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G. R. No.

151370 - December 4, 2002 In September of 1993, respondent, upon instruction of Bondoc,

submitted a report5 "RE: OUR COMMENTS AND ACTIONS
vs. MARIA LINDA R. FAROLAN, Respondent. PERFORMANCE FOR JANUARY - JULY 1993" the pertinent
portions of which read:
"1 January to July 1993 Sales x x x
1993 1992 CHANGE
Before this Court is a Petition for Review under Rule 45 of the Seaman 23 3 423 (190
1997 Rules of Civil Procedure assailing the Court of Appeals 1)
June 28, 2001 Decision1 which set aside the decision of the Expats/Tourists 50 3 7 16 (213
National Labor Relations ComPmission (NLRC) reversing that of PTAs 34 6 196 150
the Labor Arbiter, and 2) January 9, 2002 2 Resolution denying a
Refugees/IOM 53 864 811
reconsideration of its decision.

Petitioner Asia Pacific Chartering (Phils) Inc. was, until 1996, the xxx
general sales agent (GSA) of the Scandinavian Airline System
(SAS), an off-line international airline company with license to do Explanations.
business in the Philippines. As GSA, petitioner sold passenger
and cargo spaces for airlines operated by SAS. 1. International Organization for Migration (IOM)-both Vietnam
and Scandinavian Governments have terminated projects for
Respondent Maria Linda R. Farolan was on December 16, 1992 refugees; hence the tremendous decrease (94%) x x x.
hired as Sales Manager of petitioner for its passenger and cargo
GSA operations for SAS, following her conformity to a December 2. Seamans Fares-Rates not competitive enough.
10, 1992 letter-offer of employment 3 from petitioner through its
Vice President/Comptroller Catalino Bondoc. The pertinent 3. Expats/Tourists-In a market where on-line carriers
portion of the letter-offer reads: were dropping rates drastically , we were losing passengers to
said carriers.
"Dear Ms. Farolan:
1 The present Market:
Confirming our previous discussions, ASIA-PACIFIC
CHARTERING PHIL., INC. is pleased to offer you the position of 1. As SAS is off-line , we have no control over space and to an
Sales Manager of its Passenger and Cargo Operations for extent our rates are higher because of proration with delivering
SCANDINAVIAN AIRLINES SYSTEM in the Philippines, carriers.
commencing on December 16, 1992 on the following terms:
2. On-lines do not prorate with other carriers therefore can dive
Monthly fares x x x.
Basic Pay P 22, 000.00
I have convinced Mr. Jespersen to bring down the fares to be
Housing Allowance 4,000.00 more competitive. The reason he did not do so earlier was
Transportation Allowance Cash Equivalent because low-yield fares are low in priority for confirming seats.
(200 liters of gas) But now that SAS is considering increasing their frequencies ex-
Hongkong before year-end, this will be advantageous to boosting
Meal Allowance 750.00
our sales.

Please affix your signature below if you find the foregoing A. Measures to take remainder of 1993 and for 1994:
acceptable and return to us a signed duplicate. Meanwhile, we
certainly look forward to your joining us and rest assured of our
1. We have negotiated a lower fare for
fullest support.
seamen (effective September) which is competitive. We are
already getting positive response from agents. Since this(sic)
xxx low-yield sales, Hongkong did not adjust fare accordingly first
half of 1993 because of space constraints.
(Sgd) Maria Linda R. Farolan
2. As SAS still prefers high-yield sales, we have offered
Conforme:" (Emphasis supplied). incentives to Ameco as Asian Development Bank (ADB)
(effective 1st June for one year) with Mr. Jespersens approval x
It is gathered that Leslie Murray, the then Sales Manager of x x.
petitioner, talked to respondent into accepting the position after
verbally briefing her on the nature of the position. In addition, ADB itself is willing to consider proposals we submit
to them in the case of cost-savings. In exchange, they can
Soon after respondent assumed her post, she participated in a endorse to SAS a relevant share of their Europe travel x x x.
number of meetings/seminars4 including a Customer Service
Seminar in Bangkok, Thailand, a Regional Sales Meeting on the 3. We have also negotiated a lower net fare for Economy Class.
technical aspects of airline commercial operations in February This rate is also competitive and is in force.
1993, and a course on the highly technical airline computer
reservations system called "Amadeus", all geared towards 4. Incentive Program for Agents-Using the points system similar
improving her marketing and sales skills. to PALs promo (PALs Smiles), to stimulate sales. We are at
present fine-tuning mechanics for Hongkongs approval which we
intend to launch before Christmas. This promo is self-sustaining only your long-haul sales and do not include European sectors.
(no significant expenses to be incurred) The correct figure for the period will be 436,000 USD in target for
long-haul (actual 362 TUSD) and 642 TUSD total with 514 TUSD
5. We are currently pushing sales for Baltic area/Russia as we achieved.
have the best rates. We have identified the agents who have
passengers to these destinations and we are focusing on them x Please be so kind and inform Bob accordingly.
x x." (Emphasis and underscoring supplied).
As reflected in respondents report, there was a drop in SAS
sales revenues which to her was attributable to market forces On even date, however, petitioner sent respondent a letter of
beyond her control. termination8 on the ground of "loss of confidence." The letter
Noting the marked decline in SAS sales revenues, petitioner
directed its high ranking officer Roberto Zozobrado in January "This confirms our (Bob Zozobrado and myself) July 4, 1994
1994 to conduct an investigation on the matter and identify the verbal advice to you regarding Managements decision to
problem/s and implement possible solutions. terminate your Services as our GSA Manager for
Zozobrado thus informally took over some of respondents Philippines, thirty (30) days upon receipt of this Notice, due to
marketing and sales responsibilities, albeit respondent retained our loss of confidence in your Managerial and Marketing
her title as Sales Manager and continued to receive her salary as capabilities. As explained to you by Mr. Zozobrado and myself,
such. records will show that under your Management (or lack of it), our
SAS-GSA performance is, as follows:
By petitioners claim, Zozobrado found out that respondent did
not adopt any sales strategy nor conduct any sales meeting or A. 1993 vs. 1992
develop other sources of revenue for SAS, she having simply let
her sales staff perform their functions all by themselves; in 1994, Gross Revenue - 29 % shortfall
Soren Jespersen, General Manager of SAS in Hongkong,
Southern China, Taipei and the Philippines, came to the Operating Expenses - 2% over
Philippines to assess the statistics on SAS sales revenues and
SAS was convinced that respondent was not fit for the job of
Net Cash Flow - 79% shortfall
Sales Manager; and in view of the changes introduced by
Zozobrado, SAS-GSA sales operations drew positive results.
B. JAN-APR 94 vs. JAN-APR 92
On May 21, 1994, respondent received a message 6 from
Jespersen reading: Revenues - 34% shortfall

"Dear Linda and Bob [Zozobrado], Operating Expenses - 6% over

First of all congratulation to your sale result in April. You reached Net Cash Flow - 94% shortfall
and exceeded the target by 50% In C/class (Fantastic!!!) and 1%
In M/class. This is the second month in a row (and the last 2 first Several times in the past, we have made you aware in the need
in more than a year) and hopefully the beginning of a new and to improve your sales performance and gain the respect of your
positive trend. staff which have openly expressed their concern on their lack of
direction under your management. Even our principal (SAS) had
xxx negative comments about the way you handle urgent
requirements of the Regional Office. SAS was also alarmed by
the aforementioned dismal overall Performance of APC/SAS. All
As you can see May looks very good.
these prompted us to decide to replace you as our SAS GSA
Manager to save the situation and our representation of the
With the agreed focus on selling the M/class and all the activities SAS-GSA in the Philippines.
initiated, Im sure that the rest of the period will pick very soon.
x x x" (Quoted verbatim; Emphasis supplies).
x x x" (Underscoring supplied; Quoted verbatim).
Thus spawned the filing by respondent of a complaint for illegal
On July 18, 1994,7 respondent received another message from dismissal against petitioner, Bondoc, Zozobrado and one Donald
Jespersen reading: Marshall (the record indicates that he had ceased to be
connected with petitioner when the case was pending before the
"Dear Linda, Labor Arbiter), with prayer for damages and attorneys fees. In
her complaint petitioner alleged that Bondoc and Zozobrado had
The sales report for June 1994 did unfortunately not reach target asked her to tender her resignation as she was not the person
in C/class but in M/class you managed very well. Totally 9% whom SAS was looking for to handle the position of Sales
below target. Manager9 but that she refused, hence, she was terminated by
the letter of July 18, 1994 letter.10
The pre bookings eff. 14 July looks very good and encouraging
and with 2 weeks to go July should not be a problem. (enclosed) The Labor Arbiter, after a detailed analysis of the evidence for
both parties, found for respondent upon the following issues:
Please send my regards to all the girls and tell them to keep up
the good work. 1. Whether or not complainant was validly terminated for cause;

Just for reason of clarification. Enclosed to your action list is a 2. Whether or not due process was observed when complainant
production report for Jan-May 1994. The figures I send to you is was terminated; and
3. Whether or not any of the parties are entitled to damages, ASSUMING, THAT RESPONDENTS TERMINATION WAS
and disposed in his decision11 as follows: DAMAGES [MILLARES vs. NLRC, 328 SCRA 79 (2001)]
"WHEREFORE, finding the dismissal of the complainant Ms GOOD FAITH [GONZALES vs. NLRC, G.R. NO. 131653-26
Linda Farolan to be without just cause, effected with malice, ill March 2001]. THE CA, HOWEVER, REVERSED THE
will and bad faith, respondent Asian Pacific Chartering Philippine, PRESUMPTION. IT PRESUMED-WITHOUT ANY EVIDENCE
Inc. is hereby ordered to pay her separation pay of Forty Four WHATSOEVER-THAT APC ACTED IN BAD FAITH IN
Thousand Pesos (P44,000.00), and all the benefit that would TERMINATING RESPONDENT WITHOUT DUE REGARD TO
have been due her under the premises. Asian Pacific Chartering THE HARSH CONSEQUENCES OF THE TERMINATION
is likewise ordered to pay complainant moral damages in the
amount of One Million Five Hundred Thousand Pesos The issue in the main is whether or not respondents dismissal
(P1,500,000.00) and exemplary damages in the amount of was legal.
Seven Hundred Fifty Thousand Pesos (P750,000.00), nominal
damages of Five Thousand Pesos (P5,000.00) and the A statement of the requisites for a valid dismissal of an employee
equivalent of 25% of the total award as attorneys fees." is thus in order, to wit: (a) the employee must be afforded due
process, i.e., he must be given opportunity to be heard and to
On appeal, the NLRC, by Decision of March 22, 1999, 12 reversed defend himself; and (b) dismissal must be for a valid cause as
the Labor Arbiters decision, it recognizing the right of petitioner provided in Article 282 of the Labor Code or any of the
as employer to terminate or dismiss employees based on loss of authorized causes under Article 283 and 284 of the same
trust and confidence, the right being a management prerogative. Code.17

Respondents Motion for Reconsideration of the NLRC Decision As regards the first requisite, the following substantiated findings
having been denied, she brought her case to the Court of of the Labor Arbiter, which were adopted by the Court of
Appeals via Certiorari.13 Appeals, reflect respondents deprivation of due process:

By Decision of June 28, 2001,14 the Court of Appeals, as stated "x x x

early on, reversed the NLRC decision and disposed as follows:
[W]e find that the manner by which complainant was dismissed
"WHEREFORE, premises considered, the challenged decision violated the basic precepts of fairness and due process. First,
dated March 22, 1999 and the Resolution dated July 16, 1999 of without any semblance of, or written authority whatsoever (TSN
public respondent National Labor Relations Commission dated January 30, 1996, pp. 46 - 48), respondent Zozobrado
(Second Division) are hereby set aside for having been issued took over the functions of complainant. Complainant claims that
with grave abuse of discretion amounting to lack or in excess of she has been told it was upon the will of respondent Marshall
jurisdiction. The decision dated September 17, 1998 of Labor that she be replaced. Although respondent Zozobrado may have
Arbiter Romulus S. Protacio is hereby upheld with been merely giving pointers and suggestions to the staff of
modifications that the award of attorneys fees shall only be complainant, the appearance of authority was unpleasantly
equivalent to ten percent (10%) of the total monetary award. In conspicuous. Later, respondent Bondoc summoned complainant
addition, the award for nominal damages is deleted for lack of and told her to tender her resignation or face termination.
basis." (Underscoring supplied). Complainant, not having been given a justifiable ground, refused
to resign. Thereafter, she was finally terminated, without being
Petitioner filed a motion for reconsideration 15 of the Court of afforded the opportunity to be heard and to present evidence in
Appeals decision but it was denied, hence, the present Petition her defense. She was never given a written notice stating the
for Review on Certiorari16 anchored on the following grounds: particular acts or omission constituting the grounds for her
dismissal as required by law. x x x"18
As regards the second requisite, the rule is settled that in
termination cases, the employer bears the onus of proving that
the dismissal is for just cause failing which the dismissal is not
justified and the employee is entitled to reinstatement. 19
THE DUTIES DEMANDED BY SUCH POSITION. Petitioner claims that respondent failed to live up to
managements expectation in light of her failure to adopt sales
and marketing strategies to increase sales revenues of SAS,
which failure is reflective of her incompetence and inefficiency,
thus resulting to loss of revenues in 1993 and 1994.
Petitioner adds that had it not been through Zozobrados efforts,
SAS sales revenues could not have recovered.
CONFIRMED THAT RESPONDENT WAS NOT FIT FOR THE Petitioner further claims that Jespersen was the one who
POSITION OF MANAGER AND, THAT NO SPECIAL initiated the termination of respondent because of her "dismal
CIRCUMSTANCES SUFFICIENT TO TRIGGER THE SHARP performance" in handling its operations.
MARKET. And petitioner reiterates the principle that the right to dismiss a
managerial employee is a measure of self-preservation, it citing
III the cases of Grand Motor Parts Corp. v. Minister of Labor et
al.,20 and Buiser et al. v. Legardo.21
ACTED WITH GRAVE ABUSE OF DISCRETION. EVEN Before passing on petitioners position, this Court deems it
imperative to discuss the nature of respondents job as sales
manager of petitioner. It is not disputed that her job description, Respondents detailed REPORT dated September 8, 1993,
and the terms and conditions of her employment, with the quoted above, relative to SAS profit and loss for 1993, which
exception of her salary and allowances, were never reduced to was closely examined and analyzed by the Labor Arbiter,
writing. contains an explanation of what brought about the decline in
sales revenues. And it contains too a number of recommended
Recent decisions of this Court distinguish the treatment of measures on improvement of sales for the remainder of 1993
managerial employees from that of rank and file personnel and for 1994.
insofar as the application of the doctrine of loss of trust and
confidence is concerned.22 As did the Labor Arbiter and the Court of Appeals, this Court
finds respondents explanation in her Report behind the decline in
"Thus with respect to rank and file personnel, loss of trust and sales revenues as due to market forces beyond respondents
confidence as ground for valid dismissal requires proof of control plausible. In any event, there is no showing that the
involvement in the alleged events in question and that mere decline is reflective of any willfull breach of duties by respondent.
uncorroborated assertions and accusations by the employer will
not be sufficient. But as regards a managerial employee, mere The two letters sent by SAS to respondent in 1994 in fact negate
existence of a basis for believing that such employee has willful breach of her duties by respondent. The first (received on
breached the trust of his employer would suffice for his May 21, 1994) congratulated her and Zozobrado for exceeding
dismissal." (Underscoring supplied) "sale (sic) result in April" 1994. Petitioners argument that
respondent could not invoke these letters in her favor as they
As enunciated in Samson v. NLRC, 330 SCRA 460, were intended for Zozobrado fails. The letters were addressed to
respondent and Zozobrado. The second letter (received on July
"Before one may be properly considered a managerial 18, 1994) which was addressed to respondent, while noting that
employee, all the following conditions must be met: the sales for June 1994 did not reach the target in "C/class",
noted that in "M/class" she "managed very well". And it went on
to state that "[t]he pre-bookings eff. 14 July looks (sic) very good
(1) Their primary duty consists of the management of the
and encouraging and with 2 weeks to go July should not be a
establishment in which they are employed or of a department or
problem." In fact it requested respondent to "send . . . regards to
subdivision thereof;
all the girls and tell them to keep up the good work."
(2) They customarily and regularly direct the work of two or more
While petitioner attributes the improvement of sales in 1994 to
employees therein;
Zozobrado, the fact remains that respondent was still the Sales
Manager up to July 1994, in charge of those "sales meetings"
(3) They have the authority to hire or fire other employees of during which pertinent market strategies were developed and
lower rank; or their suggestions and recommendations as to the utilized to increase sales.
hiring and firing and as to the promotion or any other change of
status of other employees are given particular weight. (Section
In another vein, petitioner attributes loss of confidence to
2(b), Rule I, Book III of the Omnibus Rules Implementing the
respondents alleged "gross inefficiency and incompetence," it
Labor Code, emphasis supplied).
citing, as earlier stated, the cases of Grand Motor Parts Corp.
(supra) and Buiser et al. (supra).
By respondents claim, her function, as verbally explained to her
by Murray, dealt mainly with servicing of existing
The Grand Motors case, however, involved
clientele.23 Bondoc, however, described respondents functions
a probationary employee-manager who failed to, among other
and duties as critical.24
things, submit required monthly reports and violated company
policy, clearly mirroring his insubordination and disrespect to
The following ruling of this Court in Paper Industries Corp. of the express instructions of management.
Philippines v. Laguesma25 is instructive:
While this Court, in the Buiser case (supra), held that "[f]ailure to
"Managerial employees are ranked as Top Managers, Middle observe prescribed standards of work, or to fulfill reasonable
Managers and First Line Managers. The mere fact that an work assignments due to inefficiency" may be just cause for
employee is designated "manager" does not ipso facto make him dismissal, petitioner has neither shown what standards of work
one-designation should be reconciled with the actual job or reasonable work assignments were prescribed which
description of the employee for it is the job description that respondent failed to observe nor that if she did fail to observe
determines the nature of employment." 24 (Underscoring any such, it was due to inefficiency.
Finally and at all events, given respondents previous work
The absence of a written job description or prescribed work experience as herein below indicated, to wit:
standards, however, leaves this Court in the dark.
"Period Company Position
Even assuming, however, that respondent was a managerial 1960-1967 Express Tours, Inc. Clerk-Reservations &
employee, the stated ground (in the letter of termination) for her Ticketing
dismissal, "loss of confidence," should have a basis and 1968-1970 House of Travel, Inc. Sales Manager
determination thereof cannot be left entirely to the employer. 1971-1973 Super Travel Manager, Administration
1973-1978 American Express, Manager, World Health
Inc. Organization Account
Loss of trust and confidence to be a valid ground for an 1978-1983 F.A.R. Travel Masters, President & General
employees dismissal must be based on a willful breach and Inc. Manager
founded on clearly established facts. 26 A breach is willful if it is 1983-1984 Cebu Plaza Director, Convention
done intentionally, knowingly and purposely, 1985-1989 American Express, Manager-World Health
without justifiable excuse, as distinguished from an act done Inc. Organization In-Plant Office
carelessly, thoughtlessly, heedlessly or inadvertently.27 Senior Manager-Asian
Development Bank In-Plant
1992-1994 Asia Pacific Sales Manager, Passenger

Chartering Phil. Inc. & Cargo GSA Operations, 9. On July 18, 1994, again without regard to the basic
Scandinavian Airlines System." requirements of due process, I was given a notice of termination
signed by Mr. Bondoc; the supposed ground for my termination
(Exhibit "A", p. 72, Court of Appeals Rollo), was APCs alleged loss of confidence in my managerial and
marketing capabilities due to the companys alleged dismal
this Court is not prepared to find for petitioner. It bears noting performance during my term of office as GSA Sales Manager;
that there is no showing that respondent represented herself as once more, I was never called to answer this charge; a copy of
possessed of the highest degree of skill and care known in the the notice of termination is hereto attached as Annex E;
trade. And it is not disputed that respondent was approached by
petitioners then Sales Manager Murray, and offered the position 10. The news of my termination circulated at once in the travel
of Sales Manager. She thus could not just be unceremoniously industry and as a result, I was and still am frequently asked by
discharged for "loss of confidence" arising from alleged my friends and acquaintances in the industry about my
incompetency28. termination from APC to my endless humiliation and
embarrassment; this up to now causes me endless emotional
"While an employee may be dismissed because of inefficiency, pain that I even avoid my friends and acquaintances for fear that
neglect or carelessness, the law implies a situation they might look at me differently after my termination from APC;
or undertaking by an employee in entering into a contract of my reputation as a professional has been totally shattered by the
employment that he is competent to perform the work unjust act of APC;
undertaken and is possessed of the requisite skill and
knowledge to enable him to do so, and that he will do the work of 11. Because of the extreme social humiliation, and serious
the employer in a careful manner. If he is not qualified to do the anxiety over my now besmirched reputation in the travel industry,
work which he undertakes, if he is incompetent, unskillful or I decided to seek legal advise; on July 21, 1994, my counsel
inefficient, or if he executes his work in a negligent manner or is wrote APC demanding for my immediate reinstatement without
otherwise guilty of neglect of duty, he may lawfully be discharged loss of seniority rights and for damages; a copy of the letter-
before the expiration of his term of employment." 29 demand is hereto attached as Annex F;

In fine, this Court finds that respondent had been illegally x x x".
dismissed and is accordingly entitled to reinstatement to her
former position without loss of seniority rights and payment of They need no amplification and/or corroboration. Indeed,
backwages.30 But as the matter of reinstatement is no longer petitioner was deprived of due process and denied "basic
feasible as the GSA contract between SAS and petitioner had precepts of fairness" when she was terminated. Her resultant
been terminated in May of 1996, respondent is, as correctly held sufferings thus entitle her to an award of moral damages.
by the Court of Appeals, entitled to separation pay in an amount
equivalent to one (1) month salary for every year of service, a To warrant award of moral damages, it must be shown that the
fraction of six (6) months to be considered a year. dismissal of the employee was attended to by bad faith, or
constituted an act opposite to labor, or was done in a manner
Having been hired on December 16, 1992 and terminated on contrary to morals, good customs or public policy.31
July 18, 1994, respondent is considered to have worked for two
(2) years for purposes of computing her separation pay. Award of moral and exemplary damages for an illegally
dismissed employee is proper where the employee had been
Respondent is also entitled to the award of backwages harassed and arbitrarily terminated by the employer.32
computed from July 18, 1994 up to May of 1996.
In determining the amount of moral damages recoverable,
As regards the award to respondent of moral and exemplary however, the business, social and financial position of the
damages, petitioner assails it in this wise: "The award of offended party and the business or financial position of the
damages in so far as the same was based solely on respondents offender are taken into account.33 Given petitioners business
affidavit containing general and uncorroborated statement that position or standing before and at the time of termination and
she suffered damages as a result of her termination is null and petitioners business and financial position, this Court reduces the
void [it being] insufficient to overcome the presumption o good amount of moral damages awarded to P500,000.00 which it finds
faith." reasonable. The amount of exemplary damages awarded is
accordingly reduced too to P250,000.00.
The following pertinent portions of petitioners Affidavit which
Affidavit was submitted as part of her testimony are self- WHEREFORE, the decision of the Court of Appeals is hereby
explanatory, however. AFFIRMED with the MODIFICATION that the amount of moral
damages and exemplary damages awarded to respondent, Ma.
"x x x Linda R. Farolan, is hereby reduced to Five Hundred Thousand
(P500,000.00) Pesos and Two Hundred Fifty Thousand
8. On July 4, 1994, Messrs. Bondoc and Zozobrado summoned (P250,000.00) Pesos, respectively.
me and without any clear explanation, ordered me to submit a
letter of resignation; they informed me that I was not the person Costs against petitioner.
whom SAS was looking for to handle the position of Sales
Manager; even as I was deeply hurt, shocked, and humiliated, I SO ORDERED.
declined to resign from my position as I strongly believed that the
instruction for me to resign was unjust and violative of my rights;
during the conference, I was never given the chance to know
precisely why I was being asked to resign or to explain my
position; furthermore, I was informed then that Mr. Donald
Marshall was the one who decided and insisted on my

Tabingan promulgated a Decision,4 the dispositive portion of
which reads:

WHEREFORE, all premises considered, it is hereby found that

the complaint for Illegal Dismissal has no leg to stand on. It is
hereby ordered DISMISSED, as it is hereby DISMISSED.

G.R. No. 156367 May 16, 2005 However, still based on the above-discussed premises, the
respondent must pay to the complainant the following:
vs. a. his 13th month pay from the date of his hiring to the date of his
ANTONIO BAUTISTA, respondent. dismissal, presently computed at P78,117.87;

DECISION b. his service incentive leave pay for all the years he had been in
service with the respondent, presently computed at P13,788.05.
All other claims of both complainant and respondent are hereby
Before Us is a Petition for Review on Certiorari assailing the dismissed for lack of merit.5
Decision1 and Resolution2 of the Court of Appeals affirming the
Decision3 of the National Labor Relations Commission (NLRC). Not satisfied with the decision of the Labor Arbiter, petitioner
The NLRC ruling modified the Decision of the Labor Arbiter appealed the decision to the NLRC which rendered its decision
(finding respondent entitled to the award of 13 th month pay and on 28 September 2001, the decretal portion of which reads:
service incentive leave pay) by deleting the award of 13 th month
pay to respondent. [T]he Rules and Regulations Implementing Presidential Decree
No. 851, particularly Sec. 3 provides:
"Section 3. Employers covered. – The Decree shall apply to all
Since 24 May 1995, respondent Antonio Bautista has been employers except to:
employed by petitioner Auto Bus Transport Systems, Inc.
(Autobus), as driver-conductor with travel routes Manila- xxx xxx xxx
Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and
Manila-Tabuk via Baguio. Respondent was paid on commission e) employers of those who are paid on purely commission,
basis, seven percent (7%) of the total gross income per travel, boundary, or task basis, performing a specific work, irrespective
on a twice a month basis. of the time consumed in the performance thereof. xxx."

On 03 January 2000, while respondent was driving Autobus No. Records show that complainant, in his position paper, admitted
114 along Sta. Fe, Nueva Vizcaya, the bus he was driving that he was paid on a commission basis.
accidentally bumped the rear portion of Autobus No. 124, as the
latter vehicle suddenly stopped at a sharp curve without giving In view of the foregoing, we deem it just and equitable to modify
any warning. the assailed Decision by deleting the award of 13 th month pay to
the complainant.
Respondent averred that the accident happened because he
was compelled by the management to go back to Roxas, …
Isabela, although he had not slept for almost twenty-four (24)
hours, as he had just arrived in Manila from Roxas, Isabela.
WHEREFORE, the Decision dated 29 September 2000 is
Respondent further alleged that he was not allowed to work until
MODIFIED by deleting the award of 13th month pay. The other
he fully paid the amount of P75,551.50, representing thirty
findings are AFFIRMED.6
percent (30%) of the cost of repair of the damaged buses and
that despite respondent’s pleas for reconsideration, the same
was ignored by management. After a month, management sent In other words, the award of service incentive leave pay was
him a letter of termination. maintained. Petitioner thus sought a reconsideration of this
aspect, which was subsequently denied in a Resolution by the
NLRC dated 31 October 2001.
Thus, on 02 February 2000, respondent instituted a Complaint
for Illegal Dismissal with Money Claims for nonpayment of
13th month pay and service incentive leave pay against Autobus. Displeased with only the partial grant of its appeal to the NLRC,
petitioner sought the review of said decision with the Court of
Appeals which was subsequently denied by the appellate court
Petitioner, on the other hand, maintained that respondent’s
in a Decision dated 06 May 2002, the dispositive portion of which
employment was replete with offenses involving reckless
imprudence, gross negligence, and dishonesty. To support its
claim, petitioner presented copies of letters, memos, irregularity
reports, and warrants of arrest pertaining to several incidents WHEREFORE, premises considered, the Petition is DISMISSED
wherein respondent was involved. for lack of merit; and the assailed Decision of respondent
Commission in NLRC NCR CA No. 026584-2000 is hereby
AFFIRMED in toto. No costs.7
Furthermore, petitioner avers that in the exercise of its
management prerogative, respondent’s employment was
terminated only after the latter was provided with an opportunity Hence, the instant petition.
to explain his side regarding the accident on 03 January 2000.
On 29 September 2000, based on the pleadings and supporting
evidence presented by the parties, Labor Arbiter Monroe C.
1. Whether or not respondent is entitled to service incentive further elaborated in the Bureau of Working Conditions (BWC),
leave; Advisory Opinion to Philippine Technical-Clerical Commercial
Employees Association10 which states that:
2. Whether or not the three (3)-year prescriptive period provided
under Article 291 of the Labor Code, as amended, is applicable As a general rule, [field personnel] are those whose performance
to respondent’s claim of service incentive leave pay. of their job/service is not supervised by the employer or his
representative, the workplace being away from the principal
RULING OF THE COURT office and whose hours and days of work cannot be determined
with reasonable certainty; hence, they are paid specific amount
The disposition of the first issue revolves around the proper for rendering specific service or performing specific work. If
interpretation of Article 95 of the Labor Code vis-à-vis Section required to be at specific places at specific times, employees
1(D), Rule V, Book III of the Implementing Rules and Regulations including drivers cannot be said to be field personnel despite the
of the Labor Code which provides: fact that they are performing work away from the principal office
of the employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and
postulates that under said advisory opinion, no employee would
(a) Every employee who has rendered at least one year of
ever be considered a field personnel because every employer, in
service shall be entitled to a yearly service incentive leave of five
one way or another, exercises control over his employees.
days with pay.
Petitioner further argues that the only criterion that should be
considered is the nature of work of the employee in that, if the
Book III, Rule V: SERVICE INCENTIVE LEAVE employee’s job requires that he works away from the principal
office like that of a messenger or a bus driver, then he is
SECTION 1. Coverage. – This rule shall apply to all employees inevitably a field personnel.
We are not persuaded. At this point, it is necessary to stress that
… the definition of a "field personnel" is not merely concerned with
the location where the employee regularly performs his duties
(d) Field personnel and other employees whose performance is but also with the fact that the employee’s performance is
unsupervised by the employer including those who are engaged unsupervised by the employer. As discussed above, field
on task or contract basis, purely commission basis, or those who personnel are those who regularly perform their duties away
are paid in a fixed amount for performing work irrespective of the from the principal place of business of the employer and whose
time consumed in the performance thereof; . . . actual hours of work in the field cannot be determined with
reasonable certainty. Thus, in order to conclude whether an
A careful perusal of said provisions of law will result in the employee is a field employee, it is also necessary to ascertain if
conclusion that the grant of service incentive leave has been actual hours of work in the field can be determined with
delimited by the Implementing Rules and Regulations of the reasonable certainty by the employer. In so doing, an inquiry
Labor Code to apply only to those employees not explicitly must be made as to whether or not the employee’s time and
excluded by Section 1 of Rule V. According to the Implementing performance are constantly supervised by the employer.
Rules, Service Incentive Leave shall not apply to employees
classified as "field personnel." The phrase "other employees As observed by the Labor Arbiter and concurred in by the Court
whose performance is unsupervised by the employer" must not of Appeals:
be understood as a separate classification of employees to
which service incentive leave shall not be granted. Rather, it It is of judicial notice that along the routes that are plied by these
serves as an amplification of the interpretation of the definition of bus companies, there are its inspectors assigned at strategic
field personnel under the Labor Code as those "whose actual places who board the bus and inspect the passengers, the
hours of work in the field cannot be determined with reasonable punched tickets, and the conductor’s reports. There is also the
certainty."8 mandatory once-a-week car barn or shop day, where the bus is
regularly checked as to its mechanical, electrical, and hydraulic
The same is true with respect to the phrase " those who are aspects, whether or not there are problems thereon as reported
engaged on task or contract basis, purely commission by the driver and/or conductor. They too, must be at specific
basis." Said phrase should be related with "field personnel," place as [sic] specified time, as they generally observe prompt
applying the rule on ejusdem generis that general and unlimited departure and arrival from their point of origin to their point of
terms are restrained and limited by the particular terms that they destination. In each and every depot, there is always the
follow.9 Hence, employees engaged on task or contract basis or Dispatcher whose function is precisely to see to it that the bus
paid on purely commission basis are not automatically exempted and its crew leave the premises at specific times and arrive at
from the grant of service incentive leave, unless, they fall under the estimated proper time. These, are present in the case at bar.
the classification of field personnel. The driver, the complainant herein, was therefore under constant
supervision while in the performance of this work. He cannot be
Therefore, petitioner’s contention that respondent is not entitled considered a field personnel.11
to the grant of service incentive leave just because he was paid
on purely commission basis is misplaced. What must be We agree in the above disquisition. Therefore, as correctly
ascertained in order to resolve the issue of propriety of the grant concluded by the appellate court, respondent is not a field
of service incentive leave to respondent is whether or not he is a personnel but a regular employee who performs tasks usually
field personnel. necessary and desirable to the usual trade of petitioner’s
business. Accordingly, respondent is entitled to the grant of
According to Article 82 of the Labor Code, "field personnel" shall service incentive leave.
refer to non-agricultural employees who regularly perform their
duties away from the principal place of business or branch office The question now that must be addressed is up to what amount
of the employer and whose actual hours of work in the field of service incentive leave pay respondent is entitled to.
cannot be determined with reasonable certainty. This definition is

