownership of the same. Consequently a memorandum was issued to each of them to explain on or before
February 4, 1985 why no action should be taken against them for accepting a job order which is prejudicial
and in direct competition with the business of the company. 2 Both respondents allegedly did not submit
their explanation and did not report for work. 3 Hence, they were dismissed by petitioners on February 4,
1985. They countered by filing a complaint for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 on
February 5, 1985. 4
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive portion of which
reads: chan robles .com : virtual law lib rary
"WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-85 finding respondents guilty of
illegal dismissal and ordering them to reinstate Dioscoro Pelobello and Casimiro Zapata to their respective or
similar positions without loss of seniority rights, with full backwages from July 4, 1985 up to actual
reinstatement. The charge of unfair labor practice is dismissed for lack of merit.
"In NLRC NCR Case No. 7-26030-84, the complainants’ claims for underpayment re violation of the
minimum wage law is hereby ordered dismissed for lack of merit.
"Respondents are hereby found to have violated the decrees on the cost of living allowance, service
incentive leave pay and the 13th Month Pay. In view thereof, the economic analyst of the Commission is
directed to compute the monetary awards due each complainant based on the available records of the
respondents retroactive as of three years prior to the filing of the instant case.
"SO ORDERED." 5
From the foregoing decision, petitioners appealed to the NLRC The latter on March 30, 1988 affirmed said
decision but limited the backwages awarded the Dioscoro Pelobello and Casimiro Zapata to only one (1)
year. 6
After their motion for reconsideration was denied, petitioners filed the instant petition raising the following
issues: chan rob1e s virtual 1aw l ib rary
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP

EXISTS BETWEEN PETITIONER HABERDASHERY AND RESPONDENTS WORKERS.
II
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS WORKERS ARE ENTITLED TO
MONETARY CLAIMS DESPITE THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUM WAGE.
III
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS PELOBELLO AND ZAPATA WERE
ILLEGALLY DISMISSED. 7
The first issue which is the pivotal issue in this case is resolved in favor of private respondents. We have
repeatedly held in countless decisions that the test of employer-employee relationship is four-fold: (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. It is the so-called "control test" that is the most important
element. 8 This simply means the determination of whether the employer controls or has reserved the right
to control the employee not only as to the result of the work but also as to the means and method by which
the same is to be accomplished. 9
The facts at bar indubitably reveal that the most important requisite of control is present. As gleaned from
the operations of petitioner, when a customer enters into a contract with the haberdashery or its proprietor,
the latter directs an employee who may be a tailor, pattern maker, sewer or "plantsadora" to take the
customer’s measurements, and to saw the pants, coat or shirt as specified by the customer. Supervision is
actively manifested in all these aspects — the manner and quality of cutting, sewing and ironing. chanro bles vi rt ual lawli bra ry
Furthermore, the presence of control is immediately evident in this memorandum issued by Assistant
Manager Cecilio B. Inocencio, Jr. dated May 30, 1981 addressed to Topper’s Makati Tailors which reads in
part:jgc:chan robles .com.p h
"4. Effective immediately, new procedures shall be followed: jgc:cha nrob les.com .ph
"A. To follow instruction and orders from the undersigned, Roger Valderama, Ruben Delos Reyes and Ofel
Bautista. Other than this person (sic) must ask permission to the above mentioned before giving orders or
instructions to the tailors.
"B. Before accepting the job orders tailors must check the materials, job orders, due dates and other things
to maximize the efficiency of our production. The materials should be check (sic) if it is match (sic) with the
sample, together with the number of the job order.
"C. Effective immediately all job orders must be finished one day before the due date. This can be done by
proper scheduling of job order and if you will cooperate with your supervisors. If you have many due dates
for certain day, advise Ruben or Ofel at once so that they can make necessary adjustment on due dates.
"D. Alteration — Before accepting alteration person attending on customs (sic) must ask first or must advise
the tailors regarding the due dates so that we can eliminate what we call ‘Bitin’.
"E. If there is any problem regarding supervisors or co-tailor inside our shop, consult with me at once settle
the problem. Fighting inside the shop is strictly prohibited. Any tailor violating this memorandum will be
subject to disciplinary action.
"For strict compliance." 10
From this memorandum alone, it is evident that petitioner has reserved the right to control its employees
not only as to the result but also the means and methods by which the same are to be accomplished. That
private respondents are regular employees is further proven by the fact that they have to report for work
regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional allowance of P3.00 daily if they
report for work before 9:30 a.m. and which is forfeited when they arrive at or after 9:30 a.m. 11
Since private respondents are regular employees, necessarily the argument that they are independent
contractors must fail. As established in the preceding paragraphs, private respondents did not exercise
independence in their own methods, but on the contrary were subject to the control of petitioners from the
beginning of their tasks to their completion. Unlike independent contractors who generally rely on their own
resources, the equipment, tools, accessories, and paraphernalia used by private respondents are supplied
and owned by petitioners. Private respondents are totally dependent on petitioners in all these aspects.
Coming now to the second issue, there is no dispute that private respondents are entitled to the Minimum
Wage as mandated by Section 2(g) of Letter of Instruction No. 829, Rules Implementing Presidential Decree
No. 1614 and reiterated in Section 3(f), Rules Implementing Presidential Decree 1713 which explicitly states
that, "All employees paid by the result shall receive not less than the applicable new minimum wage rates
for eight (8) hours work a day, except where a payment by result rate has been established by the
Secretary of Labor . . ." 12 No such rate has been established in this case.
But all these notwithstanding, the question as to whether or not there is in fact an underpayment of
minimum wages to private respondents has already been resolved in the decision of the Labor Arbiter where
he stated: "Hence, for lack of sufficient evidence to support the claims of the complainants for alleged
violation of the minimum wage, their claims for underpayment re violation of the Minimum Wage Law under
Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce fall." 13
The records show that private respondents did not appeal the above ruling of the Labor Arbiter to the NLRC;
neither did they file any petition raising that issue in the Supreme Court. Accordingly, insofar as this case is
concerned, that issue has been laid to rest. As to private respondents, the judgment may be said to have
attained finality. For it is a well-settled rule in this jurisdiction that "an appellee who has not himself
appealed cannot obtain from the appellate court, any affirmative relief other than the ones granted in the
decision of the court below." 14
As a consequence of their status as regular employees of the petitioners, they can claim cost of living
allowance. This is apparent from the provision defining the employees entitled to said allowance, thus: ". . .
All workers in the private sector, regardless of their position, designation or status, and irrespective of the
method by which their wages are paid." 15
Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules and
Regulations Implementing P.D. No. 851 which provides: jgc:c hanrob les.com .ph
"Section 3. Employers covered. — The Decree shall apply to all employers except to: chan rob1es v irt ual 1aw l ibra ry
x x x
"(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in which case the employer shall be covered
by this issuance insofar as such workers are concerned." (Italics supplied.)
On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th Month Pay,
they are not entitled to service incentive leave pay because as piece-rate workers being paid at a fixed
amount for performing work irrespective of time consumed in the performance thereof, they fall under one
of the exceptions stated in Section 1(d), Rule V, Implementing Regulations, Book III, Labor Code. For the
same reason private respondents cannot also claim holiday pay (Section 1(e), Rule IV, Implementing
Regulations, Book III, Labor Code).
With respect to the last issue, it is apparent that public respondents have misread the evidence, for it does
show that a violation of the employer’s rules has been committed and the evidence of such transgression,
the copied barong tagalog, was in the possession of Pelobello who pointed to Zapata as the owner. When
required by their employer to explain in a memorandum issued to each of them, they not only failed to do
so but instead went on AWOL (absence without official leave), waited for the period to explain to expire and
for petitioner to dismiss them. They thereafter filed an action for illegal dismissal on the far-fetched ground
that they were dismissed because of union activities. Assuming that such acts do not constitute
abandonment of their jobs as insisted by private respondents, their blatant disregard of their employer’s
memorandum is undoubtedly an open defiance to the lawful orders of the latter, a justifiable ground for
termination of employment by the employer expressly provided for in Article 283(a) of the Labor Code as
well as a clear indication of guilt for the commission of acts inimical to the interests of the employer, another
justifiable ground for dismissal under the same Article of the Labor Code, paragraph (c). Well established in
our jurisprudence is the right of an employer to dismiss an employee whose continuance in the service is
inimical to the employer’s interest. 16
In fact the Labor Arbiter himself to whom the explanation of private respondents was submitted gave no
credence to their version and found their excuses that said barong tagalog was the one they got from the
embroiderer for the Assistant Manager who was investigating them, unbelievable. chan roble s.com:c ralaw:re d
Under the circumstances, it is evident that there is no illegal dismissal of said employees. Thus, We have
ruled that:jgc:chan roble s.com.p h
"No employer may rationally be expected to continue in employment a person whose lack of morals, respect
and loyalty to his employer, regard for his employer’s rules, and appreciation of the dignity and
responsibility of his office, has so plainly and completely been bared.
"That there should be concern, sympathy, and solicitude for the rights and welfare of the working class, is
meet and proper. That in controversies between a laborer and his master, doubts reasonably arising from
the evidence, or in the interpretation of agreements and writings should be resolved in the former’s favor, is
not an unreasonable or unfair rule. But that disregard of the employer’s own rights and interests can be
justified by that concern and solicitude is unjust and unacceptable." (Stanford Microsystems, Inc. v. NLRC,
157 SCRA 414-415 [1988]).
The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of the
employer. 17 More importantly, 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 automatically be
decided in favor of labor. 18
Finally, it has been established that the right to dismiss or otherwise impose discriplinary sanctions upon an
employee for just and valid cause, pertains in the first place to the employer, as well as the authority to
determine the existence of said cause in accordance with the norms of due process. 19
There is no evidence that the employer violated said norms. On the contrary, private respondents who
vigorously insist on the existence of employer-employee relationship, because of the supervision and control
of their employer over them, were the very ones who exhibited their lack of respect and regard for their
employer’s rules.
Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to terminate the
services of private respondents. chanroble s lawli bra ry : rednad
WHEREFORE, the decision of the National Labor Relations Commission dated March 30, 1988 and that of the
Labor Arbiter dated June 10, 1986 are hereby modified. The complaint filed by Pelobello and Zapata for
illegal dismissal docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack of factual and legal bases.
Award of service incentive leave pay to private respondents is deleted.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.
G.R. No. 123938 May 21, 1998
LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in behalf of its members, ANA MARIE
OCAMPO, MARY INTAL, ANNABEL CARESO, MARLENE MELQIADES, IRENE JACINTO, NANCY
GARCIA, IMELDA SARMIENTO, LENITA VIRAY, GINA JACINTO, ROSEMARIE DEL ROSARIO,
CATHERINE ASPURNA, WINNIE PENA, VIVIAN BAA, EMILY LAGMAN, LILIAN MARFIL,
NANCY DERACO, JANET DERACO, MELODY JACINTO, CAROLYN DIZON, IMELDA MANALOTO,
NORY VIRAY, ELIZA SALAZAR, GIGI MANALOTO, JOSEFINA BASILIO, MARY ANN MAYATI,
ZENAIDA GARCIA, MERLY CANLAS, ERLINDA MANALANG, ANGELINA QUIAMBAO, LANIE
GARCIA, ELVIRA PIEDRA, LOURDES PANLILIO, LUISA PANLILIO, LERIZA PANLILIO, ALMA
CASTRO, ALDA DAVID, MYRA T. OLALIA, MARIFE PINLAC, NENITA DE GUZMAN, JULIE
GACAD, EVELYN MANALO, NORA PATIO, JANETH CARREON, ROWENA MENDOZA, ROWENA
MANALO, LENY GARCIA, FELISISIMA PATIO, SUSANA SALOMON, JOYDEE LANSANGAN,
REMEDIOS AGUAS, JEANIE LANSANGAN, ELIZABETH MERCADO, JOSELYN MANALESE,
BERNADETH RALAR, LOLITA ESPIRITU, AGNES SALAS, VIRGINIA MENDIOLA, GLENDA
SALITA, JANETH RALAR, ERLINDA BASILIO, CORA PATIO, ANTONIA CALMA, AGNES
CARESO, GEMMA BONUS, MARITESS OCAMPO, LIBERTY GELISANGA, JANETH MANARANG,
AMALIA DELA CRUZ, EVA CUEVAS, TERESA MANIAGO, ARCELY PEREZ, LOIDA BIE, ROSITA
CANLAS, ANALIZA ESGUERRA, LAILA MANIAGO, JOSIE MANABAT, ROSARIO DIMATULAC,
NYMPA TUAZON, DAIZY TUASON, ERLINDA NAVARRO, EMILY MANARANG, EMELITA
CAYANAN, MERCY CAYANAN, LUZVIMINDA CAYANAN, ANABEL MANALO, SONIA DIZON,
ERNA CANLAS, MARIAN BENEDICTA, DOLORES DOLETIN, JULIE DAVID, GRACE
VILLANUEVA, VIRGINIA MAGBAG, CORAZON RILLION, PRECY MANALILI, ELENA RONOZ,
IMELDA MENDOZA, EDNA CANLAS and ANGELA CANLAS, Petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION, EMPIRE FOOD PRODUCTS, its Proprietor/President & Manager,
MR. GONZALO KEHYENG and MRS. EVELYN KEHYENG, Respondents.
DAVIDE, JR., J.:
In this special civil action for certiorari under Rule 65, petitioners seek to reverse the 29 March 1995
resolution 1 of the National Labor Relations Commission (NLRC) in NLRC RAB III Case No. 01-1964-91
which affirmed the Decision 2 of Labor Arbiter Ariel C. Santos dismissing their complaint for utter lack
of merit.
The antecedents of this case, as summarized by the Office of the Solicitor General in its Manifestation
and Motion in Lieu of Comment, 3 are as follows:
The 99 persons named as petitioners in this proceeding were rank-and-file employees of respondent
Empire Food Products, which hired them on various dates (Paragraph 1, Annex "A" of Petition, Annex
"B;" Page 2, Annex "F" of Petition).
Petitioners filed against private respondents a complaint for payment of money claim[s] and for
violation of labor standard[s] laws (NLRC Case No. RAB-111-10-1817-90). They also filed a petition
