THIRD DIVISION

G. R. No.151370 - December 4, 2002

ASIA PACIFIC CHARTERING (PHILS.) INC., Petitioner, vs. MARIA LINDA R. FAROLAN, Respondent.

DECISION

CARPIO MORALES, J.:

Before this Court is a Petition for Review under Rule 45 of the 1997 Rules of Civil Procedure assailing the Court of
Appeals 1) June 28, 2001 Decision1 which set aside the decision of the National Labor Relations Commission
(NLRC) reversing that of the Labor Arbiter, and 2) January 9, 20022 Resolution denying a reconsideration of its
decision.

Petitioner Asia Pacific Chartering (Phils) Inc. was, until 1996, the general sales agent (GSA) of the Scandinavian
Airline System (SAS), an off-line international airline company with license to do business in the Philippines. As
GSA, petitioner sold passenger and cargo spaces for airlines operated by SAS.

Respondent Maria Linda R. Farolan was on December 16, 1992 hired as Sales Manager of petitioner for its
passenger and cargo GSA operations for SAS, following her conformity to a December 10, 1992 letter-offer of
employment3 from petitioner through its Vice President/Comptroller Catalino Bondoc. The pertinent portion of the
letter-offer reads:

"Dear Ms. Farolan:

Confirming our previous discussions, ASIA-PACIFIC CHARTERING PHIL., INC. is pleased to offer you the
position of Sales Manager of its Passenger and Cargo Operations for SCANDINAVIAN AIRLINES SYSTEM in
the Philippines, commencing on December 16, 1992 on the following terms:

Monthly

Basic Pay P 22, 000.00

Housing Allowance 4,000.00

Transportation Allowance Cash Equivalent

(200 liters of gas)

Meal Allowance 750.00

Please affix your signature below if you find the foregoing acceptable and return to us a signed duplicate.
Meanwhile, we certainly look forward to your joining us and rest assured of our fullest support.

xxx

(Sgd) Maria Linda R. Farolan

Conforme:" (Emphasis supplied).

It is gathered that Leslie Murray, the then Sales Manager of petitioner, talked to respondent into accepting the
position after verbally briefing her on the nature of the position.

Soon after respondent assumed her post, she participated in a number of meetings/seminars4 including a Customer
Service Seminar in Bangkok, Thailand, a Regional Sales Meeting on the technical aspects of airline commercial
operations in February 1993, and a course on the highly technical airline computer reservations system called
"Amadeus", all geared towards improving her marketing and sales skills.

In September of 1993, respondent, upon instruction of Bondoc, submitted a report5 "RE: OUR COMMENTS AND
ACTIONS BEING TAKEN CONCERNING SAS POOR P & L PERFORMANCE FOR JANUARY - JULY 1993"
the pertinent portions of which read:

"1 January to July 1993 Sales x x x

1993 1992 CHANGE

Seaman 233 423 (190)

Expats/Tourists 503 716 (213)

PTAs 346 196 150

Refugees/IOM 53 864 811)

xxx

Explanations.

1. International Organization for Migration (IOM)-both Vietnam and Scandinavian Governments have terminated
projects for refugees; hence the tremendous decrease (94%) x x x.

2. Seamans Fares-Rates not competitive enough.

3. Expats/Tourists-In a market where on-line carriers were dropping rates drastically, we were losing passengers
to said carriers.

1 The present Market:

1. As SAS is off-line, we have no control over space and to an extent our rates are higher because of proration with
delivering carriers.

2. On-lines do not prorate with other carriers therefore can dive fares x x x.

I have convinced Mr. Jespersen to bring down the fares to be more competitive. The reason he did not do so earlier
was because low-yield fares are low in priority for confirming seats. But now that SAS is considering increasing
their frequencies ex-Hongkong before year-end, this will be advantageous to boosting our sales.

A. Measures to take remainder of 1993 and for 1994:

1. We have negotiated a lower fare for seamen (effective September) which is competitive. We are already getting
positive response from agents. Since this(sic) low-yield sales, Hongkong did not adjust fare accordingly first half of
1993 because of space constraints.

2. As SAS still prefers high-yield sales, we have offered incentives to Ameco as Asian Development Bank (ADB)
(effective 1st June for one year) with Mr. Jespersens approval x x x.

In addition, ADB itself is willing to consider proposals we submit to them in the case of cost-savings. In exchange,
they can endorse to SAS a relevant share of their Europe travel x x x.

3. We have also negotiated a lower net fare for Economy Class. This rate is also competitive and is in force.

4. Incentive Program for Agents-Using the points system similar to PALs promo (PALs Smiles), to stimulate sales.
We are at present fine-tuning mechanics for Hongkongs approval which we intend to launch before Christmas. This
promo is self-sustaining (no significant expenses to be incurred)

5. We are currently pushing sales for Baltic area/Russia as we have the best rates. We have identified the agents who
have passengers to these destinations and we are focusing on them x x x." (Emphasis and underscoring supplied).

As reflected in respondents report, there was a drop in SAS sales revenues which to her was attributable to market
forces beyond her control.

Noting the marked decline in SAS sales revenues, petitioner directed its high ranking officer Roberto Zozobrado in
January 1994 to conduct an investigation on the matter and identify the problem/s and implement possible solutions.

Zozobrado thus informally took over some of respondents marketing and sales responsibilities, albeit respondent
retained her title as Sales Manager and continued to receive her salary as such.

By petitioners claim, Zozobrado found out that respondent did not adopt any sales strategy nor conduct any sales
meeting or develop other sources of revenue for SAS, she having simply let her sales staff perform their functions
all by themselves; in 1994, Soren Jespersen, General Manager of SAS in Hongkong, Southern China, Taipei and the
Philippines, came to the Philippines to assess the statistics on SAS sales revenues and SAS was convinced that
respondent was not fit for the job of Sales Manager; and in view of the changes introduced by Zozobrado, SAS-GSA
sales operations drew positive results.

On May 21, 1994, respondent received a message6 from Jespersen reading:

"Dear Linda and Bob [Zozobrado],

First of all congratulation to your sale result in April. You reached and exceeded the target by 50% In C/class
(Fantastic!!!) and 1% In M/class. This is the second month in a row (and the last 2 first in more than a year) and
hopefully the beginning of a new and positive trend.

xxx

As you can see May looks very good.

With the agreed focus on selling the M/class and all the activities initiated, Im sure that the rest of the period will
pick very soon.

x x x" (Underscoring supplied; Quoted verbatim).

On July 18, 1994,7 respondent received another message from Jespersen reading:

"Dear Linda,

The sales report for June 1994 did unfortunately not reach target in C/class but in M/class you managed very well.
Totally 9% below target.

The pre bookings eff. 14 July looks very good and encouraging and with 2 weeks to go July should not be a
problem. (enclosed)

Please send my regards to all the girls and tell them to keep up the good work.

Just for reason of clarification. Enclosed to your action list is a production report for Jan-May 1994. The figures I
send to you is only your long-haul sales and do not include European sectors. The correct figure for the period will
be 436,000 USD in target for long-haul (actual 362 TUSD) and 642 TUSD total with 514 TUSD achieved.

Please be so kind and inform Bob accordingly.

xxx

On even date, however, petitioner sent respondent a letter of termination8 on the ground of "loss of confidence." The
letter reads:

"This confirms our (Bob Zozobrado and myself) July 4, 1994 verbal advice to you regarding Managements decision
to terminate your Services as our GSA Manager for SCANDINAVIAN AIRLINES SYSTEMs Offline Operations in
the Philippines, thirty (30) days upon receipt of this Notice, due to our loss of confidence in your Managerial and
Marketing capabilities. As explained to you by Mr. Zozobrado and myself, records will show that under your
Management (or lack of it), our SAS-GSA performance is, as follows:

A. 1993 vs. 1992

Gross Revenue - 29 % shortfall

Operating Expenses - 2% over

Net Cash Flow - 79% shortfall

B. JAN-APR 94 vs. JAN-APR 92

Revenues - 34% shortfall

Operating Expenses - 6% over

Net Cash Flow - 94% shortfall

Several times in the past, we have made you aware in the need to improve your sales performance and gain the
respect of your staff which have openly expressed their concern on their lack of direction under your management.
Even our principal (SAS) had negative comments about the way you handle urgent requirements of the Regional
Office. SAS was also alarmed by the aforementioned dismal overall Performance of APC/SAS. All these prompted
us to decide to replace you as our SAS GSA Manager to save the situation and our representation of the SAS-GSA
in the Philippines.
x x x" (Quoted verbatim; Emphasis supplies).

Thus spawned the filing by respondent of a complaint for illegal dismissal against petitioner, Bondoc, Zozobrado
and one Donald Marshall (the record indicates that he had ceased to be connected with petitioner when the case was
pending before the Labor Arbiter), with prayer for damages and attorneys fees. In her complaint petitioner alleged
that Bondoc and Zozobrado had asked her to tender her resignation as she was not the person whom SAS was
looking for to handle the position of Sales Manager9 but that she refused, hence, she was terminated by the letter of
July 18, 1994 letter.10

The Labor Arbiter, after a detailed analysis of the evidence for both parties, found for respondent upon the following
issues:

1. Whether or not complainant was validly terminated for cause;

2. Whether or not due process was observed when complainant was terminated; and

3. Whether or not any of the parties are entitled to damages,

and disposed in his decision11 as follows:

"WHEREFORE, finding the dismissal of the complainant Ms Linda Farolan to be without just cause, effected with
malice, ill will and bad faith, respondent Asian Pacific Chartering Philippine, Inc. is hereby ordered to pay her
separation pay of Forty Four Thousand Pesos (P44,000.00), and all the benefit that would have been due her under
the premises. Asian Pacific Chartering is likewise ordered to pay complainant moral damages in the amount of One
Million Five Hundred Thousand Pesos (P1,500,000.00) and exemplary damages in the amount of Seven Hundred
Fifty Thousand Pesos (P750,000.00), nominal damages of Five Thousand Pesos (P5,000.00) and the equivalent of
25% of the total award as attorneys fees."

On appeal, the NLRC, by Decision of March 22, 1999,12 reversed the Labor Arbiters decision, it recognizing the
right of petitioner as employer to terminate or dismiss employees based on loss of trust and confidence, the right
being a management prerogative.

Respondents Motion for Reconsideration of the NLRC Decision having been denied, she brought her case to the
Court of Appeals via Certiorari.13

By Decision of June 28, 2001,14 the Court of Appeals, as stated early on, reversed the NLRC decision and disposed
as follows:

"WHEREFORE, premises considered, the challenged decision dated March 22, 1999 and the Resolution dated July
16, 1999 of public respondent National Labor Relations Commission (Second Division) are hereby set aside for
having been issued with grave abuse of discretion amounting to lack or in excess of jurisdiction. The decision dated
September 17, 1998 of Labor Arbiter Romulus S. Protacio is hereby upheld with modifications that the award of
attorneys fees shall only be equivalent to ten percent (10%) of the total monetary award. In addition, the award for
nominal damages is deleted for lack of basis." (Underscoring supplied).

Petitioner filed a motion for reconsideration15 of the Court of Appeals decision but it was denied, hence, the present
Petition for Review on Certiorari16 anchored on the following grounds:

"I

THE CA DEFIED THE WELL-ESTABLISHED RULE THAT APC, AS EMPLOYER, HAS THE
MANAGEMENT PREROGATIVE TO REPLACE A SALES MANAGER WHOM IT HAS REASONABLE
GROUNDS TO BELIEVE CANNOT EFFECTIVELY DISCHARGE THE DUTIES DEMANDED BY SUCH
POSITION.

II

THE CA DECISION WAS PREMISED ON LACK OF EVIDENCE TO DISPROVE RESPONDENTS THEORY

THAT THE POOR SALES PERFORMANCE OF SAS WAS DUE TO MARKET FORCES BEYOND HER
CONTROL. YET, THE EVIDENCE ON RECORD SHOWED THE CONTRARY. NO LESS THAN SAS
CONFIRMED THAT RESPONDENT WAS NOT FIT FOR THE POSITION OF MANAGER AND, THAT NO
SPECIAL CIRCUMSTANCES SUFFICIENT TO TRIGGER THE SHARP DECLINE IN SALES
SUPERVENED IN THE PHILIPPINE MARKET.

III

IN AWARDING MORAL AND EXEMPLARY DAMAGES, THE CA ACTED WITH GRAVE ABUSE OF
DISCRETION. EVEN ASSUMING, THAT RESPONDENTS TERMINATION WAS WITHOUT JUST CAUSE,
APC IS NOT LIABLE TO PAY DAMAGES [MILLARES vs. NLRC, 328 SCRA 79 (2001)] COROLLARILY,
APC IS PRESUMED TO HAVE ACTED IN GOOD FAITH [GONZALES vs. NLRC, G.R. NO. 131653-26 March
2001]. THE CA, HOWEVER, REVERSED THE PRESUMPTION. IT PRESUMED-WITHOUT ANY EVIDENCE
WHATSOEVER-THAT APC ACTED IN BAD FAITH IN TERMINATING RESPONDENT WITHOUT DUE
REGARD TO THE HARSH CONSEQUENCES OF THE TERMINATION

The issue in the main is whether or not respondents dismissal was legal.

A statement of the requisites for a valid dismissal of an employee is thus in order, to wit: (a) the employee must be
afforded due process, i.e., he must be given opportunity to be heard and to defend himself; and (b) dismissal must be
for a valid cause as provided in Article 282 of the Labor Code or any of the authorized causes under Article 283 and
284 of the same Code.17

As regards the first requisite, the following substantiated findings of the Labor Arbiter, which were adopted by the
Court of Appeals, reflect respondents deprivation of due process:

"x x x

[W]e find that the manner by which complainant was dismissed violated the basic precepts of fairness and due
process. First, without any semblance of, or written authority whatsoever (TSN dated January 30, 1996, pp. 46 - 48),
respondent Zozobrado took over the functions of complainant. Complainant claims that she has been told it was
upon the will of respondent Marshall that she be replaced. Although respondent Zozobrado may have been merely
giving pointers and suggestions to the staff of complainant, the appearance of authority was unpleasantly
conspicuous. Later, respondent Bondoc summoned complainant and told her to tender her resignation or face
termination. Complainant, not having been given a justifiable ground, refused to resign. Thereafter, she was finally
terminated, without being afforded the opportunity to be heard and to present evidence in her defense. She was
never given a written notice stating the particular acts or omission constituting the grounds for her dismissal as
required by law. x x x"18

As regards the second requisite, the rule is settled that in termination cases, the employer bears the onus of proving
that the dismissal is for just cause failing which the dismissal is not justified and the employee is entitled to
reinstatement.19

Petitioner claims that respondent failed to live up to managements expectation in light of her failure to adopt sales
and marketing strategies to increase sales revenues of SAS, which failure is reflective of her incompetence and
inefficiency, thus resulting to loss of revenues in 1993 and 1994.
Petitioner adds that had it not been through Zozobrados efforts, SAS sales revenues could not have recovered.

Petitioner further claims that Jespersen was the one who initiated the termination of respondent because of her
"dismal performance" in handling its operations.

And petitioner reiterates the principle that the right to dismiss a managerial employee is a measure of self-
preservation, it citing the cases of Grand Motor Parts Corp. v. Minister of Labor et al.,20 and Buiser et al. v.
Legardo.21

Before passing on petitioners position, this Court deems it imperative to discuss the nature of respondents job as
sales manager of petitioner. It is not disputed that her job description, and the terms and conditions of her
employment, with the exception of her salary and allowances, were never reduced to writing.

Recent decisions of this Court distinguish 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.22

"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, mere existence of a basis for believing
that such employee has breached the trust of his employer would suffice for his dismissal." (Underscoring supplied)

As enunciated in Samson v. NLRC, 330 SCRA 460,

"Before one may be properly considered a managerial employee, all the following conditions must be met:

(1) Their primary duty consists of the management of the establishment in which they are employed or of a
department or subdivision thereof;

(2) They customarily and regularly direct the work of two or more employees therein;

(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and recommendations
as to the hiring and firing and as to the promotion or any other change of status of other employees are given
particular weight. (Section 2(b), Rule I, Book III of the Omnibus Rules Implementing the Labor Code, emphasis
supplied).

By respondents claim, her function, as verbally explained to her by Murray, dealt mainly with servicing of existing
clientele.23 Bondoc, however, described respondents functions and duties as critical.24

The following ruling of this Court in Paper Industries Corp. of the Philippines v. Laguesma25 is instructive:

"Managerial employees are ranked as Top Managers, Middle Managers and First Line Managers. The mere fact that
an employee is designated "manager" does not ipso facto make him one-designation should be reconciled with the
actual job description of the employee for it is the job description that determines the nature of
employment." 24 (Underscoring supplied).

The absence of a written job description or prescribed work standards, however, leaves this Court in the dark.

Even assuming, however, that respondent was a managerial employee, the stated ground (in the letter of termination)
for her dismissal, "loss of confidence," should have a basis and determination thereof cannot be left entirely to the
employer.
Loss of trust and confidence to be a valid ground for an employees dismissal must be based on a willful breach and
founded on clearly established facts.26 A breach is willful if it is done intentionally, knowingly and purposely,
without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.27

Respondents detailed REPORT dated September 8, 1993, quoted above, relative to SAS profit and loss for 1993,
which was closely examined and analyzed by the Labor Arbiter, contains an explanation of what brought about the
decline in sales revenues. And it contains too a number of recommended measures on improvement of sales for the
remainder of 1993 and for 1994.

As did the Labor Arbiter and the Court of Appeals, this Court finds respondents explanation in her Report behind
the decline in sales revenues as due to market forces beyond respondents control plausible. In any event, there is no
showing that the decline is reflective of any willfull breach of duties by respondent.

The two letters sent by SAS to respondent in 1994 in fact negate willful breach of her duties by respondent. The first
(received on May 21, 1994) congratulated her and Zozobrado for exceeding "sale (sic) result in April" 1994.
Petitioners argument that respondent could not invoke these letters in her favor as they were intended for Zozobrado
fails. The letters were addressed to respondent and Zozobrado. The second letter (received on July 18, 1994) which
was addressed to respondent, while noting that the sales for June 1994 did not reach the target in "C/class", noted
that in "M/class" she "managed very well". And it went on to state that "[t]he pre-bookings eff. 14 July looks (sic)
very good and encouraging and with 2 weeks to go July should not be a problem." In fact it requested respondent to
"send . . . regards to all the girls and tell them to keep up the good work."

While petitioner attributes the improvement of sales in 1994 to Zozobrado, the fact remains that respondent was still
the Sales Manager up to July 1994, in charge of those "sales meetings" during which pertinent market strategies
were developed and utilized to increase sales.

In another vein, petitioner attributes loss of confidence to respondents alleged "gross inefficiency and
incompetence," it citing, as earlier stated, the cases of Grand Motor Parts Corp. (supra) and Buiser et al. (supra).

The Grand Motors case, however, involved a probationary employee-manager who failed to, among other things,
submit required monthly reports and violated company policy, clearly mirroring his insubordination and disrespect
to express instructions of management.

While this Court, in the Buiser case (supra), held that "[f]ailure to observe prescribed standards of work, or to fulfill
reasonable work assignments due to inefficiency" may be just cause for dismissal, petitioner has neither shown what
standards of work or reasonable work assignments were prescribed which respondent failed to observe nor that if
she did fail to observe any such, it was due to inefficiency.

Finally and at all events, given respondents previous work experience as herein below indicated, to wit:

"Period Company Position

1960-1967 Express Tours, Inc. Clerk-Reservations & Ticketing

1968-1970 House of Travel, Inc. Sales Manager

1971-1973 Super Travel Manager, Administration

1973-1978 American Express, Inc. Manager, World Health Organization Account

1978-1983 F.A.R. Travel Masters, President & General Manager

Inc.
 1983-1984 Cebu Plaza Director, Convention

1985-1989 American Express, Inc. Manager-World Health Organization In-Plant Office Senior
Manager-Asian Development Bank In-Plant Office

1992-1994 Asia Pacific Chartering Sales Manager, Passenger & Cargo GSA Operations, Scandinavian
Phil. Inc. Airlines System."

(Exhibit "A", p. 72, Court of Appeals Rollo),

this Court is not prepared to find for petitioner. It bears noting that there is no showing that respondent represented
herself as possessed of the highest degree of skill and care known in the trade. And it is not disputed that respondent
was approached by petitioners then Sales Manager Murray, and offered the position of Sales Manager. She thus
could not just be unceremoniously discharged for "loss of confidence" arising from alleged incompetency28.

"While an employee may be dismissed because of inefficiency, neglect or carelessness, the law implies a situation
or undertaking by an employee in entering into a contract of employment that he is competent to perform the work
undertaken and is possessed of the requisite skill and knowledge to enable him to do so, and that he will do the work
of the employer in a careful manner. If he is not qualified to do the work which he undertakes, if he is incompetent,
unskillful or inefficient, or if he executes his work in a negligent manner or is otherwise guilty of neglect of duty, he
may lawfully be discharged before the expiration of his term of employment."29

In fine, this Court finds that respondent had been illegally dismissed and is accordingly entitled to reinstatement to
her former position without loss of seniority rights and payment of backwages.30 But as the matter of reinstatement
is no longer feasible as the GSA contract between SAS and petitioner had been terminated in May of 1996,
respondent is, as correctly held by the Court of Appeals, entitled to separation pay in an amount equivalent to one
(1) month salary for every year of service, a fraction of six (6) months to be considered a year.

Having been hired on December 16, 1992 and terminated on July 18, 1994, respondent is considered to have worked
for two (2) years for purposes of computing her separation pay.

Respondent is also entitled to the award of backwages computed from July 18, 1994 up to May of 1996.

As regards the award to respondent of moral and exemplary damages, petitioner assails it in this wise: "The award of
damages in so far as the same was based solely on respondents affidavit containing general and uncorroborated
statement that she suffered damages as a result of her termination is null and void [it being] insufficient to overcome
the presumption o good faith."

The following pertinent portions of petitioners Affidavit which Affidavit was submitted as part of her testimony are
self-explanatory, however.

"x x x

8. On July 4, 1994, Messrs. Bondoc and Zozobrado summoned me and without any clear explanation, ordered me to
submit a letter of resignation; they informed me that I was not the person whom SAS was looking for to handle the
position of Sales Manager; even as I was deeply hurt, shocked, and humiliated, I declined to resign from my position
as I strongly believed that the instruction for me to resign was unjust and violative of my rights; during the
conference, I was never given the chance to know precisely why I was being asked to resign or to explain my
position; furthermore, I was informed then that Mr. Donald Marshall was the one who decided and insisted on my
termination.
9. On July 18, 1994, again without regard to the basic requirements of due process, I was given a notice of
termination signed by Mr. Bondoc; the supposed ground for my termination was APCs alleged loss of confidence in
my managerial and marketing capabilities due to the companys alleged dismal performance during my term of office
as GSA Sales Manager; once more, I was never called to answer this charge; a copy of the notice of termination is
hereto attached as Annex E;

10. The news of my termination circulated at once in the travel industry and as a result, I was and still am frequently
asked by my friends and acquaintances in the industry about my termination from APC to my endless humiliation
and embarrassment; this up to now causes me endless emotional pain that I even avoid my friends and acquaintances
for fear that they might look at me differently after my termination from APC; my reputation as a professional has
been totally shattered by the unjust act of APC;

11. Because of the extreme social humiliation, and serious anxiety over my now besmirched reputation in the travel
industry, I decided to seek legal advise; on July 21, 1994, my counsel wrote APC demanding for my immediate
reinstatement without loss of seniority rights and for damages; a copy of the letter-demand is hereto attached as
Annex F;

x x x".

They need no amplification and/or corroboration. Indeed, petitioner was deprived of due process and denied "basic
precepts of fairness" when she was terminated. Her resultant sufferings thus entitle her to an award of moral
damages.

To warrant award of moral damages, it must be shown that the dismissal of the employee was attended to by bad
faith, or constituted an act opposite to labor, or was done in a manner contrary to morals, good customs or public
policy.31

Award of moral and exemplary damages for an illegally dismissed employee is proper where the employee had been
harassed and arbitrarily terminated by the employer.32

In determining the amount of moral damages recoverable, however, the business, social and financial position of the
offended party and the business or financial position of the offender are taken into account.33 Given petitioners
business position or standing before and at the time of termination and petitioners business and financial position,
this Court reduces the amount of moral damages awarded to P500,000.00 which it finds reasonable. The amount of
exemplary damages awarded is accordingly reduced too to P250,000.00.

WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED with the MODIFICATION that the
amount of moral damages and exemplary damages awarded to respondent, Ma. Linda R. Farolan, is hereby reduced
to Five Hundred Thousand (P500,000.00) Pesos and Two Hundred Fifty Thousand (P250,000.00) Pesos,
respectively.

Costs against petitioner.

SO ORDERED.
 SECOND DIVISION

G.R. No. 156367 May 16, 2005

AUTO BUS TRANSPORT SYSTEMS, INC., petitioner,

vs.
ANTONIO BAUTISTA, respondent.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision1 and Resolution2 of the Court of Appeals
affirming the Decision3 of the National Labor Relations Commission (NLRC). The NLRC ruling modified the
Decision of the Labor Arbiter (finding respondent entitled to the award of 13th month pay and service incentive
leave pay) by deleting the award of 13th month pay to respondent.

THE FACTS

Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus Transport Systems, Inc.
(Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila
and Manila-Tabuk via Baguio. Respondent was paid on commission basis, seven percent (7%) of the total gross
income per travel, on a twice a month basis.

On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus he was
driving accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle suddenly stopped at a sharp
curve without giving any warning.

Respondent averred that the accident happened because he was compelled by the management to go back to Roxas,
Isabela, although he had not slept for almost twenty-four (24) hours, as he had just arrived in Manila from Roxas,
Isabela. Respondent further alleged that he was not allowed to work until he fully paid the amount of P75,551.50,
representing thirty percent (30%) of the cost of repair of the damaged buses and that despite respondent’s pleas for
reconsideration, the same was ignored by management. After a month, management sent him a letter of termination.

Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for
nonpayment of 13th month pay and service incentive leave pay against Autobus.

Petitioner, on the other hand, maintained that respondent’s employment was replete with offenses involving reckless
imprudence, gross negligence, and dishonesty. To support its claim, petitioner presented copies of letters, memos,
irregularity reports, and warrants of arrest pertaining to several incidents wherein respondent was involved.