The response to this query inevitably leads us to the correlative award to three years, as the solicitor general recommends, is to
issue of whether or not the three (3)-year prescriptive period unduly restrict such right.17 [Italics supplied]
under Article 291 of the Labor Code is applicable to respondent’s
claim of service incentive leave pay. Correspondingly, it can be conscientiously deduced that the
cause of action of an entitled employee to claim his service
Article 291 of the Labor Code states that all money claims arising incentive leave pay accrues from the moment the employer
from employer-employee relationship shall be filed within three refuses to remunerate its monetary equivalent if the employee
(3) years from the time the cause of action accrued; otherwise, did not make use of said leave credits but instead chose to avail
they shall be forever barred. of its commutation. Accordingly, if the employee wishes to
accumulate his leave credits and opts for its commutation upon
In the application of this section of the Labor Code, the pivotal his resignation or separation from employment, his cause of
question to be answered is when does the cause of action for action to claim the whole amount of his accumulated service
money claims accrue in order to determine the reckoning date of incentive leave shall arise when the employer fails to pay such
the three-year prescriptive period. amount at the time of his resignation or separation from
It is settled jurisprudence that a cause of action has three
elements, to wit, (1) a right in favor of the plaintiff by whatever Applying Article 291 of the Labor Code in light of this peculiarity
means and under whatever law it arises or is created; (2) an of the service incentive leave, we can conclude that the three
obligation on the part of the named defendant to respect or not to (3)-year prescriptive period commences, not at the end of the
violate such right; and (3) an act or omission on the part of such year when the employee becomes entitled to the commutation of
defendant violative of the right of the plaintiff or constituting a his service incentive leave, but from the time when the employer
breach of the obligation of the defendant to the plaintiff. 12 refuses to pay its monetary equivalent after demand of
commutation or upon termination of the employee’s services, as
To properly construe Article 291 of the Labor Code, it is essential the case may be.
to ascertain the time when the third element of a cause of action
transpired. Stated differently, in the computation of the three-year The above construal of Art. 291, vis-à-vis the rules on service
prescriptive period, a determination must be made as to the incentive leave, is in keeping with the rudimentary principle that
period when the act constituting a violation of the workers’ right in the implementation and interpretation of the provisions of the
to the benefits being claimed was committed. For if the cause of Labor Code and its implementing regulations, the workingman’s
action accrued more than three (3) years before the filing of the welfare should be the primordial and paramount
money claim, said cause of action has already prescribed in consideration.18 The policy is to extend the applicability of the
accordance with Article 291.13 decree to a greater number of employees who can avail of the
benefits under the law, which is in consonance with the avowed
Consequently, in cases of nonpayment of allowances and other policy of the State to give maximum aid and protection to labor.19
monetary benefits, if it is established that the benefits being
claimed have been withheld from the employee for a period In the case at bar, respondent had not made use of his service
longer than three (3) years, the amount pertaining to the period incentive leave nor demanded for its commutation until his
beyond the three-year prescriptive period is therefore barred by employment was terminated by petitioner. Neither did petitioner
prescription. The amount that can only be demanded by the compensate his accumulated service incentive leave pay at the
aggrieved employee shall be limited to the amount of the time of his dismissal. It was only upon his filing of a complaint for
benefits withheld within three (3) years before the filing of the illegal dismissal, one month from the time of his dismissal, that
complaint.14 respondent demanded from his former employer commutation of
his accumulated leave credits. His cause of action to claim the
It is essential at this point, however, to recognize that the service payment of his accumulated service incentive leave thus accrued
incentive leave is a curious animal in relation to other benefits from the time when his employer dismissed him and failed to pay
granted by the law to every employee. In the case of service his accumulated leave credits.
incentive leave, the employee may choose to either use his
leave credits or commute it to its monetary equivalent if not Therefore, the prescriptive period with respect to his claim for
exhausted at the end of the year.15 Furthermore, if the employee service incentive leave pay only commenced from the time the
entitled to service incentive leave does not use or commute the employer failed to compensate his accumulated service incentive
same, he is entitled upon his resignation or separation from work leave pay at the time of his dismissal. Since respondent had filed
to the commutation of his accrued service incentive leave. As his money claim after only one month from the time of his
enunciated by the Court in Fernandez v. NLRC:16 dismissal, necessarily, his money claim was filed within the
prescriptive period provided for by Article 291 of the Labor Code.
The clear policy of the Labor Code is to grant service incentive
leave pay to workers in all establishments, subject to a few WHEREFORE, premises considered, the instant petition is
exceptions. Section 2, Rule V, Book III of the Implementing hereby DENIED. The assailed Decision of the Court of Appeals
Rules and Regulations provides that "[e]very employee who has in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.
rendered at least one year of service shall be entitled to a yearly
service incentive leave of five days with pay." Service incentive SO ORDERED.
leave is a right which accrues to every employee who has served
"within 12 months, whether continuous or broken reckoned from
the date the employee started working, including authorized
absences and paid regular holidays unless the working days in
the establishment as a matter of practice or policy, or that
provided in the employment contracts, is less than 12 months, in
which case said period shall be considered as one year." It is
also "commutable to its money equivalent if not used or
exhausted at the end of the year." In other words, an employee
who has served for one year is entitled to it. He may use it as
leave days or he may collect its monetary value. To limit the

that said workers change shift assignments every week; that,
accordingly, all of them work from 4 A.M. to 4 P.M. (first shift) for
two alternate weeks per month and from 4 P.M. to 4 A.M.
(second shift) likewise for two alternate weeks in a month; that
although said workers perform work from 4 P.M. to 4 A.M., they
receive only P.55 differential pay for the corresponding hours of
night work; that their nightwork is equivalent to the nightwork of
the 2nd and 3rd shifts of Group A combined, so that they should
receive what the 2nd and 3rd shifts of Group A, combined,
receive as differential pay, namely, P.90 (P.75 plus P.35); that,
therefore, they are entitled to payment of P.35 more as
differential pay, since up to the time of the petition, they received
only P.55 per night as differential pay.

G.R. No. L-21348 June 30, 1966 Said additional P.35 was asked by the petitioners-workers of
Group B f or work done by them from 4 P.M. to 4 A.M. Their
claim referred to the time from July 15, 1958 to the date of the
petition, allegedly at P186.90 per sheller, parer, counter and
hauler, or a total sum of P65,228.10 more or less.
Respondent company therein filed on January 28, 1962 a motion
to dismiss, stating that the Court of Industrial Relations has no
Romeo A. Real for petitioner.
jurisdiction over the case for the reason that the claim asserted
A. V. Villacorta for respondents.
in the petition is a simple money claim and that an interpretation
of a contract (the collective bargaining agreement is involved,
BENGZON, J.P., J.: which pertains to the regular courts.

Red V Coconut Products, Ltd. is a corporation with principal The Court of Industrial Relations denied said motion by
office and place of business at Lucena City. It has in that city a resolution of February 17, 1962 ruling that the claim is for unpaid
desiccated coconut factory. In said factory, it has several overtime pay of laborers still employed by the company. Said
hundred workers. About 800 of said workers are members court likewise denied a motion for reconsideration of the
of Tanglaw ng Paggawa labor union. resolution. Red V Coconut Products, Ltd. filed its answer on May
2, 1962.
Tanglaw ng Paggawa and Red V Coconut Products, Ltd. entered
into a collective bargaining agreement on July 15, 1958. In the meanwhile, on April 25, 1962, Tanglaw ng Paggawa filed
Subsequently, however, on October 5, 1961, the aforementioned with the Court of Industrial Relations a new and independent
company and union entered into another collective bargaining petition alleging unfair labor practice against Red V Coconut
agreement, to expire on October 31, 1965. Products, Ltd. (CIR Case No. 3150 ULP). It was asserted therein
that the company refused to grant 15 days leave with pay to the
The 1958 collective bargaining agreement provided among other members of the union in violation of the 1961 collective
things for payment of differentials to night shift workers in the bargaining agreement.
desiccated coconut factory.1äwphï1.ñët
The Court of Industrial Relations, on January 19, 1963 after trial,
The 1961 collective bargaining agreement retained the same rendered its decision on the petition for differential pay (CIR
arrangement. It stated: Case No. 1642-V). It found therein that the petitioners-workers
are engaged on pakiao or piece-work basis, and, therefore, are
The present shift differential will remain in effect, namely, 35¢ for not entitled to overtime pay under the Eight-Hour Labor Law
the second shift and 55¢ for the third Shift. (Sec. 2, CA 444); that their petition for night shift differentials
based on the collective bargaining agreements is meritorious
In the factory, there are two groups of workers, the three-shift because the company having paid night differentials
group — let us call it Group A — and the two — shift group — indiscriminately to the night shift workers of Group A and Group
which we shall call Group B. As observed by the parties thereto, B alike, the payments should be uniform and equal for the night
differentials were paid to workers, under the 1958 and 1961 shifts of both groups, that is, P.90. It therefore ordered payment
contracts, thus: of the deficiency in said differentials to the workers of Group B.

Hours of WorkDifferentials Red V Coconut Products, Ltd. moved for reconsideration of said
decision on January 29, 1963. The Court of Industrial
Group A —1st shift4 A.M. — 12 Noon (8 Hrs.) None Relations en banc denied said motion by resolution of February
2nd shift12 Noon— 8 P.M. (8 Hrs.) .35 25, 1963. And, hence, Red V Coconut Products, Ltd. filed this
petition for review herein.
3rd shift8 P.M. — 4 A.M. (8 Hrs.) .55
Group B —1st shift4 A.M. — 4 P.M. (12 Hrs.)None Petitioner herein contends that the present case involves a mere
2nd shift4 P.M. — 4 A.M. (12 Hrs.).55 money claim over which the Court of Industrial Relations has no
On January 17, 1962, Tanglaw ng Paggawa and some 300
workers in the above-stated factory, members of the said union, It is exiomatic that to determine the issue of jurisdiction resort is
who belong to Group B, filed a petition in the Court of Industrial to be made to the allegations in the petition or complaint. 2 The
Relations. Petitioners therein alleged that the petitioners-workers petition for shift differential in the present case, it is true, did not
are shellers, parers, counters and haulers in the two shifts expressly mention the Eight-Hour Labor Law. Nonetheless, it
(Group B) consisting of 12 hours each shift, the first shift from 4: clearly asserted that (1) petitioners-laborers " are working in the
00 A.M. to 4: 00 P.M. and the second shift from 4 P.M. to 4 A.M.; Red V Coconut Products, Ltd." and (2) they "work in two (2)

shifts (Blue and Red shifts) consisting of approximately 12 hours
each shift." Accordingly, from the said allegations, it is proper to
regard the petition, as the Court of Industrial Relations did, as
one for overtime pay by workers still employed by the company.
As such it falls within the jurisdiction of the Court of Industrial
Relations. For the same is in effect an assertion not of a simple
money claim but, as respondent court rightly held, of a claim for
overtime pay by workers who are employees of the company.3

During the trial, as stated, evidence was adduced to the effect

that the aforesaid petitioners-workers were engaged on a piece-
work basis. The same, however, does not appear from the
petition or complaint filed with the respondent court. It therefore
cannot affect its jurisdiction over the case, which was already
acquired. For jurisdiction, once acquired, continues until final
adjudication of the litigation.4

Furthermore, although the Eight-Hour Labor Law provides that it

does not cover those workers who prefer to be paid on piece-
work basis (Sec. 2, CA 444), nothing in said law precludes an
agreement for the payment of overtime compensation to piece-
workers. And in agreeing to the provision for payment of shift
differentials to the petitioners-workers aforementioned, in the
bargaining agreement, as well as in actually paying to them said
differentials, though not in full, the company in effect freely
adhered to an application and implementation of the Eight-Hour
Labor Law, or its objectives, to said workers. It should be
observed that while the provision in the bargaining agreements
speaks of shift differentials for the "second shift" and the "third
shift" and Group B has no third shift, said Group B has a second
shift, which performs work equivalent to that of the
corresponding shifts of Group A. It follows that respondent court
did not err in ordering the company to pay the full and equivalent
amount of said differentials (P.90) corresponding, under the
bargaining agreements, to the workers who performed 12 hours
of work, from 4 P.M. to 4 A.M.

And, finally, the laborers in question are not strictly under the full
concept of piece-workers as contemplated by law for the reason
that their hours of work — that is, 12 hours per shift — are fixed
by the employer. As ruled by this Court in Lara v. Del Rosario, 94
Phil. 780, 781-782, the philosophy underlying the exclusion of
piece workers from the Eight-Hour Labor Law is that said
workers are paid depending upon the work they do " irrespective
of the amount of time employed " in doing said work. Such
freedom as to hours of work does not obtain in the case of the
laborers herein involved, since they are assigned by the
employer to work in two shifts for 12 hours each shift. Thus it
cannot be said that for all purposes these workers fall outside the
law requiring payment of compensation for work done in excess
of eight hours. At least for the purpose of recovering the full
differential pay stipulated in the bargaining agreement as due to
laborers who perform 12 hours of work under the night shift, said
laborers should be deemed pro tanto or to that extent within the
scope of the afore-stated law.

Wherefore, the decision and resolution of the Court of Industrial

Relations under review are affirmed. So ordered.

WHEREFORE, in view of the foregoing considerations, the
instant complaint should therefore be, as it is hereby,

SO ORDERED. (Rollo, p. 58)

On December 12, 1986, after considering the appeal

memorandum of complainant and the opposition of respondents,
the First Division of public respondent NLRC composed of Acting
Presiding Commissioner Franklin Drilon, Commissioner Conrado
Maglaya, Commissioner Rosario D. Encarnacion as Members,
promulgated its Resolution, upholding the Labor Arbiters'
decision. The Resolution's dispositive portion reads:

'Surely, the customary functions referred to in the above- quoted

provision of the agreement includes the long-standing practice
and institutionalized non-compensable assembly time. This, in
effect, estopped complainants from pursuing this case.
G.R. No. 78210 February 28, 1989
The Commission cannot ignore these hard facts, and we are
constrained to uphold the dismissal and closure of the case.
RICARDO RICHA, RODOLFO NENO, ALBERTO WHEREFORE, let the appeal be, as it is hereby dismissed, for
JAIME BUGTAY, and 561 OTHERS, HEREIN SO ORDERED. (Annex "H", Rollo, pp. 86-89).
vs. On January 15, 1987, petitioners filed a Motion for
NATIONAL LABOR RELATIONS COMMISSION, Reconsideration which was opposed by private respondent
HONORABLE FRANKLIN DRILON, HONORABLE (Annex "I", Rollo, pp. 90-91; Annex J Rollo, pp. 92-96).
ENCARNACION, and STANDARD (PHILIPPINES) FRUIT Public respondent NLRC, on January 30, 1987, issued a
CORPORATION, respondents. resolution denying for lack of merit petitioners' motion for
reconsideration (Annex "K", Rollo, p. 97).
Koronado B. Apuzen and Jose C. Espinas for petitioners.
Hence this petition for review on certiorari filed on May 7, 1987.
The Solicitor General for public respondent.
The Court in the resolution of May 4, 1988 gave due course to
Dominguez & Paderna Law Offices Co. for private respondent. this petition.

Petitioners assign the following issues:

PARAS, J.: 1) Whether or not the 30-minute activity of the petitioners before
the scheduled working time is compensable under the Labor
This is a petition for review on certiorari of the decision of the Code.
National Labor Relations Commission dated December 12, 1986
in NLRC Case No. 2327 MC-XI-84 entitled Teofilo Arica et al. vs. 2) Whether or not res judicata applies when the facts obtaining in
Standard (Phil.) Fruits Corporation (STANFILCO) which affirmed the prior case and in the case at bar are significantly different
the decision of Labor Arbiter Pedro C. Ramos, NLRC, Special from each other in that there is merit in the case at bar.
Task Force, Regional Arbitration Branch No. XI, Davao City
dismissing the claim of petitioners. 3) Whether or not there is finality in the decision of Secretary
Ople in view of the compromise agreement novating it and the
This case stemmed from a complaint filed on April 9, 1984 withdrawal of the appeal.
against private respondent Stanfilco for assembly time, moral
damages and attorney's fees, with the aforementioned Regional 4) Whether or not estoppel and laches lie in decisions for the
Arbitration Branch No. XI, Davao City. enforcement of labor standards (Rollo, p. 10).

After the submission by the parties of their respective position Petitioners contend that the preliminary activities as workers of
papers (Annex "C", pp. 30-40; Annex "D", Rollo, pp. 41-50), respondents STANFILCO in the assembly area is compensable
Labor Arbiter Pedro C. Ramos rendered a decision dated as working time (from 5:30 to 6:00 o'clock in the morning) since
October 9, 1985 (Annex 'E', Rollo, pp. 51-58) in favor of private these preliminary activities are necessarily and primarily for
respondent STANFILCO, holding that: private respondent's benefit.

Given these facts and circumstances, we cannot but agree with These preliminary activities of the workers are as follows:
respondent that the pronouncement in that earlier case, i.e. the
thirty-minute assembly time long practiced cannot be considered (a) First there is the roll call. This is followed by getting their
waiting time or work time and, therefore, not compensable, has individual work assignments from the foreman.
become the law of the case which can no longer be disturbed
without doing violence to the time- honored principle of res-
(b) Thereafter, they are individually required to accomplish the The facts on which this decision was predicated continue to be
Laborer's Daily Accomplishment Report during which they are the facts of the case in this questioned resolution of the National
often made to explain about their reported accomplishment the Labor Relations Commission.
following day.
It is clear that herein petitioners are merely reiterating the very
(c) Then they go to the stockroom to get the working materials, same claim which they filed through the ALU and which records
tools and equipment. show had already long been considered terminated and closed
by this Court in G.R. No. L-48510. Therefore, the NLRC can not
(d) Lastly, they travel to the field bringing with them their tools, be faulted for ruling that petitioners' claim is already barred
equipment and materials. by res-judicata.

All these activities take 30 minutes to accomplish (Rollo, Petition, Be that as it may, petitioners' claim that there was a change in
p. 11). the factual scenario which are "substantial changes in the facts"
makes respondent firm now liable for the same claim they earlier
Contrary to this contention, respondent avers that the instant filed against respondent which was dismissed. It is thus
complaint is not new, the very same claim having been brought axiomatic that the non-compensability of the claim having been
against herein respondent by the same group of rank and file earlier established, constitute the controlling legal rule or
employees in the case of Associated Labor Union and Standard decision between the parties and remains to be the law of the
Fruit Corporation, NLRC Case No. 26-LS-XI-76 which was filed case making this petition without merit.
way back April 27, 1976 when ALU was the bargaining agent of
respondent's rank and file workers. The said case involved a As aptly observed by the Solicitor General that this petition is
claim for "waiting time", as the complainants purportedly were "clearly violative of the familiar principle of res judicata. There will
required to assemble at a designated area at least 30 minutes be no end to this controversy if the light of the Minister of Labor's
prior to the start of their scheduled working hours "to ascertain decision dated May 12, 1979 that had long acquired the
the work force available for the day by means of a roll call, for character of finality and which already resolved that petitioners'
the purpose of assignment or reassignment of employees to thirty (30)-minute assembly time is not compensable, the same
such areas in the plantation where they are most needed." issue can be re-litigated again." (Rollo, p. 183)
(Rollo, pp. 64- 65)
This Court has held:
Noteworthy is the decision of the Minister of Labor, on May 12,
1978 in the aforecited case (Associated Labor Union vs. In this connection account should be taken of the cognate
Standard (Phil.) Fruit Corporation, NLRC Case No. 26-LS-XI-76 principle that res judicata operates to bar not only the relitigation
where significant findings of facts and conclusions had already in a subsequent action of the issues squarely raised, passed
been made on the matter. upon and adjudicated in the first suit, but also the ventilation in
said subsequent suit of any other issue which could have been
The Minister of Labor held: raised in the first but was not. The law provides that 'the
judgment or order is, with respect to the matter directly adjudged
The thirty (30)-minute assembly time long practiced and or as to any other matter that could have been raised in relation
institutionalized by mutual consent of the parties under Article IV, thereto, conclusive between the parties and their successors in
Section 3, of the Collective Bargaining Agreement cannot be interest by title subsequent to the commencement of the action ..
considered as waiting time within the purview of Section 5, Rule litigating for the same thing and in the same capacity.' So, even if
I, Book III of the Rules and Regulations Implementing the Labor new causes of action are asserted in the second action (e.g.
Code. ... fraud, deceit, undue machinations in connection with their
execution of the convenio de transaccion), this would not
preclude the operation of the doctrine of res judicata. Those
Furthermore, the thirty (30)-minute assembly is a deeply- rooted,
issues are also barred, even if not passed upon in the first. They
routinary practice of the employees, and the proceedings
could have been, but were not, there raised. (Vda. de Buncio v.
attendant thereto are not infected with complexities as to deprive
Estate of the late Anita de Leon, 156 SCRA 352 [1987]).
the workers the time to attend to other personal pursuits. They
are not new employees as to require the company to deliver long
briefings regarding their respective work assignments. Their Moreover, as a rule, the findings of facts of quasi-judicial
houses are situated right on the area where the farm are located, agencies which have acquired expertise because their
such that after the roll call, which does not necessarily require jurisdiction is confined to specific matters are accorded not only
the personal presence, they can go back to their houses to respect but at times even finality if such findings are supported
attend to some chores. In short, they are not subject to the by substantial evidence (Special Events & Central Shipping
absolute control of the company during this period, otherwise, Office Workers Union v. San Miguel Corporation, 122 SCRA 557
their failure to report in the assembly time would justify the [1983]; Dangan v. NLRC, 127 SCRA 706 [1984]; Phil. Labor
company to impose disciplinary measures. The CBA does not Alliance Council v. Bureau of Labor Relations, 75 SCRA 162
contain any provision to this effect; the record is also bare of any [1977]; Mamerto v. Inciong, 118 SCRA 265 (1982]; National
proof on this point. This, therefore, demonstrates the indubitable Federation of Labor Union (NAFLU) v. Ople, 143 SCRA 124
fact that the thirty (30)-minute assembly time was not primarily [1986]; Edi-Staff Builders International, Inc. v. Leogardo, Jr., 152
intended for the interests of the employer, but ultimately for the SCRA 453 [1987]; Asiaworld Publishing House, Inc. v. Ople, 152
employees to indicate their availability or non-availability for work SCRA 219 [1987]).
during every working day. (Annex "E", Rollo, p. 57).
The records show that the Labor Arbiters' decision dated
Accordingly, the issues are reduced to the sole question as to October 9, 1985 (Annex "E", Petition) pointed out in detail the
whether public respondent National Labor Relations Commission basis of his findings and conclusions, and no cogent reason can
committed a grave abuse of discretion in its resolution of be found to disturb these findings nor of those of the National
December 17, 1986. Labor Relations Commission which affirmed the same.

PREMISES CONSIDERED, the petition is DISMISSED for lack (c) Then they go to the stockroom to get the working materials,
of merit and the decision of the National Labor Relations tools and equipment.
Commission is AFFIRMED.
(d) Lastly, they travel to the field bringing with them their tools,
SO ORDERED. equipment and materials. (Supra, 4-5.)

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

It is evident that the Ople decision was predicated on the

SARMIENTO, J., Dissenting: absence of any insinuation of obligatoriness in the course or
after the assembly activities on the part of the employees.(" . .
It is my opinion that res judicata is not a bar. [T]hey are not subject to the absolute control of the company
during this period, otherwise, their failure to report in the
The decision penned by then Minister Blas Ople in ALU v. assembly time would justify the company to impose disciplinary
STANFILCO (NLRC Case No. 26-LS-XI-76) relied upon by the measures;" supra, 6.) As indicated, however, by the petitioners,
respondents as basis for claims of res judicata, is not, to my things had since changed, and remarkably so, and the latter had
mind, a controlling precedent. In that case, it was held that the since been placed under a number of restrictions. My considered
thirty-minute "waiting time" complained of was a mere "assembly opinion is that the thirty-minute assembly time had become, in
time" and not a waiting time as the term is known in law, and truth and fact, a "waiting time" as contemplated by the Labor
hence, a compensable hour of work. Thus: Code.

The thirty (30)-minute assembly time long practiced and I vote, then, to grant the petition.
institutionalized by mutual consent of the parties under Article IV,
Section 3, of the Collective Bargaining Agreement cannot be Separate Opinions SARMIENTO, J., Dissenting:
considered as 'waiting time' within the purview of Section 5, Rule
1, Book III of the Rules and Regulations Implementing the Labor It is my opinion that res judicata is not a bar.
Code. ...
The decision penned by then Minister Blas Ople in ALU v.
Furthermore, the thirty (30)-minute assembly is a deeply- rooted, STANFILCO (NLRC Case No. 26-LS-XI-76) relied upon by the
routinary practice of the employees, and the proceedings respondents as basis for claims of res judicata, is not, to my
attendant thereto are not infected with complexities as to deprive mind, a controlling precedent. In that case, it was held that the
the workers the time to attend to other personal pursuits. They thirty-minute "waiting time" complained of was a mere "assembly
are not new employees as to require the company to deliver long time" and not a waiting time as the term is known in law, and
briefings regarding their respective work assignments. Their hence, a compensable hour of work. Thus:
houses are situated right on the area where the farms are
located, such that after the roll call, which does not necessarily
The thirty (30)-minute assembly time long practiced and
require the personal presence, they can go back to their houses
institutionalized by mutual consent of the parties under Article IV,
to attend to some chores.
Section 3, of the Collective Bargaining Agreement cannot be
considered as 'waiting time' within the purview of Section 5, Rule
In short, they are not subject to the absolute control of the 1, Book III of the Rules and Regulations Implementing the Labor
company during this period, otherwise, their failure to report in Code. ...
the assembly time would justify the company to impose
disciplinary measures. The CBA does not contain any provision
Furthermore, the thirty (30)-minute assembly is a deeply- rooted,
to this effect; the record is also bare of any proof on this point.
routinary practice of the employees, and the proceedings
This, therefore, demonstrates the indubitable fact that the thirty
attendant thereto are not infected with complexities as to deprive
(30)-minute assembly time was not primarily intended for the
the workers the time to attend to other personal pursuits. They
interests of the employer, but ultimately for the employees to
are not new employees as to require the company to deliver long
indicate their availability or non-availability for work during every
briefings regarding their respective work assignments. Their
working day. (Decision, 6.)
houses are situated right on the area where the farms are
located, such that after the roll call, which does not necessarily
Precisely, it is the petitioners' contention that the assembly time require the personal presence, they can go back to their houses
in question had since undergone dramatic changes, thus: to attend to some chores.

(a) First there is the roll call. This is followed by getting their In short, they are not subject to the absolute control of the
individual work assignments from the foreman. company during this period, otherwise, their failure to report in
the assembly time would justify the company to impose
(b) Thereafter,they are individually required to accomplish the disciplinary measures. The CBA does not contain any provision
Laborer's Daily Accomplishment Report during which they are to this effect; the record is also bare of any proof on this point.
often made to explain about their reported accomplishment the This, therefore, demonstrates the indubitable fact that the thirty
following day. (30)-minute assembly time was not primarily intended for the
interests of the employer, but ultimately for the employees to

indicate their availability or non-availability for work during every
working day. (Decision, 6.)

Precisely, it is the petitioners' contention that the assembly time

in question had since undergone dramatic changes, thus:

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

(b) Thereafter,they are individually required to accomplish the

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

(c) Then they go to the stockroom to get the working materials,

tools and equipment.

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

The petitioners have vehemently maintained that in view thereof,

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

It is evident that the Ople decision was predicated on the

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

I vote, then, to grant the petition.

should discuss the substance of the Code with PALEA; that
employees dismissed under the Code be reinstated and their
cases subjected to further hearing; and that PAL be declared
guilty of unfair labor practice and be ordered to pay damages
(pp. 7-14, Record.)

PAL filed a motion to dismiss the complaint, asserting its

prerogative as an employer to prescibe rules and regulations
regarding employess' conduct in carrying out their duties and
functions, and alleging that by implementing the Code, it had not
violated the collective bargaining agreement (CBA) or any
provision of the Labor Code. Assailing the complaint as
unsupported by evidence, PAL maintained that Article 253 of the
Labor Code cited by PALEA reffered to the requirements for
negotiating a CBA which was inapplicable as indeed the current
CBA had been negotiated.

