G.R. No.

102636 September 10, 1993

METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP and ANTONIO V.

BALINANG, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and METROPOLITAN BANK and
TRUST COMPANY, respondents.

Gilbert P. Lorenzo for petitioners.

Marcial G. dela Fuente for private respondents.

VITUG, J.:

In this petition for certiorari, the Metropolitan Bank & Trust Company Employees Union-ALU-TUCP
(MBTCEU) and its president, Antonio V. Balinang, raise the issue of whether or not the implementation
by the Metropolitan Bank and Trust Company of Republic Act No. 6727, mandating an increase in pay
of P25 per day for certain employees in the private sector, created a distortion that would require an
adjustment under said law in the wages of the latter's other various groups of employees.

On 25 May 1989, the bank entered into a collective bargaining agreement with the MBTCEU, granting a
monthly P900 wage increase effective 01 January 1989, P600 wage increase 01 January 1990, and
P200 wage increase effective 01 January 1991. The MBTCEU had also bargained for the inclusion of
probationary employees in the list of employees who would benefit from the first P900 increase but the
bank had adamantly refused to accede thereto. Consequently, only regular employees as of 01 January
1989 were given the increase to the exclusion of probationary employees.

Barely a month later, or on 01 January 1989, Republic Act 6727, "an act to rationalize wage policy
determination be establishing the mechanism and proper standards thereof, . . . fixing new wage rates,
providing wage incentives for industrial dispersal to the countryside, and for other purposes," took effect.
Its provisions, pertinent to this case, state:

Sec. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates of all workers and
employees in the private sector, whether agricultural or non-agricultural, shall be increased by
twenty-five pesos (P25) per day, . . .: Provided, That those already receiving above the minimum wage
rates up to one hundred pesos(P100.00) shall also receive an increase of twenty-five pesos (P25.00)
per day, . . .

xxx xxx xxx

(d) If expressly provided for and agreed upon in the collective bargaining agreements, all increase in the
daily basic wage rates granted by the employers three (3) months before the effectivity of this Act shall
be credited as compliance with the increases in the wage rates prescribed herein, provided that, where
such increases are less than the prescribed increases in the wage rates under this Act, the employer
shall pay the difference. Such increase shall not include anniversary wage increases, merit wage
increase and those resulting from the regularization or promotion of employees.

Where the application of the increases in the wage rates under this Section results in distortions as
defined under existing laws in the wage structure within an establishment and gives rise to a dispute
therein, such dispute shall first be settled voluntarily between the parties and in the event of a deadlock,
the same shall be finally resolved through compulsory arbitration by the regional branches of the
National Labor Relations Commission (NLRC) having jurisdiction over the workplace.
It shall be mandatory for the NLRC to conduct continous hearings and decide any dispute arising under
this Section within twenty (20) calendar days from the time said dispute is formally submitted to it for
arbitration. The pendency of a dispute arising from a wage distortion shall not in any way delay the
applicability of the increase in the wage rates prescribed under this Section.

Pursuant to the above provisions, the bank gave the P25 increase per day, or P750 a month, to its
probationary employees and to those who had been promoted to regular or permanent status before 01
July 1989 but whose daily rate was P100 and below. The bank refused to give the same increase to its
regular employees who were receiving more than P100 per day and recipients of the P900 CBA
increase.

Contending that the bank's implementation of Republic Act 6727 resulted in the categorization of the
employees into (a) the probationary employees as of 30 June 1989 and regular employees receiving
P100 or less a day who had been promoted to permanent or regular status before 01 July 1989, and (b)
the regular employees as of 01 July 1989, whose pay was over P100 a day, and that, between the two
groups, there emerged a substantially reduced salary gap, the MBTCEU sought from the bank the
correction of the alleged distortion in pay. In order to avert an impeding strike, the bank petitioned the
Secretary of Labor to assume jurisdiction over the case or to certify the same to the National Labor
Relations Commission (NLRC) under Article 263 (g) of the Labor Code. The parties ultimately agreed to
1

refer the issue for compulsory arbitration to the NLRC.

The case was assigned to Labor Arbiter Eduardo J. Carpio. In his decision of 05 February 1991, the
labor arbiter disregard with the bank's contention that the increase in its implementation of Republic Act
6727 did not constitute a distortion because "only 143 employees or 6.8% of the bank's population of a
total of 2,108 regular employees" benefited. He stressed that "it is not necessary that a big number of
wage earners within a company be benefited by the mandatory increase before a wage distortion may
be considered to have taken place," it being enough, he said, that such increase "result(s) in the severe
contraction of an intentional quantitative difference in wage between employee groups."

The labor arbiter concluded that since the "intentional quantitative difference" in wage or salary rates
between and among groups of employees is not based purely on skills or length of service but also on
"other logical bases of differentiation, a P900.00 wage gap intentionally provided in a collective
bargaining agreement as a quantitative difference in wage between those who WERE regular
employees as of January 1, 1989 and those who WERE NOT as of that date, is definitely a logical basis
of differentiation (that) deserves protection from any distorting statutory wage increase." Otherwise, he
added, "a minimum wage statute that seek to uplift the economic condition of labor would itself destroy
the mechanism of collective bargaining which, with perceived stability, has been labor's constitutional
and regular source of wage increase for so long a time now." Thus, since the "subjective quantitative
difference" between wage rates had been reduced from P900.00 to barely P150.00, correction of the
wage distortion pursuant to Section 4(c) of the Rules Implementing Republic Act 6727 should be made.

The labor arbiter disposed of the case, thus:

WHEREFORE, premises considered, the respondent is hereby directed to restore to complainants and
their members the Nine Hundred (P900.00) Pesos CBA wage gap they used to enjoy over non-regular
employees as of January 1, 1989 by granting them a Seven Hundred Fifty (P750.00) Pesos monthly
increase effective July 1, 1989.

SO ORDERED. 2

The bank appealed to the NLRC. On 31 May 1991, the NLRC Second Division, by a vote of 2 to 1,
reversed the decision of the Labor Arbiter. Speaking, through Commissioners Rustico L. Diokno and
Domingo H. Zapanta, the NLRC said:
. . . a wage distortion can arise only in a situation where the salary structure is characterized by
intentional quantitative differences among employee groups determined or fixed on the basis of skills,
length of service, or other logical basis of differentiation and such differences or distinction are
obliterated (In Re: Labor Dispute at the Bank of the Philippine Islands, NCMB-RB-7-11-096-89,
Secretary of Labor and Employment, February 18, 1991).

As applied in this case, We noted that in the new wage salary structure, the wage gaps between Level 6
and 7 levels 5 and 6, and levels 6 and 7 (sic) were maintained. While there is a noticeable decrease in
the wage gap between levels 2 and 3, Levels 3 and 4, and Levels 4 and 5, the reduction in the wage
gaps between said levels is not significant as to obliterate or result in severe contraction of the
intentional quantitative differences in salary rates between the employees groups. For this reason, the
basis requirement for a wage in this case. Moreover, there is nothing in the law which would justify an
across-the-board adjustment of P750.00 as ordered by the labor Arbiter.

WHEREFORE, premises considered, the appealed decision is hereby set aside and a new judgment is
hereby entered, dismissing the complaint for lack of merit.

SO ORDERED. 3

In her dissent, Presiding Commissioner Edna Bonto-Perez opined:

There may not be an obliteration nor elimination of said quantitative distinction/difference aforecited but
clearly there is a contraction. Would such contraction be severe as to warrant the necessary correction
sanctioned by the law in point, RA 6727? It is may considered view that the quantitative intended
distinction in pay between the two groups of workers in respondent company was contracted by more
than fifty (50%) per cent or in particular by more or less eighty-three (83%) per cent hence, there is no
doubt that there is an evident severe contraction resulting in the complained of wage distortion.

Nonetheless, the award of P750.00 per month to all of herein individual complainants as ordered by the
Labor Arbiter below, to my mind is not the most equitable remedy at bar, for the same would be an
across the board increase which is not the intention of RA 6727. For that matter, herein complainants
cannot by right claim for the whole amount of P750.00 a month or P25.00 per day granted to the
workers covered by the said law in the sense that they are not covered by the said increase mandated
by RA 6727. They are only entitled to the relief granted by said law by way of correction of the pay scale
in case of distortion in wages by reason thereof.

Hence, the formula offered and incorporated in Wage Order No. IV-02 issued on 21 May 1991 by the
Regional Tripartite Wages and Productivity Commission for correction of pay scale structures in case of
wage distortion as in the case at bar which is:

Minimum Wage = % x Prescribed = Distortion

—————— Increased Adjustment

Actual Salary

would be the most equitable and fair under the circumstances obtaining in this case.

For this very reason, I register my dissent from the majority opinion and opt for the modification of the
Labor Arbiter's decision as afore-discussed. 4

The MBTCEU filed a motion for reconsideration of the decision of the NLRC; having been denied, the
MBTCEU and its president filed the instant petition for certiorari, charging the NLRC with gave abuse of
discretion by its refusal (a) "to acknowledge the existence of a wage distortion in the wage or salary
rates between and among the employee groups of the respondent bank as a result of the bank's partial
implementation" of Republic Act 6727 and (b) to give due course to its claim for an across-the-board
P25 increase under Republic Act No. 6727. 5

We agree with the Solicitor General that the petition is impressed with merit. 6

The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:

(p) Wage Distortion means a situation where an increase in prescribed wage rates results in the
elimination or severe contradiction of intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of service, or other logical bases of
differentiation.

The issue of whether or not a wage distortion exists as a consequence of the grant of a wage increase
to certain employees, we agree, is, by and large, a question of fact the determination of which is the
statutory function of the NLRC. Judicial review of labor cases, we may add, does not go beyond the
7

evaluation of the sufficiency of the evidence upon which the labor official's findings rest. As such,
8

factual findings of the NLRC are generally accorded not only respect but also finality provided that its
decision are supported by substantial evidence and devoid of any taint of unfairness of
arbitrariness. When, however, the members of the same labor tribunal are not in accord on those
9

aspects of a case, as in this case, this Court is well cautioned not to be as so conscious in passing upon
the sufficiency of the evidence, let alone the conclusions derived therefrom.

In this case, the majority of the members of the NLRC, as well as its dissenting member, agree that
there is a wage distortion arising from the bank's implementation of the P25 wage increase; they do
differ, however, on the extent of the distortion that can warrant the adoption of corrective measures
required by law.

The definition of "wage distortion," aforequoted, shows that such distortion can so exist when, as a
10

result of an increase in the prescribed wage rate, an "elimination or severe contraction of intentional
quantitative differences in wage or salary rates" would occur "between and among employee groups in
an establishment as to effectively obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation." In mandating an adjustment, the law did
not require that there be an elimination or total abrogation of quantitative wage or salary differences; a
severe contraction thereof is enough. As has been aptly observed by Presiding Commissioner Edna
Bonto-Perez in her dissenting opinion, the contraction between personnel groupings comes close to
eighty-three (83%), which cannot, by any stretch of imagination, be considered less than severe.

The "intentional quantitative differences" in wage among employees of the bank has been set by the
CBA to about P900 per month as of 01 January 1989. It is intentional as it has been arrived at through
the collective bargaining process to which the parties are thereby concluded. The Solicitor General, in
11

recommending the grant of due course to the petition, has correctly emphasized that the intention of the
parties, whether the benefits under a collective bargaining agreement should be equated with those
granted by law or not, unless there are compelling reasons otherwise, must prevail and be given
effect.12

In keeping then with the intendment of the law and the agreement of the parties themselves, along with
the often repeated rule that all doubts in the interpretation and implementation of labor laws should be
resolved in favor of labor, we must approximate an acceptable quantitative difference between and
13

among the CBA agreed work levels. We, however, do not subscribe to the labor arbiter's exacting
prescription in correcting the wage distortion. Like the majority of the members of the NLRC, we are also
of the view that giving the employees an across-the-board increase of P750 may not be conducive to
the policy of encouraging "employers to grant wage and allowance increases to their employees higher
than the minimum rates of increases prescribed by statute or administrative regulation," particularly in
this case where both Republic Act 6727 and the CBA allow a credit for voluntary compliance. As the
Court, through Associate Justice Florentino Feliciano, also pointed out in Apex Mining Company,
Inc. v. NLRC: 14

. . . . (T)o compel employers simply to add on legislated increases in salaries or allowances without
regard to what is already being paid, would be to penalize employers who grant their workers more than
the statutorily prescribed minimum rates of increases. Clearly, this would be counter-productive so far
as securing the interests of labor is concerned. . . .

We find the formula suggested then by Commissioner Bonto-Perez, which has also been the standard
considered by the regional Tripartite Wages and Productivity Commission for the correction of pay scale
structures in cases of wage distortion, to well be the appropriate measure to balance the respective
15

contentions of the parties in this instance. We also view it as being just and equitable.

WHEREFORE, finding merit in the instant petition for certiorari, the same is GRANTED DUE PROCESS,
the questioned NLRC decision is hereby SET ASIDE and the decision of the labor arbiter is
REINSTATED subject to the MODIFICATION that the wage distortion in question be corrected in
accordance with the formula expressed in the dissenting opinion of Presiding Commissioner Edna
Bonto-Perez. This decision is immediately executory.

SO ORDERED.
G.R. No. 140689 February 17, 2004

BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and BANKARD, INC., respondents.

DECISION

CARPIO MORALES, J.:

The present Petition for Review on Certiorari under Rule 45 of the Rules of Court raises the issue of
whether the unilateral adoption by an employer of an upgraded salary scale that increased the hiring
rates of new employees without increasing the salary rates of old employees resulted in wage distortion
within the contemplation of Article 124 of the Labor Code.

Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level I, Level II, Level III, Level IV, and
Level V. On May 28, 1993, its Board of Directors approved a "New Salary Scale", made retroactive to
April 1, 1993, for the purpose of making its hiring rate competitive in the industry’s labor market. The
"New Salary Scale" increased the hiring rates of new employees, to wit: Levels I and V by one thousand
pesos (P1,000.00), and Levels II, III and IV by nine hundred pesos (P900.00). Accordingly, the salaries
of employees who fell below the new minimum rates were also adjusted to reach such rates under their
levels.

Bankard’s move drew the Bankard Employees Union-WATU (petitioner), the duly certified exclusive
bargaining agent of the regular rank and file employees of Bankard, to press for the increase in the
salary of its old, regular employees.

Bankard took the position, however, that there was no obligation on the part of the management to grant
to all its employees the same increase in an across-the-board manner.

As the continued request of petitioner for increase in the wages and salaries of Bankard’s regular
employees remained unheeded, it filed a Notice of Strike on August 26, 1993 on the ground of
discrimination and other acts of Unfair Labor Practice (ULP).

A director of the National Conciliation and Mediation Board treated the Notice of Strike as a "Preventive
Mediation Case" based on a finding that the issues therein were "not strikeable".

Petitioner filed another Notice of Strike on October 8, 1993 on the grounds of refusal to bargain,
discrimination, and other acts of ULP - union busting. The strike was averted, however, when the
dispute was certified by the Secretary of Labor and Employment for compulsory arbitration.

The Second Division of the NLRC, by Order of May 31, 1995, finding no wage distortion, dismissed the
case for lack of merit.

Petitioner’s motion for reconsideration of the dismissal of the case was, by Resolution of July 28, 1995,
denied.

Petitioner thereupon filed a petition for certiorari before this Court, docketed as G.R. 121970. In
accordance with its ruling in St. Martin Funeral Homes v. NLRC,1 the petition was referred to the Court
of Appeals which, by October 28, 1999, denied the same for lack of merit.

Hence, the present petition which faults the appellate court as follows:
(1) It misapprehended the basic issues when it concluded that under Bankard’s new wage structure, the
old salary gaps between the different classification or level of employees were "still reflected" by the
adjusted salary rates2; and

(2) It erred in concluding that "wage distortion does not appear to exist", which conclusion is manifestly
contrary to law and jurisprudence.3

Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among others,
Article 124 of the Labor Code) on June 9, 1989, the term "wage distortion" was explicitly defined as:

... a situation where an increase in prescribed wage rates results in the elimination or severe contraction
of intentional quantitative differences in wage or salary rates between and among employee groups in
an establishment as to effectively obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation.4

Prubankers Association v. Prudential Bank and Trust Company5 laid down the four elements of wage
distortion, to wit: (1.) An existing hierarchy of positions with corresponding salary rates; (2) A significant
change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a
higher one; (3) The elimination of the distinction between the two levels; and (4) The existence of the
distortion in the same region of the country.

Normally, a company has a wage structure or method of determining the wages of its employees. In a
problem dealing with "wage distortion," the basic assumption is that there exists a grouping or
classification of employees that establishes distinctions among them on some relevant or legitimate
bases.6

Involved in the classification of employees are various factors such as the degrees of responsibility, the
skills and knowledge required, the complexity of the job, or other logical basis of differentiation. The
differing wage rate for each of the existing classes of employees reflects this classification.

Petitioner maintains that for purposes of wage distortion, the classification is not one based on "levels"
or "ranks" but on two groups of employees, the newly hired and the old, in each and every level, and not
between and among the different levels or ranks in the salary structure.