Furthermore, petitioner avers that in the exercise of its management prerogative, respondent’s employment was
terminated only after the latter was provided with an opportunity to explain his side regarding the accident on 03
January 2000.

On 29 September 2000, based on the pleadings and supporting evidence presented by the parties, Labor Arbiter
Monroe C. Tabingan promulgated a Decision,4 the dispositive portion of which reads:

WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal has no
leg to stand on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.

However, still based on the above-discussed premises, the respondent must pay to the complainant the
following:
 a. his 13th month pay from the date of his hiring to the date of his dismissal, presently computed at
P78,117.87;

b. his service incentive leave pay for all the years he had been in service with the respondent,
presently computed at P13,788.05.

All other claims of both complainant and respondent are hereby dismissed for lack of merit.5

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the NLRC which rendered its
decision on 28 September 2001, the decretal portion of which reads:

[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3 provides:

"Section 3. Employers covered. – The Decree shall apply to all employers except to:

xxx xxx xxx

e) employers of those who are paid on purely commission, boundary, or task basis, performing a
specific work, irrespective of the time consumed in the performance thereof. xxx."

Records show that complainant, in his position paper, admitted that he was paid on a commission basis.

In view of the foregoing, we deem it just and equitable to modify the assailed Decision by deleting the
award of 13th month pay to the complainant.

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of 13th month
pay. The other findings are AFFIRMED.6

In other words, the award of service incentive leave pay was maintained. Petitioner thus sought a reconsideration of
this aspect, which was subsequently denied in a Resolution by the NLRC dated 31 October 2001.

Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of said decision with
the Court of Appeals which was subsequently denied by the appellate court in a Decision dated 06 May 2002, the
dispositive portion of which reads:

WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the
assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is hereby
AFFIRMED in toto. No costs.7

Hence, the instant petition.

ISSUES

1. Whether or not respondent is entitled to service incentive leave;

2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor Code, as amended,
is applicable to respondent’s claim of service incentive leave pay.

RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation of Article 95 of the Labor Code vis-à-
vis Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of the Labor Code which provides:

Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE

(a) Every employee who has rendered at least one year of service shall be entitled to a yearly
service incentive leave of five days with pay.

Book III, Rule V: SERVICE INCENTIVE LEAVE

SECTION 1. Coverage. – This rule shall apply to all employees except:

(d) Field personnel and other employees whose performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those who
are paid in a fixed amount for performing work irrespective of the time consumed in the
performance thereof; . . .

A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has
been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not
explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall not
apply to employees classified as "field personnel." The phrase "other employees whose performance is unsupervised
by the employer" must not be understood as a separate classification of employees to which service incentive leave
shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of field personnel
under the Labor Code as those "whose actual hours of work in the field cannot be determined with reasonable
certainty."8

The same is true with respect to the phrase "those who are engaged on task or contract basis, purely commission
basis." Said phrase should be related with "field personnel," applying the rule on ejusdem generis that general and
unlimited terms are restrained and limited by the particular terms that they follow.9 Hence, employees engaged on
task or contract basis or paid on purely commission basis are not automatically exempted from the grant of service
incentive leave, unless, they fall under the classification of field personnel.

Therefore, petitioner’s contention that respondent is not entitled to the grant of service incentive leave just because
he was paid on purely commission basis is misplaced. What must be ascertained in order to resolve the issue of
propriety of the grant of service incentive leave to respondent is whether or not he is a field personnel.

According to Article 82 of the Labor Code, "field personnel" shall refer to non-agricultural employees who regularly
perform their duties away from the principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. This definition is further elaborated in
the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial
Employees Association10 which states that:

As a general rule, [field personnel] are those whose performance of their job/service is not supervised by
the employer or his representative, the workplace being away from the principal office and whose hours
and days of work cannot be determined with reasonable certainty; hence, they are paid specific amount for
rendering specific service or performing specific work. If required to be at specific places at specific times,
employees including drivers cannot be said to be field personnel despite the fact that they are performing
work away from the principal office of the employee. [Emphasis ours]

To this discussion by the BWC, the petitioner differs and postulates that under said advisory opinion, no employee
would ever be considered a field personnel because every employer, in one way or another, exercises control over
his employees. Petitioner further argues that the only criterion that should be considered is the nature of work of the
employee in that, if the employee’s job requires that he works away from the principal office like that of a
messenger or a bus driver, then he is inevitably a field personnel.

We are not persuaded. At this point, it is necessary to stress that the definition of a "field personnel" is not merely
concerned with the location where the employee regularly performs his duties but also with the fact that the
employee’s performance is unsupervised by the employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of business of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty. Thus, in order to conclude whether an employee is
a field employee, it is also necessary to ascertain if actual hours of work in the field can be determined with
reasonable certainty by the employer. In so doing, an inquiry must be made as to whether or not the employee’s time
and performance are constantly supervised by the employer.

As observed by the Labor Arbiter and concurred in by the Court of Appeals:

It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors
assigned at strategic places who board the bus and inspect the passengers, the punched tickets, and the
conductor’s reports. There is also the mandatory once-a-week car barn or shop day, where the bus is
regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or not there are problems
thereon as reported by the driver and/or conductor. They too, must be at specific place as [sic] specified
time, as they generally observe prompt departure and arrival from their point of origin to their point of
destination. In each and every depot, there is always the Dispatcher whose function is precisely to see to it
that the bus and its crew leave the premises at specific times and arrive at the estimated proper time. These,
are present in the case at bar. The driver, the complainant herein, was therefore under constant supervision
while in the performance of this work. He cannot be considered a field personnel.11

We agree in the above disquisition. Therefore, as correctly concluded by the appellate court, respondent is not a field
personnel but a regular employee who performs tasks usually necessary and desirable to the usual trade of
petitioner’s business. Accordingly, respondent is entitled to the grant of service incentive leave.

The question now that must be addressed is up to what amount of service incentive leave pay respondent is entitled
to.

The response to this query inevitably leads us to the correlative issue of whether or not the three (3)-year
prescriptive period under Article 291 of the Labor Code is applicable to respondent’s claim of service incentive
leave pay.

Article 291 of the Labor Code states that all money claims arising from employer-employee relationship shall be
filed within three (3) years from the time the cause of action accrued; otherwise, they shall be forever barred.

In the application of this section of the Labor Code, the pivotal question to be answered is when does the cause of
action for money claims accrue in order to determine the reckoning date of the three-year prescriptive period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant
to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right
of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff.12

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the third element of a
cause of action transpired. Stated differently, in the computation of the three-year prescriptive period, a
determination must be made as to the period when the act constituting a violation of the workers’ right to the
benefits being claimed was committed. For if the cause of action accrued more than three (3) years before the filing
of the money claim, said cause of action has already prescribed in accordance with Article 291.13
Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is established that the benefits
being claimed have been withheld from the employee for a period longer than three (3) years, the amount pertaining
to the period beyond the three-year prescriptive period is therefore barred by prescription. The amount that can only
be demanded by the aggrieved employee shall be limited to the amount of the benefits withheld within three (3)
years before the filing of the complaint.14

It is essential at this point, however, to recognize that the service incentive leave is a curious animal in relation to
other benefits granted by the law to every employee. In the case of service incentive leave, the employee may
choose to either use his leave credits or commute it to its monetary equivalent if not exhausted at the end of the
year.15 Furthermore, if the employee entitled to service incentive leave does not use or commute the same, he is
entitled upon his resignation or separation from work to the commutation of his accrued service incentive leave. As
enunciated by the Court in Fernandez v. NLRC:16

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments,
subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations
provides that "[e]very employee who has rendered at least one year of service shall be entitled to a yearly
service incentive leave of five days with pay." Service incentive leave is a right which accrues to every
employee who has served "within 12 months, whether continuous or broken reckoned from the date the
employee started working, including authorized absences and paid regular holidays unless the working
days in the establishment as a matter of practice or policy, or that provided in the employment contracts, is
less than 12 months, in which case said period shall be considered as one year." It is also "commutable to
its money equivalent if not used or exhausted at the end of the year." In other words, an employee who has
served for one year is entitled to it. He may use it as leave days or he may collect its monetary value. To
limit the award to three years, as the solicitor general recommends, is to unduly restrict such right.17 [Italics
supplied]

Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to claim his
service incentive leave pay accrues from the moment the employer refuses to remunerate its monetary equivalent if
the employee did not make use of said leave credits but instead chose to avail of its commutation. Accordingly, if
the employee wishes to accumulate his leave credits and opts for its commutation upon his resignation or separation
from employment, his cause of action to claim the whole amount of his accumulated service incentive leave shall
arise when the employer fails to pay such amount at the time of his resignation or separation from employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can conclude
that the three (3)-year prescriptive period commences, not at the end of the year when the employee becomes
entitled to the commutation of his service incentive leave, but from the time when the employer refuses to pay its
monetary equivalent after demand of commutation or upon termination of the employee’s services, as the case may
be.

The above construal of Art. 291, vis-à-vis the rules on service incentive leave, is in keeping with the rudimentary
principle that in the implementation and interpretation of the provisions of the Labor Code and its implementing
regulations, the workingman’s welfare should be the primordial and paramount consideration.18 The policy is to
extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law,
which is in consonance with the avowed policy of the State to give maximum aid and protection to labor.19

In the case at bar, respondent had not made use of his service incentive leave nor demanded for its commutation
until his employment was terminated by petitioner. Neither did petitioner compensate his accumulated service
incentive leave pay at the time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one
month from the time of his dismissal, that respondent demanded from his former employer commutation of his
accumulated leave credits. His cause of action to claim the payment of his accumulated service incentive leave thus
accrued from the time when his employer dismissed him and failed to pay his accumulated leave credits.

Therefore, the prescriptive period with respect to his claim for service incentive leave pay only commenced from the
time the employer failed to compensate his accumulated service incentive leave pay at the time of his dismissal.
Since respondent had filed his money claim after only one month from the time of his dismissal, necessarily, his
money claim was filed within the prescriptive period provided for by Article 291 of the Labor Code.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision of the Court of
Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-21348 June 30, 1966

RED V COCONUT PRODUCTS, LTD., petitioner,

vs.
COURT OF INDUSTRIAL RELATIONS, TANGLAW NG PAGGAWA, ALBERTO DELA CRUZ, ET
AL., respondents.

Romeo A. Real for petitioner.

A. V. Villacorta for respondents.

BENGZON, J.P., J.:

Red V Coconut Products, Ltd. is a corporation with principal office and place of business at Lucena City. It has in
that city a desiccated coconut factory. In said factory, it has several hundred workers. About 800 of said workers are
members of Tanglaw ng Paggawa labor union.

Tanglaw ng Paggawa and Red V Coconut Products, Ltd. entered into a collective bargaining agreement on July 15,
1958. Subsequently, however, on October 5, 1961, the aforementioned company and union entered into another
collective bargaining agreement, to expire on October 31, 1965.

The 1958 collective bargaining agreement provided among other things for payment of differentials to night shift
workers in the desiccated coconut factory.1äwphï1.ñët

The 1961 collective bargaining agreement retained the same arrangement. It stated:

The present shift differential will remain in effect, namely, 35¢ for the second shift and 55¢ for the third
Shift.

In the factory, there are two groups of workers, the three-shift group — let us call it Group A — and the two — shift
group — which we shall call Group B. As observed by the parties thereto, differentials were paid to workers, under
the 1958 and 1961 contracts, thus:

Hours of Work Differentials

Group A — 1st shift 4 A.M. — 12 Noon (8 Hrs.) None

2nd shift 12 Noon — 8 P.M. (8 Hrs.) .35

3rd shift 8 P.M. — 4 A.M. (8 Hrs.) .55

Group B — 1st shift 4 A.M. — 4 P.M. (12 Hrs.) None

2nd shift 4 P.M. — 4 A.M. (12 Hrs.) .55

On January 17, 1962, Tanglaw ng Paggawa and some 300 workers in the above-stated factory, members of the said
union, who belong to Group B, filed a petition in the Court of Industrial Relations. Petitioners therein alleged that
the petitioners-workers are shellers, parers, counters and haulers in the two shifts (Group B) consisting of 12 hours
each shift, the first shift from 4: 00 A.M. to 4: 00 P.M. and the second shift from 4 P.M. to 4 A.M.; that said workers
change shift assignments every week; that, accordingly, all of them work from 4 A.M. to 4 P.M. (first shift) for two
alternate weeks per month and from 4 P.M. to 4 A.M. (second shift) likewise for two alternate weeks in a month;
that although said workers perform work from 4 P.M. to 4 A.M., they receive only P.55 differential pay for the
corresponding hours of night work; that their nightwork is equivalent to the nightwork of the 2nd and 3rd shifts of
Group A combined, so that they should receive what the 2nd and 3rd shifts of Group A, combined, receive as
differential pay, namely, P.90 (P.75 plus P.35); that, therefore, they are entitled to payment of P.35 more as
differential pay, since up to the time of the petition, they received only P.55 per night as differential pay.

Said additional P.35 was asked by the petitioners-workers of Group B f or work done by them from 4 P.M. to 4
A.M. Their claim referred to the time from July 15, 1958 to the date of the petition, allegedly at P186.90 per sheller,
parer, counter and hauler, or a total sum of P65,228.10 more or less.

Respondent company therein filed on January 28, 1962 a motion to dismiss, stating that the Court of Industrial
Relations has no jurisdiction over the case for the reason that the claim asserted in the petition is a simple money
claim and that an interpretation of a contract (the collective bargaining agreement is involved, which pertains to the
regular courts.

The Court of Industrial Relations denied said motion by resolution of February 17, 1962 ruling that the claim is for
unpaid overtime pay of laborers still employed by the company. Said court likewise denied a motion for
reconsideration of the resolution. Red V Coconut Products, Ltd. filed its answer on May 2, 1962.

In the meanwhile, on April 25, 1962, Tanglaw ng Paggawa filed with the Court of Industrial Relations a new and
independent petition alleging unfair labor practice against Red V Coconut Products, Ltd. (CIR Case No. 3150
ULP). It was asserted therein that the company refused to grant 15 days leave with pay to the members of the union
in violation of the 1961 collective bargaining agreement.

The Court of Industrial Relations, on January 19, 1963 after trial, rendered its decision on the petition for differential
pay (CIR Case No. 1642-V). It found therein that the petitioners-workers are engaged on pakiao or piece-work
basis, and, therefore, are not entitled to overtime pay under the Eight-Hour Labor Law (Sec. 2, CA 444); that their
petition for night shift differentials based on the collective bargaining agreements is meritorious because the
company having paid night differentials indiscriminately to the night shift workers of Group A and Group B alike,
the payments should be uniform and equal for the night shifts of both groups, that is, P.90. It therefore ordered
payment of the deficiency in said differentials to the workers of Group B.

Red V Coconut Products, Ltd. moved for reconsideration of said decision on January 29, 1963. The Court of
Industrial Relations en banc denied said motion by resolution of February 25, 1963. And, hence, Red V Coconut
Products, Ltd. filed this petition for review herein.

Petitioner herein contends that the present case involves a mere money claim over which the Court of Industrial
Relations has no jurisdiction.1

It is exiomatic that to determine the issue of jurisdiction resort is to be made to the allegations in the petition or
complaint.2 The petition for shift differential in the present case, it is true, did not expressly mention the Eight-Hour
Labor Law. Nonetheless, it clearly asserted that (1) petitioners-laborers "are working in the Red V Coconut
Products, Ltd." and (2) they "work in two (2) shifts (Blue and Red shifts) consisting of approximately 12 hours each
shift." Accordingly, from the said allegations, it is proper to regard the petition, as the Court of Industrial Relations
did, as one for overtime pay by workers still employed by the company. As such it falls within the jurisdiction of the
Court of Industrial Relations. For the same is in effect an assertion not of a simple money claim but, as respondent
court rightly held, of a claim for overtime pay by workers who are employees of the company.3

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

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

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

Wherefore, the decision and resolution of the Court of Industrial Relations under review are affirmed. So ordered.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 78210 February 28, 1989

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

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

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

The Solicitor General for public respondent.

Dominguez & Paderna Law Offices Co. for private respondent.

PARAS, J.:

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

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

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

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

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

SO ORDERED. (Rollo, p. 58)

On December 12, 1986, after considering the appeal memorandum of complainant and the opposition of
respondents, the First Division of public respondent NLRC composed of Acting Presiding Commissioner Franklin
Drilon, Commissioner Conrado Maglaya, Commissioner Rosario D. Encarnacion as Members, promulgated its
Resolution, upholding the Labor Arbiters' decision. The Resolution's dispositive portion reads:

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

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

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

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

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

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

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

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

Petitioners assign the following issues:

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

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

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

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

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

These preliminary activities of the workers are as follows:

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

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

(c) Then they go to the stockroom to get the working materials, tools and equipment.
 (d) Lastly, they travel to the field bringing with them their tools, equipment and materials.

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

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

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

The Minister of Labor held:

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

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

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

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

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

Be that as it may, petitioners' claim that there was a change in the factual scenario which are "substantial changes in
the facts" makes respondent firm now liable for the same claim they earlier filed against respondent which was
dismissed. It is thus axiomatic that the non-compensability of the claim having been earlier established, constitute
the controlling legal rule or decision between the parties and remains to be the law of the case making this petition
without merit.
As aptly observed by the Solicitor General that this petition is "clearly violative of the familiar principle of res
judicata. There will be no end to this controversy if the light of the Minister of Labor's decision dated May 12, 1979
that had long acquired the character of finality and which already resolved that petitioners' thirty (30)-minute
assembly time is not compensable, the same issue can be re-litigated again." (Rollo, p. 183)

This Court has held:

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

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

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

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

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 132805 February 2, 1999

PHILIPPINE AIRLINES, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ROMULUS PROTACIO and DR.
HERMINIO A. FABROS, respondents.

PUNO, J.:

Petitioner Philippine Airlines, Inc. assails the decision of the National Labor Relations Commission dismissing its
appeal from the decision of Labor Arbiter Romulus S. Protacio which declared the suspension of private respondent
Dr. Herminio A. Fabros illegal and ordered petitioner to pay private respondent the amount equivalent to all the
benefits he should have received during his period of suspension plus P500,000.00 moral damages.

The facts are as follow:

Private respondent was employed as flight surgeon at petitioner company. He was assigned at the PAL Medical
Clinic at Nichols and was on duty from 4:00 in the afternoon until 12:00 midnight.

On February 17, 1994, at around 7:00 in the evening, private respondent left the clinic to have his dinner at his
residence, which was about five-minute drive away. A few minutes later, the clinic received an emergency call from
the PAL Cargo Services. One of its employees, Mr. Manuel Acosta, had suffered a heart attack. The nurse on duty,
Mr. Merlino Eusebio, called private respondent at home to inform him of the emergency. The patient arrived at the
clinic at 7:50 in the evening and Mr. Eusebio immediately rushed him to the hospital. When private respondent
reached the clinic at around 7:51 in the evening, Mr. Eusebio had already left with the patient. Mr. Acosta died the
following day.

Upon learning about the incident, PAL Medical Director Dr. Godofredo B. Banzon ordered the Chief Flight Surgeon
to conduct an investigation. The Chief Flight Surgeon, in turn, required private respondent to explain why no
disciplinary sanction should be taken against him.

In his explanation, private respondent asserted that he was entitled to a thirty-minute meal break; that he
immediately left his residence upon being informed by Mr. Eusebio about the emergency and he arrived at the clinic
a few minutes later; that Mr. Eusebio panicked and brought the patient to the hospital without waiting for him.

Finding private respondent's explanation unacceptable, the management charged private respondent with
abandonment of post while on duty. He was given ten days to submit a written answer to the administrative charge.

In his answer, private respondent reiterated the assertions in his previous explanation. He further denied that he
abandoned his post on February 17, 1994. He said that he only left the clinic to have his dinner at home. In fact, he
returned to the clinic at 7:51 in the evening upon being informed of the emergency.
After evaluating the charge as well as the answer of private respondent, petitioner company decided to suspend
private respondent for three months effective December 16, 1994.

Private respondent filed a complaint for illegal suspension against petitioner.

On July 16, 1996, Labor Arbiter Romulus A. Protasio rendered a decision1 declaring the suspension of private
respondent illegal. It also ordered petitioner to pay private respondent the amount equivalent to all the benefits he
should have received during his period of suspension plus P500,000.00 moral damages. The dispositive portion of
the decision reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered declaring the suspension
of complainant as illegal, and ordering the respondents the restitution to the complainant of all
employment benefits equivalent to his period of suspension, and the payment to the complainant
of P500,000.00 by way of moral damages.2

Petitioner appealed to the NLRC. The NLRC, however, dismissed the appeal after finding that the decision of the
Labor Arbiter is supported by the facts on record and the law on the matter.3 The NLRC likewise denied petitioner's
motion for reconsideration.4

Hence, this petition raising the following arguments:

1. The public respondents acted without or in excess of their

jurisdiction and with grave abuse of discretion in nullifying
the 3-month suspension of private respondent despite the fact
that the private respondent has committed an offense that
warranted the imposition of disciplinary action.

2. The public respondents acted without or in excess of their

jurisdiction and with grave abuse of discretion in holding the
petitioner liable for moral damages:

(a) Despite the fact that no formal hearing

whatsoever was conducted for complainant
to substantiate his claim;

(b) Despite the absence of proof that the

petitioner acted in bad faith in imposing the
3-month suspension; and

(c) Despite the fact that the Labor Arbiter's

award of moral damages is highly irregular,
considering that it was more than what the
private respondent prayed for. 5

We find that public respondents did not err in nullifying the three-month suspension of private respondent. They,
however, erred in awarding moral damages to private respondent.

First, as regards the legality of private respondent's suspension. The facts do not support petitioner's allegation that
private respondent abandoned his post on the evening of February 17, 1994. Private respondent left the clinic that
night only to have his dinner at his house, which was only a few minutes' drive away from the clinic. His
whereabouts were known to the nurse on duty so that he could be easily reached in case of emergency. Upon being
informed of Mr. Acosta's condition, private respondent immediately left his home and returned to the clinic. These
facts belie petitioner's claim of abandonment.
Petitioner argues that being a full-time employee, private respondent is obliged to stay in the company premises for
not less than eight (8) hours. Hence, he may not leave the company premises during such time, even to take his
meals.

We are not impressed.

Art. 83 and 85 of the Labor Code read:

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

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

Art. 85. Meal periods. — Subject to such regulations as the Secretary of Labor may prescribe, it
shall be the duty of every employer to give his employees not less than sixty (60) minutes time-off
for their regular meals.

Sec. 7, Rule I, Book III of the Omnibus Rules Implementing the Labor Code further states:

Sec. 7. Meal and Rest Periods. — Every employer shall give his employees, regardless of sex, not
less than one (1) hour time-off for regular meals, except in the following cases when a meal period
of not less than twenty (20) minutes may be given by the employer provided that such shorter
meal period is credited as compensable hours worked of the employee;

(a) Where the work is non-manual work in nature or does not involve strenuous physical exertion;

(b) Where the establishment regularly operates not less than sixteen hours a day;

(c) In cases of actual or impending emergencies or there is urgent work to be performed on

machineries, equipment or installations to avoid serious loss which the employer would otherwise
suffer; and

(d) Where the work is necessary to prevent serious loss of perishable goods.

Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be considered as
compensable working time.

Thus, the eight-hour work period does not include the meal break. Nowhere in the law may it be inferred that
employees must take their meals within the company premises. Employees are not prohibited from going out of the
premises as long as they return to their posts on time. Private respondent's act, therefore, of going home to take his
dinner does not constitute abandonment.

We now go to the award of moral damages to private respondent.

Not every employee who is illegally dismissed or suspended is entitled to damages. As a rule, moral damages are
recoverable only where the dismissal or suspension of the employee was attended by bad faith or fraud, or
constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public
policy.6 Bad faith does not simply mean negligence or bad judgment. It involves a state of mind dominated by ill
will or motive. It implies a conscious and intentional design to do a wrongful act for a dishonest purpose or some
moral obliquity.7 The person claiming moral damages must prove the existence of bad faith by clear and convincing
evidence for the law always presumes good faith.8

In the case at bar, there is no showing that the management of petitioner company was moved by some evil motive
in suspending private respondent. It suspended private respondent on an honest, albeit erroneous, belief that private
respondent's act of leaving the company premises to take his meal at home constituted abandonment of post which
warrants the penalty of suspension. Also, it is evident from the facts that petitioner gave private respondent all the
opportunity to refute the charge against him and to defend himself. These negate the existence of bad faith on the
part of petitioner. Under the circumstances, we hold that private respondent is not entitled to moral damages.

IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The portion of the assailed decision awarding
moral damages to private respondent is DELETED. All other aspects of the decision are AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-30452 September 30, 1982

MERCURY DRUG CO., INC., petitioner,

vs.
NARDO DAYAO, ET AL., respondents,

Caparas & Ilagan for petitioner.

Gerardo P. Cabo Chan and Elias Banzali for respondents.

GUTIERREZ, JR., J.:

This is a petition for review on certiorari of the decision of the Court of Industrial Relations dated March 30, 1968 in
Case No. 1926-V and the Resolution of the Court en banc dated July 6, 1968 denying two separate motions for
reconsideration filed by petitioners and respondents.

The factual background of Case No. 1926-V is summarized by the respondent Court of Industrial Relations as
follows:

This is a verified petition dated March 17, 1964 which was subsequently amended on July 31,
1964 filed by Nardo Dayao and 70 others against Mercury Drug Co., Inc., and/or Mariano Que,
President & General Manager, and Mercury Drug Co., Inc., Employees Association praying, with
respect to respondent corporation and its president and general manager: 1) payment of their
unpaid back wages for work done on Sundays and legal holidays plus 25c/c additional
compensation from date of their employment up to June 30, 1962; 2) payment of extra
compensation on work done at night; 3) reinstatement of Januario Referente and Oscar Echalar to
their former positions with back salaries; and, as against the respondent union, for its
disestablishment and the refund of all monies it had collected from petitioners.

In separate motions, respondent management and respondent union move to dismiss, the first on
the ground that:

I. The petition states no cause of action.

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

III. There is another action pending between the same parties, namely, Mercury Drug Co., Inc.,
and/or Mariano Que and Nardo Dayao.

while on the other hand, the second alleges that this Court has no jurisdiction over the acts complained of against the
respondent union.
 For reasons stated in the Order dated March 24, 1965, two Court resolved the motions to dismiss,
as follows:

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

2. Its second ground was found meritorious and, accordingly Januario Referente and Oscar
Echalar were dropped as party petitioners in this case.

