What, then, is the basis of computation of backwages?

Are annual general increases in basic salary

deemed component in the computation of full backwages? The weight of authority leans in petitioner
Bank’s favor and against respondent Sadac’s claim for the inclusion of general increases in the
computation of his backwages.

We stressed in Paramount that an unqualified award of backwages means that the employee is paid
at the wage rate at the time of his dismissal, thus:
The determination of the salary base for the computation of backwages requires simply an
application of judicial precedents defining the term "backwages". Unfortunately, the Labor Arbiter
erred in this regard. An unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal

 And the Court has declared that the base figure to be used in the computation of backwages due to
the employee should include not just the basic salary, but also the regular allowances that he had
been receiving, such as the emergency living allowances and the 13th month pay mandated under
the law

There is no ambivalence in Paramount, that the base figure to be used in the computation of
backwages is pegged at the wage rate at the time of the employee’s dismissal, inclusive of regular
allowances that the employee had been receiving such as the emergency living allowances and the
13th month pay mandated under the law.

As held by the Court of Appeals, however, the mere fact that petitioner had been previously granted
salary increases by reason of his excellent performance does not necessarily guarantee that he
would have performed in the same manner and, therefore, qualify for the said increase later. What is
more, his claim is tantamount to saying that he had a vested right to remain as Head of the Garnet
Exchange and given salary increases simply because he had performed well in such position, and
thus he should not be moved to any other position where management would require his services

There was no lawful decree or order supporting his claim, such that his salary increases can be
made a component in the computation of backwages. What is evident is that salary increases are a
mere expectancy. They are, by its nature volatile and are dependent on numerous variables,
including the company’s fiscal situation and even the employee’s future performance on the job, or
the employee’s continued stay in a position subject to management prerogative to transfer him to
another position where his services are needed. In short, there is no vested right to salary increases.
G.R. No. 145561               June 15, 2005

HONDA PHILS., INC., petitioner, 

vs.
SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.
FACTS: 
the case stems from the Collective Bargaining Agreement (CBA) forged between
petitioner Honda and respondent union Samahan ng Malayang Manggagawa sa Honda
(respondent union) which contained the following provisions:
Section 3. 13th Month Pay
The COMPANY shall maintain the present practice in the implementation [of] the
13th month pay.
Section 6. 14th Month Pay
The COMPANY shall grant a 14th Month Pay, computed on the same basis as
computation of 13th Month Pay.
Section 7. The COMPANY agrees to continue the practice of granting, in its
discretion, financial assistance to covered employees in December of each year, of not
less than 100% of basic pay.
This CBA is effective until year 2000. In the latter part of 1998, the parties started re-
negotiations for the fourth and fifth years of their CBA. When the talks between the
parties bogged down, respondent union filed a Notice of Strike on the ground of
bargaining deadlock. Thereafter, Honda filed a Notice of Lockout. [To cut the story
short, Secretary assumed jurisdiction; second notice of strike; Sec. again assumed
jurisdiction]
The management of Honda subsequently issued a memorandum announcing its new
computation of the 13th and 14th month pay to be granted to all its employees
whereby the thirty-one (31)-day long strike shall be considered unworked days for
purposes of computing said benefits. As per the company’s new formula, the amount
equivalent to 1/12 of the employees’ basic salary shall be deducted from these
bonuses, with a commitment however that in the event that the strike is declared legal,
Honda shall pay the amount deducted.
Respondent union opposed the pro-rated computation of the bonuses in a letter.
Honda sought the opinion of the Bureau of Working Conditions (BWC) on the issue.
BWC agreed with the pro-rata payment of the 13th month pay as proposed by Honda.
The matter was brought before the Grievance Machinery in accordance with the
parties’ existing CBA but when the issue remained unresolved, it was submitted for
voluntary arbitration, the latter invalidated Honda’s computation. Motion for Partial
Reconsideration by Honda denied. CA dismissed for lack of merit. Hence, this
petition for review.
ISSUE: WON the pro-rated computation of the 13th month pay and the other bonuses
in question is valid and lawful.
HELD:  The petition lacks merit.
A collective bargaining agreement refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of work and
all other terms and conditions of employment in a bargaining unit.8 As in all
contracts, the parties in a CBA may establish such stipulations, clauses, terms and
conditions as they may deem convenient provided these are not contrary to law,
morals, good customs, public order or public policy.9 Thus, where the CBA is clear
and unambiguous, it becomes the law between the parties and compliance
therewith is mandated by the express policy of the law.10
In some instances, however, the provisions of a CBA may become contentious, as in
this case.
We agree with the findings of the arbitrator that the assailed CBA provisions are far
from being unequivocal. A cursory reading of the provisions will show that
they did not state categorically whether the computation of the 13th
month pay, 14th month pay and the financial assistance would be
based on one full month’s basic salary of the employees, or pro-rated
based on the compensation actually received. The arbitrator thus
properly resolved the ambiguity in favor of labor as mandated by Article 1702 of
the Civil Code.11 The Court of Appeals affirmed the arbitrator’s finding and added
that the computation of the 13th month pay should be based on the length of
service and not on the actual wage earned by the worker.
Under the Revised Guidelines on the Implementation of the 13th month pay issued on
November 16, 1987, the salary ceiling of P1,000.00 under P.D. No. 851 was
removed. It further provided that the minimum 13th month pay required by law
shall not be less than one-twelfth (1/12) of the total basic salary earned by an
employee within a calendar year. The guidelines pertinently provides:
The “basic salary” of an employee for the purpose of computing the 13th month
pay shall include all remunerations or earnings paid by his employer for services
rendered but does not include allowances and monetary benefits which are not
considered or integrated as part of the regular or basic salary, such as the cash
equivalent of unused vacation and sick leave credits, overtime premium, night
differential and holiday pay, and cost-of-living allowances.

For employees receiving regular wage, we have interpreted “basic salary” to mean,
not the amount actually received by an employee, but 1/12 of their standard
monthly wage multiplied by their length of service within a given calendar
year.
The revised guidelines also provided for a pro-ration of this benefit only in cases of
resignation or separation from work. As the rules state, under these circumstances, an
employee is entitled to a pay in proportion to the length of time he worked during the
year, reckoned from the time he started working during the calendar year.
Considering the foregoing, the computation of the 13th month pay should be based on
the length of service and not on the actual wage earned by the worker. In the present
case, there being no gap in the service of the workers during the calendar year in
question, the computation of the 13th month pay should not be pro-rated but
should be given in full.
The memorandum dated November 22, 1999 which Honda issued shows that it was
the first time a pro-rating scheme was to be implemented in the company. That a full
month payment of the 13th month pay is the established practice at Honda is
further bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada.
Both attested that when they were absent from work due to motorcycle accidents, and
after they have exhausted all their leave credits and were no longer receiving their
monthly salary from Honda, they still received the full amount of their 13th month,
14th month and financial assistance pay.
This, we rule likewise constitutes voluntary employer practice which cannot be
unilaterally withdrawn by the employer without violating Art. 100 of the Labor
Code.
Petition Denied.
MAYON HOTEL v. ROLANDO ADANA, GR NO. 157634, 2005-05-16
Facts:
Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the name
of petitioner Pacita O. Po... whose mother, petitioner Josefa Po Lam, manages the
establishment.
The hotel and restaurant employed about... sixteen (16) employees.
Due to the expiration and non-renewal of the lease contract for the rented space occupied
by the said hotel and restaurant... the hotel operations of the business were suspended
The operation of the restaurant was... continued in its new location... while waiting for the
construction of a new Mayon Hotel & Restaurant
Only nine (9) of the sixteen (16) employees continued working in the Mayon
Restaurant at its new site.
The 16 employees filed complaints for underpayment of wages and other money claims
against petitioners
LA

Labor Arbiter... rendered a Joint Decision in favor of the employees.

NLRC

On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the
complaints were dismissed.
CA reinstated the Joint Decision of the LA

CA
Petitioners... claim that the cost of the food and snacks provided to respondents as facilities
should have been included in reckoning the payment of respondents' wages. They state
that although on the surface respondents appeared to receive minimal wages, petitioners
had... granted respondents other benefits which are considered part and parcel of their
wages and are allowed under existing laws.
They claim that these benefits make up for whatever inadequacies there may be in
compensation.
Issues:
YES

Are respondents entitled to their money claims due to underpayment of wages, and
nonpayment of holiday pay, rest day premium, SILP, COLA, overtime pay, and night shift
differential pay?
Ruling:
As stated in the Labor Arbiter's decision
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.
Even granting that meals and snacks were provided and indeed constituted facilities, such
facilities could not be deducted without compliance with certain legal requirements.
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.
There was no proof of respondents' written authorization.
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.
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 deduction of the cost of meals from respondents' wages, therefore, should be removed.
 SECOND DIVISION

[ G.R. No. 198935, November 27, 2013 ]

MAYNILAD WATER SUPERVISORS ASSOCIATION, REPRESENTED BY ROBERTA

ESTINO, PETITIONERS, VS. MAYNILAD WATER SERVICES, INC., RESPONDENT.

DECISION
PEREZ, J.:
For resolution is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court,
seeking to reverse, annul and set aside the Amended Decision and Resolution issued by the
Court of Appeals (CA) in CA-G.R. S.P. No. 101911, specifically the (a) Amended Decision [2] dated
31 January 2011 which reversed its earlier Decision dated 31 May 2010 and (b)
Resolution[3] dated 12 September 2011 which denied petitioner's Motion for Reconsideration.

Culled from the records are the following antecedent facts:[4]

Petitioner Maynilad Water Supervisors Association (MWSA) is an association composed of

former supervisory employees of Metropolitan Waterworks and Sewerage System (MWSS).
These employees claim that during their employment with MWSS, they were receiving a
monthly cost of living allowance (COLA) equivalent to 40% of their basic pay.

The payment of these allowances and other additional compensation,

including the COLA were, however, discontinued without qualification
effective 1 November 1989 when the Department of Budget and Management (DBM)
issued Corporate Compensation Circular No. 10 (CCC No. 10).

In 1997, MWSS was privatized and part of it, MWSS West, was acquired by Maynilad Water
Services, Inc. (Maynilad). Some of the employees of MWSS, which included members of MWSA,
were absorbed by Maynilad subject to the terms and conditions of a Concession Agreement, a
portion of which reads:

Article 6.1.1 (ii)

One month prior to the Commencement Date, the Concessionaire shall make an offer to employ
each Concessionaire Employee, subject to a probationary period of six months following the
Commencement Date, at a salary or pay scale and with benefits at least equal to those enjoyed
by such Employee on the date of his or her separation from MWSS. x x x

xxxx
Article 6.1.3. Non-Diminution of Benefits

The Concessionaire shall grant to all Concessionaire Employees employee benefits no less
favorable than those granted to such employees by the MWSS at the time of their separation
from MWSS, particularly those set forth in Exhibit F and the following:

xxxx

The payment of COLA was not among those listed as benefits in Exhibit "F."

In 1998, the Supreme Court promulgated a Decision[5] declaring DBM CCC No.10 ineffective for
failure to comply with the publication requirement. Consequently, MWSS partially released the
COLA payments for its employees, including members of MWSA, covering the years 1989 to
1997, and up to year 1999 for its retained employees.

In 2002, MWSA filed a complaint before the Labor Arbiter praying for
the payment of their COLA from the year 1997, the time its members
were absorbed by Maynilad, up to the present. MWSA argued that since DBM
CCC No. 10 was rendered ineffective, the COLA should be paid as part of the benefits enjoyed by
their members at the time of their separation from MWSS, and which should form part of their
salaries and benefits with Maynilad.

In a decision dated 10 November 2006, the Labor Arbiter granted MWSA's claim and directed
Maynilad to pay the COLA of the supervisors retroactive to the date when they were hired in
1997, with legal interest from the date of promulgation of the decision. It also directed Maynilad
to take necessary measures to ensure that the benefit is incorporated in the employees' monthly
compensation.[6]

On 11 December 2006, Maynilad appealed the decision before the National Labor Relations
Commission (NLRC) and filed an Urgent Manifestation and Motion to Reduce Bond.

The NLRC granted Maynilad's motion and reversed on appeal the decision of the Labor Arbiter.

On 28 September 2007, MWSA filed a motion for reconsideration but this was denied by the
NLRC in its 23 October 2007 resolution.

Aggrieved, MWSA filed a petition for certiorari with the CA on 11 January 2008.

In a Decision[7] dated 31 May 2010, the CA Ninth Division annulled and set aside the decision of
the NLRC. It thus reinstated the decision of the Labor Arbiter.

Maynilad filed a motion for reconsideration of the 31 May 2010 CA Decision.

On 31 January 2011, the CA Ninth Division reconsidered its earlier Decision. The decretal
portion of the amended decision reads:
WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED.
Consequently, the Court's 31 May 2010 Decision is REVERSED and SET ASIDE, and the 07
September 2007 Decision and 23 October 2007 Resolution of the NLRC are AFFIRMED, and
are thus REINSTATED.[8]

MWSA filed a Motion for Reconsideration of the amended decision. Pending resolution of the
Motion for Reconsideration, MWSA moved for the inhibition of the members of the Ninth
Division of the CA. The members of the division recused from the case in a Resolution dated 3
June 2011.