Public respondent National Labor Relations Commission (NLRC) refutes petitioner’s position, however.
It, through the Office of the Solicitor General, essays in its Comment of April 12, 2000 as follows:

To determine the existence of wage distortion, the "historical" classification of the employees prior to the
wage increase must be established. Likewise, it must be shown that as between the different
classification of employees, there exists a "historical" gap or difference.

xxx

The classification preferred by petitioner is belied by the wage structure of private respondent as shown
in the new salary scale it adopted on May 28, 1993, retroactive to April 1, 1993, which provides, thus:

Hiring Minimum Maximum

Level From To From To From To

 I 3,100 4,100 3,200 4,200 7,200 9,250

II 3,200 4,100 3,300 4,200 7,500 9,500

III 3,300 4,200 3,400 4,300 8,000 10,000

IV 3,500 4,400 3,600 4,500 8,500 10,500

V 3,700 4,700 3,800 4,800 9,000 11,000

Thus the employees of private respondent have been "historically" classified into levels, i.e. I to V,
and not on the basis of their length of service. Put differently, the entry of new employees to the
company ipso facto place[s] them under any of the levels mentioned in the new salary scale which
private respondent adopted retroactive [to] April 1, 1993. Petitioner cannot make a contrary
classification of private respondent’s employees without encroaching upon recognized management
prerogative of formulating a wage structure, in this case, one based on level.7 (Emphasis and
underscoring supplied)

The issue of whether wage distortion exists being a question of fact that is within the jurisdiction of
quasi-judicial tribunals,8 and it being a basic rule that findings of facts of quasi-judicial agencies, like the
NLRC, are generally accorded not only respect but at times even finality
if they are supported by substantial evidence, as are the findings in the case at bar, they must be
respected. For these agencies have acquired expertise, their jurisdiction being confined to specific
matters.9

It is thus clear that there is no hierarchy of positions between the newly hired and regular employees of
Bankard, hence, the first element of wage distortion provided in Prubankers is wanting. lawphi1.nêt

While seniority may be a factor in determining the wages of employees, it cannot be made
the sole basis in cases where the nature of their work differs.

Moreover, for purposes of determining the existence of wage distortion, employees cannot create their
own independent classification and use it as a basis to demand an across-the-board increase in salary.

As National Federation of Labor v. NLRC, et al.10 teaches, the formulation of a wage structure through
the classification of employees is a matter of management judgment and discretion.

[W]hether or not a new additional scheme of classification of employees for compensation purposes
should be established by the Company (and the legitimacy or viability of the bases of distinction there
embodied) is properly a matter of management judgment and discretion, and ultimately, perhaps,
a subject matter for bargaining negotiations between employer and employees. It is assuredly
something that falls outside the concept of "wage distortion."11 (Emphasis and underscoring supplied)

As did the Court of Appeals, this Court finds that the third element provided in Prubankers is also
wanting. For, as the appellate court explained:

In trying to prove wage distortion, petitioner union presented a list of five (5) employees allegedly
affected by the said increase:
 Pay of Old/ Pay of Newly Difference

Regular Employees Hired Employees

A. Prior to April 1, 1993

P4,518.75
Level I P3,100 P1,418.75
(Sammy Guce)

P6,242.00
Level II P3,200 P3,042.00
(Nazario Abello)

P4,850.00
Level III P3,300 P1,550.00
(Arthur Chavez)

P5,339.00
Level IV P3,500 P1,839.00
Melissa Cordero)

P7,090.69
Level V (Ma. Lourdes P3,700 P3,390.69
Dee)

B. Effective April 1, 1993

P4,518.75
Level I P4,100 P418.75
Sammy Guce)

P6,242.00
Level II P4,100 P2,142.00
(Nazario Abello)

P4,850.00
Level III P4,200 P650.00
(Arthur Chavez)

P5,330.00
Level IV P4,400 P939.00
(Melissa Cordero)

P7,090.69
Level V (Ma. Lourdes P4,700 P2,390.69
Dee)

Even assuming that there is a decrease in the wage gap between the pay of the old employees and the
newly hired employees, to Our mind said gap is not significant as to obliterate or result in severe
contraction of the intentional quantitative differences in the salary rates between the employee group.
As already stated, the classification under the wage structure is based on the rank of an employee, not
on seniority. For this reason, ,wage distortion does not appear to exist.12 (Emphasis and underscoring
supplied)

Apart from the findings of fact of the NLRC and the Court of Appeals that some of the elements of wage
distortion are absent, petitioner cannot legally obligate Bankard to correct the alleged "wage distortion"
as the increase in the wages and salaries of the newly-hired was not due to a prescribed law or wage
order.

The wordings of Article 124 are clear. If it was the intention of the legislators to cover all kinds of wage
adjustments, then the language of the law should have been broad, not restrictive as it is currently
phrased:

Article 124. Standards/Criteria for Minimum Wage Fixing.

xxx

Where the application of any prescribed wage increase by virtue of a law or Wage Order issued by
any Regional Board results in distortions of the wage structure within an establishment, the employer
and the union shall negotiate to correct the distortions. Any dispute arising from the wage distortions
shall be resolved through the grievance procedure under their collective bargaining agreement and, if it
remains unresolved, through voluntary arbitration.

x x x (Italics and emphasis supplied)

Article 124 is entitled "Standards/Criteria for Minimum Wage Fixing." It is found in CHAPTER V on
"WAGE STUDIES, WAGE AGREEMENTS AND WAGE DETERMINATION" which principally deals
with the fixing of minimum wage. Article 124 should thus be construed and correlated in relation to
minimum wage fixing, the intention of the law being that in the event of an increase in minimum wage,
the distinctions embodied in the wage structure based on skills, length of service, or other logical bases
of differentiation will be preserved.

If the compulsory mandate under Article 124 to correct "wage distortion" is applied to voluntary and
unilateral increases by the employer in fixing hiring rates which is inherently a business judgment
prerogative, then the hands of the employer would be completely tied even in cases where an increase
in wages of a particular group is justified due to a re-evaluation of the high productivity of a particular
group, or as in the present case, the need to increase the competitiveness of Bankard’s hiring rate. An
employer would be discouraged from adjusting the salary rates of a particular group of employees for
fear that it would result to a demand by all employees for a similar increase, especially if the financial
conditions of the business cannot address an across-the-board increase.

Petitioner cites Metro Transit Organization, Inc. v. NLRC13 to support its claim that the obligation to
rectify wage distortion is not confined to wage distortion resulting from government decreed law or wage
order.

Reliance on Metro Transit is however misplaced, as the obligation therein to rectify the wage distortion
was not by virtue of Article 124 of the Labor Code, but on account of a then existing "company practice"
that whenever rank-and-file employees were paid a statutorily mandated salary increase, supervisory
employees were, as a matter of practice, also paid the same amount plus an added premium. Thus this
Court held in said case:

We conclude that the supervisory employees, who then (i.e., on April 17, 1989) had, unlike the
rank-and-file employees, no CBA governing the terms and conditions of their employment, had the right
to rely on the company practice of unilaterally correcting the wage distortion effects of a salary
increase given to the rank-and-file employees, by giving the supervisory employees a corresponding
salary increase plus a premium. . . .14 (Emphasis supplied)

Wage distortion is a factual and economic condition that may be brought about by different causes.
In Metro Transit, the reduction or elimination of the normal differential between the wage rates of
rank-and-file and those of supervisory employees was due to the granting to the former of wage
increase which was, however, denied to the latter group of employees.

The mere factual existence of wage distortion does not, however, ipso facto result to an obligation to
rectify it, absent a law or other source of obligation which requires its rectification.

Unlike in Metro Transit then where there existed a "company practice," no such management practice is
herein alleged to obligate Bankard to provide an across-the-board increase to all its regular employees.

Bankard’s right to increase its hiring rate, to establish minimum salaries for specific jobs, and to adjust
the rates of employees affected thereby is embodied under Section 2, Article V (Salary and Cost of
Living Allowance) of the parties’ Collective Bargaining Agreement (CBA), to wit:

Section 2. Any salary increase granted under this Article shall be without prejudice to the right of the
Company to establish such minimum salaries as it may hereafter find appropriate for specific jobs, and
to adjust the rates of the employees thereby affected to such minimum salaries thus
established.15 (Italics and underscoring supplied)

This CBA provision, which is based on legitimate business-judgment prerogatives of the employer, is a
valid and legally enforceable source of rights between the parties.

In fine, absent any indication that the voluntary increase of salary rates by an employer was done
arbitrarily and illegally for the purpose of circumventing the laws or was devoid of any legitimate purpose
other than to discriminate against the regular employees, this Court will not step in to interfere with this
management prerogative. Employees are of course not precluded from negotiating with its employer
and lobby for wage increases through appropriate channels, such as through a CBA.

This Court, time and again, has shown concern and compassion to the plight of workers in adherence to
the Constitutional provisions on social justice and has always upheld the right of workers to press for
better terms and conditions of employment. It does not mean, however, that every dispute should be
decided in favor of labor, for employers correspondingly have rights under the law which need to be
respected.

WHEREFORE, the present petition is hereby DENIED.

SO ORDERED.
G.R. No. 196936 July 2, 2014

MONCHITO R. AMPELOQUIO, Petitioner,

vs.
JAKA DISTRIBUTION, INC., Respondent.

DECISION

PEREZ, J.:

We here have a petition for review on certiorari under Rule 45 of the Rules of Court posing a question on
the scope of the reinstatement relief afforded an illegally dismissed employee.

Petitioner Monchito R. Ampeloquio (Ampeloquio) is a reinstated employee of respondent Jaka

Distribution, Inc. (JAKA), formerly RMI Marketing Corporation (RMI).

Previously, Ampeloquio had filed a complaint for illegal dismissal against RMI before the National Labor
Relations Commission (NLRC). Subsequently, the Labor Arbiter found RMI guilty of illegal dismissal:

WHEREFORE, decision is hereby rendered declaring that [Ampeloquio] is a regular

employee of respondent RMI Marketing (now known as JAKA DISTRIBUTION, INC.)
and that he was illegally dismissed.

The respondents RMI Marketing Corp., (now known as JAKA DISTRIBUTION, INC.)
and Teodoro Barzabal, are ordered to reinstate [petitioner] Monchito Ampeloquio in his
former position as merchandiser without loss of seniority rights and other benefits and to
pay him backwages and attorney’s fees in the total amount of THREE HUNDRED
THIRTY THREE THOUSAND FOUR PESOS & 42/100 (₱333,034.42). 1

On 6 August 2004, Ampeloquio resumed work as merchandiser at JAKA and reported at JAKA’s outlets
within Metro Manila, Shopwise Makati and Alabang. He received a daily wage of ₱252.00, without meal
and transportation allowance.

On 4 April 2005, Ampeloquio was transferred outside of Metro Manila, to Lucena City and subsequently
to San Pablo City. At that time, he was receiving the same daily wage of ₱252.00, without meal and
transportation allowance. Ampeloquio was given a monthly cost of living allowance (COLA) of ₱720.00.

In a Letter dated 16 March 2005 addressed to JAKA’s general manager, Ampeloquio requested for
salary adjustment and benefits retroactive to the date of his reinstatement, 6 August 2004, and payment
of salary differential in the total amount of ₱42,196.00.

In another Letter dated 7 July 2006, Ampeloquio wrote JAKA reiterating his request for salary
adjustment and payment of benefits retroactive to his reinstatement, and an increase from his previous
request of salary differential which amounted to a total of ₱180,590.00.

Ampeloquio based his request on what other merchandisers of JAKA received:

[The] supposed daily wage [prevailing at the time of his reinstatement] was ₱394.12,
COLA at ₱1,200.00 per month, meal allowance of ₱60.00 and transportation allowance
from house to outlet [and] vice-versa that his co-employees in the same job received
₱4,500.00 or ₱281.25 daily wage actual cost of transportation expenses and meal
allowance of 60.00 per day; that a messengerial employee receives ₱394.21 or
₱9,641.00 monthly salary plus transportation and meal allowance; x x x. 2
Because of the discrepancy in wages, Ampeloquio filed anew before the NLRC, a complaint for
underpayment of wages, COLA, non-payment of meal and transportation allowances docketed as
NLRC NCR Case No. 00-06-04702-06. 3

The NLRC summarized the claims and defenses of the parties, to wit:

x x x [Ampeloquio] seeks entitlement to underpayment or wage differential of ₱142.00,

COLA differential of ₱500.00 a month, meal allowance of ₱60.00 per day and average
transportation allowance of ₱100.00 per day; that he called the attention of [JAKA’s
general manager], Mr. Ariel Villasenor abouthis concern on 16 March 2005 but to no
avail although upon second demand his ECOLA was increased to ₱1,200.00 per month
starting 16 July 2006.

For their part, [JAKA] avers that it is engaged in the business of distribution of consumer
goods; that [Ampeloquio] is their only regular employee as merchandiser; that at the
time of the filing of this case, [Ampeloquio] is still working in a supermarket with a
monthly salary of ₱7,985.00; that their other merchandiser[s] are outsourced from
manpower agencies or are seasonal employees hired during peak season; that the
salary of [Ampeloquio] was based on the minimum wage of ₱250.00 and ECOLA of
₱50.00 per day; that it is in the process of computing the wage distortion in the
implementation of 2005 wage increase of ₱25.00; that their exemption in the
implementation of wage increase expired last 25 June 2006 prior to the filing of this
complaint; that they did not act on [Ampeloquio’s] demand for money claims due to the
pendency of this case.

In their reply, [JAKA] admits that [Ampeloquio] was reinstated in accordance with the
Labor Arbiter’s decision in the illegal dismissal case; that he received the same rate as
that of his co-employees, hence there is no basis for [Ampeloquio’s] money claims. On
the other hand, [Ampeloquio] stressed the discrepancy and discrimination in the
payment of wages which he allegedly suffered as he received lower than that of his
co-workers and to substantiate his arguments he submitted the payslips of his
co-employees. 4

The Court of Appeals would summarize the position of JAKA, thus:

x x x [Ampeloquio] is receiving a basic rate of ₱6,545.00, ECOLA of ₱1,200.00, transportation

allowance of ₱240.00, and medicine allowance of ₱200.00; and that the company had made clear to
merchandisers as early as 2004 that transportation reimbursement can only be made in such
eventuality and does not include an instance where the employee (merchandiser) leaves his house to
go to his assigned outlet or if he leaves his last outlet to go home.
5

On 25 May 2007, Labor Arbiter Renaldo O. Hernandez granted Ampeloquio’s complaint for
underpayment of wages, basic and COLA and non-payment of allowances, meal and transportation:

WHEREFORE, premises considered[,] judgment is entered finding that [Ampeloquio] was illegally (sic)
in bad faith, underpaid his wages, basic, COLA not paid his meal allowance and transportation
allowance by [JAKA], ORDERING, hence [JAKA] (sic):

1. to pay him from 04/04/2005 to 06/14/2005 the total underpayment of COLA ₱3.85/day + unpaid
nonstandard benefit of ₱60.00 meal allowance/day + nonstandard benefit of ₱36.06 transportation
allowance/day, total of 99.85/day or ₱2,596.00/month x 2.53 months = ₱6,568.00 unpaid benefits and to
pay him from 06/15/2005 – 06/05/2006 the underpayment of ₱122.96/day or ₱3,196.96/month x 11.6
months = 37,084.73 total unpaid wage differential, both to earn 12% legal interest from date of suit on
06/05/2006 until finally paid, plus 10% attorney’s fees on the total amount in accord with Article 111 of
the Labor Code.

2. to pay him moral damage[s] of ₱50,000.00 and exemplary [damages] of ₱10,000.00. 6

In ruling for Ampeloquio, the Labor Arbiter used the following guideposts:

1. The claim should be limited to the three (3) year prescriptive period, that is, from date of filing
06/05/2006 and back, to 06/05/2003;

2. The existing statutory minimum wages and COLA during said 3-year period, viz:

1. 06/05/2003 – 07/09/2004 Era of (Basic) W.O. No. NCR-08 effective 11/01/2000 and (COLA) NCR 09
effective 11/05/2001 and 02/01/2002

Basic ₱250/day x 26 = ₱6,500/month + COLA ₱30.00/day x 26 = ₱780/month

Daily Take Home ₱250 + ₱30 = ₱280

Monthly Take Home ₱6,500 + ₱780 = ₱7,280

2. 07/10/2004 – 06/14/2005 Era of W.O. NCR-10 COLA increase of ₱20.00/day effective 07/10/2004

Basic same + COLA ₱50.00 x ₱26 = ₱1,300

Daily Take Home ₱250 + ₱50 = ₱300

Monthly Take Home ₱6,500 + ₱1,300 = ₱7,800

3. 06/15/2005 – 06/05/2006 Era of W.O. NCR 11 Basic increase of ₱25.00/day effective 06/15/2005

Basic ₱275/day x 26 = ₱7,150/month + COLA ₱50.00/day x 26 = ₱1,300/month

Daily Take Home ₱275 + ₱50 = ₱325

Monthly Take Home ₱7,150 + ₱1,300 = ₱8,450.00 7

On appeal by JAKA, the NLRC proper, in its Resolution dated 29 November 2007 in NLRC LAC NO.
08-002252-07, noted the exemption of JAKA from the pertinent Wage Order Nos. 10 & 11, and
8

consequently, modified the amounts ordered by the Labor Arbiter to be paid by JAKA to Ampeloquio:

In this case it is undisputed that [Ampeloquio’s] claim for salary differential covers the period from his
date of reinstatement on 06 August 2004 to the date of the filing of this case on 05 June 2006. x x x.