for direct certification of petitioner Labor Congress of the Philippines as their bargaining representative
(Case No. R0300-9010-RU-005).
On October 23, 1990, petitioners represented by LCP President Benigno B. Navarro, Sr. and private
respondents Gonzalo Kehyeng and Evelyn Kehyeng in behalf of Empire Food Products, Inc. entered
into a Memorandum of Agreement which provided, among others, the following:
1. That in connection with the pending Petition for Direct Certification filed by the Labor Congress with
the DOLE, Management of the Empire Food Products has no objection [to] the direct certification of
the LCP Labor Congress and is now recognizing the Labor Congress of the Philippines (LCP) and its
Local Chapter as the SOLE and EXCLUSIVE Bargaining Agent and Representative for all rank and file
employees of the Empire Food Products regarding "WAGES, HOURS Of WORK, AND OTHER TERMS
AND CONDITIONS OF EMPLOYMENT;"
2. That with regards [sic] to NLRC CASE NO. RAB-III-10-1817-90 pending with the NLRC parties
jointly and mutually agreed that the issues thereof, shall be discussed by the parties and resolve[d]
during the negotiation of the Collective Bargaining Agreement;
3. That Management of the Empire Food Products shall make the proper adjustment of the Employees
Wages within fifteen (15) days from the signing of this Agreement and further agreed to register all
the employees with the SSS;
4. That Employer, Empire Food Products thru its Management agreed to deduct thru payroll deduction
UNION DUES and other Assessment[s] upon submission by the LCP Labor Congress individual Check-
Off Authorization[s] signed by the Union Members indicating the amount to be deducted and further
agreed all deduction[s] made representing Union Dues and Assessment[s] shall be remitted
immediately to the LCP Labor Congress Treasurer or authorized representative within three (3) or five
(5) days upon deductions [sic], Union dues not deducted during the period due, shall be refunded or
reimbursed by the Employer/Management. Employer/Management further agreed to deduct Union
dues from non-union members the same amount deducted from union members without need of
individual Check-Off Authorizations [for] Agency Fee;
5. That in consideration [of] the foregoing covenant, parties jointly and mutually agreed that NLRC
CASE NO. RAB-III-10-1817-90 shall be considered provisionally withdrawn from the Calendar of the
National Labor Relations Commission (NLRC), while the Petition for direct certification of the LCP Labor
Congress parties jointly move for the direct certification of the LCP Labor Congress;
6. That parties jointly and mutually agreed that upon signing of this Agreement, no Harassments [sic],
Threats, Interferences [sic] of their respective rights under the law, no Vengeance or Revenge by each
partner nor any act of ULP which might disrupt the operations of the business;
7. Parties jointly and mutually agreed that pending negotiations or formalization of the propose[d]
CBA, this Memorandum of Agreement shall govern the parties in the exercise of their respective rights
involving the Management of the business and the terms and condition[s] of employment, and
whatever problems and grievances may arise by and between the parties shall be resolved by them,
thru the most cordial and good harmonious relationship by communicating the other party in writing
indicating said grievances before taking any action to another forum or government agencies;
8. That parties [to] this Memorandum of Agreement jointly and mutually agreed to respect, abide and
comply with all the terms and conditions hereof. Further agreed that violation by the parties of any
provision herein shall constitute an act of ULP. (Annex "A" of Petition).
In an Order dated October 24, 1990, Mediator Arbiter Antonio Cortez approved the memorandum of
agreement and certified LCP "as the sole and exclusive bargaining agent among the rank-and-file
employee of Empire Food Products for purposes of collective bargaining with respect to wages, hours
of work and other terms and conditions of employment" (Annex "B" of Petition).
On November 9, 1990, petitioners through LCP President Navarro submitted to private respondents a
proposal for collective bargaining (Annex "C" of Petition).
On January 23, 1991, petitioners filed a complaint docketed as NLRC Case No. RAB-III-01-1964-91
against private respondents for:
a. Unfair Labor Practice by way of Illegal Lockout and/or Dismissal;
b. Union busting thru Harassments [sic], threats, and interfering with the rights of employees to self-
organization;
c. Violation of the Memorandum of Agreement dated October 23, 1990;
d. Underpayment of Wages in violation of R.A. No. 6640 and R.A. No. 6727, such as Wages
promulgated by the Regional Wage Board;
e. Actual, Moral and Exemplary Damages. (Annex "D" of Petition)
After the submission by the parties of their respective position papers and presentation of testimonial
evidence, Labor Arbiter Ariel C. Santos absolved private respondents of the charges of unfair labor
practice, union busting, violation of the memorandum of agreement, underpayment of wages and
denied petitioners' prayer for actual, moral and exemplary damages. Labor Arbiter Santos, however,
directed the reinstatement of the individual complainants:
The undersigned Labor Arbiter is not oblivious to the fact that respondents have violated a cardinal
rule in every establishment that a payroll and other papers evidencing hours of work, payments, etc.
shall always be maintained and subjected to inspection and visitation by personnel of the Department
of Labor and Employment. As such penalty, respondents should not escape liability for this
technicality, hence, it is proper that all individual complainants except those who resigned and
executed quitclaim[s] and releases prior to the filing of this complaint should be reinstated to their
former position[s] with the admonition to respondents that any harassment, intimidation, coercion or
any form of threat as a result of this immediately executory reinstatement shall be dealt with
accordingly.
SO ORDERED. (Annex "G" of petition)
On appeal, the National Labor Relations Commission vacated the Decision dated April 14, 1972 [sic]
and remanded the case to the Labor Arbiter for further proceedings for the following reasons:
The Labor Arbiter, through his decision, noted that ". . . complainant did not present any single
witness while respondent presented four (4) witnesses in the persons of Gonzalo Kehyeng, Orlando
Cairo, Evelyn Kehyeng and Elvira Bulagan . . ." (p. 183, Records), that ". . . complainant before the
National Labor Relations Commission must prove with definiteness and clarity the offense charged. . .
." (Record, p. 183); that ". . . complainant failed to specify under what provision of the Labor Code
particularly Art. 248 did respondents violate so as to constitute unfair labor practice . . ." (Record, p.
183); that "complainants failed to present any witness who may describe in what manner respondents
have committed unfair labor practice . . ." (Record, p. 185); that ". . . complainant LCP failed to
present anyone of the so-called 99 complainants in order to testify who committed the threats and
intimidation . . ." (Record, p. 185).
Upon review of the minutes of the proceedings on record, however, it appears that complainant
presented witnesses, namely, BENIGNO NAVARRO, JR. (28 February 1991, RECORD, p. 91; 8 March
1991, RECORD, p. 92, who adopted its POSITION PAPER AND CONSOLIDATED AFFIDAVIT, as Exhibit
"A" and the annexes thereto as Exhibit "B", "B-1" to "B-9", inclusive. Minutes of the proceedings on
record show that complainant further presented other witnesses, namely: ERLINDA BASILIO (13
March 1991, RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENIE GARCIA (16 April 1991,
Record, p.96, see back portion thereof ; 2 May 1991, Record, p. 102; 16 May 1991, Record, p. 103,
11 June 1991, Record, p. 105). Formal offer of Documentary and Testimonial Evidence was made by
complainant on June 24, 1991 (Record, p. 106-109)
The Labor Arbiter must have overlooked the testimonies of some of the individual complainants which
are now on record. Other individual complainants should have been summoned with the end in view of
receiving their testimonies. The complainants should be afforded the time and opportunity to fully
substantiate their claims against the respondents. Judgment should be rendered only based on the
conflicting positions of the parties. The Labor Arbiter is called upon to consider and pass upon the
issues of fact and law raised by the parties.
Toward this end, therefore, it is Our considered view [that] the case should be remanded to the Labor
Arbiter of origin for further proceedings. (Annex "H" of Petition)
In a Decision dated July 27, 1994, Labor Arbiter Santos made the following determination:
Complainants failed to present with definiteness and clarity the particular act or acts constitutive of
unfair labor practice.
It is to be borne in mind that a declaration of unfair labor practice connotes a finding of prima
facieevidence of probability that a criminal offense may have been committed so as to warrant the
filing of a criminal information before the regular court. Hence, evidence which is more than a scintilla
is required in order to declare respondents/employers guilty of unfair labor practice. Failing in this
regard is fatal to the cause of complainants. Besides, even the charge of illegal lockout has no leg to
stand on because of the testimony of respondents through their guard Orlando Cairo (TSN, July 31,
1991 hearing; p. 5-35) that on January 21, 1991, complainants refused and failed to report for work,
hence guilty of abandoning their post without permission from respondents. As a result of
complainants['] failure to report for work, the cheese curls ready for repacking were all spoiled to the
prejudice of respondents. Under cross-examination, complainants failed to rebut the authenticity of
respondents' witness testimony.
As regards the issue of harassments [sic], threats and interference with the rights of employees to
self-organization which is actually an ingredient of unfair labor practice, complainants failed to specify
what type of threats or intimidation was committed and who committed the same. What are the acts
or utterances constitutive of harassments [sic] being complained of? These are the specifics which
should have been proven with definiteness and clarity by complainants who chose to rely heavily on
its position paper through generalizations to prove their case.
Insofar as violation of [the] Memorandum of Agreement dated October 23, 1990 is concerned, both
parties agreed that:
2 - That with regards [sic] to the NLRC Case No. RAB III-10-1817-90 pending with the NLRC, parties
jointly and mutually agreed that the issues thereof shall be discussed by the parties and resolve[d]
during the negotiation of the CBA.
The aforequoted provision does not speak of [an] obligation on the part of respondents but on a
resolutory condition that may occur or may not happen. This cannot be made the basis of an
imposition of an obligation over which the National Labor Relations Commission has exclusive
jurisdiction thereof.
Anent the charge that there was underpayment of wages, the evidence points to the contrary. The
enumeration of complainants' wages in their consolidated Affidavits of merit and position paper which
implies underpayment has no leg to stand on in the light of the fact that complainants' admission that
they are piece workers or paid on a pakiao [basis] i.e. a certain amount for every thousand pieces of
cheese curls or other products repacked. The only limitation for piece workers or pakiao workers is
that they should receive compensation no less than the minimum wage for an eight (8) hour work
[sic]. And compliance therewith was satisfactorily explained by respondent Gonzalo Kehyeng in his
testimony (TSN, p. 12-30) during the July 31, 1991 hearing. On cross-examination, complainants
failed to rebut or deny Gonzalo Kehyeng's testimony that complainants have been even receiving
more than the minimum wage for an average workers [sic]. Certainly, a lazy worker earns less than
the minimum wage but the same cannot be attributable to respondents but to the lazy workers.
Finally, the claim for moral and exemplary damages has no leg to stand on when no malice, bad faith
or fraud was ever proven to have been perpetuated by respondents.
WHEREFORE, premises considered, the complaint is hereby DISMISSED for utter lack of merit. (Annex
"I" of Petition). 4
On appeal, the NLRC, in its Resolution dated 29 March 1995, 5 affirmed in toto the decision of Labor
Arbiter Santos. In so doing, the NLRC sustained the Labor Arbiter's findings that: (a) there was a
dearth of evidence to prove the existence of unfair labor practice and union busting on the part of
private respondents; (b) the agreement of 23 October 1990 could not be made the basis of an
obligation within the ambit of the NLRC's jurisdiction, as the provisions thereof, particularly Section 2,
spoke of a resolutory condition which could or could not happen; (c) the claims for underpayment of
wages were without basis as complainants were admittedly "pakiao" workers and paid on the basis of
their output subject to the lone limitation that the payment conformed to the minimum wage rate for
an eight-hour workday; and (d) petitioners were not underpaid.
Their motion for reconsideration having been denied by the NLRC in its Resolution of 31 October
1995, 6 petitioners filed the instant special civil action for certiorari raising the following issues:
WHETHER OR NOT THE PUBLIC RESPONDENT NATIONAL LABOR RELATIONS COMMISSION GRAVELY
ABUSED ITS DISCRETION WHEN IT DISREGARDED OR IGNORED NOT ONLY THE EVIDENCE
FAVORABLE TO HEREIN PETITIONERS, APPLICABLE JURISPRUDENCE BUT ALSO ITS OWN DECISIONS
AND THAT OF THIS HONORABLE HIGHEST TRIBUNAL WHICH [WAS] TANTAMOUNT NOT ONLY TO THE
DEPRIVATION OF PETITIONERS' RIGHT TO DUE PROCESS BUT WOULD RESULT [IN] MANIFEST
INJUSTICE.
II
WHETHER OR NOT THE PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION WHEN IT DEPRIVED