Thereafter, the Second Division of the CA, to which the case was raffled, issued a
Resolution[9] on 12 September 2011 denying MWSA's Motion for Reconsideration.

Hence, this Petition for Review on Certiorari under Rule 45 of the Rules of Court.

ISSUES

Whether the CA erred in not holding that the MWSA members are entitled to COLA under the
Concession Agreement.

Whether the CA erred in not finding grave abuse of discretion on the part of NLRC when the
latter granted Maynilad's appeal despite insufficiency of the appeal bond.

OUR RULING

Simply stated, the main issue in this case is whether Maynilad bound itself under the Concession
Agreement to pay the COLA of the employees it absorbed from MWSS. A careful review of the
Concession Agreement led us to conclude that both MWSS and Maynilad never intended to
include COLA as one of the benefits to be granted to the absorbed employees.

The benefits agreed upon by the parties are stated in Exhibit "F" of the Concession Agreement,
to wit:

Existing MWSS Fringe Benefits

A.   ALLOWANCES

PERA - P500.00 Salary Grade 1 to 23 except those with RATA

 ACA P500.00 Salary Grade 1 to 25
RATA- 40% of basic Supervisory Level, Section Chiefs and
up or equivalent ranks. Technical and Executive Assistants
Medical 2,500/year
Rice 500/month
Uniform 2,000/year
Meal 25.00/day (for medical personnel P30.00/day)
Longevity 50.00/year of service/month
Children 30.00/child/month, maximum four (4) children below 21 years old
Hazard 50.00/month

B. BONUSES

Year-End Financial Assistance One (1) month Gross pay (Basic Salary plus PERA, ACA,
rice, meal, longevity, Children and RATA
Mid-Year One (1) month Gross Pay
Christmas Bonus and Cash Gift One (1) month Basic salary plus P1,000 cash gift
Anniversary (Bigay-pala) 4,000.00 or 50% of basic, whichever is greater
Productivity as of December 1995 Amount equivalent to P5,000 or 60% of gross pay,
exclusive of RATA, whichever is higher

C. PREMIUMS

Graveyard 50% (12MN 6:00 AM)

Nightwork 25% (6PM 6AM)
Holiday 125%
Sunday 150%
Overtime 125%
Distress 25% of basic pay (For Sewerage Department only)

D. PAID LEAVES

Vacation 15 days/year
Sick 15 days/year
Maternity 60 calendar days
Paternity 7 working days
Emergency Leave - 3 days/year
(Birthday/Funeral/Mourning/Graduation/Enrollment/Wedding/
Anniversary/Hospitalization/Accident/Relocation)

E. STUDY LEAVE

- Study now pay later scheme

- Grant (with contract to serve MWSS)[10]

It is clear from the aforesaid enumeration that COLA is not among the benefits to be received by
the absorbed employees. Contrary to the contention of MWSA, the declaration by the Court of
the ineffectiveness of DBM CCC No. 10 due to its non-publication in the Official Gazette or in a
newspaper of general circulation in the country, [11] did not give rise to the employee's right to
demand payment of the subject benefit from Maynilad.
As far as their employment relationship with Maynilad is concerned, the same is not affected by
the De Jesus ruling because it is governed by a separate compensation package provided for
under the Concession Agreement. It would be erroneous to presume that had the COLA been
received during the time of the execution of the contract, the benefit would have been included
in Exhibit "F." First of all, we note that the Court's ruling in the De Jesus case applies only to
government-owned and controlled corporations and not to private entities. Secondly, the parties
to the Concession Agreement could not have thought of including the COLA in Exhibit "F"
because as early as 1989, the government already resolved to remove the COLA, among others,
from the list of allowances being received by government employees. Hence, the enactment of
Republic Act R.A. No. 6758 or the Compensation and Position Classification Act of
1989[12] which integrated the COLA into the standardized salary rate.  Section 12 thereof
provides:

Consolidation of Allowances and Compensation. All allowances, except for representation and
transportation allowances; clothing and laundry allowances; subsistence allowance of marine
officers and crew on board government vessels and hospital personnel; hazard pay; allowances
of foreign service personnel stationed abroad; and such other additional compensation not
otherwise specified herein as may be determined by the DBM, shall be deemed included in the
standardized salary rates herein prescribed. x x x

From the aforesaid provision, we note that all allowances were deemed integrated into the
standardized salary rates except:

(1)   representation and transportation allowances;

(2)   clothing and laundry allowances;
(3)   subsistence allowances of marine officers and crew on board government vessels;
(4)   subsistence allowances of hospital personnel;
(5)   hazard pay;
(6)   allowances of foreign service personnel stationed abroad; and
(7)   such other additional compensation not otherwise specified in Section 12 as may be
determined by the DBM.

In Gutierrez v. DBM,[13] which is a consolidated case involving over 20 government-owned and

controlled corporations, the Court found proper the inclusion of COLA in the standardized
salary rates. It settled that COLA, not being an enumerated exclusion, was deemed already
incorporated in the standardized salary rates of government employees under the general rule of
integration. In explaining its inclusion in the standardized salary rates, the Court cited its ruling
in National Tobacco Administration v. COA,[14] in that the enumerated fringe benefits in items
(1) to (6) have one thing in common they belong to one category of privilege called allowances
which are usually granted to officials and employees of the government to defray or reimburse
the expenses incurred in the performance of their official functions. Consequently, if these
allowances are consolidated with the standardized salary rates, then the government official or
employee will be compelled to spend his personal funds in attending to his duties. On the other
hand, item (7) is a "catch-all proviso" for benefits in the nature of allowances similar to those
enumerated.[15]

Clearly, COLA is not in the nature of an allowance intended to reimburse expenses incurred by
officials and employees of the government in the performance of their official functions. It is not
payment in consideration of the fulfillment of official duty. [16] As defined, cost of living refers to
"the level of prices relating to a range of everyday items"[17] or "the cost of purchasing those
goods and services which are included in an accepted standard level of consumption." [18] Based
on this premise, COLA is a benefit intended to cover increases in the cost of living. Thus, it is
and should be integrated into the standardized salary rates.

From the aforesaid discussion, it is evident therefore, that at the time the MWSS employees
were absorbed by Maynilad in 1997, the COLA was already part and parcel of their monthly
salary. The non-publication of DBM CCC No. 10 in the Official Gazette or newspaper of general
circulation did not nullify the integration of COLA into the standardized salary rates upon the
effectivity of R.A. No. 6758.[19] As held by this Court in Phil. International Trading Corp. v. COA,
[20]
 the validity of R.A. No. 6758 should not be made to depend on the validity of its
implementing rules.

To grant COLA to herein petitioners now would create an absurd situation wherein they would
be receiving an additional COLA in the amount equivalent to 40% of their basic salary even if
the Court has already ruled that the COLA is already integrated in the employee's basic salary.
Such conclusion would give the absorbed employees far greater rights than their former co-
employees or other government employees from whom COLA was eventually disallowed.

The ruling of the Labor Arbiter which MWSA insists on is also erroneous in that it seeks to have
the COLA incorporated in the monthly compensation to be received by the absorbed employees.
It failed to consider that the employment contracts of the MWSA members with MWSS were
terminated prior to their employment with MAYNILAD. Although they may have continued
performing the same function, their employment is already covered by an entirely new
employment contract.

This Court has ruled that unless expressly assumed, labor contracts such as employment
contracts and collective bargaining agreements are not enforceable against a transferee of an
enterprise, labor contracts being in personam, thus binding only between the parties.[21] In the
instant case, the only commitment of Maynilad under the Concession Agreement it entered with
MWSS was to provide the absorbed employees with a compensation package "no less favorable
than those granted to [them] by the MWSS at the time of their separation from MWSS,
particularly those set forth in Exhibit 'F' x x x."[22] It is undisputed that Maynilad complied with
such commitment. It cannot, however, be compelled to assume the payment of an allowance
which was not agreed upon. Such would not only be unreasonable but also unfair for Maynilad.
MWSS and Maynilad could not have presumed that the COLA was part of the agreement when it
was no longer being received by the employees at the time of the execution of the contract,
which is the reckoning point of their new employment .

In Norton Resources and Development Corporation v. All Asia Bank Corporation, [23] this Court
ruled that [t]he agreement or contract between the parties is the formal expression of the
parties' rights, duties and obligations. It is the best evidence of the intention of the parties. Thus,
when the terms of an agreement have been reduced to writing, it is considered as containing all
the terms agreed upon and there can be no evidence of such terms other than the contents of the
written agreement between the parties and their successors in interest. Time and again, we have
stressed the rule that a contract is the law between the parties, and courts have no choice but to
enforce such contract so long as it is not contrary to law, morals, good customs or public policy.
Otherwise, courts would be interfering with the freedom of contract of the parties. Simply put,
courts cannot stipulate for the parties or amend the latter's agreement, for to do so would be to
alter the real intention of the contracting parties when the contrary function of courts is to give
force and effect to the intention of the parties.

In fine, contrary to the allegation of MWSA, there is no ambiguity in the Concession Agreement.
Thus, there is nothing to be construed.

Anent the issue of the insufficiency of the appeal bond posted by Maynilad, we agree with the
NLRC that there was merit in the arguments forwarded in support of the prayer for the
reduction of the appeal bond. Maynilad sought the reduction of the appeal bond to ten percent
(10%) for the following reasons: a) that it had filed a Petition for Rehabilitation before the
Regional Trial Court of Quezon City; and b) that as a result thereof, the Rehabilitation Court
issued a Stay Order prohibiting it from selling, encumbering, transferring or disposing in any
manner any of its properties making it impossible for it to fully comply with the appeal bond
requirement.[24] Our ruling in Garcia, et al. v. KJ Commercial [25] that the bond requirement on
appeals may be relaxed when there is substantial compliance with the Rules of Procedure of the
NLRC or when the appellant shows willingness to post a partial bond.  Here, we note that
Maynilad's appeal was accompanied by an appeal bond in the amount of Twenty Five Million
Pesos (P25,000,000.00) with an Urgent Manifestation and Motion to Reduce Bond on the
ground that the labor arbiter failed to specify the exact amount of monetary award from which
the amount of the appeal bond is to be based.

In University Plans v. Solano,[26] this Court reiterated the guidelines which the NLRC must
exercise in considering the motions for reduction of bond:

The bond requirement on appeals involving monetary awards has been and may be relaxed in
meritorious cases. These cases include instances in which (1) there was substantial compliance
with the Rules, (2) surrounding facts and circumstances constitute meritorious grounds to
reduce the bond, (3) a liberal interpretation of the requirement of an appeal bond would serve
the desired objective of resolving controversies on the merits, or (4) the appellants, at the very
least, exhibited their willingness and/or good faith by posting a partial bond during the
reglementary period.

It is evident that the aforesaid instances are present in the instant case.

WHEREFORE, premises considered, the instant Petition is hereby DENIED and the 31

January 2011 Amended Decision and 12 September 2011 Resolution of the Court of Appeals in
CA-G.R. SP No. 101911 is AFFIRMED in toto.
Aklan Electric Corp. Inc. vs NLRC
FACTS: January 22, 1991 by way of a resolution of the Board of Directors of AKELCO it allowed the
temporary holding of office at Amon Theater, Kalibo, Aklan upon the recommendation of Atty. Leovigildo
Mationg, then project supervisor, on the ground that the office at Lezo, Aklan was dangerous and unsafe.
Majority of the employees including the herein complainants, continued to report for work at Lezo, Aklan
and were paid of their salaries. The complainants claimed that transfer of office from Lezo, Aklan to
Kalibo, Aklan was illegal because it failed to comply with the legal requirements under P.D. 269, thus the
they remained and continued to work at the Lezo Office until they were illegally locked out therefrom by
the respondents. Despite the illegal lock out however, complainants continued to report daily to the
location of the Lezo Office, prepared to continue in the performance of their regular duties. Complainants
who continuously reported for work at Lezo, Aklan were not paid their salaries from June 1992 up to
March 18, 1993.

LA dismissed the complaints. NLRC reversed and set aside the LA’s decision and RULING that private
respondents are entitled to unpaid wages.
NLRC based its conclusion on the following: (a) the letter of Leyson, Office Manager of AKELCO
addressed to AKELCO’s General Manager, Atty. Mationg, requesting for the payment of private
respondents’ unpaid wages from June 16, 1992 to March18, 1993; (b) the memorandum of said Atty.
Mationg in answer to the letter request of Leyson where he made an assurance that he will recommend
such request; (c) the private respondents’ own computation of their unpaid wages.-

Petitioner AKELCO claims

– compensable service is best shown by timecards, payslips and other similar documents and it was an
error for public respondent to consider the computation of the claims for wages and benefits submitted
merely by private respondents as substantial evidence

ISSUE: WON the refusal of private respondents to work under the lawful orders of AKELCO management
are covered by the “no work, no pay” principle (thus not entitled to the claim for unpaid wages)

RULING: The above bases of the NLRC does not constitute substantial evidence to support the
conclusion that private respondents are entitled to the payment of wages from June 16, 1992 to March18,
1993. Substantial evidence is that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion. These evidences relied upon by public respondent did not establish the
fact that private respondents actually rendered services in the Kalibo office during the stated period.