A close examination of the Wage Orders material to [Ampeloquio’s] claim show that under Wage Order
No. 10 [on] ECOLA was granted in the amount of ₱20.00/day from July 10, 2004 and Wage Order No.
11 granted an increase of ₱25.00/day in the basic daily wage of workers from 16 June 2005 until 10 July
2006.

It appears however, that [JAKA] applied for an exemption in the implementation of Wage Order Nos. 10
and 11 x x x before the National Capitol Region Regional Tripartite Wage and Productivity Board and
the latter in their Orders and dated 11 November 2004 and 28 September 2005 respectively granted the
former twelve (12) months exemption from 10 July 2004 up to 09 July 2005 and 16 June 2005 until 15
June 2006. x x x.

In view of the foregoing, [Ampeloquio] is only entitled to a salary differential, as follows:

1. From 06 August 2004 to 15 June2005 there are 269 days at 26 days per month.

The basic salary under the Wage Order is ₱250.00 per day plus ₱50.00 ECOLA. Applying the 12
months exemption or non-implementation of the ₱20.00 increase in ECOLA, [Ampeloquio] is only
entitled to ₱280.00 per day but since he was paid ₱252.00 which he admitted, the salary differential for
the 269 days period at ₱28.00 per day is SEVEN THOUSAND FIVE HUNDRED THIRTY-TWO
(₱7,532.00) PESOS only.

2. From 16 June 2005 up to 05 June 2006 there are 305 working days at 26 days per month. The basic
salary under Wage Order No. 11 was increase by ₱25.00 or has become ₱275.00 plus the ₱50.00
ECOLA making the minimum wage ₱325.00 per day.

Applying the exemption for 12 months to [Ampeloquio] his basic salary remained at ₱250.00 but her
ECOLA has increased to ₱50.00 because of the expiration of the period for exemption, hence his salary
is ₱300.00. Considering that he was paid only ₱252.00 pesos, his salary differential for the period is
₱48.00 pesos or the total amount of FOURTEEN THOUSAND SIX HUNDRED FORTY (₱14,640.00)
PESOS only.

[Ampeloquio] is therefore entitled to a total salary differential of only ₱22,172.00.

[JAKA’s] contention that [Ampeloquio] is not entitled to reimbursement of transportation expenses from
the latters house to the outlet where he was assigned and back is impressed with merit. [JAKA]
submitted a copy of their policies and the pertinent portion, states:

"7. The only transportation expenses allowed to be reimbursed are those incurred from the first outlet to
succeeding outlets. The transportation reimbursement shall not include house to first outlet and last
outlet to house." x x x.

[JAKA’s] contention that [Ampeloquio] is not entitled to attorney’s fees is untenable. Article III of the
Labor Code expressly provides that in cases of unlawful withholding or recovery of wages, attorney’s
fee may be granted to the worker.

However, we agree with [JAKA] that [Ampeloquio] is not entitled to moral and exemplary damages.
[Ampeloquio] failed to prove his entitlement with substantial proof that there was bad faith on the part of
[JAKA] by its failure to voluntarily pay his salary differential.

WHEREFORE, premises considered, the appeal is PARTLY GRANTED and the Decision dated 25 May
2007 is MODIFIED ordering [JAKA] to pay [Ampeloquio] his salary differential in the total amount of
22,172.00 and ten percent (10%) thereof as attorney’s fees. 9

Aggrieved by the NLRC’s modification of what Ampeloquio obviously perceived as an acceptable

monetary award, the latter filed a petition for certiorari before the Court of Appeals bewailing grave
abuse of discretion in: (1) the reduction of his award of salary differential to only 22,172.00; (2) the
deletion of his entitlement to transportation expenses; and (3) the deletion of the award of moral and
exemplary damages.

The appellate court in CA-G.R. SP No. 104445 dismissed Ampeloquio’s petition for certiorari finding no
10

grave abuse of discretion in the NLRC’s ruling and finding that, in fact, it is supported by substantial
evidence:
x x x [Ampeloquio] was employed under circumstances far different from that of his other co-employees.
In fact, he never disputed the fact that he is the lone regular merchandiser of JAKA while his other
co-employees either work as casual or contractual employees. Thus, since his employment condition or
status is different than that of his co-employees, there is no point of comparison as far as their wages
and other remunerations are concerned. Precisely, the minimum wage law exists to provide as
guideposts for the least pay that an employee must receive for a day’s work. It does not serve as
restrictions on the right of the employer to provide other monetary or non-monetary benefits to its
employees. For as long as [Ampeloquio] is paid the minimum statutory wage rate or his wage rate prior
to his illegal dismissal, whichever is higher, he has no cause of action against his employer JAKA as far
as wage differential is concerned.

Further, [Ampeloquio] cannot [anchor] his right to equal pay based on wage distortions. For well-settled
is the rule that the issue of whether or not a wage distortion exists is a question of fact that is within the
jurisdiction of the quasi-judicial tribunals below. Factual findings of administrative agencies are accorded
respect and even finality in this Court if they are supported by substantial evidence. As a rule, judicial
review by this court does not extend to a reevaluation of the factual circumstances of the case.
Specialized agencies are presumed to have gained expertise on matters within their respective fields.
Thus, their findings of fact, when supported by substantial evidence, are entitled to great respect and
are generally rendered conclusive upon this Court, except only upon a clear showing of palpable error or
arbitrary disregard of evidence. A thorough examination of the records of this case reveals no reason to
justify a reversal of the factual findings of the NLRC.

Again, after carefully reviewing the [NLRC’s] assailed resolutions, this Court finds the same to have
been amply supported by substantial evidence.

WHEREFORE, the instant petition for Certiorari is DENIED. 11

Hence, this appeal by certiorari raising the following grounds:

x x x THE HONORABLE COURT [OF APPEALS] COMMITTED A SERIOUS

REVERSIBLE ERROR IN RULING THAT MONCHITO IS ONLY ENTITLED TO WAGES
OR SALARY SCALE THAT GOVERNS THE MINIMUM WAGE RATE THEN
PREVAILING OR HIS ACTUAL DAILY WAGE RATE, WHICHEVER IS HIGHER AND
NOT EQUAL TO THE WAGES AND BENEFITS RECEIVED BY MONCHITO’S
CO-EMPLOYEES WHO HAVE BEEN IN THE SERVICE OF THE COMPANY FOR
LESSER YEARS BUT WHO ARE RECEIVING FAR MORE BENEFITS AND BIGGER
WAGES.

THE HONORABLE COURT [OF APPEALS] COMMITTED A SERIOUS REVERSIBLE

ERROR IN ITS DECISION WHEREIN IT CONSTRUED UNFAVORABLY ARTICLE 223
OF THE LABOR CODE AS AGAINST [AMPELOQUIO], HEREIN
PETITIONERLABORER WHICH THEREBY RESULTED TO THE VIOLATION OF THE
SEPTEMBER 18, 2001 DECISION OF THE LABOR ARBITER WHICH DIRECTED
[JAKA] TO REINSTATE [AMPELOQUIO] TO HIS FORMER POSITION AS
MERCHANDISER WITHOUT LOSS OF SENIORITY RIGHTS AND OTHER BENEFITS.

3
 FINALLY, THE HONORABLE COURT [OF APPEALS] COMMITTED A SERIOUS
REVERSIBLE ERROR IN ITS DECISION WHEREIN IT DID NOT AWARD TO
[AMPELOQUIO] MORAL AND EXEMPLARY DAMAGES. 12

The issue for our resolution is the scope viz-a-viz wages of reinstatement "without loss of seniority rights
and other privileges."

Seniority rights refer to the creditable years of service in the employment record of the illegally
dismissed employee as if he or she never ceased working for the employer. In other words, the
employee’s years of service is deemed continuous and never interrupted. Such is likewise the rationale
for reinstatement’s twin relief of full backwages.13

Ampeloquio is correct in asserting that he is a senior employee compared to the other merchandisers
whom he himself designates as casual or contractual merchandisers. He is likewise senior to other
regular employees subsequently hired by JAKA, specifically two regular messenger employees which
Ampeloquio claims receive wages higher than what he is receiving from JAKA.

Attached to the recognition of seniority rights of a reinstated employee who had been illegally dismissed
is the entitlement to wages appurtenant thereto.

The case of Ampeloquio is outside the ordinary. His reinstatement was ordered when merchandisers
like him were no longer employed by JAKA.

He is not entitled to the same terms and conditions of employment as that which was offered to the other
regular employees (not merchandisers) subsequently hired by JAKA.

JAKA’s decision to grant or withhold certain benefits to other employees is part of its management
prerogative as a function of an employer’s constitutionally protected right to reasonable return on
investments. 14

Ampeloquio cannot likewise compare his wages to that received by "casual or contractual
merchandisers" or merchandisers who are admittedly outsourced from manpower agencies or those
who are considered seasonal employees hired only during peak season when JAKA is in need of extra
merchandisers.

To say the least, these merchandisers are not, strictly speaking, employees of JAKA, but of a service
provider company which has a service contract with JAKA. The merchandisers in this case simply
perform the work at JAKA’s outlets, wearing uniforms approved by JAKA but provided by the service
company who is actually their employer. There is no employer-employee relationship between JAKA
and these merchandisers.

Receipt by these merchandisers of a benefit such as transportation or meal allowance is part of the
monies they receive from their employer and embedded in the contract price of the service agreement
the employer has with JAKA.

The existence of an independent and permissible contractor relationship is generally established by

considering the following determinants: whether the contractor is carrying on an independent business;
the nature and extent of the work; the skill required; the term and duration of the relationship; the right to
assign the performance of a specified piece of work; the control and supervision of the work to another;
the employer's power with respect to the hiring, firing and payment of the contractor's workers; the
control of the premises; the duty to supply the premises, tools, appliances, materials and labor; and the
mode, manner and terms of payment. 15
On the other hand, existence of an employer-employee relationship is established by the presence of
the following determinants: (1) the selection and engagement of the workers; (2) power of dismissal; (3)
the payment of wages by whatever means; and (4) the power to control the worker's conduct, with the
latter assuming primacy in the overall consideration. 16

Section 8 of DOLE Department Order No. 10, series of 1997, illuminate:

Sec. 8. Job contracting.- There is job contracting permissible under the Code if the following conditions
are met:

(1) The contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with the performance of the work except
as to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary in the conduct of his business.

In the same vein, seasonal employees hired only for the peak season do not have the same status as
regular employees and do not receive amounts considered as part of a compensation and benefits
scheme for regular employees. These seasonal employees only receive payment for work rendered
during the period for which they were hired, i.e., peak season. The wages and other monies seasonal
employees may receive for the duration of their limited employment period constitute bulk or wholesale
payment for services rendered.

Seasonal employment involves work or service that is seasonal in nature or lasting for the duration of
the season. Seasonal employees differ from those classified as regular employees, in that: (1) the
employee must be performing work or services that are seasonal in nature; and (2) he had been
employed for the duration of the season. 17

The phrase without loss of seniority rights applies with practical and real effect to Ampeloquio upon his
retirement because he will reach earlier than other regular employees of JAKA the required number of
years of service to qualify for retirement.

In all, the labor tribunals were right in using as guidepost the existing statutory minimum wages and
COLA during the three (3) year prescriptive period within which Ampeloquio can make his money
claims.

We are not unaware that reinstatement is the rule and such covers reinstatement to the same or
substantially equivalent position without loss of seniority rights and privileges.

In this case, JAKA did not claim exceptions to the rule of reinstatement, i.e.,(1) strained relations, or (2)
abolition of the position; JAKA immediately complied with the Labor Arbiter’s order of reinstatement.
18

We note that, specifically, JAKA could have claimed that the position of merchandiser no longer exists
and has been abolished with the contracting of this job function. However, it merely opted to reinstate
Ampeloquio to the same position. There is no quarrel that with his reinstatement, Ampeloquio is now the
lone regular merchandiser of JAKA.

The option of reinstatement to a substantially equivalent position does not apply herein as reinstatement
to a substantially equivalent position entails the same or similar job functions and not just same wages
or salary. As applied to this case, Ampeloquio cannot be reinstated to a messengerial position although
such is a regular employment enjoying the same employment benefits and privileges. His employment
cannot likewise be converted into a contractual employment as such is actually a downgrade from his
regular employment enjoying security of tenure with JAKA.

As the sole regular merchandiser of JAKA, Ampeloquio’s reinstatement entitles him, at the minimum, to
the standard minimum wage at the time of his employment and to the wages he would have received
from JAKA had he not been illegally dismissed, as if there was no cessation of employment. Ampeloquio
is likewise entitled to any increase which JAKA may have given across the board to all its regular
employees. To repeat, Ampeloquio is not entitled to all benefits or privileges received by other
employees subsequently hired by JAKA just by the fact of his seniority in the service with JAKA.

The Court of Appeals was correct in its disquisition that:

x x x [W]ithout loss of seniority rights and benefits, this does not necessarily mean equal or more rights
than those employees hired by JAKA prior or subsequent to his reinstatement. The rule on how much
1âwp hi1

pay a reinstated employee shall receive is governed by paragraph 3 of Article 223 of the Labor Code
which provides as follows:

x x x In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee,
insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal.
The employee shall either be admitted back to work under the same terms and conditions prevailing
prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The
posting of a bond by the employer shall not stay the execution for reinstatement provided therein.

xxxx

When [Ampeloquio] was reinstated on August 6, 2004, he is entitled to receive a salary under the same
terms and conditions prevailing prior to his dismissal, provided this complies with the minimum wage law
prevailing at the time of reinstatement, in consonance to Article 99, 100 of P.D. No. 442, as amended.
Thus, this Court finds and agrees with the computation by the NLRC of [Ampeloquio's] wage rate. While
he [ Ampeloquio] may have been ordered reinstated to his former position without loss of seniority rights
and benefits, this Court cannot agree [with] the strained interpretation given by [Ampeloquio] that since
he is the most senior among his co-employees, he should be entitled to the same amount of wages and
benefits as that being received by them. x x x Thus, when he was reinstated on August 6, 2004, the
salary scale that governs shall be the minimum wage rate then prevailing or his actual daily wage rate,
which ever is higher.19

The reduction of the salary differential award to Ampeloquio by the NLRC, and affirmed by the appellate
court, was correct given the exemption to Wage Order Nos. 10 & 11 granted to JAKA.

Given our holding herein, we likewise uphold the deletion by the NLRC and the appellate court of the
award of moral and exemplary damages absent a showing of bad faith on the part of JAKA in its
corrected payment of wages to Ampeloquio.

WHEREFORE, the appeal is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 104445
and the National Labor Relations Commission in NLRC LAC No. 08-002252-07 are AFFIRMED. No
costs.

SO ORDERED.
 G.R. No. 192297, August 03, 2016

SUPRA MULTI-SERVICES, INC., JESUS TAMBUNTING, JR., AND RITA CLAIRE T. DABU, Petitioners, v. LANIE M.
LABITIGAN, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioners
Supra Multi-Services, Inc. (SMSI), Jesus S. Tambunting, Jr. (Tambunting), and Rita Claire T. Dabu (Dabu), seeking,
among other reliefs, the modification of the Decision1 dated February 22, 2010 of the Court of Appeals in CA-G.R. SP No.
103847 insofar as it awarded separation pay to respondent Lanie M. Labitigan based on its finding that although
respondent committed a breach of petitioners' trust, the termination of respondent's employment was too harsh a
punishment.

I
FACTUAL ANTECEDENTS

Petitioner SMSI is a domestic corporation engaged in furnishing its clients with manpower, such as janitors, drivers,
messengers, and maintenance personnel. Petitioners Tambunting and Dabu are the President and Vice-President for
Administration, respectively, of petitioner SMSI.

Respondent was hired as a rank and file employee of petitioner SMSI on March 13, 1994. When respondent's employment
was terminated on December 21, 2005, she was holding the position of Accounting Supervisor with a monthly salary of
PI 3,000.00.

On June 15, 2006, respondent filed before the Labor Arbiter a complaint for illegal dismissal against petitioners, seeking
reinstatement and payment of backwages, overtime pay, holiday pay, premium pay for holiday and rest day, separation
pay, unused leave pay, damages, and attorney's fees. Her complaint was docketed as NLRC-NCR Case No.
00-06-05066-06.

Respondent's Allegations

In support of her complaint, respondent alleged that she was a simple rank and file employee who was elevated to the
position of a supervisor but still performed only clerical work and did not exercise any discretion on how to run the
financial affairs of the company. Respondent admitted to being responsible for preparing the payroll of the employees of
petitioner SMSI.

During the course of respondent's employment, Wage Order No. NCR-09 took effect on November 5, 2001 providing an
Emergency Cost of Living Allowance (ECOLA) in the amount of P30.00 per day to private sector workers and employees
in the National Capital Region (NCR) earning minimum wage. Based on Wage Order No. NCR-09, respondent granted
herself ECOLA in the pro-rated amount of PI4.67 per day beginning November 2002. When Wage Order No. NCR-10 took
effect on July 10, 2004, granting additional ECOLA of P20.00 per day, respondent accordingly increased her ECOLA to
P24.67 per day. In granting herself pro-rated ECOLA, respondent reasoned that Wage Order Nos. NCR-09 and NCR-10
granted ECOLA not only to minimum wage earners, but also to other workers and employees who would suffer from wage
distortion ^because of the application of the ECOLA, such as herself. Said Wage Orders prescribed a formula precisely to
resolve wage distortion, which respondent applied to her salary and to the salaries of others similarly situated.