THE PETITIONERS OF THEIR CONSTITUTIONAL RIGHT TO SELF-ORGANIZATION, SECURITY OF
TENURE, PROTECTION TO LABOR, JUST AND HUMANE CONDITIONS OF WORK AND DUE PROCESS.
III
WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY EASED OUT [OF] OR CONSTRUCTIVELY
DISMISSED FROM THEIR ONLY MEANS OF LIVELIHOOD.
IV
WHETHER OR NOT PETITIONERS SHOULD BE REINSTATED FROM THE DATE OF THEIR DISMISSAL UP
TO THE TIME OF THEIR REINSTATEMENT, WITH BACKWAGES, STATUTORY BENEFITS, DAMAGES AND
ATTORNEY'S FEES. 7
We required respondents to file their respective Comments.
In their Manifestation and Comment, private respondents asserted that the petition was filed out of
time. As petitioners admitted in their Notice to File Petition for Review on Certiorari that they received
a copy of the resolution (denying their motion for reconsideration) on 13 December 1995, they had
only until 29 December 1995 to file the petition. Having failed to do so, the NLRC thus already entered
judgment in private respondents' favor.
In their Reply, petitioners averred that Mr. Navarro, a non-lawyer who filed the notice to file a petition
for review on their behalf, mistook which reglementary period to apply. Instead of using the
"reasonable time" criterion for certiorari under Rule 65, he used the 15-day period for petitions for
review on certiorari under Rule 45. They hastened to add that such was a mere technicality which
should not bar their petition from being decided on the merits in furtherance of substantial justice,
especially considering that respondents neither denied nor contradicted the facts and issues raised in
the petition.
In its Manifestation and Motion in Lieu of Comment, the Office of the Solicitor General (OSG) sided
with petitioners. It pointed out that the Labor Arbiter, in finding that petitioners abandoned their jobs,
relied solely on the testimony of Security Guard Rolando Cairo that petitioners refused to work on 21
January 1991, resulting in the spoilage of cheese curls ready for repacking. However, the OSG argued,
this refusal to report for work for a single day did not constitute abandonment, which pertains to a
clear, deliberate and unjustified refusal to resume employment, and not mere absence. In fact, the
OSG stressed, two days after allegedly abandoning their work, petitioners filed a complaint for, inter
alia, illegal lockout or illegal dismissal. Finally, the OSG questioned the lack of explanation on the part
of Labor Arbiter Santos as to why he abandoned his original decision to reinstate petitioners.
In view of the stand of the OSG, we resolved to require the NLRC to file its own Comment.
In its Comment, the NLRC invokes the general rule that factual findings of an administrative agency
bind a reviewing court and asserts that this case does not fall under the exceptions. The NLRC further
argues that grave abuse of discretion may not be imputed to it, as it affirmed the factual findings and
legal conclusions of the Labor Arbiter only after carefully reviewing, weighing and evaluating the
evidence in support thereof, as well as the pertinent provisions of law and jurisprudence.
In their Reply, petitioners claim that the decisions of the NLRC and the Labor Arbiter were not
supported by substantial evidence; that abandonment was not proved; and that much credit was
given to self-serving statements of Gonzalo Kehyeng, owner of Empire Foods, as to payment of just
wages.
On 7 July 1997, we gave due course to the petition and required the parties to file their respective
memoranda. However, only petitioners and private respondents filed their memoranda, with the NLRC
merely adopting its Comment as its Memorandum.
We find for petitioners.
Invocation of the general rule that factual findings of the NLRC bind this Court is unavailing under the
circumstances. Initially, we are unable to discern any compelling reason justifying the Labor
Arbiter's volte facefrom his 14 April 1992 decision reinstating petitioners to his diametrically opposed
27 July 1994 decision, when in both instances, he had before him substantially the same evidence.
Neither do we find the 29 March 1995 NLRC resolution to have sufficiently discussed the facts so as to
comply with the standard of substantial evidence. For one thing, the NLRC confessed its reluctance to
inquire into the veracity of the Labor Arbiter's factual findings, staunchly declaring that it was "not
about to substitute [its] judgment on matters that are within the province of the trier of facts." Yet, in
the 21 July 1992 NLRC resolution, 8 it chastised the Labor Arbiter for his errors both in judgment and
procedure; for which reason it remanded the records of the case to the Labor Arbiter for compliance
with the pronouncements therein.
What cannot escape from our attention is that the Labor Arbiter did not heed the observations and
pronouncements of the NLRC in its resolution of 21 July 1992, neither did he understand the purpose
of the remand of the records to him. In said resolution, the NLRC summarized the grounds for the
appeal to be:
1. that there is a prima facie evidence of abuse of discretion and acts of gross incompetence
committed by the Labor Arbiter in rendering the decision.
2. that the Labor Arbiter in rendering the decision committed serious errors in the findings of facts.
After which, the NLRC observed and found:
Complainant alleged that the Labor Arbiter disregarded the testimonies of the 99 complainants who
submitted their Consolidated Affidavit of Merit and Position Paper which was adopted as direct
testimonies during the hearing and cross-examined by respondents' counsel.
The Labor Arbiter, through his decision, noted that ". . . complainant did not present any single
witness while respondent presented four (4) witnesses in the persons of Gonzalo Kehyeng, Orlando
Cairo, Evelyn Kehyeng and Elvira Bulagan . . ." (Records, p. 183), that ". . . complainant before the
National Labor Relations Commission must prove with definiteness and clarity the offense charged. . .
." (Record, p. 183; that ". . . complainant failed to specify under what provision of the Labor Code
particularly Art. 248 did respondents violate so as to constitute unfair labor practice . . ." (Record, p.
183); that "complainants failed to present any witness who may describe in what manner respondents
have committed unfair labor practice . . ." (Record, p. 185); that ". . . complainant a [sic] LCP failed to
present anyone of the so called 99 complainants in order to testify who committed the threats and
intimidation . . ." (Record, p.185).
Upon review of the minutes of the proceedings on record, however, it appears that complainant
presented witnesses, namely BENIGNO NAVARRO, JR. (28 February 1991, RECORD, p. 91; 8 March
1991, RECORD, p. 92), who adopted its POSITION PAPER AND CONSOLIDATED AFFIDAVIT as Exhibit
A and the annexes thereto as Exhibit B, B-1 to B-9, inclusive. Minutes of the proceedings on record
show that complainant further presented other witnesses, namely: ERLINDA BASILIO (13 March 1991,
RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENI GARCIA (16 April 1991, Record, p. 96,
see back portion thereof; 2 May 1991, Record, p. 102; 16 May 1991, Record, p. 103; 11 June 1991,
Record, p. 105). Formal offer of Documentary and Testimonial Evidence was made by the complainant
on June 24, 1991 (Record, p.106-109).
The Labor Arbiter must have overlooked the testimonies of some of the individual complainants which
are now on record. Other individual complainants should have been summoned with the end in view of
receiving their testimonies. The complainants should [have been] afforded the time and opportunity to
fully substantiate their claims against the respondents. Judgment should [have been] rendered only
based on the conflicting positions of the parties. The Labor Arbiter is called upon to consider and pass
upon the issues of fact and law raised by the parties.
Toward this end, therefore, it is Our considered view the case should be remanded to the Labor
Arbiter of origin for further proceedings.
Further, We take note that the decision does not contain a dispositive portion or fallo. Such being the
case, it may be well said that the decision does not resolve the issues at hand. On another plane,
there is no portion of the decision which could be carried out by way of execution.
It may be argued that the last paragraph of the decision may be categorized as the dispositive portion
thereof:
xxx xxx xxx
The undersigned Labor Arbiter is not oblivious [to] the fact that respondents have violated a cardinal
rule in every establishment that a payroll and other papers evidencing hour[s] of work, payment, etc.
shall always be maintained and subjected to inspection and visitation by personnel of the Department
of Labor and Employment. As such penalty, respondents should not escape liability for this
technicality, hence, it is proper that all the individual complainants except those who resigned and
executed quitclaim[s] and release[s] prior to the filing of this complaint should be reinstated to their
former position with the admonition to respondents that any harassment, intimidation, coercion or any
form of threat as a result of this immediately executory reinstatement shall be dealt with accordingly.
SO ORDERED.
It is Our considered view that even assuming arguendo that the respondents failed to maintain their
payroll and other papers evidencing hours of work, payment etc., such circumstance, standing alone,
does not warrant the directive to reinstate complainants to their former positions. It is [a] well settled
rule that there must be a finding of illegal dismissal before reinstatement be mandated.
In this regard, the LABOR ARBITER is hereby directed to include in his clarificatory decision, after
receiving evidence, considering and resolving the same, the requisite dispositive portion. 9
Apparently, the Labor Arbiter perceived that if not for petitioners, he would not have fallen victim to
this stinging rebuke at the hands of the NLRC. Thus does it appear to us that the Labor Arbiter, in
concluding in his 27 July 1994 Decision that petitioners abandoned their work, was moved by, at
worst, spite, or at best, lackadaisically glossed over petitioner's evidence. On this score, we find the
following observations of the OSG most persuasive:
In finding that petitioner employees abandoned their work, the Labor Arbiter and the NLRC relied on
the testimony of Security Guard Rolando Cairo that on January 21, 1991, petitioners refused to work.
As a result of their failure to work, the cheese curls ready for repacking on said date were spoiled.
The failure to work for one day, which resulted in the spoilage of cheese curls does not amount to
abandonment of work. In fact two (2) days after the reported abandonment of work or on January 23,
1991, petitioners filed a complaint for, among others, unfair labor practice, illegal lockout and/or
illegal dismissal. In several cases, this Honorable Court held that "one could not possibly abandon his
work and shortly thereafter vigorously pursue his complaint for illegal dismissal (De Ysasi III v. NLRC,
231 SCRA 173; Ranara v. NLRC, 212 SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA 328; Atlas
Consolidated Mining and Development Corp. v. NLRC, 190 SCRA 505; Hua Bee Shirt Factory v. NLRC,
186 SCRA 586; Mabaylan v. NLRC, 203 SCRA 570 and Flexo Manufacturing v. NLRC, 135 SCRA
145). In Atlas Consolidated, supra, this Honorable Court explicitly stated:
It would be illogical for Caballo, to abandon his work and then immediately file an action seeking for
his reinstatement. We can not believe that Caballo, who had worked for Atlas for two years and ten
months, would simply walk away from his job unmindful of the consequence of his act. i.e. the
forfeiture of his accrued employment benefits. In opting to finally to [sic] contest the legality of his
dismissal instead of just claiming his separation pay and other benefits, which he actually did but
which proved to be futile after all, ably supports his sincere intention to return to work, thus negating
Atlas' stand that he had abandoned his job.
In De Ysasi III v. NLRC (supra), this Honorable Court stressed that it is the clear, deliberate and
unjustified refusal to resume employment and not mere absence that constitutes abandonment. The
absence of petitioner employees for one day on January 21, 1991 as testified [to] by Security Guard
Orlando Cairo did not constitute abandonment.
In his first decision, Labor Arbiter Santos expressly directed the reinstatement of the petitioner
employees and admonished the private respondents that "any harassment, intimidation, coercion or
any form of threat as a result of this immediately executory reinstatement shall be dealt with
accordingly.
In his second decision, Labor Arbiter Santos did not state why he was abandoning his previous
decision directing the reinstatement of petitioner employees.
By directing in his first decision the reinstatement of petitioner employees, the Labor Arbiter impliedly
held that they did not abandon their work but were not allowed to work without just cause.
That petitioner employees are "pakyao" or piece workers does not imply that they are not regular
employees entitled to reinstatement. Private respondent Empire Food Products, Inc. is a food and fruit
processing company. In Tabas v. California Manufacturing Co., Inc. (169 SCRA 497), this Honorable
Court held that the work of merchandisers of processed food, who coordinate with grocery stores and
other outlets for the sale of the processed food is necessary in the day-to-day operation[s] of the
company. With more reason, the work of processed food repackers is necessary in the day-to-day
operation[s] of respondent Empire Food Products. 10
It may likewise be stressed that the burden of proving the existence of just cause for dismissing an
employee, such as abandonment, rests on the employer, 11 a burden private respondents failed to
discharge.
Private respondents, moreover, in considering petitioners' employment to have been terminated by