It has been established that the petitioner’s business office was transferred to Kalibo and all its
equipments, records and facilities were transferred thereat and that it conducted its official business in
Kalibo during the period in question. It was incumbent upon private respondents to prove that they indeed
rendered services for petitioner, which they failed to do.

It would neither be fair nor just to allow private respondents to recover something they have not earned
and could not have earned because they did not render services at the Kalibo office during the stated
period.
 NON-DIMUNITION OF BENEFITS

G.R. No. 181806 : March 12, 2014

WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner, v. WESLEYAN

UNIVERSITY-PHILIPPINES FACULTY and STAFF ASSOCIATION,
Respondent.

DEL CASTILLO, J.:

FACTS:

Wesleyan University-Philippines (Petitioner), a non-stock, non-profit educational

institution duly organized and existing under the laws of the Philippines and
Wesleyan University-Philippines Faculty and Staff Association (Respondent), a
duly registered labor organization acting as the sole and exclusive bargaining
agent of all rank-and-file faculty and staff employees of petitioner signed a 5-year
CBA9 effective June 1, 2003 until May 31, 2008.

A Memorandum providing guidelines on the implementation of vacation and sick

leave credits as well as vacation leave commutation was issued by petitioner,
through its President, Atty. Guillermo T. Maglaya (Atty. Maglaya). Respondent
President, Cynthia L. De Lara (De Lara) wrote a letter to Atty. Maglaya informing
him that respondent is not amenable to the unilateral changes made by petitioner
and questioning the guidelines for being contrary to the existing practices and the
CBA.

Petitioner advised respondent to file a grievance complaint on the

implementation of the vacation and sick leave policy during their Labor
Management Committee (LMC) Meeting. Petitioner announced therein its plan
of implementing a one-retirement policy which was unacceptable to respondent.

Unable to settle their differences at the grievance level, the parties referred the
matter to a Voluntary Arbitrator. Respondent submitted affidavits showing that
there is an established practice of giving two retirement benefits: one from the
Private Education Retirement Annuity Association (PERAA) Plan and another
from the CBA Retirement Plan.

The Voluntary Arbitrator declared that the one-retirement policy and the
Memorandum dated August 16, 2005 is contrary to law.

Petitioner appealed the case to the CA via a Petition for Review under Rule 43 of
the Rules of Court. The CA affirmed the nullification of the one-retirement policy
and the Memorandum dated August 16, 2005 on the ground that these
unilaterally amended the CBA without the consent of respondent. Petitioner
moved for reconsideration but the CA denied the same.

ISSUES: Whether or not the Court of Appeals committed grave and palpable
error in ruling that a university practice of granting its employees two (2) sets of
Retirement Benefits had already been established? Whether or not the Court of
Appeals committed grave and palpable error in revoking petitioner
Memorandum dated 16 August 2005 for being contrary to extant policy?

HELD: Decision of the Court of Appeals is sustained.

LABOR LAW: non-diminution rule

Article 100 of the Labor Code provides for the Non-Diminution Rule. This rule
prohibits the employers from eliminating or reducing the benefits received by
their employees. It applies only if the benefit is based on an express policy, a
written contract, or has ripened into a practice. To be considered a practice, it
must be consistently and deliberately made by the employer over a long period of
time. However, this rule admits of an exception and that is when the practice is
due to error in the construction or application of a doubtful or difficult question
of law. The error, however, must be corrected immediately after its discovery;
otherwise, the rule on Non-Diminution of Benefits would still apply.

In the case at bar, respondent presented substantial evidence in the form of

affidavits supporting its claim that there are two retirement plans. As gleaned
from the affidavits, petitioner has been giving two retirement benefits as early as
1997. Petitioner failed to present any evidence to refute the veracity of said
affidavits. Moreover, no evidence was shown to prove petitioner contention that
there is only one retirement plan as the CBA Retirement Plan and the PERAA
Plan are one and the same.

LABOR LAW: collective bargaining agreement cannot be unilaterally changed

The Memorandum dated August 16, 2005 imposes a limitation not agreed upon
by the parties nor stated in the CBA. Hence, it must be struck down.
It is provided in Sections 1 and 2 of Article XII of the CBA that all covered
employees are entitled to 15 days sick leave and 15 days vacation leave with pay
every year and that after the second year of service, all unused vacation leave
shall be converted to cash and paid to the employee at the end of each school
year, not later than August 30 of each year. Whereas, it is provided in the
Memorandum dated August 16, 2005 that vacation and sick leave credits are not
automatic as leave credits would be earned on a month-to-month basis. The said
Memorandum, therefore, limits the available leave credits of an employee at the
start of the school year.

Basic is the rule that when the provisions of the CBA is clear, the literal meaning
of the stipulation shall govern. Any doubt in its interpretation must be resolved in
favor of labor.

The present petition for review is DENIED

National Sugar Refineries Corp v. NLRC
Chester Cabalza recommends his visitors to please read the original & full text of the case cited. Xie xie!

G.R. No. 101761 March 24, 1993

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.

Facts:

Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned and controlled
by the Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and Batangas. Private respondent
union represents the former supervisors of the NASUREFCO Batangas Sugar Refinery.

In 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees, from rank-and-file to
department heads. We glean from the records that for about ten years prior to the JE Program, the members of
respondent union were treated in the same manner as rank-and file employees. As such, they used to be paid
overtime, rest day and holiday pay pursuant to the provisions of Articles 87, 93 and 94 of the Labor Code as
amended.

With the implementation of the JE Program, members of respondent union were re-classified under levels S-5 to S-8
which are considered managerial staff for purposes of compensation and benefits.

In May 1990, petitioner NASUREFCO recognized herein respondent union, which was organized pursuant to
Republic Act NO. 6715 allowing supervisory employees to form their own unions, as the bargaining representative of
all the supervisory employees at the NASUREFCO Batangas Sugar Refinery.

In June 1990, the members of herein respondent union filed a complainant with the executive labor arbiter for non-
payment of overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor Code.

In 1991, Executive Labor Arbiter Pido directed NASUREFCO to pay for the wages complained of.

On appeal, in a decision promulgated on July 1991, respondent National Labor Relations Commission (NLRC)
affirmed the decision of the labor arbiter on the ground that the members of respondent union are not managerial
employees, and, therefore, they are entitled to overtime, rest day and holiday pay. Respondent NLRC declared that
these supervisory employees are merely exercising recommendatory powers subject to the evaluation, review and
final action by their department heads.

Issue:

W/N the Supervisors are considered Managerial Employees and should no longer receive overtime, rest day and
holiday pay.

Ruling:

Yes

Ratio:

"Art. 82 Coverage. — The provisions of this title shall apply to employees in all establishments and undertakings
whether for profit or not, but not to government employees, managerial employees, field personnel, members of the
family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of
another, and workers who are paid by results as determined by the Secretary of Labor in Appropriate regulations.

"As used herein, 'managerial employees' refer to those whose primary duty consists of the management of the
establishment in which they are employed or of a department or subdivision thereof, and to other officers or members
of the managerial staff." (Emphasis supplied.)
It is the submission of petitioner that while the members of respondent union, as supervisors,
may not be occupying managerial positions, they are clearly officers or members of the
managerial staff because they meet all the conditions prescribed by law and, hence, they are not
entitled to overtime, rest day.

Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits which attach
and pertain exclusively to their positions. Entitlement to the benefits provided for by law requires prior compliance
with the conditions set forth therein. With the promotion of the members of respondent union, they occupied positions
which no longer met the requirements imposed by law. Their assumption of these positions removed them from the
coverage of the law, ergo, their exemption therefrom.

As correctly pointed out by petitioner, if the union members really wanted to continue receiving the benefits which
attach to their former positions, there was nothing to prevent them from refusing to accept their promotions and their
corresponding benefits. As the saying goes by, they could not, as a simple matter of law and fairness, get the best of
both worlds at the expense of NASUREFCO.

Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of management,

provided it is done in good faith. In the case at bar, private respondent union has miserably failed to convince this
Court that the petitioner acted implementing the JE Program. There is no showing that the JE Program was intended
to circumvent the law and deprive the members of respondent union of the benefits they used to receive.
G.R. No. 149434             June 3, 2004

PHILIPPINE APPLIANCE CORPORATION (PHILACOR), petitioner,

vs.
THE COURT OF APPEALS, THE HONORABLE SECRETARY OF LABOR BIENVENIDO E.
LAGUESMA and UNITED PHILACOR WORKERS UNION-NAFLU, respondents.

DECISION

YNARES-SANTIAGO, J.:

Before us is an appeal by certiorari under Rule 45 of the Rules of Court which seeks to set aside the
decision1 of the Court of Appeals in CA-G.R. SP No. 59011, denying due course to petitioner
Philippine Appliance Corporation’s partial appeal, as well as the Resolution 2 of the same court, dated
August 10, 2001, denying the motion for reconsideration.

Petitioner is a domestic corporation engaged in the business of

manufacturing refrigerators, freezers and washing machines. Respondent
United Philacor Workers Union-NAFLU is the duly elected collective
bargaining representative of the rank-and-file employees of petitioner. During the
collective bargaining negotiations between petitioner and respondent union in 1997 (for the last two
years of the collective bargaining agreement covering the period of July 1, 1997 to August 31, 1999),
petitioner offered the amount of four thousand pesos (P4,000.00) to each
employee as an "early conclusion bonus". Petitioner claims that this bonus was promised
as a unilateral incentive for the speeding up of negotiations between the parties and to encourage
respondent union to exert their best efforts to conclude a CBA. Upon conclusion of the CBA
negotiations, petitioner accordingly gave this early signing bonus. 3

In view of the expiration of this CBA, respondent union sent notice to petitioner of its desire to
negotiate a new CBA. Petitioner and respondent union began their negotiations. On October 22,
1999, after eleven meetings, respondent union expressed dissatisfaction at the outcome of the
negotiations and declared a deadlock. A few days later, on October 26, 1999, respondent union filed
a Notice of Strike with the National Conciliation and Mediation Board (NCMB), Region IV in
Calamba, Laguna, due to the bargaining deadlock.4

A conciliation and mediation conference was held on October 30, 1999 at the NCMB in Imus, Cavite,
before Conciliator Jose L. Velasco. The conciliation meetings started with eighteen unresolved items
between petitioner and respondent union. At the meeting on November 20, 1999, respondent union
accepted petitioner’s proposals on fourteen items, 5 leaving the following items unresolved: wages,
rice subsidy, signing, and retroactive bonus. 6

Petitioner and respondent union failed to arrive at an agreement concerning these four remaining
items. On January 18, 2000, respondent union went on strike at the petitioner’s plant at Barangay
Maunong, Calamba, Laguna and at its washing plant at Parañaque, Metro Manila. The strike lasted
for eleven days and resulted in the stoppage of manufacturing operations as well as losses for
petitioner, which constrained it to file a petition before the Department of Labor and Employment
(DOLE). Labor Secretary Bienvenido Laguesma assumed jurisdiction over the dispute and, on
January 28, 2000, ordered the striking workers to return to work within twenty-four hours from notice
and directed petitioner to accept back the said employees. 7

On April 14, 2000, Secretary Laguesma issued the following Order: 8

 In view of the foregoing, we fix the wage increases at P30 per day for the first year and P25
for the second year.

The rice subsidy and retroactive pay base are maintained at their existing levels and rates.

Finally, this Office rules in favor of Company’s proposal on signing bonus. We believe that a
P3,000 bonus is fair and reasonable under the circumstances.

WHEREFORE, premises considered, Philippine Appliance Corporation and United Philacor

Workers Union-NAFLU are hereby directed to conclude a Collective Bargaining Agreement
for the period July 1, 1999 to June 30, 2001. The agreement is to incorporate the disposition
set forth above and includes other items already agreed upon in the course of negotiation
and conciliation.

SO ORDERED. (Emphasis supplied)

On April 27, 2000, petitioner filed a Partial Motion for Reconsideration 9 stating that while it accepted
the decision of Secretary Laguesma, it took exception to the award of the signing bonus. Petitioner
argued that the award of the signing bonus was patently erroneous since it was not part of the
employees’ salaries or benefits or of the collective bargaining agreement. It is not demandable or
enforceable since it is in the nature of an incentive. As no CBA was concluded through the mutual
efforts of the parties, the purpose for the signing bonus was not served. On May 22, 2000, Secretary
Laguesma issued an Order10 denying petitioner’s motion. He ruled that while the bargaining
negotiations might have failed and the signing of the agreement was delayed, this cannot be
attributed solely to respondent union. Moreover, the Secretary noted that the signing bonus was
granted in the previous CBA.