Respondent averred that her grant to herself of pro-rated ECOLA under Wage Order Nos. NCR-09 and NCR-10 was with
the knowledge and conformity of petitioners. Petitioner Tambunting himself approved and signed the payroll, and any
unauthorized padding or undeserved compensation in the payroll could not have escaped him.

However, on August 22, 2005, a Notice of Personnel Action2 was issued to respondent noting an "[e]rror in granting
proportionate ECOLA W.O. NCR 9" and cancelling respondent's daily allowance of P24.67. Respondent claimed that she
immediately took exception to the Notice and sought audience with petitioner Tambunting, who promised to look into the
matter. For the next four months or until December 12, 2005, "[n]o one protested against the status quo, including the
fact that [respondent] continued to receive the miniscule sum of P24.67 per day as ECOLA[.]" 3 chanroble slaw

Respondent reproached petitioners for being cruel and malicious in suddenly issuing Memo 11-6734 dated December 12,
2005, which gave respondent the following directive: ChanRoblesVi rtua lawlib rary

This refers to the NOTICE OF PERSONNEL ACTION dated August 22, 2005
approved and noted by the President.
 Please explain and answer in writing within 24 hours upon receipt of
this memo why there shall be no administrative action taken against you
for the following:

1. INSUBORDINATION. You continued to give yourself the

proportionate ECOLA despite its cancellation per Notice of
Personnel Action noted and approved by the President on August
22, 2005. In so doing, you manifested gross disrespect to the
decision of the President and the whole HR Department.

2. DISHONESTY. Despite of being aware of the fact that only the

minimum wage earners and those whose basic salary are distorted
as a result of addition of ECOLA, you continually give yourself
the questioned proportionate ECOLA. You are the [company's]
existing payroll master and you are very much aware of that rule.
In fact, you are applying such rule to all other operation
personnel making your case an exception to the rule.

This is for your information and compliance.

Respondent pointed out that petitioners' malice became even more evident when on the very next day, December 13,
2005, she was no longer allowed to enter the premises of petitioner SMSI. Petitioners hurriedly issued Memo 12-6755 also
on December 13, 2005, which instructed respondent thus: ChanRoblesVi rt ualawlib rary

This refers to your refusal to receive the Memo 11-673 dated December
12, 2005.

Because of the gravity of the offense, you are then being placed on
preventive suspension effective December 14, 2005 while under
investigation for Insubordination and Dishonesty.

However, you are required to come to office when you are needed by reasons
of such investigation.
This is for your information and compliance.

Petitioners followed up with Memo 12-6876 dated December 14, 2005 to respondent which dictated that: ChanRoble sVirt ualawli bra ry

This refers to your Memo 12-675 dated December 13, 2005.

1. Your preventive suspension is within 30 days.

2. You are required to report to office on December 19, 2005 (Monday)

at 3 pm for a preliminary Administrative Hearing.
 3. You are instructed to bring anybody with you on your side. It could
be your husband and/or your son. Should you prefer to bring a legal
counsel please inform us a day before the abovementioned schedule.

This is for your information and compliance.

We trust that you will give the matter your most favorable cooperation
and attention.
Respondent attended the administrative hearing on December 19, 2005, accompanied by her son. During the hearing,
petitioner Dabu repeatedly berated and insulted respondent.

On December 20, 2005, petitioners issued Memo 12-692,7 a Notice of Termination, which informed respondent that: ChanRobles Vi rtualaw lib rary

After due consideration of all the circumstances, grounds have been

established to justify your termination.

1. You willfully disobey the lawful orders of your employer.

2. Willfull breach of the trust reposed in you by the management.

In view of the above and by your admission of your disobedience and

dishonesty during the administrative hearing, you had violated the
Company Implementing Rules and Regulations on Article V - Section
25 which states that: Act of dishonesty to the company shall be
penalized with termination for the first offense.

Your services with the corporation are then being terminated effective
at the close of the business hours on December 21, 2005.

This is for your information.

Respondent received a copy of Memo 12-692 dated December 20, 2005 on December 21, 2005. That same day,
respondent went to the office of petitioner SMSI to retrieve her personal belongings, which included an amount of less
than PI 00.00 tucked in her drawer, but she was refused entry. It was only the next day, on December 22, 2005, that
respondent was allowed to take her personal belongings.

It was apparent to respondent that petitioners Tambunting and Dabu had resolved to dismiss her because she was
supposedly "highly paid" and petitioner SMSI would not have to give separation pay for her considerable tenure of 12
years. Respondent's unceremonious dismissal was already a foregone conclusion, so respondent was never really
accorded a chance to defend herself.

Respondent lastly professed that she could not afford to return three years of ECOLA. Being the breadwinner for a family
with five children, which included a special child with Down Syndrome, respondent was living hand-to-mouth.

Petitioners' Allegations

Petitioners conceded that respondent was initially hired as a rank and file employee, who eventually became the
Accounting Supervisor of petitioner SMSI. Given the absence of an Accounting Manager, respondent agreed, in a
memorandum8 dated February 12, 2001 addressed to petitioner Tambunting, to accept the responsibilities of said
position provided that petitioner SMSI would hire an accounting assistant to assume some of respondent's current
responsibilities; respondent would receive a monthly allowance of PI,000.00 beginning February 2001; and respondent
would undergo training for three months under a Ms. Vilma Roda. For taking over the responsibilities of Accounting
Manager, respondent's monthly salary was increased from P8,193.42 to P12,000.00 beginning June 2001. 9 By 2005,
respondent was receiving a monthly salary of P13,000.00 as Accounting Supervisor.

According to petitioners, respondent's position as Accounting Supervisor was reposed with trust and confidence, and
among her duties and responsibilities were as follows: ChanRoblesVirtualawl ibra ry

1. Manages accounting functions and preparation of reports and

statistics detailing financial results;

2. Checks, verifies, and approves payroll entries;

3. In charge of preparation of admin payroll;

4. Checks and verifies daily check disbursements;

5. Contacts delinquent account holders by telephone or in writing

and requests payments to bring the account current;

6. Assists the messenger/collector in personally collecting

client's check payments [;]

7. Oversees financial and accounting system controls and standards

and ensures timely financial and statistical reports for
management and/or Board of Directors' use;

8. Performs routine banking transaction;

9. Handles cash and cash accounts; and,

10. Performs all accounting and finance functions and other related
tasks as required.10

Petitioners contended that they discovered only in August 2005 that respondent was receiving ECOLA, even when she
was not entitled to the same under Wage Order Nos. NCR-09 and NCR-10. Respondent willfully and deliberately ignored
and disobeyed the Notice of Personnel Action dated August 22, 2005 cancelling the payment of her daily ECOLA of P24.67
beginning the payroll for August 16, 2005. Respondent continued to grant/give herself ECOLA in the payroll from August
16, 2005 to December 15,2005.

Consequently, petitioner SMSI, through its HR Department, issued Memo 11-673 dated December 12, 2005 requiring
respondent to explain in writing within 24 hours why no administrative action should be taken against her for
insubordination and dishonesty. Respondent, though, refused to receive her copy of said Memo when served on
December 13, 2005, as witnessed by Melanie M. Bollosa (Bollosa), Accounting Assistant of petitioner SMSI.11 Petitioner
SMSI next issued Memo 12-675 dated December 13, 2005 (placing respondent under preventive suspension starting
December 14, 2005) and Memo 12-687 dated December 14, 2005 (fixing respondent's preventive suspension at 30 days
and advising respondent to attend the administrative hearing on December 19, 2005), copies of which were received by
respondent on December 14, 2005 and December 15, 2005, respectively.

During the administrative hearing on December 19, 2005, attended by f espondent with her son, respondent was unable
to justify her grant/payment of ECOLA to herself and refusal to obey the order of petitioner SMSI to stop the same. It was
likewise discovered that (1) respondent availed herself of cash advances from petitioner SMSI, which she was supposed
to pay by periodically deducting certain amounts from her salary, but since she was not making such deductions, the
accumulated cash advances already amounted to P64,173.83; and (2) her employment record with petitioner SMSI,
spanning several years, was riddled with previous acts of insubordination and dishonesty.

As a result, petitioner SMSI issued Memo 12-692 dated December 20, 2005 terminating respondent's services effective
at the close of business hours on December 21, 2005.

Labor Arbiter's Ruling

After an exchange of pleadings, the Labor Arbiter rendered her Decision12 on February 19, 2007, in respondent's favor.
The Labor Arbiter found:ChanRoblesVi rtua lawlib rary

At bar, the issue boils down to whether or not the act of [respondent]
in continuously receiving her ECOLA after she was informed that she is
not entitled to receive ECOLA sometime in August 2005 constitutes
dishonesty so as to warrant her termination.

x x x x

While it is true that ECOLA is being enjoyed by minimum wage earners,

the provisions of the Wage Orders are not absolute since the Orders
expressly provide certain exceptions as when it would result in wage
distortion.

It appears from the records that [respondent] merely applied the

procedure prescribed by Article 124 of the Labor Code and for which she
received not the entire amount but the pro-rated share of the mandated
amount. This of course does not constitute payroll padding as alleged
by [petitioners].

[Respondent] had aptly brought this matter up with management but this
issue of Wage distortion was never settled by the [petitioners]. If
indeed it were true that [respondent] was an Account Supervisor or an
Accounting Manager for that matter, there must be wage level that
distinguishes her position as such from a mere rank and file minimum
wage earner. This is to avoid a situation where a supervisor would be
receiving the same wage level as that of the supervisees.

The [petitioners] have not discussed this matter of wage distortion in

their pleadings but had focused their arguments mainly on the alleged
non-entitlement of [respondent] to ECOLA and her refusal to receive the
notice requiring her to explain.

[Petitioners] had also resuscitated infractions whose penalty had been

aptly served. We find this as totally irrelevant at bar. While we note
certain demeanor of [respondent] as inappropriate like her refusal to
acknowledge receipt of the memorandum being served upon her, this
nevertheless, is not sufficient to warrant her termination. Such
demeanor is understandable as she was already placed under preventive
suspension. The penalty of dismissal is too harsh given the attendant
circumstances that this issue of ECOLA is an open matter.
 Records also show that her alleged illegally collected ECOLA has been
settled upon her termination and upon the release of her final salary
on December 19, 2005. It being the case, we find that paying her
separation pay in lieu of reinstatement would be the most practicable
relief under the circumstances. (Citation omitted.)

In the end, the Labor Arbiter decreed:

WHEREFORE, prescinding from the foregoing considerations, the

chanRobl esvirt ualLaw librar y

[petitioners] are hereby ordered to pay the [respondent] her separation

pay at the rate of one (1) month salary for every year of service computed
from date of hire up to date hereof or the total amount of ONE HUNDRED
13
SIXTY-NINE THOUSAND (P169,000.00) Pesos.
Ruling of the NLRC

Petitioners filed an appeal before the National Labor Relations Commission (NLRC), which was docketed as NLRC LAC No.
08-002292-07.

In a Resolution14 dated September 24, 2007, the NLRC initially dismissed petitioners' appeal for failing to submit a
certificate of non-forum shopping as required by Rule VI, Section 4 of the NLRC New Rules of Procedure.

Petitioners moved for reconsideration of the dismissal of their appeal, attributing their failure to submit the certificate of
non-forum shopping to the inadvertence of their staff and finally submitting the required certificate.

The NLRC, in its Decision15 dated January 31, 2008, reconsidered its Resolution dated September 24, 2007 and gave due
course to petitioners' appeal.

In the same Decision, the NLRC overturned the Labor Arbiter and adjudged that petitioners had sufficient cause to
dismiss respondent. Pertinent portions of the NLRC Decision are reproduced below: ChanRoblesVi rtua lawlib rary

We find reversible error.

[Respondent's] justification for entitlement to proportionate share of

ECOLA under Wage Order Nos. 9 and 10 is to prevent wage distortion.

We are not convinced.

Records show that there are other employees of [petitioners] who, like
[respondent], received more than the minimum wage. Yet, these other
employees did not receive proportionate share of ECOLA. [Respondent's]
attention on this matter was called by [petitioners] in a memorandum
dated December 12, 2005 xxx.

x x x x

The fact, that other personnel of [petitioners] receiving more than the
minimum wage were not paid ECOLA, was admitted by [respondent] during
 the administrative hearing conducted by [petitioners] on December 19,
2005 xxx. Pertinent portion of the findings in said hearing reads: ChanRobl esVirt ualawl ibrary

"4. That in one of the inquiry of the Accounting Manager one time asking why
some of the employees have no E-COLA, that the respondent (complainant)
answered quickly with "Kasi ma 'am, hindi po sila minimum, above
minimum napo", which was questioned by the committee member. If only
the minimum wage earners were entitled to the E-COLA, why did the
respondent (complainant) gave herself a corresponding E-COLA? That the
respondent (complainant) answered with "because it was given to me as a
result of distortion ". That should be applied to all employees at her level in
terms of rates since she is a payroll master."

As correctly argued by [petitioners], if indeed there was wage

distortion then [respondent], being in charge of the payroll, should
have applied proportionately the ECOLA to affected employees. But she
did not. Other employees of [petitioners] who were paid more than the
minimum wage and/or with the same salary rate with [respondent] were
not given ECOLA xxx. As it appears it was only [respondent] who received
proportionate ECOLA from among the employees of [petitioners] who are
receiving more than the minimum wage. Clearly, there was a breach of
trust committed by [respondent] that would warrant her termination from
the service. It is to be stressed that [respondent's] position as
Accounting Supervisor involves trust and confidence for it deals with
[petitioners'] finances. One aspect of which is the preparation of
[petitioners'] payroll for their employees.

All told, we find that [petitioners] had sufficient cause to dismiss

[respondent] on ground of loss of trust and confidence.16 chanrobl eslaw

The NLRC ruled thus:

WHEREFORE, premises considered, the Decision dated February 19, 2007

chanRobl esvirt ualLaw librar y

is hereby SET ASIDE and a new one entered DISMISSING the complaint for
lack of merit.17
In a Resolution18 dated March 27, 2008, the NLRC denied respondent's Verified Motion for Reconsideration.

Ruling of the Court of Appeals

Respondent then sought recourse from the Court of Appeals through a Petition for Certiorari under Rule 65 of the Revised
Rules of Court, docketed as CA-G.R. SP No. 103847. Respondent attributes grave abuse of discretion on the part of the
NLRC for (1) giving due course to petitioners' appeal notwithstanding its jurisdictional defects; and (2) reversing the
Labor Arbiter's finding that respondent was illegally dismissed.

The Court of Appeals promulgated its Decision on February 22, 2010.

On the alleged jurisdictional defects of petitioners' Memorandum of Appeal before the NLRC, the Court of Appeals held
that the last day of the 10-day period for petitioners to file their appeal before the NLRC fell on May 6, 2007, Sunday, so
the Memorandum of Appeal petitioners filed the next working day, May 7, 2007, Monday, was still timely filed; that the
posting by petitioners of a supersedeas bond with their appeal on May 7, 2007 was plain from the records; and that the
NLRC was correct in reconsidering its previous dismissal of the appeal given the subsequent submission by petitioners of
their certificate of non-forum shopping, and the policies that labor cases must be decided according to justice and equity
and the substantial merits of the controversy and that technical rules of procedure may be relaxed in labor cases to serve
the demands of substantial justice.

As to whether or not respondent was illegally dismissed, the Court of Appeals concluded that petitioners complied with
the requirements for procedural due process in dismissing respondent: ChanRoblesVirt ualawli bra ry

The minimum requirement of due process in termination proceedings

consists of notice to the employees intended to be dismissed and the
grant to them of an opportunity to present their own side on the alleged
offense or misconduct, which led to the management's decision to
terminate. To meet the requirements of due process, the employer must
furnish the worker sought to be dismissed with two written notices before
termination of employment can be legally effected, i.e., (i) a notice
which apprises the employee of the particular acts or omissions for which
his dismissal is sought; and (ii) a subsequent notice after due hearing
which informs the employee of the employer's decision to dismiss him.
These requirements were substantially complied with in the present case.