abandonment, violated their rights to security of tenure and constitutional right to due process in not
even serving them with a written notice of such termination. 12 Section 2, Rule XIV, Book V of the
Omnibus Rules Implementing the Labor Code provides:
Sec. 2. Notice of Dismissal - Any employer who seeks to dismiss a worker shall furnish him a written
notice stating the particular acts or omission constituting the grounds for his dismissal. In cases of
abandonment of work, the notice shall be served at the worker's last known address.
Petitioners are therefore entitled to reinstatement with full back wages pursuant to Article 279 of the
Labor Code, as amended by R.A. No. 6715. Nevertheless, the records disclose that taking into account
the number of employees involved, the length of time that has lapsed since their dismissal, and the
perceptible resentment and enmity between petitioners and private respondents which necessarily
strained their relationship, reinstatement would be impractical and hardly promotive of the best
interests of the parties. In lieu of reinstatement then, separation pay at the rate of one month for
every year of service, with
a fraction of at least six (6) months of service considered as one (1) year, is in order. 13
That being said, the amount of back wages to which each petitioner is entitled, however, cannot be
fully settled at this time. Petitioners, as piece-rate workers having been paid by the piece, 14 there is
need to determine the varying degrees of production and days worked by each worker. Clearly, this
issue is best left to the National Labor Relations Commission.
As to the other benefits, namely, holiday pay, premium pay, 13th month pay and service incentive
leave which the labor arbiter failed to rule on but which petitioners prayed for in their complaint, 15 we
hold that petitioners are so entitled to these benefits. Three (3) factors lead us to conclude that
petitioners, although piece-rate workers, were regular employees of private respondents. First, as to
the nature of petitioners' tasks, their job of repacking snack food was necessary or desirable in the
usual business of private respondents, who were engaged in the manufacture and selling of such food
products; second, petitioners worked for private respondents throughout the year, their employment
not having been dependent on a specific project or season; and third, the length of time 16 that
petitioners worked for private respondents. Thus, while petitioners' mode of compensation was on a
"per piece basis," the status and nature of their employment was that of regular employees.
The Rules Implementing the Labor Code exclude certain employees from receiving benefits such as
nighttime pay, holiday pay, service incentive leave 17 and 13th month pay, 18 inter alia, "field
personnel and other employees whose time and performance is unsupervised by the employer,
including those who are engaged on task or contract basis, purely commission basis, or those who are
paid a fixed amount for performing work irrespective of the time consumed in the performance
thereof." Plainly, petitioners as piece-rate workers do not fall within this group. As mentioned earlier,
not only did petitioners labor under the control of private respondents as their employer, likewise did
petitioners toil throughout the year with the fulfillment of their quota as supposed basis for
compensation. Further, in Section 8 (b), Rule IV, Book III which we quote hereunder, piece workers
are specifically mentioned as being entitled to holiday pay.
Sec. 8. Holiday pay of certain employees. -
(b) Where a covered employee is paid by results or output, such as payment on piece work, his
holiday pay shall not be less than his average daily earnings for the last seven (7) actual working days
preceding the regular holiday: Provided, however, that in no case shall the holiday pay be less than
the applicable statutory minimum wage rate.
In addition, the Revised Guidelines on the Implementation of the 13th Month Pay Law, in view of the
modifications to P.D. No. 851 19 by Memorandum Order No. 28, clearly exclude the employer of piece
rate workers from those exempted from paying 13th month pay, to wit:
2. EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:
d. Employers of those who are paid on purely commission, boundary or task basis, and those who are
paid a fixed amount for performing specific work, irrespective of the time consumed in the
performance thereof, except where the workers are paid on piece-rate basis in which case the
employer shall grant the required 13th month pay to such workers. (emphasis supplied)
The Revised Guidelines as well as the Rules and Regulations identify those workers who fall under the
piece-rate category as those who are paid a standard amount for every piece or unit of work produced
that is more or less regularly replicated, without regard to the time spent in producing the same. 20
As to overtime pay, the rules, however, are different. According to Sec. 2(e), Rule I, Book III of the
Implementing Rules, workers who are paid by results including those who are paid on piece-
work, takay, pakiao, or task basis, if their output rates are in accordance with the standards
prescribed under Sec. 8, Rule VII, Book III, of these regulations, or where such rates have been fixed
by the Secretary of Labor in accordance with the aforesaid section, are not entitled to receive overtime
pay. Here, private respondents did not allege adherence to the standards set forth in Sec. 8 nor with
the rates prescribed by the Secretary of Labor. As such, petitioners are beyond the ambit of exempted
persons and are therefore entitled to overtime pay. Once more, the National Labor Relations
Commission would be in a better position to determine the exact amounts owed petitioners, if any.
As to the claim that private respondents violated petitioners' right to self-organization, the evidence
on record does not support this claim. Petitioners relied almost entirely on documentary evidence
which, per se, did not prove any wrongdoing on private respondents' part. For example, petitioners
presented their complaint 21 to prove the violation of labor laws committed by private respondents.
The complaint, however, is merely "the pleading alleging the plaintiff's cause or causes of
action." 22 Its contents are merely allegations, the verity of which shall have to be proved during the
trial. They likewise offered their Consolidated Affidavit of Merit and Position Paper 23 which, like the
offer of their Complaint, was a tautological exercise, and did not help nor prove their cause. In like
manner, the petition for certification election 24 and the subsequent order of certification 25 merely
proved that petitioners sought and acquired the status of bargaining agent for all rank-and-file
employees. Finally, the existence of the memorandum of agreement 26 offered to substantiate private
respondents' non-compliance therewith, did not prove either compliance or non-compliance, absent
evidence of concrete, overt acts in contravention of the provisions of the memorandum.
IN VIEW WHEREOF, the instant petition is hereby GRANTED. The Resolution of the National Labor
Relations Commission of 29 March 1995 and the Decision of the Labor Arbiter of 27 July 1994 in NLRC
Case No. RAB-III-01-1964-91 are hereby SET ASIDE, and another is hereby rendered:
1. DECLARING petitioners to have been illegally dismissed by private respondents, thus entitled to full
back wages and other privileges, and separation pay in lieu of reinstatement at the rate of one
month's salary for every year of service with a fraction of six months of service considered as one
year;
2. REMANDING the records of this case to the National Labor Relations Commission for its
determination of the back wages and other benefits and separation pay, taking into account the
foregoing observations; and
3. DIRECTING the National Labor Relations Commission to resolve the referred issues within sixty (60)
days from its receipt of a copy of this decision and of the records of the case and to submit to this
Court a report of its compliance hereof within ten (10) days from the rendition of its resolution.
Costs against private respondents.
SO ORDERED.
Davide, Jr., Bellosillo, Vitug, Panganiban and Quisumbing, JJ., concur.
G.R. No. 145561 June 15, 2005
HONDA PHILS., INC., petitioner,