On June 2, 2000, petitioner filed a Petition for Certiorari with the Court of Appeals docketed as CA-
G.R. SP No. 59011 which was dismissed. The Labor Secretary’s award of the signing bonus was
affirmed since petitioner itself offered the same as an incentive to expedite the CBA negotiations.
This offer was not withdrawn and was still outstanding when the dispute reached the DOLE. As
such, petitioner can no longer adopt a contrary stand and dispute its own offer.

Petitioner filed a Motion for Reconsideration but the same was denied. Hence this petition for review
raising a lone issue, to wit:

THE HONORABLE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE

OF DISCRETION WHEN IT RENDERED A DECISION NOT IN ACCORD WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT, SPECIFICALLY THE CALTEX
DOCTRINE OF 1997.

The petition is meritorious.

Petitioner invokes the doctrine laid down in the case of Caltex v. Brillantes,11 where it was held that
the award of the signing bonus by the Secretary of Labor was erroneous. The said case involved
similar facts concerning the CBA negotiations between Caltex (Philippines), Inc. and the Caltex
Refinery Employees Association (CREA). Upon referral of the dispute to the DOLE, then Labor
Secretary Brillantes ruled, inter alia:

Fifth, specifically on the issue of whether the signing bonus is covered under the
"maintenance of existing benefits" clause, we find that a clarification is indeed imperative.
 Despite the expressed provision for a signing bonus in the previous CBA, we uphold the
principle that the award for a signing bonus should partake the nature of an incentive and
premium for peaceful negotiations and amicable resolution of disputes which apparently are
not present in the instant case. Thus, we are constrained to rule that the award of signing
bonus is not covered by the "maintenance of existing benefits" clause.

On appeal to this Court, it was held:

Although proposed by [CREA], the signing bonus was not accepted by [Caltex Philippines,
Inc.]. Besides, a signing bonus is not a benefit which may be demanded under the law.
Rather, it is now claimed by petitioner under the principle of "maintenance of existing
benefits" of the old CBA. However, as clearly explained by [Caltex], a signing bonus may not
be demanded as a matter of right. If it is not agreed upon by the parties or unilaterally offered
as an additional incentive by [Caltex], the condition for awarding it must be duly satisfied. In
the present case, the condition sine qua non for its grant—a non-strike— was not complied
with.

In the case at bar, two things militate against the grant of the signing bonus: first, the non-fulfillment
of the condition for which it was offered, i.e., the speedy and amicable conclusion of the CBA
negotiations; and second, the failure of respondent union to prove that the grant of the said bonus is
a long established tradition or a "regular practice" on the part of petitioner. Petitioner admits, and
respondent union does not dispute, that it offered an "early conclusion bonus" or an incentive for a
swift finish to the CBA negotiations. The offer was first made during the 1997 CBA negotiations and
then again at the start of the 1999 negotiations. The bonus offered is consistent with the very
concept of a signing bonus.

In the case of MERALCO v. The Honorable Secretary of Labor,12 we stated that the signing bonus is
a grant motivated by the goodwill generated when a CBA is successfully negotiated and signed
between the employer and the union. In that case, we sustained the argument of the Solicitor
General, viz:

When negotiations for the last two years of the 1992-1997 CBA broke down and the parties
sought the assistance of the NCMB, but which failed to reconcile their differences, and when
petitioner MERALCO bluntly invoked the jurisdiction of the Secretary of Labor in the
resolution of the labor dispute, whatever goodwill existed between petitioner MERALCO and
respondent union disappeared. . . .

Verily, a signing bonus is justified by and is the consideration paid for the goodwill that
existed in the negotiations that culminated in the signing of a CBA.13

In the case at bar, the CBA negotiation between petitioner and respondent union failed
notwithstanding the intervention of the NCMB. Respondent union went on strike for eleven days and
blocked the ingress to and egress from petitioner’s two work plants. The labor dispute had to be
referred to the Secretary of Labor and Employment because neither of the parties was willing to
compromise their respective positions regarding the four remaining items which stood unresolved.
While we do not fault any one party for the failure of the negotiations, it is apparent that there was no
more goodwill between the parties and that the CBA was clearly not signed through their mutual
efforts alone. Hence, the payment of the signing bonus is no longer justified and to order such
payment would be unfair and unreasonable for petitioner.

Furthermore, we have consistently ruled that a bonus is not a demandable and enforceable
obligation.14 True, it may nevertheless be granted on equitable considerations as when the giving of
such bonus has been the company’s long and regular practice. 15 To be considered a "regular
practice," however, the giving of the bonus should have been done over a long
period of time, and must be shown to have been consistent and
deliberate.  The test or rationale of this rule on long practice requires an indubitable showing that
16

the employer agreed to continue giving the benefits knowing fully well that said employees are not
covered by the law requiring payment thereof.17 Respondent does not contest the fact that petitioner
initially offered a signing bonus only during the previous CBA negotiation. Previous to that, there is
no evidence on record that petitioner ever offered the same or that the parties included a signing
bonus among the items to be resolved in the CBA negotiation. Hence, the giving of such bonus
cannot be deemed as an established practice considering that the same was given only once, that
is, during the 1997 CBA negotiation.

WHEREFORE, premises considered, the instant petition is GRANTED. The decision of the Court of
Appeals in CA-G.R. SP No. 59011 affirming the Order of the Secretary of Labor and Employment,
directing petitioner Philippine Appliance Corporation to pay each of its employees a signing bonus in
the amount of Three Thousand Pesos (P3,000.00), is hereby REVERSED and SET ASIDE. No
pronouncement as to costs.

SO ORDERED.
CASE DIGEST: SUPREME STEEL CORPORATION v. NAGKAKAISANG
MANGGAGAWA NG SUPREME INDEPENDENT UNION (NMS-IND-
APL). (G.R. No. 185556; March 28, 2011).

FACTS: On July 27, 2005, respondent filed a notice of strike with the National
Conciliation and Mediation Board (NCMB) on the ground that petitioner violated
certain provisions of the CBA. The parties failed to settle their dispute.
Consequently, the Secretary of Labor certified the case to the NLRC for
compulsory arbitration pursuant to Article 263(g) of the Labor Code.

Respondent alleged eleven CBA violations, enumerated as follows: (1) denial to

four employees of the CBA- provided wage increase, (2) contracting-out labor, (3)
failure to provide shuttle service, (4) refusal to answer for medical expenses
incurred by three employees, (5) failure to comply with time-off provision, (6)
visitors free access to company premises, (7) failure to comply with reporting
time-off provision, (8) dismissal of an employee supposedly due to disease, (9)
denial of paternity leave benefit to two employees, (10) discrimination and
harassment, and (11) non-implementation of COLA in Wage Order Nos. RBIII-10
and 11.

Out of the eleven issues raised by respondent, eight were decided in its favor; two
(denial of paternity leave benefit and discrimination of union members) were
decided in favor of petitioner; while the issue on visitors free access to company
premises was deemed settled during the mandatory conference. Petitioners
appeal to the CA was dismissed.

According to the CA, petitioner failed to show that the NLRC committed grave
abuse of discretion in finding that it violated certain provisions of the CBA. With
regard to wage increase, The CA concluded that, based on the wording of the
CBA, which uses the words "general increase" and "over and above," it
cannot be said that the parties have intended the anniversary increase to be
given in lieu of the CBA wage increase. The CA declared that the
withdrawal of the COLA under Wage Order No. RBIII-10
from the employees who were not minimum wage earners
amounted to a diminution of benefits because such grant
has already ripened into a company practice. Based on the
principle of liberal construction of the CBA, the CA likewise sustained the NLRCs
rulings on the issues pertaining to medical expenses, the shuttle service, time-off
for attendance in grievance meetings/hearings, and time-off due to brownouts.
Finally, the CA affirmed the NLRCs finding that Madayags dismissal was illegal.
It emphasized that the burden to prove that the employees disease is of
such nature or at such stage that it cannot be cured within a period of six
months rests on the employer, who failed to prove such.

ISSUE: Did the CA err in affirming the NLRC?

HELD: It is a familiar and fundamental doctrine in labor law that the CBA is the
law between the parties and compliance therewith is mandated by the express
policy of the law. If the terms of aCBA are clear and there is no doubt as to the
intention of the contracting parties, the literal meaning of its stipulation shall
prevail. Moreover, the CBA must be construed liberally rather than
narrowly and technically and the Court must place a practical and realistic
construction upon it. Any doubt in the interpretation of any law or provision
affecting labor should be resolved in favor of labor. Upon these well-established
precepts, the CAs findings and conclusions on all the issues are sustained, except
the issue pertaining to the denial of the COLA under Wage Order No. RBIII-10
and 11 to the employees who are not minimum wage earners, which respondent
avers as a diminution of benefits.

Diminution of benefits is the unilateral withdrawal by the employer of benefits

already enjoyed by the employees. There is diminution of benefits when it is
shown that:

[1] the grant or benefit is founded on a policy or has ripened into a

practice over a long period of time;
[2] the practice is consistent and deliberate;
[3] the practice is not due to error in the construction or application
of a doubtful or difficult question of law; and
[4] the diminution or discontinuance is done unilaterally by the
employer.

The implementation of the COLA under Wage Order No. RBIII-10 across the
board, which only lasted for less than a year, cannot be considered as having been
practiced "over a long period of time." While it is true that jurisprudence has not
laid down any rule requiring a specific minimum number of years in order for a
practice to be considered as a voluntary act of the employer, under existing
jurisprudence on this matter, an act carried out within less than a year would
certainly not qualify as such. Hence, the withdrawal of the COLA Wage Order No.
RBIII-10 from the salaries of non-minimum wage earners did not amount to a
"diminution of benefits" under the law. PARTIALLY GRANTED.
CENTRAL AZUCARERA DE TARLAC, Petitioner, vs CENTRAL
AZUCARERA DE TARLAC LABOR UNION-NLU, Respondent.  G.R.
No. 188949   July 26, 2010

FACTS:

       Petitioner is a domestic corporation engaged in the business of sugar

manufacturing, while respondent is a legitimate labor organization which serves as the
exclusive bargaining representative of petitioner’s rank-and-file employees. The
controversy stems from the interpretation of the term “basic pay,” essential in the
computation of the 13th-month pay.
        In compliance with P.D. No. 851, petitioner granted its employees the mandatory
13th – month pay since 1975. The formula used by petitioner in computing it
was: Total Basic Annual Salary divided by 12.  Included in petitioner’s computation
of the Total Basic Annual Salary were the following: basic monthly salary; first 8
hours overtime pay on Sunday and legal/special holiday; night premium pay; and
vacation and sick leaves for each year. Throughout the years, petitioner used this
computation until 2006.
On November 6, 2004, respondent staged a strike. During the strike, petitioner
declared a temporary cessation of operations. December 2005, all the striking union
members were allowed to return to work. Subsequently, petitioner declared another
temporary cessation of operations for the months of April and May 2006. The
suspension of operation was lifted on June 2006, but the rank-and-file employees
were allowed to report for work on a 15 day-per-month rotation basis that lasted until
September 2006. December 2006, petitioner gave the employees their 13th-
month pay based on the employee’s total earnings during the year divided by
12.
Respondent objected to this computation. It argued that petitioner did not adhere to
the usual computation of the 13th-month pay.  It claimed that the divisor should have
been eight (8) instead of 12, because the employees worked for only 8
months in 2006. It also asserted that petitioner did not observe the company practice
of giving its employees the guaranteed amount equivalent to their 1 month pay, in
instances where the computed 13th-month pay was less than their basic monthly pay.
Petitioner explained that the change in the computation of the 13th-month pay was
intended to rectify an error in the computation, particularly the concept of basic pay
which should have included only the basic monthly pay of the employees.
Respondent filed a complaint against petitioner for money claims based on the alleged
diminution of benefits/erroneous computation of 13th-month pay before the Regional
Arbitration Branch of the NLRC. LA favored petitioner. Respondents filed an appeal.
NLRC reversed LA’s decision. Petitioner filed MR which was denied. It went to CA
but it affirmed NLRC’s decision. Hence this petition.
ISSUE:

Whether the new computation of the 13th month pay will result in diminution of
benefits of respondents
RULING:

Yes. The 13th-month pay represents an additional income based on wage but not part
of the wage.  It is equivalent to 1/12 of the total basic salary earned by an employee
within a calendar year. All rank-and-file employees, regardless of their designation or
employment status and irrespective of the method by which their wages are paid, are
entitled to this benefit, provided that they have worked for at least 1 month during the
calendar year. If the employee worked for only a portion of the year, the 13th-month
pay is computed pro rata.
The Rules and Regulations Implementing P.D. No. 851 defines 13th-month pay as
“1/12 of the basic salary of an employee within a calendar year “ and basic salary as
“shall include all remunerations or earnings paid by an employer to an employee for
services rendered but may not include cost-of-living allowances granted pursuant to
PD. 525 or Letter of Instructions No. 174, profit-sharing payments, and all
allowances and monetary benefits which are not considered or integrated as part of
the regular or basic salary of the employee at the time of the promulgation of the
Decree on December 16, 1975.”
         Supplementary Rules of  P.D. No. 851 also clarified that overtime pay, earnings,
and other remuneration that are not part of the basic salary shall not be included in the
computation of the 13th-month pay.
         A Revised Guidelines on the Implementation of the 13th-Month Pay Law was
also issued. It was specifically stated that the minimum 13th-month pay required by
law shall not be less than one-twelfth 1/12 of the total basic salary earned by an
employee within a calendar year.
The salary-related benefits should be included as part of the basic salary in the
computation of the 13th-month pay if, by individual or collective agreement, company
practice or policy, the same are treated as part of the basic salary of the employees.
The practice of petitioner in giving 13th-month pay based on the employees’ gross
annual earnings which included the basic monthly salary, premium pay for work on
rest days and special holidays, night shift differential pay and holiday pay continued
for almost 30 years and has ripened into a company policy or practice which cannot
be unilaterally withdrawn.
Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule,
mandates that benefits given to employees cannot be taken back or reduced
unilaterally by the employer because the benefit has become part of the employment
contract, written or unwritten. The rule against diminution of benefits applies if it is
shown that the grant of the benefit is based on an express policy or has ripened into a
practice over a long period of time and that the practice is consistent and deliberate.
Nevertheless, the rule will not apply if the practice is due to error in the construction
or application of a doubtful or difficult question of law. But even in cases of error, it
should be shown that the correction is done soon after discovery of the error.
The argument of petitioner that the grant of the benefit was not voluntary and was due
to error in the interpretation of what is included in the basic salary deserves scant
consideration. No doubtful or difficult question of law is involved in this case. The
guidelines set by the law are not difficult to decipher. The voluntariness of the grant of
the benefit was manifested by the number of years the employer had paid the benefit
to its employees. Petitioner only changed the formula in the computation of the 13th-
month pay after almost 30 years and only after the dispute between the management
and employees erupted. This act of petitioner in changing the formula at this time
cannot be sanctioned, as it indicates bad faith.  
WHEREFORE, the Decision and Resolution of CA are AFFIRMED.
G.R. No. 152456 Case Digest
G.R. No. 152456, April 28, 2004
Sevilla Trading Companny, petitioner,
vs AVA Tomas Semana, Sevilla Trading Workers Union-Super,
respondents.
Ponente: Puno

Facts:
This is an appeal in the decision of Court of Appeals sustaining
the decision of Semana denying the petitioner's motion for
reconsideration.

2 to 3 years prior to 1999, Company engaged in trading business,

organized an added base figure in the computation of the 13th month
pay of its employees. 

Petitioner claimed that it entrusted the preparation of the payroll

to its office staff, including the computation and payment of the
13th month pay and other benefits. Later, after changing the
payroll officer, they discovered an error of including non-
basic and other benefits in the base figure, petitioner
then effected the computation of the 13th month pay, as
follows:

Hence the new computation reduced the 13th month pay. The union
then contested the  new computation. Parties failed to resolve the
issue, so they submitted it to Semana, the Accredited Voluntary
Arbitrator for consideration and resolution.

The Union alleged that petitioner violated the rule prohibiting the
elimination or diminution of employees’ benefits as provided for in
Art. 100 of the Labor Code, as amended. They claimed that paid
leaves, like sick leave, vacation leave, paternity leave, union
leave, bereavement leave, holiday pay and other leaves with pay in
the CBA should be included in the base figure in the computation of
their 13th-month pay.
On the other hand, petitioner insisted that the computation of the
13th-month pay is based on basic salary, excluding benefits such as
leaves with pay, as per P.D. No. 851, as amended. It maintained
that, in adjusting its computation of the 13th-month pay, it merely
rectified the mistake its personnel committed in the previous
years.
A.V.A. Semana decided in favor of the Union. Hence, this appeal.

Issues: (1) revert of the company's computation is without legal

basis (2) correcting errors in computation by companies will not
cause grave and irreparable damage to employers.

Ruling: 
We uphold the Court of Appeals in ruling that the proper remedy
from the adverse decision of the arbitrator is a petition for
review under Rule 43 of the 1997 Rules of Civil Procedure, not a
petition for certiorari under Rule 65. Section 1 of Rule 43 

It is elementary that the special civil action of certiorari under

Rule 65 is not, and cannot be a substitute for an appeal, where the
latter remedy is available, as it was in this case. Petitioner
Sevilla Trading failed to file an appeal within the fifteen-day
reglementary period from its notice of the adverse decision of
A.V.A. Semana. It received a copy of the decision of A.V.A. Semana
on December 20, 2000, and should have filed its appeal under Rule
43 of the 1997 Rules of Civil Procedure on or before January 4,
2001. 

Thus, the decision of A.V.A. Semana had become final and executory
when petitioner Sevilla Trading filed its petition for certiorari
on February 19, 2001. More particularly, the decision of A.V.A.
Semana became final and executory upon the lapse of the fifteen-day
reglementary period to appeal, or on January 5, 2001. Hence, the
Court of Appeals is correct in holding that it no longer had
appellate jurisdiction to alter, or much less, nullify the decision
of A.V.A. Semana.
In the light of the clear ruling of this Court, there is, thus no
reason for any mistake in the construction or application of the
law. When petitioner Sevilla Trading still included over
the years non-basic benefits of its employees, such as
maternity leave pay, cash equivalent of unused vacation
and sick leave, among others in the computation of the
13th-month pay, this may only be construed as a voluntary
act on its part. Putting the blame on the petitioner’s
payroll personnel is inexcusable.

A company practice favorable to the employees had indeed been

established and the payments made pursuant thereto, ripened into
benefits enjoyed by them. And any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished,
discontinued or eliminated by the employer, by virtue of Sec. 10 of
the Rules and Regulations Implementing P.D. No. 851, and Art. 100
of the Labor Code of the Philippines which prohibit the diminution
or elimination by the employer of the employees’ existing
benefits. 

With regard to the length of time the company practice should have
been exercised to constitute voluntary employer practice which
cannot be unilaterally withdrawn by the employer, we hold that
jurisprudence has not laid down any rule requiring a specific
minimum number of years. 
CONCEPCION, JR., J.:

Petition for certiorari and prohibition, with preliminary injunction and/or restraining order, to annul and
set aside the order of the respondent Deputy Minister of Labor which modified and affirmed the order
of Director of the National Capitol Region of the Ministry of Labor directing the petitioners to
pay the private respondents their legal holiday pay, service incentive pay, and
differentials in their emergency cost of living allowances.
The petitioner, Reynaldo Tiangco, is a fishing operator who owns the Reynaldo Tiangco Fishing
Company and a fleet of fishing vessels engaged in deep-sea fishing which operates from Navotas,
Rizal. His business is capitalized at P2,000,000.00,   while the petitioner, Victoria Tiangco, is a fish
1

broker whose business is capitalized at P100,000.00. 2

The private respondents, Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham Gilbuena,
Rustom Ofqueria, Ernesto Diong, Jesus Gilbuena, Clemente (Emerenciano) Villaruel, Dominador
Lacerna, and Graciano Durana, are batillos engaged by the petitioner Reynaldo Tiangco to unload
the fish catch from the vessels and take them to the Fish Stall of the petitioner Victoria Tiangco. The
private respondents, Eddie Batobalanos, Aguedo Marabe, Gregorio Laylay, Fruto Gihapon, Solomon
Clarin, Pepito Batoy, Jose Ofqueria, Daniel Cabrera, Juan Castro, Alcafone Esgana, Tomas
Capalar, Antonio Gilbuena, Ernesto Batoy, Serafio Yadawon, Juan Gihapon, Elias Escaran and
Roberto Bayon-on, were batillos engaged by Victoria Tiangco.   The work of these3

batillos were limited to days of arrival of the fishing vessels and their working days in a
month are comparatively few. Their working hours average four (4) hours a day.

On April 8, 1980, the private respondents filed a complaint against the petitioners with the Ministry of
Labor and Employment for non-payment of their legal holiday pay and service incentive leave pay,
as well as underpayment of their emergency cost of living allowances which used to be paid in full
irrespective of their working days, but which were reduced effective February,
1980, in contravention of Article 100 of the new Labor Code which prohibits the elimination or
diminution of existing benefits. 
4

The petitioners denied the laborers' contention, claiming that the laborers were all given, in addition
to their regular daily wage, a daily extra pay in amounts ranging from 30 centavos to 10 pesos
which are sufficient to offset the laborers' claim for service incentive leave and
legal holiday pay. As regards the claim for emergency allowance differentials, the petitioners
admitted that they discontinued their practice of paying their employees a fixed monthly allowance,
and effective February, 1980, they no longer paid allowances for non-working days. They argued,
however, that no law was violated as their refusal to pay allowances for non-working days is in
consonance with the principle of "no work, no allowance"; and that they could not pay
private respondents a fixed monthly allowance without risking the viability of their business.  5
Resolving the case, the Director of the National Capitol Region of the Ministry of Labor and
Employment ruled that the daily extra pay given to private respondents was a ,'production incentive
benefit", separate and distinct from the service incentive leave pay and legal holiday pay, payment of
which cannot be used to offset a benefit provided by law, and ordered the petitioners to pay the
private respondents their service incentive leave pay and legal holiday pay. However, he denied the
laborers' claim for differentials in the emergency cost of living allowance for the reason that the
emergency cost of living allowance accrues only when the laborers actually work following the
principle of "no work, no pay," and private respondents are not entitled to a fixed monthly
allowance since they work on a part time basis which average only four (4) days a week. The private
respondents should not be paid their allowances during non-working days.  6

From this order, both parties appealed.

On May 22, 1981, the respondent Deputy Minister of Labor and Employment modified the order and
directed the petitioners to restore and pay the individual respondents their fixed monthly allowance
from March, 1980 and to pay them the amount of P58,860.00, as underpayment of their living
allowance from May, 1977 to February 21, 1980.  7

When their motion for the reconsideration of the above order was denied, the petitioners interposed
the present recourse.

The petitioners claim that the respondent Deputy Minister of Labor and
Employment acted in excess of jurisdiction, or with grave abuse of discretion
in ordering them to pay the private respondents a fixed monthly allowance
from March, 1980, despite the "no work, no pay," law; the private respondents' consent
to receive an allowance for days worked for, as stated in their appeal; and the findings of the
Director of the National Capitol Region that private respondents work for other employers and are
part-time employees of the petitioners.

Indeed, the record shows that the private respondents work for the petitioners on a part-time basis
and their work average only four (4) days a week. It is not also disputed that the private respondents
work for more than one employer so that the private respondents should be paid their living
allowance only for the days they actually worked in a week or month and all the employers of the
employee shall share proportionately in the payment of the allowance of the employee. Section 12 of
the Rules and Regulations implementing P.D. 525 which made mandatory the payment of
emergency cost of living allowances to workers in the private section, provides, as follows:

Section 12. Allowance on Daily Paid & Part — Time employees. — Employees who
are paid on a daily basis shall be paid their allowances for the number of days they
actually worked in a week or month, on the basis of the scales provided in Section 7
hereof.

In case of part-time employment, the allowances shall be paid in the amount

proportionate to the time worked by the employee, or higher. If employed by more
than one employer, all employers of such employee shall share proportionately in the
payment of the allowance of the employee.

Section 11 of the Rules implementing P.D. 1123, increasing the emergency

allowance under P.D. 525, also provides, as follows:
 Section 11. Allowances of full-time and part-time employees. — Employees shall be
paid in full the monthly allowances on the basis of the scales provided in Section 3
hereof, regardless of the number of their regular working days, if they incur no
absence during the month. If they incur absences, the amounts corresponding to
their absences may be deducted from the monthly allowance.

In case of part-time employment, the allowance to be paid shall be proportionate to

the time worked by the employee. This requirement shall apply to any employee with
more than one employer.

However, the respondent Deputy Minister of Labor and Employment correctly ruled that since the
petitioners had been paying the private respondents a fixed monthly emergency
allowance since November, 1976 up to February, 1980 , as a matter of practice and/or
verbal agreement between the petitioners and the private respondents, the discontinuance of
the practice and/or agreement unilaterally by the petitioners contravened the
provisions of the Labor Code, particularly Article 100 thereof which prohibits
the elimination or diminution of existing benefits.

Section 15 of the Rules on P.D. 525 and Section 16 of the Rules on P. D. 1123 also prohibits the
diminution of any benefit granted to the employees under existing laws, agreements, and voluntary
employer practice. Section 15 of the Rules on P.D. 525 provides, as follows:

Section 15. Relation to Agreement. — Nothing herein shall prevent the employer and
his employees from entering into any agreement with terms more favorable to the
employees than those provided therein, or be construed to sanction the diminution of
any benefit granted to the employees under existing laws, agreements, and voluntary
employer practice.

Section 16 of the Rules on P.D. 1123 similarly prohibits diminution of benefits. It

provides, as follows:

Section 16. Relation to other agreements. — Nothing herein shall prevent employers

from granting allowances to their employees in excess of those provided under the
Decree and the Rules nor shall it be construed to countenance any reduction of
benefits already being enjoyed.