In its reply to PAL's position paper, PALEA maintained that Article

249 (E) of the Labor Code was violated when PAL unilaterally
implemented the Code, and cited provisions of Articles IV and I
of Chapter II of the Code as defective for, respectively, running
counter to the construction of penal laws and making punishable
any offense within PAL's contemplation. These provisions are the

Sec. 2. Non-exclusivity. — This Code does not contain the

entirety of the rules and regulations of the company. Every
employee is bound to comply with all applicable rules,
G.R. No. 85985 August 13, 1993 regulations, policies, procedures and standards, including
standards of quality, productivity and behaviour, as issued and
PHILIPPINE AIRLINES, INC. (PAL), petitioner, promulgated by the company through its duly authorized officials.
vs. Any violations thereof shall be punishable with a penalty to be
NATIONAL LABOR RELATIONS COMMISSION, LABOR determined by the gravity and/or frequency of the offense.
AIRLINES EMPLOYEES ASSOCIATION Sec. 7. Cumulative Record. — An employee's record of offenses
(PALEA), respondents. shall be cumulative. The penalty for an offense shall be
determined on the basis of his past record of offenses of any
Solon Garcia for petitioner. nature or the absence thereof. The more habitual an offender
has been, the greater shall be the penalty for the latest offense.
Adolpho M. Guerzon for respondent PALEA. Thus, an employee may be dismissed if the number of his past
offenses warrants such penalty in the judgment of management
even if each offense considered separately may not warrant
dismissal. Habitual offenders or recidivists have no place in PAL.
MELO, J.: On the other hand, due regard shall be given to the length of
time between commission of individual offenses to determine
In the instant petition for certiorari, the Court is presented the whether the employee's conduct may indicate occasional lapses
issue of whether or not the formulation of a Code of Discipline (which may nevertheless require sterner disciplinary action) or a
among employees is a shared responsibility of the employer and pattern of incorrigibility.
the employees.
Labor Arbiter Isabel P. Ortiguerra handling the case called the
On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely parties to a conference but they failed to appear at the scheduled
revised its 1966 Code of Discipline. The Code was circulated date. Interpreting such failure as a waiver of the parties' right to
among the employees and was immediately implemented, and present evidence, the labor arbiter considered the case
some employees were forthwith subjected to the disciplinary submitted for decision. On November 7, 1986, a decision was
measures embodied therein. rendered finding no bad faith on the part of PAL in adopting the
Code and ruling that no unfair labor practice had been
committed. However, the arbiter held that PAL was "not totally
Thus, on August 20, 1985, the Philippine Airlines Employees fault free" considering that while the issuance of rules and
Association (PALEA) filed a complaint before the National Labor regulations governing the conduct of employees is a "legitimate
Relations Commission (NLRC) for unfair labor practice (Case management prerogative" such rules and regulations must meet
No. NCR-7-2051-85) with the following remarks: "ULP with the test of "reasonableness, propriety and fairness." She found
arbitrary implementation of PAL's Code of Discipline without Section 1 of the Code aforequoted as "an all embracing and all
notice and prior discussion with Union by Management" ( Rollo, encompassing provision that makes punishable any offense one
p. 41). In its position paper, PALEA contended that PAL, by its can think of in the company"; while Section 7, likewise quoted
unilateral implementation of the Code, was guilty of unfair labor above, is "objectionable for it violates the rule against double
practice, specifically Paragraphs E and G of Article 249 and jeopardy thereby ushering in two or more punishment for the
Article 253 of the Labor Code. PALEA alleged that copies of the same misdemeanor." (pp. 38-39, Rollo.)
Code had been circulated in limited numbers; that being penal in
nature the Code must conform with the requirements of sufficient
publication, and that the Code was arbitrary, oppressive, and The labor arbiter also found that PAL "failed to prove that the
prejudicial to the rights of the employees. It prayed that new Code was amply circulated." Noting that PAL's assertion
implementation of the Code be held in abeyance; that PAL that it had furnished all its employees copies of the Code is
unsupported by documentary evidence, she stated that such
"failure" on the part of PAL resulted in the imposition of penalties WHEREFORE, premises considered, we modify the appealed
on employees who thought all the while that the 1966 Code was decision in the sense that the New Code of Discipline should be
still being followed. Thus, the arbiter concluded that "(t)he phrase reviewed and discussed with complainant union, particularly the
ignorance of the law excuses no one from compliance . . . finds disputed provisions [.] (T)hereafter, respondent is directed to
application only after it has been conclusively shown that the law furnish each employee with a copy of the appealed Code of
was circulated to all the parties concerned and efforts to Discipline. The pending cases adverted to in the appealed
disseminate information regarding the new law have been decision if still in the arbitral level, should be reconsidered by the
exerted. (p. 39, Rollo.) She thereupon disposed: respondent Philippine Air Lines. Other dispositions of the Labor
Arbiter are sustained.
WHEREFORE, premises considered, respondent PAL is hereby
ordered as follows: SO ORDERED. (p. 5, NLRC Decision.)

1. Furnish all employees with the new Code of Discipline; PAL then filed the instant petition for certiorari charging public
respondents with grave abuse of discretion in: (a) directing PAL
2. Reconsider the cases of employees meted with penalties "to share its management prerogative of formulating a Code of
under the New Code of Discipline and remand the same for Discipline"; (b) engaging in quasi-judicial legislation in ordering
further hearing; and PAL to share said prerogative with the union; (c) deciding beyond
the issue of unfair labor practice, and (d) requiring PAL to
3. Discuss with PALEA the objectionable provisions specifically reconsider pending cases still in the arbitral level (p. 7, Petition;
tackled in the body of the decision. p. 8, Rollo.)

All other claims of the complainant union (is) [are] hereby, As stated above, the Principal issue submitted for resolution in
dismissed for lack of merit. the instant petition is whether management may be compelled to
share with the union or its employees its prerogative of
formulating a code of discipline.
SO ORDERED. (p. 40, Rollo.)
PAL asserts that when it revised its Code on March 15, 1985,
PAL appealed to the NLRC. On August 19, 1988, the NLRC
there was no law which mandated the sharing of responsibility
through Commissioner Encarnacion, with Presiding
therefor between employer and employee.
Commissioner Bonto-Perez and Commissioner Maglaya
concurring, found no evidence of unfair labor practice committed
by PAL and affirmed the dismissal of PALEA's charge. Indeed, it was only on March 2, 1989, with the approval of
Nonetheless, the NLRC made the following observations: Republic Act No. 6715, amending Article 211 of the Labor Code,
that the law explicitly considered it a State policy "(t)o ensure the
participation of workers in decision and policy-making processes
Indeed, failure of management to discuss the provisions of a
affecting the rights, duties and welfare." However, even in the
contemplated code of discipline which shall govern the conduct
absence of said clear provision of law, the exercise of
of its employees would result in the erosion and deterioration of
management prerogatives was never considered boundless.
an otherwise harmonious and smooth relationship between them
Thus, in Cruz vs. Medina (177 SCRA 565 [1989]) it was held that
as did happen in the instant case. There is no dispute that
management's prerogatives must be without abuse of discretion.
adoption of rules of conduct or discipline is a prerogative of
management and is imperative and essential if an industry, has
to survive in a competitive world. But labor climate has In San Miguel Brewery Sales Force Union (PTGWO) vs.
progressed, too. In the Philippine scene, at no time in our Ople (170 SCRA 25 [1989]), we upheld the company's right to
contemporary history is the need for a cooperative, supportive implement a new system of distributing its products, but gave the
and smooth relationship between labor and management more following caveat:
keenly felt if we are to survive economically. Management can no
longer exclude labor in the deliberation and adoption of rules and So long as a company's management prerogatives are exercised
regulations that will affect them. in good faith for the advancement of the employer's interest and
not for the purpose of defeating or circumventing the rights of the
The complainant union in this case has the right to feel isolated employees under special laws or under valid agreements, this
in the adoption of the New Code of Discipline. The Code of Court will uphold them.
Discipline involves security of tenure and loss of employment — (at p. 28.)
a property right! It is time that management realizes that to attain
effectiveness in its conduct rules, there should be candidness All this points to the conclusion that the exercise of managerial
and openness by Management and participation by the union, prerogatives is not unlimited. It is circumscribed by limitations
representing its members. In fact, our Constitution has found in law, a collective bargaining agreement, or the general
recognized the principle of "shared responsibility" between principles of fair play and justice ( University of Sto. Tomas vs.
employers and workers and has likewise recognized the right of NLRC, 190 SCRA 758 [1990]). Moreover, as enunciated
workers to participate in "policy and decision-making process in Abbott Laboratories (Phil.), vs. NLRC (154 713 [1987]), it must
affecting their rights . . ." The latter provision was interpreted by be duly established that the prerogative being invoked is clearly
the Constitutional Commissioners to mean participation in a managerial one.
"management"' (Record of the Constitutional Commission, Vol.
II). A close scrutiny of the objectionable provisions of the Code
reveals that they are not purely business-oriented nor do they
In a sense, participation by the union in the adoption of the code concern the management aspect of the business of the company
if conduct could have accelerated and enhanced their feelings of as in the San Miguel case. The provisions of the Code clearly
belonging and would have resulted in cooperation rather than have repercusions on the employee's right to security of tenure.
resistance to the Code. In fact, labor-management cooperation is The implementation of the provisions may result in the
now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original deprivation of an employee's means of livelihood which, as
Record.) correctly pointed out by the NLRC, is a property right ( Callanta,
vs Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view of
Respondent Commission thereupon disposed: these aspects of the case which border on infringement of
constitutional rights, we must uphold the constitutional business demands the most stringent of measures to attain safe
requirements for the protection of labor and the promotion of travel for its patrons. Nonetheless, whatever disciplinary
social justice, for these factors, according to Justice Isagani measures are adopted cannot be properly implemented in the
Cruz, tilt "the scales of justice when there is doubt, in favor of the absence of full cooperation of the employees. Such cooperation
worker" (Employees Association of the Philippine American Life cannot be attained if the employees are restive on account, of
Insurance Company vs. NLRC, 199 SCRA 628 [1991] 635). their being left out in the determination of cardinal and
fundamental matters affecting their employment.
Verily, a line must be drawn between management prerogatives
regarding business operations per se and those which affect the WHEREFORE, the petition is DISMISSED and the questioned
rights of the employees. In treating the latter, management decision AFFIRMED. No special pronouncement is made as to
should see to it that its employees are at least properly informed costs.
of its decisions or modes action. PAL asserts that all its
employees have been furnished copies of the Code. Public SO ORDERED.
respondents found to the contrary, which finding, to say the least
is entitled to great respect.

PAL posits the view that by signing the 1989-1991 collective

bargaining agreement, on June 27, 1990, PALEA in effect,
recognized PAL's "exclusive right to make and enforce company
rules and regulations to carry out the functions of
management without having to discuss the same with PALEA
and much less, obtain the latter's conformity thereto" (pp. 11-12,
Petitioner's Memorandum; pp 180-181, Rollo.) Petitioner's view
is based on the following provision of the agreement:

The Association recognizes the right of the Company to

determine matters of management it policy and Company
operations and to direct its manpower. Management of the
Company includes the right to organize, plan, direct and control
operations, to hire, assign employees to work, transfer
employees from one department, to another, to promote,
demote, discipline, suspend or discharge employees for just
cause; to lay-off employees for valid and legal causes, to
introduce new or improved methods or facilities or to change
existing methods or facilities and the right to make and enforce
Company rules and regulations to carry out the functions of

The exercise by management of its prerogative shall be done in

a just reasonable, humane and/or lawful manner.

Such provision in the collective bargaining agreement may not

be interpreted as cession of employees' rights to participate in
the deliberation of matters which may affect their rights and the
formulation of policies relative thereto. And one such mater is the
formulation of a code of discipline.

Indeed, industrial peace cannot be achieved if the employees

are denied their just participation in the discussion of matters
affecting their rights. Thus, even before Article 211 of the labor
Code (P.D. 442) was amended by Republic Act No. 6715, it was
already declared a policy of the State, "(d) To promote the
enlightenment of workers concerning their rights and
obligations . . . as employees." This was, of course, amplified by
Republic Act No 6715 when it decreed the "participation of
workers in decision and policy making processes affecting their
rights, duties and welfare." PAL's position that it cannot be
saddled with the "obligation" of sharing management
prerogatives as during the formulation of the Code, Republic Act
No. 6715 had not yet been enacted (Petitioner's Memorandum,
p. 44; Rollo, p. 212), cannot thus be sustained. While such
"obligation" was not yet founded in law when the Code was
formulated, the attainment of a harmonious labor-management
relationship and the then already existing state policy of
enlightening workers concerning their rights as employees
demand no less than the observance of transparency in
managerial moves affecting employees' rights.

Petitioner's assertion that it needed the implementation of a new

Code of Discipline considering the nature of its business cannot
be overemphasized. In fact, its being a local monopoly in the

II. This Court has no jurisdiction over the subject of the claims of
petitioners Januario Referente and Oscar Echalar.

III. There is another action pending between the same parties,

namely, Mercury Drug Co., Inc., and/or Mariano Que and Nardo

while on the other hand, the second alleges that this Court has
no jurisdiction over the acts complained of against the
respondent union.

For reasons stated in the Order dated March 24, 1965, two Court
resolved the motions to dismiss, as follows:

1. Ground No. 1 of management's motion to dismiss was denied

for lack of merit.

2. Its second ground was found meritorious and, accordingly

Januario Referente and Oscar Echalar were dropped as party
petitioners in this case.

3. The third ground was denied, holding that there still exists the
employer- employee relationship between Nardo Dayao and the

4. With respect to the fourth ground, the Court held that on the
basis of section 7-A of C.A. No. 444, as amended by R.A. No.
1993, 'it can be safely said that,

G.R. No. L-30452 September 30, 1982 counting backward the three (3) year prescriptive period from the
date of the filing of the instant petition - March 20, 1964 - all-of
MERCURY DRUG CO., INC., petitioner, petitioners' claims have not yet prescribed.'
NARDO DAYAO, ET AL., respondents, 5. In so far as respondent union's motion is concerned, the Court
held that 'petitioners' cause of action against the respondent
Caparas & Ilagan for petitioner. Association should be dismissed without prejudice to the refiling
of the same as an unfair labor practice case.'
Gerardo P. Cabo Chan and Elias Banzali for respondents.
Only the respondent management moved to reconsider the
GUTIERREZ, JR., J.: Order of March 24, 1965 but the same was denied by the
Court en banc in a resolution dated August 26, 1965.
This is a petition for review on certiorari of the decision of the Respondent submitted an answer to the amended petition which
Court of Industrial Relations dated March 30, 1968 in Case No. was subsequently amended on January 6, 1966, containing
1926-V and the Resolution of the Court en banc dated July 6, some admissions and some denials of the material averments of
1968 denying two separate motions for reconsideration filed by the amended petition. By way of affirmative and special
petitioners and respondents. defenses,, respondents alleged that petitioners have no cause of
action against Mariano Que because their employer respondent
Mercury Drug Company, Inc., an existing corporation which has
The factual background of Case No. 1926-V is summarized by
a separate and distinct personality from its incorporators
the respondent Court of Industrial Relations as follows:
stockholders and/or officer, that the company being a service
enterprise is excluded from the coverage of the Eight Hour Labor
This is a verified petition dated March 17, 1964 which was Law, as amended; that no court has the power to set wages,
subsequently amended on July 31, 1964 filed by Nardo Dayao rates of pay, hours of employment, or other conditions of
and 70 others against Mercury Drug Co., Inc., and/or Mariano employment to the extent of disregarding an agreement thereon
Que, President & General Manager, and Mercury Drug Co., Inc., between the respondent company and the petitioners, and of
Employees Association praying, with respect to respondent fixing night differential wages; that the petitioners were fully paid
corporation and its president and general manager: 1) payment for services rendered under the terms and conditions of the
of their unpaid back wages for work done on Sundays and legal individual contracts of employment; that the petition having been
holidays plus 25c/c additional compensation from date of their verified by only three of the petitioners without showing that the
employment up to June 30, 1962; 2) payment of extra others authorized the inclusion of their names as petitioners
compensation on work done at night; 3) reinstatement of does not confer jurisdiction to this Court; that there is no
Januario Referente and Oscar Echalar to their former positions employer-employee relationship between management and
with back salaries; and, as against the respondent union, for its petitioner Nardo Dayao and that his claim has been released
disestablishment and the refund of all monies it had collected and/or barred by another action and that petitioners' claims
from petitioners. accuring before March 20, 1961 have prescribed." (Annex "P",
pp. 110-112, rollo).
In separate motions, respondent management and respondent
union move to dismiss, the first on the ground that: After hearing on the merits, the respondent court rendered its
decision. The dispositive portion of the March 30, 1968 decision
I. The petition states no cause of action. reads:

IN VIEW OF THE FOREGOING, the Court hereby resolves that: III

1. The claim of the petitioners for payment of back wages RESPONDENT CIR ERRED IN MAKING AWARDS IN FAVOR
correspoding to the first four hours work rendered on every other OF THE PRIVATE RESPONDENTS WHO NEITHER GAVE
Sunday and first four hours on legal holidays should be denied EVIDENCE NOR EVEN APPEARED TO SHOW THEIR
for lack of merit. INTEREST.

2. Respondent Mercury Drug Company, Inc.. is hereby ordered Three issues are discussed by the petitioner in its first
to pay the sixty- nine (69) petitioners: assignment of error. The first issue refers to its allegation that the
respondent Court erred in declaring the contracts of employment
(a) An additional sum equivalent to 25% of their respective basic null and void and contrary to law. This allegation is premised
or regular salaries for services rendered on Sundays and legal upon the following finding of the respondent court:
holidays during the period from March 20. 1961 up to June 30,
1962; and But the Court finds merit in the claim for the payment of
additional compensation for work done on Sundays and
(b) Another additional sum or premium equivalent to 25% of their holidays. While an employer may compel his employees to
respective basic or regular salaries for nighttime services perform service on such days, the law nevertheless imposes
rendered from March 20, 1961 up to June 30, 1962. upon him the obligation to pay his employees at least 25%
additional of their basic or regular salaries.
3. Petitioners' petition to convert them to monthly employees
should be, as it is hereby, denied for lack of merit. No person, firm or corporation, business establishment or place
of center of labor shall compel an employee or laborer to work
4. Respondent Mariano Que, being an officer and acted only as during Sundays and legal holidays unless he is paid an
an agent in behalf of the respondent corporation, should be additional sum of at least twenty-five per centum of his regular
absolved from the money claims of herein petitioners whose remuneration: PROVIDED, HOWEVER, That this prohibition
employer, according to the pleadings and evidence, is the shall not apply to public utilities performing some public service
Mercury Drug Company,, Inc. such as supplying gas, electricity, power, water, or providing
means of transportation or communication. (Section 4, C. A. No.
444) (Emphasis supplied)
To expedite the computation of the money award, the Chief
Court Examiner or his authorized representative is hereby
directed to proceed to the office of the respondent corporation at Although a service enterprise, respondent company's employees
Bambang Street, Sta. Cruz, Manila, the latter to make available are within the coverage of C. A. No. 444, as amended known as
to said employee its records, like time records, payrolls and other the Eight Hour Labor Law, for they do not fall within the category
pertinent papers, and compute the money claims awarded in this or class of employees or laborers excluded from its provisions.
decision and, upon the completion thereof, to submit his report (Section 2, Ibid.)
as soon as possible for further disposition of the Court.
The Court is not impressed by the argument that under the
Not satisfied with the decision, the respondents filed a motion for contracts of employment the petitioners are not entitled to such
its reconsideration. The motion for reconsideration, was claim for the reason that the same are contrary to law. Payment
however, denied by the Court en banc in its Resolution dated of extra or additional pay for services rendered during Sundays
July 6, 1968. and legal holidays is mandated by law. Even assuming that the
petitioners had agreed to work on Sundays and legal holidays
without any further consideration than their monthly salaries,
Petitioner Mercury Drug Company, Inc., assigned the following
they are not barred nevertheless from claiming what is due them,
errors in this petition:
because such agreement is contrary to public policy and is
declared nun and void by law.
Any agreement or contract between employer and the laborer or
RESPONDENT CIR ERRED IN DECLARING THE employee contrary to the provisions of this Act shall be null and
Under the cited statutory provision, the petitioners are justified to
receive additional amount equivalent to 25% of their respective
basic or regular salaries for work done on Sundays and legal
holidays for the period from March 20, 1961 to June 30, 1962.
(Decision, pp. 119-120, rollo)
NOT BEEN RAISED. From a perusal of the foregoing statements of the respondent
court, it can be seen readily that the petitioner-company based
its arguments in its first assignment of error on the wrong
premise. The contracts of employment signed by the private
respondents are on a standard form, an example of which is that
RESPONDENT CIR ERRED IN SUSTAINING PRIVATE of private respondent Nardo Dayao quoted hereunder:
Mercury Drug Co., Inc. 1580 Bambang, Manila
October 30, 1959
Rizal Ave., Exten.

Dear Mr. Dayao: amount of P156.40 which is the equivalent of the Sunday and
Legal Holiday rate at P9.20 basic rate of P7.36 plus 25% thereof
You are hereby appointed as Checker, in the Checking or P1.84) x 17, the latter figure representing 13 Sundays and 4
Department of MERCURY DRUG CO., INC., effective July 1, Legal Holidays of 8 hours each. ...
1959 and you shall receive an annual compensation the amount
of Two Thousand four hundred pesos only (P2,400.00), that xxx xxx xxx
includes the additional compensation for work on Sundays and
legal holidays. That the required minimum 25% Sunday and Legal Holiday
additional compensation was paid to and received by the
Your firm being a Service Enterprise, you will be required to employees for the work they rendered on every other Sunday
perform work every day in a year as follows: and on the eight Legal Holidays for the period October, 1959 to
June 30, 1962 is further corroborated by Exhibits 5, 6, 8, 9 and
8 Hours work on regular days and-all special Holidays that may 9-A and the testimony of Mr. Jacinto Concepcion thereon. (Brief
be declared but with the 25% additional compensation; for the Petitioner, pp. 24, 27).

4 Hours work on every other Sundays of the month; The aforesaid computations were not given credence by the
respondent court. In fact the same computations were not even
For any work performed in excess of the hours as above mentioned in the court's decision which shows that the court
mentioned, you shall be paid 25 % additional compensation per found such computations incredible. The computations,
hour. supposedly patterned after the WAS Interpretative Bulletin No. 2
of the Department Labor demonstrated in Exhibits "6", "7", "8",
"9", and "9-A", miserably failed to show the exact and correct
This appointment may be terminated without notice for cause
annual salary as stated in the respective contracts of
and without cause upon thirty days written notice.
employment of the respondent employees. The figures arrived at
in each case did not tally with the annual salaries on to the
This supersedes your appointment of July 1, 1959. employees' contracts of employment, the difference varying from
P1.20 to as much as P14.40 always against the interest of the
Very truly yours, employees. The petitioner's defense consists of mathematical
computations made after the filing of the case in order to explain
MERCURY DRUG CO., INC. a clear attempt to make its employees work without the extra
compensation provided by law on Sundays and legal holidays.
(Sgd.) MARIANO QUE General Manager
In not giving weight to the evidence of the petitioner company,
ACCEPTED WITH FULL CONFORMITY: the respondent court sustained the private respondents'
evidence to the effect that their 25% additional compensation for
(Sgd.) NARDO DAYAO work done on Sundays and Legal Holidays were not included in
(EXH. "A" and "l ") their respective monthly salaries. The private respondents
(Decision, pp. 114-115, rollo) presented evidence through the testimonies of Nardo Dayao,
Ernesto Talampas, and Josias Federico who are themselves
among the employees who filed the case for unfair labor practice
These contracts were not declared by the respondent court null
in the respondent court and are private respondents herein. The
and void in their entirety. The respondent court, on the basis of
petitioner- company's contention that the respondent court's
the conflicting evidence presented by the parties, in effect: 1)
conclusion on the issue of the 25% additional compensation for
rejected the theory of the petitioner company that the 25%
work done on Sundays and legal holidays during the first four
additional compensation claimed by the private respondents for
hours that the private respondents had to work under their
the four-hour work they rendered during Sundays and legal
respective contracts of employment was not supported by
holidays provided in their contracts of employment were covered
substantial evidence is, therefore, unfounded. Much less do We
by the private respondents' respective monthly salaries; 2) gave
find any grave abuse of discretion on the part of the respondent
credence to private respondents', (Nardo Dayao, Ernesto
court in its interpretation of the employment contract's provision
Talampas and Josias Federico) testimonies that the 25%
on salaries. In view of the controlling doctrine that a grave abuse
additional compensation was not included in the private
of discretion must be shown in order to warrant our disturbing the
respondents' respective monthly salaries and 3) ruled that any
findings of the respondent court, the reversal of the court's
agreement in a contract of employment which would exclude the
endings on this matter is unwarranted. (Sanchez vs. Court of
25% additional compensation for work done during Sundays and
Industrial Relations, 27 SCRA 490).
holidays is null and void as mandated by law.
The last issue raised in the first assignment of error refers to a
On the second issue, the petitioner-company reiterated its stand
procedural matter. The petitioner-company contends that ,-the
that under the,- respective contracts of employment of the
question as to whether or not the contracts of employment were
private respondents, the subject 25 % additional compensation
null and void was not put in issue, hence, the respondent court
had already been included in the latter's respective monthly
pursuant to the Rules of Court should have refrained from ruling
salaries. This contention is based on the testimony of its lone
that such contracts of employment were null and void. In this
witness, Mr. Jacinto Concepcion and pertinent exhibits. Thus:
connection We restate our finding that the respondent court did
not declare the contracts of employment null and void in their
Exhibit A shows that for the period of October 30, 1960, the entirety. Only the objectionable features violative of law were
annual compensation of private respondent Nardo Dayao, nullified. But even granting that the Court of Industrial Relations
including the additional compensation for the work he renders declared the contracts of employment wholly void, it could do so
during the first four (4) hours on every other Sunday and on the notwithstanding the procedural objection. In Sanchez u. Court of
eight (8) Legal Holidays at the time was P2,400.00 or P200.00 Industrial Relations, supra, this Court speaking through then
per month. These amounts did not represent basic salary only, Justice, now Chief Justice Enrique M. Fernando, stated:
but they represented the basic daily wage of Nardo Dayao
considered to be in the amount of P7.36 x 305 ordinary working
xxx xxx xxx
days at the time or in the total amount of P2,144.80. So plus the
Moreover, petitioners appear to be oblivious of the statutory work from daytime work. In fact, the company contended that
mandate that respondent Court in the hearing, investigation and there was no law that required the payment of additional
determination of any question or controversy and in the exercise compensation for night work unlike an overtime work which is
of any of its duties or power is to act 'according to justice and covered by Commonwealth Act No. 444 (Eight Hour Labor Law).
equity and substantial merits of the case, without regard to And this Court in that case said that while there was no law
technicalities or legal forms and shall not be bound by any actually requiring payment of additional compensation for night
technical rules of legal evidence' informing its mind 'in such work, the industrial court has the power to determine the wages
manner as it may deem just and equitable.' Again, this Court has that night workers should receive under Commonwealth Act No.
invariably accorded the most hospitable scope to the breadth 103, and so it justified the additional compensation in the Shell
and amplitude with which such provision is couched. So it has case for 'hygienic, medical, moral, cultural and sociological
been from the earliest case decided in 1939 to a 1967 decision. reasons.

Two issues are raised in the second assignment of error by the xxx xxx xxx
petitioner-company. The first hinges on the jurisdiction of the
respondent court to award additional compensation for nighttime True, in Paflu, et al. vs. Tan, et al., supra, and in a series of
work. Petitioner wants Us to re- examine Our rulings on the cases thereafter, We held that the broad powers conferred by
question of nighttime work. It contends that the respondent court Commonwealth Act 103 on the CIR may have been curtailed by
has no jurisdiction to award additional compensation for Republic Act 875 which limited them to the four categories
nighttime work because of the declared policy on freedom of therein expressed in line with the public policy of allowing
collective bargaining expressed in Republic Act 875 and the settlement of industrial disputes via the collective bargaining
express prohibition in Section 7 of the said statute. A re- process; but We find no cogent reason for concluding that a suit
examination of the decisions on nighttime pay differential was of this nature for extra compensation for night work falls outside
the focus of attention in Rheem of the Philippines, Inc. et al., v. the domain of the industrial court. Withal, the record does not
Ferrer, et al (19 SCRA 130). The earliest cases cited by the show that the employer-employee relation between the 64
petitioner-company, Naric v. Naric Workers Union L-12075, - respondents and the petitioner had ceased.
May 29, 1959 and Philippine Engineers' Syndicate u. Bautista,
L-16440, February 29, 196.4, were discussed lengthily. Thus - After the passage of Republic Act 875, this Court has not only
upheld the industrial court's assumption of jurisdiction over cases
xxx xxx xxx for salary differentials and overtime pay [Chua Workers Union
(NLU) vs. City Automotive Co., et al., G.R. No. L- 11655, April 29,
2. On the claim for night differentials, no extended discussion is 1959; Prisco vs. CIR, et al., G.R. No. L-13806, May 23, 1960] or
necessary. To be read as controlling here is Philippine Engineers' for payment of additional compensation for work rendered on
Syndicate, Inc. vs. Hon. Jose S. Bautista, et al., L-16440, Sundays and holidays and for night work [Nassco vs. Almin, et
February 29, 1964, where this Court, speaking thru Mr. Chief al., G.R. No. L9055, November 28, 1958; Detective & Protective
Justice Cesar Bengzon, declared — Bureau, Inc. vs. Felipe Guevara, et al., G.R. No. L-8738, May 31,
1957] but has also supported such court's ruling that work
Only one issue is raised: whether or not upon the enactment of performed at night should be paid more than work done at
Republic Act 875, the CIR lost its jurisdiction over claims for daytime, and that if that work is done beyond the worker's
additional compensation for regular night work. Petitioner says regular hours of duty, he should also be paid additional
that this Act reduced the jurisdiction of respondent court and compensation for overtime work. [Naric vs. Naric Workers'
limited it to specific cases which this Court has defined as: ... (1) Union. et al., G. R No. L-12075, May 29, 1959, citing Shell Co.
when the labor dispute affects an industry which is indispensable vs. National Labor Union, 81 Phil. 315]. Besides, to hold that this
to the national interest and is so certified by the President to the case for extra compensation now falls beyond the powers of the
industrial court (Sec. 10, Republic Act 875); (2) when the industrial court to decide, would amount to a further curtailment
controversy refers to minimum wage under the Minimum Wage of the jurisdiction of said court to an extent which may defeat the
Law (Republic Act 602); (3) when it involves hours of purpose of the Magna Carta to the prejudice of labor.' [Luis
employment under the Eight-Hour Labor Law (Commonwealth Recato Dy, et al v-9. CIR, G.R. No. L-17788, May 25,1962]"
Act 444) and (4) when it involves an unfair labor practice [Sec.
5(a), Republic Act 8751', [Paflu, et al. vs. Tan, et al., 52 Off. Gaz, The petitioner-company's arguments on the respondent court's
No. 13, 5836]. alleged lack of jurisdiction over additional compensation for work
done at night by the respondents is without merit.
Petitioner insists that respondents' case falls in none of these
categories because as held in two previous cases, night work is The other issue raised in the second assignment of error is
not overtime but regular work; and that respondent court's premised on the petitioner-company's contention that the
authority to try the case cannot be implied from its general respondent court's ruling on the additional compensation for
jurisdiction and broad powers' under Commonwealth Act 103 nighttime work is not supported by substantial evidence.
because Republic Act 875 precisely curbed such powers limiting
them to certain specific litigations, beyond which it is not This contention is untenable. Pertinent portions of the
permitted to act. respondent court's decision read:

We believe petitioner to be in error. Its position collides with our xxx xxx xxx
ruling in the Naric case [National Rice & Corn Corp. (NARIC) vs.
NARIC Workers' Union, et al., G.R. No. L-12075, May 29, 1959] There is no serious disagreement between the petitioners and
where we held; respondent management on the facts recited above. The
variance in the evidence is only with respect to the money
While it is true that this Court made the above comment in the claims. Witnesses for petitioners declared they worked on
aforementioned case, it does not intend to convey the Idea that regular days and on every other Sunday and also during all
work done at night cannot also be an overtime work. The holidays; that for services rendered on Sundays and holidays
comment only served to emphasize that the demand which the they were not paid for the first four (4) hours and what they only
Shell Company made upon its laborers is not merely overtime received was the overtime compensation corresponding to the
work but night work and so there was need to differentiate night number of hours after or in excess of the first four hours; and that

such payment is being indicated in the overtime pay for work The petitioner's contention that its employees fully understood
done in excess of eight hours on regular working days. It is also what they signed when they entered into the contracts of
claimed that their nighttime services could well be seen on their employment and that they should be bound by their voluntary
respective daily time records. .. (Emphasis supplied) (p.116, commitments is anachronistic in this time and age.
The Mercury Drug Co., Inc., maintains a chain of drugstores that
The respondent court's ruling on additional compensation for are open every day of the week and, for some stores, up to very
work done at night is, therefore, not without evidence. Moreover, late at night because of the nature of the pharmaceutical retail
the petitioner-company did not deny that the private respondents business. The respondents knew that they had to work Sundays
rendered nighttime work. In fact, no additional evidence was and holidays and at night, not as exceptions to the rule but as
necessary to prove that the private respondents were entitled to part of the regular course of employment. Presented with
additional compensation for whether or not they were entitled to contracts setting their compensation on an annual basis with an
the same is a question of law which the respondent court express waiver of extra compensation for work on Sundays and
answered correctly. The "waiver rule" is not applicable in the holidays, the workers did not have much choice. The private
case at bar. Additional compensation for nighttime work is respondents were at a disadvantage insofar as the contractual
founded on public policy, hence the same cannot be waived. relationship was concerned. Workers in our country do not have
(Article 6, Civil Code). On this matter, We believe that the the luxury or freedom of declining job openings or filing
respondent court acted according to justice and equity and the resignations even when some terms and conditions of
substantial merits of the case, without regard to technicalities or employment are not only onerous and inequitous but illegal. It is
legal forms and should be sustained. precisely because of this situation that the framers of the
Constitution embodied the provisions on social justice (Section 6,
The third assignment of error is likewise without merit. The fact Article 11) and protection to labor (Section 9, Article I I) in the
that only three of the private respondents testified in court does Declaration of Principles And State Policies.
not adversely affect the interests of the other respondents in the
case. The ruling in Dimayuga V. Court of Industrial It is pursuant to these constitutional mandates that the courts are
Relations (G.R. No. L-0213, May 27, 1957) has been abandoned ever vigilant to protect the rights of workers who are placed in
in later rulings of this Court. In Philippine Land Air-Sea Labor contractually disadvantageous positions and who sign waivers or
Union (PLASLU) vs. Sy Indong Company Rice And Corn Mill (11 provisions contrary to law and public policy.
SCRA 277) We had occasion to re-examine the ruling
in Dimayuga We stated: WHEREFORE, the petition is hereby dismissed. The decision
and resolution appealed from are affirmed with costs against the
The latter reversed the decision of the trial Judge as regards the petitioner.
reinstatement with backwages of ... upon the theory that this is
not a class suit; that, consequently, it is necessary and SO ORDERED.
imperative that they should personally testify and prove the
charges in the complaint', and that, having failed to do so, the
decision of the trial Judge in their favor is untenable under the
rule laid down in Dimayuga vs. Court of Industrial Relations, G.R.
No. L-0213 (May 27,1957).