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

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

counting backward the three (3) year prescriptive period from the date of the filing of the instant
petition - March 20, 1964 - all-of petitioners' claims have not yet prescribed.'

5. In so far as respondent union's motion is concerned, the Court held that 'petitioners' cause of
action against the respondent Association should be dismissed without prejudice to the refiling of
the same as an unfair labor practice case.'

Only the respondent management moved to reconsider the Order of March 24, 1965 but the same
was denied by the Court en banc in a resolution dated August 26, 1965. Respondent submitted an
answer to the amended petition which was subsequently amended on January 6, 1966, containing
some admissions and some denials of the material averments of the amended petition. By way of
affirmative and special defenses,, respondents alleged that petitioners have no cause of action
against Mariano Que because their employer respondent Mercury Drug Company, Inc., an existing
corporation which has a separate and distinct personality from its incorporators stockholders
and/or officer, that the company being a service enterprise is excluded from the coverage of the
Eight Hour Labor Law, as amended; that no court has the power to set wages, rates of pay, hours
of employment, or other conditions of employment to the extent of disregarding an agreement
thereon between the respondent company and the petitioners, and of fixing night differential
wages; that the petitioners were fully paid for services rendered under the terms and conditions of
the individual contracts of employment; that the petition having been verified by only three of the
petitioners without showing that the others authorized the inclusion of their names as petitioners
does not confer jurisdiction to this Court; that there is no employer-employee relationship between
management and petitioner Nardo Dayao and that his claim has been released and/or barred by
another action and that petitioners' claims accuring before March 20, 1961 have prescribed."
(Annex "P", pp. 110-112, rollo).

After hearing on the merits, the respondent court rendered its decision. The dispositive portion of the March 30,
1968 decision reads:

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

1. The claim of the petitioners for payment of back wages correspoding to the first four hours
work rendered on every other Sunday and first four hours on legal holidays should be denied for
lack of merit.

2. Respondent Mercury Drug Company, Inc.. is hereby ordered to pay the sixty- nine (69)
petitioners:
 (a) An additional sum equivalent to 25% of their respective basic or regular
salaries for services rendered on Sundays and legal holidays during the period
from March 20. 1961 up to June 30, 1962; and

(b) Another additional sum or premium equivalent to 25% of their respective

basic or regular salaries for nighttime services rendered from March 20, 1961 up
to June 30, 1962.

3. Petitioners' petition to convert them to monthly employees should be, as it is hereby, denied for
lack of merit.

4. Respondent Mariano Que, being an officer and acted only as an agent in behalf of the
respondent corporation, should be absolved from the money claims of herein petitioners whose
employer, according to the pleadings and evidence, is the Mercury Drug Company,, Inc.

To expedite the computation of the money award, the Chief Court Examiner or his authorized
representative is hereby directed to proceed to the office of the respondent corporation at Bambang
Street, Sta. Cruz, Manila, the latter to make available to said employee its records, like time
records, payrolls and other pertinent papers, and compute the money claims awarded in this
decision and, upon the completion thereof, to submit his report as soon as possible for further
disposition of the Court.

Not satisfied with the decision, the respondents filed a motion for its reconsideration. The motion for
reconsideration, was however, denied by the Court en banc in its Resolution dated July 6, 1968.

Petitioner Mercury Drug Company, Inc., assigned the following errors in this petition:

RESPONDENT CIR ERRED IN DECLARING THE CONTRACTS OF EMPLOYMENT,

EXHIBITS "A" AND "B", NULL AND VOID AS BEING CONTRARY TO PUBLIC POLICY
AND IN SUSTAINING, ACCORDINGLY, PRIVATE RESPONDENTS' CLAIMS FOR 25%
SUNDAY AND LEGAL HOLIDAY PREMIUMS BECAUSE SUCH DECLARATION AND
AWARD ARE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE, THUS INFRINGING
UPON THE CARDINAL RIGHTS OF THE PETITIONER; AND ALSO BECAUSE THE
VALIDITY OF SAID t CONTRACTS OF EMPLOYMENT HAS NOT BEEN RAISED.

II

RESPONDENT CIR ERRED IN SUSTAINING PRIVATE RESPONDENTS' CLAIMS FOR

NIGHTTIME WORK PREMIUMS NOT ONLY BECAUSE OF THE DECLARED POLICY ON
COLLECTIVE BARGAINING FREEDOM EX. PRESSED IN REPUBLIC ACT 875 AND THE
EXPRESS PROHIBITION IN SECTION 7 OF SAID STATUTE, BUT ALSO BECAUSE OF
THE WAIVER OF SAID CLAIMS AND THE TOTAL ABSENCE OF EVIDENCE THEREON.

III

RESPONDENT CIR ERRED IN MAKING AWARDS IN FAVOR OF THE PRIVATE

RESPONDENTS WHO NEITHER GAVE EVIDENCE NOR EVEN APPEARED TO SHOW
THEIR INTEREST.
Three issues are discussed by the petitioner in its first assignment of error. The first issue refers to its allegation that
the respondent Court erred in declaring the contracts of employment null and void and contrary to law. This
allegation is premised upon the following finding of the respondent court:

But the Court finds merit in the claim for the payment of additional compensation for work done
on Sundays and holidays. While an employer may compel his employees to perform service on
such days, the law nevertheless imposes upon him the obligation to pay his employees at least
25% additional of their basic or regular salaries.

No person, firm or corporation, business establishment or place of center of

labor shall compel an employee or laborer to work during Sundays and legal
holidays unless he is paid an additional sum of at least twenty-five per centum of
his regular remuneration: PROVIDED, HOWEVER, That this prohibition shall
not apply to public utilities performing some public service such as supplying
gas, electricity, power, water, or providing means of transportation or
communication. (Section 4, C. A. No. 444) (Emphasis supplied)

Although a service enterprise, respondent company's employees are within the coverage of C. A.
No. 444, as amended known as the Eight Hour Labor Law, for they do not fall within the category
or class of employees or laborers excluded from its provisions. (Section 2, Ibid.)

The Court is not impressed by the argument that under the contracts of employment the petitioners
are not entitled to such claim for the reason that the same are contrary to law. Payment of extra or
additional pay for services rendered during Sundays and legal holidays is mandated by law. Even
assuming that the petitioners had agreed to work on Sundays and legal holidays without any
further consideration than their monthly salaries, they are not barred nevertheless from claiming
what is due them, because such agreement is contrary to public policy and is declared nun and
void by law.

Any agreement or contract between employer and the laborer or employee contrary to the
provisions of this Act shall be null and void ab initio.

Under the cited statutory provision, the petitioners are justified to receive additional amount
equivalent to 25% of their respective basic or regular salaries for work done on Sundays and legal
holidays for the period from March 20, 1961 to June 30, 1962. (Decision, pp. 119-120, rollo)

From a perusal of the foregoing statements of the respondent court, it can be seen readily that the petitioner-
company based its arguments in its first assignment of error on the wrong premise. The contracts of employment
signed by the private respondents are on a standard form, an example of which is that of private respondent Nardo
Dayao quoted hereunder:

Mercury Drug Co., Inc. 1580 Bambang, Manila

October 30, 1959

Mr. Nardo Dayao

1015 Sta. Catalina
Rizal Ave., Exten.

Dear Mr. Dayao:

You are hereby appointed as Checker, in the Checking Department of MERCURY DRUG CO.,
INC., effective July 1, 1959 and you shall receive an annual compensation the amount of Two
 Thousand four hundred pesos only (P2,400.00), that includes the additional compensation for
work on Sundays and legal holidays.

Your firm being a Service Enterprise, you will be required to perform work every day in a year as
follows:

8 Hours work on regular days and-all special Holidays that may be declared but with the 25%
additional compensation;

4 Hours work on every other Sundays of the month;

For any work performed in excess of the hours as above mentioned, you shall be paid 25 % additional compensation
per hour.

This appointment may be terminated without notice for cause and without cause upon thirty days written notice.

This supersedes your appointment of July 1, 1959.

Very truly yours,

MERCURY DRUG CO., INC.

(Sgd.) MARIANO QUE General Manager

ACCEPTED WITH FULL CONFORMITY:

(Sgd.) NARDO DAYAO

(EXH. "A" and "l ")
(Decision, pp. 114-115, rollo)

These contracts were not declared by the respondent court null and void in their entirety. The respondent court, on
the basis of the conflicting evidence presented by the parties, in effect: 1) rejected the theory of the petitioner
company that the 25% additional compensation claimed by the private respondents for the four-hour work they
rendered during Sundays and legal holidays provided in their contracts of employment were covered by the private
respondents' respective monthly salaries; 2) gave credence to private respondents', (Nardo Dayao, Ernesto Talampas
and Josias Federico) testimonies that the 25% additional compensation was not included in the private respondents'
respective monthly salaries and 3) ruled that any agreement in a contract of employment which would exclude the
25% additional compensation for work done during Sundays and holidays is null and void as mandated by law.

On the second issue, the petitioner-company reiterated its stand that under the,- respective contracts of employment
of the private respondents, the subject 25 % additional compensation had already been included in the latter's
respective monthly salaries. This contention is based on the testimony of its lone witness, Mr. Jacinto Concepcion
and pertinent exhibits. Thus:

Exhibit A shows that for the period of October 30, 1960, the annual compensation of private
respondent Nardo Dayao, including the additional compensation for the work he renders during
the first four (4) hours on every other Sunday and on the eight (8) Legal Holidays at the time was
P2,400.00 or P200.00 per month. These amounts did not represent basic salary only, but they
represented the basic daily wage of Nardo Dayao considered to be in the amount of P7.36 x 305
ordinary working days at the time or in the total amount of P2,144.80. So plus the amount of
P156.40 which is the equivalent of the Sunday and Legal Holiday rate at P9.20 basic rate of P7.36
plus 25% thereof or P1.84) x 17, the latter figure representing 13 Sundays and 4 Legal Holidays of
8 hours each. ...
 xxx xxx xxx

That the required minimum 25% Sunday and Legal Holiday additional compensation was paid to
and received by the employees for the work they rendered on every other Sunday and on the eight
Legal Holidays for the period October, 1959 to June 30, 1962 is further corroborated by Exhibits
5, 6, 8, 9 and 9-A and the testimony of Mr. Jacinto Concepcion thereon. (Brief for the Petitioner,
pp. 24, 27).

The aforesaid computations were not given credence by the respondent court. In fact the same computations were
not even mentioned in the court's decision which shows that the court found such computations incredible. The
computations, supposedly patterned after the WAS Interpretative Bulletin No. 2 of the Department Labor
demonstrated in Exhibits "6", "7", "8", "9", and "9-A", miserably failed to show the exact and correct annual salary
as stated in the respective contracts of employment of the respondent employees. The figures arrived at in each case
did not tally with the annual salaries on to the employees' contracts of employment, the difference varying from
P1.20 to as much as P14.40 always against the interest of the employees. The petitioner's defense consists of
mathematical computations made after the filing of the case in order to explain a clear attempt to make its
employees work without the extra compensation provided by law on Sundays and legal holidays.

In not giving weight to the evidence of the petitioner company, the respondent court sustained the private
respondents' evidence to the effect that their 25% additional compensation for work done on Sundays and Legal
Holidays were not included in their respective monthly salaries. The private respondents presented evidence through
the testimonies of Nardo Dayao, Ernesto Talampas, and Josias Federico who are themselves among the employees
who filed the case for unfair labor practice in the respondent court and are private respondents herein. The
petitioner- company's contention that the respondent court's conclusion on the issue of the 25% additional
compensation for work done on Sundays and legal holidays during the first four hours that the private respondents
had to work under their respective contracts of employment was not supported by substantial evidence is, therefore,
unfounded. Much less do We find any grave abuse of discretion on the part of the respondent court in its
interpretation of the employment contract's provision on salaries. In view of the controlling doctrine that a grave
abuse of discretion must be shown in order to warrant our disturbing the findings of the respondent court, the
reversal of the court's endings on this matter is unwarranted. (Sanchez vs. Court of Industrial Relations, 27 SCRA
490).

The last issue raised in the first assignment of error refers to a procedural matter. The petitioner-company contends
that ,-the question as to whether or not the contracts of employment were null and void was not put in issue, hence,
the respondent court pursuant to the Rules of Court should have refrained from ruling that such contracts of
employment were null and void. In this connection We restate our finding that the respondent court did not declare
the contracts of employment null and void in their entirety. Only the objectionable features violative of law were
nullified. But even granting that the Court of Industrial Relations declared the contracts of employment wholly void,
it could do so notwithstanding the procedural objection. In Sanchez u. Court of Industrial Relations, supra, this
Court speaking through then Justice, now Chief Justice Enrique M. Fernando, stated:

xxx xxx xxx

Moreover, petitioners appear to be oblivious of the statutory mandate that respondent Court in the
hearing, investigation and determination of any question or controversy and in the exercise of any
of its duties or power is to act 'according to justice and equity and substantial merits of the case,
without regard to technicalities or legal forms and shall not be bound by any technical rules of
legal evidence' informing its mind 'in such manner as it may deem just and equitable.' Again, this
Court has invariably accorded the most hospitable scope to the breadth and amplitude with which
such provision is couched. So it has been from the earliest case decided in 1939 to a 1967
decision.

Two issues are raised in the second assignment of error by the petitioner-company. The first
hinges on the jurisdiction of the respondent court to award additional compensation for nighttime
work. Petitioner wants Us to re- examine Our rulings on the question of nighttime work. It
contends that the respondent court has no jurisdiction to award additional compensation for
nighttime work because of the declared policy on freedom of collective bargaining expressed in
Republic Act 875 and the express prohibition in Section 7 of the said statute. A re- examination of
the decisions on nighttime pay differential was the focus of attention in Rheem of the Philippines,
Inc. et al., v. Ferrer, et al (19 SCRA 130). The earliest cases cited by the petitioner-
company, Naric v. Naric Workers Union L-12075, - May 29, 1959 and Philippine Engineers'
Syndicate u. Bautista, L-16440, February 29, 196.4, were discussed lengthily. Thus -

xxx xxx xxx

2. On the claim for night differentials, no extended discussion is necessary. To be read as

controlling here is Philippine Engineers' Syndicate, Inc. vs. Hon. Jose S. Bautista, et al., L-16440,
February 29, 1964, where this Court, speaking thru Mr. Chief Justice Cesar Bengzon, declared —

Only one issue is raised: whether or not upon the enactment of Republic Act
875, the CIR lost its jurisdiction over claims for additional compensation for
regular night work. Petitioner says that this Act reduced the jurisdiction of
respondent court and limited it to specific cases which this Court has defined as:
... (1) when the labor dispute affects an industry which is indispensable to the
national interest and is so certified by the President to the industrial court (Sec.
10, Republic Act 875); (2) when the controversy refers to minimum wage under
the Minimum Wage Law (Republic Act 602); (3) when it involves hours of
employment under the Eight-Hour Labor Law (Commonwealth Act 444) and (4)
when it involves an unfair labor practice [Sec. 5(a), Republic Act 8751', [Paflu,
et al. vs. Tan, et al., 52 Off. Gaz, No. 13, 5836].

Petitioner insists that respondents' case falls in none of these categories because
as held in two previous cases, night work is not overtime but regular work; and
that respondent court's authority to try the case cannot be implied from its
general jurisdiction and broad powers' under Commonwealth Act 103 because
Republic Act 875 precisely curbed such powers limiting them to certain specific
litigations, beyond which it is not permitted to act.

We believe petitioner to be in error. Its position collides with our ruling in the Naric case [National
Rice & Corn Corp. (NARIC) vs. NARIC Workers' Union, et al., G.R. No. L-12075, May 29,
1959] where we held;

While it is true that this Court made the above comment in the aforementioned
case, it does not intend to convey the Idea that work done at night cannot also be
an overtime work. The comment only served to emphasize that the demand
which the Shell Company made upon its laborers is not merely overtime work
but night work and so there was need to differentiate night work from daytime
work. In fact, the company contended that there was no law that required the
payment of additional compensation for night work unlike an overtime work
which is covered by Commonwealth Act No. 444 (Eight Hour Labor Law). And
this Court in that case said that while there was no law actually requiring
payment of additional compensation for night work, the industrial court has the
power to determine the wages that night workers should receive under
Commonwealth Act No. 103, and so it justified the additional compensation in
the Shell case for 'hygienic, medical, moral, cultural and sociological reasons.

xxx xxx xxx

True, in Paflu, et al. vs. Tan, et al., supra, and in a series of cases thereafter, We held that the broad powers
conferred by Commonwealth Act 103 on the CIR may have been curtailed by Republic Act 875 which limited them
to the four categories therein expressed in line with the public policy of allowing settlement of industrial disputes via
the collective bargaining process; but We find no cogent reason for concluding that a suit of this nature for extra
compensation for night work falls outside the domain of the industrial court. Withal, the record does not show that
the employer-employee relation between the 64 respondents and the petitioner had ceased.

After the passage of Republic Act 875, this Court has not only upheld the industrial court's assumption of
jurisdiction over cases for salary differentials and overtime pay [Chua Workers Union (NLU) vs. City Automotive
Co., et al., G.R. No. L- 11655, April 29, 1959; Prisco vs. CIR, et al., G.R. No. L-13806, May 23, 1960] or for
payment of additional compensation for work rendered on Sundays and holidays and for night work [Nassco vs.
Almin, et al., G.R. No. L9055, November 28, 1958; Detective & Protective Bureau, Inc. vs. Felipe Guevara, et al.,
G.R. No. L-8738, May 31, 1957] but has also supported such court's ruling that work performed at night should be
paid more than work done at daytime, and that if that work is done beyond the worker's regular hours of duty, he
should also be paid additional compensation for overtime work. [Naric vs. Naric Workers' Union. et al., G. R No. L-
12075, May 29, 1959, citing Shell Co. vs. National Labor Union, 81 Phil. 315]. Besides, to hold that this case for
extra compensation now falls beyond the powers of the industrial court to decide, would amount to a further
curtailment of the jurisdiction of said court to an extent which may defeat the purpose of the Magna Carta to the
prejudice of labor.' [Luis Recato Dy, et al v-9. CIR, G.R. No. L-17788, May 25,1962]"

The petitioner-company's arguments on the respondent court's alleged lack of jurisdiction over additional
compensation for work done at night by the respondents is without merit.

The other issue raised in the second assignment of error is premised on the petitioner-company's contention that the
respondent court's ruling on the additional compensation for nighttime work is not supported by substantial
evidence.

This contention is untenable. Pertinent portions of the respondent court's decision read:

xxx xxx xxx

There is no serious disagreement between the petitioners and respondent management on the facts
recited above. The variance in the evidence is only with respect to the money claims. Witnesses
for petitioners declared they worked on regular days and on every other Sunday and also during all
holidays; that for services rendered on Sundays and holidays they were not paid for the first four
(4) hours and what they only received was the overtime compensation corresponding to the
number of hours after or in excess of the first four hours; and that such payment is being indicated
in the overtime pay for work done in excess of eight hours on regular working days. It is also
claimed that their nighttime services could well be seen on their respective daily time records.
.. (Emphasis supplied) (p.116, rollo)

The respondent court's ruling on additional compensation for work done at night is, therefore, not without evidence.
Moreover, the petitioner-company did not deny that the private respondents rendered nighttime work. In fact, no
additional evidence was necessary to prove that the private respondents were entitled to additional compensation for
whether or not they were entitled to the same is a question of law which the respondent court answered correctly.
The "waiver rule" is not applicable in the case at bar. Additional compensation for nighttime work is founded on
public policy, hence the same cannot be waived. (Article 6, Civil Code). On this matter, We believe that the
respondent court acted according to justice and equity and the substantial merits of the case, without regard to
technicalities or legal forms and should be sustained.

The third assignment of error is likewise without merit. The fact that only three of the private respondents testified
in court does not adversely affect the interests of the other respondents in the case. The ruling in Dimayuga V. Court
of Industrial Relations (G.R. No. L-0213, May 27, 1957) has been abandoned in later rulings of this Court. In
Philippine Land Air-Sea Labor Union (PLASLU) vs. Sy Indong Company Rice And Corn Mill (11 SCRA 277) We
had occasion to re-examine the ruling in Dimayuga We stated:

The latter reversed the decision of the trial Judge as regards the reinstatement with backwages of
... upon the theory that this is not a class suit; that, consequently, it is necessary and imperative
that they should personally testify and prove the charges in the complaint', and that, having failed
to do so, the decision of the trial Judge in their favor is untenable under the rule laid down in
Dimayuga vs. Court of Industrial Relations, G.R. No. L-0213 (May 27,1957).

We do not share the view taken in the resolution appealed from. As the trial Judge correctly said,
in Ms dissent from said resolution,:

xxx xxx xxx

In the case of Sanchez v. Court of Industrial Relations, supra, this Court stated:

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

The petitioner's contention that its employees fully understood what they signed when they entered into the contracts
of employment and that they should be bound by their voluntary commitments is anachronistic in this time and age.

The Mercury Drug Co., Inc., maintains a chain of drugstores that are open every day of the week and, for some
stores, up to very late at night because of the nature of the pharmaceutical retail business. The respondents knew that
they had to work Sundays and holidays and at night, not as exceptions to the rule but as part of the regular course of
employment. Presented with contracts setting their compensation on an annual basis with an express waiver of extra
compensation for work on Sundays and holidays, the workers did not have much choice. The private respondents
were at a disadvantage insofar as the contractual relationship was concerned. Workers in our country do not have the
luxury or freedom of declining job openings or filing resignations even when some terms and conditions of
employment are not only onerous and inequitous but illegal. It is precisely because of this situation that the framers
of the Constitution embodied the provisions on social justice (Section 6, Article 11) and protection to labor (Section
9, Article I I) in the Declaration of Principles And State Policies.

It is pursuant to these constitutional mandates that the courts are ever vigilant to protect the rights of workers who
are placed in contractually disadvantageous positions and who sign waivers or provisions contrary to law and public
policy.

WHEREFORE, the petition is hereby dismissed. The decision and resolution appealed from are affirmed with costs
against the petitioner.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 189404 December 11, 2013

WILGEN LOON, JERRY ARCILLA, ALBERTPEREYE, ARNOLD PEREYE, EDGARDO OBOSE,

ARNEL MALARAS, PATROCINO TOETIN, EVELYN LEONARDO, ELMER GLOCENDA, RUFO
CUNAMAY, ROLANDOSAJOL, ROLANDO ABUCAYON, JENNIFER NATIVIDAD, MARITESS
TORION, ARMANDO LONZAGA, RIZAL GELLIDO, EVIRDE HAQUE,1 MYRNA VINAS, RODELITO
AYALA, WINELITO OJEL, RENATO RODREGO, NENA ABINA, EMALYN OLIVEROS, LOUIE
ILAGAN, JOEL ENTIG, ARNEL ARANETA, BENJAMIN COSE, WELITO LOON and WILLIAM
ALIPAO, Petitioners,
vs.
POWER MASTER, INC., TRI-C GENERAL SERVICES, and SPOUSES HOMER and CARINA
ALUMISIN, Respondents.

DECISION

BRION, J.:

We resolve the petition for review on certiorari,2 filed by petitioners Wilgen Loon, Jerry Arcilla, Albert Pereye,
Arnold Pereye, Edgardo Obose, Arnel Malaras, Patrocino Toetin, Evelyn Leonardo, Elmer Glocenda, Rufo
Cunamay, Rolando Sajol, Rolando Abucayon, Jennifer Natividad, Maritess Torion, Armando Lonzaga, Rizal
Gellido, Evirde Haque, Myrna Vinas, Rodelito Ayala, Winelito Ojel, Renato Rodrego, Nena Abina, Emalyn
Oliveros, Louie Ilagan, Joel Entig, Arnel Araneta, Benjamin Cose, Welito Loon, William Alipao (collectively,
the petitioners), to challenge the June 5, 2009 decision3 and the August 28, 2009 resolution4 of the Court of
Appeals (CA) in CA-G.R. SP No. 95182.

The Factual Antecedents

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

Notably, the respondents did not participate in the proceedings before the Labor Arbiter except on April 19, 2001
and May 21, 2001 when Mr. Romulo Pacia, Jr. appeared on the respondents’ behalf.5 The respondents’
counsel also appeared in a preliminary mandatory conference on July 5, 2001.6 However, the respondents
neither filed any position paper nor proffered pieces of evidence in their defense despite their knowledge of the
pendency of the case.

The Labor Arbiter’s Ruling

In a decision7 dated March 15, 2002, Labor Arbiter (LA) Elias H. Salinas partially ruled in favor of the petitioners.
The LA awarded the petitioners salary differential, service incentive leave, and thirteenth month pays. In
awarding these claims, the LA stated that the burden of proving the payment of these money claims rests with the
employer. The LA also awarded attorney’s fees in favor of the petitioners, pursuant to Article 111 of the Labor
Code.8

However, the LA denied the petitioners’ claims for backwages, overtime, holiday, and premium pays. The LA
observed that the petitioners failed to show that they rendered overtime work and worked on holidays and rest days
without compensation. The LA further concluded that the petitioners cannot be declared to have been dismissed
from employment because they did not show any notice of termination of employment. They were also not barred
from entering the respondents’ premises.

The Proceedings before the NLRC

Both parties appealed the LA’s ruling with the National Labor Relations Commission. The petitioners disputed the
LA’s denial of their claim for backwages, overtime, holiday and premium pays. Meanwhile, the respondents
questioned the LA’s ruling on the ground that the LA did not acquire jurisdiction over their persons.

The respondents insisted that they were not personally served with summons and other processes. They also claimed
that they paid the petitioners minimum wages, service incentive leave and thirteenth month pays. As proofs, they
attached photocopied and computerized copies of payroll sheets to their memorandum on appeal.9 They
further maintained that the petitioners were validly dismissed. They argued that the petitioners’ repeated defiance to
their transfer to different workplaces and their violations of the company rules and regulations constituted serious
misconduct and willful disobedience.10

On January 3, 2003, the respondents filed an unverified supplemental appeal. They attached photocopied and
computerized copies of list of employees with automated teller machine (ATM) cards to the supplemental
appeal. This list also showed the amounts allegedly deposited in the employees’ ATM cards.11 They also attached
documentary evidence showing that the petitioners were dismissed for cause and had been accorded due
process.