The memorandum dated December 12, 2005 of [petitioners'] HR manager

sufficiently apprised [respondent] of the particular acts or omissions
for which she was charged of "insubordination" and "dishonesty." In the
same memorandum, she was directed to submit her explanation within
twenty-four (24) hours from notice thereof. However, [respondent]
refused to receive the memorandum. Thus, in a memorandum dated December
13, 2005, [respondent] was placed under preventive suspension effective
December 14, 2005 while under investigation for insubordination and
dishonesty. An administrative hearing was conducted on December 19, 2005.
In a memorandum dated December 20, 2005, [respondent] was informed of
[petitioners'] decision to dismiss her. x x x.19 (Citations omitted.)
As for substantive due process, while the Court of Appeals agreed with the NLRC that the requisites for a valid dismissal
of respondent on the ground of loss of trust and confidence were present in this case, it determined that the penalty of
dismissal was too harsh under the circumstances. According to the appellate court: ChanRoblesVirt ualawli bra ry

Article 282(c) of the Labor Code, as amended, allows an employer to

terminate the services of an employee for loss of trust and confidence.
There are two (2) requisites for a valid dismissal on the ground of loss
of trust and confidence. The first requisite for dismissal on the ground
of loss of trust and confidence is that the employee concerned must be
one holding a position of trust and confidence. Settled is the rule that
in order to determine whether an employee holds a position of trust and
confidence, what should be considered is not the job title but the actual
work that the employee performs. The second requisite is that there must
be an act that would justify the loss of trust and confidence.
 The aforementioned requisites are present in this case. [Respondent]
occupied the position of accounting supervisor at the time of her
dismissal from employment. The duties of [respondent] as an accounting
supervisor included, among others, checking and verifying of payroll
entries encoded by the payroll clerk, preparation of administrative
payroll, overseeing financial and accounting system controls and
standards and performance of all accounting and finance functions as
required by the company. As correctly pointed out by public respondent
NLRC, [respondent's] "position as Accounting Supervisor involves trust
and confidence for it deals with [petitioners'] finances." Public
respondent NLRC considered [respondent] to have breached [petitioners']
trust because it appears it was only complainant ([respondent]) who
received proportionate ECOLA from among the employees of [petitioners]
who are receiving more than the minimum wage, x x x.

xxxx

There was, therefore, reasonable basis to sanction [respondent] for

allowing herself to receive a proportionate ECOLA, while other
similarly-situated employees did not. However, the penalty of dismissal
is too harsh under the circumstances. It is undisputed that (i)
[respondent] had worked for [petitioners] for more than eleven (11)
years and (ii) her erroneously collected ECOLA had been deducted from
her final salary when she was dismissed from employment on December 21,
2005. Hornbook is the doctrine that infractions committed by an employee
should merit only the corresponding penalty demanded by the
circumstances. The penalty must be commensurate with the act, conduct
or omission imputed to the employee.20 (Citations omitted.)
The Court of Appeals then proceeded to award respondent with separation pay in lieu of reinstatement, but denied her
backwages and damages. Citing Victory Liner, Inc. v. Race,21 the appellate court rationalized:
ChanRoblesVirt ualawli bra ry

Anent [respondent's] claim that she is entitled to backwages, separation

pay and damages, worth mentioning are the basic provisions of Article
279 of the Labor Code, as amended, that an illegally dismissed employee
shall be entitled to reinstatement, backwages inclusive of allowances,
and to his other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the time of his
actual reinstatement. Based on this provision, an illegally dismissed
employee shall be entitled to reinstatement and full backwages. In the
event that reinstatement is no longer possible, then payment of
separation pay may be ordered in its stead.
Significantly, however, the Supreme Court has qualified and/or limited
the application of Article 279 of the Labor Code on the award of backwages.
In Victory Liner, Inc. vs. Pablo Race, the Supreme Court pointed out
several cases wherein the award of backwages was limited to a certain
number of years, or no award was given at all. Thus: ChanRobl esVirt ualawl ibrary

In San Miguel Corporation v. Javate, Jr., we affirmed the

consistent findings and conclusions of the Labor Arbiter,
National Labor Relations Commission (NLRC), and Court of
Appeals that the employee was illegally dismissed since he
was still fit to resume his work; but the employer's
liability was mitigated by its evident good faith in
terminating the employee's services based on the terms of
its Health, Welfare and Retirement Plan. Hence, the
employee was ordered reinstated to his former position
without loss of seniority and other privileges appertaining
to him prior to his dismissal, but the award of backwages
was limited to only one year considering the mitigating
circumstance of good faith attributed to the employer.

In another case, Dolores v. National Labor Relations

Commission, the employee was terminated for her
continuous absence without permission. Although we found
that the employee was indeed guilty of breach of trust and
violation of company rules, we still declared the
employee's dismissal illegal as it was too severe a penalty
considering that she had served the employer company for
21 years, it was her first offense, and her leave to study
the French language would ultimately benefit the employer
who no longer had to spend for translation services. Even
so, other than ordering the employee's reinstatement, we
awarded the said employee backwages limited to a period of
two years, given that the employer acted without malice or
bad faith in terminating the employee's services.

While in the aforementioned cases of illegal dismissal, we

ordered the employee's reinstatement, but awarded only
limited backwages in recognition of the employer's good
faith, there were also instances when we only required the
employer to reinstate the dismissed employee without any
award for backwages at all.

The employee in Itogon-Suyoc Mines, Inc. v. National Labor

 Relations Commission, was found guilty of breach of
trust for stealing high-grade stones from his
employer. However, taking into account the employee's 23
years of previously unblemished service to his employer and
absent any showing that his continued employment would
result in the employer's oppression or self-destruction,
we considered the employee's dismissal a drastic punishment.
We deemed that the ends of social and compassionate justice
would be served by ordering the employee reinstated
but without backwages in view of the employer's obvious
good faith.

Similarly, in San Miguel Corporation v. Secretary of

Labor, the employee was dismissed after he was caught
buying from his co-workers medicines that were given gratis
to them by the employer company, and re-selling said
medicines, in subversion of the employer's efforts to give
medical benefits to its workers. We likewise found in this
case that the employee's dismissal was too drastic a
punishment in light of his voluntary confession that he
committed trafficking of company-supplied medicines out of
necessity, as well as his promise not to repeat the same
mistake. We ordered the employee's reinstatement but
without backwages, again, in consideration of the
employer's good faith in dismissing him.

Reference may also be made to the case of Manila Electric

Company v. National Labor Relations Commission, wherein
the employee was found responsible for the irregularities
in the installation of electrical connections to a
residence, for which reason, his services were terminated
by the employer's company. We, however, affirmed the
findings of the NLRC and the Labor Arbiter that the employee
should not have been dismissed considering his 20 years of
service to the employer without any previous derogatory
record and his being awarded in the past two commendations
for honesty. We thus ruled that the employee's
reinstatement is proper, without backwages, bearing in mind
the employer's good faith in terminating his services.

In sum, while the Court holds that [respondent] committed breach of trust
for continuously granting proportionate ECOLA to herself despite
[petitioners'] previous order for its discontinuance, the same did not
 merit the ultimate penalty of dismissal considering that she had worked
for the company for more than eleven (11) years and [petitioners] had
deducted the amount from her last salary. Hence, the labor arbiter's
award of separation pay (since strained relations do not warrant
reinstatement) to [respondent] is correct. Notably, even the labor
arbiter did not award backwages to [respondent]. The Court sees no cogent
reason to rule differently, inasmuch as [respondent's] dismissal was
apparently done in good faith by [petitioners] after they had lost their
trust in [respondent] and the latter was afforded ample opportunity to
explain her side.

[Respondent's] further prayer for damages has no basis under the

circumstances. An employer may only be held liable for damages if the
attendant facts show that it was oppressive to labor or done in a manner
22
contrary to morals, good customs and public policy. (Citations
omitted.)
The dispositive portion of the judgment of the Court of Appeals reads: ChanRoblesVi rtualaw lib rary

WHEREFORE, the petition is partly granted. The Decision dated January

31, 2008 and Resolution dated March 27, 2008 of the public respondent
NLRC are modified and [petitioners] are ordered to pay separation pay
to [respondent], as previously determined by the labor arbiter, without
the award of backwages.23
Petitioners' Motion for Partial Reconsideration was denied by the Court of Appeals in its Resolution24 dated May 13, 2010.

II
RULING OF THE COURT

Hence, the Petition at bar in which petitioners assign a couple of errors on the part of the Court of Appeals, viz.:
chanRoble svirtual Lawlib ra ry

I.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT'S

COMMISSION OF BREACH OF TRUST DID NOT MERIT THE ULTIMATE PENALTY OF
DISMISSAL.

II.

THE HONORABLE COURT OF APPEALS ERRED IN AWARDING SEPARATION PAY TO

RESPONDENT.25
cralawre d

Petitioners seek the following reliefs from the Court: ChanRoblesVirt ualawli bra ry

PRESCINDING THEREFROM, it most respectfully prayed of this Honorable

Court that judgment be rendered, as follows:
 1. to MODIFY the Honorable Court of Appeals' Decision dated
February 22, 2010 and Resolution dated May 13, 2010 only in so
far as granting [respondent] separation pay.

2. to AFFIRM en toto the National Labor Relations Commission

Decision dated January 31, 2008 and the Resolution dated May 27,
2008 of DISMISSING the complaint for utter lack of merit.

3. to Order respondent to pay [petitioners] the total amount of the

ECOLA from 2001 up to July 2005, which she illegally credited to
herself.

4. to Order respondent to pay [petitioners] the total amount of Php.

64,173.83 plus interest, which is her outstanding cash advances.

5. to Order respondent to pay [petitioners] moral damages in the

amount of Php 100,000.00 and exemplary damages in the amount of
Php50,000.00

Other relief just and equitable is likewise prayed for.26

The instant Petition is partly meritorious.

For a valid dismissal of an employee, it is fundamental that the employer observe both substantive and procedural due
process - the termination of employment must be based on a just or authorized cause and the dismissal can only be
effected, after due notice and hearing.27 Petitioners' compliance with procedural due process in dismissing respondent is
no longer being challenged in the present Petition; the issues for review of the Court herein essentially involve
substantive due process.

Under Article 282(c) of the Labor Code, as amended, an employer may terminate an employment for, among other just
causes, fraud or willful breach by the employee of the trust reposed in him/her by his/her employer or duly authorized
representative. In Etcuban, Jr. v. Sulpicio Lines, Inc.,28 the Court expounded on this particular just cause for dismissal of
an employee: ChanRoblesVirtualawl ibra ry

Law and jurisprudence have long recognized the right of employers to

dismiss employees by reason of loss of trust and confidence. More so,
in the case of supervisors or personnel occupying positions of
responsibility, loss of trust justifies termination. Loss of confidence
as a just cause for termination of employment is premised from the fact
that an employee concerned holds a position of trust and confidence.
This situation holds where a person is entrusted with confidence on
delicate matters, such as the custody, handling, or care and protection
of the employer's property. But, in order to constitute a just cause
for dismissal, the act complained of must be "work-related" such as would
show the employee concerned to be unfit to continue working for the
employer.

The degree of proof required in labor cases is not as stringent as in

other types of cases. It must be noted, however, that recent decisions
 of this Court have distinguished the treatment of managerial employees
from that of rank and file personnel, insofar as the application of the
doctrine of loss of trust and confidence is concerned. Thus, with respect
to rank and file personnel, loss of trust and confidence as ground for
valid dismissal requires proof of involvement in the alleged events in
question, and that mere uncorroborated assertions and accusations by
the employer will not be sufficient. But as regards a managerial
employee, the mere existence of a basis for believing that such employee
has breached the trust of his employer would suffice for his dismissal.
Hence, in the case of managerial employees, proof beyond reasonable
doubt is not required, it being sufficient that there is some basis for
such loss of confidence, such as when the employer has reasonable ground
to believe that the employee concerned is responsible for the purported
misconduct, and the nature of his participation therein renders him
unworthy of the trust and confidence demanded by his position.

In the present case, the petitioner is not an ordinary rank and file
employee. The petitioner's work is of such nature as to require a
substantial amount of trust and confidence on the part of the employer.
Being the Chief Purser, he occupied a highly sensitive and critical
position and may thus be dismissed on the ground of loss of trust and
confidence. One of the many duties of the petitioner included the
preparation and filling up passage tickets, and indicating the amounts
therein before being given to the passengers. More importantly, he
handled the personnel funds of the MV Surigao Princess. Clearly, the
petitioner's position involves a high degree of responsibility
requiring trust and confidence. The position carried with it the duty
to observe proper company procedures in the fulfillment of his job, as
it relates closely to the financial interests of the company. (Emphasis
supplied, citations omitted.)
Respondent, as Accounting Supervisor, was occupying a managerial position. The Court is not persuaded by respondent's
assertion that even as Accounting Supervisor, she was still just a mere rank and file employee performing the same
clerical functions she had since her hiring in 1994. In her own memorandum dated February 12, 2001 to petitioner
Tambunting, respondent accepted the responsibilities of an Accounting Manager. Respondent underwent training for
three months, received additional compensation, and was assigned an accounting assistant to help her out with her
responsibilities. As Accounting Supervisor, respondent was entrusted with the custody and management of one of the
most delicate matters of any business, that is, the financial resources of petitioner SMSI. Respondent also exercised
discretion in the preparation of the payroll of the employees of petitioner SMSI, evident from the fact that it was by her
own judgment call that she granted and paid herself pro-rated ECOLA since November 2002.

The Court of Appeals actually affirmed the finding of the NLRC that respondent committed a breach of trust and
confidence, and there is no cogent reason for the Court to disturb the same.

It was not disputed that respondent was earning more than minimum wage, so she was not one of the intended
beneficiaries of ECOLA under Wage Order Nos. NCR-09 and NCR-10. Respondent though insisted that Wage Order Nos.
NCR-09 and NCR-10 granted her the right to a pro-rated share of the ECOLA on the ground of wage distortion.

"Wage distortion" was defined under Rule I, Section 2(w) of the Rules Implementing Wage Order No. NCR-09 and Rule
I, Section 2(x) of the Rules Implementing Wage Order No. NCR-10, as follows: ChanRoblesVirtualawl ibra ry
 "Wage Distortion" refers to a situation where an increase in the
prescribed wage rates results in the elimination or severe contraction
of intentional quantitative differences in wage or salary rates between
and * among employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation.
Section 14 of Wage Order No. NCR-09 covered situations wherein wage distortions result from the application of the
ECOLA: ChanRoblesVi rtua lawlib rary

Section 14. Where the application of the emergency cost of living

allowance prescribed in this Order results in distortions in the wage
structure within the establishment, the wage distortion may be resolved
using the following formula:
chanRobl esvirt ualLaw librar y

Minimum Wage Under

x Amount of ECOLA = Amount of ECOLA
WQ-NCR-08

Present Salary in WO-NCR-09 due to distortion

Section 13 of Wage Order No. NCR-10 no longer reproduced the formula for resolving wage distortions, but required
instead the application of the procedure for resolving wage distortions under Article 124 of the Labor Code, 29 as
amended: ChanRoblesVirtualawl ibra ry

Section 13. Where the application of the emergency cost of living

allowance prescribed in this Order results in distortions in the wage
structure within the establishment, the distortion as corrected shall
be paid as ECOLA in accordance with the procedure provided for under
Article 124 of the Labor Code of the Philippines, as amended.
The NLRC and the Court of Appeals were correct in not giving much , credence to respondent's claim of wage distortion,
based on their observation that respondent was the only employee of petitioner SMSI earning more than minimum wage
who was receiving ECOLA.

The Court additionally points out that other than respondent's bare allegation of wage distortion, there is an absolute
dearth of proof to corroborate the same. It is an age-old rule that the one who alleges a fact has the burden of proving
it and the proof should be clear, positive, and convincing. Mere allegation is not evidence. 30 By its definition, wage
distortion is quantifiable, and it may be established by presentation of the employee groups, wage structure, and the
computation showing how the application of the ECOLA eliminated or severely contracted the difference in wage or salary
rates among the groups. As Accounting Supervisor who was in charge of preparation of the payroll of the employees of
petitioner SMSI for more than a decade, respondent had knowledge of and access to all these relevant information and
was capable of illustrating, even just by approximation, how she suffered from wage distortion because of the application
of the ECOLA, which would have entitled her to pro-rated ECOLA under Section 14 of Wage Order No. NCR-09. However,
respondent, apart from her insistence on the presence of wage distortion, was remarkably silent on any other detail
concerning the purported wage distortion. It bears to stress further that the formula for computing pro-rated ECOLA in
case of wage distortions was not reproduced in Wage Order No. NCR-10. Consequently, from the effectivity date of Wage
Order No. NCR-10 on July 10, 2004, respondent's unilateral grant of pro-rated ECOLA to herself became even more
evidently baseless.

Even assuming that respondent acted in good faith in granting herself ECOLA since November 2002, petitioners already
explicitly ordered the cancellation of respondent's ECOLA through the Notice of Personnel Action dated August 22, 2005.
Yet, in defiance of said Notice, respondent still continued to grant and pay herself ECOLA until December 15, 2005.
Respondent averred that she immediately took up the matter of said Notice with petitioner Tambunting who promised to
look into it, but again, respondent's averment was unsubstantiated and lacked details which would have lent it some
credibility. Granting once more that respondent's encounter with petitioner Tambunting was true, the Notice of Personnel
Action dated August 22, 2005 was not officially recalled or reversed and, therefore, said Notice subsisted. The more
prudent course of action for respondent was to comply with the Notice for the meantime. After being expressly ordered
in the Notice to cancel her ECOLA, respondent could no longer claim good faith in continuing to grant herself said
allowance.

Respondent herself referred to the amount of daily ECOLA she was receiving as "miniscule," but given that she had been
receiving the unwarranted ECOLA since November 2002, it had already accumulated to a substantial amount. And
regardless of the amount involved, it is apparent that respondent took advantage of her position as Accounting
Supervisor in granting herself ECOLA even when she was not entitled to the same and after already being ordered to stop
doing so, which constituted breach of trust. Willful breach of trust is one of the just causes under Article 282(c) of the
Labor Code, as amended, for the employer to terminate the services of an employee.

Nevertheless, the Court of Appeals, after affirming the finding of the NLRC that respondent committed breach of trust,
still declared that the penalty of dismissal was too harsh considering that respondent worked for petitioner SMSI for
almost 12 years and the total amount of ECOLA respondent granted herself was already deducted from her last salary.
For the same reasons, the appellate court awarded respondent only separation pay for her illegal dismissal, and not
backwages.