We do not share the view taken in the resolution appealed from.

As the trial Judge correctly said, in Ms dissent from said

xxx xxx xxx

In the case of Sanchez v. Court of Industrial Relations,

supra, this Court stated:

To the reproach against the challenged order in the brief of

petitioners in view of only two of the seven claimants testifying, a
statement by this Court in Ormoc Sugar Co., Inc. vs. OSCO
Workers Fraternity Labor Union would suffice by way of
refutation. Thus: "This Court fully agrees with the respondent that
quality and not quantity of witnesses should be the primordial
consideration in the appraisal of evidence.' Barely eight days
later, in another decision, the above statement was given
concrete expression. Thus: 'The bases of the awards were not
only the respective affidavits of the claimants but the testimonies
of 24 witnesses (because 6 were not given credence by the court
below) who Identified the said 239 claimants. The contention of
petitions on this point is therefore unfounded Moveover
in Philippine Land-Air-Sea Labor Union (PLASLU) v. Sy Indong
company Rice & Corn Mill, this Court, through the present Chief
Justice rejected as untenable the theory of the Court of Industrial
Relations concerning the imperative needs of all the claimants to
testify personality and prove their charges in the complaint. As
tersely put: 'We do not share the view taken in the resolution
appealed from.

August 28, 2009 resolution4 of the Court of Appeals (CA) in CA-
G.R. SP No. 95182.

The Factual Antecedents

Respondents Power Master, Inc. and Tri-C General Services

employed and assigned the petitioners as janitors and leadsmen
in various Philippine Long Distance Telephone
Company (PLDT) offices in Metro Manila area. Subsequently, the
petitioners filed a complaint for money claims against Power
Master, Inc., Tri-C General Services and their officers, the
spouses Homer and Carina Alumisin
(collectively, the respondents). The petitioners alleged in their
complaint that they were not paid minimum wages, overtime,
holiday, premium, service incentive leave, and thirteenth month
pays. They further averred that the respondents made them sign
blank payroll sheets. On June 11, 2001, the petitioners amended
their complaint and included illegal dismissal as their cause of
action. They claimed that the respondents relieved them from
service in retaliation for the filing of their original complaint.

Notably, the respondents did not participate in the proceedings

before the Labor Arbiter except on April 19, 2001 and May
21, 2001 when Mr. Romulo Pacia, Jr. appeared on the
respondents’ behalf. 5 The respondents’ counsel also
appeared in a preliminary mandatory conference on July
5, 2001. 6 However, the respondents neither filed any position
paper nor proffered pieces of evidence in their defense despite
their knowledge of the pendency of the case.

The Labor Arbiter’s Ruling

In a decision7 dated March 15, 2002, Labor Arbiter (LA) Elias H.

Salinas partially ruled in favor of the petitioners. The LA awarded
the petitioners salary differential, service incentive leave,
and thirteenth month pays. In awarding these claims, the LA
stated that the burden of proving the payment of these money
claims rests with the employer. The LA also awarded attorney’s
G.R. No. 189404 December 11, 2013 fees in favor of the petitioners, pursuant to Article 111 of the
Labor Code.8
ARNOLD PEREYE, EDGARDO OBOSE, ARNEL However, the LA denied the petitioners’ claims for backwages,
MALARAS, PATROCINO TOETIN, EVELYN LEONARDO, overtime, holiday, and premium pays. The LA observed that
ELMER GLOCENDA, RUFO CUNAMAY, the petitioners failed to show that they rendered overtime work
ROLANDOSAJOL, ROLANDO ABUCAYON, JENNIFER and worked on holidays and rest days without compensation.
NATIVIDAD, MARITESS TORION, ARMANDO LONZAGA, The LA further concluded that the petitioners cannot be declared
RIZAL GELLIDO, EVIRDE HAQUE, 1 MYRNA VINAS, to have been dismissed from employment because they did not
RODELITO AYALA, WINELITO OJEL, RENATO show any notice of termination of employment. They were also
RODREGO, NENA ABINA, EMALYN OLIVEROS, LOUIE not barred from entering the respondents’ premises.
COSE, WELITO LOON and WILLIAM ALIPAO, Petitioners, The Proceedings before the NLRC
POWER MASTER, INC., TRI-C GENERAL SERVICES, Both parties appealed the LA’s ruling with the National Labor
and SPOUSES HOMER and CARINA Relations Commission. The petitioners disputed the LA’s denial
ALUMISIN, Respondents. of their claim for backwages, overtime, holiday and premium
pays. Meanwhile, the respondents questioned the LA’s ruling on
DECISION the ground that the LA did not acquire jurisdiction over their
The respondents insisted that they were not personally served
We resolve the petition for review on certiorari, filed by
with summons and other processes. They also claimed that they
petitioners Wilgen Loon, Jerry Arcilla, Albert Pereye, Arnold paid the petitioners minimum wages, service incentive leave and
Pereye, Edgardo Obose, Arnel Malaras, Patrocino Toetin, Evelyn thirteenth month pays. As proofs, they attached photocopied
Leonardo, Elmer Glocenda, Rufo Cunamay, Rolando Sajol, and computerized copies of payroll sheets to their
Rolando Abucayon, Jennifer Natividad, Maritess Torion, memorandum on appeal. 9 They further maintained that the
Armando Lonzaga, Rizal Gellido, Evirde Haque, Myrna Vinas, petitioners were validly dismissed. They argued that the
Rodelito Ayala, Winelito Ojel, Renato Rodrego, Nena Abina, petitioners’ repeated defiance to their transfer to different
Emalyn Oliveros, Louie Ilagan, Joel Entig, Arnel Araneta, workplaces and their violations of the company rules and
Benjamin Cose, Welito Loon, William Alipao (collectively, regulations constituted serious misconduct and willful
the petitioners), to challenge the June 5, 2009 decision 3 and the disobedience.10

On January 3, 2003, the respondents filed an unverified workplaces and to attend training seminars for the intended
supplemental appeal. They attached photocopied and reorganization and reshuffling.
computerized copies of list of employees with automated
teller machine ( ATM) cards to the supplemental The NLRC denied the petitioners’ motion for reconsideration in a
appeal. This list also showed the amounts allegedly deposited resolution dated April 28, 2006. 17 Aggrieved, the petitioners filed
in the employees’ ATM cards.11 They also attached a petition for certiorari under Rule 65 of the Rules of Court before
documentary evidence showing that the petitioners were the CA.18
dismissed for cause and had been accorded due process.
The CA Ruling
On January 22, 2003, the petitioners filed an Urgent
Manifestation and Motion 12 where they asked for the deletion The CA affirmed the NLRC’s ruling. The CA held that the
of the supplemental appeal from the records because it allegedly petitioners were afforded substantive and procedural due
suffered from infirmities. First , the supplemental appeal was not process. Accordingly, the petitioners deliberately did not explain
verified. Second , it was belatedly filed six months from the filing their side. Instead, they continuously resisted their transfer to
of the respondents’ notice of appeal with memorandum on other PLDT offices and violated company rules and regulations.
appeal. The petitioners pointed out that they only agreed to the It also upheld the NLRC’s findings on the petitioners’ monetary
respondents’ filing of a responsive pleading until December 18, claims.
2002.13 Third ¸ the attached documentary evidence on the
supplemental appeal bore the petitioners’ forged signatures.
The CA denied the petitioners’ motion for reconsideration in a
resolution dated August 28, 2009, prompting the petitioners to
They reiterated these allegations in an Urgent Motion to file the present petition.19
Resolve Manifestation and Motion (To Expunge from the
Records Respondents’ Supplemental Appeal, Reply and/or
The Petition
Rejoinder) dated January 31, 2003.14 Subsequently, the
petitioners filed an Urgent Manifestation with Reiterating
Motion to Strike-Off the Record Supplemental In the petition before this Court, the petitioners argue that the CA
Appeal/Reply, Quitclaims and Spurious Documents committed a reversible error when it did not find that the NLRC
Attached to Respondents’ Appeal dated August 7, committed grave abuse of discretion. They reiterate their
2003.15 The petitioners argued in this last motion that the payrolls arguments before the lower tribunals and the CA in support of
should not be given probative value because they were the this conclusion. They also point out that the respondents posted
respondents’ fabrications. They reiterated that the genuine a bond from a surety that was not accredited by this Court and
payrolls bore their signatures, unlike the respondents’ by the NLRC. In effect, the respondents failed to perfect their
photocopies of the payrolls. They also maintained that their appeal before the NLRC. They further insist that the NLRC
signatures in the respondents’ documents (which showed their should not have admitted the respondents’ unverified
receipt of thirteenth month pay) had been forged. supplemental appeal.20

The NLRC Ruling The Respondents’ Position

In a resolution dated November 27, 2003, the NLRC partially In their Comments, the respondents stress that the petitioners
ruled in favor of the respondents. 16 The NLRC affirmed the LA’s only raised the issue of the validity of the appeal bond for the first
awards of holiday pay and attorney’s fees. It also maintained time on appeal. They also reiterate their arguments before the
that the LA acquired jurisdiction over the persons of the NLRC and the CA. They additionally submit that the petitioners’
respondents through their voluntary appearance. arguments have been fully passed upon and found unmeritorious
by the NLRC and the CA.21
However, it allowed the respondents to submit pieces of
evidence for the first time on appeal on the ground that The Issues
they had been deprived of due process. It found that the
respondents did not actually receive the LA’s processes. It also This case presents to us the following issues:
admitted the respondents’ unverified supplemental appeal on the
ground that technicalities may be disregarded to serve the 1) Whether the CA erred when it did not find that the NLRC
greater interest of substantial due process. Furthermore, the committed grave abuse of discretion in giving due course to the
Rules of Court do not require the verification of a supplemental respondents’ appeal;
a) Whether the respondents perfected their appeal before the
The NLRC also vacated the LA’s awards of salary differential, NLRC; and
thirteenth month and service incentive leave pays. In so
ruling, it gave weight to the pieces of evidence attached to the b) Whether the NLRC properly allowed the respondents’
memorandum on appeal and the supplemental appeal. It supplemental appeal
maintained that the absence of the petitioners’ signatures in the
payrolls was not an indispensable factor for their authenticity. It 2) Whether the respondents were estopped from submitting
pointed out that the payment of money claims was further pieces of evidence for the first time on appeal;
evidenced by the list of employees with ATM cards. It also found
that the petitioners’ signatures were not forged. It took judicial
3) Whether the petitioners were illegally dismissed and are thus
notice that many people use at least two or more different
entitled to backwages;
4) Whether the petitioners are entitled to salary differential,
The NLRC further ruled that the petitioners were lawfully
overtime, holiday, premium, service incentive leave, and
dismissed on grounds of serious misconduct and willful
thirteenth month pays; and
disobedience. It found that the petitioners failed to comply with
various memoranda directing them to transfer to other
5) Whether the petitioners are entitled to attorney’s fees.

The Court’s Ruling submission of evidence and he
sufficiently proves the allegations
The respondents perfected their sought to be proven
appeal with the NLRC because the
revocation of the bonding company's In labor cases, strict adherence to the technical rules of
authority has a prospective procedure is not required. Time and again, we have allowed
application evidence to be submitted for the first time on appeal with the
NLRC in the interest of substantial justice. 28 Thus, we have
Paragraph 2, Article 223 of the Labor Code provides that "[i]n consistently supported the rule that labor officials should use all
case of a judgment involving a monetary award, an appeal by reasonable means to ascertain the facts in each case speedily
the employer may be perfected only upon the posting of a cash and objectively, without regard to technicalities of law or
or surety bond issued by a reputable bonding company duly procedure, in the interest of due process.29
accredited by the Commission in the amount equivalent to
the monetary award in the judgment appealed from." However, this liberal policy should still be subject to rules of
reason and fairplay. The liberality of procedural rules is
Contrary to the respondents’ claim, the issue of the appeal qualified by two requirements: (1) a party should
bond’s validity may be raised for the first time on appeal since its adequately explain any delay in the submission of
proper filing is a jurisdictional requirement. 22 The requirement evidence; and (2) a party should sufficiently prove the
that the appeal bond should be issued by an accredited bonding allegations sought to be proven.30 The reason for these
company is mandatory and jurisdictional. The rationale of requirements is that the liberal application of the rules before
requiring an appeal bond is to discourage the employers from quasi-judicial agencies cannot be used to perpetuate injustice
using an appeal to delay or evade the employees' just and lawful and hamper the just resolution of the case. Neither is the rule on
claims. It is intended to assure the workers that they will receive liberal construction a license to disregard the rules of
the money judgment in their favor upon the dismissal of the procedure.31
employer’s appeal.23
Guided by these principles, the CA grossly erred in ruling that the
In the present case, the respondents filed a surety bond issued NLRC did not commit grave abuse of discretion in arbitrarily
by Security Pacific Assurance Corporation (Security Pacific) on admitting and giving weight to the respondents’ pieces of
June 28, 2002. At that time, Security Pacific was still an evidence for the first time on appeal.
accredited bonding company. However, the NLRC revoked its
accreditation on February 16, 2003. 24 Nonetheless, this A. The respondents failed to
subsequent revocation should not prejudice the respondents adequately explain their delay
who relied on its then subsisting accreditation in good faith. in the submission of evidence
In Del Rosario v. Philippine Journalists, Inc. ,25 we ruled that a
bonding company’s revocation of authority is prospective in We cannot accept the respondents’ cavalier attitude in blatantly
application. disregarding the NLRC Rules of Procedure. The CA gravely
erred when it overlooked that the NLRC blindly admitted and
However, the respondents should post a new bond issued by an arbitrarily gave probative value to the respondents’ evidence
accredited bonding company in compliance with paragraph 4, despite their failure to adequately explain their delay in the
Section 6, Rule 6 of the NLRC Rules of Procedure. This submission of evidence. Notably, the respondents’ delay was
provision states that "[a] cash or surety bond shall be valid and anchored on their assertion that they were oblivious of the
effective from the date of deposit or posting, until the case is proceedings before the LA. However, the respondents did not
finally decided, resolved or terminated or the award dispute the LA’s finding that Mr. Romulo Pacia, Jr. appeared on
satisfied." their behalf on April 19, 2001 and May 21, 2001. 32 The
respondents also failed to contest the petitioners’ assertion that
The CA correctly ruled that the the respondents’ counsel appeared in a preliminary mandatory
NLRC properly gave due course to conference on July 5, 2001.33
the respondents’ supplemental
appeal Indeed, the NLRC capriciously and whimsically admitted and
gave weight to the respondents’ evidence despite its finding that
The CA also correctly ruled that the NLRC properly gave due they voluntarily appeared in the compulsory arbitration
course to the respondents’ supplemental appeal. Neither the proceedings. The NLRC blatantly disregarded the fact that the
laws nor the rules require the verification of the supplemental respondents voluntarily opted not to participate, to adduce
appeal.26 Furthermore, verification is a formal, not a jurisdictional, evidence in their defense and to file a position paper despite
requirement. It is mainly intended for the assurance that the their knowledge of the pendency of the proceedings before the
matters alleged in the pleading are true and correct and not of LA. The respondents were also grossly negligent in not informing
mere speculation.27 Also, a supplemental appeal is merely an the LA of the specific building unit where the respondents were
addendum to the verified memorandum on appeal that was conducting their business and their counsel’s address despite
earlier filed in the present case; hence, the requirement for their knowledge of their non-receipt of the processes. 34
verification has substantially been complied with.
B. The respondents failed to
The respondents also timely filed their supplemental appeal on sufficiently prove the
January 3, 2003. The records of the case show that the allegations sought to be
petitioners themselves agreed that the pleading shall be filed proven
until December 18, 2002. The NLRC further extended the filing
of the supplemental pleading until January 3, 2003 upon the Furthermore, the respondents failed to sufficiently prove the
respondents’ motion for extension. allegations sought to be proven. Why the respondents’
photocopied and computerized copies of documentary evidence
A party may only adduce evidence were not presented at the earliest opportunity is a serious
for the first time on appeal if he question that lends credence to the petitioners’ claim that the
adequately explains his delay in the respondents fabricated the evidence for purposes of

appeal. While we generally admit in evidence and give The petitioners are entitled to
probative value to photocopied documents in attorney’s fees
administrative proceedings, allegations of forgery and
fabrication should prompt the adverse party to present the The award of attorney’s fees is also warranted under the
original documents for inspection. 35 It was incumbent upon circumstances of this case.1âwphi1 An employee is entitled to
the respondents to present the originals, especially in this case an award of attorney’s fees equivalent to ten percent (10%) of
where the petitioners had submitted their specimen signatures. the amount of the wages in actions for unlawful withholding of
Instead, the respondents effectively deprived the petitioners of wages.44
the opportunity to examine and controvert the alleged spurious
evidence by not adducing the originals. This Court is thus left As a final note, we observe that Rodelito Ayala, Winelito Ojel,
with no option but to rule that the respondents’ failure to present Renato Rodrego and Welito Loon are also named as petitioners
the originals raises the presumption that evidence willfully in this case. However, we deny their petition for the reason that
suppressed would be adverse if produced.36 they were not part of the proceedings before the CA. Their failure
to timely seek redress before the CA precludes this Court from
It was also gross error for the CA to affirm the NLRC’s awarding them monetary claims.
proposition that "[i]t is of common knowledge that there are many
people who use at least two or more different signatures." 37 The All told, we find that the NLRC committed grave abuse of
NLRC cannot take judicial notice that many people use at least discretion in admitting and giving probative value to the
two signatures, especially in this case where the petitioners respondents' evidence on appeal, which errors the CA replicated
themselves disown the signatures in the respondents’ assailed when it upheld the NLRC rulings.
documentary evidence.38 The NLRC’s position is unwarranted
and is patently unsupported by the law and jurisprudence.
WHEREFORE, based on these premises,
we REVERSE and SET ASIDE the decision dated June 5,
Viewed in these lights, the scales of justice must tilt in favor of 2009, and the resolution dated August 28, 2009 of the Court of
the employees. This conclusion is consistent with the rule that Appeals in CA-G.R. SP No. 95182. This case is REMANDED to
the employer’s cause can only succeed on the strength of its the Labor Arbiter for the sole purpose of computing petitioners'
own evidence and not on the weakness of the employee’s (Wilgen Loon, Jerry Arcilla, Albert Pereye, Arnold Pereye,
evidence.39 Edgardo Obose, Arnel Malaras, Patrocino Toetin, Evelyn
Leonardo, Elmer Glocenda, Rufo Cunamay, Rolando Sajol,
The petitioners are entitled to Rolando Abucayon, Jennifer Natividad, Maritess Torion, Ammndo
backwages Lonzaga, Rizal Gellido, Evirdly Haque, Myrna Vinas, Nena
Abina, Emalyn Oliveros, Louie Ilagan, Joel Entig, Amel Araneta,
Based on the above considerations, we reverse the NLRC and Benjamin Cose and William Alipao) full backwages (computed
the CA’s finding that the petitioners were terminated for just from the date of their respective dismissals up to the finality of
cause and were afforded procedural due process. In termination this decision) and their salary differential, service incentive leave,
cases, the burden of proving just and valid cause for dismissing holiday, thirteenth month pays, and attorney's fees equivalent to
an employee from his employment rests upon the employer. The ten percent (10%) of the withheld wages. The respondents are
employer’s failure to discharge this burden results in the finding further directed to immediately post a satisfactory bond
that the dismissal is unjustified.40 This is exactly what happened conditioned on the satisfaction of the awards affirmed in this
in the present case. Decision.

The petitioners are entitled to salary SO ORDERED.

differential, service incentive,
holiday, and thirteenth month pays

We also reverse the NLRC and the CA’s finding that the
petitioners are not entitled to salary differential, service incentive,
holiday, and thirteenth month pays. As in illegal dismissal cases,
the general rule is that the burden rests on the defendant to
prove payment rather than on the plaintiff to prove non-payment
of these money claims.41 The rationale for this rule is that the
pertinent personnel files, payrolls, records, remittances and other
similar documents – which will show that differentials, service
incentive leave and other claims of workers have been paid – are
not in the possession of the worker but are in the custody and
control of the employer.42

The petitioners are not entitled to

overtime and premium pays

However, the CA was correct in its finding that the petitioners

failed to provide sufficient factual basis for the award of overtime,
and premium pays for holidays and rest days. The burden of
proving entitlement to overtime pay and premium pay for
holidays and rest days rests on the employee because these are
not incurred in the normal course of business. 43 In the present
case, the petitioners failed to adduce any evidence that would
show that they actually rendered service in excess of the regular
eight working hours a day, and that they in fact worked on
holidays and rest days.

dated August 5, 1967 and affirmed en banc by said court on
January 15, 1968.

This case started on January 28, 1965 in consequence of the

certification of the President of the Philippines of an industrial
dispute between the Philippine National Bank Employees
Association (PEMA, for short), on the one hand, and the
Philippine National Bank (PNB, for short), on the other, which
arose from no more than the alleged failure of the PNB to comply
with its commitment of organizing a Committee on Personnel
Affairs to take charge of screening and deliberating on the
promotion of employees covered by the collective bargaining
agreement then in force between the said parties. On January
28, 1965, the Industrial Court issued an order aimed at settling
the dispute temporarily between the parties, which was certified
by the President. Pertinent portions of the order read thus:

xxx xxx xxx

1. That in order to settle the strike and for the employees to

return to work immediately starting January 29, 1965, the
Committee on Personnel Affairs is hereby created to start
functioning on February 1, 1965;

xxx xxx xxx

f. That in return for this concession, an injunction against future

strikes or lockouts shall be issued by the Court to last for a
period of six months but which shall terminate even before that
period should all disputes of the parties be already resolved;
(Page 84, Record.)

According to the very decision now on appeal, "on May 22, 1965,
petitioner (private respondent herein) filed another pleading
submitting to this Court for determination certain matters which it
claims cannot be resolved by the parties, which are as follows:

First Cause of Action

a. In a Resolution No. 1162 dated September 16, 1957, the

Respondent's Board of Directors approved a revision of the
computation of overtime pay retroactive as of July 1, 1954, and
authorized a recomputation of the regular one- hour and extra
overtime already rendered by all officers and employees of the
Respondent Bank.

The details of the benefits involved in said Resolution are

contained in a Memorandum of the Respondent Bank dated
September 18, 1957.
G.R. No. L-30279 July 30, 1982
b. Since the grant of the benefits in question, the employees of
the Respondent, represented by the petitioner, have always
PHILIPPINE NATIONAL BANK, petitioner, considered them to be a part of their salaries and/or fringe
vs. benefits; nevertheless, the Respondent, in 1963, without just
PHILIPPINE NATIONAL BANK EMPLOYEES cause, withdrew said benefits and in spite of repeated demands
ASSOCIATION (PEMA) and COURT OF INDUSTRIAL refused, and still refuses to reinstate the same up to the present.
RELATIONS, respondents.
Second Cause of Action
Conrado E. Medina, Edgardo M. Magtalas and Nestor Kalaw for
c. After the promulgation of the Decision in National Waterworks
and Sewerage Authority vs. NAWASA Consolidated Unions, et
Leon O. Ty, Gesmundo Fernandez & Zulueta, Oliver B. al. G.R. No. L-18938, Aug. 31, 1964, the Petitioner has
Gesmundo and Israel Bocobo for respondents. repeatedly requested Respondent that the cost of living
allowance and longevity pay be taken into account in the
computation of overtime pay, effective as of the grant of said
benefits on January 1, 1958, in accordance with the ruling in said
BARREDO, J.: Decision of the Supreme Court.

Appeal by the Philippine National Bank from the decision of the

trial court of the Court of Industrial Relations in Case No. IPA-53

d. Until now Respondent has not taken any concrete steps As to the objection posed that the issues are mere money
toward the payment of the differential overtime and nighttime claims, there appears to be no ground for the same. In the first
pays arising from the cost of living allowance and longevity pay. place, although the same involves a claim for additional
compensation it is also a part of the labor dispute existing
xxx xxx xxx between the parties and subject to the compulsory arbitration
powers of the Court, pursuant to Section 10 of Rep. Act No. 875.
Respondent in its answer of June 7, 1965 took exception to this In the second place, on the basis of the so-called PRISCO
mentioned petition on several grounds, namely, (1) the said doctrine (G.R. No. L- 13806, May 23,.1960), there is an existing
alleged causes of action were not disputes existing between the and current employer-employee relationship between the
parties, (2) the same are mere money claims and therefore not respondent and the members of petitioner union, for whom the
within this Court's jurisdiction, and (3) that the parties have not additional overtime compensation is claimed.
so stipulated under the collective bargaining agreement between
them, or the same is premature as the pertinent collective With respect to ground three of the answer on which objection is
bargaining agreement has not yet expired." (Pp. 84-86, based, on C.A. 444, as amended, Section 6 thereof, provides as
Record.) 1 follows:

Resolving the issues of jurisdiction and prematurity thus raised 'Any agreement or contract between the employer and the
by PNB, the court held: laborer or employee contrary to the provisions of this Act shall be
null and void ab initio'.
As to the first ground, it is well to note that this Court in its Order
of January 28, 1965 has enjoined the parties not to strike or The instant action is partially subject to the provisions of
lockout for a period of six (6) months starting from said date. In a Commonwealth Act 444, as amended. Even if, the parties have
very definite sense the labor disputes between the parties have stipulated to the extent that overtime will not be paid, the same
been given a specific period for the settlement of their will not be binding. More so under the present circumstances,
differences. The fact that thereafter the question of the manner where the only question is the correctness of the computation of
of payment of overtime pay is being put in issue, appears to the overtime payments.
indicate that this was a part of the labor dispute. If we are to
consider that this question, particularly the second cause of While the Court notes that the first cause of action has become
action, has in fact existed as early as 1958, shows the necessity moot and academic in view of the compliance by respondent,
of resolving the same now. And the same would indeed be an hence there is no further need to resolve the same (t.s.n., pp. 5-
existing issue considering that the present certification came only 7, August 16, 1965), the settlement of said first cause of action
in 1965. further strengthens the view that the second cause of action is
indeed an existing dispute between the parties. Both causes of
It is further to be noted that the presidential certification has not fiction involve overtime questions. Both stem from dates well
limited specific areas of the labor dispute embraced within the beyond and before the presidential certification of the present
said certification. It speaks of the existence of a labor dispute proceedings. If respondent has been fit to take steps to expedite
between the parties and of a strike declared by the PEMA, for and resolve, without court intervention, the first cause of action, it
which the Court has been requested to take immediate steps in cannot deny the existence of the second cause of action as the
the exercise of its powers under the law. first and second appear to be interrelated matters. (Pp. 86-89,
Even on the assumption that the present issue is not one
embraced by the presidential certification or it is an issue And We agree that the foregoing holding is well taken. It would
presented by one party on a cause arising subsequent to the be more worthwhile to proceed to the basic issues immediately
certification, the same would still be subject to the jurisdiction of than to add anything more of Our own discourse to the
this Court. In "Apo Cement Workers Union versus Cebu Portland sufficiently based disposition of the court a quo of the above-
Cement", Case No. 11 IPA (G.R. No. L-12451, July 10, 1957), mentioned preliminary questions.
the Court en banc (where this Sala has taken an opposite view)
upheld its jurisdiction under the circumstances just enumerated. After discussing the pros and cons on the issue involved in the
It would seem that this question has been further settled by our second cause of action as to whether or not the cost-of-living
Supreme Court in "National Waterworks & Sewerage Authority allowance otherwise denominated as equity pay and longevity
vs. NAWASA Consolidated Unions, et al." (supra), which we pay granted by the bank, the first beginning January 1, 1958 and
quote in part: the latter effective July 1, 1961, should be included in the
computation of overtime-pay, the court granted the demands of
xxx xxx xxx PE MA, except the additional rate of work for night pay, and
rendered the following judgment:
4. Petitioner's claim that the issue of overtime compensation not
having been raised in the original case but merely dragged into it WHEREFORE, in view of the foregoing, this Court hereby
by intervenors, respondent Court cannot take cognizance thereof promulgates the following:
under Section 1, Rule 13 of the Rules of Court.
1. The respondent Philippine National Bank is hereby required to
xxx xxx xxx pay overtime and nighttime rates to its employees from January
28, 1962; and such overtime compensation shall be based on
... The fact that the question of overtime payment is not included the sum total of the employee's basic salary or wage plus cost of
in the principal case in the sense that it is not one of the items of living allowance and longevity pay under the following schedule:
dispute certified to by the President is of no moment, for it comes
within the sound discretion of the Court of Industrial Relations. 'a. Overtime services rendered shall be paid at the rate of time
Moreover, in labor disputes technicalities of procedure should as and one-third, but overtime work performed between 6:00 P.M.
much as possible be avoided not only in the interest of labor but and 6- .00 A.M. shall be paid at the rate of 150% or 50% beyond
to avoid multiplicity of action. This claim has no merit. the regular rate;

xxx xxx xxx

'b. The rate for work performed in the night shift, or during the NAWASA, since the sole and definite ratio decidendi in NAWASA
period from 6:00 P.M. to 6:00 A.M. shall be compensated at the was merely that inasmuch as Republic Act 1880 merely fixed a
rate of 150% or 50% beyond the regular rate, provided the work 40-hour 5-day work for all workers, laborers and employees
performed involved a definite night shift and not merely a including government-owned corporations like NAWASA, the
continuation by way of overtime of the regular and established weekly pay of NAWASA workers working more than five days a
hours of the respondent Bank. week should remain intact; with overtime pay in excess of eight
hours work and 25 % additional compensation on Sundays.
2. The Chief of the Examining Division of the Court or any of his There was no pronouncement at all therein regarding the basis
duly designated representatives is hereby ordered to compute of the computation of overtime pay in regard to bonuses and
the overtime rates due each employee of the respondent Bank other fringe benefits.
from January 28, 1962, in accordance with the above
determination; and to complete the same within a period of sixty For being commendably lucid and comprehensive, We deem it
(60) days from receipt of this Order. However, considering that justified to quote from that Shell decision:
the Philippine National Bank is a government depository, and
renders and performs functions distinct and unique; and, while it The main issue:
may be a banking institution, its relationship with other
government agencies and the public is such that it has no basis The Unions appear to have read the NAWASA case very broadly.
for comparison with other banking institutions organized under They would want it held that in view of the said ruling of the
the corporation law or special charter. To require it to pay Supreme Court, employers and employees must, even in the
immediately the liability after the exact amount shall have been face of existing bargaining contracts providing otherwise,
determined by the Court Examiner and duly approved by the determine the daily and hourly rates of employees in this
Court, as in other cases, would work undue hardship to the manner: Add to basic pay all the money value of all fringe
whole government machinery, not to mention the outstanding benefits agreed upon or already received by the workers
foreign liabilities and outside commitments, if any. Moreover, the individually and overtime pay shall be computed thus —
records show that this case was initiated long before the taking
over of the incumbent bank officials.
Basic yearly Rate plus Value of all Fringe Benefits divided by
number of days worked during the year equals daily wage; Daily
Accordingly, the Court feels that the payment shall be subject to wage divided by 8 equals hourly rate. Hourly rate plus premium
the negotiations by the parties as to time, amount, and duration. rate equals hourly overtime rate.