On January 22, 2003, the petitioners filed an Urgent Manifestation and Motion12 where they asked for the deletion
of the supplemental appeal from the records because it allegedly suffered from infirmities. First, the supplemental
appeal was not verified. Second, it was belatedly filed six months from the filing of the respondents’ notice of
appeal with memorandum on appeal. The petitioners pointed out that they only agreed to the respondents’ filing of a
responsive pleading until December 18, 2002.13 Third¸ the attached documentary evidence on the supplemental
appeal bore the petitioners’ forged signatures.

They reiterated these allegations in an Urgent Motion to Resolve Manifestation and Motion (To Expunge from
the Records Respondents’ Supplemental Appeal, Reply and/or Rejoinder) dated January 31,
2003.14 Subsequently, the petitioners filed an Urgent Manifestation with Reiterating Motion to Strike-Off the
Record Supplemental Appeal/Reply, Quitclaims and Spurious Documents Attached to Respondents’
Appeal dated August 7, 2003.15 The petitioners argued in this last motion that the payrolls should not be given
probative value because they were the respondents’ fabrications. They reiterated that the genuine payrolls bore their
signatures, unlike the respondents’ photocopies of the payrolls. They also maintained that their signatures in the
respondents’ documents (which showed their receipt of thirteenth month pay) had been forged.

The NLRC Ruling

In a resolution dated November 27, 2003, the NLRC partially ruled in favor of the respondents.16 The NLRC
affirmed the LA’s awards of holiday pay and attorney’s fees. It also maintained that the LA acquired jurisdiction
over the persons of the respondents through their voluntary appearance.

However, it allowed the respondents to submit pieces of evidence for the first time on appeal on the ground
that they had been deprived of due process. It found that the respondents did not actually receive the LA’s
processes. It also admitted the respondents’ unverified supplemental appeal on the ground that technicalities may be
disregarded to serve the greater interest of substantial due process. Furthermore, the Rules of Court do not require
the verification of a supplemental pleading.

The NLRC also vacated the LA’s awards of salary differential, thirteenth month and service incentive leave
pays. In so ruling, it gave weight to the pieces of evidence attached to the memorandum on appeal and the
supplemental appeal. It maintained that the absence of the petitioners’ signatures in the payrolls was not an
indispensable factor for their authenticity. It pointed out that the payment of money claims was further evidenced by
the list of employees with ATM cards. It also found that the petitioners’ signatures were not forged. It took judicial
notice that many people use at least two or more different signatures.

The NLRC further ruled that the petitioners were lawfully dismissed on grounds of serious misconduct and
willful disobedience. It found that the petitioners failed to comply with various memoranda directing them to
transfer to other workplaces and to attend training seminars for the intended reorganization and reshuffling.

The NLRC denied the petitioners’ motion for reconsideration in a resolution dated April 28, 2006.17 Aggrieved, the
petitioners filed a petition for certiorari under Rule 65 of the Rules of Court before the CA.18

The CA Ruling

The CA affirmed the NLRC’s ruling. The CA held that the petitioners were afforded substantive and procedural due
process. Accordingly, the petitioners deliberately did not explain their side. Instead, they continuously resisted their
transfer to other PLDT offices and violated company rules and regulations. It also upheld the NLRC’s findings on
the petitioners’ monetary claims.

The CA denied the petitioners’ motion for reconsideration in a resolution dated August 28, 2009, prompting the
petitioners to file the present petition.19

The Petition

In the petition before this Court, the petitioners argue that the CA committed a reversible error when it did not find
that the NLRC committed grave abuse of discretion. They reiterate their arguments before the lower tribunals and
the CA in support of this conclusion. They also point out that the respondents posted a bond from a surety that was
not accredited by this Court and by the NLRC. In effect, the respondents failed to perfect their appeal before the
NLRC. They further insist that the NLRC should not have admitted the respondents’ unverified supplemental
appeal.20

The Respondents’ Position

In their Comments, the respondents stress that the petitioners only raised the issue of the validity of the appeal bond
for the first time on appeal. They also reiterate their arguments before the NLRC and the CA. They additionally
submit that the petitioners’ arguments have been fully passed upon and found unmeritorious by the NLRC and the
CA.21

The Issues

This case presents to us the following issues:

1) Whether the CA erred when it did not find that the NLRC committed grave abuse of discretion in giving
due course to the respondents’ appeal;

a) Whether the respondents perfected their appeal before the NLRC; and

b) Whether the NLRC properly allowed the respondents’ supplemental appeal

 2) Whether the respondents were estopped from submitting pieces of evidence for the first time on appeal;

3) Whether the petitioners were illegally dismissed and are thus entitled to backwages;

4) Whether the petitioners are entitled to salary differential, overtime, holiday, premium, service incentive
leave, and thirteenth month pays; and

5) Whether the petitioners are entitled to attorney’s fees.

The Court’s Ruling

The respondents perfected their

appeal with the NLRC because the
revocation of the bonding company's
authority has a prospective
application

Paragraph 2, Article 223 of the Labor Code provides that "[i]n case of a judgment involving a monetary award, an
appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the
judgment appealed from."

Contrary to the respondents’ claim, the issue of the appeal bond’s validity may be raised for the first time on appeal
since its proper filing is a jurisdictional requirement.22 The requirement that the appeal bond should be issued by an
accredited bonding company is mandatory and jurisdictional. The rationale of requiring an appeal bond is to
discourage the employers from using an appeal to delay or evade the employees' just and lawful claims. It is
intended to assure the workers that they will receive the money judgment in their favor upon the dismissal of the
employer’s appeal.23

In the present case, the respondents filed a surety bond issued by Security Pacific Assurance Corporation (Security
Pacific) on June 28, 2002. At that time, Security Pacific was still an accredited bonding company. However, the
NLRC revoked its accreditation on February 16, 2003.24 Nonetheless, this subsequent revocation should not
prejudice the respondents who relied on its then subsisting accreditation in good faith. In Del Rosario v. Philippine
Journalists, Inc.,25 we ruled that a bonding company’s revocation of authority is prospective in application.

However, the respondents should post a new bond issued by an accredited bonding company in compliance with
paragraph 4, Section 6, Rule 6 of the NLRC Rules of Procedure. This provision states that "[a] cash or surety bond
shall be valid and effective from the date of deposit or posting, until the case is finally decided, resolved or
terminated or the award satisfied."

The CA correctly ruled that the

NLRC properly gave due course to
the respondents’ supplemental
appeal

The CA also correctly ruled that the NLRC properly gave due course to the respondents’ supplemental appeal.
Neither the laws nor the rules require the verification of the supplemental appeal.26 Furthermore, verification is a
formal, not a jurisdictional, requirement. It is mainly intended for the assurance that the matters alleged in the
pleading are true and correct and not of mere speculation.27 Also, a supplemental appeal is merely an addendum to
the verified memorandum on appeal that was earlier filed in the present case; hence, the requirement for verification
has substantially been complied with.
The respondents also timely filed their supplemental appeal on January 3, 2003. The records of the case show that
the petitioners themselves agreed that the pleading shall be filed until December 18, 2002. The NLRC further
extended the filing of the supplemental pleading until January 3, 2003 upon the respondents’ motion for extension.

A party may only adduce evidence

for the first time on appeal if he
adequately explains his delay in the
submission of evidence and he
sufficiently proves the allegations
sought to be proven

In labor cases, strict adherence to the technical rules of procedure is not required. Time and again, we have allowed
evidence to be submitted for the first time on appeal with the NLRC in the interest of substantial justice.28 Thus, we
have consistently supported the rule that labor officials should use all reasonable means to ascertain the facts in each
case speedily and objectively, without regard to technicalities of law or procedure, in the interest of due process.29

However, this liberal policy should still be subject to rules of reason and fairplay. The liberality of procedural
rules is qualified by two requirements: (1) a party should adequately explain any delay in the submission of
evidence; and (2) a party should sufficiently prove the allegations sought to be proven.30 The reason for these
requirements is that the liberal application of the rules before quasi-judicial agencies cannot be used to perpetuate
injustice and hamper the just resolution of the case. Neither is the rule on liberal construction a license to disregard
the rules of procedure.31

Guided by these principles, the CA grossly erred in ruling that the NLRC did not commit grave abuse of discretion
in arbitrarily admitting and giving weight to the respondents’ pieces of evidence for the first time on appeal.

A. The respondents failed to

adequately explain their delay
in the submission of evidence

We cannot accept the respondents’ cavalier attitude in blatantly disregarding the NLRC Rules of Procedure. The CA
gravely erred when it overlooked that the NLRC blindly admitted and arbitrarily gave probative value to the
respondents’ evidence despite their failure to adequately explain their delay in the submission of evidence. Notably,
the respondents’ delay was anchored on their assertion that they were oblivious of the proceedings before the LA.
However, the respondents did not dispute the LA’s finding that Mr. Romulo Pacia, Jr. appeared on their behalf on
April 19, 2001 and May 21, 2001.32 The respondents also failed to contest the petitioners’ assertion that the
respondents’ counsel appeared in a preliminary mandatory conference on July 5, 2001.33

Indeed, the NLRC capriciously and whimsically admitted and gave weight to the respondents’ evidence despite its
finding that they voluntarily appeared in the compulsory arbitration proceedings. The NLRC blatantly disregarded
the fact that the respondents voluntarily opted not to participate, to adduce evidence in their defense and to file a
position paper despite their knowledge of the pendency of the proceedings before the LA. The respondents were also
grossly negligent in not informing the LA of the specific building unit where the respondents were conducting their
business and their counsel’s address despite their knowledge of their non-receipt of the processes.34

B. The respondents failed to

sufficiently prove the
allegations sought to be
proven

Furthermore, the respondents failed to sufficiently prove the allegations sought to be proven. Why the respondents’
photocopied and computerized copies of documentary evidence were not presented at the earliest opportunity is a
serious question that lends credence to the petitioners’ claim that the respondents fabricated the evidence for
purposes of appeal. While we generally admit in evidence and give probative value to photocopied documents in
administrative proceedings, allegations of forgery and fabrication should prompt the adverse party to present the
original documents for inspection.35 It was incumbent upon the respondents to present the originals, especially in
this case where the petitioners had submitted their specimen signatures. Instead, the respondents effectively deprived
the petitioners of the opportunity to examine and controvert the alleged spurious evidence by not adducing the
originals. This Court is thus left with no option but to rule that the respondents’ failure to present the originals raises
the presumption that evidence willfully suppressed would be adverse if produced.36

It was also gross error for the CA to affirm the NLRC’s proposition that "[i]t is of common knowledge that there are
many people who use at least two or more different signatures."37 The NLRC cannot take judicial notice that many
people use at least two signatures, especially in this case where the petitioners themselves disown the signatures in
the respondents’ assailed documentary evidence.38 The NLRC’s position is unwarranted and is patently unsupported
by the law and jurisprudence.

Viewed in these lights, the scales of justice must tilt in favor of the employees. This conclusion is consistent with the
rule that the employer’s cause can only succeed on the strength of its own evidence and not on the weakness of the
employee’s evidence.39

The petitioners are entitled to

backwages

Based on the above considerations, we reverse the NLRC and the CA’s finding that the petitioners were terminated
for just cause and were afforded procedural due process. In termination cases, the burden of proving just and valid
cause for dismissing an employee from his employment rests upon the employer. The employer’s failure to
discharge this burden results in the finding that the dismissal is unjustified.40 This is exactly what happened in the
present case.

The petitioners are entitled to salary

differential, service incentive,
holiday, and thirteenth month pays

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

The petitioners are not entitled to

overtime and premium pays

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

The petitioners are entitled to

attorney’s fees

The award of attorney’s fees is also warranted under the circumstances of this case.1âwphi1 An employee is entitled
to an award of attorney’s fees equivalent to ten percent (10%) of the amount of the wages in actions for unlawful
withholding of wages.44
As a final note, we observe that Rodelito Ayala, Winelito Ojel, Renato Rodrego and Welito Loon are also named as
petitioners in this case. However, we deny their petition for the reason that they were not part of the proceedings
before the CA. Their failure to timely seek redress before the CA precludes this Court from awarding them monetary
claims.

All told, we find that the NLRC committed grave abuse of discretion in admitting and giving probative value to the
respondents' evidence on appeal, which errors the CA replicated when it upheld the NLRC rulings.

WHEREFORE, based on these premises, we REVERSE and SET ASIDE the decision dated June 5, 2009, and the
resolution dated August 28, 2009 of the Court of Appeals in CA-G.R. SP No. 95182. This case is REMANDED to
the Labor Arbiter for the sole purpose of computing petitioners' (Wilgen Loon, Jerry Arcilla, Albert Pereye, Arnold
Pereye, Edgardo Obose, Arnel Malaras, Patrocino Toetin, Evelyn Leonardo, Elmer Glocenda, Rufo Cunamay,
Rolando Sajol, Rolando Abucayon, Jennifer Natividad, Maritess Torion, Ammndo Lonzaga, Rizal Gellido, Evirdly
Haque, Myrna Vinas, Nena Abina, Emalyn Oliveros, Louie Ilagan, Joel Entig, Amel Araneta, Benjamin Cose and
William Alipao) full backwages (computed from the date of their respective dismissals up to the finality of this
decision) and their salary differential, service incentive leave, holiday, thirteenth month pays, and attorney's fees
equivalent to ten percent (10%) of the withheld wages. The respondents are further directed to immediately post a
satisfactory bond conditioned on the satisfaction of the awards affirmed in this Decision.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-30279 July 30, 1982

PHILIPPINE NATIONAL BANK, petitioner,

vs.
PHILIPPINE NATIONAL BANK EMPLOYEES ASSOCIATION (PEMA) and COURT OF INDUSTRIAL
RELATIONS, respondents.

Conrado E. Medina, Edgardo M. Magtalas and Nestor Kalaw for petitioner.

Leon O. Ty, Gesmundo Fernandez & Zulueta, Oliver B. Gesmundo and Israel Bocobo for respondents.

BARREDO, J.:

Appeal by the Philippine National Bank from the decision of the trial court of the Court of Industrial Relations in
Case No. IPA-53 dated August 5, 1967 and affirmed en banc by said court on January 15, 1968.

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

xxx xxx xxx

1. That in order to settle the strike and for the employees to return to work immediately starting
January 29, 1965, the Committee on Personnel Affairs is hereby created to start functioning on
February 1, 1965;

xxx xxx xxx

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

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

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

First Cause of Action

 a. In a Resolution No. 1162 dated September 16, 1957, the Respondent's Board of Directors
approved a revision of the computation of overtime pay retroactive as of July 1, 1954, and
authorized a recomputation of the regular one- hour and extra overtime already rendered by all
officers and employees of the Respondent Bank.

The details of the benefits involved in said Resolution are contained in a Memorandum of the
Respondent Bank dated September 18, 1957.

b. Since the grant of the benefits in question, the employees of the Respondent, represented by the
petitioner, have always considered them to be a part of their salaries and/or fringe benefits;
nevertheless, the Respondent, in 1963, without just cause, withdrew said benefits and in spite of
repeated demands refused, and still refuses to reinstate the same up to the present.

Second Cause of Action

c. After the promulgation of the Decision in National Waterworks and Sewerage Authority vs.
NAWASA Consolidated Unions, et al. G.R. No. L-18938, Aug. 31, 1964, the Petitioner has
repeatedly requested Respondent that the cost of living allowance and longevity pay be taken into
account in the computation of overtime pay, effective as of the grant of said benefits on January 1,
1958, in accordance with the ruling in said Decision of the Supreme Court.

d. Until now Respondent has not taken any concrete steps toward the payment of the differential
overtime and nighttime pays arising from the cost of living allowance and longevity pay.

xxx xxx xxx

Respondent in its answer of June 7, 1965 took exception to this mentioned petition on several grounds, namely, (1)
the said alleged causes of action were not disputes existing between the parties, (2) the same are mere money claims
and therefore not within this Court's jurisdiction, and (3) that the parties have not so stipulated under the collective
bargaining agreement between them, or the same is premature as the pertinent collective bargaining agreement has
not yet expired." (Pp. 84-86, Record.) 1

Resolving the issues of jurisdiction and prematurity thus raised by PNB, the court held:

As to the first ground, it is well to note that this Court in its Order of January 28, 1965 has
enjoined the parties not to strike or lockout for a period of six (6) months starting from said date.
In a very definite sense the labor disputes between the parties have been given a specific period for
the settlement of their differences. The fact that thereafter the question of the manner of payment
of overtime pay is being put in issue, appears to indicate that this was a part of the labor dispute. If
we are to consider that this question, particularly the second cause of action, has in fact existed as
early as 1958, shows the necessity of resolving the same now. And the same would indeed be an
existing issue considering that the present certification came only in 1965.

It is further to be noted that the presidential certification has not limited specific areas of the labor
dispute embraced within the said certification. It speaks of the existence of a labor dispute between
the parties and of a strike declared by the PEMA, for which the Court has been requested to take
immediate steps in the exercise of its powers under the law.

Even on the assumption that the present issue is not one embraced by the presidential certification
or it is an issue presented by one party on a cause arising subsequent to the certification, the same
would still be subject to the jurisdiction of this Court. In "Apo Cement Workers Union versus
Cebu Portland Cement", Case No. 11 IPA (G.R. No. L-12451, July 10, 1957), the Court en banc
(where this Sala has taken an opposite view) upheld its jurisdiction under the circumstances just
 enumerated. It would seem that this question has been further settled by our Supreme Court in
"National Waterworks & Sewerage Authority vs. NAWASA Consolidated Unions, et al." (supra),
which we quote in part:

xxx xxx xxx

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

xxx xxx xxx

... The fact that the question of overtime payment is not included in the principal case in the sense
that it is not one of the items of dispute certified to by the President is of no moment, for it comes
within the sound discretion of the Court of Industrial Relations. Moreover, in labor disputes
technicalities of procedure should as much as possible be avoided not only in the interest of labor
but to avoid multiplicity of action. This claim has no merit.

xxx xxx xxx

As to the objection posed that the issues are mere money claims, there appears to be no ground for
the same. In the first place, although the same involves a claim for additional compensation it is
also a part of the labor dispute existing between the parties and subject to the compulsory
arbitration powers of the Court, pursuant to Section 10 of Rep. Act No. 875. In the second place,
on the basis of the so-called PRISCO doctrine (G.R. No. L- 13806, May 23,.1960), there is an
existing and current employer-employee relationship between the respondent and the members of
petitioner union, for whom the additional overtime compensation is claimed.

With respect to ground three of the answer on which objection is based, on C.A. 444, as amended,
Section 6 thereof, provides as follows:

'Any agreement or contract between the employer and the laborer or employee
contrary to the provisions of this Act shall be null and void ab initio'.

The instant action is partially subject to the provisions of Commonwealth Act 444, as amended.
Even if, the parties have stipulated to the extent that overtime will not be paid, the same will not
be binding. More so under the present circumstances, where the only question is the correctness of
the computation of the overtime payments.

While the Court notes that the first cause of action has become moot and academic in view of the
compliance by respondent, hence there is no further need to resolve the same (t.s.n., pp. 5-7,
August 16, 1965), the settlement of said first cause of action further strengthens the view that the
second cause of action is indeed an existing dispute between the parties. Both causes of fiction
involve overtime questions. Both stem from dates well beyond and before the presidential
certification of the present proceedings. If respondent has been fit to take steps to expedite and
resolve, without court intervention, the first cause of action, it cannot deny the existence of the
second cause of action as the first and second appear to be interrelated matters. (Pp. 86-89,
Record)

And We agree that the foregoing holding is well taken. It would be more worthwhile to proceed to the basic issues
immediately than to add anything more of Our own discourse to the sufficiently based disposition of the court a quo
of the above- mentioned preliminary questions.
After discussing the pros and cons on the issue involved in the second cause of action as to whether or not the cost-
of-living allowance otherwise denominated as equity pay and longevity pay granted by the bank, the first beginning
January 1, 1958 and the latter effective July 1, 1961, should be included in the computation of overtime-pay, the
court granted the demands of PE MA, except the additional rate of work for night pay, and rendered the following
judgment:

WHEREFORE, in view of the foregoing, this Court hereby promulgates the following:

1. The respondent Philippine National Bank is hereby required to pay overtime and nighttime rates
to its employees from January 28, 1962; and such overtime compensation shall be based on the
sum total of the employee's basic salary or wage plus cost of living allowance and longevity pay
under the following schedule:

'a. Overtime services rendered shall be paid at the rate of time and one-third, but
overtime work performed between 6:00 P.M. and 6- .00 A.M. shall be paid at
the rate of 150% or 50% beyond the regular rate;

'b. The rate for work performed in the night shift, or during the period from 6:00
P.M. to 6:00 A.M. shall be compensated at the rate of 150% or 50% beyond the
regular rate, provided the work performed involved a definite night shift and not
merely a continuation by way of overtime of the regular and established hours of
the respondent Bank.

2. The Chief of the Examining Division of the Court or any of his duly designated representatives
is hereby ordered to compute the overtime rates due each employee of the respondent Bank from
January 28, 1962, in accordance with the above determination; and to complete the same within a
period of sixty (60) days from receipt of this Order. However, considering that the Philippine
National Bank is a government depository, and renders and performs functions distinct and
unique; and, while it may be a banking institution, its relationship with other government agencies
and the public is such that it has no basis for comparison with other banking institutions organized
under the corporation law or special charter. To require it to pay immediately the liability after the
exact amount shall have been determined by the Court Examiner and duly approved by the Court,
as in other cases, would work undue hardship to the whole government machinery, not to mention
the outstanding foreign liabilities and outside commitments, if any. Moreover, the records show
that this case was initiated long before the taking over of the incumbent bank officials.

Accordingly, the Court feels that the payment shall be subject to the negotiations by the parties as
to time, amount, and duration.

The Court may intervene in said negotiations for the purpose of settling once and for all this case
to maintain industrial peace pursuant to Section 13 of Commonwealth Act 103, as amended, if
desired, however by the parties.

After all this is not an unfair labor practice case.

SO ORDERED. (Pp. 98-100, Record.)

In connection with the above decision, two interesting points appear at once to be of determinative relevance:

The first is that in upholding its jurisdiction to take cognizance of the demand in question about cost-of-living
allowance and longevity pay, the Industrial Court carefully noted that it was not resolving a petition for declaratory
relief in the light of the decision of this Court in NAWASA vs. NAWASA Consolidated Unions, G.R. No. L-
18938, August 31, 1964, 11 SCRA 766. Thus the decision under review states:
 Incidentally, the present action is not one for declaratory relief as to the applicability of a judicial
decision to the herein parties. A careful perusal of the pleadings indicates that what is being sought
is the payment of differential overtime and nighttime pay based on existing law and jurisprudence.
The cause of action is not anchored on any decision of any court but on provisions of the law
which have been in effect at the time of the occurrence of the cause of the action in relation to a
labor dispute. Hence, this is not a petition for declaratory relief. (Pp. 94-95, Record.)

The second refers to a subsequent decision of the same Industrial Court in Shell Oil Workers Union vs. Shell Co., et
al., Case No. 2410-V and Shell & Affiliates Supervisors Union vs. Shell Company of the Philippines, et al., Case No.
2411- V, in which the court made an explanatory discourse of its understanding of the NAWASA ruling, supra, and
on that basis rejected the claim of the workers. In brief, it held that (1) NAWASA does not apply where the
collective bargaining agreement does not provide for the method of computation of overtime pay herein insisted
upon by private respondent PEMA and (2) the fact-situation in the Shell cases differed from that of NAWASA,
since the sole and definite ratio decidendi in NAWASA was merely that inasmuch as Republic Act 1880 merely
fixed a 40-hour 5-day work for all workers, laborers and employees including government-owned corporations like
NAWASA, the weekly pay of NAWASA workers working more than five days a week should remain intact; with
overtime pay in excess of eight hours work and 25 % additional compensation on Sundays. There was no
pronouncement at all therein regarding the basis of the computation of overtime pay in regard to bonuses and other
fringe benefits.

For being commendably lucid and comprehensive, We deem it justified to quote from that Shell decision:

The main issue:

The Unions appear to have read the NAWASA case very broadly. They would want it held that in
view of the said ruling of the Supreme Court, employers and employees must, even in the face of
existing bargaining contracts providing otherwise, determine the daily and hourly rates of
employees in this manner: Add to basic pay all the money value of all fringe benefits agreed upon
or already received by the workers individually and overtime pay shall be computed thus —

Basic yearly Rate plus Value of all Fringe Benefits divided by number of days worked during the
year equals daily wage; Daily wage divided by 8 equals hourly rate. Hourly rate plus premium rate
equals hourly overtime rate.

The NAWASA case must be viewed to determine whether it is that broad. NAWASA case must
be understood in its setting. The words used by the Supreme Court in its reasoning should not be
disengaged from the fact-situation with which it was confronted and the specific question which it
was there required to decide. Above all care should be taken not to lose sight of the truth that the
facts obtaining, the issue settled, and the law applied in the said case, and these, though extractable
from the records thereof as material in the resolution herein, were, as they are, primarily
declarative of the rights and liabilities of the parties involved therein.

Recourse to the records of the NAWASA case shows that the fact- situation, as far as can be
materially connected with the instant case, is as follows:

In view of the enactment of Rep. Act 1880, providing that the legal hours of
work for government employees, (including those in government-owned or
controlled corporations) shall be eight (8) hours a day for five (5) days a week or
forty (40) hours a week, its implementation by NAWASA was disputed by the
Union. The workers affected were those who, for a period of three (3) months
prior to or immediately preceding the implementation of Rep. Act 1880, were
working seven (7) days a week and were continuously receiving 25% Sunday
differential pay. The manner of computing or determining the daily rate of
monthly salaried employees.
And the Supreme Court, specifically laid out the issue to be decided, as it did decide, in the
NAWASA, as follows:

7. and 8. How is a daily wage of a weekly employee computed in the light of Republic Act
1880?'(G.R. L-18938)

Resolving the above issue, it was held;

According to petitioner, the daily wage should be computed exclusively on the

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

It is thus necessary to analyze the Court's rationale in the said NAWASA case, 'in the light of Rep.
Act 1880', and the 'specific corollaries' discussed preparatory to arriving at a final conclusion on
the main issue. What was required to be done, by way of implementing R. A. 1880? The statute
directs that working hours and days of government employees (including those of government
owned and controlled proprietary corporations) shall be reduced to five days-forty hours a week.
But, the same law carried the specific proviso, designed to guard against diminution of salaries or
earnings of affected employees. The Supreme Court itself clearly spelled this out in the following
language: 'It is evident that Republic Act 1880 does not intend to raise the wages of the employees
over what they are actually receiving. Rather, its purpose is to limit the working days in a week to
five days, or to 40 hours without however permitting any reduction in the weekly or daily wage of
the compensation which was previously received. ...