The Court disagrees with the appellate court.

The law is plain and clear: willful breach of trust is a just cause for termination of employment. Necessarily, a finding of
breach of trust on the part of respondent in the present case already justified her dismissal from service by petitioners.
An employer cannot be compelled to retain an employee who is guilty of acts inimical to the interests of the employer. A
company has the right to dismiss its employees as a measure of protection, more so in the case of supervisors or
personnel occupying positions of responsibility.31 Together with petitioners' compliance with procedural due process,
there is no other logical conclusion than that respondent's dismissal was valid.

In view of the valid dismissal from service of respondent, then she is not entitled to backwages, as well as separation pay
in lieu of reinstatement. The award of separation pay is inconsistent with a finding that there was no illegal dismissal, for
under Article 279 of the Labor Code, as amended, and as held in a catena of cases, the employee who is dismissed without
just cause and without due process is entitled to backwages and reinstatement or payment of separation pay in lieu
thereof.32
chanroble slaw

Of particular significance to the case at bar are the following pronouncements of the Court in Reno Foods, Inc. v.
Nagkakaisang Lakas ng Manggagawa-Katipunan33: ChanRoblesVi rtua lawlib rary

We find no justification for the award of separation pay to Capor. This

award is a deviation from established law and jurisprudence.

The law is clear. Separation pay is only warranted when the cause for
termination is not attributable to the employee's fault, such as those
provided in Articles 283 and 284 of the Labor Code, as well as in cases
of illegal dismissal in which reinstatement is no longer feasible. It
is not allowed when an employee is dismissed for just cause, such as
serious misconduct.

Jurisprudence has classified theft of company property as a serious

misconduct and denied the award of separation pay to the erring employee.
We see no reason why the same should not be similarly applied in the
case of Capor. She attempted to steal the property of her long-time
employer. For committing such misconduct, she is definitely not entitled
to an award of separation pay.

It is true that there have been instances when the Court awarded
financial assistance to employees who were terminated for just causes,
on grounds of equity and social justice. The same, however, has been
curbed and rationalized in Philippine Long Distance Telephone Company
v. National Labor Relations Commission. In that case, we recognized
the harsh realities faced by employees that forced them, despite their
good intentions, to violate company policies, for which the employer
can rightfully terminate their employment. For these instances, the
award of financial assistance was allowed. But, in clear and
unmistakable language, we also held that the award of financial
assistance shall not be given to validly terminated employees, whose
offenses are iniquitous or reflective of some depravity in their moral
character. When the employee commits an act of dishonesty, depravity,
or iniquity, the grant of financial assistance is misplaced compassion.
It is tantamount not only to condoning a patently illegal or dishonest
act, but an endorsement thereof. It will be an insult to all the laborers
who, despite their economic difficulties, strive to maintain good
values and moral conduct.

In fact, in the recent case of Toyota Motors Philippines, Corp. Workers

Association (TMPCWA) v. National Labor Relations Commission, we ruled
that separation pay shall not be granted to all employees who are
dismissed on any of the four grounds provided in Article 282 of the Labor
Code. Such ruling was reiterated and further explained in Central
Philippines Bandag Retreaders, Inc. v. Diasnes: ChanRobl esVirt ualawl ibrary

To reiterate our ruling in Toyota, labor adjudicatory

officials and the CA must demur the award of separation pay
based on social justice when an employee's dismissal is
based on serious misconduct or willful disobedience; gross
and habitual neglect of duty; fraud or willful breach of
trust; or commission of a crime against the person of the
employer or his immediate family - grounds under Art. 282
of the Labor Code that sanction dismissals of employees.
They must be most judicious and circumspect in awarding
separation pay or financial assistance as the
constitutional policy to provide full protection to labor
is not meant to be an instrument to oppress the employers.
The commitment of the Court to the cause of labor should
not embarrass us from sustaining the employers when they
are right, as here. In fine, we should be more cautious in
awarding financial assistance to the undeserving and those
who are unworthy of the liberality of the law.

We are not persuaded by Capor's argument that despite the finding of

theft, she should still be granted separation pay in light of her long
years of service with petitioners. We held in Central Pangasinan
Electric Cooperative, Inc. v. National Labor Relations
Commission that: ChanRobl esVirt ualawl ibrary

Although long years of service might generally be

considered for the award of separation benefits or some form
of financial assistance to mitigate the effects of
termination, this case is not the appropriate instance for
generosity x x x. The fact that private respondent served
petitioner for more than twenty years with no negative
record prior to his dismissal, in our view of this case,
does not call for such award of benefits, since his
violation reflects a regrettable lack of loyalty and worse,
betrayal of the company. If an employee's length of service
is to be regarded as justification for moderating the
penalty of dismissal, such gesture will actually become a
prize for disloyalty, distorting the meaning of social
justice and undermining the efforts of labor to clean its
ranks of undesirables.

Indeed, length of service and a previously clean employment record

cannot simply erase the gravity of the betrayal exhibited by a malfeasant
employee. Length of service is not a bargaining chip that can simply
be stacked against the employer. After all, an employer-employee
relationship is symbiotic where both parties benefit from mutual loyalty
and dedicated service. If an employer had treated his employee well,
has accorded him fairness and adequate compensation as determined by
law, it is only fair to expect a long-time employee to return such
fairness with at least some respect and honesty. Thus, it may be said
that betrayal by a long-time employee is more insulting and odious for
a fair employer. As stated in another case: ChanRobl esVirt ualawl ibrary

xxx The fact that [the employer] did not suffer pecuniary
damage will not obliterate respondent's betrayal of trust
and confidence reposed by petitioner. Neither would his
length of service justify his dishonesty or mitigate his
liability. His length of service even aggravates his
offense. He should have been more loyal to petitioner
company from which he derived his family bread and butter
for seventeen years.

While we sympathize with Capor's plight, being of retirement age and

having served petitioners for 39 years, we cannot award any financial
assistance in her favor because it is not only against the law but also
 a retrogressive public policy. We have already explained the folly of
granting financial assistance in the guise of compassion in the
following pronouncements: ChanRobl esVirt ualawl ibrary

xxx Certainly, a dishonest employee cannot be rewarded with

separation pay or any financial benefit after his
culpability is established in two decisions by competent
labor tribunals, which decisions appear to be well-
supported by evidence. To hold otherwise, even in the name
of compassion, would be to send a wrong signal not only that
"crime pays" but also that one can enrich himself at the
expense of another in the name of social justice. And courts
as well as quasi-judicial entities will be overrun by "*
petitioners mouthing dubious pleas for misplaced social
justice. Indeed, before there can be an occasion for
compassion and mercy, there must first be justice for all.
Otherwise, employees will be encouraged to steal and
misappropriate in the expectation that eventually, in the
name of social justice and compassion, they will not be
penalized but instead financially rewarded. Verily, a
contrary holding will merely encourage lawlessness,
dishonesty, and duplicity. These are not the values that
society cherishes; these are the habits that it abhors.
(Emphases supplied, citations omitted.)
Hence, respondent's length of service of 11 years at petitioner SMSI did not mitigate, but even aggravated her offense,
demonstrating, in addition to her insubordination and dishonesty, her lack of loyalty. It is likewise worthy to note that
respondent, through her years of employment, was charged with the commission of several other transgressions, to wit:
failing to regularly deduct from her salary the payment for her cash advances which already amounted to P64,173.83;
leaving unused bank checks unattended on her desk even though she was provided a safe/vault in which she was
supposed to keep all pertinent bank documents; leaving the safe/vault unlocked; failing to submit reports on time;
instructing other people to punch in her time card several times; failing to hand over the office keys to the guard on duty
as company rules prescribed; and having shortages in the payroll. These administrative charges of previous acts of
dishonesty or negligence form part of respondent's employment record and which the petitioners could also very well
consider in finally deciding to impose upon respondent the ultimate penalty of dismissal for her latest infraction.

Also contrary to the ruling of the Court of Appeals, petitioners are not divested of their right to terminate the employment
of respondent just because the amount of ECOLA which respondent unlawfully granted herself for three years was
eventually deducted from her last salary. It was only proper that petitioners recover from respondent what did not
rightfully pertain to the latter, otherwise, respondent would have unjustly enriched herself at petitioners' expense; but
said recovery by petitioners still would not erase the fact that respondent willfully breached petitioners' trust. Moreover,
as petitioners clarified, what was deducted from respondent's last salary was only the amount of ECOLA she still granted
herself after the issuance of the Notice of Personnel Action dated August 22, 2005, which was for the period of August
2005 to December 2005. Respondent is still liable to return to petitioners the ECOLA she granted herself from November
2002 to July 2005. For this purpose, the case shall be remanded to the Labor Arbiter for computation of the exact amount
of ECOLA which respondent must pay back to petitioner SMSI.

Unlike the unwarranted ECOLA, however, the Court cannot order respondent to pay her outstanding cash advances from
petitioner SMSI, allegedly amounting to P64,173.83.

In Bahez v. Valdevilla,34 the Court recognized that the jurisdiction of Labor Arbiters and the NLRC in Article 217 35 of the
Labor Code, as amended, is comprehensive enough to include claims for all forms of damages "arising from the
employer-employee relations." Whereas the Court in a number of occasions had applied the jurisdictional provisions of
Article 217 to claims for damages filed by employees, it also held that by the designating clause "arising from the
employer-employee relations," Article 217 should apply with equal force to the claim of an employer for actual damages
against its dismissed employee, where the basis for the claim arises from or is necessarily connected with the fact of
termination, and should be entered as a counterclaim in the illegal dismissal case.

Petitioners' counterclaim for payment of respondent's outstanding cash advances, although undoubtedly arising from
employer-employee relations between petitioners and respondent, did not arise from or was not necessarily connected
with the fact of respondent's termination. To recall, petitioners terminated respondent's employment on the ground that
respondent, in granting herself unwarranted ECOLA, willfully breached the trust reposed in her by petitioners as
Accounting Supervisor. Respondent's failure to make the necessary deductions from her salary to pay for her cash
advances from petitioner SMSI was clearly another transgression petitioners were charging respondent with. While the
Court may take cognizance herein of the fact that such a charge by petitioners against respondent exists, it has no
jurisdiction to determine the truth or falsity of such charge. Such charge was not covered by the notices and hearing
petitioners accorded respondent prior to the latter's dismissal and for the Court to rule upon the same in this case
would'be in violation of respondent's right to due process.

Finally, the Court denies petitioners' claims for moral and exemplary damages for utter lack of factual and legal bases.

WHEREFORE, premises considered, the instant Petition for Review is PARTIALLY GRANTED. The Decision dated
February 22, 2010 of the Court of Appeals in CA-G.R. SP No. 103847 is AFFIRMED with the following MODIFICATIONS:
(1) the award of separation pay to respondent Lanie M. Labitigan is DELETED; (2) the Decision dated January 31, 2008
of the NLRC in NLRC LAC No. 08-002292-07, dismissing for lack of merit respondent Lanie M. Labitigan's complaint for
illegal dismissal against petitioners Supra Multi-Services, Inc., Jesus S. Tambunting, Jr., and Rita Clair T. Dabu,
is AFFIRMED; (3) respondent Lanie M. Labitigan is ORDERED to pay back petitioner Supra Multi-Services, Inc. the
amount of ECOLA she granted and paid to herself from November 2002 to July 2005, plus 6% interest from the time of
finality of this judgment until the said amount is fully paid; and (4) the case is REMANDED to the Labor Arbiter for
computation of the total amount respondent Lanie M. Labitigan is to pay back to petitioner Supra Multi-services, Inc.

SO ORDERED. chanRoblesvirt ualLaw lib rary

 [G.R. NO. 149464 : October 19, 2004]

NATIONAL FEDERATION OF LABOR (NFL), CENON BANGA, ROGELIO VILLACORTE, NAZARIO

HATAM, JULIO CUGAL, JUANITO GAVIOLA, BONIFACIO MANLAPAZ, TOMAS FABILLAR, BERNARD
SIASON, WILFREDO SANTOS, MARCIANO NAPAL, FIDEL ABALOS, PEDRO INANA, SIMPLICIO
QUIMSON, HERMINIGILDO DELOS SANTOS, FRANCISCO MANONGONG, RODRIGO DOMINGO,
MARCELINO GUILLANO, JR., VALERIANO BRIONES, RAMON PUNTOD, SIMON MORO, ROLANDO
BANGA, PABLO NUEZ, ALBERTO LADERO, BENEDICTO SUMALINOG, ISMAEL MOLAS, FIDEL
CONSTANCIA, CASIANO PLAD, MARCELO SUMALINOG, NESTOR GARCIA, FELICIANO LOZANO,
CORNELIO TUMAMBUS, ANASTACIO RODRIGUEZ GIPUNAN UNDING, CRESENCIO LASIT,
FEDERICO BASILIO, LEONARDO BARREDO, ABELARDO GARCIA, ESTANISLAO PUREZA, RAUL
LINIANG, LEONCIO PALAR, NICASIO CABANERO, LEONARDO PULGAR, ROMUALDO BACTONG,
ABDUL BORJAL, MAGDINO ANSOG, JACARIA ASSANUDDIN, HERCULANO DAGOY, MARIO
TULABING, ROBERTO MAHUSAY, BENGAY MAJID, ZOSIMO TUGAHAN, SALVADOR LUBIANO,
ABDULMAJID ALIMUDDIN, POLICARPIO WAHING, EFREN CRUZ, MELCHOR LOMONGGO,
ASPALON CUEVAS, MARCIAL SERUNDO, GENER MARTALLA, FRANCISCO BUHIAN, ROMULO
GANGE, RICARDO CRUZ, ODITO TARROZA, CATALINO MOLEJON, EUSTACIO MANLAPAZ,
BIENVENIDO ALBURO, DIOSCORO MOLOS, JUAN SIMAURIO, LUCIANO BASACA, ROMANTICO
SAN LUIS, PERPITO REVILLA, SERVANDO SINGSON, WILFREDO DEMCO, JIBRON GARCIA, JOSE
SACRISTAN, MANUEL SAYSON, GAUDIOSO DUMAYO, FELIX PLAZA, NESTOR GARCIA, ANDRES
GAMUTAN, VALERIANO LUBIANO, WILFREDO MAHUSAY, DIONESIO SALISIG, ANTONIO
SUMALINOG, PATRICIO RUALES, LEODEGARIO MANONGONG DONATO LADERO, WILFREDO
BASILIO, EMMANUEL EVANGELISTA, BIENVENIDO CRUZ, CELESTINO BACOR, HENRY GARCIA,
CRISTINO ESCUDERO, CECILIO MANAHAN, REYNALDO LOPEZ, ROGELIO AMPATIN,ALEXANDER
REMILLETE, AURELIO CACHUELA, EUTIQUIO FRONTAL, FABIAN DURAN, EXPEDITO BARRERA,
CENISO BUENO JOVENCIO VELITA, VICENTE ELEMIA, ROGELIO MIRONTOS, CESAR ALAJAS,
ANTONIO FORASTEROS, RESTITUTO DAMILES, WILFREDO ORTIZ, GERUNDIO TORINO,
TEOFISTO CALUNOD, ROGELIO CUEVAS, CASMIRO BASILIO, ELMO PEDLO, RAFAEL LAURENO,
AGAPITO CARINO, EDUARDO TUGAHAN, ANASTACIO TORINO, REIMBERTO ACOSTA, CESAR
MALALIS, WINEFREDA SARENO, FILADELFO RABINA, ANGEL YU, VICENCIO SACRISTAN, JR.,
CESAR AWYAN, QUIRINO RAMOS, ELEUTERIO INFANTE, JOSE MAGONCIA, JESUS GAROTE,
GODOFREDO UYAO, EXEQUIEL GREGANA, SALUSTIANO FLORES, ADALAIDA PORLARES,
SOFRIANO EDIM, ALFREDO CERIALES, GODOFREDO DEMCO, CIPRIANO PIOQUINTO, ANTONIO
JOSE FORASTEROS, FILOMENO MOLAS, SOLIG TOTO, FRANCISCO SOLON, AMADO ENRIQUEZ,
AMADO BUCOY, ARTURO AJON, FORTIBILLAR NABI, JUAN BAYOCA, WILFREDO ORPIANA,
VICTORIANO IMBO and SABDURANI MABLIA, Petitioners v. THE HON. COURT OF APPEALS (8th
DIV.), NATIONAL LABOR RELATIONS COMMISSION, EXECUTIVE LABOR ARBITER RHETT JULIUS
J. PLAGATA, SIME DARBY PILIPINAS, INC., AMERICAN RUBBER COMPANY, INC., SEAN O'KELLEY
and/or EXPEDITO DOQUILLO, SR., Respondents.

DECISION

CALLEJO, SR., J.:

This is a Petition for Review of the Decision1 of the Court of Appeals in CA-G.R. SP No. 56230, holding that
the petitioners were properly paid their separation pay after the closure of the rubber plantation of Sime
Darby Pilipinas, Inc. (SDPI) in Latuan, Isabela, Basilan.