The Court may intervene in said negotiations for the purpose of The NAWASA case must be viewed to determine whether it is
settling once and for all this case to maintain industrial peace that broad. NAWASA case must be understood in its setting. The
pursuant to Section 13 of Commonwealth Act 103, as amended, words used by the Supreme Court in its reasoning should not be
if desired, however by the parties. disengaged from the fact-situation with which it was confronted
and the specific question which it was there required to decide.
After all this is not an unfair labor practice case. Above all care should be taken not to lose sight of the truth that
the facts obtaining, the issue settled, and the law applied in the
SO ORDERED. (Pp. 98-100, Record.) said case, and these, though extractable from the records
thereof as material in the resolution herein, were, as they are,
In connection with the above decision, two interesting points primarily declarative of the rights and liabilities of the parties
appear at once to be of determinative relevance: involved therein.

The first is that in upholding its jurisdiction to take cognizance of Recourse to the records of the NAWASA case shows that the
the demand in question about cost-of-living allowance and fact- situation, as far as can be materially connected with the
longevity pay, the Industrial Court carefully noted that it was not instant case, is as follows:
resolving a petition for declaratory relief in the light of the
decision of this Court in NAWASA vs. NAWASA Consolidated In view of the enactment of Rep. Act 1880, providing that the
Unions, G.R. No. L- 18938, August 31, 1964, 11 SCRA 766. legal hours of work for government employees, (including those
Thus the decision under review states: in government-owned or controlled corporations) shall be eight
(8) hours a day for five (5) days a week or forty (40) hours a
Incidentally, the present action is not one for declaratory relief as week, its implementation by NAWASA was disputed by the
to the applicability of a judicial decision to the herein parties. A Union. The workers affected were those who, for a period of
careful perusal of the pleadings indicates that what is being three (3) months prior to or immediately preceding the
sought is the payment of differential overtime and nighttime pay implementation of Rep. Act 1880, were working seven (7) days a
based on existing law and jurisprudence. The cause of action is week and were continuously receiving 25% Sunday differential
not anchored on any decision of any court but on provisions of pay. The manner of computing or determining the daily rate of
the law which have been in effect at the time of the occurrence of monthly salaried employees.
the cause of the action in relation to a labor dispute. Hence, this
is not a petition for declaratory relief. (Pp. 94-95, Record.) And the Supreme Court, specifically laid out the issue to be
decided, as it did decide, in the NAWASA, as follows:
The second refers to a subsequent decision of the
same Industrial Court in Shell Oil Workers Union vs. Shell Co., 7. and 8. How is a daily wage of a weekly employee computed in
et al., Case No. 2410-V and Shell & Affiliates Supervisors Union the light of Republic Act 1880?'(G.R. L-18938)
vs. Shell Company of the Philippines, et al. , Case No. 2411- V, in
which the court made an explanatory discourse of its Resolving the above issue, it was held;
understanding of the NAWASA ruling, supra, and on that basis
rejected the claim of the workers. In brief, it held that (1) According to petitioner, the daily wage should be computed
NAWASA does not apply where the collective bargaining exclusively on the basic wage without including the automatic
agreement does not provide for the method of computation of increase of 25% corresponding to the Sunday differential. To
overtime pay herein insisted upon by private respondent PEMA include said Sunday differential would be to increase the basic
and (2) the fact-situation in the Shell cases differed from that of pay which is not contemplated by said Act. Respondent court
disagrees with this manner of computation. lt holds that Republic merely an inducement to accept employment at times which are
Act 1880 requires that the basic weekly wage and the basic not at desirable form a workman's standpoint (International L.
monthly salary should not be diminished notwithstanding the Ass'n. Wise 50 F. Supp. 26, affirmed C.C.A. Carbunao v.
reduction in the number of working days a week. If the automatic National Terminals Corp. 139 F. 853).
increase corresponding to the salary differential should not be
included there would be a diminution of the weekly wage of the But this paragraph in the decision appears to have been used
laborer concerned. Of course, this should only benefit those who and cited by the Court to sustain the action of the court a quo:
have been working seven days a week and had been regularly that it was correct to include the 25% Sunday premium for the
receiving 25% additional compensation for Sunday work before purpose of setting the weekly wage of specified workers whose
the effectivity of the Act. weekly earnings before the passage of R.A. 1880 would be
diminished, if said premium pay regularly received for three
It is thus necessary to analyze the Court's rationale in the said months were not included. It is significant that the citations
NAWASA case, 'in the light of Rep. Act 1880', and the 'specific therein used by the Supreme Court are excerpts from American
corollaries' discussed preparatory to arriving at a final conclusion decisions whose legislation on overtime is at variance with the
on the main issue. What was required to be done, by way of law in this jurisdiction in this respect: the U.S. legislation
implementing R. A. 1880? The statute directs that working hours considers work in excess of forty hours a week as overtime;
and days of government employees (including those of whereas, what is generally considered overtime in the
government owned and controlled proprietary corporations) shall Philippines is work in excess 'of the regular 8-hours a day. It is
be reduced to five days-forty hours a week. But, the same law understandably material to refer to precedents in the U.S. for
carried the specific proviso, designed to guard against diminution purposes of computing weekly wages under a 40- hour a week
of salaries or earnings of affected employees. The Supreme rule, since the particular issue involved in NAWASA is the
Court itself clearly spelled this out in the following language: 'It is conversion of prior weekly regular earnings into daily rates
evident that Republic Act 1880 does not intend to raise the without allowing diminution or addition.
wages of the employees over what they are actually receiving.
Rather, its purpose is to limit the working days in a week to five No rule of universal application to other cases may, therefore, be
days, or to 40 hours without however permitting any reduction in justifiably extracted from the NAWASA case. Let it be enough
the weekly or daily wage of the compensation which was that in arriving at just solution and correct application of R.A.
previously received. ... 1880, an inference was drawn from other decisions that a regular
wage includes payments 'agreed by the parties to be received
If the object of the law was to keep intact, (not either to increase during the week.' But to use this analogy in another fact-
it or decrease it) it is but natural that the Court should concern situation would unmitigatingly stretch its value as basis for legal
itself, as it did, with the corollary, what is the weekly wage of reasoning, for analogies are not perfect and can bring a collapse
worker who, prior to R.A. 1880, had been working seven (7) days if stretched far beyond their logical and reasoned efficacy.
a week and regularly receiving differential payments for work on Neither would it be far to ascribe to the Supreme Court's citation
Sundays or at night? It seems clear that the Court was only of foreign jurisprudence, which was used for purposes of
concerned in implementing correctly R.A. 1880 by ensuring that analogy, the force of statute law, for this would be the
in diminishing the working days and hours of workers in one consequence if it were allowed to be used as authority for all
week, no diminution should result in the worker's weekly or daily fact-situations, even if different from the NAWASA case. This,
wage. And, the conclusion reached by the Supreme Court was to because courts do not legislate. All they do is apply the law.
affirm or recognize the correctness of the action taken by the
industrial court including such differential pay in computing the The above discussions impel the objective analyst to reject the
weekly wages of these employees and laborers who worked proposition that the NAWASA decision is an embracing and can
seven days a week and were continuously receiving 25% be used with the authority of a statute's effects on existing
Sunday differential for a period of three months immediately contracts.
preceding the implementation of R.A. 1880.' Nothing was said
about adding the money value of some other bonuses or It appears that the answer to dispute lies, not in the text of the
allowances or money value of other fringe benefits, received NAWASA case but in the terms and conditions and practice in
outside the week or at some other periods. That was not within the implementation of, the agreement, an area which makes
the scope of the issue before the Court. in fact, the limited resolution of the issue dependent on the relation of the terms
application of the decision is expressed in the decision itself. The and conditions of the contract to the phraseology and purpose of
resolution of this particular issue was for the benefit of only a the Eight-Hour Labor Law (Act 444).
segment of the NAWASA employees. Said the Court 'Of course,
this should only benefit those who have been working seven
The more we read the NAWASA case, the more we are
days a week and had been regularly receiving 25% additional
convinced that the overtime computation set therein cannot
compensation for Sunday work before the effectivity of the Act.'
apply to the cases at bar. For to do so would lead to unjust
results, inequities between and among the employees
Unions make capital of the following pronouncement of the themselves and absurd situations. To apply the NAWASA
Supreme Court in the NAWASA case: computation would require a different formula for each and every
employee, would require reference to and continued use of
It has been held that for purposes of computing overtime individual earnings in the past, thus multiplying the administrative
compensation a regular wage includes all payments which the difficulties of the Company. It would be cumbersome and tedious
parties have agreed shall be received during the work week, a process to compute overtime pay and this may again cause
including piece-work wages, differential payments for working at delays in payments, which in turn could lead to serious disputes.
undesirable times, such as at night or on Sundays and holidays, To apply this mode of computation would retard and stifle the
and the cost of board and lodging customarily furnished the growth of unions themselves as Companies would be irresistibly
employee (Walling v. Yangerman-Reynolds Hardwook Co., 325 drawn into denying, new and additional fringe benefits, if not
U.S. 419; Walling v. Harischfeger Corp. 325 U.S. 427). The those already existing, for fear of bloating their overhead
'Regular rate of pay also ordinarily includes incentive bonus or expenses through overtime which, by reason of being unfixed,
profit- sharing payments made in addition to the normal basic becomes instead a veritable source of irritant in labor relations.
pay (56 C.J.S., pp. 704-705), and it was also held that the higher
rate for night, Sunday and holiday work is just as much as One other reason why application of the NAWASA case should
regular rate as the lower rate for daytime work. The higher rate is be rejected is that this Court is not prepared to accept that it can
lay down a less cumbersome formula for a company-wide evidence of the case now before Us, We rule that the NAWASA
overtime pay other than that which is already provided in the case is not in point and, therefore, is inapplicable to the case at
collective bargaining agreement. Courts cannot make contracts bar.
for the parties themselves.
The ruling of this Court in the NAWASA case contemplates the
Commonwealth Act 444 prescribes that overtime work shall be regularity and continuity of the benefits enjoyed by the
paid 'at the same rate as their regular wages or salary, plus at employees or workers (for at least three (3) months) as the
least twenty-five per centum additional' (Secs. 4 & 5). The law condition precedent before such additional payments or benefits
did not define what is a 'regular wage or salary'. What the law are taken into account. This is evident in the aforequoted ruling
emphasized by way of repeated expression is that in addition to of this Court in the NAWASA case as well as in the hereinbelow
'regular wage', there must be paid an additional 25% of that cited authorities, to wit:
'regular wage' to constitute overtime rate of pay. The parties
were thus allowed to agree on what shag be mutually considered The 'regular rate' of pay on the basis of which overtime must be
regular pay from or upon which a 25% premium shall be based computed must reflect an payments which parties have agreed
and added to make up overtime compensation. This the parties shall be received regularly during the work week, exclusive of
did by agreeing and accepting for a very long period to a basic overtime payments.' Walling v. Garlock Packing Co. C.C.A.N.Y.,
hourly rate to which a premium shall be added for purposes of 159 F. 2d 44, 45. (Page 289, WORDS And PHRASES,
overtime. Permanent Edition, Vol. 36A; Italics supplied); and

Also significant is the fact that Commonwealth Act 444 merely As a general rule the words 'regular rate' mean the hourly rate
sets a minimum, a least premium rate for purposes of overtime. actually paid for the normal, non-overtime work week, and an
In this case, the parties agreed to premium rates four (4) or even employee's regular compensation is the compensation which
six (6) times than that fixed by the Act. Far from being against regularly and actually reaches him, ... .' (56 C.J.S. 704;
the law, therefore, the agreement provided for rates Emphasis supplied).
'commensurate with the Company's reputation of being among
the leading employers in the Philippines' (Art. 1, Sec. 2, Coll. Even in the definition of wage under the Minimum Wage Law, the
Barg. Agreement) at the same time that the Company is words 'customarily furnished' are used in referring to the
maintained in a competitive position in the market Coll. Barg. additional payments or benefits, thus, -
Agreement, lbid).
'Wage' paid to any employee shag mean the remuneration or
Since the agreed rates are way above prevailing statutory wages earnings, however designated, capable of being expressed in
and premiums, fixed by themselves bona fide through terms of money, whether fixed or ascertained on a time, task,
negotiations favored by law, there appears no compelling reason piece, commission basis, or other method of calculating the
nor basis for declaring the same illegal. A basic principle forming same, which is payable by an employer to an employee under a
an important foundation of R.A. 875 is the encouragement given written or unwritten contract of employment for work done or to
to parties to resort to peaceful settlement of industrial problems be done or for services rendered or to be rendered, and includes
through collective bargaining. It behooves this Court, therefore, the fair and reasonable value, as determined by the Secretary of
to help develop respect for those agreements which do not Labor, of board, lodging or other facilities customarily furnished
exhibit features of illegality This is the only way to build by the employer to the employee.' (Sec. 2 (g), R.A. No. 602).
confidence in the democratic process of collective bargaining.
Parties cannot be permitted to avoid the implications and
Having been stipulated by the parties that ... the Tin Factory
ramifications of the agreement.
Incentive Pay has ceased in view of the closure of the factory in
May 1966 the fringe benefits as described show that they are
Although this Court has gone very far in resolving an doubts and occasionally not regularly enjoyed and that not all employees are
in giving great weight to evidence and presumptions in favor of entitled to them', herein petitioners failed to meet the test laid
labor, it may not go as far as reconstruct the law to fit particular down by this Court in the NAWASA case. Further, the collective
cases." (Pp. 174-181, Record) bargaining agreement resorted to by the parties being in
accordance with R.A. 875, with its provision on overtime pay far
Proof of the correctness of the aforequoted considerations, the way beyond the premium rate provided for in Sections 4 and 5 of
appeal of the workers from the Industrial Court's decision did not Commonwealth Act 444, the same should govern their
prosper. Affirming the appealed decision, We held: relationship. Since this is their contract entered into by them
pursuant to bargaining negotiations under existing laws, they are
The theory, therefore, of the petitioners is to the effect that, bound to respect it. It is the duty of this Court to see to it that
notwithstanding the terms and conditions of their existing contracts between parties, not tainted with infirmity or irregularity
collective bargaining agreement with respondent Shell Company, or illegality, be strictly complied with by the parties themselves.
particularly Exhibit 'A-l' for the Petitioners and Exhibit 'l-A' for the This is the only way by which unity and order can be properly
Respondent (which is Appendix 'B' of the Collective Bargaining attained in our society.
Agreement of the parties), considering the ruling in the NAWASA
case, a recomputation should be made of their basic wage by It should be noted in passing that Commonwealth Act 444
adding the money value of the fringe benefits enjoyed by them prescribes only a minimum of at least 25% in addition to the
from whence the premium rates agreed upon shall be computed regular wage or salary of an employee to constitute his overtime
in order to arrive at the correct computation of their overtime rate of pay, whereas, under Appendix 'B', (Exhs. 'A-l', Petitioners
compensation from the Company. On the other hand, and 'l-A', Respondent) of the Collective Bargaining Agreement of
respondent Shell Company maintains that the NAWASA case the parties, the premium rate of overtime pay is as high as l50%
should not be utilized as the basis for the alteration of their mode on regular working days up to 250 % on Sundays and
of computing overtime rate of pay as set forth in their collective recognized national holidays. (Shell Oil Workers Union vs. Shell
Bargaining Agreement. It insists that their collective bargaining Company of the Philippines, G.R. No. L-30658-59, March 31,
agreement should be the law between them. 1976, 70 SCRA 242-243.)

After a careful and thorough re-examination of the NAWASA

case, supra, and a minute examination of the facts and the

In the instant case, on May 22, 1965 PEMA alleged in the court interpretation of the applicable law, namely, CA 444, in the light
below the following cause of action as amended on June 7, of its own impression of the opinion of this Court in NAWASA and
1965: based its decision thereon.

Since the start of the giving of cost of living allowance and Accordingly, upon the fact-situation of this case hereunder to be
longevity pay and reiterated, after the promulgation of the set forth, the fundamental question for Us to decide is whether or
Decision in National Waterworks and Sewerage Authority vs. not the decision under appeal is in accordance with that law and
NAWASA Consolidated Unions et al., G.R. No. L-18938, August the cited jurisprudence. In brief, as PEMA posits, is NAWASA
31, 1964, the petitioner has repeatedly requested respondent four-square with this case? And even assuming, for a while, that
that the cost of living allowance and longevity pay be taken into in a sense what is before Us is an arbitration decision, private
account in the computation of overtime pay, effective as of the respondent itself admits in its above-mentioned memorandum
grant of said benefits on January 1, 1958, in accordance with the that this Court is not without power and authority to determine
ruling in said Decision of the Supreme Court. (Page 14, PNB's whether or not such arbitration decision is against the law or
Brief.) jurisprudence or constitutes a grave abuse of discretion. Thus, in
PEMA's memorandum, it makes the observation that
To be sure, there could be some plausibility in PNB's pose "(F)urthermore, in the Shell cases, the unions are using the
regarding the jurisdiction of the Industrial Court over the above NAWASA decision as a source of right for recomputation, while
cause of action. But, as We have already stated, We agree with in the PNB, the Union merely cites the NAWASA doctrine, not as
the broader view adopted by the court a quo on said point, and a source of right, but as a legal authority or reference by both
We find that it is in the best interests of an concerned that this parties so the Union demand may be granted. " (Motion to
almost 25-year dispute be settled once and for all without the Dismiss, p. 3.)
need of going through other forums only for the matter to
ultimately come back to this Court probably years later, taking Obviously, therefore, the polestar to which Our mental vision
particular note as We do, in this regard, of the cases cited on must be focused in order that We may arrive at a correct legal
pages 9-10 of PEMA's original memo, as follows: and equitable determination of this controversy and, in the
process make NAWASA better understood as We believe it
Realizing its error before in not considering the present case a should be, is none other than Sections 3 and 4 of Com. Act No.
certified labor dispute, the Bank now concedes that the case at 444, the Eight Hour Labor Law, which pertinently provide thus:
bar 'belongs to compulsory arbitration'. Hence, the lawful powers
of the CIR over the same. However, the Bank says 'overtime SEC. 3. Work may be performed beyond eight hours a day in
differential is but a money claim, (and) respondent court does not case of actual or impending emergencies caused by serious
have jurisdiction to take cognizance of the same'. accidents, fire, flood, typhoon, earthquake, epidemic, or other
disaster or calamity in order to prevent loss to life and property or
But this is not a pure money claim (pp. 10-11, Opposition) imminent danger to public safety; or in case of urgent work to be
because other factors are involved - certification by the performed on the machines, equipment, or installations in order
President, the matter may likely cause a strike, the dispute to avoid a serious loss which the employer would otherwise
concerns national interest and comes within the CIR's injunction suffer, or some other just cause of a similar nature; but in all
against striking, and the employer-employee relationship such cases the laborers and employees shall be entitled to
between the Bank and the employees has not been severed. receive compensation for the overtime work performed at the
Besides, 'money claim' is embraced within the term same rate as their regular wages or salary, plus at least twenty-
'compensation' and therefore falls squarely under the jurisdiction five per centum additional.
of the CIR in the exercise of its arbitration power (Sec. 4, CA
103; Please see also Republic vs. CIR, L- 21303, Sept. 23/68; In case of national emergency the Government is empowered to
Makalintal J., NWSA Case, L-26894-96, Feb. 28/69; Fernando, establish rules and regulations for the operation of the plants and
J.). factories and to determine the wages to be paid the laborers.

What confers jurisdiction on the Industrial Court, says Justice xxx xxx xxx
J.B.L. Reyes, is not the form or manner of certification by the
President, but the referral to said court of the industrial dispute SEC. 4. No person, firm, or corporation, business establishment
between the employer and the employees. (Liberation or place or center of labor shall compel an employee or laborer
Steamship vs. CIR, etc., L-25389 & 25390, June 27/68). to work during Sundays and legal holidays, unless he is paid an
additional sum of at least twenty-five per centum of his regular
In Phil. Postal Savings Bank, et al. vs. CIR, et al ., L-24572, Dec. remuneration: Provided, however, that this prohibition shall not
20/67, this Honorable Court, speaking through Chief Justice apply to public utilities performing some public service such as
Concepcion, held that the certification of the issue 'as a dispute supplying gas, electricity, power, water, or providing means of
affecting an industry indispensable to the national interest' leaves transportation or communication.
'no room for doubt on the jurisdiction of the CIR to settle such
dispute.' The vital question is, what does "regular wage or salary" mean or
connote in the light of the demand of PEMA?
Relatedly, however, it is to be noted that it is clear from the
holding of the Industrial Court's decision We have earlier quoted, In Our considered opinion, the answer to such question lies in
"the cause of action (here) is not on any decision of any court but the basic rationale of overtime pay. Why is a laborer or employee
on the provisions of the law which have been in effect at the time who works beyond the regular hours of work entitled to extra
of the occurrence of the cause of action in relation to a labor compensation called in this enlightened time, overtime pay?
dispute". Viewed from such perspective laid by the lower court Verily, there can be no other reason than that he is made to work
itself, it can hardly be said that it indeed exercised purely its longer than what is commensurate with his agreed compensation
power of arbitration, which means laying down the terms and for the statutorily fixed or voluntarily agreed hours of labor he is
conditions that should govern the relationship between the supposed to do. When he thus spends additional time to his
employer and employees of an enterprise following its own work, the effect upon him is multi-faceted: he puts in more effort,
appreciation of the relevant circumstances rather empirically. physical and/or mental; he is delayed in going home to his family
More accurately understood, the court in fact indulged in an to enjoy the comforts thereof; he might have no time for

relaxation, amusement or sports; he might miss important pre- amidst the cross -currents of country-wide economic dislocation,
arranged engagements; etc., etc. It is thus the additional work, employers try their best to help them tide over the hardships and
labor or service employed and the adverse effects just difficulties of the situation. Sometimes, such allowances are
mentioned of his longer stay in his place of work that justify and voluntarily agreed upon in collective bargaining agreements. At
is the real reason for the extra compensation that he called other times, it is imposed by the government as in the instances
overtime pay. of Presidential Decrees Nos. 525, 928, 1123, 1389, 1614, 1678,
1751 and 1790; Letters of Instructions No. 1056 and Wage Order
Overtime work is actually the lengthening of hours developed to No. 1. Notably, Presidential Decree No. 1751 increased the
the interests of the employer and the requirements of his statutory wage at all levels by P400 in addition to integrating the
enterprise. It follows that the wage or salary to be received must mandatory emergency living allowances under Presidential
likewise be increased, and more than that, a special additional Decree No. 525 and Presidential Decree No. 1123 into the basic
amount must be added to serve either as encouragement or pay of all covered workers.
inducement or to make up fop the things he loses which We
have already referred to. And on this score, it must always be Going over these laws, one readily notices two distinctive
borne in mind that wage is indisputably intended as payment for features: First, it is evidently gratifying that the government, in
work done or services rendered. Thus, in the definition of wage keeping with the humanitarian trend of the times, always makes
for purposes of the Minimum Wage Law, Republic Act No. 602, it every effort to keep wages abreast with increased cost of living
is stated: conditions, doing it as soon as the necessity for it arises.
However, obviously, in order not to overdo things, except when
'Wage' paid to any employee shall mean the remuneration or otherwise provided, it spares from such obligation employers
earnings, however designated, capable of being expressed in who by mutual agreement with their workers are already paying
terms of money, whether fixed or ascertained on a time task, what the corresponding law provides (See Sec. 4 of P.D. No.
piece, commission basis or other method of calculating the 525; Section 2 of P.D. No. 851 until P.D. 1684 abolished all
same, which is payable by an employer to an employee under a exemptions under P.D. No. 525, P.D. No. 1123, P.D. No. 851 and
written or unwritten contract of employment for work done or to P.D. No. 928 among distressed employers who even though
be done or for services rendered or to be rendered and includes given sufficient lapse of time to make the necessary adjustment
the fair and reasonable value as determined by the Secretary of have not done so.)3
Labor, of board, lodging or other facilities customarily furnished
by the employer to the employee. 'Fair and reasonable value' In the case at bar, as already related earlier, the cost-of-living
shall not include a profit to the employer which reduces the wage allowance began to be granted in 1958 and the longevity pay in
received by the employee below the minimum wage applicable 1981. In other words, they were granted by PNB upon realizing
to the employee under this Act, nor shall any transaction the difficult plight of its labor force in the face of the unusual
between an employer or any person affiliated with the employer inflationary situation in the economy of the country, which,
and the employee of the employer include any profit to the however acute, was nevertheless expected to improve. There
employer or affiliated person which reduces the employee's was thus evident an inherently contingent character in said
wage below the wage applicable to the employee under this allowances. They were not intended to be regular, much less
Act.' 2 (Emphasis supplied). permanent additional part of the compensation of the employees
and workers. To such effect were the testimonies of the
As can be seen, wage under said law, in whatever means or witnesses at the trial. For instance, Mr. Ladislao Yuzon declared:
form it is given to the worker, is "for work done or to be done or
for services rendered or to be rendered" and logically "includes ATTORNEY GESMUNDO
(only) the fair and reasonable value as determined by the
Secretary of Labor, of board, lodging or other facilities Questioning ....
customarily furnished by the employer to the employee".
Q. Calling your attention to paragraph No. 1, entitled monthly
Indeed, for the purpose of avoiding any misunderstanding or living allowance, which has been marked as Exhibit 'A-l', will you
misinterpretation of the word "wage" used in the law and to kindly tell us the history of this benefit- monthly living allowance,
differentiate it from "supplement", the Wage Administration why the same has been granted?
Service to implement the Minimum Wage Law, defined the latter
as: A. Well, in view of the increasing standard of living, we decided
to demand from management in our set of demands ... included
extra remuneration or benefits received by wage earners from in our set of demands in 1957-1958 a monthly living allowance in
their employers and include but are not restricted to pay for addition to our basic salary. This benefit was agreed upon and
vacation and holidays not worked; paid sick leave or maternity granted to take effect as of January 1, 1958. That was the first
leave; overtime rate in excess of what is required by law; time it was enjoyed by the employees of the Philippine National
pension, retirement, and death benefits; profit-sharing, family Bank. It started on a lesser amount but year after year we have
allowances; Christmas, war risk and cost-of-living bonuses; or been demanding for increases on this living allowance until we
other bonuses other than those paid as a reward for extra output have attained the present amount of P 1 50.00 a month, starting
or time spent on the job. (Emphasis ours). with P40.00 when it was first granted. The same is still being
enjoyed by the employees on a much higher amount. There
In these times when humane and dignified treatment of labor is were a few variations to that. (t. t.s.n., pp. 18-19, Hearing of
steadily becoming universally an obsession of society, we, in our August 16, 1965)
country, have reached a point in employer- employee
relationship wherein employers themselves realize the which testimony was affirmed by Mr. Panfilo Domingo, on cross-
indispensability of at least making the compensation of workers examination by counsel for the respondent, reading as follows:
equal to the worth of their efforts as much as this case can be
statistically determined. Thus, in order to meet the effects of ATTORNEY GESMUNDO:
uncertain economic conditions affecting adversely the living
conditions of wage earners, employers, whenever the financial
Q. Do you recall Mr. Domingo, that in denying the cost of living
conditions of the enterprise permit, grant them what has been
allowance and longevity pay for incorporation with the basic
called as cost-of-living allowance. In other words, instead of
salary, the reason given by the management was that as
leaving the workers to assume the risks of or drift by themselves
according to you, it will mean an added cost and ' furthermore it On this point, the respondent court held that under its broad
will increase the contribution of the Philippine National Bank to jurisdiction, it was within the ambit of its authority to provide for
the GSIS, is that correct? what the parties could not agree upon. We are not persuaded to
view the matter that way. We are not convinced that the
A. This is one of the reasons, of the objections for the inclusion government, thru the Industrial Court, then, could impose upon
of the living allowance and longevity pay to form part of the basic the parties in an employer-employee conflict, terms and
pay, I mean among others, because the basic reason why conditions which are inconsistent with the existing law and
management would object is the cost of living allowance is jurisprudence, particularly where the remedy is sought by the
temporary in nature, the philosophy behind the grant of this actors more on such legal basis and not purely on the court's
benefit, Nonetheless, it was the understanding if I recall right that arbitration powers.
in the event that cost of living should go down then there should
be a corresponding decrease in the cost of living allowance As pointed out earlier in this opinion, Our task here is two-fold:
being granted I have to mention this because this is the First, reviewing the decision under scrutiny as based on law and
fundamental philosophy in the grant of cost of living allowance . jurisprudence, the question is whether or not the rulings therein
(Pp. 19-20, Record.) are correct. And second, reading such judgment as an arbitration
decision, did the court a quo gravely abuse its discretion in
Much less were they dependent on extra or special work done or holding, as it did, that cost-of-living allowance and longevity pay
service rendered by the corresponding recipient. Rather, they should be included in the computation of overtime pay?
were based on the needs of their families as the conditions of the
economy warranted. Such is the inexorable import of the In regard to the first question, We have already pointed out to
pertinent provisions of the collective bargaining agreement: start with, that as far as longevity pay is concerned, it is beyond
question that the same cannot be included in the computation of
MONTHLY LIVING ALLOWANCE overtime pay for the very simple reason that the contrary is
expressly stipulated in the collective bargaining agreement and,
All employees of the Bank shall be granted a monthly living as should be the case, it is settled that the terms and conditions
allowance of P140, plus P10 for each minor dependent child of a collective bargaining agreement constitute the law between
below 21 years of age, but in no case shall the total allowance the parties. (Mactan Workers Union vs. Aboitiz, 45 SCRA 577.
exceed P200 or 25% of the monthly salary, whichever is higher, See also Shell Oil Workers Union et al. vs. Shell Company of the
subject to the following conditions: Philippines, supra) The contention of PEMA that the express
provision in the collective bargaining agreement that "this benefit
(longevity pay) shall not form part of the basic salaries of the
a) That this new basic allowance shall be applicable to all
officers so affected" cannot imply the same Idea insofar as the
employees, irrespective of their civil status;
computation of the overtime pay is concerned defies the rules of
logic and mathematics. If the basic pay cannot be deemed
b) That a widow or widower shall also enjoy the basic allowance increased, how could the overtime pay be based on any
of P140 a month, plus the additional benefit of P10 for each increased amount at all?
minor dependent child but not to exceed P200 or 25% of basic
salary whichever is higher.
However, the matter of the cost-of-living allowance has to be
examined from another perspective, namely, that while PEMA
c) That in case the husband and wife are both employees in the had been always demanding for its integration into the basic pay,
Bank both shall enjoy this new basic monthly living allowance of it never succeeded in getting the conformity of PNB thereto, and
P140 but only one of spouses shall be entitled to claim the so, all collective bargaining agreements entered -4 into
additional benefit of P10 for each minor legitimate or periodically by the said parties did not provide therefor. And it
acknowledged child. (Pp. 30-31, PNB's memo.) would appear that PEMA took the non-agreement of the bank in
good grace, for the record does not show that any remedial
So also with the longevity pay; manifestly, this was not based on measure was ever taken by it in connection therewith. In other
the daily or monthly amount of work done or service rendered it words, the parties seemed to be mutually satisfied that the
was more of a gratuity for their loyalty, or their having been in the matter could be better left for settlement on the bargaining table
bank's employment for consideration periods of time. Indeed, sooner or later, pursuant to the spirit of free bargaining
with particular reference to the longevity pay, the then existing underlying Republic Act 875, the Industrial Peace Act then in
collective bargaining contract expressly provided: "... That this force. Or, as observed by PEMA in its memorandum, (page 23),
benefit shall not form part of the basic salaries of the officers so the parties "agreed to let the question remain open-pending
affected." decision of authorities that would justify the demand of the
Union." Indeed, on pages 23-24 of said memorandum, the
PEMA may contend that the express exclusion of the longevity following position of PEMA is stated thus:
pay, means that the cost-of-living allowance was not intended to
be excluded. Considering, however, the contingent nature of the Thus the following proceeding took place at the Court a quo:
allowances and their lack of relation to work done or service
rendered, which in a sense may be otherwise in respect to ATTY. GESMUNDO:
longevity pay PEMA's contention is untenable. The rule
of exclusio unius, exclusio alterius would not apply here, if only
That is our position, Your Honor, because apparently there was
because in the very nature of the two benefits in question,
an understanding reached between the parties as to their having
considerations and conclusions as to one of them could be non-
to wait for authorities and considering that the issue or one of the
sequitur as to the other.
issues then involved in the NAWASA case pending in the CIR
supports the stand of the union, that the principle enunciated in
Withal, there is the indisputable significant fact that after 1958, connection with that issue is applicable to this case.
everytime a collective bargaining agreement was being entered
into, the union always demanded the integration of the cost-of-
xxx xxx xxx
living allowances and longevity pay, and as many times, upon
opposition of the bank, no stipulation to such effect has ever
been included in any of said agreements. And the express Q. Do we understand from you, Mister Yuson, that it was
exclusion of longevity pay was continued to be maintained. because of the management asking you for authorities in