The petitioners further claim that the respondent Deputy Minister of Labor and Employment erred in
ordering them to pay the amount of P58,860.00 to the private respondents as underpayment of
respondents' allowances from May, 1977 to February 20, 1980. The petitioners contend that the
emergency cost of living allowances of the private respondents had been paid in full.

We find no merit in the contention. However, a revision of the amount due the private
respondents is in order for the reason that the respondent Deputy Minister of Labor and Employment
failed to take into consideration, in computing the amount due each worker, the fact that the private
respondents are employed by two different individuals whose businesses are divergent and
capitalized at various amounts, contrary to the provisions of P.D. 525 and subsequent amendatory
decrees, wherein the amount of the emergency cost of living allowance to be paid to a worker is
made to depend upon the capitalization of the business of his employer or its total assets, whichever
is higher. Thus, Section 7 of the Rules and Regulations implementing P.D. 525 reads, as follows:
 Section 7. Amount of Allowances. — Every covered employer shall give to each of
his employees who is receiving less than P600.00 a month not less than the
following allowances;

(a) P50.00 where the authorized capital stock or total assets, whichever is applicable
and higher, is 71 million or more;

(b) P30.00 where the authorized capital stock or total assets, whichever is applicable
and higher is at least P100,000.00 but less than P 1miilion and

(c) P15.00 where the authorized capital stock or total assets, whichever is applicable
and higher, is less than P100,000.00.

Nothing herein shall prevent employers from granting allowances to their employees
who will receive more than P600.00 a month, including the allowances. An employer,
however, may grant his employees an allowance which if added to their monthly
salary, will not yield to them more than P600.00 a month.

In this case, the private respondents admit that only ten (10) of them, namely: Aurelio Ilustrisimo,
Pepito Gilbuena, Rogelio Carabio, Abraham Gilbuena, Rustom Ofquiera, Ernesto Diong, Jesus
Gilbuena, Emerenciano Villaruel, Dominador Lacerna, and Graciano Durana, were employees of the
petitioner Reynaldo Tiangco, while the remaining seventeen (17) were employed by the petitioner
Victoria Tiangco.   Accordingly, the workers of the petitioner Victoria Tiangco, whose business as
8

fish broker is capitalized at P100,000.00,   should receive a lesser amount of allowance (P30.00)
9

than those workers employed by the petitioner Reynaldo Tiangco whose business, as a fishing
operator with a fleet of fishing vessels, is capitalized at more than P2,000,000.00, and are entitled to
receive a fixed monthly allowance of P50.00 a month, each.

After P.D. 525, the following amendatory decrees, directing the payment of additional allowances to
employees, were promulgated:

1. P.D. 1123. providing for an across-the-board increase of P60.00 a month effective

May 1, 1977;

2. P.D. 1614, which directed the payment of P60.00 monthly allowance effective April
1, 1979;

3. P.D. 1634, which provided for the payment of an additional P60.00 a month
effective September 1, 1979, and another P30.00 a month beginning January 1,
1980; and

4. P.D. 1678,which directed the payment of an additional P2.00 a day from February
21, 1980.

Hence, for the period from November, 1976 to April 30, 1977, the petitioner Victoria Tiangco should
pay her workers a fixed monthly allowance of P 30.00, while the workers of the petitioner Reynaldo
Tiangco were entitled to a fixed monthly allowance of P50.00, each. The record shows that during
this period, the petitioner Victoria Tiangco was paying her workers a monthly allowance of P30.00
each.   Accordingly, there was no underpayment for this period insofar as her batillos are concerned.
10

The petitioner Reynaldo Tiangco, however, paid his employees P30.00, instead of P50.00, as
mandated by law.   Therefore, there was an underpayment of P20.00 a month for
11
each batillo under his employ. For the 6-month period, he should pay his workers
differentials in the amount of P120.00 each.

For the period from May, 1977 to March 1979, the workers of the petitioner Victoria Tiangco were
entitled to a fixed monthly allowance of P90.00 in view of the promulgation of P.D. 1123 which
granted an across-the-board increase of P60.00 a month in their allowances. For this period,
however, the said petitioner paid her workers only P60.00 a month, or a difference of P30.00 a
month.   There was, therefore, an underpayment of P690.00 for every batillo under her employ for
12

the 23-month period.

With the addition of P60.00 across-the-board increase in their allowances, the workers of the
petitioner Reynaldo Tiangco were entitled to receive a fixed monthly allowance of P110.00.
However, the record shows that his workers were only paid P60.00 a month,   or a difference of
13

P50.00 a month. Consequently, each batillo hired by him should be paid a differential of P1,150.00

for the 23-month period.

For the period from April, 1979 to August, 1979, the employees of the petitioner Victoria Tiangco
were entitled to a fixed monthly allowance of P150.00 while the workers employed by the petitioner
Reynaldo Tiangco were entitled to an allowance of P170.00, pursuant to P.D. 1614. The record
shows, however, that both petitioners paid their workers only P120.00 a month.   There was a
14

difference of P30.00 a month in the case of the petitioner Victoria Tiangco, and P50.00, a month, in
the case of the petitioner Reynaldo Tiangco. Hence, for this period, the petitioner Victoria Tiangco
should pay the amount of P150.00 to each batillo in her employ, while the petitioner Reynaldo
Tiangco should pay the amount of P250.00, as differentials in the cost of living allowances of the
workers under his employ.

Upon the promulgation of P.D. 1634, directing the payment of an additional P60.00 a month effective
September, 1979 and another P30.00 effective January 1, 1980, the workers of the petitioner
Victoria Tiangco were entitled to receive a fixed monthly allowance of P210.00 a month from
September, 1979, and P340.00, a month beginning January, 1980. The workers of the petitioner
Reynaldo Tiangco, upon the other hand, were entitled to a monthly allowance of P230.00, effective
September, 1979, and P260.00, a month beginning January, 1980. The record shows, however, that
both petitioners paid their workers the amounts of P180.00 a month for the months of September to
December, 1979,   and P210.00 a month for the months of January and February, 1980.   There
15 16

was underpayment, therefore, in the allowances of the workers of the petitioner Victoria Tiangco in
the amount of P30.00, a month, for the months of September, 1979 to February, 1980, or P180.00
for each batillo in her employ. The private respondents hired by the petitioner Reynaldo Tiangco,
upon the other hand, are entitled to differentials in the amount of P50.00 a month for the same
period, or P300.00 each.

Then, beginning February, 21, 1980, the workers should be paid an additional P2.00, a day,
pursuant to P.D. 1678. The record shows that the petitioners had complied with this
requirement.   The petitioners, however, failed to pay the fixed monthly allowance of their workers
17

which was P240.00, in the case of the workers employed by the petitioner Victoria Tiangco, and
P260.00, in the case of the workers of the petitioner Reynaldo Tiangco. Thus, for the month of
March, 1980, the petitioner Victoria Tiangco paid her workers varying amounts, the lowest of which
was P30.00, paid to Eddie Batobalanos and Fruto Gihapon, and the highest of which was P210.00,
paid to Juan Gihapon and Roberto Bayonon.   Hence, there was underpayment in their emergency
18

cost of living allowances. But, since, the respondents employed by Victoria Tiangco are wining to
accept P50.00 a month as differentials for the months of March, 1980 to May, 1980,   the workers
19

employed by her should be paid P50.00, each, for the month of March, 1980, except Juan Gihapon
and Roberto Bayon-on who should be paid P30.00, each, for the said month, having received the
amount of P210.00, each as allowance for that month.

For the month of April, 1980, the workers of the petitioner, Victoria Tiangco, were paid varying
amounts ranging from P120.00 to P210.00.   Hence, there was also underpayment in their
20

allowances. Accordingly, they should be paid the amount of P50.00, each, except for Juan Gihapon,
Antonio Gilbuena, Juan Castro, and Aguedo Marabe, who should be paid P40.00, each, and
Solomon Clarin, Daniel Cabrera, and Gregorio Laylay who should be paid P30.00 each.

For the month of May, 1980, the petitioner Victoria Tiangco, paid her workers varying amounts less
that what was provided for by law.   Hence, they should be paid the amount of P50.00, each, for this
21

month.

The petitioner, Reynaldo Tiangco, also paid the employees varying amounts, ranging from P210.00
to P250.00, as emergency cost of living allowance, for the month of March, 22, 1980.   Since they
22

were entitled to a fixed monthly allowance of P260.00, each, there was underpayment in their cost of
living allowances. Accordingly, the petitioner should pay the respondent Pepito Gilbuena the amount
of P50.00; the respondents Dominador Lacerna and Graciano Durano, the amount of P40.00, each;
the respondent Ernesto Diong, the amount of P30.00; the respondents Rustom Ofqueria and Aurelio
Ilustrisimo, the amount of P20.00, each; and the respondents Abraham Gilbuena, Jesus Gilbuena,
Rogelio Carabio, and Emerenciano Villaruel, the amount of P10.00 each.

For the month of April, 1980, the workers of the petitioner Reynaldo Tiangco, were not also paid their
emergency cost of living allowance in full.   Hence, the said petitioner should pay his workers the
23

amount of P30.00 each, except for Pepito Gilbuena, who should be paid the amount of P50.00, and
Rustom Ofqueria, Jesus Gilbuena, and Graciano Durano, who are entitled to only P40.00 each.

The petitioner, Reynaldo Tiangco did not also pay his workers their full cost of living allowance for
the month of May, 1980. The workers were paid varying amounts of P130.00 to P150.00, instead of
P260.00, as required by law.   Hence, they should be paid the amunt of P50.00 each for the month
24

of May, 1980.

WHEREFORE, the petitioners Victoria Tiangco and Reynaldo Tiangco should be, as they are
hereby, ordered to PAY the private respondents the following amounts as differentials in their
emergency cost of living allowance
Globe-Mackay Cable and Radio Corporation (GMRC), Petitioner
Vs.
National Labor Relations Commission (NLRC) and Imelda Salazar, Respondents

G.R. No. 82511, March 3, 1992

Facts:

Private Respondent, "Imelda Salazar" was employed as general systems analyst of Globe-
Mackay Cable and Radio Corp. (GMRC) While Delfin Saldivar, her close friend, was
employed as technical operations' support manager in May 1982.

Petitioner GMRC investigated Saldivar's activities due to the reports indicating that the
company equipment and spare parts were in custody of Saldivar. The internal audit report
also indicated that Saldivar entered into a partnership with Richard A. Yambao, owner and
manager of Eledon Engineering Services (Elecon), a supplier often recommended by
Saldivar to the petitioner. It also appeared in the course of Maramara's investigation that
Imelda Salazar violated company regulations by involving herself in transactions with
conflict of interest with the company. Evidence showed that she signed as a witness to the
articles of partnership between Yambao and Saldivar, and that she had full knowledge of
the loss and whereabouts of the missing air conditioner but she failed to inform her
employer.

The Company placed Salazar under 1 month preventive suspension, allowing her 30 days
within which to explain her side. However, Salazar instead filed a complaint against
petitioner for illegal suspension, which was later modified to illegal dismissal.

The Labor arbiter ordered the company to reinstate Salazar to her former and equivalent
position and to pay her full back wages and benefits, plus moral damages. National Labor
Relations Commission (NLRC) affirmed the labor arbiter's decision but limited back wages
for only two years and deleted the award of moral damages.

Issue:

Whether or Not the action of dismissal would constitute a violation of Art. 279 of the Labor
Code, which protects the security of tenure of an employee.
Held:

Positive. The Court did not agree on the petitioner's action of suspension and eventual
dismissal of Salazar due to lack of evidence to show that Salazar was involved with the
malicious activities of Saldivar.

The wordings of the Labor Code is clear and unambiguous "An employee who is unjustly
dismissed from work shall be entitled to reinstatement and full back wages." Under the
principle of Statutory Construction, if a statute is clear, plain and free from ambiguity. It must
be given its literal meaning and applied without attempted interpretation. The plain meaning
rule or Verba Legis derived from the maxim "Speech is the index of intention" should be
applied in this case.