If the object of the law was to keep intact, (not either to increase it or decrease it) it is but natural
that the Court should concern itself, as it did, with the corollary, what is the weekly wage of
worker who, prior to R.A. 1880, had been working seven (7) days a week and regularly receiving
differential payments for work on Sundays or at night? It seems clear that the Court was only
concerned in implementing correctly R.A. 1880 by ensuring that in diminishing the working days
and hours of workers in one week, no diminution should result in the worker's weekly or daily
wage. And, the conclusion reached by the Supreme Court was to affirm or recognize the
correctness of the action taken by the industrial court including such differential pay in computing
the weekly wages of these employees and laborers who worked seven days a week and were
continuously receiving 25% Sunday differential for a period of three months immediately
preceding the implementation of R.A. 1880.' Nothing was said about adding the money value of
some other bonuses or allowances or money value of other fringe benefits, received outside the
week or at some other periods. That was not within the scope of the issue before the Court. in fact,
the limited application of the decision is expressed in the decision itself. The resolution of this
particular issue was for the benefit of only a segment of the NAWASA employees. Said the Court
'Of course, this should only benefit those who have been working seven days a week and had been
regularly receiving 25% additional compensation for Sunday work before the effectivity of the
Act.'

Unions make capital of the following pronouncement of the Supreme Court in the NAWASA
case:
 It has been held that for purposes of computing overtime compensation a regular
wage includes all payments which the parties have agreed shall be received
during the work week, including piece-work wages, differential payments for
working at undesirable times, such as at night or on Sundays and holidays, and
the cost of board and lodging customarily furnished the employee (Walling v.
Yangerman-Reynolds Hardwook Co., 325 U.S. 419; Walling v. Harischfeger
Corp. 325 U.S. 427). The 'Regular rate of pay also ordinarily includes incentive
bonus or profit- sharing payments made in addition to the normal basic pay (56
C.J.S., pp. 704-705), and it was also held that the higher rate for night, Sunday
and holiday work is just as much as regular rate as the lower rate for daytime
work. The higher rate is merely an inducement to accept employment at times
which are not at desirable form a workman's standpoint (International L. Ass'n.
Wise 50 F. Supp. 26, affirmed C.C.A. Carbunao v. National Terminals Corp.
139 F. 853).

But this paragraph in the decision appears to have been used and cited by the Court to sustain the
action of the court a quo: that it was correct to include the 25% Sunday premium for the purpose
of setting the weekly wage of specified workers whose weekly earnings before the passage of R.A.
1880 would be diminished, if said premium pay regularly received for three months were not
included. It is significant that the citations therein used by the Supreme Court are excerpts from
American decisions whose legislation on overtime is at variance with the law in this jurisdiction in
this respect: the U.S. legislation considers work in excess of forty hours a week as overtime;
whereas, what is generally considered overtime in the Philippines is work in excess 'of the regular
8-hours a day. It is understandably material to refer to precedents in the U.S. for purposes of
computing weekly wages under a 40- hour a week rule, since the particular issue involved in
NAWASA is the conversion of prior weekly regular earnings into daily rates without allowing
diminution or addition.

No rule of universal application to other cases may, therefore, be justifiably extracted from the
NAWASA case. Let it be enough that in arriving at just solution and correct application of R.A.
1880, an inference was drawn from other decisions that a regular wage includes payments 'agreed
by the parties to be received during the week.' But to use this analogy in another fact- situation
would unmitigatingly stretch its value as basis for legal reasoning, for analogies are not perfect
and can bring a collapse if stretched far beyond their logical and reasoned efficacy. Neither would
it be far to ascribe to the Supreme Court's citation of foreign jurisprudence, which was used for
purposes of analogy, the force of statute law, for this would be the consequence if it were allowed
to be used as authority for all fact-situations, even if different from the NAWASA case. This,
because courts do not legislate. All they do is apply the law.

The above discussions impel the objective analyst to reject the proposition that the NAWASA
decision is an embracing and can be used with the authority of a statute's effects on existing
contracts.

It appears that the answer to dispute lies, not in the text of the NAWASA case but in the terms and
conditions and practice in the implementation of, the agreement, an area which makes resolution
of the issue dependent on the relation of the terms and conditions of the contract to the
phraseology and purpose of the Eight-Hour Labor Law (Act 444).

The more we read the NAWASA case, the more we are convinced that the overtime computation
set therein cannot apply to the cases at bar. For to do so would lead to unjust results, inequities
between and among the employees themselves and absurd situations. To apply the NAWASA
computation would require a different formula for each and every employee, would require
reference to and continued use of individual earnings in the past, thus multiplying the
administrative difficulties of the Company. It would be cumbersome and tedious a process to
compute overtime pay and this may again cause delays in payments, which in turn could lead to
 serious disputes. To apply this mode of computation would retard and stifle the growth of unions
themselves as Companies would be irresistibly drawn into denying, new and additional fringe
benefits, if not those already existing, for fear of bloating their overhead expenses through
overtime which, by reason of being unfixed, becomes instead a veritable source of irritant in labor
relations.

One other reason why application of the NAWASA case should be rejected is that this Court is not
prepared to accept that it can lay down a less cumbersome formula for a company-wide overtime
pay other than that which is already provided in the collective bargaining agreement. Courts
cannot make contracts for the parties themselves.

Commonwealth Act 444 prescribes that overtime work shall be paid 'at the same rate as their
regular wages or salary, plus at least twenty-five per centum additional' (Secs. 4 & 5). The law did
not define what is a 'regular wage or salary'. What the law emphasized by way of repeated
expression is that in addition to 'regular wage', there must be paid an additional 25% of that
'regular wage' to constitute overtime rate of pay. The parties were thus allowed to agree on what
shag be mutually considered regular pay from or upon which a 25% premium shall be based and
added to make up overtime compensation. This the parties did by agreeing and accepting for a
very long period to a basic hourly rate to which a premium shall be added for purposes of
overtime.

Also significant is the fact that Commonwealth Act 444 merely sets a minimum, a least premium
rate for purposes of overtime. In this case, the parties agreed to premium rates four (4) or even six
(6) times than that fixed by the Act. Far from being against the law, therefore, the agreement
provided for rates 'commensurate with the Company's reputation of being among the leading
employers in the Philippines' (Art. 1, Sec. 2, Coll. Barg. Agreement) at the same time that the
Company is maintained in a competitive position in the market Coll. Barg. Agreement, lbid).

Since the agreed rates are way above prevailing statutory wages and premiums, fixed by
themselves bona fide through negotiations favored by law, there appears no compelling reason nor
basis for declaring the same illegal. A basic principle forming an important foundation of R.A.
875 is the encouragement given to parties to resort to peaceful settlement of industrial problems
through collective bargaining. It behooves this Court, therefore, to help develop respect for those
agreements which do not exhibit features of illegality This is the only way to build confidence in
the democratic process of collective bargaining. Parties cannot be permitted to avoid the
implications and ramifications of the agreement.

Although this Court has gone very far in resolving an doubts and in giving great weight to
evidence and presumptions in favor of labor, it may not go as far as reconstruct the law to fit
particular cases." (Pp. 174-181, Record)

Proof of the correctness of the aforequoted considerations, the appeal of the workers from the Industrial Court's
decision did not prosper. Affirming the appealed decision, We held:

The theory, therefore, of the petitioners is to the effect that, notwithstanding the terms and
conditions of their existing collective bargaining agreement with respondent Shell Company,
particularly Exhibit 'A-l' for the Petitioners and Exhibit 'l-A' for the Respondent (which is
Appendix 'B' of the Collective Bargaining Agreement of the parties), considering the ruling in the
NAWASA case, a recomputation should be made of their basic wage by adding the money value
of the fringe benefits enjoyed by them from whence the premium rates agreed upon shall be
computed in order to arrive at the correct computation of their overtime compensation from the
Company. On the other hand, respondent Shell Company maintains that the NAWASA case
should not be utilized as the basis for the alteration of their mode of computing overtime rate of
pay as set forth in their collective Bargaining Agreement. It insists that their collective bargaining
agreement should be the law between them.

After a careful and thorough re-examination of the NAWASA case, supra, and a minute
examination of the facts and the evidence of the case now before Us, We rule that the NAWASA
case is not in point and, therefore, is inapplicable to the case at bar.

The ruling of this Court in the NAWASA case contemplates the regularity and continuity of the
benefits enjoyed by the employees or workers (for at least three (3) months) as the condition
precedent before such additional payments or benefits are taken into account. This is evident in the
aforequoted ruling of this Court in the NAWASA case as well as in the hereinbelow cited
authorities, to wit:

The 'regular rate' of pay on the basis of which overtime must be computed must
reflect an payments which parties have agreed shall be received regularly during
the work week, exclusive of overtime payments.' Walling v. Garlock Packing
Co. C.C.A.N.Y., 159 F. 2d 44, 45. (Page 289, WORDS And PHRASES,
Permanent Edition, Vol. 36A; Italics supplied); and

As a general rule the words 'regular rate' mean the hourly rate actually paid for
the normal, non-overtime work week, and an employee's regular compensation
is the compensation which regularly and actually reaches him, ... .' (56 C.J.S.
704; Emphasis supplied).

Even in the definition of wage under the Minimum Wage Law, the words 'customarily furnished'
are used in referring to the additional payments or benefits, thus, -

'Wage' paid to any employee shag mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece,
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done or for
services rendered or to be rendered, and includes the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging or other facilities customarily furnished by the employer
to the employee.' (Sec. 2 (g), R.A. No. 602).

Having been stipulated by the parties that ... the Tin Factory Incentive Pay has ceased in view of
the closure of the factory in May 1966 the fringe benefits as described show that they are
occasionally not regularly enjoyed and that not all employees are entitled to them', herein
petitioners failed to meet the test laid down by this Court in the NAWASA case. Further, the
collective bargaining agreement resorted to by the parties being in accordance with R.A. 875, with
its provision on overtime pay far way beyond the premium rate provided for in Sections 4 and 5 of
Commonwealth Act 444, the same should govern their relationship. Since this is their contract
entered into by them pursuant to bargaining negotiations under existing laws, they are bound to
respect it. It is the duty of this Court to see to it that contracts between parties, not tainted with
infirmity or irregularity or illegality, be strictly complied with by the parties themselves. This is
the only way by which unity and order can be properly attained in our society.

It should be noted in passing that Commonwealth Act 444 prescribes only a minimum of at least
25% in addition to the regular wage or salary of an employee to constitute his overtime rate of
pay, whereas, under Appendix 'B', (Exhs. 'A-l', Petitioners and 'l-A', Respondent) of the Collective
Bargaining Agreement of the parties, the premium rate of overtime pay is as high as l50% on
regular working days up to 250 % on Sundays and recognized national holidays. (Shell Oil
Workers Union vs. Shell Company of the Philippines, G.R. No. L-30658-59, March 31, 1976, 70
SCRA 242-243.)
In the instant case, on May 22, 1965 PEMA alleged in the court below the following cause of action as amended on
June 7, 1965:

Since the start of the giving of cost of living allowance and longevity pay and reiterated, after the
promulgation of the Decision in National Waterworks and Sewerage Authority vs. NAWASA
Consolidated Unions et al., G.R. No. L-18938, August 31, 1964, the petitioner has repeatedly
requested respondent that the cost of living allowance and longevity pay be taken into account in
the computation of overtime pay, effective as of the grant of said benefits on January 1, 1958, in
accordance with the ruling in said Decision of the Supreme Court. (Page 14, PNB's Brief.)

To be sure, there could be some plausibility in PNB's pose regarding the jurisdiction of the Industrial Court over the
above cause of action. But, as We have already stated, We agree with the broader view adopted by the court a quo
on said point, and We find that it is in the best interests of an concerned that this almost 25-year dispute be settled
once and for all without the need of going through other forums only for the matter to ultimately come back to this
Court probably years later, taking particular note as We do, in this regard, of the cases cited on pages 9-10 of
PEMA's original memo, as follows:

Realizing its error before in not considering the present case a certified labor dispute, the Bank
now concedes that the case at bar 'belongs to compulsory arbitration'. Hence, the lawful powers of
the CIR over the same. However, the Bank says 'overtime differential is but a money claim, (and)
respondent court does not have jurisdiction to take cognizance of the same'.

But this is not a pure money claim (pp. 10-11, Opposition) because other factors are involved -
certification by the President, the matter may likely cause a strike, the dispute concerns national
interest and comes within the CIR's injunction against striking, and the employer-employee
relationship between the Bank and the employees has not been severed. Besides, 'money claim' is
embraced within the term 'compensation' and therefore falls squarely under the jurisdiction of the
CIR in the exercise of its arbitration power (Sec. 4, CA 103; Please see also Republic vs. CIR, L-
21303, Sept. 23/68; Makalintal J., NWSA Case, L-26894-96, Feb. 28/69; Fernando, J.).

What confers jurisdiction on the Industrial Court, says Justice J.B.L. Reyes, is not the form or
manner of certification by the President, but the referral to said court of the industrial dispute
between the employer and the employees. (Liberation Steamship vs. CIR, etc., L-25389 & 25390,
June 27/68).

In Phil. Postal Savings Bank, et al. vs. CIR, et al., L-24572, Dec. 20/67, this Honorable Court,
speaking through Chief Justice Concepcion, held that the certification of the issue 'as a dispute
affecting an industry indispensable to the national interest' leaves 'no room for doubt on the
jurisdiction of the CIR to settle such dispute.'

Relatedly, however, it is to be noted that it is clear from the holding of the Industrial Court's decision We have
earlier quoted, "the cause of action (here) is not on any decision of any court but on the provisions of the law which
have been in effect at the time of the occurrence of the cause of action in relation to a labor dispute". Viewed from
such perspective laid by the lower court itself, it can hardly be said that it indeed exercised purely its power of
arbitration, which means laying down the terms and conditions that should govern the relationship between the
employer and employees of an enterprise following its own appreciation of the relevant circumstances rather
empirically. More accurately understood, the court in fact indulged in an interpretation of the applicable law,
namely, CA 444, in the light of its own impression of the opinion of this Court in NAWASA and based its decision
thereon.

Accordingly, upon the fact-situation of this case hereunder to be set forth, the fundamental question for Us to decide
is whether or not the decision under appeal is in accordance with that law and the cited jurisprudence. In brief, as
PEMA posits, is NAWASA four-square with this case? And even assuming, for a while, that in a sense what is
before Us is an arbitration decision, private respondent itself admits in its above-mentioned memorandum that this
Court is not without power and authority to determine whether or not such arbitration decision is against the law or
jurisprudence or constitutes a grave abuse of discretion. Thus, in PEMA's memorandum, it makes the observation
that "(F)urthermore, in the Shell cases, the unions are using the NAWASA decision as a source of right for
recomputation, while in the PNB, the Union merely cites the NAWASA doctrine, not as a source of right, but as a
legal authority or reference by both parties so the Union demand may be granted. " (Motion to Dismiss, p. 3.)

Obviously, therefore, the polestar to which Our mental vision must be focused in order that We may arrive at a
correct legal and equitable determination of this controversy and, in the process make NAWASA better understood
as We believe it should be, is none other than Sections 3 and 4 of Com. Act No. 444, the Eight Hour Labor Law,
which pertinently provide thus:

SEC. 3. Work may be performed beyond eight hours a day in case of actual or impending
emergencies caused by serious accidents, fire, flood, typhoon, earthquake, epidemic, or other
disaster or calamity in order to prevent loss to life and property or imminent danger to public
safety; or in case of urgent work to be performed on the machines, equipment, or installations in
order to avoid a serious loss which the employer would otherwise suffer, or some other just cause
of a similar nature; but in all such cases the laborers and employees shall be entitled to receive
compensation for the overtime work performed at the same rate as their regular wages or salary,
plus at least twenty-five per centum additional.

In case of national emergency the Government is empowered to establish rules and regulations for
the operation of the plants and factories and to determine the wages to be paid the laborers.

xxx xxx xxx

SEC. 4. No person, firm, or corporation, business establishment or place or center of labor shall
compel an employee or laborer to work during Sundays and legal holidays, unless he is paid an
additional sum of at least twenty-five per centum of his regular remuneration: Provided, however,
that this prohibition shall not apply to public utilities performing some public service such as
supplying gas, electricity, power, water, or providing means of transportation or communication.

The vital question is, what does "regular wage or salary" mean or connote in the light of the demand of PEMA?

In Our considered opinion, the answer to such question lies in the basic rationale of overtime pay. Why is a laborer
or employee who works beyond the regular hours of work entitled to extra compensation called in this enlightened
time, overtime pay? Verily, there can be no other reason than that he is made to work longer than what is
commensurate with his agreed compensation for the statutorily fixed or voluntarily agreed hours of labor he is
supposed to do. When he thus spends additional time to his work, the effect upon him is multi-faceted: he puts in
more effort, physical and/or mental; he is delayed in going home to his family to enjoy the comforts thereof; he
might have no time for relaxation, amusement or sports; he might miss important pre-arranged engagements; etc.,
etc. It is thus the additional work, labor or service employed and the adverse effects just mentioned of his longer stay
in his place of work that justify and is the real reason for the extra compensation that he called overtime pay.

Overtime work is actually the lengthening of hours developed to the interests of the employer and the requirements
of his enterprise. It follows that the wage or salary to be received must likewise be increased, and more than that, a
special additional amount must be added to serve either as encouragement or inducement or to make up fop the
things he loses which We have already referred to. And on this score, it must always be borne in mind that wage is
indisputably intended as payment for work done or services rendered. Thus, in the definition of wage for purposes of
the Minimum Wage Law, Republic Act No. 602, it is stated:

'Wage' paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time task, piece,
commission basis or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done or for
 services rendered or to be rendered and includes the fair and reasonable value as determined by
the Secretary of Labor, of board, lodging or other facilities customarily furnished by the employer
to the employee. 'Fair and reasonable value' shall not include a profit to the employer which
reduces the wage received by the employee below the minimum wage applicable to the employee
under this Act, nor shall any transaction between an employer or any person affiliated with the
employer and the employee of the employer include any profit to the employer or affiliated person
which reduces the employee's wage below the wage applicable to the employee under this
Act.' 2 (Emphasis supplied).

As can be seen, wage under said law, in whatever means or form it is given to the worker, is "for work done or to be
done or for services rendered or to be rendered" and logically "includes (only) 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".

Indeed, for the purpose of avoiding any misunderstanding or misinterpretation of the word "wage" used in the law
and to differentiate it from "supplement", the Wage Administration Service to implement the Minimum Wage Law,
defined the latter as:

extra remuneration or benefits received by wage earners from their employers and include but are
not restricted to pay for vacation and holidays not worked; paid sick leave or maternity leave;
overtime rate in excess of what is required by law; pension, retirement, and death benefits; profit-
sharing, family allowances; Christmas, war risk and cost-of-living bonuses; or other bonuses other
than those paid as a reward for extra output or time spent on the job. (Emphasis ours).

In these times when humane and dignified treatment of labor is steadily becoming universally an obsession of
society, we, in our country, have reached a point in employer- employee relationship wherein employers themselves
realize the indispensability of at least making the compensation of workers equal to the worth of their efforts as
much as this case can be statistically determined. Thus, in order to meet the effects of uncertain economic conditions
affecting adversely the living conditions of wage earners, employers, whenever the financial conditions of the
enterprise permit, grant them what has been called as cost-of-living allowance. In other words, instead of leaving the
workers to assume the risks of or drift by themselves amidst the cross -currents of country-wide economic
dislocation, employers try their best to help them tide over the hardships and difficulties of the situation. Sometimes,
such allowances are voluntarily agreed upon in collective bargaining agreements. At other times, it is imposed by
the government as in the instances of Presidential Decrees Nos. 525, 928, 1123, 1389, 1614, 1678, 1751 and 1790;
Letters of Instructions No. 1056 and Wage Order No. 1. Notably, Presidential Decree No. 1751 increased the
statutory wage at all levels by P400 in addition to integrating the mandatory emergency living allowances under
Presidential Decree No. 525 and Presidential Decree No. 1123 into the basic pay of all covered workers.

Going over these laws, one readily notices two distinctive features: First, it is evidently gratifying that the
government, in keeping with the humanitarian trend of the times, always makes every effort to keep wages abreast
with increased cost of living conditions, doing it as soon as the necessity for it arises. However, obviously, in order
not to overdo things, except when otherwise provided, it spares from such obligation employers who by mutual
agreement with their workers are already paying what the corresponding law provides (See Sec. 4 of P.D. No. 525;
Section 2 of P.D. No. 851 until P.D. 1684 abolished all exemptions under P.D. No. 525, P.D. No. 1123, P.D. No.
851 and P.D. No. 928 among distressed employers who even though given sufficient lapse of time to make the
necessary adjustment have not done so.)3

In the case at bar, as already related earlier, the cost-of-living allowance began to be granted in 1958 and the
longevity pay in 1981. In other words, they were granted by PNB upon realizing the difficult plight of its labor force
in the face of the unusual inflationary situation in the economy of the country, which, however acute, was
nevertheless expected to improve. There was thus evident an inherently contingent character in said allowances.
They were not intended to be regular, much less permanent additional part of the compensation of the employees
and workers. To such effect were the testimonies of the witnesses at the trial. For instance, Mr. Ladislao Yuzon
declared:
ATTORNEY GESMUNDO

Questioning ....

Q. Calling your attention to paragraph No. 1, entitled monthly living allowance,

which has been marked as Exhibit 'A-l', will you kindly tell us the history of this
benefit- monthly living allowance, why the same has been granted?

A. Well, in view of the increasing standard of living, we decided to demand

from management in our set of demands ... included in our set of demands in
1957-1958 a monthly living allowance in addition to our basic salary. This
benefit was agreed upon and granted to take effect as of January 1, 1958. That
was the first time it was enjoyed by the employees of the Philippine National
Bank. It started on a lesser amount but year after year we have been demanding
for increases on this living allowance until we have attained the present amount
of P 1 50.00 a month, starting with P40.00 when it was first granted. The same is
still being enjoyed by the employees on a much higher amount. There were a
few variations to that. (t. t.s.n., pp. 18-19, Hearing of August 16, 1965)

which testimony was affirmed by Mr. Panfilo Domingo, on cross- examination by counsel for the respondent,
reading as follows:

ATTORNEY GESMUNDO:

Q. Do you recall Mr. Domingo, that in denying the cost of living allowance and
longevity pay for incorporation with the basic salary, the reason given by the
management was that as according to you, it will mean an added cost and '
furthermore it will increase the contribution of the Philippine National Bank to
the GSIS, is that correct?

A. This is one of the reasons, of the objections for the inclusion of the living
allowance and longevity pay to form part of the basic pay, I mean among others,
because the basic reason why management would object is the cost of living
allowance is temporary in nature, the philosophy behind the grant of this
benefit, Nonetheless, it was the understanding if I recall right that in the event
that cost of living should go down then there should be a corresponding
decrease in the cost of living allowance being granted I have to mention this
because this is the fundamental philosophy in the grant of cost of living
allowance. (Pp. 19-20, Record.)

Much less were they dependent on extra or special work done or service rendered by the corresponding recipient.
Rather, they were based on the needs of their families as the conditions of the economy warranted. Such is the
inexorable import of the pertinent provisions of the collective bargaining agreement:

MONTHLY LIVING ALLOWANCE

All employees of the Bank shall be granted a monthly living allowance of P140, plus P10 for each
minor dependent child below 21 years of age, but in no case shall the total allowance exceed P200
or 25% of the monthly salary, whichever is higher, subject to the following conditions:

a) That this new basic allowance shall be applicable to all employees,

irrespective of their civil status;
 b) That a widow or widower shall also enjoy the basic allowance of P140 a
month, plus the additional benefit of P10 for each minor dependent child but not
to exceed P200 or 25% of basic salary whichever is higher.

c) That in case the husband and wife are both employees in the Bank both shall
enjoy this new basic monthly living allowance of P140 but only one of spouses
shall be entitled to claim the additional benefit of P10 for each minor legitimate
or acknowledged child. (Pp. 30-31, PNB's memo.)

So also with the longevity pay; manifestly, this was not based on the daily or monthly amount of work done or
service rendered it was more of a gratuity for their loyalty, or their having been in the bank's employment for
consideration periods of time. Indeed, with particular reference to the longevity pay, the then existing collective
bargaining contract expressly provided: "... That this benefit shall not form part of the basic salaries of the officers
so affected."

PEMA may contend that the express exclusion of the longevity pay, means that the cost-of-living allowance was not
intended to be excluded. Considering, however, the contingent nature of the allowances and their lack of relation to
work done or service rendered, which in a sense may be otherwise in respect to longevity pay PEMA's contention is
untenable. The rule of exclusio unius, exclusio alterius would not apply here, if only because in the very nature of
the two benefits in question, considerations and conclusions as to one of them could be non-sequitur as to the other.

Withal, there is the indisputable significant fact that after 1958, everytime a collective bargaining agreement was
being entered into, the union always demanded the integration of the cost-of-living allowances and longevity pay,
and as many times, upon opposition of the bank, no stipulation to such effect has ever been included in any of said
agreements. And the express exclusion of longevity pay was continued to be maintained.

On this point, the respondent court held that under its broad jurisdiction, it was within the ambit of its authority to
provide for what the parties could not agree upon. We are not persuaded to view the matter that way. We are not
convinced that the government, thru the Industrial Court, then, could impose upon the parties in an employer-
employee conflict, terms and conditions which are inconsistent with the existing law and jurisprudence, particularly
where the remedy is sought by the actors more on such legal basis and not purely on the court's arbitration powers.

As pointed out earlier in this opinion, Our task here is two-fold: First, reviewing the decision under scrutiny as based
on law and jurisprudence, the question is whether or not the rulings therein are correct. And second, reading such
judgment as an arbitration decision, did the court a quo gravely abuse its discretion in holding, as it did, that cost-of-
living allowance and longevity pay should be included in the computation of overtime pay?

In regard to the first question, We have already pointed out to start with, that as far as longevity pay is concerned, it
is beyond question that the same cannot be included in the computation of overtime pay for the very simple reason
that the contrary is expressly stipulated in the collective bargaining agreement and, as should be the case, it is settled
that the terms and conditions of a collective bargaining agreement constitute the law between the parties. (Mactan
Workers Union vs. Aboitiz, 45 SCRA 577. See also Shell Oil Workers Union et al. vs. Shell Company of the
Philippines, supra) The contention of PEMA that the express provision in the collective bargaining agreement that
"this benefit (longevity pay) shall not form part of the basic salaries of the officers so affected" cannot imply the
same Idea insofar as the computation of the overtime pay is concerned defies the rules of logic and mathematics. If
the basic pay cannot be deemed increased, how could the overtime pay be based on any increased amount at all?