vs.
SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review under Rule 45 seeks the reversal of the Court of Appeals’ decision1 dated
September 14, 20002 and its resolution3 dated October 18, 2000, in CA-G.R. SP No. 59052. The
appellate court affirmed the decision dated May 2, 2000 rendered by the Voluntary Arbitrator who
ruled that petitioner Honda Philippines, Inc.’s (Honda) pro-rated payment of the 13th and 14th month
pay and financial assistance to its employees was invalid.
As found by the Court of Appeals, the case stems from the Collective Bargaining Agreement (CBA)
forged between petitioner Honda and respondent union Samahan ng Malayang Manggagawa sa
Honda (respondent union) which contained the following provisions:
Section 3. 13th Month Pay
The COMPANY shall maintain the present practice in the implementation [of] the 13th month pay.
Section 6. 14th Month Pay
The COMPANY shall grant a 14th Month Pay, computed on the same basis as computation of 13th
Month Pay.
Section 7. The COMPANY agrees to continue the practice of granting, in its discretion, financial
assistance to covered employees in December of each year, of not less than 100% of basic pay.
This CBA is effective until year 2000. In the latter part of 1998, the parties started re-negotiations for
the fourth and fifth years of their CBA. When the talks between the parties bogged down, respondent
union filed a Notice of Strike on the ground of bargaining deadlock. Thereafter, Honda filed a Notice
of Lockout. On March 31, 1999, then Department of Labor and Employment (DOLE) Secretary
Laguesma assumed jurisdiction over the labor dispute and ordered the parties to cease and desist
from committing acts that would aggravate the situation. Both parties complied accordingly.
On May 11, 1999, however, respondent union filed a second Notice of Strike on the ground of unfair
labor practice alleging that Honda illegally contracted out work to the detriment of the workers.
Respondent union went on strike and picketed the premises of Honda on May 19, 1999. On June
16, 1999, DOLE Acting Secretary Felicisimo Joson, Jr. assumed jurisdiction over the case and
certified the same to the National Labor Relations Commission (NLRC) for compulsory arbitration.
The striking employees were ordered to return to work and the management accepted them back
under the same terms prior to the strike staged.
On November 22, 1999, the management of Honda issued a memorandum4 announcing its new
computation of the 13th and 14th month pay to be granted to all its employees whereby the thirty-
one (31)-day long strike shall be considered unworked days for purposes of computing said benefits.
As per the company’s new formula, the amount equivalent to 1/12 of the employees’ basic salary
shall be deducted from these bonuses, with a commitment however that in the event that the strike is
declared legal, Honda shall pay the amount deducted.
Respondent union opposed the pro-rated computation of the bonuses in a letter dated November 25,
1999. Honda sought the opinion of the Bureau of Working Conditions (BWC) on the issue. In a letter
dated January 4, 2000,5 the BWC agreed with the pro-rata payment of the 13th month pay as
proposed by Honda.
The matter was brought before the Grievance Machinery in accordance with the parties’ existing
CBA but when the issue remained unresolved, it was submitted for voluntary arbitration. In his
decision6 dated May 2, 2000, Voluntary Arbitrator Herminigildo C. Javen invalidated Honda’s
computation, to wit:
WHEREFORE, in view of all foregoing premises being duly considered and evaluated, it is hereby
ruled that the Company’s implementation of pro-rated 13th Month pay, 14th Month pay and Financial
Assistance [is] invalid. The Company is thus ordered to compute each provision in full month basic
pay and pay the amounts in question within ten (10) days after this Decision shall have become final
and executory.
The three (3) days Suspension of the twenty one (21) employees is hereby affirmed.
SO ORDERED.7
Honda’s Motion for Partial Reconsideration was denied in a resolution dated May 22, 2000. Thus, a
petition was filed with the Court of Appeals, however, the petition was dismissed for lack of merit.
Hence, the instant petition for review on the sole issue of whether the pro-rated computation of the
13th month pay and the other bonuses in question is valid and lawful.
The petition lacks merit.
A collective bargaining agreement refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions
of employment in a bargaining unit.8As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient provided these are not
contrary to law, morals, good customs, public order or public policy.9 Thus, where the CBA is clear
and unambiguous, it becomes the law between the parties and compliance therewith is mandated by
the express policy of the law.10
In some instances, however, the provisions of a CBA may become contentious, as in this case.
Honda wanted to implement a pro-rated computation of the benefits based on the "no work, no pay"
rule. According to the company, the phrase "present practice" as mentioned in the CBA refers to the
manner and requisites with respect to the payment of the bonuses, i.e., 50% to be given in May and
the other 50% in December of each year. Respondent union, however, insists that the CBA
provisions relating to the implementation of the 13th month pay necessarily relate to the computation
of the same.
We agree with the findings of the arbitrator that the assailed CBA provisions are far from being
unequivocal. A cursory reading of the provisions will show that they did not state categorically
whether the computation of the 13th month pay, 14th month pay and the financial assistance would
be based on one full month’s basic salary of the employees, or pro-rated based on the
compensation actually received. The arbitrator thus properly resolved the ambiguity in favor of labor
as mandated by Article 1702 of the Civil Code.11 The Court of Appeals affirmed the arbitrator’s
finding and added that the computation of the 13th month pay should be based on the length of
service and not on the actual wage earned by the worker.
We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings of labor officials,
who are deemed to have acquired expertise in matters within their respective jurisdiction, are
generally accorded not only respect but even finality, and bind us when supported by substantial
evidence. It is not our function to assess and evaluate the evidence all over again, particularly where
the findings of both the arbiter and the Court of Appeals coincide.12
Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, which required all
employers to pay their employees a 13th month pay, was issued to protect the level of real wages
from the ravages of worldwide inflation. It was enacted on December 16, 1975 after it was noted that
there had been no increase in the minimum wage since 1970 and the Christmas season was an
opportune time for society to show its concern for the plight of the working masses so that they may
properly celebrate Christmas and New Year.13
Under the Revised Guidelines on the Implementation of the 13th month pay issued on November 16,
1987, the salary ceiling of P1,000.00 under P.D. No. 851 was removed. It further provided 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. The guidelines pertinently provides:
The "basic salary" of an employee for the purpose of computing the 13th month pay shall include
all remunerations or earnings paid by his employer for services rendered but does not include
allowances and monetary benefits which are not considered or 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.14 (Emphasis supplied)
For employees receiving regular wage, we have interpreted "basic salary" to mean, not the
amount actually receivedby an employee, but 1/12 of their standard monthly wage multiplied by their
length of service within a given calendar year. Thus, we exclude from the computation of "basic
salary" payments for sick, vacation and maternity leaves, night differentials, regular holiday pay and
premiums for work done on rest days and special holidays.15 In Hagonoy Rural Bank v. NLRC,16 St.
Michael Academy v. NLRC,17 Consolidated Food Corporation v. NLRC,18 and similar cases, the
13th month pay due an employee was computed based on the employee’s basic monthly wage
multiplied by the number of months worked in a calendar year prior to separation from employment.
The revised guidelines also provided for a pro-ration of this benefit only in cases of resignation or
separation from work. As the rules state, under these circumstances, an employee is entitled to a
pay in proportion to the length of time he worked during the year, reckoned from the time he started
working during the calendar year.19 The Court of Appeals thus held that:
Considering the foregoing, the computation of the 13th month pay should be based on the length of
service and not on the actual wage earned by the worker. In the present case, there being no gap in
the service of the workers during the calendar year in question, the computation of the 13th month
pay should not be pro-rated but should be given in full.20 (Emphasis supplied)
More importantly, it has not been refuted that Honda has not implemented any pro-rating of the
13th month pay before the instant case. Honda did not adduce evidence to show that the 13th month,
14th month and financial assistance benefits were previously subject to deductions or pro-rating or
that these were dependent upon the company’s financial standing. As held by the Voluntary
Arbitrator:
The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to adopt
a pro-rata computation, aside [from] being in [a] state of rehabilitation due to 227M substantial losses
in 1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This is an implicit acceptance
that prior to the strike, a full month basic pay computation was the "present practice" intended to be
maintained in the CBA.21
The memorandum dated November 22, 1999 which Honda issued shows that it was the first time a
pro-rating scheme was to be implemented in the company. It was a convenient coincidence for the
company that the work stoppage held by the employees lasted for thirty-one (31) days or exactly one
month. This enabled them to devise a formula using 11/12 of the total annual salary as base amount
for computation instead of the entire amount for a 12-month period.
That a full month payment of the 13th month pay is the established practice at Honda is further
bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada. Both attested that
when they were absent from work due to motorcycle accidents, and after they have exhausted all
their leave credits and were no longer receiving their monthly salary from Honda, they still received
the full amount of their 13th month, 14th month and financial assistance pay.22
The case of Davao Fruits Corporation v. Associated Labor Unions, et al.23 presented an example of
a voluntary act of the employer that has ripened into a company practice. In that case, the employer,
from 1975 to 1981, freely and continuously included in the computation of the 13th month pay those
items that were expressly excluded by the law. We have held that this act, which was favorable to
the employees though not conforming to law, has ripened into a practice and therefore can no longer
be withdrawn, reduced, diminished, discontinued or eliminated. Furthermore, in Sevilla Trading
Company v. Semana,24 we stated:
With regard to the length of time the company practice should have been exercised to constitute
voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold that
jurisprudence has not laid down any rule requiring a specific minimum number of years. In the above
quoted case of Davao Fruits Corporation vs. Associated Labor Unions, the company practice lasted
for six (6) years. In another case, Davao Integrated Port Stevedoring Services vs. Abarquez, the
employer, for three (3) years and nine (9) months, approved the commutation to cash of the
unenjoyed portion of the sick leave with pay benefits of its intermittent workers. While in Tiangco vs.
Leogardo, Jr. the employer carried on the practice of giving a fixed monthly emergency allowance
from November 1976 to February 1980, or three (3) years and four (4) months. In all these cases,
this Court held that the grant of these benefits has ripened into company practice or policy
which cannot be peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept the
practice of including non-basic benefits such as paid leaves for unused sick leave and vacation
leave in the computation of their 13th-month pay for at least two (2) years. This, we rule likewise
constitutes voluntary employer practice which cannot be unilaterally withdrawn by the
employer without violating Art. 100 of the Labor Code.25 (Emphasis supplied)
Lastly, the foregoing interpretation of law and jurisprudence is more in keeping with the underlying
principle for the grant of this benefit. It is primarily given to alleviate the plight of workers and to help
them cope with the exorbitant increases in the cost of living. To allow the pro-ration of the 13th month
pay in this case is to undermine the wisdom behind the law and the mandate that the workingman’s
welfare should be the primordial and paramount consideration.26 What is more, the factual milieu of
this case is such that to rule otherwise inevitably results to dissuasion, if not a deterrent, for workers
from the free exercise of their constitutional rights to self-organization and to strike in accordance
with law.27
WHEREFORE, the instant petition is DENIED. The decision and the resolution of the Court of
Appeals dated September 14, 2000 and October 18, 2000, respectively, in CA-G.R. SP No. 59052,
affirming the decision rendered by the Voluntary Arbitrator on May 2, 2000, are hereby
AFFIRMED in toto.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.
G.R. No. 151966 July 8, 2005
JPL MARKETING PROMOTIONS, Petitioner,
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, NOEL GONZALES, RAMON ABESA III
and FAUSTINO ANINIPOT, Respondents
D E C I S I O N TINGA, J.:
This is a Petition for Review of the Decision[1] of the Court of Appeals in CA-G.R. SP No. 62631 dated 03
October 2001 and its Resolution[2] dated 25 January 2002 denying petitioner’s Motion for
Reconsideration, affirming the Resolution of the National Labor Relations Commission (NLRC), Second
Division, dated 27 July 2000, awarding separation pay, service incentive leave pay, and 13th month pay
to private respondents..JPL Marketing and Promotions (hereinafter referred to as “JPL”) is a domestic
corporation engaged in the business of recruitment and placement of workers. On the other hand,
private respondents Noel Gonzales, Ramon Abesa III and Faustino Aninipot were employed by JPL as
merchandisers on separate dates and assigned at different establishments in Naga City and Daet,
Camarines Norte as attendants to the display of California Marketing Corporation (CMC), one of
petitioner’s clients..On 13 August 1996, JPL notified private respondents that CMC would stop its direct
merchandising activity in the Bicol Region, Isabela, and Cagayan Valley effective 15 August 1996.[3] They
were advised to wait for further notice as they would be transferred to other clients. However, on 17
October 1996,[4] private respondents Abesa and Gonzales filed before the National Labor Relations