The Antecedents

American Rubber Company, Inc. (ARCI) is a domestic corporation existing in and incorporated under the
laws of the Philippines. It was the registered and beneficial owner of a 1, 024-hectare rubber plantation in
Latuan, Isabela, Basila. On July 21, 1986, ARCI also had another rubber plantation in Tumajubong and
Ito-ito. ACI entered into a Farm Management Agreement (FMA) with SDPI, another domestic corporation,
involving the 1,024-hectare rubber plantation in Latuan and other rubber plantations. SDPI was given the
right to manage, administer, develop, cultivate, and improve the rubber plantations as an agro-industrial
development project, specifically designed for planting rubber trees, processing of and marketing of its
products and providing technical expertise for a period of twenty-five years, or up to the year 2011.2

National Federation of Labor (NFL) was the duly registered bargaining agent of the daily-and-monthly-paid
rank-and-file employees of SDPI in the Latuan rubber plantation. 3 SDPI and NFL executed a collective
bargaining agreement (CBA) in which they agreed that in case of permanent or temporary lay-off, workers
affected would be entitled to termination pay as provided by the Labor Code. The 150 petitioners were
daily-and-monthly paid employees of SDPI in the Latuan plantation and were, likewise, members of NFL.

On June 15, 1988, during the effectivity of the FMA between ARCI and SDPI, Republic Act No. 6657,
otherwise known as the Comprehensive Agrarian Reform Law (CARL) of 1988, took effect. 4 Section 8
thereof mandated that all lands of public domain leased, held or possessed by multinational corporations or
association or private non-governmental corporations, devoted to agro-industrial enterprises shall be
subjected to immediate compulsory acquisition and distribution upon the applicable lease, management,
grower or service contracts in effects as of August 29, 1987 or otherwise upon its valid termination,
whichever comes sooner but not later than after ten years following the effectivity of Rep. Act No. 6657.

Prior to the expiration of the June 30, 1998 deadline, SDPI decided to terminate the FMA with ARCI and
cease operation of the rubber plantation in Latuan, Isabela, Basilan, effective January 17, 1998. On
December 17, 1997, SDPI served formal notices of termination to all the employees of the plantation
effective January 17, 1998.5 Simultaneously, a letter to the Department of Labor of Employment (DOLE) of
Region IX, Zamboanga City, respecting the terminations was sent by SDPI. Separation pay for the
employees was computed pursuant to the provisions of the CBA between SDPI and NFL, in relation to the
Labor Code of the Philippines.

Meanwhile, when the 150 daily-and-monthly-paid rank-and-file employees received their individual
termination letters, the members of the NFL met, on January 10, 1998, and approved Resolution No. 1,
Series of 1998, requesting SDPI that the separation pay benefits for its members be segregated from
regular workdays, vacation leave, unused sick leave and other benefits. 6 Cenon S. Banga, the union
president of the daily-paid-rank-and-file employees, wrote Emmanuel A. Tamayo, the Senior Vice President
of SDPI, requesting the segregation of separation pay benefits from the other receivables.7 He also sent, on
the same date, a letter to SDPI seeking the clarification on the basis of computation of their separation pay.
He pointed out that separation pay should be computed pursuant to the company policy of thirty days per
year of service. He stressed that the union members would refuse to receive the computed separation pay
if less than that previously given to employees whose employment had been terminated by SDPI on prior
dates pursuant to the company policy,8 more specifically separation pay equivalent to one month for every
year of employment of the employees.

On January 17, 1998, each of the petitioners received his separation pay equivalent to one-half month pay
for every year of service, and other benefits which were all lumped in one Metrobank check. 9 The petitioners
simultaneously executed individual "Released and Quitclaim"10 following the explanation to them by
Executive Labor Arbiter (ELA) Rhett Julius J. Plagata of the nature and legal effects of the said
quitclaims.11 The Labor Arbiter also assured that each of the petitioners executed his respected deed of
quitclaim voluntarily.

However, on April 2, 1998, the petitioners filed a complaint for illegal dismissal, deficiency in separation pay,
backwages, reinstatement, legal interest, moral damages, exemplary damages, attorney's fees, and cost of
litigation before the Regional Arbitration Branch of Zamboanga City of the National Labor Relations
Commission (NLRC), docketed as NLRC case No. RAB-09-04-00125-98.12 The complainants raised the
following issues:

'(1) whether or not the complainants were illegally dismissed; and (2) whether or not they are entitled to
their claims for separation pay differentials ("non-payment of the exact computation of separation pay"),
legal interest, moral and exemplary damages, and attorney's fees and costs of litigation.

A matter also put is the effect of the quitclaim and releases executed by the complaints before the
undersigned on 15 and 16 January 1998 in consideration of payment to them by SDPI of separation pay
computed at one-half (1/2) month pay for every years of service.13

On November 24, 1998, the ELA rendered a decision dismissing the complaints for lack of merit. 14 He ruled
the termination of the petitioners' employment was based on authorized cause, namely, the closure of SDPI,
Latuan rubber plantation, as a consequence of the implementation of CARL, which set the deadline for the
compulsory distribution of agricultural, including agro-industrial lands ten years after the effectivity of the
law or June 30, 1998. Consequently, pursuant to the CBA between the SDPI and NFL in relation to Article
283 of the Labor Code, the dismissed employees should receive separation pay at the rate of one-half
month pay per year of service instead of a rate equivalent to one month for every year of service. He also
held that the petitioners had no right to invoke company policy of paying separation pay equivalent to one
month pay for every year of employment granted by SDPI for its retrenched employees in its plantations. He
also ruled that the petitioners were estopped from demanding for separation pay differentials because they
voluntarily and willingly executed their respective deeds of quitclaim.

Aggrieved, the petitioners appealed to the NLRC, which issued a Resolution on May 19, 1999 affirming the
decision of the ELA.15 The NLRC ruled that payment of separation pay in check did not violate Article 102 of
the Labor Code which required payment of wages in legal tender because (a) the check is a legal tender; and
(b) the statement allows payment of wages in check in special circumstances, as in the present case where
the individual complaints were paid large amounts of monetary benefits.

Dissatisfied, the petitioners filed a motion for reconsideration of the resolution, contending that the NLRC
denied the said motion for lack of merit. In the absence of any provision in the CBA, the existing company
policy or practice should have been applied in the computation of the separation pay of the monthly-paid
employees. Thee noted that in several instances, SDPI had paid separation pay computed at one month per
year of service. The NLRC denied the motion in a Resolution dated August 23, 1999.16

Distressed, the petitioners filed a petition for certiorari under Rule 65 of the 1997 Rules of Procedure before
the Court of Appeals (CA) docketed as CA-G.R. SP No. 56230. The petitioners alleged that:

(I)

THE RESPONDENT NLRC COMMITED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK

OR EXCESS OF JURISDICTION, MORE SPECIFICALLY, IN NOT RULING THAT THE

ELIMINATION OR DIMINUTION OF EMPLOYEE BENEFITS IS PROHIBITED UNDER ARTICLE

100 OF THE LABOR CODE, AS AMENDED.

(II)

THE RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION, MORE SPECIFICALLY, WHEN IT RULED THAT

PETITIONER-WORKERS WERE ESTOPED FROM CLAIMING THE BALANCE OF THEIR

SEPARATION PAY OR BENEFITS.

(III)

THE RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION, MORE SPECIFICALLY, WHEN IT RULED THAT CHECK

IS LEGAL TENDER.17

In its Manifestation and Motion, the Office of the Solicitor General (OSG) agreed that the petitioners were
dismissed based on authorized cause. However, it asserted that they were entitled to separation pay
equivalent to one-month pay for every year of service. Citing the case of Robles v. Zambales Chromite
Mining Co., 18 the OSG opined that to hold that payment of separation pay equivalent to one-month pay
applies only in cases of retrenchment and not when the termination is due to cessation of business
operations not due to serious business losses, would create a distinction which was not contemplated under
the law. According to the OSG, Section 9, Implementing Rules of Book VI, which provides that in case of
terminations based on business closures, separation pay shall be computed at one-half month pay per year
of service, cannot prevail over the provisions of the law.

The OSG furthered that the petitioners were not barred from recovering the balance of their separation pay
because they were compelled to sign the quitclaims prepared by the respondent SDPI. The signing was
made a condition to enable the petitioners to receive their separation pay and other monetary benefits
without undue delay.

On May 7, 2001, the CA rendered a decision affirming the decision of the NLRC and dismissing the
petition.
ςη αñ rοbl ε š νιr†υ αl l αω l ιb rα rÿ

Applying Article 283 of the Labor Code, the CA ruled that separation pay due to business closures not due
to business losses shall be equivalent to one-month pay or atleast one-half month pay for every year of
service, whichever is higher. Citing the cases of Philippine Tobacco Flue-Curing & Redrying Corporation v.
NLRC19 and Naguiat v. NLRC,20 the CA held that separation pay of employees dismissed based on business
closures should be one half their respective monthly wage, multiplied by the number of years they actually
rendered service, provided that they worked for at least six months during a given year.

The threshold issue is whether or not the CA erred in holding that the petitioners are entitled to separation
pay equivalent to one-half month pay for every year of employment with the private respondent.

The petitioners contend that the private respondent is bound by its policy of granting separation pay
equivalent to one-month pay for every year of service to its retrenched employees in the Tumajubong and
Latuan plantations prior to the closure of Latuan rubber plantation where they were employed. They aver
that the separation pay equivalent to one-half month pay for every year of service with the private
respondent is proscribed by Article 100 of the Labor Code of the Philippines, to wit:

ART. 100. Prohibition against elimination or diminution of benefits. - Nothing in this book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the
time of promulgation of this Code.

The petitioners posit that Article 100 of the Labor Code of the Philippines should prevail over any provisions
of the CBA between the NFL and the private respondent. They assert that they believed in good faith that the
private respondent would follow and implement its policy which had been in effect even before the private
respondent and the NFL executed their CBA. They contend that had the NFL and/or its members been
informed, before the execution of the said CBA, that the private respondent would not follow its policy when
the plantation stopped its operation, for sure, NFL and/or its members would have insisted in the inclusion
in the CBA of a provision granting each of them separation pay equivalent to one month pay for every year
of service. On the other hand, the CA ruled that:

We agree with respondent SDPI that its past payment of separation pay at one (1) month pay for every year
of service cannot be taken as "precedent or company practice" applicable to individual complaints herein
due to different factual setting. Firstly, there was no provision in the CBA between the respondent SDPI and
the rank-and-file employees in Tumajubong Rubber Plantation fixing the rate of separation pay for any
worker who was terminated for authorized cause. Secondly, the Tumajubong Rubber Plantation and Latuan
Rubber Plantation where individual complaints herein were assigned were two entities, separate and distinct
from each other. Thirdly, the workers in the Latuan Rubber Plantation alluded to have been terminated from
employment on April 1, 1994 in pursuance of the staff reduction program were actually separated from the
service due to redundancy, and, as such, they were entitled to separation pay equivalent to one (1) month
pay for every year of service under Article 283 of the Labor Code. Fourthly, Rustom Democrito and other
complaining workers in the early NLRC Case No. M-001457-93 (RAB 09-11-00297-90) were paid of their
separation pay at one (1) month pay per year of service by virtue of a compromise settlement.

If-at-all, respondent SDPI, through Mr. Ortalla and other representatives in the CBA negotiations, have
intended to uniformly grant separation pay at one (1) month pay per year of service to all workers who were
terminated from employment due to authorized cause as what complainants would want to make it appear,
the parties to the CBA could have expressly made a provision to that effect to erase any doubt to the
contrary.21

We agree with the NLRC and the CA.

Article 283 of the Labor Code provides that employees who are dismissed due to closures that are not due
to business insolvency should be paid separation pay equivalent to one-month pay or to at least one-half
month pay for every year of service, whichever is higher. A fraction of at least six months shall be
considered one whole year, thus:
ART. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the
employment of any employee due to installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof.
In case of termination due to installation of labor saving devices or redundancy, the worker affected thereby
shall be entitled to at least his one (1) month pay or to at least (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of
operations of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole
year.

Patently, in cases of closures or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay of employees shall be equivalent to one-month pay
or to at least one-half month pay for every year of service, whichever is higher.22 In no case will an
employee get less than one-month separation pay if the separation from the service is due to the above
stated causes, provided that he has already served for at least six months. Thus, if an employee had been
in the service for at least six months, he is entitled to a full month's pay as his termination pay if his
separation from the job is due to any of the causes enumerated above. However, if he has to his credit ten
years of service, he is entitled to five months pay, this being higher than one-month pay. Stated differently,
the computation of termination pay should be based on either one-month or one-half month pay, whichever
will yield to the employees' higher separation pay, taking into consideration his length of service.23

In this case, the petitioners had served the respondent SDPI for a period longer than six months. Hence,
their separation pay computed at one-half pay per year of service is more than the minimum one-month
pay.

Pursuant to the 1995 CBA between the SDPI and its Latuan daily-paid rank-and-file employees, permanent
or temporary lay-off workers affected would be entitled to termination pay as by the Labor Code. 24 The
parties did not incorporate in the CBA a specific provision providing that employees terminated from
employment due to the closure of business operations would be entitled to separation pay equivalent to
one-month pay for every year of service. The parties opted to be bound by the provisions of the Labor Code
and not by company policy. The employees of the private respondent who were members of the NFL ratified
the CBA which had been in force and effect for three years before the closure of the plantation, without the
NFL initiating the revision thereof.

It bears stressing that a collective bargaining agreement refers to the negotiated contract between the
legitimate labor organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in the bargaining unit.25 During the negotiations, the parties, management and
union meet and convene promptly and expeditiously in good faith for the purpose of negotiating an
agreement.26 Had the daily-paid rank-and-file employees deemed the same to be a diminution of their
benefits, they should have rejected the CBA. The petitioners never assailed the CBA as prejudicial to them
or for having been in violation of Article 100 of the Labor Code. Unless annulled, the CBA, as a contract
governing the employer and the employees respecting the terms of employment, should prevail.

The records reveal that there is no substantial evidence to support the claim that a similar practice had been
made in the case of monthly-paid employees. Neither is there any evidence that a CBA exist between
monthly-paid rank-and-file employees and the SDPI. Consequently, Article 283 of the Labor Code, which
grants separation pay equivalent to one-month pay or one-half month pay for every year of service,
whichever is higher, to the employees retrenched due to business closures, should apply.

We find that the petitioners' contention, that they were impelled to execute the deed of quitclaim and
receive their separation pay and monetary benefits because, otherwise, they and their families would have
starved, is implausible. We agree with the following ratiocination of the ELA:

Beforehand, however, it must be stressed that when the complainants were paid separation benefits and
executed their quitclaims and releases before the undersigned on 15 and 16 January 1998, the undersigned
verified and confirmed that they did so voluntarily and willingly, after having been made to understand the
consequences thereof. And they received their separation benefits and executed their quitclaims and
releases despite the fact that they had asked for but were not granted a higher rate of separation pay; that
their union officers were present at that time; that they were made to understand the consequences of their
receiving the separation benefits proffered to them and their execution of quitclaims and releases.

Their voluntary acceptance of separation benefits and execution of quitclaims and releases, to the mind of
the undersigned, now bars the complainants from asking for more. If they were not amenable to the
computation or amount thereof, they should have accepted the same. But by so accepting the separation
benefits, they thereby entered into a compromise thereon with SDPI. This is so, even if the existence of
company policy or practice on the basis of which the complainants ask for separation pay differentials, is
assumed to be true.

While it is true that quitclaims are frowned upon the in labor claims, this holds true only when the
consideration therefor is unconscionably low. Where, however, the consideration is substantial, the efficacy
and validity thereof has been upheld, more so, where the quitclaim was voluntarily and willingly executed,
as in the instant case.

The amount of separation pay paid to and received by the complainants, was one-half of what they wanted.
To the mind of the undersigned, that constituted substantial consideration for the quitclaims the
complainants voluntarily executed. This is particularly so, considering that the separation pay the
complainants received (one-half month pay for every year of service) was the minimum prescribed by law,
as embodied in Article 283 of the Labor Code, as amended.

As held in Periquet v. National Labor Relations Commission, 186 SCRA 724 (1990):

Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered
into and represents a reasonable settlement, it is binding on the parties and may not be disowned simply
because of a changed of mind. It is only where there is a clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of the settlement are unconscionable on its face, that the law
will step in to annul the questionable transaction. But where it is shown that the person making the waiver
did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is
credible and reasonable, the transaction must recognized as a valid and binding undertaking.

This ruling was subsequently reiterated and applied

in Samaniego vs. National Labor Relations Commission, 198 SCRA (1991)
and Veloso vs. Department of Labor and Employment, 200 SCRA 201 (1991).

Accordingly, the complainants are not entitled to, and cannot anymore be granted separation pay
differentials.

It bears stressing anew that the complainants were paid substantial amounts of separation pay in the
presence of the undersigned, before whom they executed and corresponding quitclaims and releases and to
whom they affirmed the voluntariness and their willingness as to the execution thereof and receipt of
separation benefits proffered to them by SDPI at that time, with understanding as to the contents of the
quitclaims and releases and the consequences of their said acts.

In the light of the foregoing discussion, the other money claims of the complainants must also be set
aside.27

We do not agree with the claim of the petitioners that the payment of separation pay and other benefits in
check is in violation of Article 102 of the Labor Code, which provides:

Art. 102. - Forms of Payment. - No employers shall pay the wages of an employee by means of
promissory notes, vouchers, coupons, tokens, tickets, chits or any object other than legal tender, even
when expressly requested by the employee.

Payment of wages by check or money order shall be allowed when such payment is customary on the date
of effectivity of this Code, or is necessary because of special circumstances as specified in appropriate
regulations to be issued by the Secretary of Labor or a stipulation in a collective bargaining agreement.