However, the matter of the cost-of-living allowance has to be examined from another perspective, namely, that
while PEMA had been always demanding for its integration into the basic pay, it never succeeded in getting the
conformity of PNB thereto, and so, all collective bargaining agreements entered -4 into periodically by the said
parties did not provide therefor. And it would appear that PEMA took the non-agreement of the bank in good grace,
for the record does not show that any remedial measure was ever taken by it in connection therewith. In other words,
the parties seemed to be mutually satisfied that the matter could be better left for settlement on the bargaining table
sooner or later, pursuant to the spirit of free bargaining underlying Republic Act 875, the Industrial Peace Act then
in force. Or, as observed by PEMA in its memorandum, (page 23), the parties "agreed to let the question remain
open-pending decision of authorities that would justify the demand of the Union." Indeed, on pages 23-24 of said
memorandum, the following position of PEMA is stated thus:

Thus the following proceeding took place at the Court a quo:

ATTY. GESMUNDO:

That is our position, Your Honor, because apparently there was an understanding reached between
the parties as to their having to wait for authorities and considering that the issue or one of the
issues then involved in the NAWASA case pending in the CIR supports the stand of the union,
that the principle enunciated in connection with that issue is applicable to this case.

xxx xxx xxx

Q. Do we understand from you, Mister Yuson, that it was because of the

management asking you for authorities in allowing the integration of the cost of
living allowance with your basic salary and your failure to produce at the time
such authorities that the union then did not bring any case to the Court?

A. Well, in the first place, it is not really my Idea to be bringing matters to the
Court during my time but I would much prefer that we agree on the issue. Well,
insofar as you said that the management was asking me, welt I would say that
they were invoking (on) authorities that we can show in order to become as a
basis for granting or for agreeing with us although we were aware of the
existence of a pending case which is very closely similar to our demand, yet we
decided to wait until this case should be decided by the Court so that we can
avail of the decision to present to management as what they are asking for.
(t.s.n., pp. 31-32, 35-36, Aug. 28,1965.)

Now, to complete proper understanding of the character of the controversy before Us, and lest it be felt by those
concerned that We have overlooked a point precisely related to the matter touched in the above immediately
preceding paragraph, it should be relevant to quote a portion of the "Stipulation of Facts" of the parties hereto:

1. This particular demand was among those submitted by Petitioner-Union in the current collective
bargaining negotiations to the Respondent Bank. However, since this case was already filed in
court on May 22, 1965, the parties agreed not to include this particular demand in the discussion,
leaving the matter to the discretion and final judicial determination of the courts of justice." (Page
81, Rec.)

In fine, what the parties commonly desire is for this Court to construe CA 444 in the light of NAWASA, considering
the fact- situation of the instant case.

In this respect, it is Our considered opinion, after mature deliberation, that notwithstanding the portions of the
NAWASA's opinion relied upon by PEMA, there is nothing in CA 444 that could justify its posture that cost-of-
living allowance should be added to the regular wage in computing overtime pay.

After all, what was said in NAWASA that could be controlling here? True, it is there stated that "for purposes of
computing overtime compensation, regular wage includes all payments which the parties have agreed shall be
received during the work week, including - differential payments for working at undesirable times, such as at night
and the board and lodging customarily furnished the employee. ... The 'regular rate' of pay also ordinarily includes
incentive bonus or profit-sharing payments made in addition to the normal basic pay (56 C.J.S., pp. 704-705), and it
was also held that the higher rate for night, Sunday and holiday work is just as much a regular rate as the lower rate
for daytime work. The higher rate is merely an inducement to accept employment at times which are not as desirable
from a workmen's standpoint (International L. Ass'n vs. National Terminals Corp. C.C. Wise, 50 F. Supp. 26,
affirmed C.C.A. Carbunoa v. National Terminals Corp. 139 F. 2d 853)." (11 SCRA, p. 783)

But nowhere did NAWASA refer to extra, temporary and contingent compensation unrelated to work done or
service rendered, which as explained earlier is the very nature of cost-of- living allowance. Withal, in strict sense,
what We have just quoted from NAWASA was obiter dictum, since the only issue before the Court there was
whether or not "in computing the daily wage, (whether) the addition compensation for Sunday should be included. "
(See No. 7 of Record)

In any event, as stressed by Us in the Shell cases, the basis of computation of overtime pay beyond that required by
CA 444 must be the collective bargaining agreement, 4 for, to reiterate Our postulation therein and in Bisig ng
Manggagawa, supra, it is not for the court to impose upon the parties anything beyond what they have agreed upon
which is not tainted with illegality. On the other hand, where the parties fail to come to an agreement, on a matter
not legally required, the court abuses its discretion when it obliges any 6f them to do more than what is legally
obliged.

Doctrinally, We hold that, in the absence of any specific provision on the matter in a collective bargaining
agreement, what are decisive in determining the basis for the computation of overtime pay are two very germane
considerations, namely, (1) whether or not the additional pay is for extra work done or service rendered and (2)
whether or not the same is intended to be permanent and regular, not contingent nor temporary and given only to
remedy a situation which can change any time. We reiterate, overtime pay is for extra effort beyond that
contemplated in the employment contract, hence when additional pay is given for any other purpose, it is illogical to
include the same in the basis for the computation of overtime pay. This holding supersedes NAWASA.

Having arrived at the foregoing conclusions, We deem it unnecessary to discuss any of the other issues raised by the
parties.

WHEREFORE, judgment is hereby rendered reversing the decision appealed from, without costs.
 THIRD DIVISION

G.R. No. 144664 March 15, 2004

ASIAN TRANSMISSION CORPORATION, petitioner,

vs.
The Hon. COURT OF APPEALS, Thirteenth Division, HON. FROILAN M. BACUNGAN as Voluntary
Arbitrator, KISHIN A. LALWANI, Union, Union representative to the Panel Arbitrators; BISIG NG ASIAN
TRANSMISSION LABOR UNION (BATLU); HON. BIENVENIDO T. LAGUESMA in his capacity as
Secretary of Labor and Employment; and DIRECTOR CHITA G. CILINDRO in her capacity as Director of
Bureau of Working Conditions, respondents.

DECISION

CARPIO-MORALES, J.:

Petitioner, Asian Transmission Corporation, seeks via petition for certiorari under Rule 65 of the 1995 Rules of
Civil Procedure the nullification of the March 28, 2000 Decision1 of the Court of Appeals denying its petition to
annul 1) the March 11, 1993 "Explanatory Bulletin"2 of the Department of Labor and Employment (DOLE) entitled
"Workers’ Entitlement to Holiday Pay on April 9, 1993, Araw ng Kagitingan and Good Friday", which bulletin the
DOLE reproduced on January 23, 1998, 2) the July 31, 1998 Decision3 of the Panel of Voluntary Arbitrators ruling
that the said explanatory bulletin applied as well to April 9, 1998, and 3) the September 18, 19984 Resolution of the
Panel of Voluntary Arbitration denying its Motion for Reconsideration.

The following facts, as found by the Court of Appeals, are undisputed:

The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano B. Trajano, issued an
Explanatory Bulletin dated March 11, 1993 wherein it clarified, inter alia, that employees are entitled to 200% of
their basic wage on April 9, 1993, whether unworked, which[,] apart from being Good Friday [and, therefore, a
legal holiday], is also Araw ng Kagitingan [which is also a legal holiday]. The bulletin reads:

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

Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy Thursday and Araw ng
Kagitingan x x x x

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

In accordance with Step 6 of the grievance procedure of the Collective Bargaining Agreement (CBA) existing
between petitioner and BATLU, the controversy was submitted for voluntary arbitration. x x x x On July 31,
1998, the Office of the Voluntary Arbitrator rendered a decision directing petitioner to pay its covered employees
"200% and not just 100% of their regular daily wages for the unworked April 9, 1998 which covers two regular
holidays, namely, Araw ng Kagitignan and Maundy Thursday." (Emphasis and underscoring supplied)

Subject of interpretation in the case at bar is Article 94 of the Labor Code which reads:
ART. 94. Right to holiday pay. - (a) Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than ten (10) workers;

(b) The employer may require an employee to work on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate; and

(c) As used in this Article, "holiday" includes: New Year’s Day, Maundy Thursday, Good Friday, the ninth
of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth
and thirtieth of December and the day designated by law for holding a general election,

which was amended by Executive Order No. 203 issued on June 30, 1987, such that the regular holidays are now:

1. New Year’s Day January 1

2. Maundy Thursday Movable Date

3. Good Friday Movable Date

4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)

5. Labor Day May 1

6. Independence Day June 12

7. National Heroes Day Last Sunday of August

8. Bonifacio Day November 30

9. Christmas Day December 25

10. Rizal Day December 30

In deciding in favor of the Bisig ng Asian Transmission Labor Union (BATLU), the Voluntary Arbitrator held that
Article 94 of the Labor Code provides for holiday pay for every regular holiday, the computation of which is
determined by a legal formula which is not changed by the fact that there are two holidays falling on one day, like
on April 9, 1998 when it was Araw ng Kagitingan and at the same time was Maundy Thursday; and that that the
law, as amended, enumerates ten regular holidays for every year should not be interpreted as authorizing a reduction
to nine the number of paid regular holidays "just because April 9 (Araw ng Kagitingan) in certain years, like 1993
and 1998, is also Holy Friday or Maundy Thursday."

In the assailed decision, the Court of Appeals upheld the findings of the Voluntary Arbitrator, holding that the
Collective Bargaining Agreement (CBA) between petitioner and BATLU, the law governing the relations between
them, clearly recognizes their intent to consider Araw ng Kagitingan and Maundy Thursday, on whatever date they
may fall in any calendar year, as paid legal holidays during the effectivity of the CBA and that "[t]here is no
condition, qualification or exception for any variance from the clear intent that all holidays shall be compensated."5

The Court of Appeals further held that "in the absence of an explicit provision in law which provides for [a]
reduction of holiday pay if two holidays happen to fall on the same day, any doubt in the interpretation and
implementation of the Labor Code provisions on holiday pay must be resolved in favor of labor."

By the present petition, petitioners raise the following issues:

 I

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION IN ERRONEOUSLY INTERPRETING THE TERMS OF THE COLLECTIVE BARGAINING
AGREEMENT BETWEEN THE PARTIES AND SUBSTITUTING ITS OWN JUDGMENT IN PLACE OF THE
AGREEMENTS MADE BY THE PARTIES THEMSELVES

II

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION IN HOLDING THAT ANY DOUBTS ABOUT THE VALIDITY OF THE POLICIES
ENUNCIATED IN THE EXPLANATORY BULLETIN WAS LAID TO REST BY THE REISSUANCE OF THE
SAID EXPLANATORY BULLETIN

III

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION IN UPHOLDING THE VALIDITY OF THE EXPLANATORY BULLETIN EVEN WHILE
ADMITTING THAT THE SAID BULLEITN WAS NOT AN EXAMPLE OF A JUDICIAL, QUASI-JUDICIAL,
OR ONE OF THE RULES AND REGULATIONS THAT [Department of Labor and Employment] DOLE MAY
PROMULGATE

IV

WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE)
BY ISSUING EXPLANATORY BULLETIN DATED MARCH 11, 1993, IN THE GUISE OF PROVIDING
GUIDELINES ON ART. 94 OF THE LABOR CODE, COMMITTED GRAVE ABUSE OF DISCRETION, AS IT
LEGISLATED AND INTERPRETED LEGAL PROVISIONS IN SUCH A MANNER AS TO CREATE
OBLIGATIONS WHERE NONE ARE INTENDED BY THE LAW

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION IN SUSTAINING THE SECRETARY OF THE DEPARTMENT OF LABOR IN REITERATING
ITS EXPLANATORY BULLETIN DATED MARCH 11, 1993 AND IN ORDERING THAT THE SAME POLICY
OBTAINED FOR APRIL 9, 1998 DESPITE THE RULINGS OF THE SUPREME COURT TO THE CONTRARY

VI

WHETHER OR NOT RESPONDENTS’ ACTS WILL DEPRIVE PETITIONER OF PROPERTY WITHOUT DUE
PROCESS BY THE "EXPLANATORY BULLETIN" AS WELL AS EQUAL PROTECTION OF LAWS

The petition is devoid of merit.

At the outset, it bears noting that instead of assailing the Court of Appeals Decision by petition for review
on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner lodged the present petition for certiorari
under Rule 65.

[S]ince the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged errors committed by it in
the exercise of its jurisdiction would be errors of judgment which are reviewable by timely appeal and not by a
special civil action of certiorari. If the aggrieved party fails to do so within the reglementary period, and the
decision accordingly becomes final and executory, he cannot avail himself of the writ of certiorari, his predicament
being the effect of his deliberate inaction.
The appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45 and not a special
civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65, respectively, of the 1997 Rules of Civil
Procedure. Rule 45 is clear that the decisions, final orders or resolutions of the Court of Appeals in any case, i.e.,
regardless of the nature of the action or proceeding involved, may be appealed to this Court by filing a petition for
review, which would be but a continuation of the appellate process over the original case. Under Rule 45 the
reglementary period to appeal is fifteen (15) days from notice of judgment or denial of motion for reconsideration.

xxx

For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show that he has no plain,
speedy and adequate remedy in the ordinary course of law against its perceived grievance. A remedy is considered
"plain, speedy and adequate" if it will promptly relieve the petitioner from the injurious effects of the judgment and
the acts of the lower court or agency. In this case, appeal was not only available but also a speedy and adequate
remedy.6

The records of the case show that following petitioner’s receipt on August 18, 2000 of a copy of the August 10,
2000 Resolution of the Court of Appeals denying its Motion for Reconsideration, it filed the present petition for
certiorari on September 15, 2000, at which time the Court of Appeals decision had become final and executory, the
15-day period to appeal it under Rule 45 having expired.

Technicality aside, this Court finds no ground to disturb the assailed decision.

Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the State shall afford
protection to labor.7 Its purpose is not merely "to prevent diminution of the monthly income of the workers on
account of work interruptions. In other words, although the worker is forced to take a rest, he earns what he should
earn, that is, his holiday pay."8 It is also intended to enable the worker to participate in the national celebrations held
during the days identified as with great historical and cultural significance.

Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last Sunday of August),
Bonifacio Day (November 30) and Rizal Day (December 30) were declared national holidays to afford Filipinos
with a recurring opportunity to commemorate the heroism of the Filipino people, promote national identity, and
deepen the spirit of patriotism. Labor Day (May 1) is a day traditionally reserved to celebrate the contributions of
the working class to the development of the nation, while the religious holidays designated in Executive Order No.
203 allow the worker to celebrate his faith with his family.

As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the enjoyment of ten paid regular
holidays.9 The provision is mandatory,10 regardless of whether an employee is paid on a monthly or daily
basis.11 Unlike a bonus, which is a management prerogative,12 holiday pay is a statutory benefit demandable under
the law. Since a worker is entitled to the enjoyment of ten paid regular holidays, the fact that two holidays fall on the
same date should not operate to reduce to nine the ten holiday pay benefits a worker is entitled to receive.

It is elementary, under the rules of statutory construction, that when the language of the law is clear and
unequivocal, the law must be taken to mean exactly what it says.13 In the case at bar, there is nothing in the law
which provides or indicates that the entitlement to ten days of holiday pay shall be reduced to nine when two
holidays fall on the same day.

Petitioner’s assertion that Wellington v. Trajano14 has "overruled" the DOLE March 11, 1993 Explanatory Bulletin
does not lie. In Wellington, the issue was whether monthly-paid employees are entitled to an additional day’s pay if
a holiday falls on a Sunday. This Court, in answering the issue in the negative, observed that in fixing the monthly
salary of its employees, Wellington took into account "every working day of the year including the holidays
specified by law and excluding only Sunday." In the instant case, the issue is whether daily-paid employees are
entitled to be paid for two regular holidays which fall on the same day.15
In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and interpretation of its
provisions, including its implementing rules and regulations, shall be resolved in favor of labor. For the working
man’s welfare should be the primordial and paramount consideration.16

Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor Code provides that "Nothing in
the law or the rules shall justify an employer in withdrawing or reducing any benefits, supplements or payments for
unworked regular holidays as provided in existing individual or collective agreement or employer practice or
policy."17

From the pertinent provisions of the CBA entered into by the parties, petitioner had obligated itself to pay for the
legal holidays as required by law. Thus, the 1997-1998 CBA incorporates the following provision:

ARTICLE XIV
PAID LEGAL HOLIDAYS

The following legal holidays shall be paid by the COMPANY as required by law:

1. New Year’s Day (January 1st)

2. Holy Thursday (moveable)

3. Good Friday (moveable)

4. Araw ng Kagitingan (April 9th)

5. Labor Day (May 1st)

6. Independence Day (June 12th)

7. Bonifacio Day [November 30]

8. Christmas Day (December 25th)

9. Rizal Day (December 30th)

10. General Election designated by law, if declared public non-working holiday

11. National Heroes Day (Last Sunday of August)

Only an employee who works on the day immediately preceding or after a regular holiday shall be entitled to the
holiday pay.

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

Under similar circumstances, the COMPANY will give a day’s wage for November 1st and December 31st
whenever declared a holiday. When required to work on said days, the employee will be paid according to Art. VI,
Sec. 3B hereof.18

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

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

JOSE RIZAL COLLEGE, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION AND NATIONAL ALLIANCE OF
TEACHERS/OFFICE WORKERS, respondents.

PARAS, J.:

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

WHEREFORE, in view of the foregoing considerations, the decision appealed from is

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

SO ORDERED.

The factual background of this case which is undisputed is as follows:

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

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

After the parties had submitted their respective position papers, the Labor Arbiter ** rendered a decision on
February 5, 1979, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1. The faculty and personnel of the respondent Jose Rizal College who are paid their salary by the
month uniformly in a school year, irrespective of the number of working days in a month, without
deduction for holidays, are presumed to be already paid the 10 paid legal holidays and are no
longer entitled to separate payment for the said regular holidays;
 2. The personnel of the respondent Jose Rizal College who are paid their wages daily are entitled
to be paid the 10 unworked regular holidays according to the pertinent provisions of the Rules and
Regulations Implementing the Labor Code;

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

On appeal, respondent National Labor Relations Commission in a decision promulgated on June 2, 1982, modified
the decision appealed from, in the sense that teaching personnel paid by the hour are declared to be entitled to
holiday pay (Rollo. p. 33).

Hence, this petition.

The sole issue in this case is whether or not the school faculty who according to their contracts are paid per lecture
hour are entitled to unworked holiday pay.

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

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

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

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

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

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

Subject holiday pay is provided for in the Labor Code (Presidential Decree No. 442, as amended), which reads:
 Art. 94. Right to holiday pay — (a) Every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments regularly employing less than ten (10)
workers;

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

and in the Implementing Rules and Regulations, Rule IV, Book III, which reads:

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

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

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

On the other hand, both the law and the Implementing Rules governing holiday pay are silent as to payment on
Special Public Holidays.

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

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

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

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

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

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

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

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 168120 January 25, 2012

MANSION PRINTING CENTER and CLEMENT CHENG, Petitioners,

vs.
DIOSDADO BITARA, JR. Respondent.

DECISION

PEREZ, J.:

Before us is a petition for review on certiorari seeking to reverse and set aside the issuances of the Court of Appeals
in CA-GR. SP No. 70965, to wit: (a) the Decision1 dated 18 March 2004 granting the petition for certiorari under
Rule 65 of herein respondent Diosdado Bitara, Jr.; and (b) the Resolution2 dated 10 May 2005 denying the
petitioners Motion for Reconsideration of the Decision. The assailed decision of the Court of Appeals reversed the
findings of the National Labor Relations Commission3 and the Labor Arbiter4 that respondent was validly dismissed
from the service.

The Antecedents

Petitioner Mansion Printing Center is a single proprietorship registered under the name of its president and co-
petitioner Clement Cheng. It is engaged in the printing of quality self-adhesive labels, brochures, posters, stickers,
packaging and the like.5

Sometime in August 1998, petitioners engaged the services of respondent as a helper (kargador). Respondent was
later promoted as the company’s sole driver tasked to pick-up raw materials for the printing business, collect
account receivables and deliver the products to the clients within the delivery schedules.6

Petitioners aver that the timely delivery of the products to the clients is one of the foremost considerations material
to the operation of the business.7 It being so, they closely monitored the attendance of respondent. They noted his
habitual tardiness and absenteeism.

Thus, as early as 23 June 1999, petitioners issued a Memorandum8 requiring respondent to submit a written
explanation why no administrative sanction should be imposed on him for his habitual tardiness.

Several months after, respondent’s attention on the matter was again called to which he replied:

29 NOV. 1999

MR. CLEMENT CHENG

SIR:

I UNDERSTAND MY TARDINESS WHATEVER REASON I HAVE AFFECTS SOMEHOW THE DELIVERY

SCHEDULE OF THE COMPANY, THUS DISCIPLINARY ACTION WERE IMPOSED TO ME BY THE
MANAGEMENT. AND ON THIS END, ACCEPT MY APOLOGIES AND REST ASSURED THAT I WILL
COME ON TIME (ON OR BEFORE 8:30 AM) AND WILLINGNESS TO EXTEND MY SERVICE AS A
COMPANY DRIVER. WHATEVER HELP NEEDED. (sic)

RESPECTFULLY YOURS,

(SGD.) DIOSDADO BITARA, JR.9

Despite respondent’s undertaking to report on time, however, he continued to disregard attendance policies. His
weekly time record for the first quarter of the year 200010 revealed that he came late nineteen (19) times out of the
forty-seven (47) times he reported for work. He also incurred nineteen (19) absences out of the sixty-six (66)
working days during the quarter. His absences without prior notice and approval from March 11-16, 2000 were
considered to be the most serious infraction of all11 because of its adverse effect on business operations.

Consequently, Davis Cheng, General Manager of the company and son of petitioner Cheng, issued on 17 March
2000 another Memorandum12 (Notice to Explain) requiring respondent to explain why his services should not be
terminated. He personally handed the Notice to Explain to respondent but the latter, after reading the directive,
refused to acknowledge receipt thereof.13 He did not submit any explanation and, thereafter, never reported for work.

On 21 March 2000, Davis Cheng personally served another Memorandum14 (Notice of Termination) upon him
informing him that the company found him grossly negligent of his duties, for which reason, his services were
terminated effective 1 April 2000.

On even date, respondent met with the management requesting for reconsideration of his termination from the
service. However, after hearing his position, the management decided to implement the 21 March 2000
Memorandum. Nevertheless, the management, out of generosity, offered respondent financial assistance in the
amount of ₱6,110.00 equivalent to his one month salary. Respondent demanded that he be given the amount
equivalent to two (2) months’ salary but the management declined as it believed it would, in effect, reward
respondent for being negligent of his duties.15

On 27 April 2000, respondent filed a complaint16 for illegal dismissal against the petitioners before the Labor
Arbiter. He prayed for his reinstatement and for the payment of full backwages, legal holiday pay, service incentive
leave pay, damages and attorney’s fees.17

In his Position Paper18 filed with the Labor Arbiter, respondent claimed that he took a leave of absence from March
17-23, 200019 due to an urgent family problem. He returned to work on 24 March 200020 but Davis Cheng allegedly
refused him admission because of his unauthorized absences.21 On 1 April 2000, respondent was summoned by
Davis Cheng who introduced him to a lawyer, who, in turn, informed him that he will no longer be admitted to work
because of his 5-day unauthorized absences. Respondent explained that he was compelled to immediately leave for
the province on 17 March 200022 due to the urgency of the matter and his wife informed the office that he will be
absent for a week. The management found his explanation unacceptable and offered him an amount equivalent to his
one (1) month salary as separation pay but respondent refused the offer because he wanted to keep the job.23 In
his Reply to Respondents’ Position Paper,24 however, respondent averred that he rejected the offer because he
wanted an amount equivalent to one and a half months’ pay.

On 21 December 2000, the Labor Arbiter dismissed the complaint for lack of merit.25

On appeal to the National Labor Relations Commission (hereinafter referred to as the Commission), the findings of
the Labor Arbiter was AFFIRMED en toto. Thus, in its Resolution of 29 June 2001 in NLRC NCR CA No. 027871-
01, the Commission declared:

Upon Our review of the record of the case, We perceive no abuse of discretion as to compel a reversal. Appellant
failed to adduce convincing evidence to show that the Labor Arbiter in rendering the assailed decision has acted in a
manner inconsistent with the criteria set forth in the foregoing pronouncement.
Neither are we persuaded to disturb the factual findings of the Labor Arbiter a quo. The material facts as found are
all in accordance with the evidence presented during the hearing as shown by the record.

WHEREFORE, finding no cogent reason to modify, alter, much less reverse the decision appealed from, the same is
AFFIRMED en toto and the instant appeal DISMISSED for lack of merit.26

It likewise denied respondent’s Motion for Reconsideration of the Resolution on 21 February 2002.27

Before the Court of Appeals, respondent sought the annulment of the Commission’s Resolution dated 29 June 2001
and Order dated 21 February 2002 on the ground that they were rendered with grave abuse of discretion and/or
without or in excess of jurisdiction.28

The Court of Appeals found for the respondent and reversed the findings of the Commission. The dispositive portion
of its Decision dated 18 March 2004 reads:

WHEREFORE, the petition is GRANTED. In lieu of the assailed Resolution and Order of the respondent NLRC, a
NEW DECISION is hereby rendered declaring petitioner Diosdado Bitara, Jr. to have been Illegally Dismissed and,
thus, entitled to the following:

1. Reinstatement or if no longer feasible, Separation Pay to be computed from the commencement of his
employment in August 1988 up to the time of his termination on April 1, 2000, including his imputed
service from April 1, 2000 until the finality of this decision, based on the salary rate prevailing at the said
finality;
2. Backwages, inclusive of allowances and other benefits, computed from April 1, 2000 up to the finality of
this decision, without qualification or deduction; and
3. 5-day Service Incentive Leave Pay for every year of service from the commencement of his employment in
August 1988 up to its termination on April 1, 2000.29

On 10 May 2005, the Court of Appeals denied respondent’s Motion for Reconsideration of the decision for lack of
merit. 30

Hence, the instant petition.31

Issue

The core issue in this case is whether or not the Court of Appeals correctly found that the Commission acted without
and/or in excess of jurisdiction and with grave abuse of discretion amounting to lack or excess of jurisdiction (a) in
upholding the termination of respondent’s employment and (b) in affirming the denial of his claim for non-payment
of holiday pay, service incentive leave pay, moral and exemplary damages.