Commission Regional Arbitration Branch (NLRC) Sub V complaints for illegal dismissal, praying for
separation pay, 13th month pay, service incentive leave pay and payment for moral damages.[5]
Aninipot filed a similar case thereafter..After the submission of pertinent pleadings by all of the parties
and after some clarificatory hearings, the complaints were consolidated and submitted for resolution.
Executive Labor Arbiter Gelacio L. Rivera, Jr. dismissed the complaints for lack of merit.[6] The Labor
Arbiter found that Gonzales and Abesa applied with and were employed by the store where they were
originally assigned by JPL even before the lapse of the six (6)-month period given by law to JPL to
provide private respondents a new assignment. Thus, they may be considered to have unilaterally
severed their relation with JPL, and cannot charge JPL with illegal dismissal.[7] The Labor Arbiter held
that it was incumbent upon private respondents to wait until they were reassigned by JPL, and if after
six months they were not reassigned, they can file an action for separation pay but not for illegal
dismissal.[8] The claims for 13th month pay and service incentive leave pay was also denied since
private respondents were paid way above the applicable minimum wage during their
employment.[9].Private respondents appealed to the NLRC. In its Resolution,[10] the Second Division of
the NLRC agreed with the Labor Arbiter’s finding that when private respondents filed their complaints,
the six-month period had not yet expired, and that CMC’s decision to stop its operations in the areas
was beyond the control of JPL, thus, they were not illegally dismissed. However, it found that despite
JPL’s effort to look for clients to which private respondents may be reassigned it was unable to do so,
and hence they are entitled to separation pay.[11] Setting aside the Labor Arbiter’s decision, the NLRC
ordered the payment of:
1. Separation pay, based on their last salary rate and counted from the first day of their employment
with the respondent JPL up to the finality of this judgment;
2. Service Incentive Leave pay, and 13th month pay, computed as in No.1 hereof.[12] Aggrieved, JPL
filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of Appeals, imputing
grave abuse of discretion on the part of the NLRC. It claimed that private respondents are not by law
entitled to separation pay, service incentive leave pay and 13th month pay.
The Court of Appeals dismissed the petition and affirmed in toto the NLRC resolution. While conceding
that there was no illegal dismissal, it justified the award of separation pay on the grounds of equity and
social justice.[13] The Court of Appeals rejected JPL’s argument that the difference in the amounts of
private respondents’ salaries and the minimum wage in the region should be considered as payment for
their service incentive leave and 13th month pay.[14] Notwithstanding the absence of a contractual
agreement on the grant of 13th month pay, compliance with the same is mandatory under the law.
Moreover, JPL failed to show that it was exempt from paying service incentive leave pay. JPL filed a
motion for reconsideration of the said resolution, but the same was denied on 25 January 2002.[15] In
the instant petition for review, JPL claims that the Court of Appeals committed reversible error in
rendering the assailed Decision and Resolution.[16] The instant case does not fall under any of the
instances where separation pay is due, to wit: installation of laborsaving devices, redundancy,
retrenchment or closing or cessation of business operation,[17] or disease of an employee whose
continued employment is prejudicial to him or co-employees,[18] or illegal dismissal of an employee but
reinstatement is no longer feasible.[19] Meanwhile, an employee who voluntarily resigns is not entitled
to separation unless stipulated in the employment contract, or the collective bargaining agreement, or is
sanctioned by established practice or policy of the employer.[20] It argues that private respondents’
good record and length of service, as well as the social justice precept, are not enough to warrant the
award of separation pay. Gonzales and Aninipot were employed by JPL for more than four (4) years,
while Abesa rendered his services for more than two (2) years, hence, JPL claims that such short period
could not have shown their worth to JPL so as to reward them with payment of separation pay.[21].In
addition, even assuming arguendo that private respondents are entitled to the benefits awarded, the
computation thereof should only be from their first day of employment with JPL up to 15 August 1996,
the date of termination of CMC’s contract, and not up to the finality of the 27 July 2000 resolution of the
NLRC.[22] To compute separation pay, 13th month pay, and service incentive leave pay up to 27 July
2000 would negate the findings of both the Court of Appeals and the NLRC that private respondents
were not unlawfully terminated.[23] Additionally, it would be erroneous to compute service incentive
leave pay from the first day of their employment up to the finality of the NLRC resolution since an
employee has to render at least one (1) year of service before he is entitled to the same. Thus, service
incentive leave pay should be counted from the second year of service.[24].On the other hand, private
respondents maintain that they are entitled to the benefits being claimed as per the ruling of this Court
in Serrano vs. NLRC, et al.[25] They claim that their dismissal, while not illegal, was tainted with bad
faith.[26] They allege that they were deprived of due process because the notice of termination was
sent to them only two (2) days before the actual termination.[27] Likewise, the most that JPL offered to
them by way of settlement was the payment of separation pay of seven (7) days for every year of
service.[28].Replying to private respondents’ allegations, JPL disagrees that the notice it sent to them
was a notice of actual termination. The said memo merely notified them of the end of merchandising for
CMC, and that they will be transferred to other clients.[29] Moreover, JPL is not bound to observe the
thirty (30)-day notice rule as there was no dismissal to speak of. JPL counters that it was private
respondents who acted in bad faith when they sought employment with another establishment, without
even the courtesy of informing JPL that they were leaving for good, much less tender their
resignation.[30] In addition, the offer of seven (7) days per year of service as separation pay was merely
an act of magnanimity on its part, even if private respondents are not entitled to a single centavo of
separation pay.[31] The case thus presents two major issues, to wit: whether or not private respondents
are entitled to separation pay, 13th month pay and service incentive leave pay, and granting that they
are so entitled, what should be the reckoning point for computing said awards..Under Arts. 283 and 284
of the Labor Code, separation pay is authorized only in cases of dismissals due to any of these reasons:
(a) installation of labor saving devices; (b) redundancy; (c) retrenchment; (d) cessation of the employer’s
business; and (e) when the employee is suffering from a disease and his continued employment is
prohibited by law or is prejudicial to his health and to the health of his co-employees. However,
separation pay shall be allowed as a measure of social justice in those cases where the employee is
validly dismissed for causes other than serious misconduct or those reflecting on his moral character,
but only when he was illegally dismissed.[32] In addition, Sec. 4(b), Rule I, Book VI of the Implementing
Rules to Implement the Labor Code provides for the payment of separation pay to an employee entitled
to reinstatement but the establishment where he is to be reinstated has closed or has ceased operations
or his present position no longer exists at the time of reinstatement for reasons not attributable to the
employer..The common denominator of the instances where payment of separation pay is warranted is
that the employee was dismissed by the employer.[33] In the instant case, there was no dismissal to
speak of. Private respondents were simply not dismissed at all, whether legally or illegally. What they
received from JPL was not a notice of termination of employment, but a memo informing them of the
termination of CMC’s contract with JPL. More importantly, they were advised that they were to be
reassigned. At that time, there was no severance of employment to speak of..Furthermore, Art. 286 of
the Labor Code allows the bona fide suspension of the operation of a business or undertaking for a
period not exceeding six (6) months, wherein an employee/employees are placed on the so-called
“floating status.” When that “floating status” of an employee lasts for more than six months, he may be
considered to have been illegally dismissed from the service. Thus, he is entitled to the corresponding
benefits for his separation, and this would apply to suspension either of the entire business or of a
specific component thereof.[34].As clearly borne out by the records of this case, private respondents
sought employment from other establishments even before the expiration of the six (6)-month period
provided by law. As they admitted in their comment, all three of them applied for and were employed
by another establishment after they received the notice from JPL.[35] JPL did not terminate their
employment; they themselves severed their relations with JPL. Thus, they are not entitled to separation
pay..The Court is not inclined in this case to award separation pay even on the ground of compassionate
justice. The Court of Appeals relied on the cases[36] wherein the Court awarded separation pay to
legally dismissed employees on the grounds of equity and social consideration. Said cases involved
employees who were actually dismissed by their employers, whether for cause or not. Clearly, the
principle applies only when the employee is dismissed by the employer, which is not the case in this
instance. In seeking and obtaining employment elsewhere, private respondents effectively terminated
their employment with JPL..In addition, the doctrine enunciated in the case of Serrano[37] cited by
private respondents has already been abandoned by our ruling in Agabon vs. National Labor Relations
Commission.[38] There we ruled that an employer is liable to pay indemnity in the form of nominal
damages to a dismissed employee if, in effecting such dismissal, the employer failed to comply with the
requirements of due process. However, private respondents are not entitled to the payment of damages
considering that there was no violation of due process in this case. JPL’s memo dated 13 August 1996 to
private respondents is not a notice of termination, but a mere note informing private respondents of the
termination of CMC’s contract and their reassignment to other clients. The thirty (30)-day notice rule
does not apply. Nonetheless, JPL cannot escape the payment of 13th month pay and service incentive
leave pay to private respondents. Said benefits are mandated by law and should be given to employees
as a matter of right..Presidential Decree No. 851, as amended, requires an employer to pay its rank and
file employees a 13th month pay not later than 24 December of every year. However, employers not
paying their employees a 13th month pay or its equivalent are not covered by said law.[39] The term “its
equivalent” was defined by the law’s implementing guidelines as including Christmas bonus, mid-year
bonus, cash bonuses and other payment amounting to not less than 1/12 of the basic salary but shall
not include cash and stock dividends, cost-of-living-allowances and all other allowances regularly
enjoyed by the employee, as well as non-monetary benefits.[40].On the other hand, service incentive
leave, as provided in Art. 95 of the Labor Code, is a yearly leave benefit of five (5) days with pay, enjoyed
by an employee who has rendered at least one year of service. Unless specifically excepted, all
establishments are required to grant service incentive leave to their employees. The term “at least one
year of service” shall mean service within twelve (12) months, whether continuous or broken reckoned
from the date the employee started working.[41] The Court has held in several instances that “service
incentive leave is clearly demandable after one year of service.”[42] Admittedly, private respondents
were not given their 13th month pay and service incentive leave pay while they were under the employ
of JPL. Instead, JPL provided salaries which were over and above the minimum wage. The Court rules
that the difference between the minimum wage and the actual salary received by private respondents
cannot be deemed as their 13th month pay and service incentive leave pay as such difference is not
equivalent to or of the same import as the said benefits contemplated by law. Thus, as properly held by
the Court of Appeals and by the NLRC, private respondents are entitled to the 13th month pay and
service incentive leave pay..However, the Court disagrees with the Court of Appeals’ ruling that the 13th
month pay and service incentive leave pay should be computed from the start of employment up to the
finality of the NLRC resolution. While computation for the 13th month pay should properly begin from
the first day of employment, the service incentive leave pay should start a year after commencement of
service, for it is only then that the employee is entitled to said benefit. On the other hand, the
computation for both benefits should only be up to 15 August 1996, or the last day that private
respondents worked for JPL. To extend the period to the date of finality of the NLRC resolution would
negate the absence of illegal dismissal, or to be more precise, the want of dismissal in this case. Besides,
it would be unfair to require JPL to pay private respondents the said benefits beyond 15 August 1996
when they did not render any service to JPL beyond that date. These benefits are given by law on the
basis of the service actually rendered by the employee, and in the particular case of the service incentive
leave, is granted as a motivation for the employee to stay longer with the employer. There is no cause
for granting said incentive to one who has already terminated his relationship with the employer..The
law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the
employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is but
recognition of the inherent economic inequality between labor and management. The intent is to
balance the scale of justice; to put the two parties on relatively equal positions. There may be cases
where the circumstances warrant favoring labor over the interests of management but never should the
scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be
denied to none).[43].
WHEREFORE, the petition is GRANTED IN PART. The Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 62631 are hereby MODIFIED. The award of separation pay is deleted. Petitioner is
ordered to pay private respondents their 13th month pay commencing from the date of employment up
to 15 August 1996, as well as service incentive leave pay from the second year of employment up to 15
August 1996. No pronouncement as to costs.
SO ORDERED.
PUNO, J., (Chairman), AUSTRIA-MARTINEZ, CALLEJO, SR., and CHICO-NAZARIO, JJ., concur.