Since there is no evidence to show an authorized or legal dismissal, and GMRC only relied
to an internal audit findings, Salazar, according to the Labor Code, is entitled to
reinstatement and full back wages allowed by the Court.
TSPIC CORPORATION v. TSPIC EMPLOYEES UNION, GR No. 163419, 2008-02-13
Facts:
TSPIC is engaged in the business of designing, manufacturing, and marketing integrated
circuits to serve the communication, automotive, data processing, and aerospace industries.
Respondent TSPIC Employees Union (FFW) (Union), on the other hand, is the registered
bargaining... agent of the rank-and-file employees of TSPIC.
. The respondents,... are all members of the Union.
TSPIC and the Union entered into a Collective Bargaining Agreement (CBA)... for the years
2000 to 2004. The CBA included a provision on yearly salary increases starting January
2000 until January 2002.
Consequently,... all the regular rank-and-file employees of TSPIC received a 10% increase
in their salary.
The CBA also provided that employees who acquire regular employment status within the
year but after the effectivity of a particular salary increase shall receive a proportionate part
of the increase upon attainment of their regular status.
h
Then... the Regional Tripartite Wage and Productivity Board, National Capital Region,
issued Wage Order
(WO No. 8) which raised the daily minimum wage from PhP 223.50 to PhP 250
Conformably, the... wages of 17 probationary employees... were increased to PhP 250.00...
during the last quarter of 2000, the above named 17 employees attained regular
employment... and received 25% of 10% of their salaries as granted under the provision on
regularization increase under... the CBA.
In
2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the
nine employees (first group), who were senior to the above-listed recently regularized
employees, received less wages.
a few weeks after the salary increase for the year 2001 became effective, TSPIC's Human
Resources Department notified 24 employees,... that due to an error in the automated
payroll system, they were overpaid and the overpayment would be deducted from
their salaries
The Union, on the other hand, asserted that there was no error and the deduction of
the alleged overpayment from employees constituted diminution of pay.
Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary
issue of whether or not the acts of the management in making deductions from the salaries
of the affected employees constituted diminution of pay.
Arbitrator... rendered a Decision, holding that the unilateral deduction made by TSPIC
violated Art. 100... of the Labor Code.
Aggrieved, TSPIC filed before the CA a petition for review
The appellate court... dismissed the petition
TSPIC failed to convince the appellate court that the deduction... was a result of a system
error in the automated payroll system.
TSPIC filed the instant petition
TSPIC maintains that the formula proposed by the Union, adopted by the arbitrator and
affirmed by the CA, was flawed, inasmuch as it completely disregarded the "crediting
provision" contained in
CBA.
TSPIC also maintains that charging the overpayments made to the 16 respondents through
staggered deductions from their salaries does not constitute diminution of benefits.
Issues:
Does the TSPIC's decision to deduct the alleged overpayment from the salaries of the
affected members of the Union constitute diminution of benefits in violation of the Labor
Code?
Ruling:
We find TSPIC's contention meritorious.
A Collective Bargaining Agreement is the law between the parties... and they are obliged to
comply with its provisions.
Here, TSPIC wants to credit the increase granted by WO No. 8 to the increase granted
under the CBA. According to TSPIC, it is specifically provided in the CBA that "the
salary/wage increase... for the year 2001 shall be deemed inclusive of the mandated
minimum wage increases under future wage orders that may be issued after Wage Order
No. 7." The Union, on the other hand, insists that the "crediting" provision of the CBA finds
no application in the present case, since... at the time WO No. 8 was issued, the
probationary employees (second group) were not yet covered by the CBA, particularly by its
crediting provision.
Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that,
effective January 1, 2001, all employees on regular status and within the bargaining unit on
or before said date shall be granted a salary increase equivalent to twelve (12%) of their
basic... monthly salary as of December 31, 2000. The 12% salary increase is granted to all
employees who (1) are regular employees and (2) are within the bargaining unit.
Second paragraph of (c) provides that the salary increase for the year 2000 shall not
include the increase in salary granted under WO No. 7 and the correction of the wage
distortion for November 1999.
The last paragraph, on the other hand, states the specific condition that the wage/salary
increases for the years 2001 and 2002 shall be deemed inclusive of the mandated minimum
wage increases under future wage orders, that may be issued after WO No. 7, and shall be
considered... as correction of the wage distortions that may be brought about by the said
future wage orders. Thus, the wage/salary increases in 2001 and 2002 shall be deemed as
compliance to future wage orders after WO No. 7.
Respondents should not be allowed to receive benefits from the CBA while avoiding the
counterpart crediting provision. They have received their regularization increases under...
the CBA and the yearly increase for the year 2001. They should not then be allowed to...
avoid the crediting provision which is an accompanying condition.
We agree with TSPIC.
As correctly pointed out by TSPIC, the overpayment of its employees was a result of
an error. This error was immediately rectified by TSPIC upon its discovery. We have
ruled before that an erroneously granted benefit may be withdrawn without violating the
prohibition against... non-diminution of benefits.
Here, no vested right accrued to individual respondents when TSPIC corrected its error by
crediting the salary increase for the year 2001 against the salary increase granted under
WO No. 8, all in accordance with the CBA.
Hence, any amount given to the employees in excess of what they were entitled to, as
computed above, may be legally deducted by TSPIC from the employees' salaries. It
was also compassionate and fair that TSPIC deducted the overpayment in installments over
a period of 12 months... starting from the date of the initial deduction to lessen the burden
on the overpaid employees. TSPIC, in turn, must refund to individual respondents any
amount deducted from their salaries which was in excess of what TSPIC is legally allowed
to deduct from the salaries based on... the computations discussed in this Decision.
As a last word, it should be reiterated that though it is the state's responsibility to afford
protection to labor, this policy should not be used as an instrument to oppress
management and capital.
In resolving disputes between labor and capital,... fairness and justice should always
prevail.
BONIFACIO ANINO, RICARDO NAVARRO, HENRY FILOTEO, DAVID DAUGDAUG, EDGARDO
CEREDON and ALAN BALADYA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HINATUAN MINING CORPORATION and
FEDERICO B. GANIGAN, respondents.

PANGANIBAN, J.:

Were petitioners validly retrenched? In answering this question in the negative, the Court adheres to
the doctrine, laid down in Lopez Sugar Corporation vs. Federation of Free Workers  and reiterated
1

very recently in Somerville Stainless Steel Corporation vs. NLRC,  listing the basic requisites that
2

employers must prove with substantial evidence to justify the retrenchment of their employees.

The Case

This is a petition for review under Rule 65 of the Rules of Court seeking to set aside the August 22,
1995 Decision   and October 27, 1995 Resolution   of the National Labor Relations Commission   in
3 4 5

NLRC CA No. M-002292-95. The dispositive portion of the challenged Decision reads: 6

WHEREFORE, the assailed decision is [m]odified in that the finding of illegal

dismissal is [v]acated and [s]et [a]side. Complainants' Motion for [R]einstatement is
[d]enied for lack of merit.

The assailed Resolution denied petitioners' motion for reconsideration.

The Facts

Adopted by the NLRC were these factual antecedents related by the labor arbiter:

Complainants allege that they are employees of respondent Hinatuan Mining

Corporation (HMC) holding supervisory positions. Sometime in September 1993,
complainants planned the formation of a supervisors union with HMC. The plan was
received enthusiastically by practically all employees with supervisory rank, and
shortly thereafter the HINATUAN MINING SUPERVISORY UNION (HIMSU) was
formally organized and registered with the DOLE Region X under Registration No.
1000-9320-43. Complainants Anino, Navarro, Daug-daug and Filoteo were elected
as President, Vice President, PIO and Director, respectively. Complainants Baladja
[sic] and Ceredon though not elected officers of the union were nevertheless active
members of the union.
 On or about 03 November 1993, HIMSU formally notified the company of its legal
existence through a letter addressed to SALVADOR B. ZAMORA III, President of
respondent HMC. It formally informed the company of its desire for a collective
bargaining agreement and submitted its proposals therefor under letter dated 16
November 1993, which again was addressed to the company's President, Hon.
Salvador B. Zamora III, Attention: Messrs. Federico B. Ganigan, Vice President-
Operation and Jose T. Nacorda, Jr., Vice President-Finance.

The company, complainant claims, completely ignored the union's proposals and did
not answer HIMSU about it, which constrained the union to file an unfair labor
practice case against HMC on 13 May 1994. In order to weaken and if possible
destroy the union, respondents, in the guise of retrenchment, dismissed the
complainants who are the active leaders of the union under letter dated 16 June
1994. Complainants aver that their dismissal was done with malicious intent to cause
them and the union damage for their legitimate exercise of the right to self-
organization, in open defiance of Art. 248 of the Labor Code.

Because of their dismissal, complainants state that they were deprived of their
salaries, and suffered moral damages for mental anguish, serious anxiety, social
humiliation, besmirched reputation and other similar hurt which may be assessed at
not less than P100,000.00 each. And in order to protect their rights and obtain
redress for the damage they sustained, complainants were compelled to engage the
services of counsel to file and prosecute this case, incurring thereby expenses of
litigation and attorney's fee in the sum of not less than P50,000.00.

Complainants then pray that respondents: (a) be declared guilty of unfair labor
practices; (b) be ordered to reinstate complainants to their former positions with
backwages and to pay complainants jointly and severally the amount of
P150,000.00, as moral damages and litigation and attorney's fees, respectively.

Respondents, in a "MOTION TO DISMISS" dated 31 August 1994, allege, among other things, the
following:

1. On August 1, 1994, complainants filed the instant complaint for Unfair Labor
Practice, Illegal Dismissal and Damages after respondents implemented a
retrenchment in line with the streamlining or organizational structure in order to
prevent further losses;

2. The retrenchment measures affected both the rank-and-file as well as the

supervisors and managerial staffs;

3. Moreover, the retrenchment is admitted by complainants (see ANNEXES "F" to "F-

6" of their instant complaint), was done on June 16, 1994 with due notice to take
effect thirty (30) days from receipt thereof;

4. Above all, complainants had ACCEPTED/RECEIVED separation pay equivalent to

one (1) month pay for every year of service (more superior than the law) plus other
monetary benefits, and in consideration of said separation pay and other benefits,
complainants executed a WAIVER and QUITCLAIM for value received and
evidenced by ANNEXES "A" to "A-5" hereof;
 5. The instant complaint was filed (on August 1, 1994) only after the respondent had
filed a Petition for Certification Election on June 16, 1994 with DOLE, Regional Office
No. 10, Cagayan de Oro City, as evidenced by the attached Petition received on
June 16, 1994 at 1:55 PM, copy of said Petition is hereto attached as ANNEX "B"
hereof, and only after the initial hearing on July 21, 1994 of said Petition for
Certification Election. Counsel for complainants even manifested/declared in open
court that they were still filing a new complaint for Unfair Labor Practice (this case)
which manifestly shows this is an after-thought in order to give semblance of
credence to their position/opposition to conduct a certification election;

6. That herein respondents replead and incorporate by reference all pertinent

arguments/pleadings as well as documents filed with this Honorable Arbiter in
relation with the earlier complaint for unfair labor practice docketed as NLRC-SRAB
Case No. 10-05-00081-94.

Respondents then "MOVED and prayed that the instant complaint as well as the
reliefs sought therein filed as an afterthought be DISMISSED for lack of merit. 7

The Labor Arbiter's Ruling

Finding no evidence substantiating private respondents' theory of retrenchment, Labor Arbiter

Rogelio P. Legaspi held that the services of petitioners were illegally terminated and thus ordered
their reinstatement and the grant of back wages. On the other hand, neither was there any positive
showing that petitioners were retrenched purposely to weaken or destroy their union; hence, their
claim of unfair labor practice was dismissed. Likewise, their claim for damages was denied by the
arbiter, who reasoned that no fraud or bad faith was committed by private respondents in dismissing
them. The dispositive portion of his Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring complainants' dismissal illegal;

2. Ordering respondents to reinstate complainants to their former positions without

loss of seniority rights with full backwages and to pay complainants attorney's fees
equivalent to 10% of the total monetary award.

Since complainants already received their separation benefits, the same shall be
deducted from their monetary award herein granted and if the said award is not
sufficient, from the salaries of herein complainants.

For purposes of appeal, the bond is hereby fixed at P20,000.00.

Complainants' other claims are dismissed for lack of merit. 8

The NLRC's Decision

We quote in full the simplistic and abbreviated justification given by the NLRC to its reversal of the
labor arbiter's ruling:

Records show that it was only after a period of two (2) months that six (6)
complainants/supervisors out of those retrenched challenged their separation, and
 despite their having accepted and received retrenchment pay, equivalent to the one
(1) month pay for every year of service plus other monetary benefits (Vol. 2, p.
3, supra). A question is therefore raised on complainants' actuations.

As regards the alleged financial difficulties encountered by respondent, We take

judicial notice that in one area of Mindanao, the mining industry suffered economic
difficulties. If small mining cooperatives experienced the same fate, what more with
those highly mechanized establishments? 9

With the foregoing dubious arguments, the NLRC rejected all claims of the dismissed employees.
Petitioners' motion for reconsideration was also denied. Thus, this petition.  10

Issues

The following issues are raised by petitioners:

Whether or not the National Labor Relations Commission committed grave abuse of
discretion amounting to lack or excess of its jurisdiction when it absolved
respondents from its [sic] duty to prove losses as a just ground for retrenchment

II

Whether or not the National Labor Relations Commission likewise exceeded its
jurisdiction in recognizing the waivers/quitclaims executed by petitioners as an
effective bar to this complaint

III

Whether or not the National Labor Relations Commission abused its discretion when
it ordered the dismissal of the instant complaint and totally disregarded the labor
arbiter's findings of facts and petitioners' motion for execution  11

We shall initially take up the third issue and then revert to the first and second, which are the crucial
questions.