Our Ruling

The petition is meritorious.

The special civil action for certiorari seeks to correct errors of jurisdiction and not errors of judgment.32

xxx The raison d’etre for the rule is when a court exercises its jurisdiction, an error committed while so
engaged does not deprive it of the jurisdiction being exercised when the error is committed. If it did, every
error committed by a court would deprive it of its jurisdiction and every erroneous judgment would be a void
judgment. xxx Hence, where the issue or question involved affects the wisdom or legal soundness of the
decision – not the jurisdiction of the court to render said decision – the same is beyond the province of a
special civil action for certiorari. xxx33
xxx [J]udicial review does not go as far as to evaluate the sufficiency of evidence upon which the Labor Arbiter and
NLRC based their determinations, the inquiry being limited essentially to whether or not said public respondents had
acted without or in excess of its jurisdiction or with grave abuse of discretion.34 The said rule directs us to merely
determine whether there is basis established on record to support the findings of a tribunal and such findings meet
the required quantum of proof, which in this case, is substantial evidence. Our deference to the expertise acquired by
quasi-judicial agencies and the limited scope granted to us in the exercise of certiorari jurisdiction restrain us from
going so far as to probe into the correctness of a tribunal’s evaluation of evidence, unless there is palpable mistake
and complete disregard thereof in which case certiorari would be proper.35

It is on the alleged lack of substantial evidence that the Court of Appeals found for the respondents, thereby
reversing the decision of the Commission.

We hold otherwise.

Upon examination of the documents presented by the parties, we are convinced that the finding of facts on which the
conclusions of the Commission and the Labor Arbiter were based was actually supported by substantial evidence –
"that amount of relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if
other minds, equally reasonable, might conceivably opine otherwise."36 (Emphasis supplied.)

In order to validly dismiss an employee, the employer is required to observe both substantive and procedural aspects
– the termination of employment must be based on a just or authorized cause of dismissal and the dismissal must be
effected after due notice and hearing.37

Substantive Due Process

We cannot agree with the Court of Appeals that the sole basis of the termination of respondent’s employment was
his absences from March 11-16, 2000.

Indeed, the Notice to Explain38 clearly stated:

We are seriously considering your termination from service, and for this reason you are directed to submit a
written explanation, within seventy-two hours from your receipt of this notice, why you should not be terminated
from service for failure to report for work without verbal or written notice or permission on March 11, 13, 14, 15
and 16, 2000. xxx (Emphasis supplied.)

To give full meaning and substance to the Notice to Explain, however, the paragraph should be read together with its
preceding paragraph, to wit:

We have time and again, verbally and formally, called your attention to your negligence from your tardiness
and your frequent absences without any notice but still, you remain to ignore our reminder. As you know, we
are in need of a regular driver and your action greatly affected the operation of our company. (Emphasis supplied.)

Necessarily, he was considered for termination of employment because of his previous infractions capped by his
recent unauthorized absences from March 11-16, 2000.

That the recent absences were unauthorized were satisfactorily established by petitioners. Two (2) employees of the
company belied the claim of respondent’s wife Mary Ann Bitara that she called the office on 11 March 2000, and,
through a certain Delia, as allegedly later identified by respondent, informed petitioners that her husband would take
a leave of absence for a week because he went to the province.39
Delia Abalos, a "binder/finisher" of the company, stated in her Affidavit that she never received a call from
respondent nor his wife regarding his absences from March 11-16 and 17-23 during the month of March 2000.40 On
the other hand, Ritchie Distor, a messenger of the company, narrated in his Affidavit that, upon instruction of the
Management, he went to respondent’s house on 13 March 2000 to require him to report for work. Instead of relaying
the message to him, as respondent would have it, the wife informed him that respondent had already left the house
but that she did not know where he was going.41

The Court of Appeals relied heavily on our ruling in Stellar Industrial Services, Inc. vs. NLRC,42 which is not on all
fours with the present case. In that case, the employer dismissed respondent for non-observance of company rules
and regulations. On the basis of the facts presented, this Court honored the questioned medical certificate justifying
the absences he incurred. It further ratiocinated:

xxx [P]rivate respondent’s absences, as already discussed, were incurred with due notice and compliance with
company rules and he had not thereby committed a "similar offense" as those he had committed in the past [to wit:
gambling, for which he was preventively suspended; habitual tardiness for which he received several warnings; and
violation of company rules for carrying three sacks of rice, for which he was required to explain.] xxx To refer to
those earlier violations as added grounds for dismissing him is doubly unfair to private respondent.43 (Emphasis
supplied.)

In the present case, however, petitioners have repeatedly called the attention of respondent concerning his habitual
tardiness. The Memorandum dated 23 June 1999 of petitioner Cheng required him to explain his tardiness. Also in
connection with a similar infraction, respondent even wrote petitioner Cheng a letter dated 29 November 1999
where he admitted that his tardiness has affected the delivery schedules of the company, offered an apology, and
undertook to henceforth report for duty on time. Despite this undertaking, he continued to either absent himself from
work or report late during the first quarter of 2000.

We, therefore, agree with the Labor Arbiter’s findings, to wit:

The imputed absence and tardiness of the complainant are documented. He faltered on his attendance 38 times of the
66 working days. His last absences on 11, 13, 14, 15 and 16 March 2000 were undertaken without even
notice/permission from management. These attendance delinquencies may be characterized as habitual and are
sufficient justifications to terminate the complainant’s employment.44

On this score, Valiao v. Court of Appeals45 is instructive:

xxx It bears stressing that petitioner’s absences and tardiness were not isolated incidents but manifested a pattern of
habituality. xxx The totality of infractions or the number of violations committed during the period of employment
shall be considered in determining the penalty to be imposed upon an erring employee. The offenses committed by
him should not be taken singly and separately but in their totality. Fitness for continued employment cannot be
compartmentalized into tight little cubicles of aspects of character, conduct, and ability separate and independent of
each other.46

There is likewise no merit in the observation of the Court of Appeals that the petitioners themselves are not certain
of the official time of their employees after pointing out the seeming inconsistencies between the statement of the
petitioners that "there is no need for written rules since even the [respondent] is aware that his job starts from 8 am
to 5 pm"47 and its Memorandum of 23 June 1999, where it was mentioned that respondent’s official time was from
8:30 a.m. to 5:30 p.m. On the contrary, it was clearly stated in the Memorandum that the Management adjusted his
official time from 8:00 a.m. to 5:00 p.m. to 8:30 a.m. to 5:30 p.m. to hopefully solve the problem on his tardiness.48

Neither is there basis to hold that the company tolerates the offsetting of undertime with overtime services. The
Weekly Time Record relied upon by respondent does not conclusively confirm the alleged practice.

In Valiao,49 we defined gross negligence as "want of care in the performance of one’s duties"50 and habitual
neglect as "repeated failure to perform one’s duties for a period of time, depending upon the circumstances."51 These
are not overly technical terms, which, in the first place, are expressly sanctioned by the Labor Code of the
Philippines, to wit:

ART. 282. Termination by employer. - An employer may terminate an employment for any of the following causes:

(a) xxx

(b) Gross and habitual neglect by the employee of his duties;

xxx

Clearly, even in the absence of a written company rule defining gross and habitual neglect of duties, respondent’s
omissions qualify as such warranting his dismissal from the service.

We cannot simply tolerate injustice to employers if only to protect the welfare of undeserving employees. As aptly
put by then Associate Justice Leonardo A. Quisumbing:

Needless to say, so irresponsible an employee like petitioner does not deserve a place in the workplace, and it is
within the management’s prerogative xxx to terminate his employment. Even as the law is solicitous of the welfare
of employees, it must also protect the rights of an employer to exercise what are clearly management prerogatives.
As long as the company’s exercise of those rights and prerogative is in good faith to advance its interest and not for
the purpose of defeating or circumventing the rights of employees under the laws or valid agreements, such exercise
will be upheld.52

And, in the words of then Associate Justice Ma. Alicia Austria-Martinez in Philippine Long Distance and Telephone
Company, Inc. v. Balbastro:53

While it is true that compassion and human consideration should guide the disposition of cases involving
termination of employment since it affects one's source or means of livelihood, it should not be overlooked that the
benefits accorded to labor do not include compelling an employer to retain the services of an employee who has
been shown to be a gross liability to the employer. The law in protecting the rights of the employees authorizes
neither oppression nor self-destruction of the employer.54 It should be made clear that when the law tilts the scale of
justice in favor of labor, it is but a recognition of the inherent economic inequality between labor and management.
The intent is to balance the scale of justice; to put the two parties on relatively equal positions. There may be cases
where the circumstances warrant favoring labor over the interests of management but never should the scale be so
tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied to none).55

Procedural Due Process

Procedural due process entails compliance with the two-notice rule in dismissing an employee, to wit: (1) the
employer must inform the employee of the specific acts or omissions for which his dismissal is sought; and (2) after
the employee has been given the opportunity to be heard, the employer must inform him of the decision to terminate
his employment.56

Respondent claimed that he was denied due process because the company did not observe the two-notice rule. He
maintained that the Notice of Explanation and the Notice of Termination, both of which he allegedly refused to sign,
were never served upon him.57

The Court of Appeals favored respondent and ruled in this wise:

Furthermore, We believe that private respondents failed to afford petitioner due process. The allegation of private
respondents that petitioner refused to sign the memoranda dated March 17 and 21, 2000 despite receipt thereof is not
only lame but also implausible. First, the said allegation is self-serving and unsubstantiated. Second, a prudent
employer would simply not accept such mere refusal, but would exert effort to observe the mandatory requirement
of due process. We cannot accept the self-serving claim of respondents that petitioner refused to sign both
memoranda. Otherwise, We would be allowing employers to do away with the mandatory twin-notice rule in the
termination of employees. We find more credible the claim of petitioner that he was illegally dismissed on April 1,
2000 when the lawyer of the company informed him, without prior notice and in derogation of his right to due
process, of his termination by offering him a 1-month salary as separation pay. The petitioner’s immediate filing of a
complaint for illegal dismissal on April 27, 2000 reinforced Our belief that petitioner was illegally dismissed and
was denied due process.58 (Emphasis in the original.)

We rule otherwise.

In Bughaw v. Treasure Island Industrial Corporation,59 this Court, in verifying the veracity of the allegation that
respondent refused to receive the Notice of Termination, essentially looked for the following: (1) affidavit of service
stating the reason for failure to serve the notice upon the recipient; and (2) a notation to that effect, which shall be
written on the notice itself.60 Thus:

xxx Bare and vague allegations as to the manner of service and the circumstances surrounding the same would not
suffice. A mere copy of the notice of termination allegedly sent by respondent to petitioner, without proof of receipt,
or in the very least, actual service thereof upon petitioner, does not constitute substantial evidence. It was
unilaterally prepared by the petitioner and, thus, evidently self-serving and insufficient to convince even an
unreasonable mind.61

Davis Cheng, on the other hand, did both. First, he indicated in the notices the notation that respondent "refused to
sign" together with the corresponding dates of service. Second, he executed an Affidavit dated 29 July 2000 stating
that: (1) he is the General Manager of the company; (2) he personally served each notice upon respondent, when
respondent went to the office/factory on 17 March 2000 and 21 March 2000, respectively; and (3) on both
occasions, after reading the contents of the memoranda, respondent refused to acknowledge receipt thereof. We are,
thus, convinced that the notices have been validly served.

Premises considered, we find that respondent was accorded both substantive and procedural due process.

II

As to respondent’s monetary claims, petitioners did not deny respondent’s entitlement to service incentive leave pay
as, indeed, it is indisputable that he is entitled thereto. In Fernandez v. NLRC,62 this Court elucidated:

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments, subject to
a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations63 provides that "[e]very
employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five
days with pay." Service incentive leave is a right which accrues to every employee who has served "within 12
months, whether continuous or broken reckoned from the date the employee started working, including authorized
absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or
that provided in the employment contracts, is less than 12 months, in which case said period shall be considered as
one year."64 It is also "commutable to its money equivalent if not used or exhausted at the end of the year."65 In other
words, an employee who has served for one year is entitled to it. He may use it as leave days or he may collect its
monetary value. xxx66 (Emphasis supplied.)

Be that as it may, petitioners failed to establish by evidence that respondent had already used the service incentive
leave when he incurred numerous absences notwithstanding that employers have complete control over the records
of the company so much so that they could easily show payment of monetary claims against them by merely
presenting vouchers or payrolls,67 or any document showing the off-setting of the payment of service incentive leave
with the absences, as acknowledged by the absentee, if such is the company policy. Petitioners presented none.

We thus quote with approval the findings of the Court of Appeals on the following:
[P]rivate respondents bear the burden to prove that employees have received these benefits in accordance with law.
It is incumbent upon the employer to present the necessary documents to prove such claim. Although private
respondents labored to show that they paid petitioner his holiday pay, no similar effort was shown with regard to his
service incentive leave pay. We do not agree with the Labor Arbiter’s conclusion that petitioner’s service incentive
leave pay has been used up by his numerous absences, there being no proof to that effect.68

As to the payment of holiday pay, we are convinced that respondent had already received the same based on the cash
vouchers on record.1avvphil

Accordingly, we affirm the ruling of the National Labor Relations Commission that the dismissal was valid.
However, respondent shall be entitled to the money equivalent of the five-day service incentive leave pay for every
year of service from the commencement of his employment in August 1988 up to its termination on 1 April 2000.
The Labor Arbiter shall compute the corresponding amount.

WHEREFORE, the Resolution dated 29 June 2001 and the Order dated 21 February 2002 of the National Labor
Relations Commission in NLRC NCR CASE No. 027871-01 are hereby REINSTATED with
the MODIFICATION that petitioners are ORDERED to pay respondent the money equivalent of the five-day
service incentive leave for every year of service covering his employment period from August 1988 to 1 April 2000.
This case is hereby REMANDED to the Labor Arbiter for the computation of respondent’s service incentive leave
pay.

SO ORDERED.
 SECOND DIVISION

G.R. No. 157634 May 16, 2005

MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM, petitioners,

vs.
ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO ALAMARES, AMADO
ALAMARES, EDGARDO TORREFRANCA, LOURDES CAMIGLA, TEODORO LAURENARIA,
WENEFREDO LOVERES, LUIS GUADES, AMADO MACANDOG, PATERNO LLARENA, GREGORIO
NICERIO, JOSE ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS BROÑOLA, respondents.

DECISION

PUNO, J.:

This is a petition for certiorari to reverse and set aside the Decision issued by the Court of Appeals (CA)1 in CA-
G.R. SP No. 68642, entitled "Rolando Adana, Wenefredo Loveres, et. al. vs. National Labor Relations Commission
(NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al.," and the Resolution2 denying petitioners' motion for
reconsideration. The assailed CA decision reversed the NLRC Decision which had dismissed all of respondents'
complaints,3 and reinstated the Joint Decision of the Labor Arbiter4 which ruled that respondents were illegally
dismissed and entitled to their money claims.

The facts, culled from the records, are as follows:5

Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the name of petitioner Pacita O.
Po,6 whose mother, petitioner Josefa Po Lam, manages the establishment.7 The hotel and restaurant employed about
sixteen (16) employees.

Records show that on various dates starting in 1981, petitioner hotel and restaurant hired the following people, all
respondents in this case, with the following jobs:8

1. Wenefredo Loveres Accountant and Officer-in-charge

2. Paterno Llarena Front Desk Clerk
3. Gregorio Nicerio Supervisory Waiter
4. Amado Macandog Roomboy
5. Luis Guades Utility/Maintenance Worker
6. Santos Broñola Roomboy
7. Teodoro Laurenaria Waiter
8. Eduardo Alamares Roomboy/Waiter
9. Lourdes Camigla Cashier
10. Chona Bumalay Cashier
11. Jose Atractivo Technician
12. Amado Alamares Dishwasher and Kitchen Helper
13. Roger Burce Cook
14. Rolando Adana Waiter
15. Miguel Torrefranca Cook
16. Edgardo Torrefranca Cook

Due to the expiration and non-renewal of the lease contract for the rented space occupied by the said hotel and
restaurant at Rizal Street, the hotel operations of the business were suspended on March 31, 1997.9 The operation of
the restaurant was continued in its new location at Elizondo Street, Legazpi City, while waiting for the construction
of a new Mayon Hotel & Restaurant at Peñaranda Street, Legazpi City.10 Only nine (9) of the sixteen (16)
employees continued working in the Mayon Restaurant at its new site.11

On various dates of April and May 1997, the 16 employees filed complaints for underpayment of wages and other
money claims against petitioners, as follows:12

Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal dismissal,
underpayment of wages, nonpayment of holiday and rest day pay; service incentive leave pay (SILP) and
claims for separation pay plus damages;

Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment of wages;
nonpayment of cost of living allowance (COLA) and overtime pay; premium pay for holiday and rest day;
SILP; nightshift differential pay and separation pay plus damages;

Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages; nonpayment of
holiday and rest day pay and SILP;

Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages; nonpayment of COLA,
overtime, holiday, rest day, SILP and nightshift differential pay;

Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and SILP and night shift
differential pay;

Santos Broñola for illegal dismissal, underpayment of wages, overtime pay, rest day pay, holiday pay,
SILP, and damages;13 and

Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime pay; premium pay for
holiday and rest day, and SILP.

On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint Decision in favor of the
employees. The Labor Arbiter awarded substantially all of respondents' money claims, and held that respondents
Loveres, Macandog and Llarena were entitled to separation pay, while respondents Guades, Nicerio and Alamares
were entitled to their retirement pay. The Labor Arbiter also held that based on the evidence presented, Josefa Po
Lam is the owner/proprietor of Mayon Hotel & Restaurant and the proper respondent in these cases.

On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the complaints were dismissed.

Respondents filed a motion for reconsideration with the NLRC and when this was denied, they filed a petition
for certiorari with the CA which rendered the now assailed decision.

After their motion for reconsideration was denied, petitioners now come to this Court, seeking the reversal of the
CA decision on the following grounds:

I. The Honorable Court of Appeals erred in reversing the decision of the National Labor Relations
Commission (Second Division) by holding that the findings of fact of the NLRC were not supported by
substantial evidence despite ample and sufficient evidence showing that the NLRC decision is indeed
supported by substantial evidence;

II. The Honorable Court of Appeals erred in upholding the joint decision of the labor arbiter which ruled
that private respondents were illegally dismissed from their employment, despite the fact that the reason
why private respondents were out of work was not due to the fault of petitioners but to causes beyond the
control of petitioners.
 III. The Honorable Court of Appeals erred in upholding the award of monetary benefits by the labor arbiter
in his joint decision in favor of the private respondentS, including the award of damages to six (6) of the
private respondents, despite the fact that the private respondents have not proven by substantial evidence
their entitlement thereto and especially the fact that they were not illegally dismissed by the petitioners.

IV. The Honorable Court of Appeals erred in holding that Pacita Ong Po is the owner of the business
establishment, petitioner Mayon Hotel and Restaurant, thus disregarding the certificate of registration of the
business establishment ISSUED by the local government, which is a public document, and the unqualified
admissions of complainants-private respondents.14

In essence, the petition calls for a review of the following issues:

1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of petitioner Mayon Hotel &
Restaurant, and the proper respondent in this case?

2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio illegally dismissed?

3. Are respondents entitled to their money claims due to underpayment of wages, and nonpayment of
holiday pay, rest day premium, SILP, COLA, overtime pay, and night shift differential pay?

It is petitioners' contention that the above issues have already been threshed out sufficiently and definitively by the
NLRC. They therefore assail the CA's reversal of the NLRC decision, claiming that based on the ruling in Castillo
v. NLRC,15 it is non sequitur that the CA should re-examine the factual findings of both the NLRC and the Labor
Arbiter, especially as in this case the NLRC's findings are allegedly supported by substantial evidence.

We do not agree.

There is no denying that it is within the NLRC's competence, as an appellate agency reviewing decisions of Labor
Arbiters, to disagree with and set aside the latter's findings.16 But it stands to reason that the NLRC should state an
acceptable cause therefore, otherwise it would be a whimsical, capricious, oppressive, illogical, unreasonable
exercise of quasi-judicial prerogative, subject to invalidation by the extraordinary writ of certiorari.17 And when the
factual findings of the Labor Arbiter and the NLRC are diametrically opposed and this disparity of findings is called
into question, there is, necessarily, a re-examination of the factual findings to ascertain which opinion should be
sustained.18 As ruled in Asuncion v. NLRC,19

Although, it is a legal tenet that factual findings of administrative bodies are entitled to great weight and
respect, we are constrained to take a second look at the facts before us because of the diversity in the
opinions of the Labor Arbiter and the NLRC. A disharmony between the factual findings of the Labor
Arbiter and those of the NLRC opens the door to a review thereof by this Court.20

The CA, therefore, did not err in reviewing the records to determine which opinion was supported by substantial
evidence.

Moreover, it is explicit in Castillo v. NLRC21 that factual findings of administrative bodies like the NLRC are
affirmed only if they are supported by substantial evidence that is manifest in the decision and on the records.
As stated in Castillo:

[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a decision of a Labor
Arbiter. Mere variance in evidentiary assessment between the NLRC and the Labor Arbiter does not
automatically call for a full review of the facts by this Court. The NLRC's decision, so long as it is not
bereft of substantial support from the records, deserves respect from this Court. As a rule, the original and
exclusive jurisdiction to review a decision or resolution of respondent NLRC in a petition
for certiorari under Rule 65 of the Rules of Court does not include a correction of its evaluation of the
 evidence but is confined to issues of jurisdiction or grave abuse of discretion. Thus, the NLRC's factual
findings, if supported by substantial evidence, are entitled to great respect and even finality, unless
petitioner is able to show that it simply and arbitrarily disregarded the evidence before it or had
misappreciated the evidence to such an extent as to compel a contrary conclusion if such evidence had been
properly appreciated. (citations omitted)22

After careful review, we find that the reversal of the NLRC's decision was in order precisely because it was not
supported by substantial evidence.

1. Ownership by Josefa Po Lam

The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa Po Lam is, in fact, the owner
of Mayon Hotel & Restaurant. Although the NLRC reversed this decision, the CA, on review, agreed with the Labor
Arbiter that notwithstanding the certificate of registration in the name of Pacita Po, it is Josefa Po Lam who is the
owner/proprietor of Mayon Hotel & Restaurant, and the proper respondent in the complaints filed by the employees.
The CA decision states in part:

[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we cannot fault the labor
arbiter in ruling that Josefa Po Lam is the owner of the subject hotel and restaurant. There were conflicting
documents submitted by Josefa herself. She was ordered to submit additional documents to clearly establish
ownership of the hotel and restaurant, considering the testimonies given by the [respondents] and the non-
appearance and failure to submit her own position paper by Pacita Po. But Josefa did not comply with the
directive of the Labor Arbiter. The ruling of the Supreme Court in Metropolitan Bank and Trust Company
v. Court of Appeals applies to Josefa Po Lam which is stated in this wise:

When the evidence tends to prove a material fact which imposes a liability on a party, and he has it
in his power to produce evidence which from its very nature must overthrow the case made against
him if it is not founded on fact, and he refuses to produce such evidence, the presumption arises
that the evidence[,] if produced, would operate to his prejudice, and support the case of his
adversary.

Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant, the labor arbiter
relied also on the testimonies of the witnesses, during the hearing of the instant case. When the conclusions
of the labor arbiter are sufficiently corroborated by evidence on record, the same should be respected by
appellate tribunals, since he is in a better position to assess and evaluate the credibility of the contending
parties.23 (citations omitted)

Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that petitioner Josefa Po Lam is the
owner of Mayon Hotel & Restaurant. They allege that the documents they submitted to the Labor Arbiter
sufficiently and clearly establish the fact of ownership by petitioner Pacita Po, and not her mother, petitioner Josefa
Po Lam. They contend that petitioner Josefa Po Lam's participation was limited to merely (a) being the overseer; (b)
receiving the month-to-month and/or year-to-year financial reports prepared and submitted by respondent Loveres;
and (c) visitation of the premises.24 They also put emphasis on the admission of the respondents in their position
paper submitted to the Labor Arbiter, identifying petitioner Josefa Po Lam as the manager, and Pacita Po as the
owner.25 This, they claim, is a judicial admission and is binding on respondents. They protest the reliance the Labor
Arbiter and the CA placed on their failure to submit additional documents to clearly establish ownership of the hotel
and restaurant, claiming that there was no need for petitioner Josefa Po Lam to submit additional documents
considering that the Certificate of Registration is the best and primary evidence of ownership.

We disagree with petitioners. We have scrutinized the records and find the claim that petitioner Josefa Po Lam is
merely the overseer is not borne out by the evidence.

First. It is significant that only Josefa Po Lam appeared in the proceedings with the Labor Arbiter. Despite receipt of
the Labor Arbiter's notice and summons, other notices and Orders, petitioner Pacita Po failed to appear in any of the
proceedings with the Labor Arbiter in these cases, nor file her position paper.26 It was only on appeal with the
NLRC that Pacita Po signed the pleadings.27 The apathy shown by petitioner Pacita Po is contrary to human
experience as one would think that the owner of an establishment would naturally be concerned when all her
employees file complaints against her.