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Labor Law – Conditions of Employment

G.R. No. L-44169 December 3, 1985

ROSARIO A. GAA, petitioner,

Federico C. Alikpala and Federico Y. Alikpala, Jr. for petitioner.

Borbe and Palma for private respondent.

Teehankee (Chairman), Plana, Gutierrez, Jr. and De la Fuente, JJ., concur.

Melencio-Herrera (Chairperson) and Relova, JJ., is on leave.

G.R. No. L-50999 March 23, 1990

Raul E. Espinosa for petitioners.

Lucas Emmanuel B. Canilao for petitioner A. Manuel.

Atienza, Tabora, Del Rosario & Castillo for private respondent.

The antecedent facts are as follows:

ARTICLE XIV — Retirement Gratuity

RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered

Hence, the present petition.

The petition is impressed with merit.

On its part, the NLRC ruled (p. 110, Rollo):

Narvasa (Chairman), Cruz, Gancayco and Griño-Aquino, JJ., concur.

G.R. No. L-72654-61 January 22, 1990

J.C. Espinas & Associates for petitioners.

Hence, the instant petition.

We rule in favor of petitioners.

Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly

We have consistently ruled that in determining the existence of an employer-employee relationship,

Gutierrez, Jr., Bidin and Cortés, JJ., concur.

Feliciano, J., concurs in the result.

G.R. No. L-7349 July 19, 1955

Pablo C. Sanidad for petitioner.

REYES, J. B. L., J.:

xxx xxx xxx

xxx xxx xxx

Rice ration P.55 per

"Supplements", therefore, constitute extra renumeration or special privileges or benefits given to or

No person, firm, or corporations, business establishment or place or center of labor shall

G.R. No. L-12444 February 28, 1963

STATES MARINE CORPORATION and ROYAL LINE, INC., petitioners,

Pedro B. Uy Calderon for petitioners.

However, section 19, same law, states —

"Supplements", therefore, constitute extra remuneration or special privileges or benefits

The CIR held —

The ruling is in conformity with the evidence, law and equity.

[G.R. No. 118506. April 18, 1997.]

NORMA MABEZA, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, PETER

Tenefrancia Agranzamendez, Liceralde & Associates for Petitioner.

Romeo M. Rome for Private Respondent.

1. LABOR AND SOCIAL LEGISLATION; DISMISSAL; JUST CAUSE, BURDEN OF PROOF. — In

7. ID.; ILLEGAL DISMISSAL; SEPARATION PAY IN LIEU OF REINSTATEMENT PROPER IN

(Sgd.) (Sgd.) (Sgd.)

SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY

(Sgd) (Sgd.) (Sgd.)

MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA

JONATHAN PICART JOSE DIZON

The manipulations of private respondents should not be countenanced. 23

The answer in this case must inevitably be in the affirmative.

WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations

Padilla, Bellosillo and Vitug, JJ., concur.

Hermosisima, Jr., J., is on leave.

G.R. No. L-58870 December 18, 1987

CEBU INSTITUTE OF TECHNOLOGY (CIT), petitioner,

No. L-68345 December 18, 1987

Nos. L-69224-5 December 18, 1987

FAR EASTERN UNIVERSITY EMPLOYEES LABOR UNION, petitioner,

No. 70832 December 18, 1987