Also, the Court notes the solicitor general's Manifestation and Motion in lieu of
Comment,   supporting the contention of petitioners who argued inter alia:
12

Respondent Corporation cannot merely rely on the myopic inference that since
Republic Act No. 7729 reduced mining taxes from five percent (5%) to one percent
(1%) on a graduated basis, the mining industry is in economic distress, hence it can
facilely retrench its employees. The enactment does not operate as a blanket
authority for any employer to dismiss its workers without observing the requirements
of the Labor Code, nay the 1987 Constitution. For nothing in the words and
provisions of R.A. 7729, entitled "An Act Reducing the Excise Tax Rate on Metallic
and Non-Metallic Minerals and Quarry Resources, Amending for the Purpose Section
151 (a) of the National Internal Revenue Code, as amended," would show and
indicate the supposition advanced by respondent Corporation.
In its own Comment   dated July 20, 1997, Public Respondent NLRC simplistically submits that this
13

Court, not being a trier of facts, should dismiss the petition, since it presents only factual questions,
and thus uphold the assailed Decision which is allegedly supported by substantial evidence.

For its part, private respondent corporation avers   that the validity of the retrenchment was not an
14

issue in the complaint filed by petitioners before the labor arbiter; that it merely exercised its
management prerogative when it resorted to retrenchment as a means of preventing losses, a
measure fully explained to all its employees; and that the waivers/quitclaims freely and voluntarily
executed by petitioners constituted valid contracts, since they awarded benefits far greater than
those provided by law.

The Court's Ruling

The petition is impressed with merit. (LA AFFIRMED) This case is an exception to the
general rule that findings of fact of the NLRC are to be accorded respect and finality on appeal.   It is
15

equally well-settled that this Court will not uphold erroneous conclusions of the NLRC when it
reverses decisions of the labor arbiters or when the findings of facts, from which its conclusions were
based, are nor supported by substantial evidence.  16

The Court finds occasion to remind courts and quasi-judicial bodies that "[a] decision should faithfully
comply with Section 14, Article VIII of the Constitution which provides that no decision shall be
rendered by any court [or quasi-judicial body] without expressing therein clearly and distinctly the
facts of the case and the law on which it is based. . . . It is a requirement of due process and fair play
that the parties to a litigation be informed of how it was decided, with an explanation of the factual
and legal reasons that led to the conclusions of the court [or quasi-judicial body]. A decision that
does not clearly and distinctly stare the facts and the law on which it is based leaves the parties in
the dark as to how it was reached and is especially prejudicial to the losing party, who is unable to
pinpoint the possible errors of the court [or quasi-judicial body] for review by a higher tribunal." 
17

In the present case, the NLRC was definitely wanting in the observance of the aforesaid
constitutional requirement. Its assailed five-page Decision consisted of about three pages of
quotation from the labor arbiter's decision, including the dispositive portion, and barely a page (two
short paragraphs of two sentences each) of its own discussion of its reasons for reversing the
arbiter's findings. It merely raised a doubt on the motive of the complaining employees and took
"judicial notice that in one area of Mindanao, the mining industry suffered economic difficulties." In
affirming peremptorily the validity of private respondents' retrenchment program, it surmised that "[i]f
small mining cooperatives experienced the same fare, what more with those highly mechanized
establishments."

Jurisprudence prescribes the minimum standards necessary to prove the validity of a

retrenchment.   Because, in the instant case, the factual and legal bases of public
18

respondent's conclusions were bereft of substantial evidence — the quantum of proof in

labor cases   — its disposition is manifestly a violation of the constitutional mandate and an
19

exercise of grave abuse of discretion. Such decision is a nullity.

First Issue: Company Must Prove

Imminent Losses to Justify Retrenchment

Retrenchment is resorted to by an employer because of losses in the operation of a business

occasioned by lack of work and considerable reduction in the volume of business. It is a
management prerogative consistently recognized and affirmed by this Court,   subject only
20
to faithful compliance with the substantive and procedural requirements laid down by law
and jurisprudence.   The pertinent provision of the Labor Code reads:
21

Art. 283. Closure of establishment and reduction of personnel. — The employer

may also terminate the employment of any employee due to the installation of
labor saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the [Department] of Labor and
Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the
worker affected thereby shall be entitled to separation pay equivalent to at
least his one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and in
cases of closures or cessation of operations of establishment or undertaking
not due to serious business losses or financial reverses, the separation pay
shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year. (Emphasis supplied.)

To justify retrenchment, the following requisites must be complied with: "(a) the losses
expected should be substantial and not merely de minimis in extent; (b) the substantial
losses apprehended must be reasonably imminent; (c) the retrenchment must be reasonably
necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if
already incurred, and the expected imminent losses sought to be forestalled must be proved
by sufficient and convincing evidence."  22

In termination cases, the burden of proving that the dismissal was for a valid or authorized
cause rests upon the employer.   In the case at bar, respondent corporation did not submit
23

an iota of evidence to show losses in its business operations and the economic havoc it
would sustain imminently. It merely claimed that retrenchment was undertaken as a measure
of self-preservation to prevent losses brought about by the continuing decline of nickel
prices and export volume in the mining industry. Additionally, it alleged that the reduction of
excise taxes on mining from 5% to 1% on a graduated basis, as provided under Republic Act
No. 7729, was a clear recognition by the government itself of the industry's worsening
economic difficulties.

These bare statements of private respondents miserably fall short of the requirements to
show the validity of a retrenchment. For nor every loss incurred
or expected justifies retrenchment.   In Central Azucarera de la Carlota vs. NLRC,   for
24 25

instance, the employer more than merely cited the economic setback suffered by the sugar
industry as a whole to justify its retrenchment program; yet, the Court — emphasizing the
necessity of submitting adequate, credible and persuasive evidence — rebuffed the
employer's unsubstantiated claims in the following manner:

A litany of woes, from a labor strike way back in 1982 to the various crises
endured by the sugar industry, droughts, the 1983 assassination of former
Senator Benigno Aquino, Jr., high crop loan interests, spiralling prices of
fertilizers and spare parts, the depression of sugar prices in the world market,
cutback in the U.S. sugar quota, abandonment of productive areas because of
the insurgency problem and the absence of fair and consistent government
policies may have contributed to the unprecedented decline in sugar
 production in the country, but there is no solid evidence that they translated
into specific and substantial losses that would necessitate retrenchment. Just
exactly what negative effects were borne by petitioner as a result, petitioner
failed to underscore. 26

In Somerville vs. NLRC, we also stressed that not only should losses be substantial but that
retrenchment be "reasonably necessary to avert such losses." The employer must further
"prove that it expected no abatement of such losses in the coming years." Thus:

In a nutshell, the law recognizes a company's right to retrench employees

when "made necessary or compelled by economic factors that would
otherwise endanger its stability or existence." Unarguably, retrenchment is
only "a measure of last resort when other less drastic means have been tried
and found to be inadequate."  27

Furthermore, the passage of RA 7729 alone is certainly not a definite and sufficient indication
of respondent corporation's actual and specific financial standing. A tax rate reduction may
simply be meant to provide an incentive to the intended beneficiary. But in no way is it an
explicit and conclusive declaration of the financial situation in every company engaged in
such industry; much less does it translate into a license to retrench personnel recklessly.

Even if, arguendo, the contentions of respondent corporation are accepted at face value, they
still fail to satisfy the jurisprudential requirements that further or expected losses must be
substantial and reasonably imminent; and the dismissal of employees, reasonably necessary
and likely to be effective in preventing the expected losses. Respondent corporation has not
even shown any trend or circumstance beyond its control that is likely to result in continued
or future losses.   As cited by petitioners, the general standards by which the acts of the
28

employer must be appraised were laid down in Lopez Sugar Corporation thus:

Firstly, the losses expected should be substantial and not merely de minimis in
extent. If the loss purportedly sought to be forestalled by retrenchment is
clearly shown to be insubstantial and inconsequential in character,
the bonafide nature of the retrenchment would appear to be seriously in
question. Secondly, the substantial loss apprehended must be reasonably
imminent, as such imminence can be perceived objectively and in good faith
by the employer. There should, in other words, be a certain degree of urgency
for the retrenchment, which is after all a drastic recourse with serious
consequences for the livelihood of the employees retired or otherwise laid-off.
Because of the consequential nature of retrenchment, it must, thirdly, be
reasonably necessary and likely to effectively prevent the expected losses. The
employer should have taken other measures prior or parallel to retrenchment
to forestall losses, i.e., cut other costs than labor costs. An employer who, for
instance, nays off substantial numbers of workers while continuing to
dispense fat executive bonuses and perquisites or so-called "golden
parachutes", can scarcely claim to be retrenching in good faith to avoid
losses. To impart operational meaning to the constitutional policy of providing
"full protection" to labor, the employer's prerogative to bring down labor costs
by retrenching must be exercised essentially as a measure of last resort, after
less drastic means — e.g., reduction of both management and rank-and-file
bonuses and salaries, going on reduced time, improving manufacturing
efficiencies, trimming of marketing and advertising costs, etc. — have been
tried and found wanting.
 Lastly, but certainly not the least important, alleged losses if already realized,
and the expected imminent losses sought to be forestalled, must be proved by
sufficient and convincing evidence: any less exacting standard of proof would
render too easy the abuse of this ground for termination of services of
employees.  29

Ineluctably, with the private respondents' manifest failure to present sufficient, convincing
and competent evidence, no valid retrenchment may be allowed.

Second Issue: Quitclaims Not a Bar

to a Complaint for Illegal Dismissal

Private respondents also insist that petitioners' acceptance of separation benefits and
execution of waivers and quitclaims negate their claim of illegal dismissal. The waivers and
quitclaims allegedly constitute valid and binding contracts between petitioners and
respondent corporation.

The recognized and accepted doctrine is that a dismissed employee who has accepted
separation pay is not necessarily estopped from challenging the
validity of his or her dismissal.   Neither does it relieve the employer of legal obligations. 
30 31

Waivers and quitclaims, on the other hand, are generally looked upon with disfavor. In Agoy
vs. NLRC,   the Court explained that the employee's acknowledgment of his notice of
32

termination without any outright objection does not altogether mean voluntariness on his
part. Neither do the execution of a final settlement and the receipt of amounts agreed upon
foreclose his right to pursue a claim for illegal dismissal or unfair labor practice. The reasons
for such policy were laid down in AFP Mutual Benefit Association, Inc. vs. AFP-MBAI-EU   as 33

follows:

In labor jurisprudence, it is well established that quitclaims and/or complete

releases executed by the employees do not estop them from pursuing their
claims arising from the unfair labor practice of the employer. The basic reason
for this is that such quitclaims and/or complete releases are against public
policy and, therefore, null and void. The acceptance of termination pay does
not divest a laborer of the right to prosecute his employer for unfair labor
practice acts. (Cariño vs. ACCFA, L-19808, September 29, 1966, 18 SCRA 163;
Philippine Sugar Institute vs. CIR, L-13475, September 29, 1960, 109 Phil. 452;
Mercury Drug Co. vs. CIR, L-23357, April 30, 1974, 56 SCRA 694, 704)

In the Cariño case, supra, the Supreme Court, speaking thru Justice Sanchez,
said:

Acceptance of those benefits would not amount to estoppel. The reason is

plain. Employer and employee, obviously, do not stand on the same footing.
The employer drove the employee to the wall. The latter must have to get hold
of money. Because, out of job, he had to face the harsh necessities of life. He
thus found himself in no position to resist money proffered. His, then, is a case
of adherence, not of choice. One thing sure, however, is that petitioners did
not relent their claim. They pressed it. They are deemed not to have waived any
of their rights. Renuntiatio non praesumitur. (Emphasis supplied)
Private respondents further claim and petitioners do not dispute that the reinstatement of
petitioners to their previous positions is not possible anymore, because those positions no
longer exist. If reinstatement to former position, or one substantially equivalent thereto, is
not feasible anymore, the employees are entitled to the grant of separation pay and full back
wages.   Separation pay shall be equivalent to at least one month salary or one month salary
34

for every year of service, whichever is higher, a fraction of six months being considered as
one whole year.   It shall be computed from the date the petitioners were employed by private
35

respondent until this Decision becomes final and executory.

Finally, we note that Private Respondent Federico B. Ganigan impleaded in his capacity as
vice president of respondent corporation. While the president of the erring company may be
held jointly and severally liable for the obligations of the latter to its dismissed
employees,   such solidary liability does not extend to the vice president of the
36

company.   Absent any proof of the extent of the participation of Respondent Ganigan in the
37

formulation and the implementation of management policies and programs, he cannot be

held financially liable for the illegal dismissal of petitioners.

WHEREFORE, the petition is hereby GRANTED and the challenged NLRC Decision is SET
ASIDE. The Decision of Labor Arbiter Rogelio P. Legaspi in NLRC Case No. SRAB-10-08-
00130-94 is REINSTATED, except that Respondent Federico B. Ganigan shall not be liable for
petitioners' monetary claims. In lieu of reinstatement petitioners, Respondent Hinatuan
Mining Corporation shall PAY them separation benefits, computed from the time each of the
petitioners was employed until this Decision becomes final and executory. No
pronouncement as to costs.

SO ORDERED.