allowing the integration of the cost of living allowance with your must be the collective bargaining agreement, 4 for, to reiterate
basic salary and your failure to produce at the time such Our postulation therein and in Bisig ng Manggagawa, supra, it is
authorities that the union then did not bring any case to the not for the court to impose upon the parties anything beyond
Court? what they have agreed upon which is not tainted with illegality.
On the other hand, where the parties fail to come to an
A. Well, in the first place, it is not really my Idea to be bringing agreement, on a matter not legally required, the court abuses its
matters to the Court during my time but I would much prefer that discretion when it obliges any 6f them to do more than what is
we agree on the issue. Well, insofar as you said that the legally obliged.
management was asking me, welt I would say that they were
invoking (on) authorities that we can show in order to become as Doctrinally, We hold that, in the absence of any specific provision
a basis for granting or for agreeing with us although we were on the matter in a collective bargaining agreement, what are
aware of the existence of a pending case which is very closely decisive in determining the basis for the computation of overtime
similar to our demand, yet we decided to wait until this case pay are two very germane considerations, namely, (1) whether or
should be decided by the Court so that we can avail of the not the additional pay is for extra work done or service rendered
decision to present to management as what they are asking for. and (2) whether or not the same is intended to be permanent
(t.s.n., pp. 31-32, 35-36, Aug. 28,1965.) and regular, not contingent nor temporary and given only to
remedy a situation which can change any time. We reiterate,
Now, to complete proper understanding of the character of the overtime pay is for extra effort beyond that contemplated in the
controversy before Us, and lest it be felt by those concerned that employment contract, hence when additional pay is given for any
We have overlooked a point precisely related to the matter other purpose, it is illogical to include the same in the basis for
touched in the above immediately preceding paragraph, it should the computation of overtime pay. This holding supersedes
be relevant to quote a portion of the "Stipulation of Facts" of the NAWASA.
parties hereto:
Having arrived at the foregoing conclusions, We deem it
1. This particular demand was among those submitted by unnecessary to discuss any of the other issues raised by the
Petitioner-Union in the current collective bargaining negotiations parties.
to the Respondent Bank. However, since this case was already
filed in court on May 22, 1965, the parties agreed not to include WHEREFORE, judgment is hereby rendered reversing the
this particular demand in the discussion, leaving the matter to the decision appealed from, without costs.
discretion and final judicial determination of the courts of justice."
(Page 81, Rec.) Guerrero, De Castro, Plana, Escolin, Vasquez, Relova and
Gutierrez, Jr., JJ., concur.
In fine, what the parties commonly desire is for this Court to
construe CA 444 in the light of NAWASA, considering the fact- Fernando, C.J., Concepcion and Abad Santos, JJ., took no part.
situation of the instant case.
Melencio-Herrera J., concur in the result.
In this respect, it is Our considered opinion, after mature
deliberation, that notwithstanding the portions of the NAWASA's
opinion relied upon by PEMA, there is nothing in CA 444 that
could justify its posture that cost-of-living allowance should be
added to the regular wage in computing overtime pay.
Separate Opinions
After all, what was said in NAWASA that could be controlling
here? True, it is there stated that "for purposes of computing
overtime compensation, regular wage includes all payments AQUINO, J., concurring:
which the parties have agreed shall be received during the work
week, including - differential payments for working at undesirable I concur in the result. This case involves the correctness of the
times, such as at night and the board and lodging customarily holding of the Court of Industrial Relations that the Philippine
furnished the employee. ... The 'regular rate' of pay also National Bank should compute the overtime pay of its employees
ordinarily includes incentive bonus or profit-sharing payments from January 28, 1962 on the basis of the sum total Of the.
made in addition to the normal basic pay (56 C.J.S., pp. 704- employee's basic salary or wage plus cost-of- living allowance
705), and it was also held that the higher rate for night, Sunday (equity pay) and longevity pay.
and holiday work is just as much a regular rate as the lower rate
for daytime work. The higher rate is merely an inducement to The Industrial Court relied on the ruling that in computing the
accept employment at times which are not as desirable from a daily wage of employees and workers who worked seven days a
workmen's standpoint (International L. Ass'n vs. National week their 25% Sunday differential pay should be included. The
Terminals Corp. C.C. Wise, 50 F. Supp. 26, affirmed C.C.A. computation should not be based exclusively on the basic wage
Carbunoa v. National Terminals Corp. 139 F. 2d 853)." (11 (National Waterworks and Sewerage Authority vs. NAWASA
SCRA, p. 783) Consolidated Unions, 120 Phil. 736, 754). That ruling was
rendered in connection with the computation of the worker's daily
But nowhere did NAWASA refer to extra, temporary and wage for purposes of the five-day, forty-hour week prescribed in
contingent compensation unrelated to work done or service Republic Act No. 1880.
rendered, which as explained earlier is the very nature of cost-of-
living allowance. Withal, in strict sense, what We have just That ruling was in turn based on the holding that for purposes of
quoted from NAWASA was obiter dictum, since the only issue computing overtime pay a regular wage includes all payments
before the Court there was whether or not "in computing the received by the worker for work at night, Sundays and holidays
daily wage, (whether) the addition compensation for Sunday and the cost of board and lodging customarily furnished the
should be included. " (See No. 7 of Record) employees (Walling vs. Harnischfeger Corp., 325 U.S..427;
Walling vs. Yangerman-Reynolds Hardwood Co., 325 U.S. 419).
In any event, as stressed by Us in the Shell cases, the basis of
computation of overtime pay beyond that required by CA 444

There is also a ruling that the regular pay includes incentive
bonus or profit-sharing payments made in addition to the normal
basic pay (56 C.J.S. 704-705) and that the higher rate for night, G.R. No. 144664 March 15, 2004
Sunday and holiday work is just as much a regular rate as the
lower rate for daytime work. The higher rate is merely an ASIAN TRANSMISSION CORPORATION, petitioner,
inducement to accept employment at times which are not as vs.
desirable from a workman's standpoint (International L. Assn. vs. The Hon. COURT OF APPEALS, Thirteenth Division,
National Terminals Corp., 50 F. Supp. 26; Cabunac vs. National HON. FROILAN M. BACUNGAN as Voluntary Arbitrator,
Terminals Corporation, 139 F. 2nd 853). KISHIN A. LALWANI, Union, Union representative to the
These rulings cannot be applied under the Eight- Hour Labor LABOR UNION (BATLU); HON. BIENVENIDO T.
Law, Commonwealth Act No. 444, because sections 3 and 4 LAGUESMA in his capacity as Secretary of Labor and
thereof provide that the overtime pay should be based on the Employment; and DIRECTOR CHITA G. CILINDRO in her
"regular wages or salary" or "regular remuneration" of the capacity as Director of Bureau of Working
laborers and employees. Conditions, respondents.

Those terms should be sensibly interpreted. They should be DECISION

given their ordinary meaning. Those terms do not include the
cost-of- living allowance, longevity pay or other fringe benefits, CARPIO-MORALES, J.:
which items constitute extra pay or additions to the regular or
basic pay.
Petitioner, Asian Transmission Corporation, seeks via petition
for certiorari under Rule 65 of the 1995 Rules of Civil Procedure
The rulings in American cases cited in the NWSA case are not the nullification of the March 28, 2000 Decision 1 of the Court of
controlling and should not be applied to this case. Our law Appeals denying its petition to annul 1) the March 11, 1993
makes the regular pay the basis for computing the overtime pay. "Explanatory Bulletin"2 of the Department of Labor and
The collective bargaining agreements between the PNB and the Employment (DOLE) entitled "Workers’ Entitlement to Holiday
union provide that the longevity pay does not "form part of the Pay on April 9, 1993, Araw ng Kagitingan and Good Friday",
basic salaries of the employees involved. which bulletin the DOLE reproduced on January 23, 1998, 2) the
July 31, 1998 Decision3 of the Panel of Voluntary Arbitrators
In Shell Oil Workers Union vs. Shell Company of the Philippines, ruling that the said explanatory bulletin applied as well to April 9,
L-30658-59, March 31, 1976, 70 SCRA 238, this Court held that, 1998, and 3) the September 18, 1998 4 Resolution of the Panel of
notwithstanding the ruling in the NWSA case, the fringe benefits Voluntary Arbitration denying its Motion for Reconsideration.
should not be added to the basic pay in computing the overtime
pay. The following facts, as found by the Court of Appeals, are
I agree that the Industrial Court erred in including the cost-of-
living allowance and the longevity pay as part of the employee's The Department of Labor and Employment (DOLE), through
basic salary or wage on which the overtime pay should be Undersecretary Cresenciano B. Trajano, issued an Explanatory
based. Bulletin dated March 11, 1993 wherein it clarified, inter alia, that
employees are entitled to 200% of their basic wage on April 9,
1993, whether unworked, which[,] apart from being Good Friday
[and, therefore, a legal holiday], is also Araw ng
Kagitingan [which is also a legal holiday]. The bulletin reads:

"On the correct payment of holiday compensation on April 9,

1993 which apart from being Good Friday is also Araw ng
Kagitingan, i.e., two regular holidays falling on the same
day, this Department is of the view that the covered employees
are entitled to at least two hundred percent (200%) of their basic
wage even if said holiday is unworked. The first 100% represents
the payment of holiday pay on April 9, 1993 as Good Friday and
the second 100% is the payment of holiday pay for the same
date as Araw ng Kagitingan.

Said bulletin was reproduced on January 23, 1998, when April 9,

1998 was both Maundy Thursday and Araw ng Kagitingan x x x x

Despite the explanatory bulletin, petitioner [Asian Transmission

Corporation] opted to pay its daily paid employees only 100% of
their basic pay on April 9, 1998. Respondent Bisig ng Asian
Transmission Labor Union (BATLU) protested.

In accordance with Step 6 of the grievance procedure of the

Collective Bargaining Agreement (CBA) existing between
petitioner and BATLU, the controversy was submitted for
voluntary arbitration. x x x x On July 31, 1998, the Office of the
Voluntary Arbitrator rendered a decision directing petitioner to
pay its covered employees "200% and not just 100% of their
regular daily wages for the unworked April 9, 1998 which covers
two regular holidays, namely, Araw ng Kagitignan and Maundy
Thursday." (Emphasis and underscoring supplied)
Subject of interpretation in the case at bar is Article 94 of the By the present petition, petitioners raise the following issues:
Labor Code which reads:
ART. 94. Right to holiday pay. - (a) Every worker shall be paid
his regular daily wage during regular holidays, except in retail WHETHER OR NOT THE RESPONDENT COURT OF
and service establishments regularly employing less than ten APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
(b) The employer may require an employee to work on any PARTIES AND SUBSTITUTING ITS OWN JUDGMENT IN
holiday but such employee shall be paid a compensation PLACE OF THE AGREEMENTS MADE BY THE PARTIES
equivalent to twice his regular rate; and THEMSELVES

(c) As used in this Article, "holiday" includes: New Year’s Day, II

Maundy Thursday, Good Friday, the ninth of April, the first of
May, the twelfth of June, the fourth of July, the thirtieth of WHETHER OR NOT THE RESPONDENT COURT OF
November, the twenty-fifth and thirtieth of December and the day APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
designated by law for holding a general election, HOLDING THAT ANY DOUBTS ABOUT THE VALIDITY OF THE
which was amended by Executive Order No. 203 issued on June WAS LAID TO REST BY THE REISSUANCE OF THE SAID
30, 1987, such that the regular holidays are now: EXPLANATORY BULLETIN

1. New Year’s Day January 1 III


4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day) BULLEITN WAS NOT AN EXAMPLE OF A JUDICIAL, QUASI-
THAT [Department of Labor and Employment] DOLE MAY
5. Labor Day May 1
6. Independence Day June 12
7. National Heroes Day Last Sunday of August
8. Bonifacio Day November 30 EXPLANATORY BULLETIN DATED MARCH 11, 1993, IN THE
In deciding in favor of the Bisig ng Asian Transmission Labor
Union (BATLU), the Voluntary Arbitrator held that Article 94 of the V
Labor Code provides for holiday pay for every regular holiday,
the computation of which is determined by a legal formula which WHETHER OR NOT THE RESPONDENT COURT OF
is not changed by the fact that there are two holidays falling on APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
one day, like on April 9, 1998 when it was Araw ng SUSTAINING THE SECRETARY OF THE DEPARTMENT OF
Kagitingan and at the same time was Maundy Thursday; and LABOR IN REITERATING ITS EXPLANATORY BULLETIN
that that the law, as amended, enumerates ten regular holidays DATED MARCH 11, 1993 AND IN ORDERING THAT THE SAME
for every year should not be interpreted as authorizing a POLICY OBTAINED FOR APRIL 9, 1998 DESPITE THE
reduction to nine the number of paid regular holidays "just RULINGS OF THE SUPREME COURT TO THE CONTRARY
because April 9 (Araw ng Kagitingan) in certain years, like 1993
and 1998, is also Holy Friday or Maundy Thursday." VI

In the assailed decision, the Court of Appeals upheld the findings WHETHER OR NOT RESPONDENTS’ ACTS WILL DEPRIVE
of the Voluntary Arbitrator, holding that the Collective Bargaining PETITIONER OF PROPERTY WITHOUT DUE PROCESS BY
Agreement (CBA) between petitioner and BATLU, the law THE "EXPLANATORY BULLETIN" AS WELL AS EQUAL
governing the relations between them, clearly recognizes their PROTECTION OF LAWS
intent to consider Araw ng Kagitingan and Maundy Thursday, on
whatever date they may fall in any calendar year, as paid legal
The petition is devoid of merit.
holidays during the effectivity of the CBA and that "[t]here is no
condition, qualification or exception for any variance from the
clear intent that all holidays shall be compensated." 5 At the outset, it bears noting that instead of assailing the Court of
Appeals Decision by petition for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure, petitioner lodged the
The Court of Appeals further held that "in the absence of an
present petition for certiorari under Rule 65.
explicit provision in law which provides for [a] reduction of
holiday pay if two holidays happen to fall on the same day, any
doubt in the interpretation and implementation of the Labor Code [S]ince the Court of Appeals had jurisdiction over the petition
provisions on holiday pay must be resolved in favor of labor." under Rule 65, any alleged errors committed by it in the exercise
of its jurisdiction would be errors of judgment which are
reviewable by timely appeal and not by a special civil action It is elementary, under the rules of statutory construction, that
of certiorari. If the aggrieved party fails to do so within the when the language of the law is clear and unequivocal, the law
reglementary period, and the decision accordingly becomes final must be taken to mean exactly what it says. 13 In the case at bar,
and executory, he cannot avail himself of the writ of certiorari, his there is nothing in the law which provides or indicates that the
predicament being the effect of his deliberate inaction. entitlement to ten days of holiday pay shall be reduced to nine
when two holidays fall on the same day.
The appeal from a final disposition of the Court of Appeals is a
petition for review under Rule 45 and not a special civil action Petitioner’s assertion that Wellington v. Trajano14 has "overruled"
under Rule 65 of the Rules of Court, now Rule 45 and Rule 65, the DOLE March 11, 1993 Explanatory Bulletin does not lie.
respectively, of the 1997 Rules of Civil Procedure. Rule 45 is In Wellington, the issue was whether monthly-paid employees
clear that the decisions, final orders or resolutions of the Court of are entitled to an additional day’s pay if a holiday falls on a
Appeals in any case, i.e., regardless of the nature of the action Sunday. This Court, in answering the issue in the negative,
or proceeding involved, may be appealed to this Court by filing a observed that in fixing the monthly salary of its
petition for review, which would be but a continuation of the employees, Wellington took into account "every working day of
appellate process over the original case. Under Rule 45 the the year including the holidays specified by law and excluding
reglementary period to appeal is fifteen (15) days from notice of only Sunday." In the instant case, the issue is whether daily-paid
judgment or denial of motion for reconsideration. employees are entitled to be paid for two regular holidays which
fall on the same day.15
In any event, Art. 4 of the Labor Code provides that all doubts in
For the writ of certiorari under Rule 65 of the Rules of Court to the implementation and interpretation of its provisions, including
issue, a petitioner must show that he has no plain, speedy and its implementing rules and regulations, shall be resolved in favor
adequate remedy in the ordinary course of law against its of labor. For the working man’s welfare should be the primordial
perceived grievance. A remedy is considered "plain, speedy and and paramount consideration.16
adequate" if it will promptly relieve the petitioner from the
injurious effects of the judgment and the acts of the lower court Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to
or agency. In this case, appeal was not only available but also a Implement the Labor Code provides that "Nothing in the law or
speedy and adequate remedy.6 the rules shall justify an employer in withdrawing or reducing any
benefits, supplements or payments for unworked regular
The records of the case show that following petitioner’s receipt holidays as provided in existing individual or collective
on August 18, 2000 of a copy of the August 10, 2000 Resolution agreement or employer practice or policy."17
of the Court of Appeals denying its Motion for Reconsideration, it
filed the present petition for certiorari on September 15, 2000, at From the pertinent provisions of the CBA entered into by the
which time the Court of Appeals decision had become final and parties, petitioner had obligated itself to pay for the legal holidays
executory, the 15-day period to appeal it under Rule 45 having as required by law. Thus, the 1997-1998 CBA incorporates the
expired. following provision:

Technicality aside, this Court finds no ground to disturb the ARTICLE XIV
assailed decision. PAID LEGAL HOLIDAYS

Holiday pay is a legislated benefit enacted as part of the The following legal holidays shall be paid by the COMPANY as
Constitutional imperative that the State shall afford protection to required by law:
labor.7 Its purpose is not merely "to prevent diminution of the
monthly income of the workers on account of work interruptions. 1. New Year’s Day (January 1st)
In other words, although the worker is forced to take a rest, he
earns what he should earn, that is, his holiday pay." 8 It is also 2. Holy Thursday (moveable)
intended to enable the worker to participate in the national
celebrations held during the days identified as with great
3. Good Friday (moveable)
historical and cultural significance.
4. Araw ng Kagitingan (April 9th)
Independence Day (June 12), Araw ng Kagitingan (April 9),
National Heroes Day (last Sunday of August), Bonifacio Day
(November 30) and Rizal Day (December 30) were declared 5. Labor Day (May 1st)
national holidays to afford Filipinos with a recurring opportunity to
commemorate the heroism of the Filipino people, promote 6. Independence Day (June 12th)
national identity, and deepen the spirit of patriotism. Labor Day
(May 1) is a day traditionally reserved to celebrate the 7. Bonifacio Day [November 30]
contributions of the working class to the development of the
nation, while the religious holidays designated in Executive 8. Christmas Day (December 25th)
Order No. 203 allow the worker to celebrate his faith with his
family. 9. Rizal Day (December 30th)

As reflected above, Art. 94 of the Labor Code, as amended, 10. General Election designated by law, if declared public non-
affords a worker the enjoyment of ten paid regular holidays. 9 The working holiday
provision is mandatory,10 regardless of whether an employee is
paid on a monthly or daily basis. 11 Unlike a bonus, which is a
11. National Heroes Day (Last Sunday of August)
management prerogative,12 holiday pay is a statutory benefit
demandable under the law. Since a worker is entitled to the
enjoyment of ten paid regular holidays, the fact that two holidays Only an employee who works on the day immediately preceding
fall on the same date should not operate to reduce to nine the or after a regular holiday shall be entitled to the holiday pay.
ten holiday pay benefits a worker is entitled to receive.

A paid legal holiday occurring during the scheduled vacation
leave will result in holiday payment in addition to normal vacation
pay but will not entitle the employee to another vacation leave.

Under similar circumstances, the COMPANY will give a day’s

wage for November 1st and December 31st whenever declared
a holiday. When required to work on said days, the employee will
be paid according to Art. VI, Sec. 3B hereof.18 G.R. No. L-65482 December 1, 1987

WHEREFORE, the petition is hereby DISMISSED. JOSE RIZAL COLLEGE, petitioner,

WORKERS, respondents.


This is a petition for certiorari with prayer for the issuance of a

writ of preliminary injunction, seeking the annulment of the
decision of the National Labor Relations Commission * in NLRC
Case No. RB-IV 23037-78 (Case No. R4-1-1081-71) entitled
"National Alliance of Teachers and Office Workers and Juan E.
Estacio, Jaime Medina, et al. vs. Jose Rizal College" modifying
the decision of the Labor Arbiter as follows:

WHEREFORE, in view of the foregoing considerations, the

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


The factual background of this case which is undisputed is as


Petitioner is a non-stock, non-profit educational institution duly

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

Unable to receive their corresponding holiday pay, as claimed,

from 1975 to 1977, private respondent National Alliance of
Teachers and Office Workers (NATOW) in behalf of the faculty
and personnel of Jose Rizal College filed with the Ministry of
Labor a complaint against the college for said alleged non-
payment of holiday pay, docketed as Case No. R04-10-81-72.
Due to the failure of the parties to settle their differences on
conciliation, the case was certified for compulsory arbitration
where it was docketed as RB-IV-23037-78 (Rollo, pp. 155-156).

After the parties had submitted their respective position papers,

the Labor Arbiter ** rendered a decision on February 5, 1979,
the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1. The faculty and personnel of the respondent Jose Rizal

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

2. The personnel of the respondent Jose Rizal College who are earns what he should earn. That is his holiday pay. It is no
paid their wages daily are entitled to be paid the 10 unworked excuse therefore that the school calendar is extended whenever
regular holidays according to the pertinent provisions of the holidays occur, because such happens only in cases of special
Rules and Regulations Implementing the Labor Code; holidays (Rollo, p. 32).

3. Collegiate faculty of the respondent Jose Rizal College who by Subject holiday pay is provided for in the Labor Code
contract are paid compensation per student contract hour are not (Presidential Decree No. 442, as amended), which reads:
entitled to unworked regular holiday pay considering that these
regular holidays have been excluded in the programming of the Art. 94. Right to holiday pay — (a) Every worker shall be paid his
student contact hours. (Rollo. pp. 26-27) regular daily wage during regular holidays, except in retail and
service establishments regularly employing less than ten (10)
On appeal, respondent National Labor Relations Commission in workers;
a decision promulgated on June 2, 1982, modified the decision
appealed from, in the sense that teaching personnel paid by the (b) The employer may require an employee to work on any
hour are declared to be entitled to holiday pay (Rollo. p. 33). holiday but such employee shall be paid a compensation
equivalent to twice his regular rate; ... "
Hence, this petition.
and in the Implementing Rules and Regulations, Rule IV, Book
The sole issue in this case is whether or not the school faculty III, which reads:
who according to their contracts are paid per lecture hour are
entitled to unworked holiday pay. SEC. 8. Holiday pay of certain employees. — (a) Private school
teachers, including faculty members of colleges and universities,
Labor Arbiter Julio Andres, Jr. found that faculty and personnel may not be paid for the regular holidays during semestral
employed by petitioner who are paid their salaries monthly, are vacations. They shall, however, be paid for the regular holidays
uniformly paid throughout the school year regardless of working during Christmas vacations. ...
days, hence their holiday pay are included therein while the daily
paid employees are renumerated for work performed during Under the foregoing provisions, apparently, the petitioner,
holidays per affidavit of petitioner's treasurer (Rollo, pp. 72-73). although a non-profit institution is under obligation to give pay
even on unworked regular holidays to hourly paid faculty
There appears to be no problem therefore as to the first two members subject to the terms and conditions provided for
classes or categories of petitioner's workers. therein.

The problem, however, lies with its faculty members, who are We believe that the aforementioned implementing rule is not
paid on an hourly basis, for while the Labor Arbiter sustains the justified by the provisions of the law which after all is silent with
view that said instructors and professors are not entitled to respect to faculty members paid by the hour who because of
holiday pay, his decision was modified by the National Labor their teaching contracts are obliged to work and consent to be
Relations Commission holding the contrary. Otherwise stated, on paid only for work actually done (except when an emergency or
appeal the NLRC ruled that teaching personnel paid by the hour a fortuitous event or a national need calls for the declaration of
are declared to be entitled to holiday pay. special holidays). Regular holidays specified as such by law are
known to both school and faculty members as no class days;"
Petitioner maintains the position among others, that it is not certainly the latter do not expect payment for said unworked
covered by Book V of the Labor Code on Labor Relations days, and this was clearly in their minds when they entered into
considering that it is a non- profit institution and that its hourly the teaching contracts.
paid faculty members are paid on a "contract" basis because
they are required to hold classes for a particular number of On the other hand, both the law and the Implementing Rules
hours. In the programming of these student contract hours, legal governing holiday pay are silent as to payment on Special Public
holidays are excluded and labelled in the schedule as "no class Holidays.
day. " On the other hand, if a regular week day is declared a
holiday, the school calendar is extended to compensate for that It is readily apparent that the declared purpose of the holiday pay
day. Thus petitioner argues that the advent of any of the legal which is the prevention of diminution of the monthly income of
holidays within the semester will not affect the faculty's salary the employees on account of work interruptions is defeated when
because this day is not included in their schedule while the a regular class day is cancelled on account of a special public
calendar is extended to compensate for special holidays. Thus holiday and class hours are held on another working day to
the programmed number of lecture hours is not diminished make up for time lost in the school calendar. Otherwise stated,
(Rollo, pp. 157- 158). the faculty member, although forced to take a rest, does not earn
what he should earn on that day. Be it noted that when a special
The Solicitor General on the other hand, argues that under public holiday is declared, the faculty member paid by the hour is
Article 94 of the Labor Code (P.D. No. 442 as amended), holiday deprived of expected income, and it does not matter that the
pay applies to all employees except those in retail and service school calendar is extended in view of the days or hours lost, for
establishments. To deprive therefore employees paid at an their income that could be earned from other sources is lost
hourly rate of unworked holiday pay is contrary to the policy during the extended days. Similarly, when classes are called off
considerations underlying such presidential enactment, and its or shortened on account of typhoons, floods, rallies, and the like,
precursor, the Blue Sunday Law (Republic Act No. 946) apart these faculty members must likewise be paid, whether or not
from the constitutional mandate to grant greater rights to labor extensions are ordered.
(Constitution, Article II, Section 9). (Reno, pp. 76-77).
Petitioner alleges that it was deprived of due process as it was
In addition, respondent National Labor Relations Commission in not notified of the appeal made to the NLRC against the decision
its decision promulgated on June 2, 1982, ruled that the purpose of the labor arbiter.
of a holiday pay is obvious; that is to prevent diminution of the
monthly income of the workers on account of work interruptions. The Court has already set forth what is now known as the
In other words, although the worker is forced to take a rest, he "cardinal primary" requirements of due process in administrative
proceedings, to wit: "(1) the right to a hearing which includes the
right to present one's case and submit evidence in support
thereof; (2) the tribunal must consider the evidence presented;
(3) the decision must have something to support itself; (4) the
evidence must be substantial, and substantial evidence means
such evidence as a reasonable mind might accept as adequate
to support a conclusion; (5) the decision must be based on the
evidence presented at the hearing, or at least contained in the
record and disclosed to the parties affected; (6) the tribunal or
body of any of its judges must act on its or his own independent [G.R. No. 168120 : January 25, 2012]
consideration of the law and facts of the controversy, and not
simply accept the views of a subordinate; (7) the board or body MANSION PRINTING CENTER AND CLEMENT CHENG,
should in all controversial questions, render its decisions in such PETITIONERS, VS. DIOSDADO BITARA, JR.
manner that the parties to the proceeding can know the various RESPONDENT.
issues involved, and the reason for the decision rendered. "
(Doruelo vs. Commission on Elections, 133 SCRA 382 [1984]). DECISION

The records show petitioner JRC was amply heard and
represented in the instant proceedings. It submitted its position
Before us is a petition for review on certiorari seeking to reverse
paper before the Labor Arbiter and the NLRC and even filed a
and set aside the issuances of the Court of Appeals in CA-GR.
motion for reconsideration of the decision of the latter, as well as
SP No. 70965, to wit: (a) the Decision [1] dated 18 March 2004
an "Urgent Motion for Hearing En Banc" (Rollo, p. 175). Thus,
granting the petition for certiorari under Rule 65 of herein
petitioner's claim of lack of due process is unfounded.
respondent Diosdado Bitara, Jr.; and (b) the Resolution [2] dated
10 May 2005 denying the petitioners Motion for Reconsideration
PREMISES CONSIDERED, the decision of respondent National of the Decision. The assailed decision of the Court of Appeals
Labor Relations Commission is hereby set aside, and a new one reversed the findings of the National Labor Relations
is hereby RENDERED: Commission[3] and the Labor Arbiter[4] that respondent was validly
dismissed from the service.
(a) exempting petitioner from paying hourly paid faculty members
their pay for regular holidays, whether the same be during The Antecedents
the regular semesters of the school year or during semestral,
Christmas, or Holy Week vacations; Petitioner Mansion Printing Center is a single proprietorship
registered under the name of its president and co-petitioner
(b) but ordering petitioner to pay said faculty members their Clement Cheng. It is engaged in the printing of quality self-
regular hourly rate on days declared as special holidays or for adhesive labels, brochures, posters, stickers, packaging and the
some reason classes are called off or shortened for the hours like.[5]
they are supposed to have taught, whether extensions of class
days be ordered or not; in case of extensions said faculty Sometime in August 1998, petitioners engaged the services of
members shall likewise be paid their hourly rates should they respondent as a helper (kargador). Respondent was later
teach during said extensions. promoted as the company’s sole driver tasked to pick-up raw
materials for the printing business, collect account receivables
SO ORDERED. and deliver the products to the clients within the delivery

Petitioners aver that the timely delivery of the products to the

clients is one of the foremost considerations material to the
operation of the business.[7] It being so, they closely monitored
the attendance of respondent. They noted his habitual tardiness
and absenteeism.