Second. The records of the case belie petitioner Josefa Po Lam's claim that she is merely an overseer. The findings
of the Labor Arbiter on this question were based on credible, competent and substantial evidence. We again quote
the Joint Decision on this matter:

Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner] Josefa Po Lam claims
that it is her daughter, Pacita Po, who owns the hotel and restaurant when the latter purchased the same
from one Palanos in 1981, Josefa failed to submit the document of sale from said Palanos to Pacita as
allegedly the sale was only verbal although the license to operate said hotel and restaurant is in the name of
Pacita which, despite our Order to Josefa to present the same, she failed to comply (p. 38, tsn. August 13,
1998). While several documentary evidences were submitted by Josefa wherein Pacita was named therein
as owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,] there were documentary evidences
also that were submitted by Josefa showing her ownership of said enterprise (pp. 468 to 469; vol. II, rollo).
While Josefa explained her participation and interest in the business as merely to help and assist her
daughter as the hotel and restaurant was near the former's store, the testimonies of [respondents] and Josefa
as well as her demeanor during the trial in these cases proves (sic) that Josefa Po Lam owns Mayon Hotel
and Restaurant. [Respondents] testified that it was Josefa who exercises all the acts and manifestation of
ownership of the hotel and restaurant like transferring employees from the Greatwall Palace Restaurant
which she and her husband Roy Po Lam previously owned; it is Josefa to whom the employees submits
(sic) reports, draws money for payment of payables and for marketing, attending (sic) to Labor Inspectors
during ocular inspections. Except for documents whereby Pacita Po appears as the owner of Mayon Hotel
and Restaurant, nothing in the record shows any circumstance or manifestation that Pacita Po is the owner
of Mayon Hotel and Restaurant. The least that can be said is that it is absurd for a person to purchase a
hotel and restaurant in the very heart of the City of Legazpi verbally. Assuming this to be true, when
[petitioners], particularly Josefa, was directed to submit evidence as to the ownership of Pacita of the hotel
and restaurant, considering the testimonies of [respondents], the former should [have] submitted the lease
contract between the owner of the building where Mayon Hotel and Restaurant was located at Rizal St.,
Legazpi City and Pacita Po to clearly establish ownership by the latter of said enterprise. Josefa failed. We
are not surprised why some employers employ schemes to mislead Us in order to evade liabilities. We
therefore consider and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel and Restaurant and the
proper respondent in these cases.28

Petitioners' reliance on the rules of evidence, i.e., the certificate of registration being the best proof of ownership, is
misplaced. Notwithstanding the certificate of registration, doubts were cast as to the true nature of petitioner Josefa
Po Lam's involvement in the enterprise, and the Labor Arbiter had the authority to resolve this issue. It was therefore
within his jurisdiction to require the additional documents to ascertain who was the real owner of petitioner Mayon
Hotel & Restaurant.

Article 221 of the Labor Code is clear: technical rules are not binding, and the application of technical rules of
procedure may be relaxed in labor cases to serve the demand of substantial justice.29 The rule of evidence prevailing
in court of law or equity shall not be controlling in labor cases and it is the spirit and intention of the Labor Code
that the Labor Arbiter shall use every and all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in the interest of due process.30 Labor laws
mandate the speedy administration of justice, with least attention to technicalities but without sacrificing the
fundamental requisites of due process.31

Similarly, the fact that the respondents' complaints contained no allegation that petitioner Josefa Po Lam is the
owner is of no moment. To apply the concept of judicial admissions to respondents — who are but lowly employees
- would be to exact compliance with technicalities of law that is contrary to the demands of substantial justice.
Moreover, the issue of ownership was an issue that arose only during the course of the proceedings with the Labor
Arbiter, as an incident of determining respondents' claims, and was well within his jurisdiction.32
Petitioners were also not denied due process, as they were given sufficient opportunity to be heard on the issue of
ownership.33 The essence of due process in administrative proceedings is simply an opportunity to explain one's side
or an opportunity to seek reconsideration of the action or ruling complained of.34 And there is nothing in the records
which would suggest that petitioners had absolute lack of opportunity to be heard.35 Obviously, the choice not to
present evidence was made by petitioners themselves.36

But more significantly, we sustain the Labor Arbiter and the CA because even when the case was on appeal with the
NLRC, nothing was submitted to negate the Labor Arbiter's finding that Pacita Po is not the real owner of the
subject hotel and restaurant. Indeed, no such evidence was submitted in the proceedings with the CA nor with this
Court. Considering that petitioners vehemently deny ownership by petitioner Josefa Po Lam, it is most telling that
they continue to withhold evidence which would shed more light on this issue. We therefore agree with the CA that
the failure to submit could only mean that if produced, it would have been adverse to petitioners' case.37

Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam is the owner of petitioner
Mayon Hotel & Restaurant.

2. Illegal Dismissal: claim for separation pay

Of the sixteen employees, only the following filed a case for illegal dismissal: respondents Loveres, Llarena,
Nicerio, Macandog, Guades, Atractivo and Broñola.38

The Labor Arbiter found that there was illegal dismissal, and granted separation pay to respondents Loveres,
Macandog and Llarena. As respondents Guades, Nicerio and Alamares were already 79, 66 and 65 years old
respectively at the time of the dismissal, the Labor Arbiter granted retirement benefits pursuant to Article 287 of the
Labor Code as amended.39 The Labor Arbiter ruled that respondent Atractivo was not entitled to separation pay
because he had been transferred to work in the restaurant operations in Elizondo Street, but awarded him damages.
Respondents Loveres, Llarena, Nicerio, Macandog and Guades were also awarded damages.40

The NLRC reversed the Labor Arbiter, finding that "no clear act of termination is attendant in the case at bar" and
that respondents "did not submit any evidence to that effect, but the finding and conclusion of the Labor Arbiter
[are] merely based on his own surmises and conjectures."41 In turn, the NLRC was reversed by the CA.

It is petitioners contention that the CA should have sustained the NLRC finding that none of the above-named
respondents were illegally dismissed, or entitled to separation or retirement pay. According to petitioners, even the
Labor Arbiter and the CA admit that when the illegal dismissal case was filed by respondents on April 1997, they
had as yet no cause of action. Petitioners therefore conclude that the filing by respondents of the illegal dismissal
case was premature and should have been dismissed outright by the Labor Arbiter.42 Petitioners also claim that since
the validity of respondents' dismissal is a factual question, it is not for the reviewing court to weigh the conflicting
evidence.43

We do not agree. Whether respondents are still working for petitioners is a factual question. And the records are
unequivocal that since April 1997, when petitioner Mayon Hotel & Restaurant suspended its hotel operations and
transferred its restaurant operations in Elizondo Street, respondents Loveres, Macandog, Llarena, Guades and
Nicerio have not been permitted to work for petitioners. Respondent Alamares, on the other hand, was also laid-off
when the Elizondo Street operations closed, as were all the other respondents. Since then, respondents have not been
permitted to work nor recalled, even after the construction of the new premises at Peñaranda Street and the
reopening of the hotel operations with the restaurant in this new site. As stated by the Joint Decision of the Labor
Arbiter on July 2000, or more than three (3) years after the complaint was filed:44

[F]rom the records, more than six months had lapsed without [petitioner] having resumed operation of the
hotel. After more than one year from the temporary closure of Mayon Hotel and the temporary transfer to
another site of Mayon Restaurant, the building which [petitioner] Josefa allege[d] w[h]ere the hotel and
restaurant will be transferred has been finally constructed and the same is operated as a hotel with bar and
 restaurant nevertheless, none of [respondents] herein who were employed at Mayon Hotel and Restaurant
which was also closed on April 30, 1998 was/were recalled by [petitioner] to continue their services...

Parenthetically, the Labor Arbiter did not grant separation pay to the other respondents as they had not filed an
amended complaint to question the cessation of their employment after the closure of Mayon Hotel & Restaurant on
March 31, 1997.45

The above factual finding of the Labor Arbiter was never refuted by petitioners in their appeal with the NLRC. It
confounds us, therefore, how the NLRC could have so cavalierly treated this uncontroverted factual finding by
ruling that respondents have not introduced any evidence to show that they were illegally dismissed, and that the
Labor Arbiter's finding was based on conjecture.46 It was a serious error that the NLRC did not inquire as to
the legality of the cessation of employment. Article 286 of the Labor Code is clear — there is termination of
employment when an otherwise bona fide suspension of work exceeds six (6) months.47 The cessation of
employment for more than six months was patent and the employer has the burden of proving that the termination
was for a just or authorized cause.48

Moreover, we are not impressed by any of petitioners' attempts to exculpate themselves from the charges. First, in
the proceedings with the Labor Arbiter, they claimed that it could not be illegal dismissal because the lay-off was
merely temporary (and due to the expiration of the lease contract over the old premises of the hotel).
They specifically invoked Article 286 of the Labor Code to argue that the claim for separation pay was premature
and without legal and factual basis.49 Then, because the Labor Arbiter had ruled that there was already illegal
dismissal when the lay-off had exceeded the six-month period provided for in Article 286, petitioners raise this
novel argument, to wit:

It is the firm but respectful submission of petitioners that reliance on Article 286 of the Labor Code is
misplaced, considering that the reason why private respondents were out of work was not due to the fault of
petitioners. The failure of petitioners to reinstate the private respondents to their former positions should
not likewise be attributable to said petitioners as the private respondents did not submit any evidence to
prove their alleged illegal dismissal. The petitioners cannot discern why they should be made liable to the
private respondents for their failure to be reinstated considering that the fact that they were out of work was
not due to the fault of petitioners but due to circumstances beyond the control of petitioners, which are the
termination and non-renewal of the lease contract over the subject premises. Private respondents, however,
argue in their Comment that petitioners themselves sought the application of Article 286 of the Labor Code
in their case in their Position Paper filed before the Labor Arbiter. In refutation, petitioners humbly submit
that even if they invoke Article 286 of the Labor Code, still the fact remains, and this bears stress and
emphasis, that the temporary suspension of the operations of the establishment arising from the non-
renewal of the lease contract did not result in the termination of employment of private respondents and,
therefore, the petitioners cannot be faulted if said private respondents were out of work, and consequently,
they are not entitled to their money claims against the petitioners.50

It is confounding how petitioners have fashioned their arguments. After having admitted, in effect, that respondents
have been laid-off since April 1997, they would have this Court excuse their refusal to reinstate respondents or grant
them separation pay because these same respondents purportedly have not proven the illegality of their dismissal.

Petitioners' arguments reflect their lack of candor and the blatant attempt to use technicalities to muddle the issues
and defeat the lawful claims of their employees. First, petitioners admit that since April 1997, when hotel
operations were suspended due to the termination of the lease of the old premises, respondents Loveres, Macandog,
Llarena, Nicerio and Guades have not been permitted to work. Second, even after six months of what should
have been just a temporary lay-off, the same respondents were still not recalled to work. As a matter of fact, the
Labor Arbiter even found that as of the time when he rendered his Joint Decision on July 2000 — or more than three
(3) years after the supposed "temporary lay-off," the employment of all of the respondents with petitioners had
ceased, notwithstanding that the new premises had been completed and the same operated as a hotel with bar and
restaurant. This is clearly dismissal — or the permanent severance or complete separation of the worker from the
service on the initiative of the employer regardless of the reasons therefor.51
On this point, we note that the Labor Arbiter and the CA are in accord that at the time of the filing of the complaint,
respondents had no cause of action to file the case for illegal dismissal. According to the CA and the Labor Arbiter,
the lay-off of the respondents was merely temporary, pending construction of the new building at Peñaranda
Street.52

While the closure of the hotel operations in April of 1997 may have been temporary, we hold that the evidence on
record belie any claim of petitioners that the lay-off of respondents on that same date was merely temporary. On the
contrary, we find substantial evidence that petitioners intended the termination to be permanent. First, respondents
Loveres, Macandog, Llarena, Guades, Nicerio and Alamares filed the complaint for illegal dismissal immediately
after the closure of the hotel operations in Rizal Street, notwithstanding the alleged temporary nature of the closure
of the hotel operations, and petitioners' allegations that the employees assigned to the hotel operations knew about
this beforehand. Second, in their position paper submitted to the Labor Arbiter, petitioners invoked Article 286 of
the Labor Code to assert that the employer-employee relationship was merely suspended, and therefore the claim for
separation pay was premature and without legal or factual basis.53 But they made no mention of any intent to
recall these respondents to work upon completion of the new premises. Third, the various pleadings on record
show that petitioners held respondents, particularly Loveres, as responsible for mismanagement of the establishment
and for abuse of trust and confidence. Petitioner Josefa Po Lam's affidavit on July 21, 1998, for example, squarely
blamed respondents, specifically Loveres, Bumalay and Camigla, for abusing her leniency and causing petitioner
Mayon Hotel & Restaurant to sustain "continuous losses until it is closed." She then asserts that respondents "are not
entitled to separation pay for they were not terminated and if ever the business ceased to operate it was because of
losses."54 Again, petitioners make the same allegation in their memorandum on appeal with the NLRC, where they
alleged that three (3) years prior to the expiration of the lease in 1997, the operation of the Hotel had been sustaining
consistent losses, and these were solely attributed to respondents, but most especially due to Loveres's
mismanagement and abuse of petitioners' trust and confidence.55 Even the petition filed in this court made reference
to the separation of the respondents due to "severe financial losses and reverses," again imputing it to respondents'
mismanagement.56 The vehemence of petitioners' accusation of mismanagement against respondents, especially
against Loveres, is inconsistent with the desire to recall them to work. Fourth, petitioners' memorandum on appeal
also averred that the case was filed "not because of the business being operated by them or that they were
supposedly not receiving benefits from the Labor Code which is true, but because of the fact that the source of their
livelihood, whether legal or immoral, was stopped on March 31, 1997, when the owner of the building
terminated the Lease Contract."57 Fifth, petitioners had inconsistencies in their pleadings (with the NLRC, CA and
with this Court) in referring to the closure,58 i.e., in the petition filed with this court, they assert that there is no
illegal dismissal because there was "only a temporary cessation or suspension of operations of the hotel and
restaurant due to circumstances beyond the control of petitioners, and that is, the non-renewal of the lease
contract..."59 And yet, in the same petition, they also assert that: (a) the separation of respondents was due to severe
financial losses and reverses leading to the closure of the business; and (b) petitioner Pacita Po had to close
shop and was bankrupt and has no liquidity to put up her own building to house Mayon Hotel & Restaurant.60 Sixth,
and finally, the uncontroverted finding of the Labor Arbiter that petitioners terminated all the other respondents, by
not employing them when the Hotel and Restaurant transferred to its new site on Peñaranda Street.61 Indeed, in this
same memorandum, petitioners referred to all respondents as "former employees of Mayon Hotel & Restaurant."62

These factors may be inconclusive individually, but when taken together, they lead us to conclude that petitioners
really intended to dismiss all respondents and merely used the termination of the lease (on Rizal Street premises) as
a means by which they could terminate their employees.

Moreover, even assuming arguendo that the cessation of employment on April 1997 was merely temporary,
it became dismissal by operation of law when petitioners failed to reinstate respondents after the lapse of six (6)
months, pursuant to Article 286 of the Labor Code.

We are not impressed by petitioners' claim that severe business losses justified their failure to reinstate respondents.
The evidence to prove this fact is inconclusive. But more important, serious business losses do not excuse the
employer from complying with the clearance or report required under Article 283 of the Labor Code and its
implementing rules before terminating the employment of its workers.63 In the absence of justifying circumstances,
the failure of petitioners to observe the procedural requirements set out under Article 284, taints their actuations with
bad faith, especially since they claimed that they have been experiencing losses in the three years before 1997. To
say the least, if it were true that the lay-off was temporary but then serious business losses prevented the
reinstatement of respondents, then petitioners should have complied with the requirements of written notice. The
requirement of law mandating the giving of notices was intended not only to enable the employees to look for
another employment and therefore ease the impact of the loss of their jobs and the corresponding income, but more
importantly, to give the Department of Labor and Employment (DOLE) the opportunity to ascertain the verity of the
alleged authorized cause of termination.64

And even assuming that the closure was due to a reason beyond the control of the employer, it still has to accord its
employees some relief in the form of severance pay.65

While we recognize the right of the employer to terminate the services of an employee for a just or authorized cause,
the dismissal of employees must be made within the parameters of law and pursuant to the tenets of fair play.66 And
in termination disputes, the burden of proof is always on the employer to prove that the dismissal was for a just or
authorized cause.67 Where there is no showing of a clear, valid and legal cause for termination of employment, the
law considers the case a matter of illegal dismissal.68

Under these circumstances, the award of damages was proper. As a rule, moral damages are recoverable where the
dismissal of the employee was attended by bad faith or fraud or constituted an act oppressive to labor, or was done
in a manner contrary to morals, good customs or public policy.69 We believe that the dismissal of the respondents
was attended with bad faith and meant to evade the lawful obligations imposed upon an employer.

To rule otherwise would lead to the anomaly of respondents being terminated from employment in 1997 as a matter
of fact, but without legal redress. This runs counter to notions of fair play, substantial justice and the constitutional
mandate that labor rights should be respected. If doubts exist between the evidence presented by the employer and
the employee, the scales of justice must be tilted in favor of the latter — the employer must affirmatively show
rationally adequate evidence that the dismissal was for a justifiable cause.70 It is a time-honored rule that in
controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation
of agreements and writing should be resolved in the former's favor.71 The policy is to extend the doctrine to a greater
number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of
the State to give maximum aid and protection of labor.72

We therefore reinstate the Labor Arbiter's decision with the following modifications:

(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog and Llarena; (Santos
Broñola cannot be granted separation pay as he made no such claim);

(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the time of dismissal were
entitled to their retirement benefits pursuant to Article 287 of the Labor Code as amended;73 and

(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola.

3. Money claims

The CA held that contrary to the NLRC's ruling, petitioners had not discharged the burden of proving that the
monetary claims of the respondents have been paid.74 The CA thus reinstated the Labor Arbiter's grant of
respondents' monetary claims, including damages.

Petitioners assail this ruling by repeating their long and convoluted argument that as there was no illegal dismissal,
then respondents are not entitled to their monetary claims or separation pay and damages. Petitioners' arguments are
not only tiring, repetitive and unconvincing, but confusing and confused — entitlement to labor standard benefits is
a separate and distinct concept from payment of separation pay arising from illegal dismissal, and are governed by
different provisions of the Labor Code.
We agree with the CA and the Labor Arbiter. Respondents have set out with particularity in their complaint, position
paper, affidavits and other documents the labor standard benefits they are entitled to, and which they alleged that
petitioners have failed to pay them. It was therefore petitioners' burden to prove that they have paid these money
claims. One who pleads payment has the burden of proving it, and even where the employees must allege
nonpayment, the general rule is that the burden rests on the defendant to prove nonpayment, rather than on the
plaintiff to prove non payment.75 This petitioners failed to do.

We also agree with the Labor Arbiter and the CA that the documents petitioners submitted, i.e., affidavits executed
by some of respondents during an ocular inspection conducted by an inspector of the DOLE; notices of inspection
result and Facility Evaluation Orders issued by DOLE, are not sufficient to prove payment.76 Despite repeated
orders from the Labor Arbiter,77 petitioners failed to submit the pertinent employee files, payrolls, records,
remittances and other similar documents which would show that respondents rendered work entitling them to
payment for overtime work, night shift differential, premium pay for work on holidays and rest day, and payment of
these as well as the COLA and the SILP – documents which are not in respondents' possession but in the custody
and absolute control of petitioners.78 By choosing not to fully and completely disclose information and present the
necessary documents to prove payment of labor standard benefits due to respondents, petitioners failed to discharge
the burden of proof.79 Indeed, petitioners' failure to submit the necessary documents which as employers are in their
possession, inspite of orders to do so, gives rise to the presumption that their presentation is prejudicial to its
cause.80 As aptly quoted by the CA:

[W]hen the evidence tends to prove a material fact which imposes a liability on a party, and he has it in his
power to produce evidence which from its very nature must overthrow the case made against him if it is not
founded on fact, and he refuses to produce such evidence, the presumption arises that the evidence, if
produced, would operate to his prejudice, and support the case of his adversary.81

Petitioners next claim that the cost of the food and snacks provided to respondents as facilities should have been
included in reckoning the payment of respondents' wages. They state that although on the surface respondents
appeared to receive minimal wages, petitioners had granted respondents other benefits which are considered part and
parcel of their wages and are allowed under existing laws.82 They claim that these benefits make up for whatever
inadequacies there may be in compensation.83 Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow
the deduction of facilities provided by the employer through an appropriate Facility Evaluation Order issued by the
Regional Director of the DOLE.84 Petitioners also aver that they give five (5) percent of the gross income each
month as incentives. As proof of compliance of payment of minimum wages, petitioners submitted the Notice of
Inspection Results issued in 1995 and 1997 by the DOLE Regional Office.85

The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of respondents'
minimum wage. As stated in the Labor Arbiter's decision:86

While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo) issued by the DOLE
Regional Office whereby the cost of meals given by [petitioners] to [respondents] were specified for
purposes of considering the same as part of their wages, We cannot consider the cost of meals in the Orders
as applicable to [respondents]. [Respondents] were not interviewed by the DOLE as to the quality and
quantity of food appearing in the applications of [petitioners] for facility evaluation prior to its approval to
determine whether or not [respondents] were indeed given such kind and quantity of food. Also, there was
no evidence that the quality and quantity of food in the Orders were voluntarily accepted by [respondents].
On the contrary; while some [of the respondents] admitted that they were given meals and merienda, the
quality of food serve[d] to them were not what were provided for in the Orders and that it was only when
they filed these cases that they came to know about said Facility Evaluation Orders (pp. 100; 379[,] vol.
II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa herself, who applied for evaluation of the facility
(food) given to [respondents], testified that she did not inform [respondents] concerning said Facility
Evaluation Orders (p. 34, tsn[,] August 13, 1998).

Even granting that meals and snacks were provided and indeed constituted facilities, such facilities could not be
deducted without compliance with certain legal requirements. As stated in Mabeza v. NLRC,87 the employer simply
cannot deduct the value from the employee's wages without satisfying the following: (a) proof that such facilities are
customarily furnished by the trade; (b) the provision of deductible facilities is voluntarily accepted in writing by the
employee; and (c) the facilities are charged at fair and reasonable value. The records are clear that petitioners failed
to comply with these requirements. There was no proof of respondents' written authorization. Indeed, the Labor
Arbiter found that while the respondents admitted that they were given meals and merienda, the quality of food
served to them was not what was provided for in the Facility Evaluation Orders and it was only when they filed the
cases that they came to know of this supposed Facility Evaluation Orders.88 Petitioner Josefa Po Lam
herself admitted that she did not inform the respondents of the facilities she had applied for.89

Considering the failure to comply with the above-mentioned legal requirements, the Labor Arbiter therefore erred
when he ruled that the cost of the meals actually provided to respondents should be deducted as part of their salaries,
on the ground that respondents have availed themselves of the food given by petitioners.90 The law is clear that mere
availment is not sufficient to allow deductions from employees' wages.

More important, we note the uncontroverted testimony of respondents on record that they were required to eat in the
hotel and restaurant so that they will not go home and there is no interruption in the services of Mayon Hotel &
Restaurant. As ruled in Mabeza, food or snacks or other convenience provided by the employers are deemed as
supplements if they are granted for the convenience of the employer. The criterion in making a distinction between a
supplement and a facility does not so much lie in the kind (food, lodging) but the purpose.91 Considering, therefore,
that hotel workers are required to work different shifts and are expected to be available at various odd hours, their
ready availability is a necessary matter in the operations of a small hotel, such as petitioners' business.92 The
deduction of the cost of meals from respondents' wages, therefore, should be removed.

We also do not agree with petitioners that the five (5) percent of the gross income of the establishment can be
considered as part of the respondents' wages. We quote with approval the Labor Arbiter on this matter, to wit:

While complainants, who were employed in the hotel, receive[d] various amounts as profit share, the same
cannot be considered as part of their wages in determining their claims for violation of labor standard
benefits. Although called profit share[,] such is in the nature of share from service charges charged by the
hotel. This is more explained by [respondents] when they testified that what they received are not fixed
amounts and the same are paid not on a monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo). Also,
[petitioners] failed to submit evidence that the amounts received by [respondents] as profit share are to be
considered part of their wages and had been agreed by them prior to their employment. Further, how can
the amounts receive[d] by [respondents] be considered as profit share when the same [are] based on the
gross receipt of the hotel[?] No profit can as yet be determined out of the gross receipt of an enterprise.
Profits are realized after expenses are deducted from the gross income.

On the issue of the proper minimum wage applicable to respondents, we sustain the Labor Arbiter. We note that
petitioners themselves have admitted that the establishment employs "more or less sixteen (16)
employees,"93 therefore they are estopped from claiming that the applicable minimum wage should be for service
establishments employing 15 employees or less.

As for petitioners repeated invocation of serious business losses, suffice to say that this is not a defense to payment
of labor standard benefits. The employer cannot exempt himself from liability to pay minimum wages because of
poor financial condition of the company. The payment of minimum wages is not dependent on the employer's ability
to pay.94

Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.

4. Conclusion

There is no denying that the actuations of petitioners in this case have been reprehensible. They have terminated the
respondents' employment in an underhanded manner, and have used and abused the quasi-judicial and judicial
processes to resist payment of their employees' rightful claims, thereby protracting this case and causing the
unnecessary clogging of dockets of the Court. They have also forced respondents to unnecessary hardship and
financial expense. Indeed, the circumstances of this case would have called for exemplary damages, as the dismissal
was effected in a wanton, oppressive or malevolent manner,95 and public policy requires that these acts must be
suppressed and discouraged.96

Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages of P10,000.00 each to all
respondents. While it is true that other forms of damages under the Civil Code may be awarded to illegally
dismissed employees,97 any award of moral damages by the Labor Arbiter cannot be based on the Labor Code but
should be grounded on the Civil Code.98 And the law is clear that exemplary damages can only be awarded if
plaintiff shows proof that he is entitled to moral, temperate or compensatory damages.99

As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and Broñola specifically claimed
damages from petitioners, then only they are entitled to exemplary damages.sjgs1

Finally, we rule that attorney's fees in the amount to P10,000.00 should be granted to each respondent. It is settled
that in actions for recovery of wages or where an employee was forced to litigate and incur expenses to protect his
rights and interest, he is entitled to an award of attorney's fees.100 This case undoubtedly falls within this rule.

IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17, 2003 of the Court of Appeals
in CA-G.R. SP No. 68642 upholding the Joint Decision of July 14, 2000 of the Labor Arbiter in RAB V Case Nos.
04-00079-97 and 04-00080-97 is AFFIRMED, with the following MODIFICATIONS:

(1) Granting separation pay of one-half (1/2) month for every year of service to respondents Loveres,
Macandog and Llarena;

(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;

(3) Removing the deductions for food facility from the amounts due to all respondents;

(4) Awarding moral damages of P20,000.00 each for respondents Loveres, Macandog, Llarena, Guades,
Nicerio, Atractivo, and Broñola;

(5) Deleting the award of exemplary damages of P10,000.00 from all respondents except Loveres,
Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola; and

(6) Granting attorney's fees of P10,000.00 each to all respondents.

The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total monetary benefits awarded
and due to the employees concerned in accordance with the decision. The Labor Arbiter is ORDERED to submit his
compliance thereon within thirty (30) days from notice of this decision, with copies furnished to the parties.

SO ORDERED.