Payment by check - payment of wages by bank checks, postal checks or money orders is allowed where
such manner of wage payment is customary on the date of the effectivity of the Code, where it is stipulated
in a collective bargaining agreement, or where all of the following conditions are met:
 1. There is a bank or other facility for encashment within a radius of one (1) kilometer from

the workplace;

2. The employer, or any of his agents or representatives, does not receive any pecuniary

benefit directly or indirectly from the arrangement;

3. The employee are given reasonable time during banking hours to withdraw their wages

from the bank which time shall be considered as compensable hours worked if done during

the working hours; andcralawlibrary

4. The payment by check is with the written consent of the employees concerned if there is

no collective agreement authorizing the payment of wages by bank checks.28

The term "wage" was defined in Article 97(f) of the Labor Code as "the remuneration or earnings, however,
designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the
employer to the employee.29 Wages shall be paid only by means of legal tender. The only instance when an
employer is permitted to pay wages in forms other than legal tender, that is by checks or money order, is
when the circumstances prescribed in the second paragraph of Article 102 are present.

In the present case, the petitioners' separation pay, other benefits, and the wages from January 1 to 17
were paid in check. Strictly speaking, SDPI violated the Labor Code when it included wages from January 1
to 17, 1998 in the check. Considering, however, the amount of other monetary benefits to be paid, payment
in check was the most convenient form for both the petitioners and the respondent. Further, as pointed out
by the respondents, the petitioners are deemed estopped from questioning the legality of payment of wages
from January 1 to 17, 1998 in check because the same was raised for the first time only in their appeal
before the NLRC.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision and resolution of the Court of
Appeals in CA-G.R. SP No. 56230 are AFFIRMED.

SO ORDERED.
 G.R. No. 207252, January 24, 2018

PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION (PGIEU), Petitioner, v. CHEVRON GEOTHERMAL PHILS.
HOLDINGS, INC., Respondent.

DECISION

REYES, JR., J.:

This is a Petition for Review on Certiorari1 pursuant to Rule 45 of the Rules of Court, as amended, seeking to reverse and
set aside the Decision2 dated November 5, 2012 of the Court of Appeals (CA) in CA-G.R. SP. No. 115796, dismissing the
Petition for Review entitled "Philippine Geothermal, Inc. Employees Union (PGIEU) vs. Chevron Geothermal Phils.
Holdings, Inc.'' as well as the Resolution3 dated May 17, 2013 denying Philippine Geothermal, Inc. Employees Union's
(petitioner) Motion4 for Reconsideration dated November 27, 2012.

The Facts

Petitioner is a legitimate labor organization and the certified bargaining agent of the rank-and-file employees of Chevron
Geothermal Phils. Holdings, Inc. (respondent).5

On July 31, 2008, the petitioner and respondent formally executed a Collective Bargaining Agreement (CBA) which was
made effective for the period from November 1, 2007 until October 31, 2012. Under Article VII, Section 1 thereof, there
is a stipulation governing salary increases of the respondent's rank-and-file employees, as follows:

Section 1. WAGE INCREASE

The COMPANY will grant the following:

- Effective Nov. 1, 2007, P260,000.00 - lump sum payment for the 1st year
of this agreement (taxable).
- Effective Nov. 1, 2008, across the board increase on the monthly salary
in the amount of P1,500.00.
- Effective Nov. 1, 2009, across the board increase on the monthly salary
in the amount of P1,500.00.6

In implementing the foregoing provision, the parties agreed on the following guidelines appended as Annex D of said
CBA, viz.:

Employment Status P260K P1500 P1500

Lump (Nov. 1, (Nov. 1,

Sum 2008) 2009)

Regularized on or before April 30, 2008 / / /

Regularized between May 1, 2008 and

X / /
October 31, 2008

Regularized on or before April 30, 2009 X / /

Regularized between May 1, 2009 and
X X /
October 31, 2009

Regularized on or before April 30, 2010 X X /

On October 6, 2009, a letter dated September 20, 2009 was sent by the petitioner's President to respondent expressing,
on behalf of its members, the concern that the aforesaid CBA provision and implementing rules were not being
implemented properly pursuant to the guidelines and that, if not addressed, might result to a salary distortion among
union members.7

On even date, respondent responded by letter denying any occurrence of salary distortion among union members and
reiterating its remuneration philosophy of having "similar values for similar jobs", which means that employees in
similarly-valued jobs would have similar salary rates. It explained that to attain such objective, it made annual reviews
and necessary adjustments of the employees' salaries and hiring rates based on the computed values for each job.8

Finding the explanation not satisfactory, petitioner, with respondent's approval, referred the subject dispute to the
Voluntary Arbitration of the National Conciliation and Mediation Board (NCMB). It averred that respondent breached their
CBA provision on worker's wage increase because it granted salary increase even to probationary employees in
contravention of the express mandate of that particular CBA article and implementing guidelines that salary increases
were to be given only to regular employees.9

To cite an example, petitioner alleged that respondent granted salary increases of One Thousand Five Hundred Pesos
(P1,500.00) each to then probationary employees Sherwin Lanao (Lanao) and Jonel Cordovales (Cordovales) at a time
when they have not yet attained regular status. They (Lanao and Cordovales) were regularized only on January 1, 2010
and April 16, 2010, respectively, yet they were given salary increase for November 1, 2008. As a consequence of their
accelerated increases, wages of said probationary workers equated the wage rates of the regular employees, thereby
obliterating the wage rates distinction based on merit, skills and length of service. Therefore, the petitioner insisted that
its members' salaries must necessarily be increased so as to maintain the higher strata of their salaries from those of the
probationary employees who were given the said premature salary increases.10

On the other hand, respondent maintained that it did not commit any violation of that CBA provision and its implementing
guidelines; in fact, it complied therewith. It reasoned that the questioned increases given to Lanao and Cordovales'
salaries were granted, not during their probationary employment, but after they were already regularized. It further
asseverated that there was actually no salary distortion in this case since the disparity or difference of salaries between
Lanao and Cordovales with that of the other company employees were merely a result of their being hired on different
dates, regularization at different occasions, and differences in their hiring rates at the time of their employment. 11

After due proceedings, the Voluntary Arbitrator rendered a Decision12 dated August 16, 2010 in favor of respondent,
ruling that petitioner failed to duly substantiate its allegations that the former prematurely gave salary increases to its
probationary employees and that there was a resultant distortion in the salary scale of its regular employees. 13

Thereafter, a Petition14 for Review under Rule 65 was filed with the CA on September 22, 2010.

On November 5, 2012, the CA rendered its Decision.15 It dismissed the petition for review and sustained the Voluntary
Arbitrator's decision. The pertinent and dispositive portion of the assailed decision reads as follows:

In fine, We hold that the Voluntary Arbitrator of NCMB did not commit
grave abuse of discretion in dismissing petitioner union's complaint
against respondent company. Settled is the rule that factual findings
of labor officials who are deemed to have acquired expertise in matters
within their jurisdiction, are generally accorded not only respect but
even finality, and they are binding when supported by substantial
evidence. In this case, these findings are supported by competent and
convincing evidence.
 WHEREFORE, premises considered, the instant petition is DISMISSED. The
Decision dated 16 August 2010 of the Voluntary Arbitrator of the NCMB
Regional Branch No. IV is SUSTAINED.

SO ORDERED.16

On November 28, 2012, petitioner filed its Motion17 for Reconsideration. This was, however, denied by the CA in its
Resolution18 dated May 17, 2013.

Hence, this petition.

The Issues

I.

WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT RESPONDENT DID NOT
VIOLATE THE CBA IN GRANTING WAGE INCREASE OF P1,500.00 TO LANAO AND
CORDOVALES AT A TIME WHEN THEY HAD NOT YET ATTAINED REGULAR STATUS

II.

WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT THE GRANT OF WAGE
INCREASE TO LANAO AND CORDOVALES IS A VALID EXERCISE OF MANAGEMENT
PREROGATIVES BY RESPONDENT

III.

WHETHER OR NOT THE CA ERRED IN NOT ORDERING RESPONDENT TO LIKEWISE

INCREASE THE RATES OF OTHER REGULAR EMPLOYEES IN ORDER TO MAINTAIN THE
DIFFERENCE BETWEEN THEIR RATES AND THOSE OF THE EMPLOYEES WHO WERE
ALLEGEDLY GRANTED PREMATURE WAGE INCREASES

Ruling of the Court

The petition is devoid of merit.

Petitioner and respondent entered into an agreement whereby employees will be granted a wage increase depending on
the date of their regularization, viz.:

Employment Status P260K P1500 P1500

Lump (Nov. 1, (Nov. 1,

Sum 2008) 2009)

Regularized on or before April 30, 2008 / / /

Regularized between May 1, 2008 and
X / /
October 31, 2008

Regularized on or before April 30, 2009 X / /

Regularized between May 1, 2009 and

X X /
October 31, 2009

Regularized on or before April 30, 2010 X X /

Petitioner claims that Lanao and Cordovales having been regularized only on January 1, 2010 and April 16, 2010,
respectively, are not covered by the P260,000.00 lump sum and the initial P1500.00 wage increase effective on Nov. 1,
2008. It appears, however, that based on the actual pay slips of union members, Lanao and Cordovales both received
wage increase in the amount of P1500.00 effective Nov. 1, 2008 and that such increase was immediately granted to them
at the time of their hiring which resulted to the increase of their salaries to P36,500.00 per month.

It is further stressed by petitioner that the increase granted by respondent to Lanao and Cordovales are violative of the
terms of the CBA, specifically Section 1, Article VII and Annex D, for the reason that these employees have not yet
attained "Regular" status at the time they were granted a wage increase and thus resulting to a salary/wage distortion.

Respondent, for its part, claims that the alleged "increase" in the wages of these employees was not due to application
of the provisions of Article VII and Annex D of the CBA, rather it was brought about by the increase in the hiring rates at
the time these employees were hired. As a matter of fact, a careful scrutiny of the records reveals that respondent have
complied with the terms agreed upon in the CBA.

Notably, respondent's reply to the petitioner's letter accusing them of violation of the terms of the CBA and holding them
responsible for the alleged wage distortion, clarified the ambiguity with regard to the hiring rates, viz.:

As for the perceived salary distortion among Union members resulting

from the non-implementation of the guidelines on Article VH-Salaries
and Allowances, Section 1 - Wage Increase, Annex D of the CBA 2007-2012,
we would like to reiterate our discussion during the recent NLMC meeting
of September 16, on Chevron's remuneration philosophy of having "similar
value for similar jobs" which simply states that employees in similarly
valued jobs will have similar salary rates. Salaries and hiring rates
are reviewed annually and adjusted as necessary based on the computed
values of each job, an employee's tenure or seniority in his/her current
19
position will not influence the value of the job. (Underlining Ours)

Clearly then, the increase in the salaries of Lanao and Cordovales was not pursuant to the wage increase agreed upon in
CBA 2007-2012 rather it was the result of the increase in hiring rates at the time they were hired.

To illustrate, in its Reply,20 respondent discussed the difference in the hiring rates of employees Lanao and Robert
Gawat, viz.:

Mr. Robert Gawat was regularized on April 16, 2007 having been hired
on October 16, 2007 while Mr. Lanao as shown in the Company's position
paper was regularized on January 1, 2010, having been hired only on July
1, 2009. At the time of Mr. Gawat's hiring, the hiring rate for Pay
 Grade 12 was P31,800.00. On April 16, 2007, Mr. Gawat was given a CBA
salary increase under the 2002-2007 CBA of P1,700.00 per month which
increased his pay to P33,500.00 per month. He received another CBA salary
increase of P1,500.00 under the 2007-2012 CBA on November 1, 2008, thus
increasing his pay to P35,000.00. On November 1, 2009, he received
another salary increase of P1,500.00 under the 2007-2012 CBA which
further increased his pay to P36,500.00 per month until the present.

On the other hand, when Mr. Lanao was hired on July 9, 2009, the hiring
rate at the time for employees falling under Pay Grade 12 was already
P35,000.00, having been adjusted by the company in accordance with
market and industry practice. On January 1, 2010, Mr. Lanao was
regularized and as dictated by the CBA, he was given a CBA salary increase
of P1,500.00 per month effective January 1, 2010 which increased his
monthly pay at the present to P36,500.00.21 (Emphasis and underlining
Ours)

As shown above, the respondent never violated the CBA and in fact, complied with it to the letter. Clearly, the petitioner
only used the respondent's alleged violation of the CBA when its true gripe is related to the respondent's prerogative of
setting the hiring rate of the employees over which the petitioner neither has the personality nor the privilege to meddle
or interfere with.22

The second and third issue, being interrelated, shall be discussed jointly.

Upon the enactment of Republic Act (R.A.) No. 6727 (Wage Rationalization Act, amending among others, Article 124 of
the Labor Code) on June 9, 1989, the term "Wage Distortion" was explicitly defined as "a situation where an increase in
prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or
salary rate between and among employee groups an establishment as to effectively obliterate the distinctions embodied
in such wage structure based on skills, length of service or other logical bases of differentiation."23

Contrary to petitioner's claim of alleged "wage distortion", Article 124 of the Labor Code of the Philippines only cover wage
adjustments and increases due to a prescribed law or wage order, viz.:

Article 124. Standards/Criteria for Minimum Wage Fixing.

x x x x

Where the application of any prescribed wage increase by virtue of a

law or Wage Order issued by any Regional Board results in distortions
of the wage structure within an establishment, the employer and union
shall negotiate to correct the distortions. Any dispute arising from
the wage distortions shall be resolved through the grievance procedure
under their collective bargaining agreement and, if it remains
unresolved, through voluntary arbitration.24 (Emphasis Ours)

Prubankers Association v. Prudential Bank and Trust Company25 laid down the four elements of wage distortion, to wit:
(1) an existing hierarchy of positions with corresponding salary rates; (2) a significant change in the salary rate of a lower
pay class without a concomitant increase in the salary rate of a higher one; (3) the elimination of the distinction between
the two levels; and (4) the existence of the distortion in the same region of the country.
The apparent increase in Lanao and Cordovales' salaries as compared to the other company workers who also have the
same salary/pay grade with them should not be interpreted to mean that they were given a premature increase for
November 1, 2008, thus resulting to a wage distortion. The alleged increase in their salaries was not a result of the
erroneous application of Article VII and Annex D of the CBA, rather, it was because when they were hired by respondent
in 2009, when the hiring rates were relatively higher as compared to those of the previous years. Verily, the setting and
implementation of such various engagement rates were purely an exercise of the respondent's business prerogative in
order to attract or lure the best possible applicants in the market and which We will not interfere with, absent any showing
that it was exercised in bad faith.

Management prerogative gives an employer freedom to regulate according to their discretion and best judgment, all
aspects of employment including work assignment, working methods, the processes to be followed, working regulations,
transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers.26 This right
is tempered only by these limitations: that it must be exercised in good faith and with due regard to the rights of the
employees.27

Petitioner claims that the wages of other employees should also be increased in order to maintain the difference between
their salaries and those of employees granted a "premature" wage increase. Such a situation may be remedied if it falls
under the concept of a wage distortion as defined by Article 124 of the Labor Code of the Philippines. However, as already
discussed, there is no wage distortion in the case at bench. Not all increases in salary which obliterate the salary
differences of certain employees should be perceived as wage distortion.

In the case of Bankard Employees Union-Workers Alliance Trade Unions v. National Labor Relations Commission,28 the
Court discussed the possible implication of an expanded interpretation of the concept of Wage Distortion, to wit:

If the compulsory mandate under Article 124 to correct "wage distortion"

is applied to voluntary and unilateral increases by the employer in
fixing hiring rates which is inherently a business judgment prerogative,
then the hands of the employer would be completely tied even in cases
where an increase in wages of a particular group is justified due to
a re-evaluation of the high productivity of a particular group, or as
in the present case, the need to increase the competitiveness of
Bankard's hiring rate. An employer would be discouraged from adjusting
the salary rates of a particular group of employees for fear that it
would result to a demand by all employees for a similar increase,
especially if the financial conditions the business cannot address an
across-the-board increase.29

The Court's ruling in the case of Bankard seek to address and resolve conflicting opinions regarding the true concept of
a wage distortion like the one presented in this case whereby a legitimate exercise by an employer of its management
prerogative is being taken against it in the guise of an allegation that it is circumventing labor laws. An employer should
not be held hostage by the whims and caprices of its employees especially when it has faithfully complied with and
executed the terms of the CBA.

It is the prerogative of management to regulate, according to its discretion and judgment all aspects of employment. This
flows from the established rule that labor law does not authorize the substitution of the judgment of the employer in the
conduct of its business. Such management prerogative may be availed of without fear of any liability so long as it is
exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or agreements and are not exercised in a malicious, harsh,
oppressive, vindictive or wanton manner or out of malice or spite.30

On a final note, the Court has ruled time and again that factual findings of labor officials, who are deemed to have
acquired expertise in matters within their jurisdiction, are generally accorded not only respect but even finality by the
courts when supported by substantial evidence and affirmed by the CA, in the exercise of its expanded jurisdiction to
review findings of the National Labor Relations Commission.

WHEREFORE, premises considered, the petition is DENIED. The Decision dated November 5, 2012 of the Court of
Appeals in CA-G.R. SP No. 115796 is hereby AFFIRMED.
SO ORDERED.