Thus, as early as 23 June 1999, petitioners issued a

Memorandum[8] requiring respondent to submit a written
explanation why no administrative sanction should be imposed
on him for his habitual tardiness.

Several months after, respondent’s attention on the matter was

again called to which he replied:

29 NOV. 1999




29 June 2001 in NLRC NCR CA No. 027871-01, the Commission
Upon Our review of the record of the case, We perceive no
Despite respondent’s undertaking to report on time, however, he abuse of discretion as to compel a reversal. Appellant failed to
continued to disregard attendance policies. His weekly time adduce convincing evidence to show that the Labor Arbiter in
record for the first quarter of the year 2000 [10] revealed that he rendering the assailed decision has acted in a manner
came late nineteen (19) times out of the forty-seven (47) times inconsistent with the criteria set forth in the foregoing
he reported for work. He also incurred nineteen (19) absences pronouncement.
out of the sixty-six (66) working days during the quarter. His
absences without prior notice and approval from March 11-16, Neither are we persuaded to disturb the factual findings of the
2000 were considered to be the most serious infraction of Labor Arbiter a quo. The material facts as found are all in
all[11] because of its adverse effect on business operations. accordance with the evidence presented during the hearing as
shown by the record.
Consequently, Davis Cheng, General Manager of the company
and son of petitioner Cheng, issued on 17 March 2000 another WHEREFORE, finding no cogent reason to modify, alter, much
Memorandum[12] (Notice to Explain) requiring respondent to less reverse the decision appealed from, the same is AFFIRMED
explain why his services should not be terminated. He personally en toto and the instant appeal DISMISSED for lack of merit. [26]
handed the Notice to Explain to respondent but the latter, after
reading the directive, refused to acknowledge receipt thereof. It likewise denied respondent’s Motion for Reconsideration of the
He did not submit any explanation and, thereafter, never Resolution on 21 February 2002. [27]
reported for work.
Before the Court of Appeals, respondent sought the annulment
On 21 March 2000, Davis Cheng personally served another of the Commission’s Resolution dated 29 June 2001 and Order
Memorandum[14] (Notice of Termination) upon him informing him dated 21 February 2002 on the ground that they were rendered
that the company found him grossly negligent of his duties, for with grave abuse of discretion and/or without or in excess of
which reason, his services were terminated effective 1 April jurisdiction.[28]
The Court of Appeals found for the respondent and reversed the
On even date, respondent met with the management requesting findings of the Commission. The dispositive portion of its
for reconsideration of his termination from the service. However, Decision dated 18 March 2004 reads:
after hearing his position, the management decided to implement
the 21 March 2000 Memorandum. Nevertheless, the WHEREFORE, the petition is GRANTED. In lieu of the assailed
management, out of generosity, offered respondent financial Resolution and Order of the respondent NLRC, a NEW
assistance in the amount of P6,110.00 equivalent to his one DECISION is hereby rendered declaring petitioner Diosdado
month salary. Respondent demanded that he be given the Bitara, Jr. to have been Illegally Dismissed and, thus, entitled to
amount equivalent to two (2) months’ salary but the management the following:
declined as it believed it would, in effect, reward respondent for
being negligent of his duties. [15] 1. Reinstatement or if no longer feasible, Separation
Pay to be computed from the commencement of his employment
On 27 April 2000, respondent filed a complaint [16] for illegal in August 1988 up to the time of his termination on April 1, 2000,
dismissal against the petitioners before the Labor Arbiter. He including his imputed service from April 1, 2000 until the finality
prayed for his reinstatement and for the payment of full of this decision, based on the salary rate prevailing at the said
backwages, legal holiday pay, service incentive leave pay, finality;
damages and attorney’s fees. [17]
2. Backwages, inclusive of allowances and other
In his Position Paper[18] filed with the Labor Arbiter, respondent benefits, computed from April 1, 2000 up to the finality of this
claimed that he took a leave of absence from March 17-23, decision, without qualification or deduction; and
2000[19] due to an urgent family problem. He returned to work on
24 March 2000[20] but Davis Cheng allegedly refused him
3. 5-day Service Incentive Leave Pay for every year of
admission because of his unauthorized absences. [21] On 1 April
service from the commencement of his employment in August
2000, respondent was summoned by Davis Cheng who
1988 up to its termination on April 1, 2000.[29]
introduced him to a lawyer, who, in turn, informed him that he will
no longer be admitted to work because of his 5-day unauthorized
absences. Respondent explained that he was compelled to
immediately leave for the province on 17 March 200022 due to On 10 May 2005, the Court of Appeals denied respondent’s
the urgency of the matter and his wife informed the office that he Motion for Reconsideration of the decision for lack of merit. [30]
will be absent for a week. The management found his
explanation unacceptable and offered him an amount equivalent Hence, the instant petition.[31]
to his one (1) month salary as separation pay but respondent
refused the offer because he wanted to keep the job. [23] In Issue
his Reply to Respondents’ Position Paper ,[24] however,
respondent averred that he rejected the offer because he wanted The core issue in this case is whether or not the Court of
an amount equivalent to one and a half months’ pay. Appeals correctly found that the Commission acted without
and/or in excess of jurisdiction and with grave abuse of
On 21 December 2000, the Labor Arbiter dismissed the discretion amounting to lack or excess of jurisdiction (a) in
complaint for lack of merit.[25] upholding the termination of respondent’s employment and (b) in
affirming the denial of his claim for non-payment of holiday pay,
On appeal to the National Labor Relations Commission service incentive leave pay, moral and exemplary damages.
(hereinafter referred to as the Commission), the findings of the
Labor Arbiter was AFFIRMED en toto. Thus, in its Resolution of Our Ruling

The petition is meritorious. To give full meaning and substance to the Notice to Explain,
however, the paragraph should be read together with its
The special civil action for certiorari seeks to correct errors of preceding paragraph, to wit:
jurisdiction and not errors of judgment.[32]
We have time and again, verbally and formally, called your
xxx The raison d’etre for the rule is when a court exercises its attention to your negligence from your tardiness and your
jurisdiction, an error committed while so engaged does frequent absences without any notice but still, you remain
not deprive it of the jurisdiction being exercised when the to ignore our reminder. As you know, we are in need of a
error is committed. If it did, every error committed by a court regular driver and your action greatly affected the operation of
would deprive it of its jurisdiction and every erroneous judgment our company. (Emphasis supplied.)
would be a void judgment. xxx Hence, where the issue or
question involved affects the wisdom or legal soundness Necessarily, he was considered for termination of employment
of the decision – not the jurisdiction of the court to render because of his previous infractions capped by his recent
said decision – the same is beyond the province of a unauthorized absences from March 11-16, 2000.
special civil action for certiorari. xxx[33]
That the recent absences were unauthorized were satisfactorily
xxx [J]udicial review does not go as far as to evaluate the established by petitioners. Two (2) employees of the company
sufficiency of evidence upon which the Labor Arbiter and NLRC belied the claim of respondent’s wife Mary Ann Bitara that she
based their determinations, the inquiry being limited essentially called the office on 11 March 2000, and, through a certain Delia,
to whether or not said public respondents had acted without or in as allegedly later identified by respondent, informed petitioners
excess of its jurisdiction or with grave abuse of discretion. [34] The that her husband would take a leave of absence for a week
said rule directs us to merely determine whether there is basis because he went to the province.[39]
established on record to support the findings of a tribunal and
such findings meet the required quantum of proof, which in this Delia Abalos, a “binder/finisher” of the company, stated in her
case, is substantial evidence. Our deference to the expertise Affidavit that she never received a call from respondent nor his
acquired by quasi-judicial agencies and the limited scope wife regarding his absences from March 11-16 and 17-23 during
granted to us in the exercise of certiorari jurisdiction restrain us the month of March 2000.[40] On the other hand, Ritchie Distor, a
from going so far as to probe into the correctness of a tribunal’s messenger of the company, narrated in his Affidavit that, upon
evaluation of evidence, unless there is palpable mistake and instruction of the Management, he went to respondent’s house
complete disregard thereof in which case certiorari would be on 13 March 2000 to require him to report for work. Instead of
proper.[35] relaying the message to him, as respondent would have it, the
wife informed him that respondent had already left the house but
It is on the alleged lack of substantial evidence that the Court of that she did not know where he was going. [41]
Appeals found for the respondents, thereby reversing the
decision of the Commission. The Court of Appeals relied heavily on our ruling in Stellar
Industrial Services, Inc. vs. NLRC,[42] which is not on all fours
We hold otherwise. with the present case. In that case, the employer dismissed
respondent for non-observance of company rules and
Upon examination of the documents presented by the parties, regulations. On the basis of the facts presented, this Court
we are convinced that the finding of facts on which the honored the questioned medical certificate justifying the
conclusions of the Commission and the Labor Arbiter were absences he incurred. It further ratiocinated:
based was actually supported by substantial evidence – “that
amount of relevant evidence as a reasonable mind might accept xxx [P]rivate respondent’s absences, as already discussed, were
as adequate to support a conclusion, even if other minds, incurred with due notice and compliance with company rules and
equally reasonable, might conceivably opine he had not thereby committed a “similar offense” as those he
otherwise.”[36] (Emphasis supplied.) had committed in the past [to wit: gambling, for which he was
preventively suspended; habitual tardiness for which he received
I several warnings; and violation of company rules for carrying
three sacks of rice, for which he was required to explain.] xxx To
In order to validly dismiss an employee, the employer is required refer to those earlier violations as added grounds for dismissing
to observe both substantive and procedural aspects – the him is doubly unfair to private respondent. [43] (Emphasis
termination of employment must be based on a just or authorized supplied.)
cause of dismissal and the dismissal must be effected after due
notice and hearing.[37] In the present case, however, petitioners have repeatedly called
the attention of respondent concerning his habitual tardiness.
Substantive Due Process The Memorandum dated 23 June 1999 of petitioner Cheng
required him to explain his tardiness. Also in connection with a
We cannot agree with the Court of Appeals that the sole basis of similar infraction, respondent even wrote petitioner Cheng a
the termination of respondent’s employment was his absences letter dated 29 November 1999 where he admitted that his
from March 11-16, 2000. tardiness has affected the delivery schedules of the company,
offered an apology, and undertook to henceforth report for duty
Indeed, the Notice to Explain38 clearly stated: on time. Despite this undertaking, he continued to either absent
himself from work or report late during the first quarter of 2000.
We are seriously considering your termination from
service, and for this reason you are directed to submit a We, therefore, agree with the Labor Arbiter’s findings, to wit:
written explanation, within seventy-two hours from your receipt
of this notice, why you should not be terminated from The imputed absence and tardiness of the complainant are
service for failure to report for work without verbal or written documented. He faltered on his attendance 38 times of the 66
notice or permission on March 11, 13, 14, 15 and 16, 2000. xxx working days. His last absences on 11, 13, 14, 15 and 16 March
(Emphasis supplied.) 2000 were undertaken without even notice/permission from
management. These attendance delinquencies may be
characterized as habitual and are sufficient justifications to Martinez in Philippine Long Distance and Telephone Company,
terminate the complainant’s employment.[44] Inc. v. Balbastro:[53]

On this score, Valiao v. Court of Appeals[45] is instructive: While it is true that compassion and human consideration should
guide the disposition of cases involving termination of
xxx It bears stressing that petitioner’s absences and tardiness employment since it affects one's source or means of livelihood,
were not isolated incidents but manifested a pattern of it should not be overlooked that the benefits accorded to labor do
habituality. xxx The totality of infractions or the number of not include compelling an employer to retain the services of an
violations committed during the period of employment shall be employee who has been shown to be a gross liability to the
considered in determining the penalty to be imposed upon an employer. The law in protecting the rights of the employees
erring employee. The offenses committed by him should not be authorizes neither oppression nor self-destruction of the
taken singly and separately but in their totality. Fitness for employer.[54] It should be made clear that when the law tilts the
continued employment cannot be compartmentalized into tight scale of justice in favor of labor, it is but a recognition of the
little cubicles of aspects of character, conduct, and ability inherent economic inequality between labor and management.
separate and independent of each other.[46] 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
There is likewise no merit in the observation of the Court of management but never should the scale be so tilted if the result
Appeals that the petitioners themselves are not certain of the is an injustice to the employer. Justitia nemini neganda
official time of their employees after pointing out the seeming est (Justice is to be denied to none).[55]
inconsistencies between the statement of the petitioners that
“there is no need for written rules since even the [respondent] is
aware that his job starts from 8 am to 5 pm” [47] and its Procedural Due Process
Memorandum of 23 June 1999, where it was mentioned that
respondent’s official time was from 8:30 a.m. to 5:30 p.m. On the Procedural due process entails compliance with the two-notice
contrary, it was clearly stated in the Memorandum that the rule in dismissing an employee, to wit: (1) the employer must
Management adjusted his official time from 8:00 a.m. to 5:00 inform the employee of the specific acts or omissions for which
p.m. to 8:30 a.m. to 5:30 p.m. to hopefully solve the problem on his dismissal is sought; and (2) after the employee has been
his tardiness.48 given the opportunity to be heard, the employer must inform him
of the decision to terminate his employment. [56]
Neither is there basis to hold that the company tolerates the
offsetting of undertime with overtime services. The Weekly Time Respondent claimed that he was denied due process because
Record relied upon by respondent does not conclusively confirm the company did not observe the two-notice rule. He maintained
the alleged practice. that the Notice of Explanation and the Notice of Termination,
both of which he allegedly refused to sign, were never served
In Valiao,[49] we defined gross negligence as “want of care in upon him.[57]
the performance of one’s duties”[50] and habitual neglect as
“repeated failure to perform one’s duties for a period of time, The Court of Appeals favored respondent and ruled in this wise:
depending upon the circumstances.”51 These are not overly
technical terms, which, in the first place, are expressly Furthermore, We believe that private respondents failed to afford
sanctioned by the Labor Code of the Philippines, to wit: petitioner due process. The allegation of private respondents that
petitioner refused to sign the memoranda dated March 17 and
ART. 282. Termination by employer. - An employer may 21, 2000 despite receipt thereof is not only lame but also
terminate an employment for any of the following causes: implausible. First, the said allegation is self-serving and
unsubstantiated. Second, a prudent employer would simply not
(a) xxx accept such mere refusal, but would exert effort to observe the
mandatory requirement of due process. We cannot accept the
(b) Gross and habitual neglect by the employee of his self-serving claim of respondents that petitioner refused to sign
duties; both memoranda. Otherwise, We would be allowing employers
to do away with the mandatory twin-notice rule in the termination
xxx of employees. We find more credible the claim of petitioner that
he was illegally dismissed on April 1, 2000 when the lawyer of
the company informed him, without prior notice and in derogation
Clearly, even in the absence of a written company rule defining of his right to due process, of his termination by offering him a 1-
gross and habitual neglect of duties, respondent’s omissions month salary as separation pay. The petitioner’s immediate filing
qualify as such warranting his dismissal from the service. of a complaint for illegal dismissal on April 27, 2000 reinforced
Our belief that petitioner was illegally dismissed and was denied
We cannot simply tolerate injustice to employers if only to protect due process.[58] (Emphasis in the original.)
the welfare of undeserving employees. As aptly put by then
Associate Justice Leonardo A. Quisumbing:
We rule otherwise.
Needless to say, so irresponsible an employee like petitioner
does not deserve a place in the workplace, and it is within the In Bughaw v. Treasure Island Industrial Corporation ,[59] this Court,
management’s prerogative xxx to terminate his employment. in verifying the veracity of the allegation that respondent refused
Even as the law is solicitous of the welfare of employees, it must to receive the Notice of Termination, essentially looked for the
also protect the rights of an employer to exercise what are following: (1) affidavit of service stating the reason for failure to
clearly management prerogatives. As long as the company’s serve the notice upon the recipient; and (2) a notation to that
exercise of those rights and prerogative is in good faith to effect, which shall be written on the notice itself.[60] Thus:
advance its interest and not for the purpose of defeating or
circumventing the rights of employees under the laws or valid xxx Bare and vague allegations as to the manner of service and
agreements, such exercise will be upheld.[52] the circumstances surrounding the same would not suffice. A
mere copy of the notice of termination allegedly sent by
respondent to petitioner, without proof of receipt, or in the very
And, in the words of then Associate Justice Ma. Alicia Austria- least, actual service thereof upon petitioner, does not constitute
substantial evidence. It was unilaterally prepared by the vouchers on record.
petitioner and, thus, evidently self-serving and insufficient to
convince even an unreasonable mind.[61] Accordingly, we affirm the ruling of the National Labor Relations
Commission that the dismissal was valid. However, respondent
Davis Cheng, on the other hand, did both. First, he indicated in shall be entitled to the money equivalent of the five-day service
the notices the notation that respondent “refused to sign” incentive leave pay for every year of service from the
together with the corresponding dates of service. Second, he commencement of his employment in August 1988 up to its
executed an Affidavit dated 29 July 2000 stating that: (1) he is termination on 1 April 2000. The Labor Arbiter shall compute the
the General Manager of the company; (2) he personally served corresponding amount.
each notice upon respondent, when respondent went to the
office/factory on 17 March 2000 and 21 March 2000, WHEREFORE, the Resolution dated 29 June 2001 and the
respectively; and (3) on both occasions, after reading the Order dated 21 February 2002 of the National Labor Relations
contents of the memoranda, respondent refused to acknowledge Commission in NLRC NCR CASE No. 027871-01 are
receipt thereof. We are, thus, convinced that the notices have hereby REINSTATED with the MODIFICATION that petitioners
been validly served. are ORDERED to pay respondent the money equivalent of the
five-day service incentive leave for every year of service
Premises considered, we find that respondent was accorded covering his employment period from August 1988 to 1 April
both substantive and procedural due process. 2000. This case is hereby REMANDED to the Labor Arbiter for
the computation of respondent’s service incentive leave pay.
As to respondent’s monetary claims, petitioners did not deny
respondent’s entitlement to service incentive leave pay as, G.R. No. 157634 May 16, 2005
indeed, it is indisputable that he is entitled thereto. In Fernandez
v. NLRC,[62] this Court elucidated: MAYON HOTEL & RESTAURANT, PACITA O. PO and/or
JOSEFA PO LAM, petitioners,
The clear policy of the Labor Code is to grant service incentive vs.
leave pay to workers in all establishments, subject to a few ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE,
exceptions. Section 2, Rule V, Book III of the Implementing EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO
Rules and Regulations[63] provides that “[e]very employee who TORREFRANCA, LOURDES CAMIGLA, TEODORO
has rendered at least one year of service shall be entitled to a LAURENARIA, WENEFREDO LOVERES, LUIS GUADES,
yearly service incentive leave of five days with pay.” Service AMADO MACANDOG, PATERNO LLARENA, GREGORIO
incentive leave is a right which accrues to every employee who NICERIO, JOSE ATRACTIVO, MIGUEL TORREFRANCA,
has served “within 12 months, whether continuous or broken and SANTOS BROÑOLA, respondents.
reckoned from the date the employee started working, including
authorized absences and paid regular holidays unless the DECISION
working days in the establishment as a matter of practice or
policy, or that provided in the employment contracts, is less than PUNO, J. :
12 months, in which case said period shall be considered as one
year.”[64] It is also “commutable to its money equivalent if not This is a petition for certiorari to reverse and set aside the
used or exhausted at the end of the year.” [65] In other words, an Decision issued by the Court of Appeals (CA) 1 in CA-G.R. SP
employee who has served for one year is entitled to it. He may No. 68642, entitled "Rolando Adana, Wenefredo Loveres, et. al.
use it as leave days or he may collect its monetary value. vs. National Labor Relations Commission (NLRC), Mayon Hotel
xxx[66] (Emphasis supplied.) & Restaurant/Pacita O. Po, et al.," and the Resolution 2 denying
petitioners' motion for reconsideration. The assailed CA decision
Be that as it may, petitioners failed to establish by evidence that reversed the NLRC Decision which had dismissed all of
respondent had already used the service incentive leave when respondents' complaints,3 and reinstated the Joint Decision of
he incurred numerous absences notwithstanding that employers the Labor Arbiter4 which ruled that respondents were illegally
have complete control over the records of the company so much dismissed and entitled to their money claims.
so that they could easily show payment of monetary claims
against them by merely presenting vouchers or payrolls,67 or The facts, culled from the records, are as follows:5
any document showing the off-setting of the payment of service
incentive leave with the absences, as acknowledged by the Petitioner Mayon Hotel & Restaurant is a single proprietor
absentee, if such is the company policy. Petitioners presented business registered in the name of petitioner Pacita O.
none. Po,6 whose mother, petitioner Josefa Po Lam, manages the
establishment.7 The hotel and restaurant employed about sixteen
We thus quote with approval the findings of the Court of Appeals (16) employees.
on the following:
Records show that on various dates starting in 1981, petitioner
[P]rivate respondents bear the burden to prove that employees
hotel and restaurant hired the following people, all respondents
have received these benefits in accordance with law. It is
in this case, with the following jobs:8
incumbent upon the employer to present the necessary
documents to prove such claim. Although private respondents
labored to show that they paid petitioner his holiday pay, no
similar effort was shown with regard to his service incentive 1. Wenefredo Loveres Accountant and Officer-in-c
leave pay. We do not agree with the Labor Arbiter’s conclusion
that petitioner’s service incentive leave pay has been used up by
his numerous absences, there being no proof to that effect. [68] 2. Paterno Llarena Front Desk Clerk

As to the payment of holiday pay, we are convinced that

respondent had already received the same based on the cash 3. Gregorio Nicerio Supervisory Waiter
and rest day; SILP; nightshift differential pay and separation pay
plus damages;

Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for

underpayment of wages; nonpayment of holiday and rest day
4. Amado Macandog Roomboy pay and SILP;

Rolando Adana, Roger Burce and Amado Alamares for

5. Luis Guades Utility/Maintenance Worker underpayment of wages; nonpayment of COLA, overtime,
holiday, rest day, SILP and nightshift differential pay;

6. Santos Broñola Roomboy Eduardo Alamares for underpayment of wages, nonpayment of

holiday, rest day and SILP and night shift differential pay;

Santos Broñola for illegal dismissal, underpayment of wages,

7. Teodoro Laurenaria Waiter
overtime pay, rest day pay, holiday pay, SILP, and
damages;13 and

8. Eduardo Alamares Roomboy/Waiter Teodoro Laurenaria for underpayment of wages; nonpayment of

COLA and overtime pay; premium pay for holiday and rest day,
and SILP.
9. Lourdes Camigla Cashier
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr.
rendered a Joint Decision in favor of the employees. The Labor
Arbiter awarded substantially all of respondents' money claims,
10. Chona Bumalay Cashier
and held that respondents Loveres, Macandog and Llarena were
entitled to separation pay, while respondents Guades, Nicerio
and Alamares were entitled to their retirement pay. The Labor
11. Jose Atractivo Technician Arbiter also held that based on the evidence presented, Josefa
Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and
the proper respondent in these cases.
12. Amado Alamares Dishwasher and Kitchen Helper
On appeal to the NLRC, the decision of the Labor Arbiter was
reversed, and all the complaints were dismissed.
13. Roger Burce Cook
Respondents filed a motion for reconsideration with the NLRC
and when this was denied, they filed a petition for certiorari with
the CA which rendered the now assailed decision.
14. Rolando Adana Waiter
After their motion for reconsideration was denied, petitioners now
come to this Court, seeking the reversal of the CA decision on
15. Miguel Torrefranca Cook the following grounds:

I. The Honorable Court of Appeals erred in reversing the decision

of the National Labor Relations Commission (Second Division)
16. Edgardo Torrefranca Cook
by holding that the findings of fact of the NLRC were not
supported by substantial evidence despite ample and sufficient
evidence showing that the NLRC decision is indeed supported
Due to the expiration and non-renewal of the lease contract for by substantial evidence;
the rented space occupied by the said hotel and restaurant at
Rizal Street, the hotel operations of the business were II. The Honorable Court of Appeals erred in upholding the joint
suspended on March 31, 1997. 9 The operation of the restaurant decision of the labor arbiter which ruled that private respondents
was continued in its new location at Elizondo Street, Legazpi were illegally dismissed from their employment, despite the fact
City, while waiting for the construction of a new Mayon Hotel & that the reason why private respondents were out of work was
Restaurant at Peñaranda Street, Legazpi City.10 Only nine (9) of not due to the fault of petitioners but to causes beyond the
the sixteen (16) employees continued working in the Mayon control of petitioners.
Restaurant at its new site.11
III. The Honorable Court of Appeals erred in upholding the award
On various dates of April and May 1997, the 16 employees filed of monetary benefits by the labor arbiter in his joint decision in
complaints for underpayment of wages and other money claims favor of the private respondentS, including the award of
against petitioners, as follows:12 damages to six (6) of the private respondents, despite the fact
that the private respondents have not proven by substantial
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose evidence their entitlement thereto and especially the fact that
Atractivo for illegal dismissal, underpayment of wages, they were not illegally dismissed by the petitioners.
nonpayment of holiday and rest day pay; service incentive leave
pay (SILP) and claims for separation pay plus damages; IV. The Honorable Court of Appeals erred in holding that Pacita
Ong Po is the owner of the business establishment, petitioner
Paterno Llarena and Gregorio Nicerio for illegal dismissal with Mayon Hotel and Restaurant, thus disregarding the certificate of
claims for underpayment of wages; nonpayment of cost of living registration of the business establishment ISSUED by the local
allowance (COLA) and overtime pay; premium pay for holiday

government, which is a public document, and the unqualified the evidence before it or had misappreciated the evidence to
admissions of complainants-private respondents.14 such an extent as to compel a contrary conclusion if such
evidence had been properly appreciated. (citations omitted)22
In essence, the petition calls for a review of the following issues:
After careful review, we find that the reversal of the NLRC's
1. Was it correct for petitioner Josefa Po Lam to be held liable as decision was in order precisely because it was not supported by
the owner of petitioner Mayon Hotel & Restaurant, and the substantial evidence.
proper respondent in this case?
1. Ownership by Josefa Po Lam
2. Were respondents Loveres, Guades, Macandog, Atractivo,
Llarena and Nicerio illegally dismissed? The Labor Arbiter ruled that as regards the claims of the
employees, petitioner Josefa Po Lam is, in fact, the owner of
3. Are respondents entitled to their money claims due to Mayon Hotel & Restaurant. Although the NLRC reversed this
underpayment of wages, and nonpayment of holiday pay, rest decision, the CA, on review, agreed with the Labor Arbiter that
day premium, SILP, COLA, overtime pay, and night shift notwithstanding the certificate of registration in the name of
differential pay? Pacita Po, it is Josefa Po Lam who is the owner/proprietor of
Mayon Hotel & Restaurant, and the proper respondent in the
It is petitioners' contention that the above issues have already complaints filed by the employees. The CA decision states in
been threshed out sufficiently and definitively by the NLRC. They part:
therefore assail the CA's reversal of the NLRC decision, claiming
that based on the ruling in Castillo v. NLRC ,15 it is non [Despite] the existence of the Certificate of Registration in the
sequitur that the CA should re-examine the factual findings of name of Pacita Po, we cannot fault the labor arbiter in ruling that
both the NLRC and the Labor Arbiter, especially as in this case Josefa Po Lam is the owner of the subject hotel and restaurant.
the NLRC's findings are allegedly supported by substantial There were conflicting documents submitted by Josefa herself.
evidence. She was ordered to submit additional documents to clearly
establish ownership of the hotel and restaurant, considering the
We do not agree. testimonies given by the [respondents] and the non-appearance
and failure to submit her own position paper by Pacita Po. But
Josefa did not comply with the directive of the Labor Arbiter. The
There is no denying that it is within the NLRC's competence, as
ruling of the Supreme Court in Metropolitan Bank and Trust
an appellate agency reviewing decisions of Labor Arbiters, to
Company v. Court of Appeals applies to Josefa Po Lam which is
disagree with and set aside the latter's findings. 16 But it stands to
stated in this wise:
reason that the NLRC should state an acceptable cause
therefore, otherwise it would be a whimsical, capricious,
oppressive, illogical, unreasonable exercise of quasi-judicial When the evidence tends to prove a material fact which imposes
prerogative, subject to invalidation by the extraordinary writ a liability on a party, and he has it in his power to produce
of certiorari.17 And when the factual findings of the Labor Arbiter evidence which from its very nature must overthrow the case
and the NLRC are diametrically opposed and this disparity of made against him if it is not founded on fact, and he refuses to
findings is called into question, there is, necessarily, a re- produce such evidence, the presumption arises that the
examination of the factual findings to ascertain which opinion evidence[,] if produced, would operate to his prejudice, and
should be sustained.18 As ruled in Asuncion v. NLRC,19 support the case of his adversary.

Although, it is a legal tenet that factual findings of administrative Furthermore, in ruling that Josefa Po Lam is the real owner of
bodies are entitled to great weight and respect, we are the hotel and restaurant, the labor arbiter relied also on the
constrained to take a second look at the facts before us because testimonies of the witnesses, during the hearing of the instant
of the diversity in the opinions of the Labor Arbiter and the case. When the conclusions of the labor arbiter are sufficiently
NLRC. A disharmony between the factual findings of the Labor corroborated by evidence on record, the same should be
Arbiter and those of the NLRC opens the door to a review respected by appellate tribunals, since he is in a better position
thereof by this Court.20 to assess and evaluate the credibility of the contending
parties.23 (citations omitted)
The CA, therefore, did not err in reviewing the records to
determine which opinion was supported by substantial evidence. Petitioners insist that it was error for the Labor Arbiter and the
CA to have ruled that petitioner Josefa Po Lam is the owner of
Mayon Hotel & Restaurant. They allege that the documents they
Moreover, it is explicit in Castillo v. NLRC 21 that factual findings
submitted to the Labor Arbiter sufficiently and clearly establish
of administrative bodies like the NLRC are affirmed only if they
the fact of ownership by petitioner Pacita Po, and not her mother,
are supported by substantial evidence that is manifest in
petitioner Josefa Po Lam. They contend that petitioner Josefa Po
the decision and on the records. As stated in Castillo:
Lam's participation was limited to merely (a) being the overseer;
(b) receiving the month-to-month and/or year-to-year financial
[A]buse of discretion does not necessarily follow from a reversal reports prepared and submitted by respondent Loveres; and (c)
by the NLRC of a decision of a Labor Arbiter. Mere variance in visitation of the premises.24 They also put emphasis on the
evidentiary assessment between the NLRC and the Labor Arbiter admission of the respondents in their position paper submitted to
does not automatically call for a full review of the facts by this the Labor Arbiter, identifying petitioner Josefa Po Lam as the
Court. The NLRC's decision, so long as it is not bereft of manager, and Pacita Po as the owner.25 This, they claim, is a
substantial support from the records, deserves respect from this judicial admission and is binding on respondents. They protest
Court. As a rule, the original and exclusive jurisdiction to review a the reliance the Labor Arbiter and the CA placed on their failure
decision or resolution of respondent NLRC in a petition to submit additional documents to clearly establish ownership of
for certiorari under Rule 65 of the Rules of Court does not the hotel and restaurant, claiming that there was no need for
include a correction of its evaluation of the evidence but is petitioner Josefa Po Lam to submit additional documents
confined to issues of jurisdiction or grave abuse of discretion. considering that the Certificate of Registration is the best and
Thus, the NLRC's factual findings, if supported by substantial primary evidence of ownership.
evidence, are entitled to great respect and even finality, unless
petitioner is able to show that it simply and arbitrarily disregarded
We disagree with petitioners. We have scrutinized the records additional documents to ascertain who was the real owner of
and find the claim that petitioner Josefa Po Lam is merely the petitioner Mayon Hotel & Restaurant.
overseer is not borne out by the evidence.
Article 221 of the Labor Code is clear: technical rules are not
First. It is significant that only Josefa Po Lam appeared in the binding, and the application of technical rules of procedure may
proceedings with the Labor Arbiter. Despite receipt of the Labor be relaxed in labor cases to serve the demand of substantial
Arbiter's notice and summons, other notices and Orders, justice.29 The rule of evidence prevailing in court of law or equity
petitioner Pacita Po failed to appear in any of the proceedings shall not be controlling in labor cases and it is the spirit and
with the Labor Arbiter in these cases, nor file her position intention of the Labor Code that the Labor Arbiter shall use every
paper.26 It was only on appeal with the NLRC that Pacita Po and all reasonable means to ascertain the facts in each case
signed the pleadings.27 The apathy shown by petitioner Pacita speedily and objectively and without regard to technicalities of
Po is contrary to human experience as one would think that the law or procedure, all in the interest of due process. 30 Labor laws
owner of an establishment would naturally be concerned when mandate the speedy administration of justice, with least attention
all her employees file complaints against her. to technicalities but without sacrificing the fundamental requisites
of due process.31
Second. The records of the case belie petitioner Josefa Po
Lam's claim that she is merely an overseer. The findings of the Similarly, the fact that the respondents' complaints contained no
Labor Arbiter on this question were based on credible, allegation that petitioner Josefa Po Lam is the owner is of no
competent and substantial evidence. We again quote the Joint moment. To apply the concept of judicial admissions to
Decision on this matter: respondents — who are but lowly employees - would be to exact
compliance with technicalities of law that is contrary to the
Mayon Hotel and Restaurant is a [business name] of an demands of substantial justice. Moreover, the issue of ownership
enterprise. While [petitioner] Josefa Po Lam claims that it is her was an issue that arose only during the course of the
daughter, Pacita Po, who owns the hotel and restaurant when proceedings with the Labor Arbiter, as an incident of determining
the latter purchased the same from one Palanos in 1981, Josefa respondents' claims, and was well within his jurisdiction.32
failed to submit the document of sale from said Palanos to Pacita
as allegedly the sale was only verbal although the license to Petitioners were also not denied due process, as they were
operate said hotel and restaurant is in the name of Pacita which, given sufficient opportunity to be heard on the issue of
despite our Order to Josefa to present the same, she failed to ownership.33 The essence of due process in administrative
comply (p. 38, tsn. August 13, 1998). While several documentary proceedings is simply an opportunity to explain one's side or an
evidences were submitted by Josefa wherein Pacita was named opportunity to seek reconsideration of the action or ruling
therein as owner of the hotel and restaurant (pp. 64, 65, 67 to complained of.34 And there is nothing in the records which would
69; vol. I, rollo)[,] there were documentary evidences also that suggest that petitioners had absolute lack of opportunity to be
were submitted by Josefa showing her ownership of said heard.35 Obviously, the choice not to present evidence was made
enterprise (pp. 468 to 469; vol. II, rollo). While Josefa explained by petitioners themselves.36
her participation and interest in the business as merely to help
and assist her daughter as the hotel and restaurant was near the But more significantly, we sustain the Labor Arbiter and the CA
former's store, the testimonies of [respondents] and Josefa as because even when the case was on appeal with the NLRC,
well as her demeanor during the trial in these cases proves (sic) nothing was submitted to negate the Labor Arbiter's finding that
that Josefa Po Lam owns Mayon Hotel and Restaurant. Pacita Po is not the real owner of the subject hotel and
[Respondents] testified that it was Josefa who exercises all the restaurant. Indeed, no such evidence was submitted in the
acts and manifestation of ownership of the hotel and restaurant proceedings with the CA nor with this Court. Considering that
like transferring employees from the Greatwall Palace petitioners vehemently deny ownership by petitioner Josefa Po
Restaurant which she and her husband Roy Po Lam previously Lam, it is most telling that they continue to withhold evidence
owned; it is Josefa to whom the employees submits (sic) reports, which would shed more light on this issue. We therefore agree
draws money for payment of payables and for marketing, with the CA that the failure to submit could only mean that if
attending (sic) to Labor Inspectors during ocular inspections. produced, it would have been adverse to petitioners' case. 37
Except for documents whereby Pacita Po appears as the owner
of Mayon Hotel and Restaurant, nothing in the record shows any Thus, we find that there is substantial evidence to rule that
circumstance or manifestation that Pacita Po is the owner of petitioner Josefa Po Lam is the owner of petitioner Mayon Hotel
Mayon Hotel and Restaurant. The least that can be said is that it & Restaurant.
is absurd for a person to purchase a hotel and restaurant in the
very heart of the City of Legazpi verbally. Assuming this to be
2. Illegal Dismissal: claim for separation pay
true, when [petitioners], particularly Josefa, was directed to
submit evidence as to the ownership of Pacita of the hotel and
restaurant, considering the testimonies of [respondents], the Of the sixteen employees, only the following filed a case for
former should [have] submitted the lease contract between the illegal dismissal: respondents Loveres, Llarena, Nicerio,
owner of the building where Mayon Hotel and Restaurant was Macandog, Guades, Atractivo and Broñola.38
located at Rizal St., Legazpi City and Pacita Po to clearly
establish ownership by the latter of said enterprise. Josefa failed. The Labor Arbiter found that there was illegal dismissal, and
We are not surprised why some employers employ schemes to granted separation pay to respondents Loveres, Macandog and
mislead Us in order to evade liabilities. We therefore consider Llarena. As respondents Guades, Nicerio and Alamares were
and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel already 79, 66 and 65 years old respectively at the time of the
and Restaurant and the proper respondent in these cases. 28 dismissal, the Labor Arbiter granted retirement benefits pursuant
to Article 287 of the Labor Code as amended. 39 The Labor Arbiter
Petitioners' reliance on the rules of evidence, i.e., the certificate ruled that respondent Atractivo was not entitled to separation pay
of registration being the best proof of ownership, is misplaced. because he had been transferred to work in the restaurant
Notwithstanding the certificate of registration, doubts were cast operations in Elizondo Street, but awarded him damages.
as to the true nature of petitioner Josefa Po Lam's involvement in Respondents Loveres, Llarena, Nicerio, Macandog and Guades
the enterprise, and the Labor Arbiter had the authority to resolve were also awarded damages.40
this issue. It was therefore within his jurisdiction to require the

The NLRC reversed the Labor Arbiter, finding that "no clear act premature and without legal and factual basis. 49 Then, because
of termination is attendant in the case at bar" and that the Labor Arbiter had ruled that there was already illegal
respondents "did not submit any evidence to that effect, but the dismissal when the lay-off had exceeded the six-month period
finding and conclusion of the Labor Arbiter [are] merely based on provided for in Article 286, petitioners raise this novel argument,
his own surmises and conjectures."41 In turn, the NLRC was to wit:
reversed by the CA.
It is the firm but respectful submission of petitioners that reliance
It is petitioners contention that the CA should have sustained the on Article 286 of the Labor Code is misplaced, considering that
NLRC finding that none of the above-named respondents were the reason why private respondents were out of work was not
illegally dismissed, or entitled to separation or retirement pay. due to the fault of petitioners. The failure of petitioners to
According to petitioners, even the Labor Arbiter and the CA admit reinstate the private respondents to their former positions should
that when the illegal dismissal case was filed by respondents on not likewise be attributable to said petitioners as the private
April 1997, they had as yet no cause of action. Petitioners respondents did not submit any evidence to prove their alleged
therefore conclude that the filing by respondents of the illegal illegal dismissal. The petitioners cannot discern why they should
dismissal case was premature and should have been dismissed be made liable to the private respondents for their failure to be
outright by the Labor Arbiter.42 Petitioners also claim that since reinstated considering that the fact that they were out of work
the validity of respondents' dismissal is a factual question, it is was not due to the fault of petitioners but due to circumstances
not for the reviewing court to weigh the conflicting evidence. 43 beyond the control of petitioners, which are the termination and
non-renewal of the lease contract over the subject premises.
We do not agree. Whether respondents are still working for Private respondents, however, argue in their Comment that
petitioners is a factual question. And the records are unequivocal petitioners themselves sought the application of Article 286 of the
that since April 1997, when petitioner Mayon Hotel & Restaurant Labor Code in their case in their Position Paper filed before the
suspended its hotel operations and transferred its restaurant Labor Arbiter. In refutation, petitioners humbly submit that even if
operations in Elizondo Street, respondents Loveres, Macandog, they invoke Article 286 of the Labor Code, still the fact remains,
Llarena, Guades and Nicerio have not been permitted to work for and this bears stress and emphasis, that the temporary
petitioners. Respondent Alamares, on the other hand, was also suspension of the operations of the establishment arising from
laid-off when the Elizondo Street operations closed, as were all the non-renewal of the lease contract did not result in the
the other respondents. Since then, respondents have not been termination of employment of private respondents and, therefore,
permitted to work nor recalled, even after the construction of the the petitioners cannot be faulted if said private respondents were
new premises at Peñaranda Street and the reopening of the out of work, and consequently, they are not entitled to their
hotel operations with the restaurant in this new site. As stated by money claims against the petitioners.50
the Joint Decision of the Labor Arbiter on July 2000, or more
than three (3) years after the complaint was filed: 44 It is confounding how petitioners have fashioned their
arguments. After having admitted, in effect, that respondents
[F]rom the records, more than six months had lapsed without have been laid-off since April 1997, they would have this Court
[petitioner] having resumed operation of the hotel. After more excuse their refusal to reinstate respondents or grant them
than one year from the temporary closure of Mayon Hotel and separation pay because these same respondents purportedly
the temporary transfer to another site of Mayon Restaurant, the have not proven the illegality of their dismissal.
building which [petitioner] Josefa allege[d] w[h]ere the hotel and
restaurant will be transferred has been finally constructed and Petitioners' arguments reflect their lack of candor and the blatant
the same is operated as a hotel with bar and restaurant attempt to use technicalities to muddle the issues and defeat the
nevertheless, none of [respondents] herein who were employed lawful claims of their employees. First, petitioners admit
at Mayon Hotel and Restaurant which was also closed on April that since April 1997, when hotel operations were suspended
30, 1998 was/were recalled by [petitioner] to continue their due to the termination of the lease of the old premises,
services... respondents Loveres, Macandog, Llarena, Nicerio and
Guades have not been permitted to work. Second, even
Parenthetically, the Labor Arbiter did not grant separation pay to after six months of what should have been just a temporary
the other respondents as they had not filed an amended lay-off, the same respondents were still not recalled to work.
complaint to question the cessation of their employment after the As a matter of fact, the Labor Arbiter even found that as of the
closure of Mayon Hotel & Restaurant on March 31, 1997. 45 time when he rendered his Joint Decision on July 2000 — or
more than three (3) years after the supposed "temporary lay-
The above factual finding of the Labor Arbiter was never refuted off," the employment of all of the respondents with
by petitioners in their appeal with the NLRC. It confounds us, petitioners had ceased, notwithstanding that the new premises
therefore, how the NLRC could have so cavalierly treated this had been completed and the same operated as a hotel with bar
uncontroverted factual finding by ruling that respondents have and restaurant. This is clearly dismissal — or the permanent
not introduced any evidence to show that they were illegally severance or complete separation of the worker from the service
dismissed, and that the Labor Arbiter's finding was based on on the initiative of the employer regardless of the reasons
conjecture.46 It was a serious error that the NLRC did not inquire therefor.51
as to the legality of the cessation of employment. Article 286 of
the Labor Code is clear — there is termination of employment On this point, we note that the Labor Arbiter and the CA are in
when an otherwise bona fide suspension of work exceeds six (6) accord that at the time of the filing of the complaint, respondents
months.47 The cessation of employment for more than six had no cause of action to file the case for illegal dismissal.
months was patent and the employer has the burden of proving According to the CA and the Labor Arbiter, the lay-off of the
that the termination was for a just or authorized cause. 48 respondents was merely temporary, pending construction of the
new building at Peñaranda Street.52
Moreover, we are not impressed by any of petitioners' attempts
to exculpate themselves from the charges. First, in the While the closure of the hotel operations in April of 1997 may
proceedings with the Labor Arbiter, they claimed that it could not have been temporary, we hold that the evidence on record belie
be illegal dismissal because the lay-off was merely temporary any claim of petitioners that the lay-off of respondents on that
(and due to the expiration of the lease contract over the old same date was merely temporary. On the contrary, we find
premises of the hotel). They specifically invoked Article 286 of substantial evidence that petitioners intended the termination to
the Labor Code to argue that the claim for separation pay was be permanent. First, respondents Loveres, Macandog, Llarena,
Guades, Nicerio and Alamares filed the complaint for illegal We are not impressed by petitioners' claim that severe business
dismissal immediately after the closure of the hotel operations losses justified their failure to reinstate respondents. The
in Rizal Street, notwithstanding the alleged temporary nature of evidence to prove this fact is inconclusive. But more important,
the closure of the hotel operations, and petitioners' allegations serious business losses do not excuse the employer from
that the employees assigned to the hotel operations knew about complying with the clearance or report required under Article 283
this beforehand. Second, in their position paper submitted to the of the Labor Code and its implementing rules before terminating
Labor Arbiter, petitioners invoked Article 286 of the Labor Code the employment of its workers. 63 In the absence of justifying
to assert that the employer-employee relationship was merely circumstances, the failure of petitioners to observe the
suspended, and therefore the claim for separation pay was procedural requirements set out under Article 284, taints their
premature and without legal or factual basis. 53 But they made actuations with bad faith, especially since they claimed that they
no mention of any intent to recall these respondents to have been experiencing losses in the three years before 1997.
work upon completion of the new premises. Third, the To say the least, if it were true that the lay-off was temporary but
various pleadings on record show that petitioners held then serious business losses prevented the reinstatement of
respondents, particularly Loveres, as responsible for respondents, then petitioners should have complied with the
mismanagement of the establishment and for abuse of trust and requirements of written notice. The requirement of law
confidence. Petitioner Josefa Po Lam's affidavit on July 21, mandating the giving of notices was intended not only to enable
1998, for example, squarely blamed respondents, specifically the employees to look for another employment and therefore
Loveres, Bumalay and Camigla, for abusing her leniency and ease the impact of the loss of their jobs and the corresponding
causing petitioner Mayon Hotel & Restaurant to sustain income, but more importantly, to give the Department of Labor
"continuous losses until it is closed." She then asserts that and Employment (DOLE) the opportunity to ascertain the verity
respondents "are not entitled to separation pay for they were not of the alleged authorized cause of termination. 64
terminated and if ever the business ceased to operate it was
because of losses."54 Again, petitioners make the same And even assuming that the closure was due to a reason beyond
allegation in their memorandum on appeal with the NLRC, where the control of the employer, it still has to accord its employees
they alleged that three (3) years prior to the expiration of the some relief in the form of severance pay.65
lease in 1997, the operation of the Hotel had been sustaining
consistent losses, and these were solely attributed to While we recognize the right of the employer to terminate the
respondents, but most especially due to Loveres's services of an employee for a just or authorized cause, the
mismanagement and abuse of petitioners' trust and dismissal of employees must be made within the parameters of
confidence.55 Even the petition filed in this court made reference law and pursuant to the tenets of fair play.66 And in termination
to the separation of the respondents due to "severe financial disputes, the burden of proof is always on the employer to prove
losses and reverses," again imputing it to respondents' that the dismissal was for a just or authorized cause. 67 Where
mismanagement.56 The vehemence of petitioners' accusation of there is no showing of a clear, valid and legal cause for
mismanagement against respondents, especially against termination of employment, the law considers the case a matter
Loveres, is inconsistent with the desire to recall them to of illegal dismissal.68
work. Fourth, petitioners' memorandum on appeal also averred
that the case was filed "not because of the business being
Under these circumstances, the award of damages was proper.
operated by them or that they were supposedly not receiving
As a rule, moral damages are recoverable where the dismissal of
benefits from the Labor Code which is true, but because of the
the employee was attended by bad faith or fraud or constituted
fact that the source of their livelihood, whether legal or
an act oppressive to labor, or was done in a manner contrary to
immoral, was stopped on March 31, 1997, when the owner
morals, good customs or public policy.69 We believe that the
of the building terminated the Lease Contract." 57 Fifth, petitioners
dismissal of the respondents was attended with bad faith and
had inconsistencies in their pleadings (with the NLRC, CA and
meant to evade the lawful obligations imposed upon an
with this Court) in referring to the closure, 58 i.e., in the petition
filed with this court, they assert that there is no illegal dismissal
because there was "only a temporary cessation or suspension of
operations of the hotel and restaurant due to circumstances To rule otherwise would lead to the anomaly of respondents
beyond the control of petitioners, and that is, the non-renewal of being terminated from employment in 1997 as a matter of fact,
the lease contract..."59 And yet, in the same petition, they also but without legal redress. This runs counter to notions of fair play,
assert that: (a) the separation of respondents was due to severe substantial justice and the constitutional mandate that labor
financial losses and reverses leading to the closure of the rights should be respected. If doubts exist between the evidence
business; and (b) petitioner Pacita Po had to close shop and presented by the employer and the employee, the scales of
was bankrupt and has no liquidity to put up her own building to justice must be tilted in favor of the latter — the employer must
house Mayon Hotel & Restaurant. 60 Sixth, and finally, the affirmatively show rationally adequate evidence that the
uncontroverted finding of the Labor Arbiter that petitioners dismissal was for a justifiable cause.70 It is a time-honored rule
terminated all the other respondents, by not employing them that in controversies between a laborer and his master, doubts
when the Hotel and Restaurant transferred to its new site on reasonably arising from the evidence, or in the interpretation of
Peñaranda Street.61 Indeed, in this same memorandum, agreements and writing should be resolved in the former's
petitioners referred to all respondents as "former employees of favor.71 The policy is to extend the doctrine to a greater number
Mayon Hotel & Restaurant."62 of employees who can avail of the benefits under the law, which
is in consonance with the avowed policy of the State to give
maximum aid and protection of labor.72
These factors may be inconclusive individually, but when taken
together, they lead us to conclude that petitioners really intended
to dismiss all respondents and merely used the termination of We therefore reinstate the Labor Arbiter's decision with the
the lease (on Rizal Street premises) as a means by which they following modifications:
could terminate their employees.
(a) Separation pay for the illegal dismissal of respondents
Moreover, even assuming arguendo that the cessation of Loveres, Macandog and Llarena; (Santos Broñola cannot be
employment on April 1997 was merely temporary, granted separation pay as he made no such claim);
it became dismissal by operation of law when petitioners failed
to reinstate respondents after the lapse of six (6) months, (b) Retirement pay for respondents Guades, Nicerio, and
pursuant to Article 286 of the Labor Code. Alamares, who at the time of dismissal were entitled to their

retirement benefits pursuant to Article 287 of the Labor Code as are allowed under existing laws.82 They claim that these benefits
amended;73 and make up for whatever inadequacies there may be in
compensation.83 Specifically, they invoked Sections 5 and 6,
(c) Damages for respondents Loveres, Macandog, Llarena, Rule VII-A, which allow the deduction of facilities provided by the
Guades, Nicerio, Atractivo, and Broñola. employer through an appropriate Facility Evaluation Order
issued by the Regional Director of the DOLE. 84 Petitioners also
3. Money claims aver that they give five (5) percent of the gross income each
month as incentives. As proof of compliance of payment of
minimum wages, petitioners submitted the Notice of Inspection
The CA held that contrary to the NLRC's ruling, petitioners had
Results issued in 1995 and 1997 by the DOLE Regional Office. 85
not discharged the burden of proving that the monetary claims of
the respondents have been paid.74 The CA thus reinstated the
Labor Arbiter's grant of respondents' monetary claims, including The cost of meals and snacks purportedly provided to
damages. respondents cannot be deducted as part of respondents'
minimum wage. As stated in the Labor Arbiter's decision: 86
Petitioners assail this ruling by repeating their long and
convoluted argument that as there was no illegal dismissal, then While [petitioners] submitted Facility Evaluation Orders (pp. 468,
respondents are not entitled to their monetary claims or 469; vol. II, rollo) issued by the DOLE Regional Office whereby
separation pay and damages. Petitioners' arguments are not the cost of meals given by [petitioners] to [respondents] were
only tiring, repetitive and unconvincing, but confusing and specified for purposes of considering the same as part of their
confused — entitlement to labor standard benefits is a separate wages, We cannot consider the cost of meals in the Orders as
and distinct concept from payment of separation pay arising from applicable to [respondents]. [Respondents] were not interviewed
illegal dismissal, and are governed by different provisions of the by the DOLE as to the quality and quantity of food appearing in
Labor Code. the applications of [petitioners] for facility evaluation prior to its
approval to determine whether or not [respondents] were indeed
given such kind and quantity of food. Also, there was no
We agree with the CA and the Labor Arbiter. Respondents have
evidence that the quality and quantity of food in the Orders were
set out with particularity in their complaint, position paper,
voluntarily accepted by [respondents]. On the contrary; while
affidavits and other documents the labor standard benefits they
some [of the respondents] admitted that they were given meals
are entitled to, and which they alleged that petitioners have failed
and merienda, the quality of food serve[d] to them were not what
to pay them. It was therefore petitioners' burden to prove that
were provided for in the Orders and that it was only when they
they have paid these money claims. One who pleads payment
filed these cases that they came to know about said Facility
has the burden of proving it, and even where the employees
Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June
must allege nonpayment, the general rule is that the burden
19, 1998). [Petitioner] Josefa herself, who applied for evaluation
rests on the defendant to prove nonpayment, rather than on the
of the facility (food) given to [respondents], testified that she did
plaintiff to prove non payment.75 This petitioners failed to do.
not inform [respondents] concerning said Facility Evaluation
Orders (p. 34, tsn[,] August 13, 1998).
We also agree with the Labor Arbiter and the CA that the
documents petitioners submitted, i.e., affidavits executed by
Even granting that meals and snacks were provided and indeed
some of respondents during an ocular inspection conducted by
constituted facilities, such facilities could not be deducted without
an inspector of the DOLE; notices of inspection result and
compliance with certain legal requirements. As stated in Mabeza
Facility Evaluation Orders issued by DOLE, are not sufficient to
v. NLRC, 87 the employer simply cannot deduct the value from
prove payment.76 Despite repeated orders from the Labor
the employee's wages without satisfying the following: (a) proof
Arbiter,77 petitioners failed to submit the pertinent employee files,
that such facilities are customarily furnished by the trade; (b) the
payrolls, records, remittances and other similar documents which
provision of deductible facilities is voluntarily accepted in writing
would show that respondents rendered work entitling them to
by the employee; and (c) the facilities are charged at fair and
payment for overtime work, night shift differential, premium pay
reasonable value. The records are clear that petitioners failed to
for work on holidays and rest day, and payment of these as well
comply with these requirements. There was no proof of
as the COLA and the SILP – documents which are not in
respondents' written authorization. Indeed, the Labor Arbiter
respondents' possession but in the custody and absolute control
found that while the respondents admitted that they were given
of petitioners.78 By choosing not to fully and completely disclose
meals and merienda, the quality of food served to them was not
information and present the necessary documents to prove
what was provided for in the Facility Evaluation Orders and it
payment of labor standard benefits due to respondents,
was only when they filed the cases that they came to know of
petitioners failed to discharge the burden of proof. 79 Indeed,
this supposed Facility Evaluation Orders. 88 Petitioner Josefa Po
petitioners' failure to submit the necessary documents which as
Lam herself admitted that she did not inform the respondents of
employers are in their possession, inspite of orders to do so,
the facilities she had applied for.89
gives rise to the presumption that their presentation is prejudicial
to its cause.80 As aptly quoted by the CA:
Considering the failure to comply with the above-mentioned legal
requirements, the Labor Arbiter therefore erred when he ruled
[W]hen the evidence tends to prove a material fact which
that the cost of the meals actually provided to respondents
imposes a liability on a party, and he has it in his power to
should be deducted as part of their salaries, on the ground that
produce evidence which from its very nature must overthrow the
respondents have availed themselves of the food given by
case made against him if it is not founded on fact, and he
petitioners.90 The law is clear that mere availment is not sufficient
refuses to produce such evidence, the presumption arises that
to allow deductions from employees' wages.
the evidence, if produced, would operate to his prejudice, and
support the case of his adversary.81
More important, we note the uncontroverted testimony of
respondents on record that they were required to eat in the hotel
Petitioners next claim that the cost of the food and snacks
and restaurant so that they will not go home and there is no
provided to respondents as facilities should have been included
interruption in the services of Mayon Hotel & Restaurant. As
in reckoning the payment of respondents' wages. They state that
ruled in Mabeza, food or snacks or other convenience provided
although on the surface respondents appeared to receive
by the employers are deemed as supplements if they are
minimal wages, petitioners had granted respondents other
granted for the convenience of the employer. The criterion in
benefits which are considered part and parcel of their wages and
making a distinction between a supplement and a facility does
not so much lie in the kind (food, lodging) but the plaintiff shows proof that he is entitled to moral, temperate or
purpose.91 Considering, therefore, that hotel workers are compensatory damages.99
required to work different shifts and are expected to be available
at various odd hours, their ready availability is a necessary As only respondents Loveres, Guades, Macandog, Llarena,
matter in the operations of a small hotel, such as petitioners' Nicerio, Atractivo and Broñola specifically claimed damages from
business.92 The deduction of the cost of meals from respondents' petitioners, then only they are entitled to exemplary damages. sjgs1
wages, therefore, should be removed.
Finally, we rule that attorney's fees in the amount to P10,000.00
We also do not agree with petitioners that the five (5) percent of should be granted to each respondent. It is settled that in actions
the gross income of the establishment can be considered as part for recovery of wages or where an employee was forced to
of the respondents' wages. We quote with approval the Labor litigate and incur expenses to protect his rights and interest, he is
Arbiter on this matter, to wit: entitled to an award of attorney's fees.100 This case undoubtedly
falls within this rule.
While complainants, who were employed in the hotel, receive[d]
various amounts as profit share, the same cannot be considered IN VIEW WHEREOF, the petition is hereby DENIED. The
as part of their wages in determining their claims for violation of Decision of January 17, 2003 of the Court of Appeals in CA-G.R.
labor standard benefits. Although called profit share[,] such is in SP No. 68642 upholding the Joint Decision of July 14, 2000 of
the nature of share from service charges charged by the hotel. the Labor Arbiter in RAB V Case Nos. 04-00079-97 and 04-
This is more explained by [respondents] when they testified that 00080-97 is AFFIRMED, with the following MODIFICATIONS:
what they received are not fixed amounts and the same are paid
not on a monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo). (1) Granting separation pay of one-half (1/2) month for every
Also, [petitioners] failed to submit evidence that the amounts year of service to respondents Loveres, Macandog and Llarena;
received by [respondents] as profit share are to be considered
part of their wages and had been agreed by them prior to their
(2) Granting retirement pay for respondents Guades, Nicerio,
employment. Further, how can the amounts receive[d] by
and Alamares;
[respondents] be considered as profit share when the same [are]
based on the gross receipt of the hotel[?] No profit can as yet be
determined out of the gross receipt of an enterprise. Profits are (3) Removing the deductions for food facility from the amounts
realized after expenses are deducted from the gross income. due to all respondents;

On the issue of the proper minimum wage applicable to (4) Awarding moral damages of P20,000.00 each for
respondents, we sustain the Labor Arbiter. We note that respondents Loveres, Macandog, Llarena, Guades, Nicerio,
petitioners themselves have admitted that the establishment Atractivo, and Broñola;
employs "more or less sixteen (16) employees,"93 therefore they
are estopped from claiming that the applicable minimum wage (5) Deleting the award of exemplary damages of P10,000.00
should be for service establishments employing 15 employees or from all respondents except Loveres, Macandog, Llarena,
less. Guades, Nicerio, Atractivo, and Broñola; and

As for petitioners repeated invocation of serious business losses, (6) Granting attorney's fees of P10,000.00 each to all
suffice to say that this is not a defense to payment of labor respondents.
standard benefits. The employer cannot exempt himself from
liability to pay minimum wages because of poor financial The case is REMANDED to the Labor Arbiter for the
condition of the company. The payment of minimum wages is not RECOMPUTATION of the total monetary benefits awarded and
dependent on the employer's ability to pay.94 due to the employees concerned in accordance with the
decision. The Labor Arbiter is ORDERED to submit his
Thus, we reinstate the award of monetary claims granted by the compliance thereon within thirty (30) days from notice of this
Labor Arbiter. decision, with copies furnished to the parties.

4. Conclusion SO ORDERED.

There is no denying that the actuations of petitioners in this case

have been reprehensible. They have terminated the
respondents' employment in an underhanded manner, and have
used and abused the quasi-judicial and judicial processes to
resist payment of their employees' rightful claims, thereby
protracting this case and causing the unnecessary clogging of
dockets of the Court. They have also forced respondents to
unnecessary hardship and financial expense. Indeed, the
circumstances of this case would have called for exemplary
damages, as the dismissal was effected in a wanton, oppressive
or malevolent manner,95 and public policy requires that these
acts must be suppressed and discouraged.96

Nevertheless, we cannot agree with the Labor Arbiter in granting

exemplary damages of P10,000.00 each to all respondents.
While it is true that other forms of damages under the Civil Code
may be awarded to illegally dismissed employees, 97 any award
of moral damages by the Labor Arbiter cannot be based on the
Labor Code but should be grounded on the Civil Code. 98 And the
law is clear that exemplary damages can only be awarded if